Science and Research Committee on April 18th, 2023

[The Vice-Chair, Conservative, Corey Tochor]

I call this meeting to order.

Welcome to meeting number 38 of the House of Commons Standing Committee on Science and Research. Today’s meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application.

We have a busy committee today. First off are the witnesses for the support for the commercialization of intellectual property study, and then in the last hour we have our in camera business to discuss.

I would like to make a few comments for the benefit of witnesses and members.

For interpretation for those on Zoom, you have the choice at the bottom of your screen of floor, English or French. For those in the room, you can use the earpiece and select the desired channel. All comments should be addressed through the chair. In accordance with our routine motion, I am informing the committee that all witnesses have completed the required connection tests in advance of the meeting.

We will start our witnesses with five minutes for each for an opening statement, followed by rounds of questions. Today I will hand the floor over to Mr. Hinton for five minutes.

Please do your best to keep it within five minutes. I'll give you a heads-up when there is about one minute left.

Mr. Hinton, the floor is yours for five minutes.

[Jim Hinton, Intellectual Property Lawyer, As an Individual]

That's great. Thank you.

Thank you to the committee for inviting me to speak.

I am Jim Hinton, an IP lawyer and patent and trademark agent with Own Innovation. I am a senior fellow at the Centre for International Governance Innovation, a co-founder of the Innovation Asset Collective, as well as an assistant professor at Western University.

I'll begin my remarks by explaining why Canada has been focusing on the wrong thing when it comes to innovation policy and then move to concrete suggestions on how Canada can properly position its innovation policy.

Our misorientation on innovation policy has created significant risk to Canada's economic prosperity. If we don't reorient, Canada is at risk of becoming a middle-income country.

IP and data aren't everything, but they're almost everything. More than 90% of the value of companies today is in intangible assets. Registered IP like patents and trademarks are only the tip of the iceberg. While the U.S., China, Europe and other savvy countries have shifted decades ago to intangible asset capture, Canada has not prioritized owning and commercializing intellectual property.

You can't commercialize what you don't own, and as a country Canada does not own very much IP. For example, in the clean technology space we own less than 1% of global IP. No one is expecting us to be China or the U.S., but we are barely in the game, and things are actually getting worse. We need to get our own piece of the pie.

As we've heard from other witnesses, IP provides freedom to operate, which prevents or discourages others from taking your market. However, importantly, others' IP limits your freedom to operate, even though you don't intentionally steal anything. They leverage their IP position to limit your ability to grow and scale. In many ways, IP is zero sum. You have the IP and you get paid. If you don't, then you end up paying.

Currently, we allow our publicly funded IP to be given away. We do the hard work of funding the research and creating the great ideas, but then we assign the rights to that IP to foreign companies. They make the money on our IP, sell the products back to us and, most devastatingly, they use Canadian-funded IP against us.

More than half of all industry-assigned IP that comes out of Canadian universities is assigned to foreign companies. Canadian universities are actually limiting the freedom to operate of Canadian companies. They are not going to like me saying this, but as it currently stands for research outputs, Canadian universities are part of the problem. In a particularly egregious example, for Canada's so-called AI strategy, with hundreds of millions of dollars in public funding, only 7% of the IP generated ended up in Canadian industry hands, with 75% of the IP generated being owned by foreign companies. That cannot have been our intention.

Enough about the problems. They're well documented. It's on to solutions.

First, we must understand what success in the innovation economy means. Success is having Canadian-owned IP commercialized globally and at scale. We need a whole-of-government approach to embed Canadian-owned IP and data assets in global value chains. We need to decrease our IP deficit and move from being IP renters to IP owners.

To do that, we need to instill the mechanisms and infrastructure to support economic prosperity and increased productivity.

First, have full stack and coordinated IP education, so companies know the rules of the game. We have existing programs like the Innovation Asset Collective, CIPO outreach, IP law clinics, IRAP IP assist and new programs like ElevateIP, IP Ontario and other provincial efforts. These programs need to be turbocharged.

Second is IP generation to ensure that companies capture what they create. It's providing resources to support Canadian companies to action IP strategies and ensure that all innovation programs make IP costs eligible.

Third is IP retention, because the wealth accrues to the IP owner. We need to ensure that Canadian companies are the ones commercializing and making money from the IP. Mandate universities and research institutions to prioritize Canadian companies and steward publicly funded IP for Canadian economic benefit. In the review of SR and ED, we must ensure that IP being funded is beneficially owned by Canadian companies.

Fourth is collective action. Even if we do IP education, generation and retention, that will not be enough. The world of IP is already owned. We need to catch up. Take a collective effort to increase freedom to operate with patent collectives, data collectives and across all strategically important sectors. Every sector is now an IP sector.

Fundamentally, we need to take a whole-of-government approach to increase freedom to operate for Canadian companies. If we get this right, it will mean economic prosperity for generations. If we get it wrong, it means that we won't be able to pay for the social programs that Canadians rely on.

I'm happy to discuss it.

[The Vice-Chair, Conservative, Corey Tochor]

Thank you so much for that testimony.

We'll have the second five-minute opening statement and then we'll go into rounds of questioning.

Ms. Gagné, the floor is yours for five minutes.

[Marie Gagné, Chief Executive Officer, Synchronex]

Good morning, I'm Marie Gagné, CEO of Synchronex, a network of college centres for technology transfer and innovative social practices.

A CCTT is a centre for innovation and applied research. We have 59 of them in Quebec, 49 devoted to technology and 10 for social innovation. Each centre specializes in a field ranging from aerospace and integration of people with disabilities to agriculture and artificial intelligence. Each centre has its own area of expertise. They bring together a total of 2,400 experts across Quebec. They are the equivalent of technology access centres or polytechnics in the rest of Canada. Each year, our experts work with 6,000 businesses on 11,000 innovation projects. We're talking about intellectual property commercialization support here today.

Commercializing an invention means making it an innovation and integrating it into the market. Commercializing an invention means using it. The committee's study could be called “Support for the Use of Intellectual Property”. Because over 50% of Canada's GDP is linked to the activity of small and medium-sized enterprises, we need to develop a model that meets the needs of SMEs. They need a model that is both simple, to help them overcome their reluctance to innovate, and fast, to quickly show them the benefits of innovation. SMEs also need a low-cost system to protect profit margins, which took a hit during the pandemic and are currently being hampered by inflationary pressures.

There's no doubt that traditional patent management is neither simple, quick, nor inexpensive. We would argue that intellectual property needs to be put to work and licenced. In 99% of cases, when we work with businesses, we give them usage rights in their field of activity. Let me give you an example. If we develop a new alloy for a dental business, we assign that business the rights to use that alloy for dental purposes. We can then continue to work on that alloy and adapt it it for a battery or aerospace business, for example. We apply flexible, simple, effective intellectual property management.

We're certainly not into all or nothing. We're about incremental innovation. When we have an all or nothing, we work together with universities and then it's a more formal type of intellectual property based on a patent, and the university's development office works on it. In Quebec, this is done in cooperation with Axelys, an agency that deals with intellectual property.

So my recommendation to the committee is pretty straightforward and has to do with funding. If we want our businesses to be able to use intellectual property, and therefore commercialize it, we need to support even more funding for applied research, and therefore the technology access centres and polytechnics. They have expertise in innovation at the grassroots level, which enables the use of intellectual property.

In the most recent budget, we received over $100 million in additional funding for the college and community innovation program, which is administered by the Natural Sciences and Engineering Research Council. Those funds will be available for three years. Three years is not enough time to develop long-term strategies, nor is it enough time to attract, hire and retain top talent. So we need sustained recurring funding, and the $170 million requested was a minimum amount.

We need to support innovation in our SMEs so that intellectual property gets used. We also need to more adequately support networking, bridging between the applied research done in colleges and the university community. We need to shorten the time between idea, invention and innovation, that moment when a new technology hits the market and gets used. To do that, we need to more adequately support the relationship between universities and applied research organizations in the development of projects, upstream of business involvement, to reduce the risk to business. We need to make sure that what we offer to businesses is easy to integrate and promotes wealth creation for Canada.

I'm ready to answer your questions.

[The Vice-Chair, Conservative, Corey Tochor]

Thank you so much for that.

We will now enter the first round of questions, which will be six minutes apiece for each MP.

Kicking it off, we have MP Mazier for six minutes.

The floor is yours.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you, Chair.

Thank you, Mr. Hinton, for being here today.

The Globe and Mail reported that Canada's spy agency specifically warned Canadian universities about research ties to Huawei. Are you aware of this advice from CSIS?

[Jim Hinton]

Yes, CSIS is actively monitoring Canadian research institutions for IP transfer and reviewing ties to foreign government actors. Then we saw the banning of 5G organizations like Huawei in particular.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you.

Despite this warning, the University of British Columbia admitted at this committee that they are still working with Huawei technologies. We also know that multiple Canadian universities have transferred intellectual property to Huawei. Do you have any idea how many universities have ongoing research partnerships with Huawei despite the warnings from CSIS?

[Jim Hinton]

There are at least 20 Canadian universities that have been working with Huawei.

More recently, I pulled up some recent patent data, and the University of Toronto, McGill, Ottawa, Laval, Waterloo, UBC, Carleton, École Polytechnique, Western, Regina and McMaster all continue to work with Huawei. Nobody's told them to stop. They're getting money and they're happy, so they'll continue on.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Canadian universities receive government funding for research. This means that intellectual property transferred to Huawei by Canadian universities could be funded by these research funds. Would you agree?

[Jim Hinton]

Canadian universities are getting money. I think they got $3.34 billion in federal funding, and Huawei would be one of the beneficiaries of this funding.

Huawei's been able to generate hundreds of patents out of Canadian universities over the years.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you.

Has the current government done anything to guarantee that government research funding is not being used to develop intellectual property for Huawei or for the other entities that CSIS warned against?

[Jim Hinton]

No, it's the opposite. There are incentive programs through NSERC to encourage Canadian universities to partner with organizations like Huawei. There's nothing stopping a researcher or a university from continuing to work with those organizations. As we've seen, they'll continue to do that unless somebody steps up and says that we need to reconsider this. We did see, out of Alberta, that the Alberta government said that enough is enough and those universities were told to stop.

It's clear that the universities aren't governing themselves well enough. Somebody needs to come in and say, “It's time to handle this more appropriately.”

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you.

The Alberta government has done it. Have any other governments that you're aware of?

[Jim Hinton]

Early this year, we saw that Canadian researchers were working with Chinese military scientists, and then very quickly that was pushed back on. However, corporate actors like Huawei continue to be available for partnership, and a lot of these universities are in long-term agreements with these and getting a few millions dollars here and there to send the IP and all the commercial value back to Huawei.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Mr. Hinton, CNN Business reported that Huawei backtracked on a patent application they filed for a facial recognition system intended to identify Uyghurs from other ethnic groups. As you know, Parliament declared Beijing's treatment of the Uyghurs a genocide.

How do we know that technologies being developed with Huawei in Canadian universities are not being used by the Chinese Communist Party for uses such as surveillance of minority populations?

[Jim Hinton]

We don't know.

If you look at the list of IP that's coming out of Canadian universities, it's being assigned to organizations like Huawei. It's artificial intelligence, it's photonics, and it's advanced processing. Somebody needs to understand this, and we need to get to the bottom of it.

There's a transparency issue here. We don't know who or what is being done with Canadian publicly funded research, and there are egregious examples that we need to make sure are not happening. There are policies in place, but the fox is in charge of the henhouse. The researcher who wants to get the money is the one checking the boxes to say that there's no issue here. They're not security experts either, so they're not trained on what the geopolitical issues they need to be looking for are. They don't have that expertise. We need somebody to do that proper governance.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

I guess I have about a minute left.

Is there anything else you want to add from your opening statement or to any of the questions I've asked?

[Jim Hinton]

Yes. I think Huawei is one example. It's an egregious example, because we're working with them through the front door when we're worried about them going through our secure data networks.

However, it happens across the board. We basically give away our IP to global companies all the time. We're just happy to participate, and that 75% of the AI IP is just abysmal. Nobody should be thinking we need to be funding and giving away our IP like that. They're profiting off of us. They're using that data. There's no control over it. That's not how innovation works.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you.

That's all, Mr. Chair.

[The Vice-Chair, Conservative, Corey Tochor]

You had 21 extra seconds. Thank you for being very tight with your time.

We're now moving on to Madam Diab for six minutes.

[Lena Metlege Diab, Liberal, Halifax West, NS]

Thank you very much, Mr. Chair.

Welcome to our witnesses today.

Ms. Gagné, I have a few questions for you and I'll start by congratulating you for your experience in this field.

As a woman, I'm very interested in the challenges that women face in the area of intellectual property commercialization. Can you tell us about that this morning?

[Marie Gagné]

Are there any pitfalls for women in commercializing intellectual property? I would say that it's women's struggle in general to take their rightful place in society.

Are intellectual property issues more important? In social innovation—the door I want to open—when we talk about commercializing new ways of doing things and new approaches, anything having to do with equity, diversity, inclusion and decolonization is part of those new practices. This is very often forgotten when we talk about commercialization of intellectual property. That's why I prefer to talk about using intellectual property.

In addition, intellectual property that is created in social innovation generates multiple types of wealth, because it can be transferred across multiple organizations. We often want knowledge to multiply and be shared far and wide. Therefore, if we want to help women and minorities take their place, we mustn't forget the mechanisms that need to be put in place to support the use of intellectual property in social innovation. One way to do that would be to create a funding program dedicated to applied college research and adapted to its realities at the Canadian Institutes of Health Research, but also at the Social Sciences and Humanities Research Council. It could use the same model as the Natural Sciences and Engineering Research Council of Canada's college and community innovation program. That would start appropriating new and innovative societal practices more broadly.

[Lena Metlege Diab, Liberal, Halifax West, NS]

You brought up something very important. What supports would you say are currently in place in Quebec and in the rest of Canada? Also, can you recommend any improvements the government should make to support research?

[Marie Gagné]

We talk a lot about the economic value of intellectual property, when what we should be talking about is socio-economic value. Top social science researchers can be found in colleges, polytechnics and universities in Quebec and Canada. Support is needed to bridge the gap between basic research and applied research. Additional funding is also needed to support knowledge transfer to interested stakeholders, in other words, not-for-profit organizations and organizations with limited means but the ability to access broad segments of the population. In many cases, they include vulnerable groups in society who have been shunted aside, as well as professional settings that are very much in need of social and societal improvements. Health care, in particular, comes to mind. The focus is on managing disease, not on managing health. If we want to manage health, we have to focus on social innovation pre-technology.