Good morning, honourable members. Thank you for inviting me to this standing committee meeting.
I've read over the years many reports on commercialization and intellectual property protection. It's actually refreshing to be invited to this kind of format to give you a perspective right from the coal face, from a practitioner's point of view. So again, thank you for the invitation this morning.
I'll make a few brief remarks about the University of Waterloo and set the context for my following remarks.
The University of Waterloo is a relatively new university, incorporated in 1957. It was incorporated with a couple of key principles. One was the co-op education program. It was designed to have a closer working relationship between industry and academe. With students going out into the workplace, learning practical skill sets, and bringing that back into the learning environment, professors would then get that continuous feedback mechanism—which is what's relevant and practical to industry—and that would then get introduced back into the classroom.
Along with that, the university focused on engineering and math in its earliest days. We were the first university to have a faculty of math. It was very much driven by a desire to work closely to solve industry problems. The university's pedigree was based on this closeness to industry, on industrial relevance, bringing that into a learning environment.
The third pillar on which the university was built was an intellectual property policy that granted ownership to the inventors. The principle behind that was that incentives drive commercialization activity. Incentives are is a motivator to actually take innovation, create it under their research programs, and move it out into the marketplace.
That inventor ownership policy has been responsible for attracting more entrepreneurial-oriented faculty members. It draws to the University of Waterloo certain types of faculty members, those who are interested in commercial activity. And actually, those kinds of faculty members play nice with industry, so there's a very interesting dynamic. It's a culture that's been cultivated at the university right from inception.
In the Canadian university IP landscape, I guess the relevant contrast is with the U.S., where intellectual property is owned by the institutions under the Bayh-Dole Act, whereas in Canada it is policy driven. Each individual university sets policy with respect to its intellectual property ownership practices. Approximately 40% of Canadian universities have a form of inventor-own or joint ownership policy. The rest, of course, would be institution-owned.
Waterloo's policy, as I mentioned earlier, is an inventor-own policy. The philosophy is that ownership attracts high-quality entrepreneurial researchers, and incentive is the best motivator to promote the transfer of technology. The result is that UW is widely acknowledged as one of the most entrepreneurial research environments in Canada.
One might wonder why there is a technology transfer office at Waterloo, then, if faculty members own it. Of course not every faculty member is entrepreneurial. There are many who would prefer to just stick to their academic pursuits. Our office is there as one of many options for our faculty inventors and creators to support commercialization activity.
So we are there, and we have to market our services to our faculty members. It forces us to be more customer-focused. It requires us to be proactive in finding the best researchers, and marketing our services to them, and actually offering them a value proposition.
If they work with us, the concept is that we share revenues: 75% to the creator-owners, 25% back to the University of Waterloo. As a consequence of both the ownership policy and the revenue-sharing model, it's one of the most attractive inventor commercialization environments in Canada from a faculty member's perspective.
You can't talk about intellectual property without talking about commercialization. IP, or patents in particular, is almost always a prerequisite for commercialization, with the exception of software, where you don't necessarily need patents. The Institute for Competitiveness and Prosperity has indicated that a solid measure of a region's innovative capacity is patenting. Compared to the U.S. peer jurisdiction, Ontario's patent per output is 55% lower, and intellectual property represents 45% to 75% of corporate value of the Fortune 500 largest companies. It's quite clear that in intellectual property, having patents or investment in patents is a necessary precursor to future commercial opportunities and the creation of wealth.
Universities often make very early and thus very risky investments in intellectual property. We see stuff that's very early. In fact, it's not uncommon for colleagues—Gay, me, and others—to see faculty members come into our offices two days before a conference, when they're about ready to disclose the technology, requesting patent protection to be filed to preserve an opportunity. Then of course you're forced to make decisions very quickly.
Fortunately, there are very affordable ways to file patent protection to preserve those opportunities, but we're in a very fast-moving environment sometimes, and we're forced to make decisions on value propositions on stuff that's very early and without a lot of feedback as to what the market opportunity might be.
Essentially, we're in a position where we are creating an asset. Our investments preserve an opportunity for future commercialization, commercialization beyond intellectual property. IP or patents are essentially an ante to play in the commercialization game. Universities most commonly operate in the pre-commercialization gap space. We spend a lot of time validating technology performance through prototyping and demonstration projects. There are a number of federal and provincial programs that support those activities, such as the NSERC idea to innovation program. We spend a lot of time trying to de-risk technology opportunities to attract commercial interests. De-risking is very important for both licensees who may want to take on the technology and for angel investors who may want to invest in actually creating a start-up company.
Commercialization is done by the private sector. It's either by investment or by licensing. Universities don't commercialize. Universities set the conditions that enable future commercialization. I think that's a key distinction. A lot of people talk about university and commercialization. It should be viewed more as setting the stage for commercialization.
In Waterloo in particular, we have a philosophy that it takes a village to raise a child when it comes to start-ups. Start-up companies require government support, financial support, industry support, and also community support. In Waterloo, we have a very entrepreneurial ecosystem. We have the Accelerator Centre in town, where technologies and young companies can be incubated with mentoring services, and a very active industry association, Communitech, which provides mentoring support and best practices and support for finding financing for these young companies.
Thank you.