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A Patent Necessity

By Paul Lima |

How much is a patent worth? If you are Star Navigation Systems Group Ltd., it is your entire business.

The proof of the importance of patents for some businesses was evident after Toronto-based Star Navigation was awarded its first patent in 2005. The company signed approximately $17 million in orders for its In-flight Safety Monitoring System (ISMS). In January 2006, Star Navigation secured its second patent, from Hong Kong, and based on that has forecast an even more successful 2006, said Viraf Kapadia, chairman and CEO of Star Navigation.

Kapadia is seeking worldwide protection for the ISMS. "When you have a product that flies through the airspace of a number of countries, you want patent protection in each of those countries," he said. Initially, he focused on gaining patent protection in the UK, Hong Kong and North America so no company that tried to break the patent could fly through UK, Hong Kong or North American airspace.

"Securing patents is a key strategy in maintaining Star Navigation's proprietary advantage with the ISMS, the first system in the world to feature in-flight data monitoring and diagnostics with a real-time, secure connection between aircraft and the ground, made possible through current technology and satellite transmission," said Mr. Kapadia. "We could not run this business without the patent. Each patent makes us stronger."

As important as patents are, when it comes to filing patents to protect intellectual property the statistics say that Canada lags behind other countries.

In 2005, the number of patents applied for in Japan totalled 300,623. In the US, it was 149,936. South Koreans applied for 32,521 patents. At 2,193 patents, Canada ranked below Germany, China, Russia, UK, Taiwan, Italy, Australia and Brazil, and just above Sweden and Spain, according to Thomson Scientific, part of the scientific and healthcare market segment of The Thomson Corporation.

Why this middling placement? "Canada is a resource-based nation lacking the technology-intensive nature of smaller countries like Finland and Sweden," said Thomas Keil, assistant professor, entrepreneurship, with the Schulich School of Business at York University in Toronto. In addition, there are many branch plants in Canada and patent applications are usually generated by head offices.

"Patents and copyright are central mechanisms to foster innovation," said Mr. Keil. "Patents are the only tangible thing a small firm or inventor owns. With few resources and personnel and no brand, patents may be all they have. They are one of the motors that keep innovation going."

The patent gives the inventor or the patent-holding company protection for about 20 years from date of application. During that time, the patent holder can use the exclusivity of the patent to raise funds required to take the product to market or sell the licence to a larger company that might be better positioned to market the product.

Things are looking up for Canadians, according to Andrew Currier, senior associate and patent attorney with Torys LLP in Toronto and an adjunct professor of patent law at the University of Western Ontario in London. "I am seeing more businesses at the start up phase with an intellectual property strategy in place."

Patent cases like the U.S. Supreme Court's rejection of a request to review a major patent infringement ruling against Waterloo, Ontario-based Research In Motion Inc., the maker of the BlackBerry handheld wireless device, have led to greater awareness of the importance of using patents to protect intellectual property. "High profile cases like RIM seem to be the only way that patent education is raised right now," Mr. Currier said.

In addition, the statistics might not accurately reflect Canada's patent application standing as Canadians often file for patents only in countries where they plan to launch and market their products. They are also more inclined to file for patents in countries where they perceive that their fiercest competitors exists – particularly the U.S., U.K. and Europe. While the exact number of patents applied for by Canadians around the world is not known, if companies like Lee Valley Tools Ltd. in Ottawa, Canica Design Incorporated in Almonte, Ontario and Star Navigation are any indication, Canadians are protecting their intellectual property on the world stage.

Lee Valley tools has close to 100 patents, most issued in the United States, some in both the United States and Canada and some in other countries where woodworking is popular, said founder and chairman, Leonard Lee. Applying for patents in the US, Lee Valley's largest market, makes sense because it protects products against patent-infringing imitations. Lee Valley recently won patent-infringement cases against a German manufacturer and a US mail order firm. "The cases took years to settle. A smaller firm would not have had the resources to see it out," said Mr. Lee.

Applying for a patent in a country where you will not sell your products, or where sales will be minimal, does not make sense because of the time and cost associated with the patent application process, said Mr. Lee. He has eight patents "that are being enforced worldwide, including markets like China and Japan" for Canica, a medical instruments research, development and design company.

Canica patents its products worldwide because there is a global market for products such as Canica's "mind-numbingly simple" adhesive bandage that can be applied to surgical wounds. An elastic centre draws together the edges of the wounds to help the healing process and reduce scaring. Clear plastic lets doctors see if there is infection without removing the bandage. Without a patent, competitors could reverse engineer the product and "take it to market in months," Mr. Lee said.

The process to obtain patents is a challenge, especially if you want to patent internationally, Mr. Keil said. It can take several thousand dollars and two to four years from application to the time the patent is granted. However, the idea is protected – patent pending – from the moment the application is filed.

The breakthrough for Star Navigation came when the company received its first ISMS patent from the UK in February 2005. "We could say nobody else has the technology for real-time monitoring of aircraft in flight," said Mr. Kapadia. Without patent protection, a company "with big dollars could do a knock-off of our high-tech products before we get going. They could stifle us and we've taken all the risks and paid start up costs. Without patent protection R&D and innovation would be stifled," he said.

Patent protection in many emerging nations, such as China, "is a lot less clear" but there is a big push through international bodies such as the World Trade Organization to have countries adopt similar patent standards, added Mr. Keil.

"We tend to forget that the patent system goes back to the origins of our free market economy. Competition is a good thing, but patents are there as an important tool for innovation," said Mr. Currier. Because the application process and the rules for what can and cannot be patented are similar, but not the same, in each country, Mr. Currier suggests that companies trying to patent ideas in Canada and the US work with patent agents who are registered in both countries.

In addition, he would like to see greater global harmony in the processes and rules – but he is not just talking about inconsistencies in developing nations. For instance, he would like to see Canada clarify its rules on software patents and bring them into alignments with the US to encourage Canadian software engineers to be more innovative and protect their ideas when they go to market.

When it comes to global patents, or patenting multiple products, "inventors need to strike a balance," said Mr. Lee. He has seen inventors spend their life savings patenting products that have no real market value. "A patent is not a licence to print money. It is protection of an idea. You still need to have a business plan to take your idea to market."

Information on patents in Canada is available on Industry Canada's Canadian Intellectual Property Office website:  

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