Evidence of meeting #66 for Industry, Science and Technology in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was universities.
A recording is available from Parliament.
9:50 a.m.
Liberal
The Chair Liberal Dan Ruimy
Thank you very much.
We're going to move to Mr. Dreeshen.
You have five minutes.
9:50 a.m.
Conservative
Earl Dreeshen Conservative Red Deer—Mountain View, AB
Thank you very much, Mr. Chair.
Welcome to all of our guests here this morning.
We have had so much information here today, and it will be very interesting trying to work our way through it.
Mr. Gold, you mentioned that you're looking at the university model as somewhat broken. We've had 30 years of doing the same thing and wondering why we're not getting better results and, of course, that's what our major study is about. It's about how do we manage and take a look at where all the funding is? How are we getting the bang for our buck and so on? In a lot of ways it's as though we are trying to find ways to enhance what we have done already, but without looking at what the results are. That is really part of it. And then there is the discussion on having a national university policy. We understand the structure that we have in this country and how it's difficult even if you have different universities in the same province, let alone having something that's going to work at a national level.
Those are my observations. Of course, there are other things we've heard. Making sure there is better broadband for rural areas is critical, and a gigabyte for business is what is needed. But there are so many businesses out there. In our visit to the U.S, and of course in all the discussions we've had with Canadian businesses, we can't forget the smaller areas. That's where the resources are. That's where the wealth is. The people, for their wealth, are in the big cities, but if you look at what makes Canada go, it's the rest of the country. When you think about that—and the discussion is working its way to that right now—we have to think about perhaps having different tax structures or things that can help to bring in angel investors and ensure they are there to help people over the original hump that we have.
Perhaps I'll go to Mr. Gold first, then to Mr. Smith, because I know that you've talked about tax structures. Could you talk a bit about what you might see us doing from a government perspective as far as some of the different tax incentives taxes are concerned?
9:50 a.m.
James McGill Professor, Faculty of Law, Faculty of Medecine, McGill University, As an Individual
Let me just focus on one in particular, and that is the use of charities. Our rules around charitable investments are pretty strict. What we're looking at is creating models where charities will fund research to provide open data, but if something comes out of that, a commercial product, there has to be a route to commercialization. The problem is that if the charity knows in advance and partners with private firms so that the private firms will get the benefit, there is a significant risk that those charities will be offside the tax rules.
In the United Kingdom—and we are about to propose this actually—the government has a vehicle called the CIC. I can send more information on that later. It's a single-purpose, social-purpose-built corporation that has funding from charities but also from the private sector. We need to use these types of mechanisms to enable the charitable sector, which has lots of money and is eager to invest in innovation, to put their money in without risking their tax status. We can understand why you don't want charities going into business for themselves, but can we harness that power? It's just one small place where our tax act is more restrictive than our neighbours' and doesn't allow us to unleash that value.
9:55 a.m.
Conservative
Earl Dreeshen Conservative Red Deer—Mountain View, AB
I'm on a five-minute time frame here, and I have a minute and 15 seconds left.
Scott, perhaps you could take a look at what your members are talking about and the types of things they see as advantageous, or some of the things that are disadvantageous.
9:55 a.m.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
Absolutely. I'll start with the SR and ED program. A few years ago that was a very well used, very appreciated tax incentive for businesses, both small and large. The changes that happened in 2012 made it a lot more complicated and less useful for the larger companies, so you're seeing a resulting drop in R and D spending by those large companies in this country. They move to other jurisdictions where the tax arrangements are more favourable.
9:55 a.m.
Conservative
Earl Dreeshen Conservative Red Deer—Mountain View, AB
Just on that, does it mean, then, that the small and medium companies filled in or just that they had given up and decided they wanted other models?
9:55 a.m.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
They'd given up and decided they wanted other models.
9:55 a.m.
Conservative
Earl Dreeshen Conservative Red Deer—Mountain View, AB
Why didn't the small and medium businesses fill in that vacuum?
9:55 a.m.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
It's a complicated question. I think it's largely a result of the way SR and ED is applied. It's not uniformly applied, and the criteria are complicated for a lot of small businesses to be able to meet those criteria.
9:55 a.m.
Conservative
9:55 a.m.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
There are a couple of other options that we've been looking at over the course of the last couple of years and that we've made submissions on. For instance, one is to use a patent box as an incentive to commercialize in this country. We're actually calling it an “innovation box”. It goes beyond just the patent. Where the end result of a research and development project and the IP resides in Canada, there would be a tax incentive for that product down the road.
The other option that I just spoke about was the flow-through capital shares, where the investor retains the tax incentive for that small business and it encourages the flow of capital into this country so that it stays here.
And then the third one—and Mr. Gold talk about this a little bit—is the idea of a sovereign patent pool arrangement in which the crown actually retains ownership of the IP that is created based on public funding, and then is able to licence that at a preferred rate for Canadian companies.
9:55 a.m.
Liberal
The Chair Liberal Dan Ruimy
Thank you very much.
We're going to move to Mr. Arya.
You have five minutes.
9:55 a.m.
Liberal
Chandra Arya Liberal Nepean, ON
Thank you, Mr. Chair.
Hello, Ritch. It's nice seeing you again. Of course, as a former board member of Invest Ottawa, I know that Invest Ottawa has has been working very closely with you since the inception of CENGN.
My colleague, Mr. Longfield, may not know that CENGN is also exploring precision agriculture both in Guelph and in my riding of Barrhaven, and hopefully something will come out of it.
Congratulations on getting $63 million from the Government of Ontario. I know you guys are doing good work.
We are already investing quite a bit of funds into research and development, especially in the universities. Over a period of time, the Government of Canada has invested billions of dollars in the universities. But I feel that the benefits have not flowed to the private sector, especially the SMEs. What can we do? How can we leverage the investments we are making in the universities to make sure that the benefits are available to Canadian SMEs?
9:55 a.m.
President and Chief Executive Officer, Centre of Excellence in Next Generation Networks
Maybe it's a simplistic view from my side, but I would like to see the universities working on real-world problems. If you're not satisfying a business need, a government need, and changing Canadian citizens' lives, I'm not sure why we're doing that kind of work.
9:55 a.m.
Liberal
Chandra Arya Liberal Nepean, ON
It's not the research I'm looking at. Yes, there is fundamental research that we support, and we also support applied research. But what is it that we can do? I don't want to use the word “force”, but is there something we can do to the universities to make sure that the knowledge transfer takes place with industry?
10 a.m.
President and Chief Executive Officer, Centre of Excellence in Next Generation Networks
The model that we're using seems to work. I don't know if it's the answer for all. There has to be collaboration between the various organizations. The universities have a role to play. Right now we're utilizing them for a talent base because we're working on next-generation networks. It's an area that they're really not teaching in universities because it's so advanced. So we're in fact teaching the students and so on.
I'm hoping they will bring back to the universities the real-world problems that industry is looking to solve.
10 a.m.
Liberal
Chandra Arya Liberal Nepean, ON
Thanks. I have limited time.
Mr. Gold, we have been investing billions of dollars in universities. How can we ensure that the knowledge transfer takes place to Canadian SMEs?
10 a.m.
James McGill Professor, Faculty of Law, Faculty of Medecine, McGill University, As an Individual
We have to separate out these two things: research activity is vastly different from innovation activity. You do research because it generates knowledge, it generates people, it generates excitement and places that are attractive. There is not an innovative place in the world that doesn't have a university. Universities play don't play an innovation role, but a research role.
But we can do a whole bunch of things. One idea would be to open our labs to firms. Have a firm come in and use our equipment. The quid pro quo would be sharing data so we could do Ph.D. theses. Get them to work together. Make the boundary between the university lab and the industry lab more permeable. Have grad students and post-docs move back and forth. That's where real knowledge transfer happens. It's not actually the patents; it's the thing in their brains.
10 a.m.
Liberal
Chandra Arya Liberal Nepean, ON
You're talking about the tacit knowledge transfer, which of course I've been asking about, in addition to the codified knowledge transfer.
One of the witnesses mentioned last week that in the U.S. researchers are paid for only eight months during the year. For the remaining four months they go to industry on consulting assignments. Would that help in tacit knowledge transfer?
10 a.m.
James McGill Professor, Faculty of Law, Faculty of Medecine, McGill University, As an Individual
I don't think so, because most of them actually go to grants during the summer. The university pays a full year's salary in nine months. You have to remember that U.S. researchers are paid vastly more than we are, so they basically get in nine months what we would get in a year, and then they supplement it with grants.
I think my generation is lost. You need to focus on grad students and post-docs. Get them to see that there are opportunities.
10 a.m.
Liberal
Chandra Arya Liberal Nepean, ON
Thanks, Mr. Gold.
I've just got a few seconds.
Mr. Beney, you seemed to indicate that more funding is required for technology transfer offices. You are asking for more funding for one more sector, but we already fund research through the SR and ED and other things. We also fund SMEs through a lot of investments and venture capital. We do a lot of funding. How can we use the existing funding to help the SMEs?
10 a.m.
President, Intellectual Property Institute of Canada
I think my comment was along the lines that there is a funding gap between getting a company to a certain point, the beginning of it, and then getting it to the next stage, the SME for example. I think there's a bit of a funding gap at that particular point.
Universities often start the company, and then they kind of let it go. They get the licence and venues in place, maybe, but then the companies often collapse and die, so there's that aspect there.
There are different levels of funding required, and I'm not exactly certain there's a right answer for all of these things, but there are different points, and you have to look at inflection points, if you will. I don't know if the funding that the universities get actually translates all the way through to the last goal of getting a company up and going and self-sustaining.