Industry Committee on June 13th, 2017

[Lloyd Longfield, Liberal, Guelph, ON]

Terrific. Thank you very much.

[The Chair, Liberal, Dan Ruimy]

Excellent. Thank you.

We're going to move to Mr. Dreeshen. You have seven minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you, Mr. Chair.

Thanks to all of our witnesses for being here this morning. There is certainly a lot to take in. We've had discussions about how our research dollars are second in the G7 and the different responses that we have there.

Of course, there still seems to be a disconnect as to the investment dollars that we have and perhaps some of the results that we're getting. I think that's what is critical for us at this point in time.

I think Mr. Srinivasan had pointed out that there are some gaps, and maybe this is great to have the different groups here so we can talk about some of those. Of course, part of it is the way universities are structured, and U15 would understand; and we have the different provinces that have their own way of doing things. If you're going to have the same type of thing happening, even within one city, you'll find it's going to be frustrating for people to work through that.

My question is for Ms. Hinzer. When we're talking about the challenges for researchers when it comes to intellectual property filing, is it the application process? Is it the costs associated with the process itself? If that's the case, what can legislators do to get rid of some of the inefficiencies? Are there updates to regulations that could perhaps be put in, and could they tie into some of the concerns that Anand had mentioned?

[Dr. Karin Hinzer]

I'm aware of the different rules in the Ottawa area with intellectual property and the different institutions. On the filing of patents, universities have a finite amount of funds that are available to patents.

If there is a company that has a long-standing relationship and that shows interest and has been collaborating with that research group for a long time, they will say, “Okay, we have a good chance of a licence, so let's patent.”

But they have finite resources. They have to take this out of their general budget in order to protect intellectual property and so they have to make choices. Often the choices are quite limited. It depends on the university, but they will say, “If we don't licence very quickly, we do not have a financial incentive, so instead we'll just try to have the know-how and go with new hires to a company.”

That's fine for the D, as Desire2Learn was expressing. Often that will go more in the form of hires, but if we have new, more groundbreaking...or if there's no industry, or nascent industry.... We can talk about AI. I wanted to go into AI when I was a student and all my professors said, “Don't go into AI. There are no jobs in Ottawa. There are no jobs in Canada. Yes, go to Boston.” That was it.

I didn't want to go to Boston at that time, and so I didn't go into AI. Now AI is big. It was really just R and D. Maybe there would have been a lot of patents. I could have started a company. If I had said no, this is really what I want to do.... I went into another field, but this is where universities cannot provide a lot of support at this point. The way the funding agencies are done, for these more long-term, building portfolios, unless you're in a very rich university.... The University of Toronto, the University of Waterloo, the University of British Columbia do that, but if you're not in one of those three universities. it can be very hard for you to create a portfolio to start a company in new emerging fields. High technologies are all about emerging fields.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

I would like to comment on what you have mentioned, because if the universities are saying, “We have to set aside a certain amount of money so that we can do this”, then wouldn't it be better to find some ways that companies, small SMEs or whatever, could engage at that stage? You keep your money and deal with the things that you're good at and stay out of that part of it and find ways of having others find venture capital or whatever they need in order to move things forward that look as though they could well be commercialized.

I'm wondering about that, and perhaps maybe Anand could tie in on that as well.

[Dr. Karin Hinzer]

Can I say something on that?

There are companies out there that the university can go to and ask them to be responsible for the licensing, and usually they will, but there's no guarantee that it's going to be licensed in Canada, and you have to remember this is taxpayers' money. So I'm a little bit against that model, personally.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Anand.

[Dr. Anand Srinivasan]

Let me think through this clearly. The person who created this particular intellectual property is the researcher, along with the SME. In general, researchers are either professors or students. Looking at the 80:20 rule, I can confidently say that university professors and researchers are not entrepreneurs. So either we train them to become entrepreneurs so that they can see from an entrepreneurial angle that something has commercialization potential, or we give it to an SME where an entrepreneur can take it up.

The university professors in general do not have—and rightly so—an interest in making a company. That's again the 80:20 rule. There are exceptions like Dr. Praveen Jain at Queen's University, who has formed three companies, but those people are very rare.

There are two things that can be done. First, we can inculcate in the researcher, preferably a young researcher, the importance of creating a patent. In general he or she is a master's or a Ph.D. student, and you can at least create a bit of an entrepreneurial spirit in these researchers so that they see from a patent angle rather than a paper angle. Second, we can give a bit more control to the other side, which means investing money to show they are really serious about it.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

From that perspective, how do you satisfy Ms. Hinzer's and everyone's concern about the taxpayer investment? Is there something that could be done so that this isn't just going to be tagged and taken someplace else where the investment will be lost?

[The Chair, Liberal, Dan Ruimy]

Please be brief.

[Dr. Anand Srinivasan]

Yes. There are only two funding options that are possible. One is the fully government-funded option, and the other has an SME involved. If an SME is involved, and the SME makes the decisions, then it becomes easy for them to say no. If it's government-funded, then there has to be a body that decides what needs to be commercialized and how it has to be done.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

[The Chair, Liberal, Dan Ruimy]

We're going to move to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and my thanks to our witnesses.

One of the things that has become evident during the testimony we've received is that there's lots of money going out the door for research and partnerships, but there doesn't seem to be any coordination. In fact, one of the biggest questions I ask is, what is it we want from our results? We don't seem to have an answer for that. We're seeking out something, a final result, that we don't even know yet.

For myself and the constituency I represent—tool and die, mould-making, automotive—it's patents that lead to manufacturing and good jobs. What has become frustrating is that you develop some of these patents and then they go to the United States or some other country. These companies in other places end up putting Canadian companies out of work. Canadian companies have had patents developed by their own workers who go to work every single day just trying to get by. It doesn't seem to be much of a strategy.

Mr. Dixon, you've clustered 15 universities here. Who gets in and out of the cluster of 15 universities? From an organizational perspective, why wouldn't we do that with all universities and all colleges and create some type of a base expectation and an exit program, a pooling of resources? Or are we all just continually replicating things, with people left out of it? Why is it not U10, U20, or along that line? Why is it U15?

[Dr. D. George Dixon]

This is not an easy question to answer. It was U10, then it became U13, and now it's U15. It is effectively developed on two bases. There is an attempt to be pan-Canadian in the representation of universities, and it also represents the universities that are most research-intensive. Take a look at those U15 universities. They effectively receive something on the order of 75% of all of the research funding in Canada, and they produce about 75% of the Ph.D. students. That's the simple basis. The fact is that U15 has mainly come together to try to share best practices between the universities in the research space.

[Brian Masse, NDP, Windsor West, ON]

I have a question for Ms. Hinzer, and then go across to include everybody here.

Is there a way for research...or is there a common bond in terms of a final exit, what you want for the investment? Is it for Ph.D. students, or is to get products to market? Is there some type of capability at the end of the day for a national strategy related to this? We're getting into competition with a lot of other countries. Is there any common bond in all of this to produce a national strategy, or is it just too diverse to bring it together?

[Dr. Karin Hinzer]

A quick answer is that it's what people want. As a taxpayer, what I want is good jobs in Canada. The innovation economy creates a lot of good jobs. We're a rich country, but if we want to stay rich we have to keep investing in innovation.

Automotive is booming around the world. I have collaborations with international companies—not Canadian—that do automotive manufacturing in Canada, but most of the automotive companies do not do their big R and D in Canada. That's one thing that the people here want the Canadian government to do. As an academic, I don't want to see my students going to California, to Tesla, or to Ann Arbor, Michigan, but that's where they're going.

[Brian Masse, NDP, Windsor West, ON]

You're a hundred per cent correct. We've had some things here, but this is almost the platinum age of automotive innovation, and we're getting our clock cleaned like there's no tomorrow. It's unreal.

Maybe I can ask our guests to quickly go.

Mr. Chair, how much time do I have?

[The Chair, Liberal, Dan Ruimy]

You have two and a half minutes.

Laura.

[Laura O'Blenis]

I have a couple of comments on that. Certainly, you mentioned a coordination effort, and we do believe that is part of the issue. There's also the issue of the programs that fund early-stage research and commercialization activities. They do not account for “go to market”. There are not allocations. They fund only the research and development component. There is not the component to educate people on getting it to market and on new market access. Innovation is only innovation when you have clients and intellectual property.

So...consideration of reviewing some of the programs or having parameters within the programs, for example the NSERC engage grant or other granting councils that exist. There are fantastic programs across Canada already, but perhaps if we really want to see the effort and the focus on the technology transfer, we need to have a component of allowing companies to access that. Otherwise, we're really not going to get away from companies going to the United States, because they're going to go where their investors are. And if they can get investors to get it to market in the United States, and we can't control that patent or that intellectual property, then inevitably it's going to continue to happen. Until we have a solution on that, it may prove to be something we won't be able to overcome.

We believe having a coordinated effort is very important—we do not think that is insurmountable—and having some type of IP strategy that does protect...D2L, for example, talking about issues in the States. There are things we can do within Canada. Also, when there are IP lawsuits that occur, many countries fight the battle in the country of origin. We don't have protection areas like that, for example.

There are a number of things we can do from a Canadian perspective in terms of collaboration, education, and “go to market” that could solve a number of the issues we're currently having and drive the outcomes that we anticipate you want to see as a result of this exercise.

[The Chair, Liberal, Dan Ruimy]

You have about 30 seconds.

[Brian Masse, NDP, Windsor West, ON]

Does anybody else want to respond to that?

[Jeremy Auger]

I'm happy to take 20 seconds, if I can.

I'd reiterate all that's been said. When we look across Canada at the importance of IP, especially speaking with the tech field, we see that almost 70% of tech companies in Canada have fewer than five employees. When we then think about how we keep IP in Canada.... Largely, IP developed in Canada today is assigned to the parent company of U.S. multinationals—something like 40% of it. Then, as we see our start-up economy blossom, many of those companies end up selling themselves—again, largely to U.S. acquirers—so that IP is being drained to the benefit primarily of U.S. multinationals. We need to help support Canadian scale-ups to keep that IP in Canada.

[Laura O'Blenis]

Exactly.

[Brian Masse, NDP, Windsor West, ON]

We've become a branch plant.