Thank you, Mr. Chair.
Good morning, everyone. Thank you very much for the invitation to join you today.
I'm Avvey Peters, and I'm with Communitech. We're the technology organization in Waterloo region, Ontario. I also have the pleasure of working with Communitech's national initiative, the Canadian Digital Media Network—our effort to connect Canada's digital media industry clusters together.
At Communitech we work at the front lines of Canada's tech industry, serving a network of close to a thousand tech companies. It generates more than $25 billion in revenue. Our work connects us to companies at all stages of growth, from more than 400 active start-ups that employ fewer than five people, through to Canada's largest software company, OpenText, and Canada's largest tech company, Research in Motion. The Waterloo region tech sector employs more than 33,000 Canadians.
I'm sharing this background because it's the vantage point that gives us insight into how jobs are created and also into what tech companies need to be successful.
I want to begin by telling you how pleased we are that you're choosing to explore the relationship between intellectual property and innovation in Canada. To us, IP is more than patents and copyrights and protections against counterfeiting; IP is a Canadian asset that drives productivity. Our goal should be to help companies do a better job of strategically managing their intellectual property as a business asset.
The OECD's recent report on Canada's economic performance highlights several barriers to Canadian productivity. Specifically, it references some original research that was conducted by the Canadian International Council for its report entitled Rights and Rents: Why Canada must harness its intellectual property resources.
There's one item from that report that I'd like to highlight for you. The CIC found that of 137 venture-capital-backed Canadian firms whose ownership changed hands between 2006 and 2010, nearly 60% of those companies were sold to foreign buyers, mainly for their valuable intellectual property, which meant they were taking Canadian-educated talent out of the country.
In other words, what we're seeing is that Canadian start-ups generate a great deal of intellectual property that's attractive to investors, but rather than exploit that IP to the fullest extent in Canada, a lot of these start-ups are acquired before they have the opportunity to grow. That makes Canada a great source of cheap IP that can be exploited by the acquiring entity, and any resulting job creation from the commercialization of that IP happens in countries other than Canada. This is the lost opportunity of our current intellectual property regime.
Today I want to focus on just two things that I think are ways in which Canada could reap the benefits of intellectual property for the purposes of fostering Canadian productivity. The first is to help small and medium-sized enterprises do a more effective job of leveraging IP as a key business asset. The second is to help companies and universities collaborate more effectively to commercialize intellectual property.
Small and medium-sized enterprises are widely acknowledged as engines of job creation in Canada. In Waterloo region we're blessed with a strong start-up ecosystem, more than 400 early-stage companies. But as innovative as these companies are, they generally do a really poor job of strategically managing their intellectual property assets.
The reason is twofold: Canadian SMEs typically don't understand the full range of the strategic advantage of their IP, and they don't understand the enormous risk of IP management done badly. In the latter case, that often means they become targets of patent litigation and aren't aware of how it can damage or destroy their company and its prospects.
Better education can play a big part in overcoming this barrier. Organizations like mine can help companies understand the importance of IP strategy and how to maximize the value it brings, as well as highlight the potential for the possibility of crippling litigation if IP is not effectively managed. Universities in Canada can offer more in the way of education about IP management. Companies need education to understand their risk management tools and strategies.
From an industry-academic collaboration perspective, Canada continues to view university research as a leading producer of intellectual property and the commercialization of university research as a leading source of innovation. In our experience, this is not really the case. While our universities and colleges are an important producer of IP in Canada, they're by far the minority source of commercial opportunity.
At Communitech, we work with more than one new start-up a day. They come through the door and they ask us for help. In our experience, fewer than 12% of them are university spinoffs. It's more likely that a start-up is being led by a current industry professional with a deep understanding of the market they're trying to serve.
Now, industry-academic collaboration is a good thing. It leads to new ventures and new partnerships and more research and more commercialization. But a lot of our companies are struggling to find the best way to work with academic partners. There are complex ownership agreements to negotiate, often with a multitude of partners.
I think there are better ways that Canada could be doing this. Consider the approach of Israel, where research institutes take a simplified approach to IP licensing. Any joint project with industry that receives government financing has to sign a standard agreement. There is no negotiation. This speeds up the time to execution on collaborative projects and provides clarity to the partners involved.
While there's a divide in the understanding between universities and industry around IP, I think it's one of communications and culture; it's not one of productivity. Both parties need to learn how to work more effectively with one another.
In conclusion, I think Canada can produce IP-rich tech companies with the potential for driving tremendous productivity gains, but we need to support companies and their efforts to better leverage their IP and maximize it as a business asset, and we need to focus on industry as the key producers of intellectual property for Canada's benefit and help them to be more effective.
Thank you for your time this morning. I look forward to your questions.