The Internet Association, a U.S.-based industry association that counts most of the biggest names in the internet economy as its members (including Google, Amazon, eBay, Facebook, Netflix, and Yahoo), recently released a policy paper on how Canada could become more competitive in the digital economy. The report's recommendations on tax reform generated some attention, but buried within the 27-page report was a call for patent reform.

Patenting the Sun read more

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The internet giants warned against patent trolling, which refers to instances when companies that had no involvement in the creation or invention of a patent demand licences or other payments from legitimate companies by relying on dubious patents. Studies indicate that patent trolling has a negative impact on economic growth and innovation and is a particularly big problem in the U.S., which tends to be more litigious than Canada.

Given those concerns, the Internet Association urged the Canadian government to enact reforms to "limit the ability of non-practicing entities [a euphemism for patent trolls] of exploiting patents to make unreasonable demands of productive companies and prevent crippling damage awards."

While the Canadian government has yet to respond publicly to the recommendations, according to documents recently obtained under the Access to Information Act, earlier this year Industry Minister James Moore launched a series of private consultations with Canadian business on intellectual property issues. The government came prepared to engage directly on the patent trolling issue, going so far as to identify several potential policy measures.

Yet it was Canadian business that discouraged Moore from taking action, warning against the "unintended consequences" of patent reforms.

Ministry proposed tough reforms: documents

The primary consultation took place in Feb. 2014, featuring a who's who of Canadian business including associations such as the Canadian Chamber of Commerce and Canadian Council of Chief Executives as well as Blackberry, IBM, Bombardier, Microsoft, and Cisco. The internal documents indicate that Moore's opening remarks stressed concern with patent trolling, as he told the executives that "I am also particularly interested in hearing about any experience you may have had dealing with patent trolls in Canada or abroad."

Moore's comments were more than just talk. Government documents reveal that his department prepared a detailed discussion document on potential policy reforms that raised the possibility of implementing some of the toughest anti-patent troll reforms in the world.

For example, the government opened the door to a new prohibition against demand letters that are intentionally ambiguous or designed to induce a settlement without considering the merits of the claim. The government also raised the possibility of mandating public disclosure of the demand letters, which it hoped would create a public database of active patent trolling activity.

If the demand letter reforms were insufficient, the government mooted reforms that would grant the Federal Court the power to issue injunctions to stop patent trolls from forum shopping or amendments to the Competition Act to give the Competition Bureau the power to target anti-competitive activity by patent trolls.

Reforms 'could do more harm than good': industry

Yet despite the opportunity to give the green light to combat patent trolls, the Canadian business community urged caution. According an internal summary document on the discussions, Cisco warned that the reforms "could do more harm than good." Jim Balsille, the co-founder of Blackberry, indicated that he supported the intent of the patent troll reforms, but cautioned about the need to get the details right. The Canadian Chamber of Commerce also expressed concern with the reforms, arguing that the measures could legislate against legitimate assertion of patent rights and that they could create a chilling effect.

Given the negative response, the government appears to have backtracked on the patent troll issue. The initiative will come as a surprise to some, however, as the government's proactive efforts to address patent trolling were secretly met with opposition from some of the same groups that have not hesitated to publicly criticize Canada's intellectual property system.