May 2, 1939

CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Yes.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

I understand the hon.

member to say he is in favour of a reduction of the income tax on corporations; am I right?

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Well, I do not like to put it in those words. I said that I was in favour of a lowering of the corporation income tax- that is, that applies to the income earned by industry or corporations. If I may say so to my hon. friend, of course it does not affect the income on dividends earned from a corporation by shareholders. I am not talking about that.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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THE ROYAL ASSENT


A message was delivered by Major A. R. Thompson, Gentleman Usher of the Black Rod, as follows: Mr. Speaker, His Honour, the deputy of His Excellency the Governor General, desires the immediate attendance of this honourable house in the chamber of the honourable the Senate. Accordingly the house went up to the Senate, And having returned, Mr. SPEAKER informed the house that the deputy of His Excellency the Governor General had been pleased to give in His Majesty's name the royal assent to the following bills: An act to amend the Department of Transport Stores Act. An act to amend the Foreign Insurance Companies Act, 1932. An act to amend the Canadian and British Insurance Companies Act, 1932. An act to give effect to a convention for the unification of certain rules relating to international carriage by air, to make provision for applying the rules contained in the said convention, subject to exceptions, adaptations and modifications, to carriage by air which is not international carriage within the meaning of the convention, and for purposes connected therewith. An act respecting the Canadian National Railway Company, the Ontario and Quebec Railway Company, the Canadian Pacific Railway Company and the Toronto Terminals Railway Company. An act to create a national film board. An act to amend the Dominion Trade and Industry Commission Act, 1935. An act to amend the Meat and Canned Foods Act. An act to amend the Agricultural Pests' Control Act and change the title thereof. An act for the relief of Jean Winifred Hunter Urquhart. An act for the relief of Sarah Theresa Norman. An act for the relief of Helen Kathleen Yuill. An act for the relief of Constance Lillian Talbot Mais Pocock. An act for the relief of Edith Cecilia Shaw Mayne. An act to change the name of Ancient Foresters' Mutual Life Insurance Company to Toronto Mutual Life Insurance Company. An act to incorporate the Canada Board of American Missions of the United Lutheran Church in America. An act respecting the Sterling Insurance Company of Canada. An act to make provision for the Sealing of Royal Instruments. An act to amend the Dairy Industry Act. An act respecting the Chief Justice of Canada. An Act to assist in the alleviation of Unemployment and Agricultural Distress. An act respecting the Toronto Harbour Commissioners. An act to Incorporate the Associated Canadian Travellers. The Budget-Mr. Bothwell An act to encourage the Improvement of Cheese and Cheese Factories. An act respecting Small Loans. An act respecting the New Brunswick Railway Company. An act to ratify and confirm the agreement respecting the joint use by Canadian Pacific Railway Company and the Midland Railway Company of Manitoba of certain tracks and premises of Canadian Pacific Railway Company at Winnipeg, Manitoba.


THE BUDGET

DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE


The house resumed consideration of the motion of Hon. Charles A. Dunning (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means, and the amendment thereto of Mr. Lawson, and the amendment to the amendment of Mr. Coldwell.


LIB

Charles Edward Bothwell

Liberal

Mr. C. E. BOTHWELL (Swift Current):

Mr. Speaker, when one listens to addresses from hon. members opposite one is inclined to tear up the notes he has made and simply answer some of the arguments advanced. To-day, however, I intend to deal with just one paragraph of the address of the Minister of Finance (Mr. Dunning). But before doing so, may I congratulate him upon his restoration to what looks like reasonable health, and also upon the manner in which he delivered the budget address. I particularly appreciated the audacity, if I may use that term, with which he addressed industry in Canada. I believe there is much in those paragraphs that industry could take to heart, and thereby cooperate with the government to solve some of the difficulties confronting us.

The paragraph to which I make special reference and which I shall quote is found at page 3151 of Hansard, as follows:

Reports from the tariff board I have laid on the table to-day, respecting furniture, cigars, cocoa matting, starches and dextrines, worsted weaving yarns, coke, radios and tubes, and automobiles. The report on the radio industry, apart from recommending free entry of certain parts, refers to the bearing of the Patent Act upon the investigation. In this connection the board states that "radio tube manufacturers in Canada have taken full advantage of the protection afforded to them by the terms of the Patent Act." The board expresses the opinion that selling prices of radio tubes in Canada to all classes of purchasers should not be in excess of the recognized list prices in the United States, plus all charges on importation. To that end the board suggests that the proposed reduced duties on parts, unless "immediately reflected" in the published selling prices of Canadian radio tubes, be rescinded. In giving fuller study to other phases of this report than

those relating strictly to tariff rates, the government will have to consider the relation thereto of the provisions of the Patent Act respecting the abuse of exclusive rights under patents.

For some years I have been wondering whether tariff reductions were as important as some other things we might do in connection with the industrial life of this country, and also for just how long the manufacturers and industrialists of this country have been taking advantage of our patent laws to exploit the Canadian public. I was intrigued by the remarks made by the former Secretary of State (Mr. Cahan) before the senate committee of 1935 which was considering amendments to the Patent Act. He said:

The fact is that the administration of the patent office of Canada has in recent years become a matter of very grave criticism not only in this country but in other countries, and some measures of reconstruction and reorganization of the office are necessary.

What is brought to my attention from day to day and week to week is the danger arising from these monopolies (patents) which are established here, unless there is some reasonable, equitable and impartial control.

At the economic conference which was held in Canada in 1932 we had a large number of English engineering firms represented and it was my duty to deal with some of those representatives. They were complaining that our purchases of engineering machinery from England were very limited. And when you inquired into it you found that the patents under which that engineering machinery was manufactured in England had been resold or assigned to American manufacturers . . . with exclusive rights as to Canada, and Canadians were invited to buy in Ohio, or in Pittsburg, or from some high building on Broadway, because the article could be purchased for use in Canada from the United States.

As I look over the situation, with my experience of the last five years, I see the industrial life of Canada held in the grip of the holders of some 200,000 patent monopolies, all of whom obtained similar patents in the United States, or in Germany or England, and none of whom have any strong incentive to produce in Canada, if they can make use of the manufacturing facilities of the neighbouring republic or of the other foreign states.

I do not want to pass any reflections, but I do not think the Canadian patent office has been efficiently administered. I think that in the past thirty years many patents have been granted which never should have been granted. There has grown up in Canada an idea that the patent office is a revenue producing branch of a department of government. It should not be administered solely as a revenue producing branch. It should be thoroughly equipped and reorganized, but the difficulty is to produce officials who are thoroughly competent at the salaries which the parliament of Canada is willing to pay for such services.

But I think you should revise this bill on the clear understanding in view, that the patent office is to be reconstructed, reorganized and reformed. Having that understanding in view,

The Budget-Mr. Bothwell

I think you should proceed to consider what should be enacted to ensure that legitimate industry in this country may be protected and that all foreign combinations which seek to control the domestic market of Canada may be duly restricted and restrained.

Following that investigation the Patent Act was amended, but the amendments, so far as I understand their application, were, with one exception, of no special benefit. That one compelled an applicant to make application for patent in Canada before a patent was granted to him in some foreign country. Prior to that, and under the act as it existed before 1935, an applicant could make his application here at any time within two years after the patent had been granted in the foreign country. That amendment did something to improve the situation.

The United States has been up against somewhat similar conditions. On December 1 last a committee was set up in the United States to study its patent law. It found that not only was the patent law subject to abuses of various kinds by patentees themselves, but that the act lent itself to the formation of monopolies in trade which were so restrictive that they had a very bad effect upon United States industry. The committee which was set up is known as the temporary national economic committee. It held its first sittings in December, 1938. I shall refer to some clippings in connection with its investigation, first quoting a statement of the United States department of justice:

Whether the patent system as it has developed around the present laws has served its purpose of promoting the progress of science and the useful arts, or whether the "legal monopolies" created by the law have been used to restrict freedom of opportunity, foster rigid price levels, increase or decrease the demand for manufactured products, withhold adequate compensation from inventors, and finally, whether they have been used to "circumvent the fundamental objective of another government policy-that policy which finds expression in the anti-trust laws," are among the questions :oncerning the economic committee.

The United States department of justice, in its report quoted by the correspondent of the New York Times, said:

The complexity of the patent system had recently increased with the complexity and scale of business "and the ingenuity of counsel." all of which have combined to create a host of legal devices which have altered radically the simple body of patent laws existing in the early days of American government.

A study has been made of some abuses which have existed in this country under our Patent Act. For the information of the house I want to quote some remarks made before the patent institute in an address delivered by TMr. Bothwell.]

George H. Riches, a patent attorney of the city of Toronto. Dealing with abuses under the Patent Act, he said:

Canadian patents were found in each case tp contain claims which had been rejected as unpatentable by the examiners of the United States patent office.

And he expresses the opinion that:

Greater care should be exercised that such patents are not issued wherewith patentees may threaten legitimate Canadian industry.

And again:

Many manufacturers take advantage of this weakness in the Canadian patent system to obtain patents which are invalid but which they know will have a high value in preventing other manufacturers entering into competition with them.

In his address before the patent institute he gave several examples of the use that manufacturers have made of the Patent Act in Canada and the advantage they took of the public. For instance, he gave an illustration of a fellow with a valve which he found it convenient to manufacture in connection with his other business. This particular valve had been in use for quite a number of years. A patent attorney was requested to make a search to find out whether there was anything to prevent him from manufacturing this valve. In the course of the search it was learned that several applications for patents were pending for various devices in the same class as the article he proposed to manufacture; and, the patent attorney says, under our patent law and under the system in vogue in our patent office, there is no way of ascertaining whether this device would be an infringement of the patents which would eventually issue on these applications. As I understand the situation, patent applications at least three years old are still lying in the patent office, and manufacturers who want to take advantage of devices which they know have been manufactured for years and upon which they believe the patents have expired, are not able to find out from our patent office whether or not it is possible for them to proceed to manufacture.

A further illustration is given to show the way in which some manufacturers will take advantage of our patent law:

For over fifty years an American company had manufactured a smoothing harrow consisting of four gangs of plates with a scrub or levelling board located with two gangs in front and two gangs behind it.

This implement is used by market gardeners to pulverize and level the soil and up until a few years ago was made at least by two companies in the United States, one of whom at one time shipped some into Toronto.

One of our distributors in the United States-

The Budget-Mr. Bothwell

This is written from the office of the manufacturer.

-asked us to make a similar outfit, substituting steel in place of wood for the frame and a steel plate in place of a wooden board for the levelling or scrub board.

We designed and developed such a machine and bad it ready for sale when we were notified that a blacksmith at Weston had applied for patent on such an implement.

I believe that Weston is a small suburb of Toronto. That implement had been manufactured for fifty years.

In the application for patent, claims made by the original manufacturers were included and in his advertising matter the Weston blacksmith had simplv copied the advertising of the Meeker of Higganum, Conn., even to the extent of copying word for word testimonials received by the original manufacturer.

Notwithstanding our objections which were so strongly supported, a patent was issued and in due time we were threatened with suit for infringement.

I was approached twice-[DOT]

This manufacturer saj's:

-by legal representatives and once by the wife of the patentee, with a suggestion that the matter be settled amicably either by direct payment or by an agreement to pay royalty.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

How long ago was that?

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Charles Edward Bothwell

Liberal

Mr. BOTHWELL:

That was in 1937. I quote that in order to illustrate what manufacturers may do in connection with our Patent Act, and the use that they may make of it.

Mr. Justice Maclean of the exchequer court of Canada, discussing patents and our patent law, in 1932 Exchequer Court Reports, page 106, dealing with the case of Lightning Fastener Company v. Colonial Fastener Company, used these words:

It must be remembered that the object of the claim is to give a perfectly clear statement of the invention claimed. Of late years a superstition has arisen that a patent is more valid and has a greater hold over infringement if every possible permutation and combination of the elements entering into the invention is separately claimed; and it has become a practice to file claims which are copies of those used in American specifications. American claims may be very useful in dealing with American law, but in English law prolixity does not help a court which, whether in considering subject matter, novelty or infringement, invariably seeks to obtain an answer to the particular question, what has this man invented.

Again in the same report, by the same judge:

Prolixity and repetition in patent claims have also been frequently condemned in the United States courts. If the provisions of the Patent Act are not in terms sufficiently clear to enable the patent office to prevent a useless and confusing multiplicity of claims, and repetition in the separate claims, I would respectfully suggest to the commissioner of patents that he urge that the Patent Act be so amended as to

bestow ample power on the patent office, to curtail the abuse to which I refer and which is calculated to bring the whole law of patents into disrepute. I need hardly observe that my remarks are not applicable to all applications . . . perhaps only to a relatively small number, but in my own experience I have frequently noticed that claims are allowed which appear to me to be objectionable because of repetition in the separate claims, and the practice in my opinion should not be permitted to gather weight.

Again, by way of illustration, I would call attention to what has happened in connection with radio. It was referred to yesterday by the hon. member for Kootenay West (Mr. Esling) in his speech. One is astounded to know just how far people will go in order to exploit the consuming public of Canada. Dealing with this question of radio the statement has been made, and it has not been contradicted-I believe it is borne out by the evidence taken before the tariff board-that when the patent situation with regard to electrical apparatus was examined, it was found that this field was largely controlled by six companies who have pooled an innumerable number of good and bad patents. The companies are: Canadian General Electric Company, Canadian Westinghouse Company, Canadian Marconi Company, Northern Electric Company, Rogers Majestic Corporation Limited, Radio Corporation of Canada.

These six companies were involved in an investigation a few years ago under the Combines Investigation Act, and after the findings were made no action was taken against them. They have extended their operations to some other companies, and it would be astonishing to read the agreement that these companies entered into whereby they arranged that one company should have the manufacturing of one particular article and the others would not interfere, another company would have the manufacturing of some other article and the others would not interfere, and so on all through. The parent concerns are American, and they hold patents in Canada in connection with everything electrical connected with radio. Only ten per cent of the patents are held in Canada, ninety per cent being held in the United States; the parent company dictates what shall be done here, what price shall be charged; and if you buy a radio manufactured in the United States not only are you subject to a duty on bringing it in, but you are also liable to prosecution for infringement of patent rights by having it in Canada contrary to our own patent law.

' I will not take up any more time in this connection except to suggest that the defects which have been found in our Patent

The Budget*-Mr. Bothwell

Act might be outlined as follows-and I hope the minister in charge of patents and the government will see that the matter is looked into just as it was in the United States, where it was found that the manufacturer who is unconscionable enough to take advantage of the laws there is able to exploit the people unmercifully. And in Canada they can do it to a greater extent even than in the United States. I am going to suggest for consideration by the minister in charge of the Patent Act that there is lack of efficient examination of patent applications. The high cost of taking advantage of the remedies set forth in the Patent Act to curb abuses under it are prohibitive. Another defect is the cumbersome method by which such relief may be obtained and the uncertainty of the outcome. Other defects are: lack of responsible officers to investigate abuses; lack of power to punish patentees who have been found guilty of abusing patent rights; the large number of patents issued for the same articles; no positive, inexpensive way of ascertaining what patents cover a certain article; lack of positive control over the patentee; the wide powers given the patentee by means of which he may destroy the business of a competitor. These are matters for consideration. When one looks into the findings in the United States and considers some of the expressions that have been used there in the investigation, he will find that the chairman, after a hearing of several days, makes this statement:

The greatest handicap under the present system arises from the fact that there is no single court of patent appeals and no effective limitation upon the number of baseless attacks which may be made in the patent office by an applicant who desires to exploit or hamper an inventor.

Among manufacturers as well as among inventors there seems to be an agreement that patent procedure should be so changed that action on a patent application may not be unduly delayed in the patent office and that the entire life of a patent from the date of the application to the date of expiration shall not be more than twenty years.

One instance was brought to the attention of the committee of the extension by means of delays of the period of exclusive use from the seventeen years contemplated by law to forty-four years.

I might give an illustration of a company in the United States called Owens Illinois which is possibly a subsidiary of Hartford-Empire. No doubt Hartford-Empire control a large number of patents in the United States. They do not manufacture. For the period from 1925 to the end of 1937 they had an income of $49,479,062 from licence fees and royalties without manufacturing anything. It was "found that that company and Owens Illinois controlled 67 [DOT] 4 per cent and 29-2 per cent respectively of all glass

containers produced in the country, leaving about 3 per cent for all independent competitors. Two companies control the whole situation there in connection with glass containers. An investigation. in Canada might reveal a somewhat similar situation. My studied conclusion on the whole matter is that by the patent laws we have in Canada we are enabling foreign manufacturers to exploit the Canadian public to an extent that could not be done even under the tariff of the late administration.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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CCF

Angus MacInnis

Co-operative Commonwealth Federation (C.C.F.)

Mr. ANGUS MacINNIS (Vancouver East):

The hon. member for Swift Current (Mr. Bothwell) has referred to one phase of the evils which we in this group have been drawing to the attention of this house for a number of years; that is, the evil of private ownership in the means of life of the people of this country. That was not a bad thing while the number of owners was large, in other words, while property was distributed over a large number of owners; for then the amount that could go to any one owner was limited. But as the hon. member has just said, we find now that in industry after industry there is almost complete monopoly, and those industries are used not to supply the everyday needs of the people but to take from the people every possible cent that can be sweated out of them.

In rising to say a few words in this debate I do so because I wish to take issue with the point of view on which the minister based his argument for the exemption from income tax of new capital investment. I shall read the resolution of which he gave notice to amend the Income War Tax Act in the way I have stated. It is to be found on page 3153 of Hansard of April 25 last, as follows:

That it is expedient to amend the Income War Tax Act and to provide:

1. That a taxpayer (other than a company deriving income from a metalliferous mine to which section 89 of the act applies) shall be entitled to deduct from the tax that would otherwise be payable under the act amounts not exceeding in the aggregate ten per cent of capital costs actually incurred and paid in the period beginning May 1, 1939, and ending April 30, 1940, in respect of the construction, installation, betterment, replacement or extension of plant, machinery or fixed equipment during the same period, by deducting, in each of the first three fiscal years of the taxpayer after April 30, 1940, in which the taxpayer has taxable income, an amount not exceeding one-third of the aggregate amount of the deductions authorized.

The Minister of Finance (Mr. Dunning), in proposing this resolution, stated that he was doing so in order to encourage industry, increase employment and increase the national income. I say as emphatically as I can, and this opinion is shared by the group to which

Railway Act-Language Requirement

I belong, that this proposal of the Minister of Finance is not a solution of the problem facing the Canadian people. The problem facing us is not to create new capital, it is to distribute consumers' goods. And consumers' goods will not be distributed in greater relative proportion by the increase of capital at the present time. I freely admit that if new expenditures for capital goods are made, the first result will be beneficial, but it will be beneficial only as a shot in the arm is beneficial to a drug addict; it stimulates him for a while, but there is always the reaction, and the last state of that individual is worse than the first. And to the extent that we encourage capital investment in Canada without at the same time and to a greater extent finding ways to distribute consumer purchasing power, our last state will be worse than our first.

The root cause of the world depression which engulfed us in the fall of 1929 is still with us. That cause is too large an accumulation of capital goods in too few hands. The result in effect is that too large a share of the national income goes to a few capitalists, compared with the share which goes to the workers and farmers who produce that income.

At six o'clock the house took recess.

After Recess

The house resumed at eight o'clock.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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PRIVATE BILLS

SECOND READINGS


Bill No. 110, for the relief of Dorothy Gertrude Mary Huggins Yaun.-Mr. Hill. Bill No. Ill, for the relief of Lola Margaret Miller Atkinson.-Mr. Walsh. Bill No. 112, for the relief of Zeno Brack.- Mr. Plaxton. Bill No. 113, for the relief of Esther Steinberg Soloway.-Mr. McNiven (Regina City). Bill No. 114, for the relief of Sarah Sherry Miller.-Mr. Tomlinson.


RAILWAY ACT

LANGUAGE REQUIREMENT IN QUEBEC PROVINCE RESPECTING EMPLOYEES OF RAILWAY AND TELEGRAPH COMPANIES


Mr. WILFRID LACROIX (Quebec-Mont-morency) moved that the house go into committee on Bill No. 3, to amend the Railway Act.


LIB

Alexander MacGillivray Young

Liberal

Mr. YOUNG:

Mr. Speaker, I rise to a point of order. When it was the decision of the committee not to report the bill, how does it now come before the house?

Topic:   RAILWAY ACT
Subtopic:   LANGUAGE REQUIREMENT IN QUEBEC PROVINCE RESPECTING EMPLOYEES OF RAILWAY AND TELEGRAPH COMPANIES
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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

It is for the house to decide whether or not it will go into committee on the bill. The matter can be discussed, and if on a vote the motion is adopted, the bill will have to go to committee of the whole.

Topic:   RAILWAY ACT
Subtopic:   LANGUAGE REQUIREMENT IN QUEBEC PROVINCE RESPECTING EMPLOYEES OF RAILWAY AND TELEGRAPH COMPANIES
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May 2, 1939