Tariffs, which the US president has constantly said he would introduce, are a threat to Canada’s national economic security. If Donald Trump follows through, Canada must respond with all economic weapons at its disposal, a key armament of which is intellectual property (IP) such as patents.
This country has the right, under both Canadian and international law, to effectively suspend patent rights held by US-controlled companies in key sectors, such as pharmaceuticals and artificial intelligence (AI). Doing so would put tremendous pressure on the Trump administration.
Under the World Trade Organization and section 19 of Canada’s Patent Act, Canada can circumvent US-controlled patents, freeing up Canadian companies to make patented drugs as well as develop AI-based inventions and other key technologies to sell predominantly in Canada but also around the world. Given the national emergency that Trump’s tariffs would create, Canada could immediately seek permission to accord these rights from the Commissioner of Patents, a public servant in charge of the Canadian patent office.
Canada’s future economy depends on our ability to harness and have control over intangible assets, such as patents and other IP. While the United States has advanced its intangibles economy through patents, it has constrained Canadian economic sovereignty through trade deals that require Canada to give US companies greater patent rights. Canada can regain some of this lost sovereignty by working around US-controlled patents.
Canada has always had an uneasy relationship with patents, most of which are controlled by foreign companies that take our academic knowledge and sell it back to Canadians for pennies on the dollar. In return for Canada giving the pharmaceutical industry greater patent rights in the late 1980s, the industry promised to increase its research investments to 10 percent of its Canadian revenues, far below the rates in competitor countries.
Although it did so for most of the 1990s, the industry has failed to meet that target since 2000 and has a lower rate of investment today than when the deal was done. At the same time, Canadian biotech companies are faced with the choice of either selling their assets to US businesses or going bankrupt.
Despite being a leader in AI technology, Canada has little control over the patents that its own largely publicly funded research has produced. Jim Hinton, a patent lawyer specializing in AI, found that three-quarters of patents produced by Canada’s two leading AI institutes leave the country. Canada may produce key AI inventions, but it does not profit from them.
On the other hand, the United States is the largest recipient of foreign income from its IP, having raked in US$127.39 billion in 2022. Taking into account its size, the United States is fifth in international payments for its IP, while Canada is seventeenth. In a game of IP tit-for-tat, Canada could cause key US industries far more pain than the United States can impose on our companies.
By exercising its powers under international and Canadian law to limit US-controlled patents, Canada would not only curtail the current extraction of Canadian wealth to the United States when Canadians pay US companies for patented goods, but it would also enhance its sovereignty over the intangible economy. Canada is a powerhouse of academic knowledge that, once free of US-controlled patents, could use that knowledge to produce lower-cost medicines, ramp up AI-assisting drug discovery, develop new climate-related technology and render our health systems more efficient.
If the United States chooses to declare economic warfare on Canada, this country needs to adopt policies that not only cost US companies dearly, but that also create opportunities for Canadian businesses as well. Our companies can compete in a world where knowledge is open rather than hoarded by US businesses. Let’s give them that opportunity.
This piece first appeared in The Globe and Mail.
