INNOVATION AND COMPETITION ENFORCEMENT IN CANADA

1. INNOVATION AND COMPETITION ENFORCEMENT IN CANADA Adam Fanaki Special Counsel to the Commissioner of Competition Competition Bureau Legal Services Justice Canada October 29, 2008

2. Introduction “Much of Canada's poor productivity performance can be attributed to the comparatively poor performance of Canadian firms with respect to innovation. We rank poorly across almost all aspects of innovation: the creation of knowledge, the diffusion of knowledge, the transformation of knowledge and the use of knowledge through commercialization” - “Compete to Win” – Competition Policy Review Panel

3. Convergence and Divergence • General desire among competition authorities to avoid chilling innovative activity; • Recent developments highlight divergence in approaches between and among jurisdictions; • Concerns arise when conduct is subject to differing or even conflicting standards between jurisdictions; • Fragmented or inconsistent enforcement has the potential to chill pro-competitive innovative activity;

4. Comity • Comity: important concept in globalized economy; • Also important given significant growth in the number of competition agencies enforcing antitrust laws worldwide; • ICN in October 2001 consisted of 16 competition agencies from 14 jurisdictions. Now, 102 competition agencies from 91 different jurisdictions; • When should the Bureau defer to an ongoing investigation or resolution in another jurisdiction? (e.g. Microsoft);

5. Enforcement • Bureau is charged with protecting and promoting competitive markets in Canada; • Commentators have traditionally underscored a tension between intellectual property and competition regimes; • These regimes should not be viewed as contradictory, but complementary; • Competition laws may be invoked to protect incentives for innovation from anti-competitive conduct;

6. Enforcement • “Mere exercise” of an intellectual property right: s. 32(1) of the Competition Act applied in circumstances where the exercise of such a right is restraining or injuring competition unduly; • “Something more than the mere exercise” of an intellectual property right: Bureau will challenge conduct that that substantially or unduly lessens or prevents competition in a market; • Recent jurisprudence confirms the important role of the Competition Act in dealing with intellectual property issues (Eli Lilly and Co. v. Apotex Inc.);

7. Efficiencies • How to appropriately assess innovation incentives in cases of abuse of dominance? • Dominant firm engaged in conduct with an intended predatory, exclusionary or disciplinary negative effect on a competitor; • A valid business justification may overcome deemed intention based on actual or foreseeable effects of the impugned conduct; • Would preserving incentives for innovation constitute a valid business justification for otherwise anti-competitive conduct?

8. Efficiencies • Canada Pipe: A valid business justification must be more than simply a self-interested explanation for the conduct; • Must be “a credible efficiency or pro-competitive rationale for the conduct in question, attributable to the respondent, which relates to and counterbalances the anti-competitive effects and/or subjective intent of the act”; • Remains to be determined whether preserving incentives for innovation would constitute an alternative and pro-competitive rationale for the purpose of the abuse of dominance provision;

9. Conclusion • Bureau recognizes importance of fostering complementary – not contradictory – relationship between competition and intellectual property laws; • Bureau will continue to strive to find the right balance between creating incentives for continual innovation and the encouragement of vigorous competition in the market place.

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