America’s Message To The New Canadian Prime Minister – Innovation Matters

Gregory Kiley President, Kiley & Associates
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In the first state visit since 1997, Canada’s newly elected Prime Minister Justin Trudeau will meet with President Obama on March 10 to strengthen bilateral ties between the two nations. With Trudeau a closer ideological ally to Obama compared with his predecessor, it should be a cordial visit.

But Obama shouldn’t hesitate to hold Trudeau’s feet to the fire on his campaign promises to jump start Canada’s flagging economy. As our largest trading partner and 3rd largest foreign investor, Americans are counting on Trudeau to turn a corner.  

Indeed, when Trudeau was campaigning for office last year, he often spoke about Canada’s sluggish economy and how to get it growing again. At a time when natural resource industries are suffering and Canada’s competitive advantage — traditional manufacturing — has been eroded, the country’s future increasingly depends on being able to turn great ideas into great businesses.

A report released a month before the election by the Conference Board of Canada gave the country a “C” grade when it comes to innovation, ranking Canada ninth out of 16 “peer” countries. While the study noted improvements in access to venture capital and “entrepreneurial ambition” in recent years, it said Canada still lags in a number of critical measures, including corporate research and development, information technology investments, patents and productivity.

Additionally, despite its status as one of the premier economies in the world, the Canadian legal system is not all that friendly to new ideas, brands and inventions. Its patent system is badly broken. Unelected judges have been hard at work crushing incentives that drive investment in valuable new medicines. And sadly, their last government did nothing to stop them.

Patents are crucial for innovation. Entrepreneurs are willing take huge, costly bets on research and development because patents give them the temporary exclusive right to sell their inventions and the chance to recover their investments. If inventors can’t get or keep patents, the financial incentive to bring valuable new discoveries to market is lost.

Unfortunately, that’s exactly what’s happening in Canada. Over the last couple years, Canada has gone from the 12th most innovative country in the world to the 25th, according the World Economic Forum (WEF). The folks at WEF give Canada’s patent system a “D” grade.

Out on the campaign trail, Mr. Trudeau talked up his plan to turnaround his country’s flailing economy. Better protecting innovation and restoring a patent system devastated by a series of misguided court decisions must be a critical part of the Liberal Party prescription for jobs and economic growth.  

Relying on a misguided legal theory called the “promise doctrine,” Canadian courts have revoked dozens of patents on innovative medicines over the last decade.

To get a patent, inventors must show novelty and utility. They must demonstrate that a product is new and non-obvious and that it is capable of industrial application. But recently, some of judges have decided to make up their own utility standard – one that is entirely inconsistent with well-established norms around the world and that upends the proven process by which biopharmaceutical innovators transform new discoveries into valuable medicines.

Their rulings demand that inventors demonstrate and “soundly predict” that a promising new molecule will be safe and effective for the treatment of a particular disease or condition at the time a patent application is filed – something that can only be shown much later after a series of expensive clinical trials involving hundreds and even thousands of patients.

The “promise doctrine” is a big “keep out” sign for biopharmaceutical firms overseas and for investors that fund our own, home-grown start-ups. Research from the Council of Canadian Academies shows that domestic pharmaceutical development fell by nearly a third in 2008 – three years after the first court decision citing the “promise doctrine.” Annual drug R&D has not recovered since. Fewer dollars are going toward creating breakthrough treatments for patients that can power the creation of new jobs and economic opportunity for working Canadians.

New leaders in Canada can fix their broken patent system with a few legislative changes. For Canadian patients and for the future economy the many jobs it supports and the many more it can create – leaders must fulfill promises made. President Obama should make these issues a priority for his meeting with Trudeau in March.