Industry Committee on June 8th, 2017

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Lobb, you have five minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thanks very much.

I want to go back. Somebody mentioned the global innovation index, and when you look at the countries that are ahead of Canada on that index, most of them, but not all, are smaller than Canada and have smaller economies than Canada.

What are those countries doing—Switzerland, Sweden, Finland, Ireland, Denmark—to get themselves higher up on this list? Is this list credible? Is it worthwhile? Is it something to worry about? What is a group of politicians to think of Canada being on this list and far behind these much smaller countries?

Would anybody like to take a run at that one?

[Scott Smith]

I'll start, if you like.

I was the one who mentioned it. It's an index like any other index, so it has criteria that they evaluate in order to determine where you fall on that list. As an example of some of the criteria, this country has taken a position that it wants more balance in the system in order to balance IP rights against freedom to operate. Okay, that puts it somewhere on that list, and it has to accept what that is.

I think you can take some stock in the fact that the countries that are doing better on that list—Switzerland, Germany, the U.S.—really do focus on specific industries; they do pick winners. They have also focused on their education systems and streamlining those systems so that there is a marriage between industry and education, and that what comes out of those marriages are commercializable products.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Mr. Gold, you put your hand up.

[Prof. Richard Gold]

I actually do empirical work and I use a whole bunch of different indices to do this. The one Scott refers to is an industry-based one, which is quite opaque in its methodology. It doesn't meet academic standards, but it doesn't mean it's useless. It's based on what industry, especially multinationals, want. It's useful from that point of view, but I wouldn't take it as being the ultimate ranking. On the other indices, Canada does considerably better.

The more important point is that while Scott mentioned there's a correlation and these two numbers go together, except that in the case of Canada there's no causation. It's like saying how much snow we get in winter goes to your IQ. These two things may or may not be correlated, but it doesn't mean they're causally linked, so take this with a grain of sand. It's a useful piece of information, but don't rely on it too much. Look at the underlying economic analysis, which says that Canadian IP is not driving Canadian innovation; it's U.S. and European IP that's driving Canadian innovation.

How to get Canadians to access that is the more interesting figure, and none of these rankings take that into account.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Okay.

Mr. Beney, in your presentation or brief, I thought somewhere in there was a recommendation that we need to help universities understand the transfer of technology. I'm probably saying it the wrong way.

I guess when I see the billions of dollars that industry and governments in Ottawa and across the country are spending, I would be a little disappointed if university researchers still don't have a clue about the importance of patents. Is this problem out there, or am I reading this the wrong way?

[Stephen Beney]

I think it would vary from university to university, but I will tell you that in my work with universities, a lot of it is education. They do not understand the basics of business and how to promote IP innovation.

[Ben Lobb, Conservative, Huron—Bruce, ON]

If that's the case, to me that's the root problem of what we're studying here. If people are investing billions of dollars each and every year and don't have a basic, fundamental understanding of business or law, that's a huge problem, before we get into spending more or super clusters or any of it.

[Stephen Beney]

A long-term goal, I would say, is more of a cultural change and shift to an innovation culture. I know that China right now is starting to look into that as well. They don't have an innovation culture, but they will have one, and we need to develop one as well. It's a long-term goal getting it into the universities, and possibly high schools.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We'll go to Mr. Sheehan. You have five minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much for your presentations. I'm sure they'll be helpful to our study.

The first question I have is for Richard Gold. You mentioned one of the issues that I think this committee recognizes, that the universities are selling their tech to American firms and American firms are selling it back to us. It's sort of a double whammy.

Why is that? Why aren't Canadian companies doing it? Is it money? What's the issue? Can you expand on that for us?

[Prof. Richard Gold]

That's the million dollar question. If I had the answer, I'd win the Nobel prize. It's the environment. We know it's the entire ecosystem. It's not the IP system itself. I think we've touched on a number of these things. Some of it is capital. We don't have enough people with experience in scaling up.

One of the things we're trying to do is to bring in our alumni from the universities who have gone to the United States and Europe and started businesses. Can we bring them back? They won't move back, but bring back their knowledge to work with firms in our space, so that the technical, tactical, strategic knowledge we're missing....

There are some funding concerns, but the problem is that Canadian firms grow to a certain extent, mostly on the basis of getting public funding, but when they've got proof of concept, they sell. It's okay to sell at a certain point, but we want the value to be here, so we need our firms to be able to go further and there's something missing in the environment. I think those are two of the ingredients.

If I knew the rest, I would certainly tell you. Nobody has the magic bullet.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Fair enough.

Maybe you could take a deep dive for us into the patent pool and explain in a little more detail what your thoughts and ideas are on this patent pool.

[Prof. Richard Gold]

The most realistic patent pool is not one owned by the government. That has been done in South Korea and France. It should be industry-led, with government funding and co-funding.

I work with Power Corporation here. They're interested in doing some things in this area, whereby firms would get together, define a space, perhaps in association with a cluster, and buy patents. They would then license those patents out to any Canadian firm—it would have to be completely open—and you could do so in one of two ways. One is just to provide freedom to operate, so that eventually, if some U.S. firm were to sue them, they'd be able to countersue and tell them not to go ahead, rather than use it as an armament—that is, we transfer it to a Canadian firm and allow them to attack other firms.

The first line of defence is simply to provide Canadian firms with some defence, especially in the IT industry, where it's most important, so they can negotiate agreements.

You can also achieve a similar route through funding. When you fund large projects, you can attach a rule to the funding agencies that says they can patent, but if they patent, whenever they license the patent there must be a agreement by the licensee or the transferee that they not sue Canadian entities. You would have to define them.

What you're basically trying to say is that knowledge that the government is funding or that industry as a group is funding cannot be asserted against Canadians. That gives us room to breathe. It doesn't bring new products, but at least it gives us the opportunity to enter into the U.S. market.

The alternative of having the Canadian or provincial governments set up a pool.... I just don't think that governments are willing to put that much money into it by themselves. The safer way is to have it industry-led.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you.

Scott Smith, going back to the global innovation index—I remember reading about it when it came out—you mentioned that Canada has declined steadily on it in the last 10 years; we're no longer in the top 10. You also mentioned the superclusters.

How might a supercluster help Canada get back into the top 10, at least?

[Scott Smith]

With respect to the IP index, we were never in the top 10. We've actually improved our IP regime over the last couple of years by acceding to the Internet treaties, for example. With the CETA agreement, we're going to be improving some of our patent terms on the pharmaceutical side. There are some positives there.

With respect to our innovation index, I think the superclusters are going to do a lot more in terms of visibility and identity of certain industries. That just attracts attention. In terms of government spending, probably the best bang for your buck is building that attention globally, and it attracts investment from other countries. There's a positive there for sure.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much.

[The Chair, Liberal, Dan Ruimy]

Mr. Masse, you have two minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

With only two minutes in this round, I want to ask Mr. Smith this question.

You represent it as diverse, but what common low-hanging fruit is there for Canadian businesses? We hear about access to capital at times and we hear the BDC saying that they're now into small business. I still have some concerns about the access they still have. Is there a galvanizing change that can take place before we go down the road of low-hanging fruit while waiting for superclusters to emerge to sort out the situation?

[Scott Smith]

As to whether there's low-hanging fruit that will appeal to every business out there, I don't think you can put one program in place that will suit everybody. The only way you can do it is through various tax incentives.

If you want to incent research and development, that's great, but it isn't necessarily going to result in any kind of innovation. It should, but it isn't always going to. As for expectation that you're going to have a product coming out of something around IRAP, you may not.

It was brought up several times around this table that the gap is not so much at that first round of getting an idea off the table, but how you market and commercialize that idea. How do you get the expertise? It's the collaboration and bringing in of that marketing expertise and making use of perhaps more than just the university system. We have a number of very competent colleges and polytechnics out there that can help bring things to market. They have the people in place.

[Brian Masse, NDP, Windsor West, ON]

It's funny you should say that, because I guess I'm biased. I'm a sociologist. We heard from many different people from the United States about the problem of not having the proper skills and multidisciplinary understanding on how to bring all those disciplines together. We're going to have some more testimony coming up, so I'll leave it at that for now.

[The Chair, Liberal, Dan Ruimy]

We have enough time, and we've agreed that we'll all do one question of seven minutes each.

We're going to go to Ms. Lambropoulos. Welcome to our committee, by the way.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Mr. Gold, I'm going to ask my question in French, if you don't mind. You said American companies tend to be the ones who buy the ideas and research that come out of our universities. How do they find out about your ideas, unlike Canadian companies? How do you promote your ideas?

I'm sorry, that's for Mr. Gold.

[Prof. Richard Gold]

I listened to the interpretation, and I think I understand your question.

It's quite easy, actually. There are patent registers, and companies search those databases. They are in contact with researchers, so they can see what exists in Canada. We are talking about big companies like Google. In the field of artificial intelligence, the players are Google, Apple, Uber and so forth. They are highly sophisticated. They make small investments in research and have numerous contacts in the academic community. Since these are major companies and they have access to the databases, they can find us.

Small Canadian companies have a harder time. Yes, all the information is out there, but they don't have the same resources to find out about the various patents or as much money to buy them.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

What would you suggest to Canadian businesses or government to push Canadian innovation and businesses to find out more about these ideas?