Industry Committee on June 8th, 2017

[Prof. Richard Gold]

Clusters have two dimensions. One is very geographic, because we know that where we have a certain number of players, we build out from there, and it's really important for that ecosystem, but they are also nationally focused.

We are exceedingly small in Canada. I think Jim Hinton provided evidence a couple of days ago about AI. Our patents are spread out across Canada. There is no one place. If we just focused on the Vector Institute in Toronto, we would lose. It has to be pan-Canadian.

Somehow, we have to bring the patents that exist across Canada and make them available to Canadian firms. From that perspective, we can't have firms outside. I think that's the idea behind superclusters. It's not to do original research; it's to build the infrastructure that allows that sharing and common base.

We want competition within Canada, kind of like intramural sports, but when we go on the outside we want Canada's A-team, so we have to bring it together. In my mind, that's what the supercluster is about.

That doesn't negate the importance of local clusters, such as the ones you're talking about or the MNI, where we build communities that involve universities and civil society. The cheapest way to deliver benefit in mental health may not be through pharmaceutical products; it may be through social services. We have to bring together all of these actors locally to develop new solutions. To me, that's not the supercluster; that's more traditional clusters.

[Brian Masse, NDP, Windsor West, ON]

Our friend from Manitoba....

[Marshall Ring]

Thank you for the question.

If I were to repeat what I think you're asking, it's how to ensure that there are smaller centres or smaller municipalities included in this—the same as Mr. Nuttall's question.

Frankly, I share a bit of the concern that the money for superclusters will go to super-cities and it will be a drop in the bucket against current activities that are already ongoing. I view the supercluster initiative more as what a bank would do to a company, which is that it would have the money available when you don't really need it. You're looking for a 6% to 8% return, but I don't think it's going to have as powerful an impact without the stated purpose of going into smaller communities.

It's been said before that it's not the big firms that are doing a lot of research, innovation, and commercialization. The big firms, with shareholders, are looking for growth of 8% a year, and they do that through acquisition of new IP and new ideas. It's the innovation that comes from the smaller and medium-sized companies that feeds the machine. When you start looking at putting money into the superclusters around the largest centres, I think the regional places where great innovation exists will be excluded from that, for the simple function that people do business with those they know. For example, I recognize that a couple of you folks know each other by name, and I'm brand new to this because of my geographic distance.

I think there needs to be a concerted effort to look at where you can empower some of the smaller communities.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Mr. Smith, go ahead.

[Scott Smith]

I'm going to take a bit of an issue with how innovation spending happens.

Roughly 12 companies account for 50% of the R and D spending in this country. The superclusters are going to be focused on those larger urban areas because they already have the infrastructure in place. I think the intent is to attract the best and the brightest in the world and to keep them here, and amenities matter in those cases. The smaller communities don't necessarily have those amenities.

How do you empower those smaller communities to take part in the innovation culture? I think somebody brought it up—it's connectivity. Make sure they have access to broadband, facilities, and data. The data is going to matter.

[Brian Masse, NDP, Windsor West, ON]

Mr. Dusome and Mr. Beney....

[The Chair, Liberal, Dan Ruimy]

Answer very briefly, please.

[Ritch Dusome]

I'm a gigantic fan of broadband Internet's being the underpinning, and in that case it doesn't matter where you are.

[Stephen Beney]

A couple of months ago, I was at an Ontario government health care initiative, and the issue of how to introduce new medical devices to hospitals came up. Of course, when you go to the big cities, you end up with huge bureaucracies. It's almost impossible to get innovations into hospitals because it just takes forever to get there. The angel investors give up. They don't want to invest in these kinds of companies.

The interesting aspect is that when you move to the rural areas, the hospitals are much more flexible and willing to try things. You can have success there, and then move it back to the big cities.

Where I'm going with this is that, if you think about it, if you're going to have $200 million, or whatever it is that's going to go to the cities, it has to be in the place of least resistance to have the most impact. Whether that's in the city or outside the city, I don't really know, but it should be put in the appropriate spot.

There is another thing. I met someone from China yesterday, when I was at a centre that promotes innovation and start-up companies in southern Ontario. Just to put it into perspective, they mentioned that they're looking at investing in start-up communities in Canada. They have $32 billion at their disposal. We can't compete with that. We have to think of alternative ways to invest in our future.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to Mr. Jowhari.

You have seven minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you to all of you. We've had great testimony today.

Certain themes are developing, such as pooling, IP generation sources, various working models, and integration or collaboration among different superclusters. One of the things I am noticing but that, at least for me, is not coming across in a very clear manner that I can use to form my model for making recommendations, is really around what Mr. Gold talked about.

You mentioned it briefly at the tail end of your conversation, and you called it “soft stuff”. You talked about some tax credits or incentives, which goes back to funding, and some policies.

With about five and a half minutes left, can each of you give me one funding model or policy that we could use? At the end of the day, the government develops policies; the policies are focused on the direction the government wants to take, and then it uses funding to be able to advance that agenda.

If you could start with one policy that you think would make a difference in tech transfer to commercialization and the creation of jobs, as well as one funding model that would support that, what would that be?

Let's start with Mr. Gold.

[Prof. Richard Gold]

It would be sharing of data, I think, from a research point of view in tech transfer. It would be making data of high quality available easily in a format people can use, and measuring the results.

In terms of helping our businesses, I would say invest in providing SMEs with strategic international IP advice. That might be getting standards or thinking about getting the right patents internationally. There's a dearth of knowledge about that. Many of our IP professionals represent international firms. Coming here, we need to think much more about how we can engage the international community. Canada is too small a community to worry about. We have to worry about the United States and Europe.

[Majid Jowhari, Liberal, Richmond Hill, ON]

So, specifically, what policy for the government do you suggest?

[Prof. Richard Gold]

I would fund a voucher that small firms can use to get international IP advice. It's not about funding to get a patent, because a patent may not be the right answer, but I would fund getting that strategic advice.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay.

Mr. Beney.

[Stephen Beney]

This is an interesting question, because I don't think there's actually one program that meets all these things. You have start-up companies; you have companies that are going from start-up to SME; and then of course you have the issue of going to scale. I have a quote here from a venture capitalist who says, “University and government seed funds create lands of the walking dead. They have no way to ensure follow-up funding which a company needs to grow. [It's] like going to a gunfight with a knife—you will die.”

So, that's another area of funding that's required as well.

If you want to talk about one area of funding, there is the area of my practice, which is mostly involved in start-up companies. I would like to see something along the lines of a first patent program in Quebec, or a start-up voucher program, something like what Mr. Gold mentioned, which I think Ontario is looking at.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Great.

Mr. Dusome, it would be good to hear from you on the business side.

[Ritch Dusome]

I would say open broadband with gigabit speeds. We should think about something very different from 50 megabit—that's embarrassing.

In terms of a single policy, I like to think about ones that have a long-term effect, not a short-term one. I think, from an industry perspective, programs like the SR and ED program are the programs that are utilized extensively, so don't change something that's working.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay.

Mr. Smith.

[Scott Smith]

With respect to funding, or access to capital, one of the key challenges in getting investors involved is the fact that they can't actually take advantage of any tax incentives, whereas if the start-up companies are using SR and ED incentives, they may have accumulated a number of tax credits they can't actually use because they don't have the revenue to support those. We do this for the mining industry: why not consider flow-through shares, whereby the investor can take on the tax advantage of what that company might accumulate?

With respect to what Mr. Gold was saying on IP strategy and awareness, CIPO has something it has just kicked off, and we're working with it to deliver that across the country, but it is probably very underfunded. That's something else you could look at. We're doing a workshop in Fredericton next week on IP strategy for small business.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Mr. Ring, you're on.

[Marshall Ring]

Implement a policy with the objective of getting more IP out of the gate that has commercial potential and have it ready for participation with existing SMEs. The policy I would use, if you're talking about a federal funding resource, is a sidecar fund. For example, in the earliest, most risky days of starting a business around IP, if you have private angels that are ready to put up $250,000, if the federal government had a sidecar fund that would match that, you're relying on the due diligence of the private sector and you are having those people manage what's right for the business.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Great.

I have about a minute. I want to go back and quickly touch on the partnership model. A lot of feedback is coming in that we should drive this innovation and IP from the business side rather than from the universities, yet all our funding is going to the universities. If you have any submissions or any further thoughts on that, I would really appreciate hearing them.

I'm going to give the last 30 seconds to Mr. Gold. Can you expand on that one?

[Prof. Richard Gold]

Certainly. Innovation is done by industry; research is done by universities. If you don't have research, you don't get innovation, but if you don't have companies doing things, you don't get things going. You need them to work together. There are lots of forms of partnerships. You want to reduce transaction costs and make it easier for the two to come together. Unrestricted data sharing and other things will assist with that. I suggest to you the MNI model in Montreal.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.