Essays July 2011

We are all i4i: How a small Canadian software company improved healthcare innovation

Neil Seeman

i4i is the Toronto-based software company that defeated Microsoft at the US Supreme Court in a recent David-vs.-Goliath decision. On June 9, America's highest court unanimously upheld an earlier ruling that found Microsoft guilty of patent infringement pertaining to Extensible Markup Language (XML) in its Word software. The court demanded that Microsoft pay $290 million to i4i.

A solid fence defines what is mine and what is yours. As Peruvian economist Hernando De Soto Polar has established, no society will prosper without property protection – and without an information framework (such as a patent office) that reliably records ownership of property.

As you read this, U.S. and Canadian judges are contemplating a $4.5 billion cash bid from a consortium that includes Apple and RIM for patents held by bankrupt Nortel. This represents $4.5 billion of value, as the free market defines value, in ideas and creativity. These are ideas that might never have surfaced but for the existence of robust property law protection.

The outcome of the i4i case was Goliathan in its impact for innovators in Canada around the globe who bang on the door every day of the US Patent and Trademark Office with new ideas to change the world. The process of filing a formal patent in the US patent office and the ensuing back-and-forth exchanges with the patent examiner can be arduous – and expensive in time and legal fees.

If Microsoft had won this case, the amount of money entrepreneurs spend on lawyers would balloon. The main legal question at stake was this: Microsoft wanted to change the standard of evidence proving a patent invalid – from “clear and convincing” to “preponderance of the evidence.” This change would have heralded entrepreneurial angst: the prospect of always feeling like your property is insecure would intimidate entrepreneurs considering property rights protection for their inventions. 

How does i4i affect healthcare innovation?

People concerned about healthcare innovation as an engine of human health and wealth generation should applaud Loudon Owen, i4i’s tireless Chairman in this historic legal battle. Consider just two patents that have generated royalty revenues and saved lives: Dr. Harry Jennings’ vaccine for group C meningococcal meningitis; and Dr. Stanley Zlotkin invention of Sprinkles to reduce anemia. Do we want to live in a society that makes it easier for mega-companies with deep pockets to pay lawyers to challenge these types of inventions? The US Supreme Court thankfully said ‘no’.

Many of us in the innovation chattering class like to bemoan the lackluster innovation performance in Canada (and in America, outside Silicon Valley). But we often fail to get concrete with suggestions over how to make things better.

When I think of innovation powerhouses in any sector – technology (IBM); healthcare (Mayo Clinic); consumer goods (Proctor & Gamble) – I think of companies with an embedded, formal innovation process that gives employees space to conjure up new ideas and helps staff objectively consider what aspect of their inventions can be patented and whether commercial value lies therein. Organizations such as Grand Challenges Canada have recognized this, which is why they support scientists in endeavors to commercialize solutions that improve global health.

If we have confidence that our property rights will be protected once we invent something to change the world, we’re going to be more willing to spend resources and time to pursue property protection. So the next time you consider filing for a patent, remember: we are all i4i.

About the Author

Neil Seeman is CEO of the Health Strategy Innovation Cell and a Senior Resident at Massey College in Toronto.

 


Comments

Anna Di Pietro wrote:

Posted 2011/07/20 at 11:05 AM EDT

The impact of IP laws upon innovation is not so clear cut. There are many examples of IP stemming the advancement of society in many different fields, from the arts to the sciences.

Take, for example, the arts, where artists build upon the work from their predecessors and peers. Are they being inspired, or stealing? There are an increasing number of lawsuits in this area.

The same can be seen with patent protection, where many companies now troll for patents not in order to be innovative and build our society, but to benefit from suing those that have employed (e.g. NTP and Visto suits versus RIM).

In health and science, what about the patents on human genes? Far back in 2005, National Geographic reported that 1/5th of the human genome had been patented. That's 1/5th of the genes that make up you and me. What impact will this have on R&D? Do you really think that these genes would not have been identified had there not been the capacity to patent them?

Conversely, open source believes that sharing is the way of the future. Even IBM has been involved in numerous open source projects and estimates it has saved tens of millions of dollars, if not more. We can see the advancement of open source Android versus Blackberry's proprietary's software, and how it has taken hold. Linux and Java are further examples. How about Wikipedia's success?

We must not arbitrarily defend patents and property rights when there are equally powerful alternatives.

 

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