A na­tional IP strat­egy is a crit­i­cal step in Canada’s ‘in­no­va­tion agenda’

The Globe and Mail (Alberta Edition) - - REPORT ON BUSINESS WEEKEND - JAMES HINTON PETER COWAN

The re­cent fed­eral bud­get sig­nalled a dra­matic shift in Canada’s ap­proach to in­no­va­tion. By an­nounc­ing a na­tional in­tel­lec­tual prop­erty (IP) strat­egy, the gov­ern­ment fi­nally ad­dressed the calls of in­no­va­tion ex­perts who un­der­stand the crit­i­cal role of IP in a 21st-cen­tury econ­omy. The gov­ern­ment also sig­nalled its con­cern for tax­pay­ers who have shov­elled bil­lions of dol­lars of in­vest­ments into in­no­va­tion in­puts, but re­ceived zero na­tional growth in in­no­va­tion out­puts.

Although short on de­tails, the two para­graphs call­ing for a na­tional IP strat­egy are a crit­i­cal step for tear­ing Canada away from the cur­rent cy­cle of rein­vest­ing only in in­no­va­tion in­puts, such as pub­licly funded re­search and tal­ent, while al­low­ing the out­puts to be raided by for­eign firms, with Cana­dian com­pa­nies then forced to li­cence back their own tax­payer-funded IP.

Canada has never be­fore had a na­tional IP strat­egy, so get­ting it right will set the stage for sub­se­quent in­no­va­tion strate­gies. Here are some fac­tors that our pol­icy mak­ers must take into ac­count:

Cana­dian in­no­va­tors have only a ba­sic un­der­stand­ing about IP

Cana­dian en­trepreneurs un­der­stand IP strat­egy as a defensive mech­a­nism to pro­tect their prod­ucts. In re­al­ity, IP is the most crit­i­cal tool for rev­enue growth and global ex­pan­sion in a 21st-cen­tury econ­omy. Cross-dis­ci­pline aware­ness and education is needed so that our in­no­va­tors know how to gen­er­ate IP through tech­nol­ogy stan­dards, reg­u­la­tory de­sign, ecosys­tem-li­cens­ing strate­gies, lit­i­ga­tion, trade agree­ments and so on. Com­pa­nies should also have ac­cess to pro bono and low-cost ser­vices at all pub­licly funded in­sti­tu­tions.

Fo­cus on global IP land­scape, rather than tweak do­mes­tic IP rules

Cana­dian in­no­va­tors com­pete in global mar­ket­places where the large com­mer­cial­iza­tion op­por­tu­ni­ties lie, so Cana­dian patents are an af­ter­thought, even for Cana­dian in­no­va­tors. Canada’s IP regime, in­clud­ing the Cana­dian In­tel­lec­tual Prop­erty Of­fice, needs a strat­egy that re­flects global norms for IP pro­tec­tion, pro­tects Cana­dian con­sumers and shrewdly sup­ports Cana­dian in­no­va­tors.

Cana­dian busi­nesses own a dis­mal amount of IP

Although IP has emerged as the most valu­able cor­po­rate as­set over the past two decades, it is over­looked by Cana­dian pol­icy mak­ers and busi­nesses. As our gov­ern­ments con­tinue to in­vest in high-po­ten­tial or gen­eral-pur­pose tech­nolo­gies such as ar­ti­fi­cial in­tel­li­gence (AI), quan­tum, clean tech and blockchain, we need to in­vest in strate­gic patent gen­er­a­tion to cap­i­tal­ize on this in­vest­ment. But patent gen­er­a­tion is not a sim­ple game of vol­ume. Cana­dian in­dus­try needs busi­ness-rel­e­vant patent as­sis­tance to help our re­searchers and high-growth firms gen­er­ate and re­tain qual­ity IP that will help ex­pand their busi­nesses.

Build­ing a qual­ity patent port­fo­lio re­quires tech­ni­cally savvy ex­perts

A high-qual­ity patent port­fo­lio needs to in­clude is­sued and in­force patents, in­clud­ing patents out­side of Canada in key mar­kets such as the United States and Europe. Strong port­fo­lios will also have broad sets of claims that are prac­tised by in­dus­try, spread across many patents cre­at­ing a cloud of rights with pend­ing ap­pli­ca­tions. Cana­dian en­trepreneurs are not taught how to build a qual­ity patent port­fo­lio with all of th­ese at­ten­dant el­e­ments. There needs to be fore­sight to un­der­stand where the in­dus­try is evolv­ing to en­sure patents have mar­ket rel­e­vance.

IP ben­e­fits from pub­lic-pri­vate part­ner­ships are flow­ing out of coun­try

To com­mer­cial­ize re­search, pub­licly funded in­sti­tu­tions cur­rently part­ner with in­dus­try play­ers. Most agree­ments end up with newly de­vel­oped IP whol­ly­owned by the in­dus­try part­ner be­cause they have the vi­sion to har­ness the value in the IP. Th­ese in­dus­try part­ners are al­most al­ways for­eign multi­na­tion­als, lead­ing to crit­i­cal leak­age of IP out of Canada. This ex­plains why Cana­dian uni­ver­si­ties have de­vel­oped world-lead­ing IP in highly valu­able fields such as re­gen­er­a­tive medicine, Ebola vac­cines, ma­chine learn­ing and AI, but most of the IP is cur­rently owned by for­eign firms, mov­ing the re­sul­tant wealth and as­so­ci­ated eco­nomic ben­e­fits out­side Canada.

En­sur­ing that IP gen­er­ated in Canada with tax­payer fund­ing is avail­able to Cana­dian in­no­va­tors is crit­i­cal to be­gin­ning to boost our in­no­va­tion out­puts. IP ex­po­sure-re­duc­tion mea­sures, such as a patent col­lec­tive, are one tool for al­low­ing for the ac­qui­si­tion and bundling of foun­da­tional patents in a man­ner that pro­vides Cana­dian in­no­va­tors with mar­ket-ac­cess op­por­tu­ni­ties (tech­ni­cally called their ‘Free­dom to Op­er­ate’) in the mar­kets that they need to ac­cess for global growth. A strate­gi­cally de­signed patent col­lec­tive is one so­lu­tion that would help deal with chal­lenges fac­ing Canada’s in­no­va­tion ecosys­tem.

Canada’s IP leak­age will not im­prove un­til we stop en­cour­ag­ing the perverse prac­tice of forc­ing Cana­dian com­pa­nies to li­cense back Cana­dian tax­payer funded IP from their big, for­eign tech­nol­ogy com­peti­tors. In­stead of rein­vest­ing in Cana­dian R&D, Cana­dian com­pa­nies are pay­ing IP roy­alty fees to for­eign com­pa­nies. This also ex­plains Canada’s low busi­ness-en­ter­prise ex­pen­di­tures on re­search and de­vel­op­ment (BERD) as ra­tio­nal be­hav­iour by cor­po­rate de­ci­sion mak­ers who as­sess un­fa­vor­able Free­dom-to-- Op­er­ate in­vest­ments.

Canada’s in­no­va­tion strat­egy must con­sider own­er­ship and re­ten­tion of our IP as one of its core prin­ci­ples. Are we sat­is­fied with per­pet­u­ally fund­ing IP cre­ation, while let­ting for­eign coun­tries reap the ben­e­fits? Or will we strive to be true ben­e­fi­cia­ries of the wealth and jobs that flow from our in­tel­lec­tual prop­erty? As Canada con­tin­ues to shift away from our tra­di­tional economies and make fur­ther in­vest­ments into in­no­va­tion, our poli­cies need to fol­low suit. IP is the 21st-cen­tury cur­rency of choice for in­no­va­tors and with­out it we will con­tinue to lose jobs across all skill lev­els, while our most skilled grad­u­ates will seek ca­reer op­por­tu­ni­ties abroad with those com­pa­nies that own the most valu­able IP.

James Hinton is a lawyer, patent and trade­mark agent with Bere­skin & Parr LLP and an as­sis­tant pro­fes­sor at West­ern Univer­sity. Peter Cowan is a se­nior IP strate­gist who led teams on all pro­cesses and meth­ods used in patent strat­egy, port­fo­lio ac­qui­si­tion, man­age­ment and li­cens­ing.

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