Transport Committee on March 1st, 2012

[Mitch Davies]

We don't have a direct role in the policy of ITAR or that particular domain and policy you're interested in. I can only deal with this from an anecdotal point of view in terms of projects that are in the research and development area, particularly in support of training.

I was in Manitoba a couple of months ago and visited a joint facility between Red River College and Standard Aero. There's an issue of ensuring that anyone who enters the facility is recorded, and access to the actual manufacturing equipment is restricted. It was fairly seamless in how they had provided for that to meet ITAR requirements.

You have to take a specific question about a specific industry and address it to the experts. We'd be pleased, if you have something that's been raised with you, to take it back to officials in the department to get you a specific answer. Canadian industry, with a long history of being a supplier to aerospace defence industries and working as part of a value chain with American and other companies, is quite comfortable and familiar with doing that, so we work on navigating through this.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Chair, the intellectual property issue is very important. We have to make sure that the recommendations for the study on innovation allow us to deal with the issue through Industry Canada. All too often, it is perceived as protectionism, which has a direct impact on our own sovereignty. Actually, we are too often subject to regulations that come from somewhere else, especially Washington. I feel that our role in terms of innovation and intellectual property is to find an approach that will enable us to remove any contentious issues. My question is along those lines, and if you have answers, please forward them to me through the chair so that we can all benefit from them.

Ms. Burr, I would imagine that infrastructure is often the poor cousin of transportation. You have talked about an integrated freight system. What I really like about your approach is that you are putting the finger on the problem in order to fix it. Overwhelmingly, we do not devote sufficient resources to innovation. There is a small problem with research and development. Do you think we are doing enough in terms of infrastructure? We are often stuck in a failing system because we have not really taken care of it and because we have only made large one-time investments. That also has implications for transport. We are talking about basic infrastructure. In terms of research and development, do you think infrastructure should be dealt with on an equal footing as part of an innovative technology strategy?

[Kristine Burr]

There is research currently being done on the maintenance of infrastructure. I know that a few excellent centres doing university research have the expertise to deal with cement and transport equipment.

On our end, departmental officials started a thorough study on the impact of climate change on infrastructure, especially in the north of the country. We are currently developing a network of university researchers who are working on that topic, since we know that it should be a priority.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Poilievre is next.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Thank you.

Thank you for an excellent presentation. This is excellent information.

The amount of money we're spending on innovation and research as a government is $5 billion. Is anybody aware of what portion of that is dedicated particularly to innovation and research in the field of transportation technologies?

[Kristine Burr]

One of the challenges of getting a good handle on this is that it's dispersed across a number of government departments. You had witnesses from Natural Resources Canada yesterday, and I understand you're going to be meeting with several other departments. At the same time, as I mentioned earlier, the private sector itself is doing research in some areas.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Right. I'm just trying to understand it in terms of public expenditure.

Would it be possible for Transport to just go to the various programs and find out what portion each of them is spending on transportation-related technology? For the purposes of this study, it would be valuable for us to know what we're spending. Because the study's on transportation technology, it would be valuable to know how much the Government of Canada spends on transportation innovation and technology. Is it possible to talk about that?

[Kristine Burr]

Yes, we'll certainly pull some statistics for you.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Great.

Mr. Davies, the deck from industry lists some of the programs that the government has in place for innovation R and D on transportation and lists the strategic aerospace and defence initiative, Automotive Partnership Canada, etc. Is it possible for your department to produce for us a list of tangible achievements that these programs have generated? By “achievements”, I mean what technologies are actually in use today because of the program in question.

In that same table, could we have an explanation of how the program actually led to that technology? It's not an achievement for us to spend public money. That's not an achievement; the achievement is producing a result. If we as a committee are going to evaluate what the programs do, we need to know what results they get.

Would that be possible?

[Mitch Davies]

It could be done. It's a question of reflecting a continuity of programming. I'll just say, for example, the largest of the programs is SADI. This is a continuity of programming that reaches back to the program prior to Technology Partnerships Canada. Prior to that was the defence industry productivity program. Over the history of that program and support—for example, to aerospace in particular—the question would be what technologies, developed by the companies that have been supported, are now in products that have had market or commercial success and are producing revenues or jobs in Canada.

The question would be, how far back can we go? In the case of SADI, because it's a newer initiative, all of the projects that we've supported under SADI are now in the research and development phase. We will track, once they move to commercial phase one, whether they're repaying us. This would be an indicator of success: the company has revenues and they're repaying the government for the funding provided.

Second, we will track the success of the technology as it's inserted into their products downstream, so in order to provide some attribution of commercial success, we'd have to actually go back beyond the current program.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

That's fine.

[Mitch Davies]

The other two are newer initiatives, so we don't have the track record. It's exactly the same sort of undertaking for us to determine.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Could you go back, though, to their predecessor programs and as precisely as possible give us a cause-and-effect presentation of what technologies would not exist but for the program in question, with a specific explanation of the causation?

[Mitch Davies]

The only caveat I have to put on it is that you can't test the counter-factual way—that is, if you didn't do this, what would have happened otherwise? I have no way to test it. You can certainly look to the companies and the stream of technology to see where it was inserted into a product and to see how those products have turned out in terms of whether they're a commercial success, but you can't test what would have happened otherwise.

I just offer that as a challenge. It's not an obfuscation; it's more or less an issue in this area of programming generally. The overall theory here is that if you don't provide some incentive to the highly risky speculative activity that is the early stage of R and D effort, you would get less of it than is socially desirable; therefore, there is support and incentive in different forms on the part of the public.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Yes.

[Mitch Davies]

Then the question is this: do you have the right instruments? Did you spend more or less than you ought to get the result? It's hard to test, and I'm just offering that as a qualification.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I appreciate that it's difficult. It's like saying, “I take vitamin C pills and I'm still alive, so vitamin C pills must have saved my life, but I don't know what would have happened if I hadn't taken the vitamin C.” I appreciate the challenge in my question, but to whatever extent you can provide that information, I would really appreciate it, and I think it would be useful to the committee.

The question of procurement that my colleagues have raised is an important one. Over the course of the last 200 years, government has played a very limited role in the advance of transportation technology. Most of the innovations have come from the private sector.

The one exception to that really is mass procurement, mostly for military uses, of transportation technology. In those instances, though, the government was actually buying something that it needed to use. It was not buying airplanes, for example, to promote more innovation in aerospace; it was buying flying machines that it could employ in a war. The purpose of the procurement was not to support industry, but rather to serve a need that the government at that time had.

To what extent do you think procurement policy should be based on subsidizing innovation versus providing the government with a good or service that it actually needs?

[The Chair, Conservative, Merv Tweed]

Please be very brief.

[Mitch Davies]

It's a complicated question.

The long-standing policy approach in terms of the Government of Canada, as you referenced rightly, is that the industrial and regional benefits program is an offset to what other countries might undertake. More direct procurement to support domestic industry has been the way Canada has gone about industrial development while at the same time buying things it needs.

Then you would look at whether we have a benefit in providing more flexibility about what industries are developed on the part of the prime contractors by support to those industries for work that they must place in Canada because they've sold us something. Dollar for dollar they have a place of work with Canadian industry, but they don't necessarily have to build the thing that we have bought from them.

You can see it in terms of the areas where we have a competitive advantage. In aircraft components, for example, we have built specialized expertise in landing gear, which now allows us to compete for and win contracts for not just landing gear that goes on Canadian planes but for contracts from prime regional equipment manufacturers from around the world. In large measure, that expertise has been built up through the support from the industrial and regional benefits. It has placed contracts with Canadian firms by prime suppliers.

The question you asked is also one that the Jenkins group undertook a specific study on at the request of the Minister of Public Works and Government Services. It was on military procurement in particular, and whether Canada should adopt a more strategic approach with respect to supporting homegrown industrial innovation around what it's buying for military purposes. Again, that's a question that I think would be best referenced to the Department of Public Works and Government Services in terms of how they've undertaken a review of that recommendation that the Jenkins panel provided them.

[The Chair, Conservative, Merv Tweed]

I have to stop you there.

Mr. Toet is next.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

Thank you, Mr. Chair.

Thank you for a wonderful presentation this morning. There is a lot of insightful information here that's going to be very helpful to us.

One of the things I wanted to talk about this morning was IP protection and patent protection. In the Industry Canada deck that you've provided us with, you talk about IP protection. In the end, essentially you say that when there's financial support given to a private sector individual or company, the IP remains with them.

What are we doing to support them to make sure that IP protection is being adequately placed by them so that they are protecting themselves from outside interests infringing on their IP? It's great that we're investing a lot of finances into these companies and helping them to build this, but how are we working closely with them to make sure they are protecting that IP?

[Mitch Davies]

Maybe I'll provide a specific answer in terms of the programs.

The ones I'm most familiar with are in the strategic aerospace and defence initiative. There are clauses in our agreement that provide that they maintain protection for the IP they've developed through support that has been provided to the company and also that it be retained in Canada. There is also a clause in respect of the subsequent use of that IP to manufacture products that are derived from that intellectual property, so there is actually quite a strong regime ensuring that there are benefits to Canada in providing the research and development support.

More generally, how people can defend their intellectual property rights is, I think, a question for my colleague in terms of the legal protections and the overall regime.

[Gerard Peets]

Generally speaking, IP is a private right, and it's up to the rights holders to enforce it. That said, there have been a lot of people who have pointed out, to take the SME example, that they could use help in understanding how to navigate the system. The Canadian Intellectual Property Office does play a role in helping people understand how to use the IP system, how to get a good patent, and how to defend it, but it is the responsibility of the patent holder in general terms.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

Yes, and I understand that it is a responsibility, but I guess what I'm trying to get to is whether there is a quantitative follow-up to make sure that actually has been done—that it's not just that we've given them the tools, but that we actually make sure it has been done, and done in an appropriate manner. Is there a reporting back from them at the conclusion?

[Mitch Davies]

Well, I would simply reference the clients that I would be most familiar with through SADI. In all cases they're quite sophisticated in respect of the protection of the IP they've developed. Often at a later point in a project, or even when they're in the repayment phase, we undertake negotiations with them in terms of how they might wish to change arrangements around that IP, so I do see a lot of awareness of this aspect.

Gerard has mentioned that for the SMEs, it's more a matter of getting the awareness up. I know that the Canadian Intellectual Property Office is undertaking to increase its level of outreach overall, particularly for SMEs, to make them more aware of intellectual property rights and their importance and to make it easier for them, so that they can claim properly and have legal standing for the rights they should have to what they've developed.

Within the program there's quite a high level of sophistication with the clients, particularly in SADI. These are global enterprises and they're very sophisticated, and I'm quite confident that this is the last thing I have to concern myself with in respect of dealing with them. Rather, our conversations are more about how their commercialization process is undertaken in terms of prospects for repayment to the crown and matters of that kind. However, I think that's where CIPO's work in outreach with SMEs is quite critical.