The United States and Canada have long benefitted from a good economic relationship, including unfettered trade.  That’s why it comes as a surprise that when Canada hosted trade negotiators from 12 countries in July to focus on opening trade through the Trans-Pacific Partnership (TPP) Agreement, there was tension.

Canadian barriers to trade and investment remain discouragingly entrenched. Even though Canada is a key ally and close partner of the United States on a wide range of strategic issues, our neighbors to the North have emerged as a key detractor to updated rules for intellectual property (IP) rights needed to bring TPP into the 21st Century.

Unfortunately, Canada’s resistance to innovation-friendly rights and protections isn’t limited to the TPP. The country’s judiciary, enforcement, and law-making bodies are further solidifying Canada as an outlier on IP rights globally.

As a key driving force behind innovation and commerce, intellectual property is playing a key role in today’s global economy. Consequently, there must be a greater focus on preserving the best standards for IP, not just here in the United States, but all around the world, as technologies evolve and countries advance economically.

A 2012 report from U.S. Chamber of Commerce’s Global Intellectual Property Center entitled IP Creates Jobs for America highlighted specific metrics showing the importance of IP to economic growth:

IP-intensive companies added more than $2.8 trillion direct output, accounting for more than 23 % of total output in the private sector in 2008-09. In addition to direct output, IP-intensive companies create more than $3 trillion indirect output along the supply chain. Altogether, IP-intensive companies created more than $5.8 trillion direct and indirect output, accounting for 48.4 % of total private sector output in the United States.

The importance of preserving IP and reforming the patent system are both important for the economic growth of the country in a continuously changing world. The progress made in the U.S. Senate last spring on patent reform was cause for minor optimism, but important legislation has since stalled. The need still exists to put pressure on lawmakers to act, and that pressure is just as important as the issue itself. Hopefully the delay in action will not be too long. After all, economy, and the consumers and businesses that drive it can’t afford to wait.

Earlier this year, the U.S. Chamber of Commerce – a traditional ally of Canada especially on all-matters Keystone XL – released a report ranking Canada’s IP system on par with Russia, and far behind most other industrialized countries.

Unfortunately, as this report points out, the policy problems span across multiple industries.  One particular issue is the tortured interpretation of a Canadian court on the standard for patent utility, which has led to the invalidation of 20 patents that are recognized in numerous other countries. In fact, Eli Lilly filed for relief under dispute settlement provisions of the North American Free Trade Agreement (NAFTA), overseen by United Nations Commission on International Trade Law. Eli Lilly argued that “Canada has undermined the agreed upon objectives of NAFTA and breached its investment obligations to Lilly under NAFTA Chapter 11.”

Regrettably, rather than clarify the statute in question to protect intellectual property rights, Ottawa has opted to defend the Canadian court’s interpretation. The long-term affect is likely to be chilling on investment in Canada from innovative companies that depend on patent rights to support their R&D investments.

Meanwhile, nefarious criminal gangs which peddle fake drugs and designer garb are taking advantage of Canada’s lax enforcement laws at the border. American businesses have expressed unease with the lack of ex officio authority for customs officials to seize counterfeit goods – and for good reason. It is actually easier to move a container-load of sometimes utterly dangerous counterfeit products across the border Canadian border than it is to transport a mattress strapped to the roof of a car (which violates health regulations).

The U.S. relationship with Canada has suffered quite a few blows under the Obama Administration. The hope for building goodwill with Canada has seriously come into question, especially with tension created by the Keystone XL hold up. However, when it comes to other serious economic questions, Canada needs to make serious strides on their side of the border in intellectual property rights to instill business confidence and to become – finally – a truly innovative economy.

There are many aspects of the Canadian economy to admire, such as their low corporate tax rate.  But until Canada recognizes the importance of protecting intellectual property, American businesses, consumers, and taxpayers will suffer the consequences of weak protections of intellectual property.