Industry Committee on June 13th, 2017

[The Chair, Liberal, Dan Ruimy]

Welcome, everybody. It's a fun-packed morning we have. This is meeting number 67 of the Standing Committee on Industry, Science and Technology, and we are continuing our study on intellectual property and tech transfer. We have quite a few witnesses with us today.

We have Karin Hinzer, associate professor and Canada research chair in photonic—that's Star Trek, I should have known that—nanostructures and integrated devices, University of Ottawa, School of Electrical Engineering and Computer Science.

We have, from the Association of University Research Parks Canada, Laura O'Blenis. She is co-founder and managing director, all the way from New Brunswick.

We have, from Desire2Learn Incorporated, Jeremy Auger.

We have, from Polytechnics Canada, Dawn Davidson, associate vice-president, research and innovation, George Brown College.

We have, from U15 Group of Canadian Research Universities, George Dixon, vice-president, university research, University of Waterloo.

From EION Inc. we have Anand Srinivasan, technology lead.

We are going to start with Karin Hinzer.

You have seven minutes, please.

[Dr. Karin Hinzer, Associate Professor and Canada Research Chair in Photonic Nanostructures and Integrated Devices, University of Ottawa, School of Electrical Engineering and Computer Science, As an Individual]

Thank you, Mr. Chair, and thank you for inviting me to speak to the committee this morning.

As well as being an associate professor at the University of Ottawa, I am also the director of SUNLAB.

I appear in my personal capacity, representing only my own views.

In my career I've been involved in all three spheres that generate most intellectual property and technology creation. I performed research at the National Research Council of Canada for five years, until 2001. I then worked in the private sector from 2001 to 2006 for large Canadian, and then American, multinationals. And in the past 10 years I have been in academia. Most of my research activities have been focused on the information and communication technologies sphere and clean technologies.

At the University of Ottawa, I direct more than 15 researchers dedicated to developing new systems and services to further our transition to clean energy generation and bring the unification of power and data networks. Our research group has interacted with more than 30 companies, as well as 20 academic and government laboratories, and has spun off three companies.

In Canada, my experience is that when graduate students start with you, you can have confidence that they will become experts in their technical field after five years, as we have universities of international stature, with world-class researchers. They will most likely create valuable intellectual property during their studies. The largest intellectual property and technology transfers from academia to Canadian companies occur when one of these innovative companies hires these technically well-trained graduating students.

Students have access to a number of resources within their universities to learn about intellectual property creation and management, and to be linked to ecosystems in their sector of study. This must usually be initiated by the students, and is usually not required to obtain their degree. Therefore, they often have low incentives to avail themselves of these extremely useful tools. Motivated students must receive adequate compensation while they are performing their research and pursuing knowledge transfer activities. This is mainly provided in Canada by the tri-agency research councils, which are NSERC, CIHR, and SSHRC. Students must have access to world-class equipment, as provided by the Canadian Foundation for Innovation, and prototyping such as provided by our fourth pillar, CMC Microsystems, in Canada.

Canada does this fairly well, although research stipends are lower than those provided by innovative countries such as Germany and Japan. Countries that experience higher rates of technology know-how transfer between academia, government labs, and industry support projects that must include the three pillars of innovation, which are academia, government labs, and industry.

To increase the rate of creation of innovative new companies and to have existing ones grow, new graduates and other members of academia must be networked into the broader innovation ecosystem. In order to do so, research groups must be well funded to attend regional, national, and international events that link collaborators, possible customers, and suppliers, and not just other academics. They must be linked with standards groups, as well as industry and professional associations.

They must be able to get funding from various sources to do design work, proof of concept, client networking, and prototyping. Often these steps can take years, especially when hardware is involved. Therefore funding and support for these ideas must be maintained over this time. This has been a constant in Europe, Japan, and the United States. Student researchers must be incorporated in large-scale research projects in order to dream big and be brought to the next level. In the United States, star students are often involved in Department of Defense or Department of Energy large-scale projects that include the three pillars. This is also observed in European framework projects, and now more and more in China as well.

Within these projects and at their university, they must learn to be comfortable discussing topics of mutual interest with their fellow researchers, evidently, but also with lawyers and business persons in their field. This cost is usually assumed internally by universities and, therefore, may not be optimal to assist a bright mind with a commercialization effort. These bright minds have access to early funding from the industrial research assistance program, IRAP, of the National Research Council. These early-stage companies often must show early local customers, and this is where the Canadian government can help, while they pursue their international customers, to be able to show early success as well as to bankroll their initial efforts.

One funding in clean tech that has worked well over the years is Sustainable Development Technology Canada, SDTC, which provides one-third of all the funds for prototypes, although this comes short of the U.S. projects funded by the small business innovation research, SBIR, and small business technology transfer, STTR, programs that fund early-stage, high-risk technologies for small companies. SBIRs carry the burden of most of the costs of early-stage projects, allowing more technological risk on the company's part.

According to the Naylor report, the amount per capita spent on research and development in Canada has been steadily decreasing for the last 20 years. At the same time, we are a society that is more and more dependent on the advanced economy, and other countries have stepped up to the plate and significantly increased their amount per capita.

In conclusion, Canada has all the basic elements to increase its generation of intellectual property and to transfer it to industry and other intersted organizations. We only have to bring them together, recognizing that resources must be allocated for the purpose.

Thank you for your attention.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We'll move now to Laura O'Blenis from the Association of University Research Parks Canada.

You have seven minutes.

[Laura O'Blenis, Co-Founder and Managing Director, Association of University Research Parks Canada]

Good morning, everyone. Thanks for the opportunity to present to you.

It's my pleasure to be here. I'm a co-founder of the Canadian Association of University Research Parks, which we founded 10 years ago. I currently act as the managing director.

Today I want to speak about the opportunity to consider an IP matchmaking program, because we believe that part of the issue with intellectual property and technology transfer is a lack of understanding and awareness of what intellectual property actually exists across the country. I'll run through a few things on this.

The Association of University Research Parks is the national not-for-profit association that advocates on behalf of the 26 research and technology parks and innovation districts across the country. The parks are locally driven communities of innovation that link industry with government and academia. Our park network has an estimated 1,400 companies and 65,000 knowledge-based workers. Over one third of our employees have advanced degrees, at master's or Ph.D. levels. Our network generates over $4.1 billion in annual GDP to the Canadian economy. This is expected to grow to $6.2 billion over the next five years. Approximately half of our companies in the parks are currently exporting to the United States, and about a third of the companies export to Europe. As well, 49% of our companies are planning to expand over the next five years.

We believe we can do more to connect industry with opportunities for technology transfer through our academic institutions, which can result in an increase in commercially viable opportunities and growth in the Canadian economy. We would like to propose an intellectual property matchmatching system. Intellectual property fuels the creation of knowledge-based economies, as we all know, by providing a legal infrastructure through which ideas can become products. Robust IP systems foster innovation, leading to economic growth, job creation, and sustained competitiveness in global markets. Intellectual property, as empirical analysis demonstrates, provides a critical infrastructure that moves innovations from great ideas to tangible, real-world solutions, and makes them broadly available to others.

Commercial intellectual property is commonly an invisible asset, but it is critical infrastructure for the long-term growth and profitability of companies. Business owners worldwide fail to appreciate the value of their intellectual assets. A survey by the London Financial Times found that 84% of company owners value their IP at zero, and only 6% value it as anything more than 10% of their company's worth. Nevertheless, the World Bank calculated that royalty and licensing fees generated 5.2 billion pounds in the U.K. in 2010, showing the scale of potential revenue available to those who do recognize the value of IP. There's also an indirect positive relationship between IP and profitability. It's exemplified by Google's acquisition of Motorola Mobility, as an example, including its 24,500 patents and patent applications, some of which Google is using to defend its Android operating system in a global patent war against Microsoft, Apple, and Oracle.

On average, a strong IP environment is associated with an increase in the level of spending on R and D by firms within that particular economy. In turn, there is a significant positive relationship between R and D and gross profit margins. Companies with higher R and D intensity are expected to have higher gross profit margins, something that we seriously need to build in the Canadian economy. Companies that are profitable can therefore reinvest in their businesses and continue to scale their operations. Just as every country needs a system of roads or, as is often the case, a digital network to bring goods and people to market, so does every country at every level of development need an intellectual property system to bring ideas to market as products.

We propose an IP inventory mapping that would help identify opportunities and challenges for Canada, practically and a policy level. By mapping the IP assets in Canada and identifying IP customers abroad, a more targeted matchmaking between Canadian IP holders and customers, including researchers and businesses who can actually transfer this IP into commercial application, can be achieved. Meanwhile, policy-makers could learn how Canada's IP approach is perceived inside and outside of Canada, allowing them to identify areas for improvement and better alignment of Canada's IP policy with its economic development agendas.

AURP Canada proposes the IP landscape matchmaking project where we can leverage our network of 1,400 companies in the 26 parks across Canada, as well as a number of government departments that are currently undertaking intellectual property development and looking for partners to commercialize this IP. We can also leverage our global network of clients and partners through our Silicon Valley office and relationships in other regions, specifically in the United States and Europe, to identify and map out companies globally who may be interested in growing their businesses within the Canadian economy with access to this new IP or knowledge of such IP.

A national matchmaking program could yield many benefits, including a better understanding of what intellectual property exists in Canada, identification of potential opportunities for an increase in technology transfer, better alignment with applied research in priority areas for our federal government, an increase in industry-academia collaboration, an increase in industry adoption and application of research conducted through our academic institutions, an increase in the number of patents executed in Canada, and an increase in the potential global advantage for Canada.

Thank you so much for your time. I'm looking forward to the discussion.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move directly to Desire2Learn Incorporated, Jeremy Auger, chief strategy officer. You have seven minutes, sir.

[Jeremy Auger, Chief Strategy Officer, Desire2Learn Incorporated]

Good morning, distinguished members of the committee. My name is Jeremy Auger. I'm the chief strategy officer of D2L, a world-leading learning technology company based in Kitchener, Ontario. Founded in 1999, D2L has evolved from a small start-up of just five people to one that now employs over 750 staff around the world, with offices in Canada, the United States, Europe, Australia, Brazil, and Singapore. As a company we're committed to breaking down the barriers to education and transforming the way the world learns. Our learning management system, Brightspace, is a cloud-based platform that looks to improve learning through data-driven technology that helps to deliver a personalized experience to every learner, regardless of geography or abilities. Today millions of learners all around the world in K to 12, higher education, and the enterprise sector use our products as their digital learning environment. Our mission to transform the way the world learns has been the same since we founded the company, and it continues to drive everything we do.

Growing to our current size has taken perseverance and a fundamental belief in our mission, and it hasn't always been easy. As a young company seeking to export to new markets, we learned of the predatory and litigious U.S. IP environment the hard way. As we entered the U.S. market, we were sued by a much larger U.S. competitor and fought a fierce, three-year IP lawsuit all the way to the U.S. federal circuit appeals court. Our experience taught us the importance of IP and that IP is, or will be, central to every business in the future if it isn't already. I believe that as technology proliferates every industry, how one leverages IP will be critical to one's success in the marketplace. For us, as a scale-up, software as a service company, our strategy is likely somewhat different from what you might find in other industries such as pharmaceutical or biotech, but it is critical nonetheless.

For Canada, our challenge is not one of having enough innovation; our challenge is to ensure that Canada retains some of the economic and social benefits from our innovation activities—to ensure that inventions are commercialized and leveraged to support the scaling of Canadian firms. Getting technology transfer practices and policies right is a critical piece of this puzzle, and I'm happy to be here today to share some of our experiences.

In the fast-changing space of software, research is an integrated and applied process. We have a different value proposition for IP than do the other industries I've mentioned. And unlike the fundamental research that occurs in some other sectors, say pharmaceuticals, which can result in breakthrough discoveries, software research tends to be continuous and incremental. For D2L, patents are rarely used for direct monetization to accrue royalties or generate a direct revenue stream; they are mainly used for defensive purposes. The patents that D2L holds primarily act as an insurance policy against competitors attempting to restrict D2L's ability to commercialize its innovations. There are two areas of focus I want to raise in my opening statement, which I'd be pleased to further elaborate on during questions.

The first relates to our experience with university-generated IP and tech transfer offices. I'll start by making it clear that academic institutions are our partners, our customers, and in my opinion Canada should be very proud of them. However, D2L has struggled to find value in university-held IP that's generated in isolation of the private sector. In cases where this has happened, many times we've found the technologies already commonplace in the private sector or not in a state where they would provide commercialization value.

The second relates to partnerships between colleges, universities, governments, and the private sector. A strong partnership between academia and business has the potential to bolster the innovation occurring in Canada, but despite participating in several government-funded research partnerships with academic institutions, D2L has struggled to find value in these projects.

When we partner with universities on research, typically funded in part through grant programs, the grant funding is generally allowed to flow only to the non-profit organization. Usually there's also a requirement on the university to have a commercialization partner, such as D2L, for them to qualify for the funding. As that partner we're required to invest with our own cash towards the university and further spend time and effort to undertake research alongside the academics. Most of the time, any resultant IP from the research will be jointly owned between the parties, and then begins the process of D2L's needing to license or buy back the IP from the university. The result of this process is that we find ourselves doubly investing in research if we have commercial interest in the output.

It's a process that pays for universities to do research with both company and government funds, yet we are beholden to the university for the free and clear use of the IP at the end of the project. D2L and other scale-up companies need relevant IP developed for the marketplace that will facilitate growth and commercial success, but paying for IP twice is a disincentive for companies like ours.

As a scale-up company, D2L needs IP for two reasons: first for defence, namely in the form of a defensive patent portfolio; and second to further our business by driving innovation into our products.

More transparency into ongoing university research would increase the accessibility for companies like D2L to understand current research areas, availability of patents for sale, and financial expectations. Any support in this area, as we just heard, would reduce efforts and costs and would transfer success between universities and the commercial sector. Additionally, upfront transparent IP ownership favouring free and clear commercial exploitation for government-funded joint research would help catalyze more joint research.

Lastly, de-risking the collaboration between academia and business has the capacity to unleash new and innovative ideas onto the world. Research, by its nature, is not certain to produce viable commercial outcomes, so engaging in research can be risky and cost-prohibitive. Smaller-scale grants like those of the engage grants program can reduce the risk of research, which may result in IP that can't be commercialized, but this program is very small in scale, and as such is more appropriate for start-ups than for scale-ups.

The pool of grants available for scale-up companies like D2L is much smaller than that for SMEs, so we are stuck between a rock and a hard place. It can be cheaper for us to hire away researchers from universities rather than having to go through the costs and efforts of dealing with universities through larger grant programs. Grants that de-risk working with universities, such as the engage grants, but that are responsive to the needs of a growth company would benefit both parties. There is huge potential in solidifying the partnership among the three levels of government, academia, and business, but we need to do a better job of de-risking technology transfers for scale-up companies like D2L.

I'll leave it at that. Thanks for the opportunity to speak to you today.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to go to Polytechnics Canada, Dawn Davidson, associate vice-president, research and innovation, George Brown College.

[Dawn Davidson, Associate Vice-President, Research and Innovation, George Brown College, and Polytechnics Canada]

Good morning, everyone. I'm Dawn Davidson, the associate vice-president of research and innovation at George Brown College. It's my pleasure to represent Polytechnics Canada this morning, of which George Brown is a founding member. Thank you for inviting Polytechnics Canada and me to present.

Polytechnics Canada is an association of 13 of Canada's large, research-intensive, and leading colleges, polytechnics, and institutes of technology. Polytechnics offer a wide range of advanced educational credentials including bachelor's degrees, advanced diplomas, certificates, and apprenticeship programs. We provide career-focused and community-responsive education developed in partnership with employers. Our commitment to building resilient regional economies is a key driver of our research initiatives, which commonly involve public-private research partnerships.

Polytechnics focus on collaborative applied research with our private sector partners. We typically work with Canadian companies ranging from small to large, as well as multinationals. We have an industry pull rather than researcher push model, so industry comes to the polytechnic with a real-world innovation challenge and the polytechnic provides access to the talent in the college, including our researchers, technologists, faculty, and students, state-of-the-art facilities, and our extended networks to help deliver an innovation solution.

I'll use a previous partnership at George Brown to illustrate a typical tech transfer scenario at a polytechnic. In 2011 the Colleges Ontario Network for Industry Innovation, which is now part of the Ontario Centres of Excellence, introduced Clear Blue Technologies to George Brown as they needed assistance to develop their smart, off-grid, solar/wind controller for community infrastructure. Clear Blue was a start-up company at the time with a small team, and they lacked all of the in-house expertise and infrastructure necessary to develop their product. We provided complementary expertise to that which was already on their team, and worked alongside them to develop components of their system with our prototyping facilities. In this way, technology transfer was completed to the Clear Blue team, both informally through working alongside one another, and formally via the delivery of technical reports, specifications, and their prototypes.

Over the last 10 years George Brown has transferred technology and knowledge to private sector partners on over 500 applied research projects in a similar manner. Technology and knowledge is also disseminated via workshops, symposia, and conferences to the broader community. This facilitates technology diffusion, the adoption and adaptation of technology, which contributes to innovation gain for our country's homegrown firms. An example of this is that at George Brown we have strong capacity in building information modelling, or BIM. In addition to collaborating with companies on applied research, we disseminate the latest information on BIM via workshops, which helps our partners fill skills gaps on their teams to ensure that they're able to adopt the results of applied research.

Polytechnics adhere to a working principle that intellectual property is best exploited by the private sector, and we have similar industry-friendly IP policies and practices in place across all of our membership. I'll go back to the collaboration with Clear Blue to illustrate this. Clear Blue signed George Brown's standard one-and-a-half page memorandum of understanding, which outlines the ownership of IP arising from a project with the polytechnic. With this agreement all forward IP was assigned to Clear Blue and they were responsible for exploiting and protecting the IP. George Brown retained the right to use the research results for academic purposes, and our students were able to acknowledge their participation on the project on their resumés. With unencumbered IP, Clear Blue Technologies has rapidly commercialized their product. They're selling it in 29 countries, 19 U.S. states, and 7 Canadian provinces. They've generated revenues and created new jobs for Canadians.

I understand that the committee is also interested in how we work with other academic partners and industries, so I'll provide one example of this. I'm happy to take further questions later. RZR Skate Blades is a Hamilton-based company that designs and manufactures custom advanced-performance hockey skate blade runners. RZR's product follows a classic hockey skate blade design, but combines high-quality aerospace-grade stainless steels with the latest technology and custom precision manufacturing processes to yield a product with superior performance, strength, and durability.

The project involved collaboration among RZR, Brock University, and George Brown in order to assess the performance of the runners from two complementary perspectives, the first at Brock University, where they did an on-ice performance testing, and the second at George Brown, where we characterized the materials and did testing on the materials themselves. The results provided RZR with empirical support and validation of the value-add of their proprietary process and will enable them to accelerate market adoption of their product.

These examples exemplify the advantages of polytechnic IP policy and practice commonalities for industry, including the following: industry exploits IP unencumbered by the partnership; industry, in working with multiple polytechnics, finds that we have similar IP policies, which simplifies things; there's clarity with respect to the ownership of IP right up front; the time to negotiate project agreements is minimized; and IP is not an impediment to industry-academic research collaborations.

To close, I want to urge the committee to ensure your study of IP policies and technology transfer issues accurately differentiates the kinds of responses that Canada's post-secondary institutions have to a company's intellectual property needs. With polytechnics, the emphasis is clear and simple: we're not motivated by generating revenue from IP. We're motivated by having access to real-world innovation challenges that can become part of the applied learning that we offer to our students. This IP-friendly approach explains why so many firms turn to applied research offices for support as they work through the commercialization process. To date, federal policy has not adequately captured this differentiated logic.

I welcome your questions.

Thank you very much.

[The Chair, Liberal, Dan Ruimy]

Thank you.

We're going to move to the U15 Group of Canadian Research Universities and George Dixon, vice-president.

You have seven minutes, sir.

[Dr. D. George Dixon, Vice-President, University Research, University of Waterloo, and U15 Group of Canadian Research Universities]

Good morning.

As a point of clarification so that it's essentially perfectly clear, I'm here speaking on behalf of the U15 Group of Universities, but I'm also the VP of research for the University of Waterloo. The brief I'm presenting today is a U15 brief.

The U15 welcomes the committee's efforts to increase the benefits that flow from partnerships, technology transfer, and intellectual property in Canadian post-secondary institutions. Disseminating new knowledge and research results is a core part of the university's research mandate. U15 universities have a strong track record of turning our world-class research into commercial successes, from insulin and Plexiglas to vaccines and, more recently, breakthroughs in artificial intelligence.

Canadian investments in investigator-led research generate three major outputs for the private sector, and I'll speak specifically to each of these. The first is a highly skilled workforce, the second is research partnerships, and the third is commercialized discoveries.

First, an innovative economy requires a highly skilled workforce. Investigators use a significant portion of the research funds that support their research to hire graduate students as research assistants. In fact, about 80% of the non-capital investment in research in universities goes to support graduate student education. The experience those students gain through their cutting-edge research provides them with the skills they share with future employers.

Second is partnerships. Our investments in investigator-led research build expertise in exciting and emerging fields that businesses can then access through research partnerships. Recent investments by Google, Microsoft, the five big banks, and others in the Canadian artificial intelligence research space are in fact the results of two decades of fundamental research in AI within the university system. This is an area where Canada performs better than most people believe. Canada is second in the G7 in terms of the percentage of higher education research that businesses fund. The U15 group undertakes more than $700 million per year in business-funded university research, or more than 80% of the Canadian total.

The last item, and the one I want to spend the most time on, is commercialization. Investigator-led research can lead to discoveries that have significant commercial potential. University technology transfer offices work to protect these discoveries with respect to IP and then commercialize those by either licensing the IP or creating a spin-out company.

Often, people focus on trying to find the perfect IP ownership model. The reality is that models differ, based on a variety of factors and local conditions. Institutions that are highly successful at commercialization use the same policies as institutions that are not as successful. The key determinants of success are not which IP ownership model or practices an institution adopts, but rather how well those practices align with the local market and within what context the university executes those activities—to be more straightforward, how well the universities execute their policies.

We have some extremely successful stories and examples of execution. U15 universities currently hold 2,900 active licences. Interestingly, of the new licence agreements the U15 executed in 2015, about 60% were with small and medium-sized businesses. In addition, over the years, the U15 has created an estimated 600 spin-out companies that remain active. It's also worth noting that 89% of the spin-outs our universities created in 2015 were founded in the institutions' home provinces, creating a significant potential local economic impact.

Although these are good numbers, we almost certainly can do better. Almost by definition, groundbreaking discoveries with significant commercial potential occur at a very early stage and need significant work to make them market ready. Effectively, what you need to do is de-risk the associated business development potential for that IP. This gap between commercial potential and market-ready products or services is one that the U15 thinks the government could help us close.

To do so, we recommend that the government introduce two complementary programs.

The first is a program modelled on the United States small business technology transfer program, to help fund R and D that turns early-stage discoveries into market-ready products and services. NSERC runs an I2I program on innovation to industry. These are effectively early-stage programs that allow you to take IP and develop it into a commercializable product.

The second is a program modelled on the United States innovation corps program, which provides robust entrepreneurship training to researchers, including helping them develop a better understanding of customer needs. This is a strategy that we adopted at the University of Waterloo about 10 years ago, in terms of educating researchers about the potential of the IP they own.

To conclude, I'd like to remind individuals about the importance of investing in investigator-led research so that we can deliver these benefits for all Canadians. There are worrying signs that Canada's strength in these areas is slipping. Although lagging investments are unlikely to undermine our economy in the short and medium term, if Canada is to excel as an innovative nation over the long term, investment in research must be sustained. Given the lag time associated with research and with training top university researchers, stagnant or declining investment in research excellence poses a pressing threat.

The recently released fundamental science review report, commonly known as the Naylor report, provides important recommendations about how to reinvest in and reinvigorate Canada's research ecosystem.

I urge the committee members to consider the importance of ensuring that Canada continues to have both a strong research capacity and the ability to maximize the impact of that research.

Thank you for your time.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Finally, we're going to move to Mr. Srinivasan, from EION Inc. You have seven minutes, sir.

[Dr. Anand Srinivasan, Technology Lead, EION Inc.]

Good morning, all. Thank you for inviting me.

I'm going to share my insights regarding the problems that SMEs face in obtaining IP from research institutions. I'm going to suggest two or three solutions because it's only a six-minute speech, and hopefully it's useful.

The intellectual property created by university research teams is important for SMEs—no doubt about it. The researchers are generally ahead of the curve. They cross-pollinate between departments, which we cannot do, and they know what is happening in the field and the latest technology. Secondly, the investment required to build a larger intellectual property portfolio, when supported by government funds, helps both researchers and the SMEs.

My take on this now is not to lessen the investment that the government is putting in. Obviously, the government is putting in a lot of money. What I'm trying to pitch here in the next six minutes is how to make that money work better. Where is the bang for the buck? It's very easy to throw more money...and to see the problem go away, but this is not going to happen.

When SMEs contribute cash and in-kind, it shows commitment from SMEs towards research. They already do not have much funds. There is a reason why they are asking for money from government and universities in order to do it.

There are a few things we can do in order to help SMEs. However, getting IP agreements done with the universities and research institutions and others is not as easy as it seems.

I am going to make my next six minutes into three parts: before the project begins, during the project, and after the project; one problem that we face in each; and what we can do—one solution each. That's all I'm going to do here. If there is more, we can always talk about it.

Before the project starts, personally having been involved in negotiating with various universities and research institutions, and from the company's point of view, I see there is a lack of consistent process across the country in application of IP rules within the research institutions. That leads to delays and overhead in spending time with multiple universities and research institutions, and dealing with different teams every time. If you put in $50,000 to deal with one particular external research institution, another one, and then another one, right across the board there is no consistency in terms of rules.

Secondly, every college and university has its own external research department. Sometimes the external research department is bigger than the number of active researchers producing commercialization with the results. You have to deal with this middleman over here who does not understand technology in order to move forward to do the real work. This leads to an overhead of almost one-third of the money in many cases. You put in $100,000, but it's only $66,000 worth that you're starting to use. The other $33,000 goes purely on overhead.

To give you an example, there are three institutions in Ottawa, all doing research. The three have three different external research divisions, and all three have totally different rules and regulations. When I'm dealing with one particular university, the same thing cannot be transplanted. Their overhead is different from the college's overhead, which is different from the other university's overhead.

What am I suggesting here? I really feel the need, right across the board in Canada, that since intellectual property is important, some department or ministry of innovation should come up with a guideline that dictates 80% of what should be there, so that universities take care of the rest of the 20% for locally managing things. However, 80% seems to be the same thing that we are hashing over again and again. If you could help me with that, then it will be easier for me to concentrate on research rather than this mumbo-jumbo.

During the project execution, the IP ownership itself has to be defined properly. The university research tends to hold onto IP, unable to commercialize, leading to the executable IPs that no one uses, or they go into this mode of agreements after agreements for a particular research result or a patent. If you see the number of patents that are coming for the amount of money that is put in, I don't think it is really very large.

The money is in billions, and the patents are not even in thousands.

So I'll give you an example from my personal experience that would relate to you. I worked in BNR and then we became Nortel. I signed an agreement with BNR that the work I do in BNR goes to BNR. I created patents in BNR and Nortel. Those two patents went to Nortel. That went to Motorola or went to Google. God knows where it went. But Nortel had the complete control of using the patents. I can go and say this is my idea, I did it all, but even if you have the idea when you're taking a shower, it still belongs to Nortel.

Similarly, it's the same thing with Tropic when I worked there, which then became Alcatel-Lucent. I created patents, and they belong to the institution. My name is there in the patent and I'm very satisfied with it. Ultimately it was created. The government puts in money for research and the research is done by the university professors or researchers. They didn't put in the money from their pocket. Why shouldn't the results belong to the Canadian people? It is the government's money so the results belong to the Canadian people. Where is the IP agreement here? The IP is the Canadian people's agreement. Why is somebody else holding the particular results?

If an SME puts in the money, then partially that particular intellectual property is held by the SME and the SME should continue developing the product. But if there's an IP created purely based on the government money that IP should be given to the budding entrepreneurs and innovators in Canada, including the SMEs, to take it up, make more jobs, and create more wealth for the country. That is not being realized at all. Instead what we are doing is saying, “my professor did this or this is mine so I'm going to hold on to it” and there is a big department in the middle that comes and starts negotiating with you.

At the end of the day, SMEs just don't have the money, time, or resources to handle this. They say, to hell with it, I'm going to hire two guys and go and do it myself. This is what is happening. Ultimately what happens is there are non-executable patents in the universities that nobody uses but their list is long. They can make claims about it. Very few of them—and maybe you can even count them on your fingertips—are saying, on big data I did this one and in the smart grid I did that one. But for the billion and a half dollars' investment, do you think that even makes sense? I don't know. If I ran my company like that, I would get fired within the first month.

For example, if you're taking the Far East—I don't want to name the countries—every research institution always has a numbered company associated with it and those numbered companies—which kind of mimic NRC—go around, find those who are synergized and then they evangelize that particular patent, and it allows them to build companies based on that and ultimately the country grows. The Canada stagnation, as many of my colleagues put it, is not due to investment. It is because there is no streamlining of processes to make use of it.

I have just a final point, on after the project. After the project, there is really a lack of proper metrics for SME impact and the intellectual property impact within the country. We need to really measure the IP creation, which is the number of patents that are created in the country. It's a very clear number. If we can compare it with the rest of the world for the amount of money that you make, the total number of patents divided by the total amount of money that you've put in gives you your efficiency. It's not rocket science. If we go and check this one, we will see where we are in the world. Once you measure you can always improve, because you know where you are. That needs to be done.

A specific budget needs to be created, and not an addition. Even within what you have, you can segregate for patent creation. Any money that the government puts in for research to a research institution has to end with a patent and that patent belongs to the Canadian people. If an SME puts in money for that particular research along with the government, that patent belongs to the SME also and there should be no agreements of any sort, because we put the money in we have the right to use it.

Of course, the researchers can write their name on the patents. We can write their name on the patents. We can feel good about it, but ultimately who paid for that research? They own the patent. This is the common norm in the private industry. I don't know why it should not be the norm in the government industry.

Those are the three ideas I have.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're tight on time. We're going to jump right into questions.

Mr. Longfield, you have seven minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks so much, and thanks to all the witnesses. My goodness, there are a lot of us this morning.

I want to look at, first of all, the tech transfer offices with Laura.

Thank you for joining us from New Brunswick. We had a good conversation last week when you were in Ottawa about the IP matchmaking service.

Could you maybe outline where there's success in that, what the challenges are, and how we get IP from universities to the small businesses.

[Laura O'Blenis]

Right now, as it stands, the academic institutions and the technology transfer offices work on a localized level with the companies that are interested in using or applying that technology and that research. What we're proposing is a system that would allow different areas. It would take it from a localized approach to a national and regional approach, whereby if there is an academic researcher in Edmonton, for example, and there is an intellectual property opportunity in Fredericton, then they would see and be able to sort by discipline or area of focus to be able to help that organization get to market faster with potentially a new innovation. There would certainly be some challenges with this type of program.

We have seen some success with a similar type of concept that is based in Europe through the International Association of Science Parks. It is based in Spain. It has a very high-touch cataloguing system that it uses. It reaches out to a network of about 250,000 researchers, businesses, and others that are interested in intellectual property, when it has a company that is interested in building out a certain platform, maybe around IT. A number of our parks are focused in advanced manufacturing, IT, oceans technology, nanotechnology, and green technology. It really is across the board.

This program is quite interesting. It's called the POINT program, through IASP. The network includes organizations and groups both in Europe and some in Canada as well that are members of IASP. It's very high touch, and it's actually not a database; it's actually done by reaching out to various organizations.

[Lloyd Longfield, Liberal, Guelph, ON]

So the importance of people doing that...I'm going to have to cut us a little short, if we can.

[Laura O'Blenis]

You definitely need access to resources. The other challenge would be from an academic institution perspective. Many of the universities have different IP policies and may or may not have all of the disclosures available to them. Fundamentally, you wouldn't be able to get 100% participation, but if you put the resources behind first mapping out what IP is actually available and then building out the database, we do believe it could be quite interesting for acceleration of company scaling, as was discussed in some of the conversation.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you very much.

I want to pivot over to the business discussion, and there are very interesting concepts, so far, from business.

D2L, looking at IP as a defensive mechanism, I know you've had a history with the States on that. Having business driving IP versus having universities drive IP has come up before in our previous meetings. Can you expand on the importance of businesses owning IPs verses universities owning IPs? We have two streams at work here, one from peer research and one from problem solving.

[Jeremy Auger]

Especially in the tech field, we talk about R and D. Especially in application development, generally speaking, you're much closer to the D than you are the R. That being said, there is still research that happens within companies.

In terms of investment and return on that investment and research, if you can find the right talent, that is largely the cheapest way to do that research. Then there's no question about resulting ownership and ability to exploit it.

While we love working with universities, we also do a lot of applied research, in software especially. Largely, that takes the form of prototyping, experimentation, and testing new technologies and things like that, more so than fundamental research that is going to yield some sort of breakthrough like you'd find in the medical field, battery technology, or something like that.

[Lloyd Longfield, Liberal, Guelph, ON]

You also mentioned, in terms of knowledge transfer versus technology transfer, actually just hiring people who have the knowledge and getting them into your business, which ultimately creates jobs and creates value within the Canadian market.

[Jeremy Auger]

Right.

If we think about just the simple cost of investing in research in a partnership, we have to weigh that against the cost of just bringing researchers on board as part of the team and doing that research in-house. When we think about emergent fields like AI and machine learning, there are a lot of collaborations forming and efforts under way to build partnerships, which we of course want to be part of. We also have to think about our own commercial interests and bringing on staff with those skills. Many of those might come out of either other AI companies or universities and colleges where they're doing research in that area.

[Lloyd Longfield, Liberal, Guelph, ON]

I know that one of my colleagues is going to be investigating that further, so I'd like to go to Polytechnics Canada, to Dawn Davidson.

I'm very interested in using colleges as a gateway to IP and looking at businesses owning the IP, using polytechnics as a prototyping service that then connects into the university networks.

Can you expand on that for our study, please?

[Dawn Davidson]

We typically don't have offices of technology transfer like they do in university settings; instead we have offices of research and innovation that are oriented towards facilitating applied research within the institution with industry. It really is that industry pull model rather than push model.

We'll work with all of the different players within the regional innovation system. We'll work with other universities, community colleges, polytechnic—

[Lloyd Longfield, Liberal, Guelph, ON]

I'm sorry, I have to get one quick question in with 15 seconds. Do you encourage businesses to develop or to register IP. Is that part of your process?

[Dawn Davidson]

Yes, we require that they either register it or exploit it, that they do something with the intellectual property.