Canadian indifference to intellectual property (IP) must be met with a concerted national strategy to ensure that investments in S&T are not squandered, according to a new report from the Canadian International Council (CIC). The Waterloo ON-based think tank recommends a series of sweeping changes ranging from the creation of a central office for IP headed by a strong and dynamic leader to new guidelines and funding mechanisms for universities to encourage more IP-sharing agreements with industry.

The report contends that Canada had an IP deficit of US$5.5 billion in 2009 — the same year that the World Bank reported that licensing from patents generated $160 billion worldwide — reflecting an undervaluing of IP which leads to IP-rich start-ups being targeted by foreign buyers. The loss of IP also undercuts the value of public support for R&D, with the inability to capture the full benefits of billions in public and private funding.

"Canada is beginning to pay a steep price for its short-sighted approach. Rather than owning IP, it is fast becoming a nation of renters," states the report. "Last year Canadian companies spent $4.5 billion more to acquire intellectual property than they earned from selling or leasing it — putting them at a serious disadvantage ... A deficit of this magnitude is stunning but, coincidentally, it matches the amount that the last of Nortel's patents fetched recently from an international consortium ... Clearly there is value in Canada's IP."

CIC research found that 58% of Canadian venture capital-backed firms that changed hands between 2006 and 2010 fell under foreign ownership, shifting control of the bulk of new knowledge-based enterprises offshore. It points to other countries such as the UK, Australia, China, Korea and South Africa that have developed IP policies, while others like Japan and Korea are launching sovereign patent investment funds to compete with other nations.

Entitled Rights and Rents: Why Canada must harness its intellectual property resources, the report's recommendations are aimed at industry, government and universities. Those targeting the university sector are receiving mixed reviews.

Dr Angus Livingston, managing director of the Univ of British Columbia's University-Industry Liaison Office, says many of the recommendations have either been tried (and failed) or reflect a naivete about the role IP plays in technology transfer to industry and company creation.

The report's singular focus on IP as the culprit for the flow of Canadian tech firms to foreign jurisdictions is being criticized as overly simplistic.

"Universities need to make things more effective, easier and standardized but the recommendations are not the right ones to get at those issues," says Livingstone. "The problem should have been framed as a multi-factor problem. Canada has a small domestic market and the capital markets are not effective. IP is only an element of it but it's not an IP issue. You can't keep companies here through changes to the IP regime."

"Canada's approach to IP is frozen in time. The last major modification to the Patent Act was in 2001, and the last time Canada signed an international IP treaty was in 1998. Remarkably, it has never conducted a review of its IP policy and practices that went beyond copyright issues. Protracted battles among various stakeholders have left Canada without a framework policy that can address economic sectors that require attention." — CIC report

Other factors are at play include duplication of efforts by industry, lack of long-term, sustainable funding for technology transfer offices and the reluctance of the granting councils to fund high-risk research.

"There's a danger of over emphasizing the role of IP in Canada. It's a small country," says Dr Richard Gold, a professor in McGill Univ's faculty of law specializing in intellectual property and common law property. "We have a robust IP regime but we need to use it more along with other mechanisms … On the industrial side, we don't share results. There's too much waste of resources duplicating. It's an international problem."

Livingstone, who attended a June/11 workshop held by CIC in Ottawa, says there were three distinct groups in attendance and that the discussion points didn't fully intersect, resulting in a series of recommendations that fail to get at the heart of the issue. He says the report's call for universities and industry to collaborate on developing a template for mutually agreeable licensing agreements is particularly naive.

"Standard agreements are sector and time specific and any standardized agreement would be wrong," says Livingstone. "We used one developed in the US and tried to adapt it. Companies found it too difficult and it didn't work."

The majority of the CIC's recommendations are directed towards government. In addition to calling for the appointment of a czar to head-up a central IP office, the report calls for a broad review of the current patent framework, a steering committee reporting directly to the prime minister, a special division within the federal court to speed up IP litigation and reduce costs, financial incentives to help small businesses and start-ups manage their IP and enforce their rights, high-level joint research projects to encourage better international collaboration and the creation of a public-private investment fund to pool patents in sectors critical to the economy. It suggests the latter recommendation should consider the model established by Northleaf Capital Partners Ltd, offshoot of the TD Bank Financial Group that manages VC investments for companies, the Ontario government and a large pension fund.

On the industry side, the report cites several examples of firms or organizations that could serve as models. Wesley Clover is lauded for its strategy of hiring graduates to help launch start-ups and providing training that includes strategic IP management.

Other models it endorses include two from Quebec. The Consortium for Research and Innovation in Aerospace in Quebec (CRIAQ) has been successful in giving royalty-free IP access to its members while universities can exploit it in non-aerospace sectors. To date, more than 120 projects have been launched and CRIAQ's membership has grown to 44 firms and 18 institutions.

The report also cites the final report of the recently disbanded Council of Science and Technology (CST), entitled Management of intellectual property in the relationship between universities and industry: Review of experience in Quebec, Canada and abroad.

That document recommends concerted action between universities, companies and research centres to provide training activities in innovation and entrepreneurship and initiatives to help SMEs manage their IP (R$, July 22/11). The CST also calls for mandatory IP management training for all graduates in science and engineering to raise the awareness of IP issues early.

The models support the CIC report's recommendation for adopting a small-business-friendly IP strategy through training in IP management and easy access to support, mentoring and networking.

McGill's Gold says there needs to be more policy around innovation in Canada and regulations that make obligations clear.

"Regulation drive innovation more than IP," he says. "The problem doesn't lie with the IP regime but with how we use the regimes we already have."

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