Thomas E. Clarke

Why Canada Needs a Technology Transfer Act

By Thomas E. Clarke

The management of intellectual property (IP) within the federal government is out-of-date. Current legislation and policies do little to ensure fairness, legitimacy and consistency in the assignment of IP rights to external contractors and the distribution of monetary rewards to internal (government scientific/technical personnel) IP developers. In Canada, the assignment of IP rights and distribution of monetary rewards resulting from the successful commercialization of IP is guided by an antiquated Act and a collection of Treasury Board policies that have been ignored by some senior bureaucrats. In the US, technology transfer activities from government to industry/academia are mainly governed by recent Acts of Congress.

A current 1991 Treasury Board policy calls for contractors to retain the ownership rights - subject to several exceptions - to any IP they develop as a result of work done under a procurement contract. The objective is to encourage the private sector to invest the time and money required to commercialize the resulting IP. Unfortunately, the exceptions were drafted so broadly that government departments and agencies can easily invoke them and retain ownership of any commercially valuable IP. Most do, and there is no appeal process.

This "Crown Pays, Crown Owns" approach is partially driven by an attitude that government bureaucrats know best. Compounding this attitude is the shortage of money in government laboratories, encouraging laboratory managers to exploit IP in such a way as to generate revenue. This is perfectly understandable in light of the short-sighted financial attacks on the federal laboratory budgets in recent years.

A new policy to take effect this October reiterates the contractor ownership position, but still leaves the ownership decision in the hands of bureaucrats. This is in sharp contrast to the US where the contractor usually makes the decision on IP ownership. A change in the new policy, however, is that bureaucrats can't use fragmentation of technology as a reason for retaining IP ownership of incrementally developed technology to use as a source of revenue.

Like its predecessor, however, the new Treasury Board policy does not address IP ownership situations where the IP results from collaborative arrangements with an external partner. Bureaucrats are therefore still at liberty to claim government ownership of any IP that results from collaborative agreements, which have become increasingly common. Wording in the new policy also implies that any IP that is the by-product of producing a specific good or service for a government department is automatically owned by the Crown. As such, IP is not covered under the new IP ownership policy and the net result is a new policy that is weaker than the 1991 version. And there is also still no appeal process for contractors.

Where IP is developed internally by government employees and is commercialized by the private sector, a 1993 Treasury Board policy calls for the award of between 15 - 35% of any revenues received by the government to be distributed among the inventors and key contributors (innovators). But the distribution of awards is discretionary and in a few cases awards have been denied altogether. Unlike the US, there is no guarantee that the balance of the IP revenues will be returned to the originating laboratory.

A Canadian technology transfer act must take into account the best interests of both the private sector and government inventors/ innovators. Without a comprehensive new Act, the government runs the risk of alienating their own employees and entrepreneurial high technology companies that will be reluctant to be involved in technology transfer or collaborative R&D projects.

An Executive Summary of the Report on which this opinion piece is based can be found at http://www.stargate-consult-ants.ca. Thomas E. Clarke is President of Stargate Consultants Ltd, which specializes in science policy and R&D management consulting, and R&D management training.