Industry Committee on May 25th, 2020

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Thank you.

The rest of my questions are to Mr. Balsillie.

In a previous life I helped do some work with intellectual property commercialization in a couple of Canada's top universities. It was interesting to me when I saw some statistics recently that showed that American firms owned 50% of the world's IP. Our share of IP ownership has shrunk compared to the Americans' share in recent years.

Why is that?

For productivity—you have a minute and a half—what are the top recommendations you would make, a bullet-point list, to change our competitiveness? People sometimes say we should just diversify the economy like it's this magic wand that you can just wave, but the reality is that receptor capacity has to be there.

How do we retain IP in Canada, and what needs to change? Can I have a bullet-point list?

[Jim Balsillie]

Number one, upstream grants so that professors have to have a responsible IP policy and can't just give it away because they feel like it. They have to do it in a way that will benefit Canada.

Number two, train people on how the IP game works. It's very technical and it has to be done in a strategic fashion.

Number three, we need to address this through collective, organized fashions, kind of like western Canada has done with farm co-ops. We need to do that. We're so imbalanced in size.

It's very important to wrap up by saying that 3M has 7,000 discrete patents with the word "mask" in them. Just because we can manufacture a mask doesn't mean we have the right to make the mask. Therefore, we have to pay attention to our freedom to operate, because that's where the geopolitical, the economic and the security battles are.

Those are my three recommendations.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

I'll be brief with the time I have left.

In terms of receptor capacity, what bothers me is that sometimes there's this dialogue in western Canada that we should just get rid of the energy sector and then diversify the economy.

[Jim Balsillie]

No.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Can you explain to people who might not understand what we need to do to build receptor capacity for things like clean tech and to retain IP in Canada?

[Jim Balsillie]

By far the number one patent filer in Canada, two and a half times number two, was Halliburton. Number four was Baker Hughes.

The oil patch is an IP and data business. What's going to happen to it, and what is happening to it, is that the value chains are going to go to those who own the IP and data, just like what happened to newspapers and taxi drivers. The same thing applies to the data to run a farm. We need sectoral IP and data co-ops, if you will, which was how Canada was built. We had mutual companies, we had credit unions and we had farm co-ops. We simply have to go to our own old playbook and have co-operative approaches, only in the competitive realms of intangibles, just as we did to build this country 100 years ago.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Erskine-Smith. You have five minutes.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

I want to pick up where Michelle left off, to some extent, but first, you've recommended national digital standards, including in relation to identification. In the last Parliament, at the privacy committee, we looked very closely at Estonia and the work in the EU. It did occur to me in the course of this crisis, as we're forced to live even more of our lives online, that we would have been so much better placed to live our lives online had we had a digital government in place to begin with.

[Jim Balsillie]

Yes, that's correct. It's the plumbing structures. The government gives you a physical identity in a driver's licence and a passport, but they've abdicated that role, essentially, in the digital realm. As we move to more online services, the government has to provide some form of identity or else corporate actors will do it, and it comes with a social media account or some kind of Airbnb rating.

The other thing is we have to have data-sharing standards. I can assure you that the folks in Treasury Board want to see these things, but it needs pressure from your committee to say to Finance that this is a priority.

I need you to understand that these are very small dollars. We're talking $10-million, $20-million or $30-million antes to make us safe and strong in this digital evolution, but you won't do it if you don't understand that it's important. That goes to that whole realm of what is called “digital policy infrastructure”, which we haven't paid attention to in 20 years.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Not only would that improve customer service from their governments for Canadians and citizens, but it would also be a significant return on a small investment, as you say. Estonia has certainly reaped significant economic rewards overall.

On innovation, there was a report in the Globe that the National Research Council has made an agreement with CanSino. We are going to foot the bill to some extent, but we have no IP and no guarantee of supply. Natalie Raffoul and Jim Hinton called it innovation “philanthropy”. They point not only to that example but to similar university networks supporting 5G research, AI research and the research on batteries out of Dalhousie that Tesla has managed to profit from.

Along the way, we are funding research and we are not reaping the benefits. Those two authors recommend an “IP collective”, and I think Jim Hinton is part of building out an IP collective. This is one of your main recommendations here as well. How does that help? Walk me through how an IP collective would support Canadian innovation.

[Jim Balsillie]

If you look at the U.S. filings for last year's patent filings—they just came out yesterday for the top 300—you'll see that these companies are building enormous arsenals. Facebook's filings were up 78% last year. IBM filed another 10,000 patents. We're so mismatched by 20 years of not paying attention that the only way we can rebalance this is through collective actions.

Again, I draw to the story of western Canada. It was so imbalanced to the force of the U.S. a hundred years ago that communities came together and created collective strategies. We need the same for IP. We can talk all we want about supplying clean tech, but we own virtually no clean-tech technologies. We've funded them through our researchers and we've funded them through our granting programs, but they've all leaked out.

CanSino is another case in point. We're counting on the benevolence of China, a Chinese company and the Chinese military for our sovereign ability to look after our health in a vaccine. That's no way, I believe, for a country to manage its security, sovereignty, health and prosperity in the 21st century.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Presumably in the case of an IP collective, the idea is to allow Canadian companies to maintain IP here in Canada and to better profit from IP here in Canada. I wonder, when it comes to public investment, what that looks like for a return for the state as well.

As Mariana Mazzucato wrote in The Entrepreneurial State, “Where an applied technological breakthrough is directly financed by the government, the government should in return be able to extract a royalty from its application.”

I wonder what you think about not only ensuring that Canadian companies are benefiting, but where we are significantly investing state dollars, public dollars, public investment, in our university networks and beyond, and where companies, Canadian or otherwise, are able to profit, should the state not have a direct return as well?

[Jim Balsillie]

I love the idea, and it's a lot better than making China richer with our money. I love your idea.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Thanks very much.

[The Chair, Liberal, Sherry Romanado]

Our next speaker is MP Patzer. You have five minutes.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Madam Chair. My first questions will go to Mr. Montpetit.

Thank you for being here today, Mr. Montpetit. We can all appreciate what a challenging time this must be for your industry.

Mr. Montpetit, with regard to the closures from the rail blockades earlier this year, was your industry still feeling the effects of that as COVID-19 was progressing?

[David Montpetit]

Absolutely, it was. One bumped up pretty well right into the other, and yes, definitely, the impact was there.

One thing about the supply chain and anyone who is dealing with the supply chain is that we're used to dealing with issues, so this just became another issue on top of another issue, but yes, we were definitely impacted by it. It did roll over.

In fact, as I stated earlier, we had not received a break at all. It's been six months, since November, since the CN strike happened, and it's been rolling forward ever since. I would honestly say that there was no chance to recover at all, because one just bled right into the other.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Are you concerned as we come out of the COVID pandemic that blockades will once again be an issue? Where are you at in that sense?

[David Montpetit]

There's always a concern with that, because I don't think all of the issues that came up were fully vetted and put to bed. There's always a concern that once that behaviour has happened in the past, it can possibly predict future behaviour too.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Yes. How well is the federal government doing at sharing clear and specific details with you as things are evolving?

[David Montpetit]

Sharing details about what?

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

I guess just how the crisis is and how it's affecting your industry in getting supports and different things.

[David Montpetit]

Well, we've had very clear communication with Transport Canada specifically and also with NRCan, our way to them, so one way, and I know they've obviously been dealing with it internally the best they can, but do we have any solutions in hand? No.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

To jump back to the issue of infrastructure and railways again, how concerned are you about the state of rail infrastructure in Canada? The reason I ask is that in your speech you referenced some of the rail issues in Saskatchewan. Derailments are happening, not necessarily in my riding, but very close to it.