Industry Committee on June 20th, 2017

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

That would be great. Thank you very much.

[Bert van den Berg]

Researchers and companies often work with people close to them, so it's helpful to have somebody nearby. Georgian College in Barrie is certainly a source of research capability. One of the visions for the superclusters is to network capabilities into the supercluster. At NSERC, we already network research from across the country to companies across the country. That said, I recognize the challenges you've outlined. Having a technology access centre in Barrie would be something, assuming that it was successful, that would probably be very important.

[The Chair, Liberal, Dan Ruimy]

Thank you.

The final questioner for this period is Mr. Jowhari.

You have a very fast five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you to all of our presenters.

I'd like to go back to what I call the collaborative model, what you called collaborative research. Specifically, you talked about open and early-stage research and bringing the public as well as the companies into this process. We know that most of the research is happening in the universities. Given the fact that most research is done by professors and the, let's say, post-doctoral students, and there is the concept of protecting that and keeping it away from the outside world so it can be considered as pure or fundamental research, how do you reconcile that? We've heard that there are some best practices out there. You gave us two examples of those. You said how successful it is; it's collaborative; it has cut the cycle time and it generates jobs. Then we talked about the fact that we need fundamental research, pure research, and it's a much longer term. We naturally want to be able to look into how we can commercialize or how we can do the technology transfer in an efficient and effective way in a short period of time. In your opinion, how do we reconcile these two things?

The question is for both Bert and Ted.

[Bert van den Berg]

Ted mentioned open access. The key thing in getting technology out is that people have to know that there are 20,000 companies that do research in a particular year. We've talked about the 10,000 faculty we support. There are more who SSHRC supports. So it's a many-to-many problem. I have to find the right person to work with, so publications are going to be good, and open access is going to be good, because I can find a person through a web search. If you can find the person and you're physically in the same country, you have a better chance to partner with them. A person in China may find the publication, but it's not enough for them to actually capitalize on a commercialized opportunity. The more we can enable the interactions, the meeting events that we support, the more all of those things speed up the early finding of the other. Once you can work together, you're going to work better on a problem of relevance and produce something.

[Majid Jowhari, Liberal, Richmond Hill, ON]

How can we convince some of the fundamental researchers in the universities that this is a world that will work and it will not impact their research in the long term?

[Bert van den Berg]

NSERC has a strategy that focuses on that continuum, and, as it is in business, it's a word-of-mouth business. “Oh, you managed to get that publication out, and you're working with this company, and the students got placed? Well, I want that too.” It's when peers show that this works well. The best researchers we have also happen to be involved with companies. It's not that the best researchers are not the people involved with companies.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Go ahead.

[Dr. Ted Hewitt]

I would just respond as well that this will entail a major culture shift, because the model in place now is a traditional model for the most part. I should mention as well that there is lots of research and development and knowledge transfer that does not involve technology. This is equally important, and it's more in the space that we work in. So, that's important to recognize.

In the case of the Montreal Neurological Institute, they decided amongst themselves, however many dozen researchers there, that they were going to enter into an open innovation model. That meant publishing and posting all of their findings on a daily basis to the Internet for everybody's access—companies and non-companies. It was the same thing with the Structural Genomics Consortium in Toronto. That was a radical move. They themselves voted to do that. How that experiment will play out, I don't know. To get to the point of something like that requires a cultural shift and agreement that it, in fact, is the direction to go.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

I have 45 seconds, and I want to ask one more question and that's regarding the fundamental researcher.

We all agree that fundamental research is important. But we are measuring fundamental research in terms of the dollar value, in some cases, that it leads into technology transfer. My question to you is should we actually use a different base of measurement for the fundamental research? I still strongly believe that fundamental research is very important, but if we keep measuring it on the basis of technology transfer and how for every dollar invested one dollar is commercialized, then are we measuring the effect and is the fundamental research the wrong way?

[Bert van den Berg]

I would suggest that we measure first the value of the students who go to work in companies; second, the value of the collaborations; and a distant third, the value of the licences and patents.

[Dr. Ted Hewitt]

I would generally agree. As I said earlier, it's really important to take a broader view of this, because the impacts and the results are often not anticipated. As was mentioned earlier, we just have to keep the pipeline going—invest in the best minds and see what happens. It may be a leap of faith, but it will produce. The Germans are very good at showing why that's true.

[The Chair, Liberal, Dan Ruimy]

On that note, I would like to thank our guests for coming in and sharing their time with us and each other.

We are going to break for a very fast one minute, just to do a switchover. We are being mindful of potential votes, so let's get back.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Sorry to rush everybody.

To our guests, we have potential votes coming up, so we really want to get your testimony on record.

We are going to start with Jacqueline Walsh, associate professor of entrepreneurship and strategy at Memorial University, all the way from Newfoundland and Labrador.

You have the floor for seven minutes. Go ahead, please.

[Dr. Jacqueline Walsh, Assistant Professor, Memorial University, As an Individual]

Thank you for the invitation and the opportunity to present to the committee. I've been following the testimony, and throughout my statement, I will refer back to remarks made in previous testimony.

My perspective on this issue of intellectual property and technology transfer comes from a combination of areas that I have been involved with in my career. I practised IP law for 17 years, working with small high-tech firms. I have a Ph.D. in IP law, and I spent many hours trying to access IP out of university.

In my current position, my research relates to entrepreneurship strategy, regional innovation, and the role of post-secondary institutions in economic development. I hope I bring you a perspective that you haven't heard to this point.

The solution to the question that you're raising is very complicated, and I don't think there are any magic bullets. However, I do believe there is a fundamental barrier to a more successful technology and knowledge transfer. I believe this originates from the university itself, not from the researchers or the TTOs. It originates from the administration and leadership of the universities, and I will explain that.

We know that universities are complex and cumbersome institutions. They have competing demands from many different stakeholders. They face a lot of pressure, more so today with reduced operating funds, budget limitations, pressure to grow enrolment in a global context, and increased pressure to show value to taxpayers. This is relatively new territory in the world of university leaders.

Traditionally, universities have two missions: teaching and research. Many countries outside of Canada have progressed to what the academics call the third mission: economic development. In my opinion, Canada has not advanced in the same respect as some other countries have. In fact, I would argue that we are still, in many cases, trying to reach our potential in the second mission, research. Many universities in other countries have embraced the concept of what we now call the entrepreneurial university. This has many definitions in literature, but I'll just highlight some of the main components. There is to have as part of their core activities an emphasis on research knowledge transfer, which includes technology transfer and exchange; on partnerships in regional areas; on entrepreneurial pedagogy and support infrastructures, such as incubators, maker spaces, etc.; and, importantly, on governance, strategy, and leadership in organizational design to make all these things happen.

A lack of governance, strategy, and design around this leads to some of the problems that we are experiencing in Canada. Technology transfer, for example, requires significant resource allocation, capacity, expertise, patience, leadership, intensive partnerships, risk, and perseverance. These objectives cannot be reached without direction, leadership, and incentives. While we focus on the TTO, who manages the TTO? It's the university administrators. It's the university administrators who will set the university policy, the HR policy, and the goals and directions for any TTO.

Likewise, we talk about incentivizing faculty. Well, faculty are employees of a university, and it's only the university that can negotiate collective agreements. I heard some discussion earlier about incentivizing faculty with money. That has been tried in many other jurisdictions. Faculty are generally not that incentivized by more money. They get paid rather well. They are incentivized by more of their personal goals, so we need to find ways to incentivize them. It's up to the university to find those ways. I'm not sure that it is something that is within the federal government's ability to do without being a very blunt object to get there.

When we talk about industry and how do we incentivize them to work with universities, they're incentivized only when they can get relevant access in a timely manner to valuable IP with minimal transaction costs. That's their incentive. They don't need much more, but that's very hard for them to get. Again, it's the university administration that has to find the internal processes to make this technology transfer more efficient and useful.

When we talk about universities and incentivizing faculty and incentivizing the TTOs, who's going to incentivize the Canadian university? How do we make the university as a whole more interested in being entrepreneurial? I have some suggestions, and these come from what I have been researching in the U.K., in Sweden, and in other parts of Europe where they have a big push on transforming their institutions into what they call entrepreneurial universities.

I would offer the following recommendations. The federal government could establish agreements with their provincial counterparts to provide funding for those universities willing to transition into entrepreneurial universities. The federal government could provide research funding dedicated to those universities that meet predetermined criteria on being an entrepreneurial university, and the federal government could offer training programs or certification for university leaders who wish to embrace the entrepreneurial university concept and wish to act as change agents within their institutions and within their regions. And this is currently being done all over the U.K.

Next I would like to provide some insight into Atlantic Canada. I have heard great discussion about colleges and great discussion about rural Canada, so I hope to provide some insight in that regard. Atlantic Canada is home to 20 universities and colleges. These institutions are doing great work in their regions and around the world. They are critical to the success of Atlantic Canada and small business. They may not all become leading technology transfer institutions, but they surely can all become entrepreneurial institutions given the right incentives and motivations.

Atlantic Canada is fortunate to have Springboard Atlantic. This is an initiative funded by the federal government through ACOA. It acts as a central network for commercialization and industry liaison. It has 19 members, and the funding allows it to put 30 specialized positions in its member institutions. I believe that Springboard will be submitting a brief to the committee, and I think that would provide a great understanding of what's going on in Atlantic Canada for the committee.

Springboard, as I said, funds 30 positions. These positions are 65% funded by Springboard, I believe, and 35% by the institution. Very few of these have been made permanent, so they're contractual, which leads one to suggest that perhaps if the funding dries up, so do the positions. There doesn't seem to be a willingness in the universities and the colleges to make these permanent positions. Springboard plays a key role, and we're very happy to have that initiative in Atlantic Canada.

Our institutions are faced with declining enrolment, aging populations, fewer dollars and operating funds, yet they have never been so critical to our economic and social development. With the exception of Dalhousie, our institutions are not part of the U15, so they compete for the much smaller share of the research funds that are available to them. I raise this issue because of previous discussions suggesting that metrics could be used, as you just talked about in the previous session, to link technology transfer directly to research funding. That would be disadvantageous to the institutions in Atlantic Canada and those that cannot necessarily produce that level of technology transfer. If the metrics were more broad and related more to preconditions for an entrepreneurial university, then I think that perhaps we could meet the needs across Canada.

The final point I would like to make is about the unique potential for community colleges in Atlantic Canada to play a greater role in economic development. In Newfoundland, Labrador, Nova Scotia, and New Brunswick, these publicly funded community colleges have a multi-campus approach. For example, in Newfoundland we have 17 campuses reaching across the province. They reach out to some very rural areas of Newfoundland and Labrador.

What I find particularly exciting in talking about colleges is that they already have a goal of economic development. Unlike universities, they can be mandated. They don't have the autonomy that universities have. The government has more power to negotiate collective agreements. The college has mechanisms for professional development that can be purposely done to affect regional development. It's not as blunt a tool as universities to reach small businesses.

From this—

[The Chair, Liberal, Dan Ruimy]

I'm afraid I'm going to have to get you to wrap it up, please.

[Dr. Jacqueline Walsh]

Okay. To wrap it up, I was going to say that the other thing I would like to talk about is how important education for IP is. I think CIPO should be doing a much better job of that. They in fact are getting cut with regard to their funding in Atlantic Canada, and we need more people beating the streets for IP.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much. I'm sorry, but we're very tight on time.

We're going to jump to Mr. Plunkett, from Communitech.

You have seven minutes, please.

[Chris Plunkett, Vice-President, External Relations, Communitech]

Thank you to the standing committee for this opportunity.

For those who aren't aware, Communitech is a public-private innovation hub in the Waterloo region with more than 1,000 members. We work with tech companies of all sizes, from the earliest stage start-up to global multinationals, providing support to help them grow.

Last year, we worked directly with 717 start-ups, 124 scaling mid-size companies, and 66 global enterprises. This included everything from boot camps and business fundamental programs for early-stage founders, to helping scaling companies access the funding and the talent they need, to working on corporate innovation challenges faced by multinationals such as General Motors, Thomson Reuters, and TD Bank.

I am therefore going to speak from a relatively practical perspective, based on what we see in the Waterloo region, what we have seen be successful in helping knowledge transfer between universities and companies, and what companies need to scale their commercial activities.

In our experience, the most successful technology or knowledge transfer program that exists is a co-op program, particularly the one run at the University of Waterloo, which has more than 19,000 students in full-time co-op programs and provides up to two years of work experience ahead of graduation.

What we see is that when we send students into the business world and back again, the silos that often exist are broken down. You have professors forced to better understand problems facing companies, and students bringing the latest research and thinking with them to their co-op placements. This helps create collaborations between existing companies but also encourages students to create new companies that can tackle the challenges they confront on their work terms. One of the big reasons that Waterloo companies largely face B2B challenges—boring problems that make a lot of money—is that they've seen them before and bring them out in the companies they're working on.

The other key ingredient is incentivizing professors and students to commercialize their research. This is a more difficult challenge, which I know a lot of people have talked about on this committee, but a focus on entrepreneurialism in general pays great dividends. There is a saying that “culture eats strategy”, and when you have a culture of entrepreneurism and a culture in which professors and students alike are encouraged to start their own business or to work with businesses directly, it benefits greatly.

In the Waterloo region, we can see the entrepreneurial education that the University of Waterloo has done. In particular, the Velocity program for both students and professors is paying great dividends. We've seen at least 400 new start-ups a year for the past five years being created in Waterloo region, the vast majority from the University of Waterloo.

Of course, beginning a start-up is far from a guarantee of success in commercializing patents or even making money. One of the obstacles many face is determining how to develop an appropriate IP strategy. Obtaining sophisticated IP advice is challenging as there is a limited amount of expertise in Canada, and it is generally too expensive for an early-stage start-up to access. However, if start-ups don't develop an IP strategy early enough, they often end up making decisions that prove costly down the road, whether by revealing too much information to competitors or filing too late and opening themselves up to lawsuits further downstream.

To address that problem, Communitech offers a number of IP-focused services for early-stage start-ups. These include a brief overview as part of our introductory programming, a more in-depth session with CIPO and local law firms, and most importantly, a pro bono law clinic every Thursday for companies with less than $1 million in revenue.

In that regard, we're incredibly fortunate to have the services of Jim Hinton, who I believe spoke to this committee earlier. He is the driving force behind our pro bono clinic and provides the kind of expert IP advice that very few start-ups have access to. In a lot of ways, the only thing worse than no IP information is bad IP strategy information that companies get early on. Finding ways to regularize and deepen these offerings so they don't rely on the goodwill of someone such as Jim and scaling them so more start-ups and other companies across Canada have access would be an important step in providing base education across the country.

At a broader policy level, it seems to us that Canada actually does fairly well in developing patents. According to a recent study by the Impact Centre at the University of Toronto, the number of U.S. patents with a Canadian inventor climbed from 3,661 in 2005 to 8,903 in 2015, placing us eighth against competitor countries on a per GDP basis. We could improve, but it's certainly not bad.

The same study notes, however, that the percentage of patents developed by Canadians but eventually assigned to another country has grown from 45% to 58% over the same period. One of the key reasons is the lack of large domestic companies that develop and commercialize patents here in Canada. With the decline of Nortel and BlackBerry, this problem has become even more pronounced. The study doesn't get into why this is, but you can see spikes in the years when those companies started to actually decline.

From our perspective, that means public policy should be focused on helping to scale Canadian companies, including investing in sales, marketing, IP protection, and other business activities needed for companies to grow rapidly. However, the vast majority of government investment and grants are focused on R and D and aren't eligible for those types of activities.

The SR and ED tax credit is the largest example of this. This is an incredibly important tax credit for early-stage start-ups as it helps make up for the relative lack of seed capital available to Canadian companies versus their U.S. counterparts. However, sales and marketing expenses are not eligible, which means that Canadian companies are incentivized to overly prioritize R and D activities, and not sales and marketing activities, to grow their companies.

It's a very complex program and this is probably not the place to talk about it. I don't want to say that SR and ED is not important. It's incredibly important, but you start to create these incentives that prioritize the research over the sales and marketing and growing of a company as if they're not important aspects to this discussion.

We tried to address these shortcomings with programs like our Rev accelerator, which is focused on helping to build scalable sales teams for companies. However, with limited funding to do this, the disincentives remain.

The recent budget has a number of promising programs, from the strategic innovation fund to the innovative solutions Canada program, which might help with more broad-based funding for scaling companies and increase government procurement, respectively. But we look forward to seeing more details on those.

Finally, in previous testimony you heard about the challenge one of our member companies, D2L, faced in being sued by a competitor in the U.S. There are a number of other companies facing similar challenges right now, including another member, Sandvine, which is engaged in an IP dispute in east Texas. This highlights an important point that I believe has been made by many witnesses but is worth repeating. The vast majority of Canadian growth companies will be focused on the U.S. and global patent markets. The Canadian market is simply too small, so changes to Canadian patent law will have a very limited effect on how Canadian companies behave.

While I'm cognizant that Canada's ability to influence U.S. laws or regulations is limited, we do have some upcoming opportunities with renegotiations of NAFTA: the addition of chapters on digital commerce, and the renegotiation of IP chapters.

There are two particular challenges that could help to limit patent trolls in the U.S.

The first is to ensure that the recent decision by the Supreme Court on venue for patent cases applies to Canadian companies as well. Currently, patent trolls tend to file patent cases in east Texas, where there were 2,500 patent cases filed last year alone related to the rules of the court and decisions that strongly favour plaintiffs, particularly non-functioning companies acting as trolls.

The recent decision means that the cases will need to be brought in the state of incorporation or where the infringement was made. It is not clear what this means for Canadian corporations, however, so it will be important to clarify and understand those issues.

Second, American courts do not provide the recovery of legal fees if the plaintiff loses, as is the case in Canada and many other jurisdictions. This means there is no disincentive to patent trolls bringing forward frivolous lawsuits that force many companies into settling rather than incurring expensive legal fees.

Even if influencing U.S. legislation may be difficult, it is important that we recognize that it is international patent markets that matter and that are where our focus needs to be. Creative solutions that other members have brought up such as patent collectives or a patent defence fund to help protect Canadian IP should be considered as further ways to protect Canadian IP in global markets.

Thank you for your consideration. I look forward to answering any questions you may have.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're just going to jump right into it. We're going to try to do five minutes, five minutes, and five minutes. Hopefully we can get through this.

Mr. Longfield.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

Thanks for both presentations.

I want to drill into the Atlantic Canada programs with Springboard Atlantic. You mentioned that 65% of the funding came from Springboard and 35% from institutions.

Of the funding from Springboard, do you know how much came from industry?

[Dr. Jacqueline Walsh]

I believe the funding doesn't come from industry. As far as I understand, it's 65% from ACOA and a membership kind of fee.

Chris would be able to answer that more.

[Lloyd Longfield, Liberal, Guelph, ON]

That's a model that's used in other countries where industry actually funds some of the transfer.

Reaching into the rural areas through the community colleges, previously the Government of Canada, back in the 1990s and early 2000s, had the intellectually property mobilization program. It sounds as though you've taken that idea and turned it on its head by getting people out working with industry versus having industry coming to technology transfer offices.

Are those roles like a sales role, the 30 positions that you described? Do they react to companies or do they go after companies?

[Dr. Jacqueline Walsh]

They do a bit of both. Some of the positions sit in the institution, and they try to work with the faculty. But there's an industry liaison role whereby they actually go out and travel around and try to find companies to speak to companies. They're very useful and there are very few of them. We have one or maybe two in all of Newfoundland. It's a very vast area. You can appreciate what they can accomplish, but it is a very effective model.

[Lloyd Longfield, Liberal, Guelph, ON]

It seems to me that because small businesses don't know what they don't know, you have to get people to go and tell them that there's help that can be....

In that Springboard program, how much of a role is played by that organization in leading people towards IP registration or helping with contract agreements?