Feds prioritize local research and inventions
Innovation minister vows to `deploy all the tools' to keep assets in Canada
Innovation Minister François-philippe Champagne says the federal government is acting to ensure intellectual property developed in Canada remains in the country, following long-standing industry concerns about foreign firms capitalizing on domestic research and inventions.
Monday's budget promised to fund advice for high-growth firms and startups and review IP provisions in federal business-support programs. The government has also recently signalled greater scrutiny of foreign investments involving sensitive technologies and research partnerships. “Data and certainly intellectual property are going to be key in the economy of tomorrow,” Champagne said in an interview with The Logic on Wednesday. “I am willing to deploy all the tools that I have in my toolbox to make sure that this is staying in Canada.”
Innovation-economy executives and IP lawyers have long warned that Canada is failing to commercialize knowledge generated here, pointing to falling or lagging patenting activity in disruptive technology fields like artificial intelligence and quantum computing. Foreign firms reap the benefits by establishing partnerships with university researchers, setting up local subsidiaries that hire domestic talent, and acquiring promising startups.
In 2017, more patents per capita were filed listing Canadian inventors than by applicants based in Canada, “implying that Canadians often make inventions for foreign firms,” according to the Inclusive Innovation Monitor, compiled by Ryerson University's Brookfield Institute for Innovation + Entrepreneurship and the University of Toronto's Innovation Policy Lab.
“We're putting enormous focus on making sure that the IP that is financed, developed and created in Canada is adequately protected,” Champagne said, citing the government's national intellectual property strategy, announced in April 2018, as well as measures unveiled this week. The 2021 budget promised a review of IP provisions in the federal government's innovation and science programming, and allocated a combined $165 million for accelerators, incubators and the National Research Council's Industrial Research Assistance Program to provide IP services to high-growth and startup clients.
Last month, Champagne issued updated guidelines for foreign investments, signalling that the feds will consider intervening in deals that could transfer innovations in fields like AI and quantum out of the country. He also tasked a joint government-academia committee with developing rules for considering national security risks in research projects. “We want to be partnering, because knowledge knows no borders,” Champagne said. But for “IP that is developed from the research and the investments that are made (domestically), we need to take the appropriate steps to duly protect it.”
The minister told Bloomberg in March that the U.S. and other western economies should be less concerned about the updated investment guidelines. But over the last year, U.S. tech firms have acquired a number of prominent Canadian scale-ups. For example, Google bought augmented-reality company North in June 2020, while Santa Clara, Calif.-based Servicenow took over Montreal's Element AI in November. The Canadian government had provided funding to both firms, each of which had filed for several patents; North repaid its award from the Strategic Innovation Fund before the takeover. “When you look at our contribution agreements … we always make sure that we protect the IP that is financed (and) developed in Canada,” said Champagne.
As COVID-19 affects company valuations and operations, other countries have implemented measures against foreign takeovers. German lawmakers promised to use legal options, and proposed a fund to buy stakes to counter unwelcome bids, while the U.K. government sought expanded powers to block and reverse transactions. Asked whether he would take similar steps, Champagne said he was “certainly willing to consider, within the tools that I have in my toolbox, (how) to protect IP.”
Other provisions in Monday's budget also suggest the feds are focusing on retaining the benefits of domestic R&D. Of the nearly $444 million in new capital for the Pan-canadian Artificial Intelligence Strategy (PCAIS), $185 million is allocated to commercialization. The original program, announced in the 2017 federal budget, focused on funding universities to hire new research chairs.
“I think we were right at the first instance to bet on talent because (it) attracts investment,” said Champagne. He cited the example of Yoshua Bengio, co-chair of the federal AI advisory council, scientific director at the Pcais-anchoring Mila in Montreal and an Element AI co-founder. “How can we use AI to commercialize some of these new innovations? I see that as the next logical step,” said Champagne, noting the technology's potential in areas like materials science, climate-change adaptation and drug discovery.
The budget's IP provisions and the PCAIS commercialization funding are belated but positive developments, said Benjamin Bergen, executive director of the Council of Canadian Innovators, in an interview earlier this week. The scale-up lobby group has previously criticized the feds for failing to adequately consider intangibles in its business-support programs. “It seems like the government has (realized) that it needs to actually figure out how to get an ROI on these investments in order to grow the economy,” Bergen said.