Thank you, Mr. Chair, and members of the committee, for your kind invitation. As a matter of fact I received an invitation from several of you, which is very encouraging.
I'm pleased to be here today to represent the Canadian Chamber of Commerce. Most of you know who we are. As the largest business organization in Canada, we have a network of over 450 local chambers of commerce in our membership. That includes boards of trade, representing over 200,000 businesses across the country. So it's businesses of all sizes and in all sectors.
A lot of those businesses aren't necessarily involved in tech transfer from the perspective that you've been listening to this morning, but there are a number of things that we might want to look at, such as what innovation actually is.
My comments to you this morning are informed by regular dialogue with these members. You've heard this before, I think, but Canada is currently ranked 15th on the World Economic Forum's global innovation index, and we've been falling behind for roughly the past decade. That was last year's number. This year's rankings come out next week, so it's too bad I couldn't have talked to you next week. I might have had a better answer for you, because the focus will be on agriculture and natural resources, which I think we're pretty good at in this country. Perhaps we'll see an improvement in the ranking.
The OECD defines innovation as the implementation of a new or significantly improved product, good, or service, or process; a new marketing method; or a new organizational method in business practices, workplace organization, or external relations. That's pretty broad. In Canada we tend to be a little narrower in our definition. We count the number of patents and we ask, what do we commercialize? Perhaps we should think a little more broadly in terms of what we mean by ”innovation” as our metrics. It might help to improve our scores if we looked a little bit beyond the traditional notion of intellectual property and find incentives for businesses to improve on their processes, as an example, to meet the needs of the 200,000 businesses out there.
That said, intellectual property is the cornerstone of the value proposition for any new venture. It's both a wealth creator and a wealth protector. As competition from other jurisdictions rises, a robust IP regime is crucial to our economy. The U.S. Chamber of Commerce—I think some of you went down to Washington recently and heard a little bit more about this—produces an intellectual property index. In that index, Canada was ranked 17th this year, just ahead of Taiwan, Malaysia, and Mexico, and just behind Israel and Poland.
The report analyzes a number of factors, including things like patent terms, and court systems and judgments, to derive a score. Then they take that score and measure it against the innovation indexes, and they found a direct correlation. Canada is an anomaly on that score—namely in terms of the relationship between innovation and IP—according to our GDP. Why is that? It's because we do pretty well in agriculture and natural resources, which are not necessarily innovation-related. There are innovation aspects to them but most of our exports are raw materials.
Weak patent protection can lead to suboptimal innovation, since the potential payoff for a private actor may be deemed insufficient for the amount of time and resources put into developing an invention. Because weak rights make it more expensive to protect inventions, firms tend to look inward to solve problems that may otherwise have been more efficiently solved by an inter-firm partnership. Patents allow employers to see the exact results of the creativity and skill of prospective employees. As well, when rights are weak, workers have trouble qualifying their value.
We're not experiencing a dearth of ideas in this country and research is well-funded by the crown, so why are we seeing other jurisdictions rise in global innovation indexes relative to Canada's position?
One of the reasons is access to capital. Start-ups tend to do quite well in seeing a first round of financing for a great new idea, but, as I think you've heard from a number of sources this morning, one of the key challenges is the sales and marketing, and the strategy for intellectual property going forward within those start-ups. Start-ups aren't always looking for an exit. Often they are looking to scale up. They just can't find the financing for that, and it's because the strategy is wrong. What ends up happening is that the start-up gets bought by a U.S. company and the U.S. company takes it on and, as you heard this morning, sells it back to us in other ways.
So we need to find a way around that.
With respect to knowledge transfer, one of the key challenges for publicly funded research is the IP ownership framework of Canadian universities. Unlike the United States, Canadian universities don't have a uniform patent policy, with both university ownership and inventor ownership models existing at different universities. For inventions, 22% of Canadian universities have university ownership policies, while inventor ownership policies are more common, making up 42%. Rarer are the joint ownership models, where technology transfer and innovation policy are for both the inventor and the university. The mandatory implementation of uniform patent ownership policies interferes with contractual freedom. IP ownership or preferred licensing terms are a prerequisite for business to participate in research projects.
Second would be the incentive structure for academics. Innovation is more likely driven by the obligation to publish in reputable journals as a means of advancement than is commercialization of products derived from research. As you heard this morning, academics aren't necessarily geared towards entrepreneurship. There are some who are very good at it, but they are the exception rather than the rule.
The questions being asked by university researchers are more often than not framed by academic curiosity rather than commercial demand. In speaking to our members, who are regularly asked to participate in these research projects, our researchers are not asking the questions business needs answered, those immediate problem-solving questions that help bring new products to market.
Third, I'll talk a bit about spin-offs and licensing. These are another method of transfer we rely on. Waterloo University is probably the only example of researcher-owned IP framework. It is the most successful research institution, but maybe we should look more to that example not just for the IP framework but as a source of human capital. Knowledge transfer comes not just from the ideas and relationships that they build, but from the interaction between business and academia. It's critical to mutual understanding. Also, I think the co-op programs, which you're seeing more universities do now, help build those relationships and trust.
Incentives for research should take into consideration the objectives for reducing the research in the first place. If the end goal is to satisfy academic curiosity, then we should forego the expectation of a commercial return. There is merit in doing research for research's sake, and funding universities is an important thing to do, but don't expect something to come out of that. If the incentives are geared towards business enterprise and commercialization of ideas, then sales and marketing should be an integral component of the research proposal, which I think is a fundamental component of the supercluster idea that's come out. That should be an integral component of the proposal, with a clear strategy to commercialization as part of a grant application.
I'll make one final note on data flows. Raw data is not treated as intellectual property in any formal sense. However, the data derived from research could produce unintended and spectacular results when analyzed outside the parameters of the original research project, and we should probably give some thought as to how data is treated as intellectual property.
With that, I will conclude, and thank you so much for your attention.