May 2, 1939 (18th Parliament, 4th Session)

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reduced duties on parts, unless "immediately reflected" in the published selling prices of Canadian radio tubes, be rescinded.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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