May 28, 1935 (17th Parliament, 6th Session)


Henry Herbert Stevens

Conservative (1867-1942)

Hon. H. H. STEVENS (East Kootenay):

I do not rise in any spirit of criticism of this bill, but there is a matter which I understand is not dealt with in it, and as there would be no clause under which the matter could be brought up in the committee stage as far as I know, I would like to lay before the government one phase in connection with patents which I trust might be considered when the bill is before the committee. I refer to the practice of concerns in Canada, and I think the same practice is followed in other countries, of taking advantage of the Patent Act for the enhancement of the price of goods, to a degree perhaps unwarranted in the circumstances. I may illustrate the point by incidents which came to my attention some months ago and which were brought to the attention of the official in charge of the act at that time. These had to do with electric light bulbs. I want it clearly understood that I am not
bringing this matter forward at the present time merely to mention this incident, but it illustrates the point to which I wish to refer.
Electric light bulbs are manufactured in Canada under patents held by certain companies. They are sold, in the case of a one hundred watt bulb, at around 55 or 60 cents each. Dealers in this class of goods assert that they can buy the same general type of bulbs which have paid all the patent royalties and observed all the provisions of the law in the United States or in Holland, pay a duty of some thirty or forty per cent and sell them in Canada at from twenty-eight to thirty-five cents retail. I should complete the statement by saying that after observing the patent laws of the country where they were produced and paying the duty charged by the Canadian customs authorities and so on, when they sought to enter these bulbs through the customs, after an appeal to certain sections of the Patent Act, they were not permitted to import them into Canada because the patent rights in this country had been reserved.
The point at issue there is simply this: Under the international agreement regarding patents and trade marks, if a certain article has been manufactured in a foreign country, with all the provisions of the patent law of that country being observed, it ought not to be an offence to bring that article into Canada providing a reasonable protection is given through customs duties if that happens to be the government policy at the time. Having observed all the regulations in the country of manufacture and having paid the duty I submit it ought to be possible to import those articles into Canada. Under the law as it now stands, however, that cannot be done and in this particular instance the Patent Act serves really as a duty of about eighty per cent in addition to the twenty-five or thirty-five per cent charged under the customs laws.
My submission is that the Patent Act never should be used or permitted to be used as a supplementary customs duty or protection. I think that should be made clear. I should like to state also that in drawing this matter to the attention of parliament I only do so because now the act is in a major state of revision before the house. I am not criticising any government, past or present, in regard to the matter; I am bringing to the attention of the house a situation that has developed and been disclosed, so far as I am concerned, only during the past year. I have a good deal of information on the matter before me, and I should like to read briefly from a reference with regard to an investigation made by the federal trade commission of the United States, who in 1928 conducted an inquiry into the

Patents oj Invention-Mr. Stevens
question of electrical equipment and competitive conditions of the electric power industry. They found the electrical industry to be dominated if not controlled by an international group of electrical manufacturers, each member of which is the most powerful in its respective community. The members of this international organization exchange .patent rights, manufacturing processes and other trade secrets. This exchange is characterized by a division of territory, and I should like to direct particular attention to this:
This exchange is characterized by a division of territory, each company granting to the other exclusive rights in specified countries, described as exclusive territory; or nonexclusive rights in other countries described as non-exclusive territory, and reserving all rights in still other countries described as excluded territory. Such agreements practically eliminate any competition of a serious nature. For example, in the case of light bulbs, in so far as Canada is concerned no independent manufacturer can either manufacture or sell in Canada without being liable for suit for lrnringement of patents which are owned by the larger organization-represented in Canada by the Canadian General Electric Company Limited, and Canadian Westinghouse Company Limited. These two firms as members of the international group have been "given" a Canadian market, and by the mere threat of suit are usually successful in disposing of any likely competitor.
That statement was made in 1928 by the federal trade commission of the United States, so I am told, but the facts are slightly different to-day. I understand, though I am speaking subject to correction, that there are now five companies in Canada, but the other companies have been added only by licence of the older or larger companies, and all these are represented by one concern. When certain dealers brought in or attempted to bring in bulbs from foreign countries, in one case Holland and in two or three other cases the United States, this one concern brought suit against the importers, secured injunctions and subjected them to a great deal of loss and inconvenience.
I would have no criticism of these companies in protecting their patent rights in Canada providing they sold their goods to the public at a reasonable and fair rate. I am quite aware of the answer that may be made; I have not had time to look up the section of the act but I am quite aware that it does provide that the commissioner of patents, I believe under the instructions of the minister, may interfere, and I think he has power actually to fix prices where he has reason to believe that abuses have occurred. In practice however, this does not happen; as a matter of practice I doubt if there is any great interference.

There is another feature which I think ought to be taken into consideration in dealing with this matter. I had under my hand, and I sent forward to the proper official in the proper department, a long list of patents affecting these articles held by these companies; if I remember correctly the list included several hundred patents, or we will say in the neighbourhood of over one hundred; the exact number I have not in mind or under my hand. The question arises as to how many of these patents, frequently bought up and controlled by the larger corporations, are ever put into actual operation. Here again I quite admit that there is an answer. The answer is that if they are not put into operation within eighteen months or some certain limited period of time the commissioner may declare them open, but again that does not work in practice. The situation is quite obvious. A man perfects an invention and, if it is good, immediately it is sought after and secured if possible by one of the large corporations. They are strong and wealthy, if the new invention affects some invention they are already manufacturing in large quantities they can easily afford to pay a very large sum, comparatively speaking, for the invention. The individual is satisfied; he is paid off, and the patent now belongs to the large corporation. It is pigeon-holed and the chances are that no one in the country has any knowledge of it, except those in the patent office, but the patent commissioner is not there for the purpose of checking up to see whether or not patents are used. Unless someone brings the matter to the attention of the patent commissioner there is little likelihood of any action being taken. Here again I submit that in this general revision the act ought to be so changed that where patents have been issued some body, some official or some official body should be clothed with the authority, to follow up those patents to see whether or not they are used, and if they are not used for the benefit of the general public some explanation ought to be forthcoming as to why they are not used. I am convinced from quite a lot of thought and investigation I carried on in connection with the subject some six or eight months ago that there is a large number of patents particularly electrical patents and others in other lines of industry resting in the archives of many corporations which would be useful to the public, which ought to be put into operation and use, but which are not used because they conflict with some general and practical object now being manufactured in large quantities.

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