Industry Committee on June 19th, 2012

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you very much.

Thank you, everyone, for your presentations this morning. It's given me lots of questions. I think we've caught some valuable information.

I'm going to start with one quick yes or no question for the entire group. Of course, Mr. Carmichael and others have mentioned that keeping companies Canadian and the work happening here is incredibly important, but recently we've seen a change to the Investment Canada Act threshold for review. Before, a review would be triggered if a company was worth $300 million or more. That threshold has now been raised to $1 billion.

[A voice]

In four years.

[Dan Harris, NDP, Scarborough Southwest, ON]

Yes, in four years, but it's going up.

Does anyone in the group here think that's going to help keep companies Canadian? Just a quick yes or no.

[Avvey Peters]

I don't know.

[Dan Harris, NDP, Scarborough Southwest, ON]

I don't know is an acceptable answer.

[Clément Fortin]

It's difficult to say. It's going to keep the big ones, but there are multiple small and medium ones.

[David Harris Kolada]

Similarly, I don't have a view on that.

[Rob Annan]

I'm afraid I can't comment. I don't have any particular expertise in the area.

[Dan Harris, NDP, Scarborough Southwest, ON]

No, that's fine.

We have some serious concerns about the changing of the threshold, because now when we talk about the disappearance of small and medium enterprises, these are all smaller groups, but when you get past that valley of death, when you start to grow and start to hit large evaluations, changing from $300 million to $1 billion, a lot of companies could fall prey to foreign takeovers without there being any review for net benefit to Canada. We find that troubling, especially when the government has repeatedly promised to define net benefit and has yet to do so.

Ms. Peters, on a similar topic, of course, we're studying intellectual property here right now. Intellectual property itself is not subject to review by Investment Canada. So if you take a situation like Nortel, their intellectual property was sold at a higher value than all the bricks and mortar assets. One of the questions we're raising here is whether we think perhaps intellectual property should be, or at least be considered to be, part of the review process. Do you have a comment to make on that?

[Avvey Peters]

The only thing I would say is that I think it's evident from the investor perspective that intellectual property is a really attractive part of the asset base when they're choosing to invest in a Canadian company. It's up to us to look at how we are capitalizing companies as another important means of retaining the company in Canada, helping it to grow. I think we'd all like to see more billion-dollar companies in Canada. The challenge, if you're a three-person start-up, is how do you get from here to there. Having a good solid intellectual property management strategy is a piece of that. Having access to talent and access to capital are the other important pieces.

Just to reinforce what I said earlier, I don't think Canadian companies, especially the small and medium-sized ones, have a sophisticated understanding yet about how their own intellectual property assets can help them to stay and grow and maximize that potential.

[Dan Harris, NDP, Scarborough Southwest, ON]

Great. Thank you.

Mr. Kolada, I think you were the one who spoke about Canada being at the low end for PhD graduates. Was it you or...? Oh, sorry. My apologies. I actually have separate questions for both of you, but I'll go on that one.

Of course, it's incredibly important to increase the number of PhD graduates, and we actually have to have jobs for them afterwards. I believe there's a lack there, and organizations like Mitacs and CRIAQ, of course, are incubators and provide those kinds of opportunities. Is there any kind of quick fix you see that could help that?

[Rob Annan]

We're working on it. I don't know if it's necessarily a quick fix per se. The challenge, of course, is that it's a bit of a changing of culture in the business community. In other countries there's greater receptivity to hiring PhDs for non-specific technical tasks, and you have PhDs who are in management and other parts of the company, whereas in Canada I think there's a bit more of a tendency to see PhDs as simply highly specialized technical labour.

Our companies, after they've hosted a student through an internship, recognize that these students have skills beyond just a specific technical task. In fact, they have analytical skills, and the list goes on. We're working hard to provide additional skills in terms of business knowledge, professional skills, soft skills, to accompany these and help them transition. But the figures are clear: countries where you have higher levels of PhDs being produced, produce higher numbers of patents. There's a correlation between the two. It's a different sort of business culture.

[The Chair, Conservative, David Sweet]

I'm sorry, you're over your time.

Now we go to Mr. McColeman, for five minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Chair, and thanks to the witnesses as well.

I want to go down the line of questioning and get your views on best practices. I know we had the comments about Israel and standardizing something, where everybody knows the way things work and how to play the game, and it simplifies and maybe streamlines things. I've had a lot of familiarity with Mitacs, in terms of what you're trying to do in terms of integrating the post-grads and the doctoral students into industry. There are obviously some places in the world, some countries in the world, that perhaps have it right, or got it better, let's put it that way, than we do. What are some examples you can offer this committee of other jurisdictions? We had the Israel example, so in a similar vein, on other fronts, what are some other jurisdictions we can learn something from?

[Rob Annan]

I would just make one very brief comment, because I know we're pressed for time. I agree that there are a lot of potential gains to be made from standardizing things, but at the same time, I think it's important to recognize that this may not necessarily be the right answer either. In fact, a variety of approaches may generate new ideas for best practices, so learning between institutions is important. Waterloo is a great example of how to manage IP, but UBC, which I think many people would argue is at the other end of the extreme in terms of IP being developed at university, also has a high rate of start-up companies. So they have different approaches. The UBC model maybe has more hands-on incubating, while Waterloo is more hands off, inventor-driven. In the United States, for instance, there isn't a standardized sort of IP regime for universities, and they're quite successful.

[Phil McColeman, Conservative, Brant, ON]

Do any of the other witnesses care to comment on what you've seen out there in other jurisdictions in the world?

[Clément Fortin]

We have to remember that the U.S. is still a very good model. I think they have very good universities and they've developed a lot. They've slowed down, but I think they can recuperate. Germany certainly has a very solid research culture, a very strong industrial base, and they have their own models with their front offers and so on. It's a very well-established model. Now people are mentioning Korea, where their innovation is really progressing well.

For me, the U.S. is still the reference. We know that when we go for IP in the U.S. we have to be quite ready to fight, but on our side we have to be more ready to face the competition.

[Avvey Peters]

The other example that may be worth examining is Denmark, which has a regional model for tech transfer. Rather than every individual university having a tech transfer office, there is one in a regional context, which acts as the central area of expertise, and companies and universities alike have access to that regional expertise.

[Phil McColeman, Conservative, Brant, ON]

I'm interested in going back to John Baker as an example of how a true entrepreneur fights through the battles on his own and picks up all this knowledge. I spent some time with John in Brazil, actually, as he was expanding his market even further around the world. I was thinking that all of the effort we're trying to do here is to help those entrepreneurial types accelerate their businesses and keep them in our country. I guess the vehicles we've chosen for doing that are constantly, I suppose, under the scrutiny of government, because government money is evolving in there.

Is there any other obvious tool in the toolbox we could be looking at as a government in terms of supporting the John Bakers of the world, other than what we're doing right now?

[David Harris Kolada]

I just want to highlight one of the recommendations we mentioned earlier. Filing for patents is expensive. It's a complex, lengthy process. The Alberta Innovates voucher program is very interesting. I don't know if you're familiar with it. Basically what it does is allow pre-approval of spending for service providers to get IP patented. Again, it's a matching program. If the company looking to file for a patent puts up 25%, Alberta Innovates puts up the remaining three-quarters for the service provider—the patent agent or the law firm—and then the work is completed. It's an interesting model to look at. To the extent that there's more support for getting some of these things pushed through, I think that's a very helpful thing to look at as well.

[The Chair, Conservative, David Sweet]

Thank you very much.

Now we'll go on to Madame LeBlanc, for five minutes.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

I'm going to be brief.

I will speak in French.

You spoke about using a pull model instead of a push model. It was also mentioned that models tend more and more towards research that is a little more directed. What about academic freedom? Do universities have reservations about that?

[Rob Annan]

I'm sorry, but I am going to answer you in English.

I think researchers are all a little bit anxious because of this pull, which Mr. Fortin mentioned as well, between discovery research and sponsored or industry-focused research. I'm not exactly sure where that balance is, and it will be different across the different disciplines. Some disciplines, such as engineering and physics, the sort of harder sciences, are often a little bit more attuned to working with industry. We're working proactively with other academic associations to try to also reduce the anxiety among other disciplines, such as humanities and social sciences even.

Once people start working with industry, they see it, in a way, as almost an addition to what they're already doing. You absolutely need a foundation of basic research, with the freedom to explore and have new ideas that no one can imagine. But supplementing that with an industrial application can actually benefit even the discovery side. It provides outlets for the students. There are any number of advantages. I think as people get more and more experienced with it, that tension is disappearing.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Just to continue this conversation, focusing on students a little bit, I think it's a great idea. I think that was in the Jenkins report and actually is something the Conservatives have been pushing a bit in their policies to increase co-ops. Maybe we can talk a little bit about the direct placing of students in industry to provide a bridge. I think we can talk about that a little bit.

Maybe you can tell me more about why companies don't hire more PhDs. Why is there this reticence? Why don't they know what a PhD can do for them?