Experts are questioning the focus and merits of Ontario’s new IP plan

Editor's note: In light of criticism by Jim Balsillie in an OpEd published on the Research Money website ("The banality of Canadian discourse on research commercialization," Sept 9, 2020), directed at the author and experts cited in this article, we are making it available to non-subscribers for a limited time. We encourage readers to submit comments to editor@researchmoneyinc.com.

In announcing Ontario’s IP Action Plan in July, the provincial government said it “will drive the province’s long-term economic competitiveness by prioritizing the generation, protection and commercialization of intellectual property.” But some academic researchers are questioning whether the plan – the first provincial IP plan in Canada – is adequately informed, takes an effective approach, or is the right policy tool to achieve the province’s economic goals.

Dr. Creso Sá (PhD), distinguished professor of science policy, higher education and innovation at the University of Toronto told Research Money that the IP Action Plan, which follows recommendations in a report released this past February by Ontario’s Expert Panel on Intellectual Property, is based on a mistaken assumption: that “academic institutions pumping out patents can somehow be a solution to the problem of weak generation of IP in industry.”

Science involves many activities and goals, and commercially successful inventions are the exception rather than the rule, Sá said. “The problem is not only this misguided expectation of a direct technological outcome of scientific research, but also the short-term perspective that this [outcome] should happen within five years or it should happen even within our lifetime.”

Instead of focusing on university patent counts and royalties, policymakers should address the real problem, which is the lack of R&D investment and licensing of IP by Canadian industry, Sá said.

University of Ottawa law professor Michael Geist, who testified before the House of Commons Standing Committee on Industry, Science and Technology for its 2017 report on IP and tech transfer, said in an interview that the committee "got it right," compared with Ontario's expert panel, by taking a more comprehensive approach than Ontario's panel did. The Standing Committee's report emphasized that innovation comes in many forms, that patent data alone isn’t an indicator, and that much innovation comes from outside the patent system, said Geist, a Canada Research Chair in Internet and E-commerce Law.

For example, open innovation (which treats R&D as a collaborative, open system) often yields tremendous results and should be a fundamental part of publicly supported institutions, he said. “You don’t see that reflected sufficiently in the Ontario plan.”

“I think it [Ontario’s plan] reflects a mistaken policy perspective that the primary way for societal benefit out of this research investment is to commercialize it,” Geist said.

But Natalie Raffoul, who served on Ontario’s expert IP panel, defended the plan’s focus on IP and commercialization and the panel’s concern that Ontario and Canada are not keeping up. She said that international data, including from the World Intellectual Property Organization, show the country is lagging Germany, Israel and other countries in filing patents, commercializing research and generating royalties.

Canada produces “great research” and peer-reviewed papers, said Raffoul, a patent lawyer and managing partner at Brion Raffoul Intellectual Property Law in Ottawa. “But we are not as good at the commercialization of research, including the amassing of intangible stock assets in areas where we are really research winners.”

Allyssa Keep, who’s on the secretariat for Ontario’s expert panel, said in an email to Research Money that the University of Toronto, for example, generates $1.3 million per year in “running royalties” (recurring royalties paid on net sales of licensed products) from $468 million in research expenditures. That amounts to about $2,800 of royalties per $1 million of research spending, with no “unicorn” companies created in at least the last decade from U of Toronto research, she said.

In comparison, many U.S. universities generate more than $100 million per year in running royalties “and are well known as engines for birthing unicorns,” Keep said.

Sá, however, argued that only a few U.S. universities generate such sizeable royalty revenues, out of some 4,000 higher-education institutions. Moreover, “over-patenting” by some American universities slows down research and threatens scientific progress and technological innovation, he said.

IP being lost to foreign entities

The Ontario government has charged the same expert panel that recommended the IP plan with implementing it. Both panels are chaired by Jim Balsillie, former chairman and co-CEO of Research In Motion (now Blackberry), and co-founder of the Council of Canadian Innovators.

Balsillie has complained publicly that current foreign investment rules fail to properly account for new technologies and IP rights, which allows foreign governments access to Canada’s critical research and IP. Ontario’s expert panel on IP also flagged this concern.

While establishing his Ottawa-based networking technology firm RANOVUS, CEO Hamid Arabzadeh told Research Money that he found many of Ontario’s university professors and their graduate students were already doing contract research for multinationals such as Huawei, Nokia and Ericsson.

“Not only are we losing our IP, which is really critical and which taxpayers paid for, but we’re also losing the capability to generate new IP by these professors,” Arabzadeh said.

However, in separate interviews, University of Toronto professors Dr. Cynthia Goh (PhD) and Dr. Molly Shoichet (PhD), whose laboratories generate IP and who have created startups including with their students, both said entrepreneurs selling their IP is part of the innovation ecosystem. “It shouldn’t be looked upon as a negative if they can sell,” said Shoichet, a Canada Research Chair in Tissue Engineering, pointing out that building companies in Ontario is only one metric of success.

Geist said it’s a misconception that Canadians don’t benefit from foreign investment in research done here. “By developing the skills and knowledge in Canada, we’re laying a bet that the jobs will stay here and that the jobs will accrue in Ontario, regardless of who is the ultimate IP holder.”

Shoichet and Goh both said they’d like to see a Canadian IP plan that includes the value and benefits of higher education to the economy, as well as new and more comprehensive indicators on innovation and tech transfer by post-secondary institutions, as the Standing Committee’s 2017 report recommended.

“The most important transfer that we do, and which is certainly never captured, is training of really excellent people who make a difference,” including with their own startups, said Goh, a chemistry professor at U Toronto’s Institute of Medical Science and the Munk School of Global Affairs and Public Policy.

Tech transfer has evolved beyond — and is broader than — patent licensing, said Dr. Stephen Susalka (PhD), CEO of AUTM (previously the Association of University Technology Managers), in an interview with Research Money.

The metrics used to measure tech transfer need to be more comprehensive, which is what AUTM, the European Commission and other organizations worldwide are developing, he said. For example, in a 2019 report prepared for the Biotechnology Innovation Organization, AUTM used an updated “input-output” approach (with metrics such as contribution to GDP and number of jobs supported) to estimate the economic impact of academic licensing over 22 years.

“If you think of tech transfer as not a revenue-generating operation for the institution, but instead a means of providing impact to society from that research at those institutions, you’re going to look at those metrics differently,” Susalka said.

TABLE: Comparing the perspective of Ontario’s expert panel on IP with that of the Standing Committee on Industry, Science and Technology in its 2017 report

Ontario will establish centralized IP education and expertise resource

Raffoul said one of the first priorities of Ontario’s IP plan is building a centralized IP education and expertise resource for the research community. IP lawyers, patent agents and other experts will be accessible across the province to post-secondary institutions and innovation “intermediaries,” including regional innovation centres, incubators and accelerators.

Ontario’s IP plan also will include a “standardized governance framework” for all innovation intermediaries receiving public funds. Raffoul said this framework will ensure board members have IP skills and that the organizations are aligned with the government’s mandate to generate IP commercialized for Ontario’s benefit.

The governance framework won’t be applied to universities, colleges or their technology transfer offices, because each post-secondary institution has its own collective bargaining agreement stipulating who is going to own IP, Raffoul said. Ownership falls into three categories: university-owned IP, researcher/inventor-owned, or a hybrid of the two.

However, the expert panel did recommend that all universities and colleges articulate an IP policy with a “clearly defined mandate regarding their roles and responsibilities in generating IP for the benefit of Ontario’s economy.”

Ontario’s IP plan also will include developing consistent metrics for management performance within the innovation intermediaries, as well as metrics to monitor outcomes such as commercialization, Raffoul said.

Claudia Dessanti, senior policy analyst at the Ontario Chamber of Commerce, which supports the province’s IP plan, said post-secondary institutions are great at generating R&D and valuable inventions. “But then there’s a gap at the commercialization level and the adoption of the technology in industry.”

Within the context of COVID-19, governments are investing aggressively in the innovation system and businesses are accelerating their adoption of technology, Dessanti said. “So if we’re not creating the monetary value of that domestically, it’s a lost opportunity.”

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Correction: Natalie Raffoul, managing partner at Brion Raffoul Intellectual Property Law, is a member of Ontario's expert panel on IP.