Industry Committee on Oct. 2nd, 2012

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Chair.

We've covered universities and so many of these different issues, but to follow my colleague, I'd like to stay on the patent investment fund for a minute.

Mr. Stajcer, you talked about taking perhaps 10 patents—whatever the number is—and that the likelihood of success is fairly minimal in terms of the risk level. How do we encourage those private-public partnerships?

You talked about CPP, and they have very real investment guidelines. The risk tolerance is going to be a significant problem here. I think that's obviously why we're at the table today, trying to figure out where the balance is in making this work.

Could you address that?

[Tony Stajcer]

I agree that's a high-risk area.

One of the issues is that you cannot get VC funds to fund that development. Companies are obviously tightening their belts. They also don't have the full capability to invest in these.

Also, I'm not talking about 10 patents; I'm talking about 10 ideas. One of the things is that some of those need to then be pulled through to the commercial end. We have to be able to accept that if we invest in 10 ideas, $1 million on each, then we have to look at the outcome. Does that $10 million generate three businesses that make $200 million in revenue? We understand that we have to do that and let the other seven fail, because if you don't explore that, you will never get to the end.

That's how I look at it; I look at my success rate. I'm closer to the market, so my success rate should be higher because I should know the problems, but at the stage where it comes out of university, you generally don't have a single idea, a single patent, that says that's going to be a success. You generally have to layer on other IP as you develop it and get into the final production.

We are a little more of a risk-averse society in Canada. I look at some of the U.S. initiatives; I've been at a meeting where we were looking at potentially developing a new battery material, and the level of investment was in the millions of dollars. We had to do a minimal amount of work, and we asked “How much do we need to develop this?”

It can be done fairly quickly, but you have to be able to accept failure.

[John Carmichael, Conservative, Don Valley West, ON]

I come from a business background in my previous career. I'm fully aware that if you believe in success, there could be a few false starts along the way.

[Tony Stajcer]

Right.

We have to measure the investment we'll make at that point to the total benefit that we get at the end. If a few fail, that's what we are expecting, but unless we take that step—

[John Carmichael, Conservative, Don Valley West, ON]

Yes, I fully agree with you. That's my concern on—

[Karen Mazurkewich]

No, I think there's confusion between investing in patents and a patent investment fund. What I am discussing is a pure private equity model whereby, if you already have 50 patents and you want to sell off 20 to save some money or generate some cashflow for your business or cross-license to that fund, then this fund becomes a player in which a cross-licenser buys patents from Tony so that he can reinvest money into that.

That's very different from direct subsidies in patents themselves, just to be clear.

[John Carmichael, Conservative, Don Valley West, ON]

Yes. We're talking ideas here versus established patents—

[Karen Mazurkewich]

Exactly.

[John Carmichael, Conservative, Don Valley West, ON]

—which have a more solid foundation already in play.

[Karen Mazurkewich]

Yes.

[Tony Stajcer]

Patents are one of the ways in which you can protect your IP. There are a number of other factors you have to consider—the size of the business, whether it is a process or software, whether it could be copyright. There are other protections for that. Otherwise you might want to just publish and have the freedom to operate, so you publish it to do that.

[John Carmichael, Conservative, Don Valley West, ON]

Right.

[Tony Stajcer]

There are many different mechanisms. I for one actually am looking for how I utilize my patents through brokers and license to other companies, but an investment fund like that would be helpful to me.

[John Carmichael, Conservative, Don Valley West, ON]

I have one minute left, so let me be quick.

I wonder if you could talk about the directory, the amazon.com. How do we corral the idea of the patents and put them in a place where we can do something productive with them?

[Karen Mazurkewich]

I think you would want to find someone to hire, a private equity partner like Loudon Owen, who has already done it. You remember i4i; he made $250 million out of Microsoft on one patent. People like that are very interested in investing in patent funds that they could buy or license from universities, etc. It would be finding the right partner. It would probably be like a private equity player who understands this game well and has played it already.

[John Carmichael, Conservative, Don Valley West, ON]

Okay. Thank you very much.

[The Chair, Conservative, David Sweet]

We go now Madam Freeman for five minutes.

Welcome to the committee.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Thank you, Chair; it's nice to be here.

Ms. Boily, when you talked to Ms. LeBlanc earlier, you concluded by mentioning that government procurement in terms of IP would theoretically allow us to develop maintenance technologies. Could you expand on that? I think that Ms. Harvey also wanted to add something to that. Could you talk about it further and about how it is reinvested in our economy?

[Lucie Boily]

Let me give you an example. We mentioned the Valley of Death just now and we are talking about the importance of developing technology demonstration programs. That is very common in other countries where they have tech demo development programs, 50% of which are funded by the government. I know that this means that the government is investing money. Seven or eight years ago, a company went to the government and asked for assistance to invest in a tech demo. The government was not able to help because of the provisions and conditions of the program.

So that company went abroad and received non-refundable support from another country. All the development and the IP went to another country, along with all the high value-added jobs. This example shows that this really isn't a zero-sum game. A non-refundable amount of about 50% may be invested, but the economic impact and the revenue for another country are quite amazing. We have missed out on a great opportunity to keep something substantial in Canada. So, in that sense, IP investments need to be a joint effort, because, ultimately, a tech demo has to do with bringing the IP to a level where the viability of the technology is demonstrated.

[Maryse Harvey]

In military procurement, there are clearly a lot of benefits when the government uses data and intellectual property so that we can use it and make it available to our companies. Since you have many companies in your riding, you are probably aware that this gives them the opportunity to build on this intellectual property and to develop solutions that can then be exported to other countries on platforms to which the intellectual property applies.

In a nutshell, economic spinoffs can potentially double if the government purchases the intellectual property and the platform at the same time, regardless of whether it is an aerospace platform or any other one.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Yes, that has actually come up in my riding where we have aerospace companies, as you know.

For example, when an investment or a federal acquisition is made—so it belongs to Canada—but the intellectual property does not belong to us, the maintenance has to be done by the first company, which is usually not in Canada. So we are constantly investing in another country.

When we export it, does it keep being reinvested in our economy?

[Maryse Harvey]

That is correct. When we own the intellectual property, we can perform work at the highest level on the platforms that we purchase. So we are talking about engineering work, not just aircraft maintenance. It means engineering. It also means looking for solutions to problems that can arise after a certain number of flying hours, or before problems arise, relying on tests that can be done jointly with research institutes, and so on.

So it is extremely intricate. Many people underestimate the quality that goes into aircraft maintenance work. Not only does a lot of money go into it, but also a lot of time, because the platforms that we purchase usually have a lifespan of 20 to 30 years.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Exactly.

Ms. Boily, would you like to add something to that?

[Lucie Boily]

By giving Canadian businesses only the so-called leftovers, or the minor work, Canada will lose the capacity to do maintenance. I do not think that the federal government can let Canada lose this capacity.

What I am saying is true. There are not a lot of companies. They are very good and competitive, but, if we take away the access to intellectual property, they will lose this advantage sooner or later. None will be left in Canada.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

So actually, if an investment is made...