Public Accounts Committee on Nov. 16th, 2009

[The Chair, Liberal, Shawn Murphy]

I wasn't just talking about Statistics Canada. I was talking about data sets that the fisheries department has, some of which I assume you sell and some you release to the public in the public interest. Is that correct?

[Claire Dansereau]

I can take a stab at it. I don't have the specific answer.

The general distinction would be that if we're doing a fisheries assessment, a stock assessment of some type, and it's used as basic information in an advisory process, that's simply information that the department uses.

On the other hand, if we're doing charting and underwater mapping and that's information that could have a commercial purpose, could have some commercial value to other sectors and other industries, then we could potentially, if there's an interested contractor, license that to them and they could turn it into something else. They could do the commercialization of it.

That would be the distinction.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

We're now going to go to the second round.

Ms. Crombie, you have five minutes.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

First of all, thank you, Madam Fraser and all our witnesses, for your fulsome and numerous presentations on this. I think this is the most numerous we've had on any one audit, so thank you.

My first question follows from the chair's question. The policy on the title to intellectual property had been approved in 2000 and was to be evaluated in 2003, but you waited another eight years. I realize the difficulties in the central reporting system, but why a delay of eight years, and what steps have been taken to improve the data collection, reporting of data, that didn't exist then?

[Paul Boothe]

The short answer to this question is that we began the process in 2001. We got to 2004 and realized that the policy was not being uniformly implemented. The data we were collecting was therefore not of a quality that could produce a useful evaluation.

At that point we went back to the drawing board and developed a new plan, which we brought to the Treasury Board in 2007. It was approved and we began the improved data collection, but we also began working on improved dissemination among departments of what they should be doing and how they should be doing it. When we went to Treasury Board with this revised plan, we targeted 2011 in terms of collecting enough data to be able to evaluate the policy. We now have the data for 2008. It's good quality, and we believe we'll be able to provide an evaluation by the end of 2010.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Thank you.

Since a national inventory of the IP that the crown holds doesn't exist, do we know what licensing revenue is generated, do we know the value of the IP that is catalogued, and do we know whether the full commercial potential is being realized?

I don't know who that question should go to--probably the NRC or Industry Canada, or perhaps Treasury Board, the band leader.

[Paul Boothe]

Dr. Coulombe is the furthest ahead of us on this.

In the case of Industry Canada, as I said, our CRC inventors are the main source of IP that is actually commercializable, if I could put it that way, and we are generating about $1.5 million per year in revenue for that.

Do we know the value of the asset that generates that revenue? I can look for an estimate of it, but I think it's important to recognize that it's always just going to be an estimate. The value of these things is not established until they're actually sold. The only hard number we have is the revenue that's generated.

Likewise, do we know whether this is the maximum possible value that could be produced? The truth is that we don't know. Basically what we do is rely on the private sector to commercialize these things. In the case of inventions that we believe are going to be potentially commercializable, we negotiate terms that we think are fair and in accord with industry standards to make sure the crown gets a share of it, but I couldn't say whether it's the absolute maximum we could get.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Further to Mr. Saxton, we notice that NRC maintains the lead position in R and D expenditure but is ranked third in licensing revenues on your own chart here. Would you like to comment?

[Pierre Coulombe]

Thank you.

First of all, let me say that NRC has a good understanding of the patents that we own. Currently we own about 850 patents in our portfolio. We now have about 1,300 patent applications, because there is a delay between the patent application and the granting of the patent by a patenting agency.

Every year we drop about 150 patents as a result of our annual review of the status of our patents. Patents are costly to maintain, so if we conclude, after an analysis, that a given patent is not going to be exploited because it's distant in time--a patent has only 20 years of history, and after that it's going to be coming into the public domain--then we remove that patent from our inventory.

The value of those assets is very difficult to measure, but NRC invests about $3.7 million a year to maintain its position on all those IPs that we own--our portfolio of 850 patents and 1,200 applications--and we collect about $9 million in royalties every year, so it's a good relationship. Obviously the value of a patent per se is very difficult to establish. It's all a matter of who is going to exploit it, what the real value is, and how competitors are moving. I would say time is of the essence here: the quicker you are in transferring technology to the marketplace, the better you are in getting yourself a strong market position and getting a lot of royalties out of it.

[The Chair, Liberal, Shawn Murphy]

Thank you, Dr. Coulombe.

Go ahead, Mr. Kramp, for five minutes.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair.

Madam Fraser gave a generally good-news report. It appears that with the NRC holding the lion's share of the activity, the government is committed to protecting its intellectual property by the relative success of NRC--but less so with some departments, as you've shown. So I think your report is certainly a wake-up call to the areas that are defined as having some weaknesses,

In particular with Health and DFO, I am very pleased--and I think our committee will be very pleased--that you've taken prompt action. Your actions are appreciated. But I would like to put you on notice from this committee that we look forward to having you back a year from now to see if the results match your intentions. That is something you can consider as you move forward. You can anticipate that kind of response so we can evaluate the success of your actions and activities.

I'm a little confused in one area. Back in 1993 we went to decentralization. Property and policies were approved to 2000 and evaluated in 2003. There was an action plan in 2004, and in 2007 a central reporting system was modified. What is the actual difference between the action plan initiated in 2004 and what is suggested now? Why didn't you do, in 2004, what is being asked now? Are there different demands? Are the recommendations you're suggesting right now dramatically different from the recommendations that came forward from the action plan in 2004?

[Sheila Fraser]

I think one of the big issues, as was mentioned earlier, was the quality of the data. An evaluation was going to be done, but then it was realized that the data was inaccurate, to put it mildly. We looked at the data from 2006, and you will see in the report that a number of contracts were identified as containing intellectual property when they clearly had no intellectual property in them. So there was no point in proceeding with an evaluation if that was the quality of the underlying data. Work has been done since then to try to improve the quality and then do the evaluation of the policy.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Specifically, in your statement you said there were significant errors in the data due to a lack of understanding of the entire issue. As we move forward, if we can't embrace the mistakes that have been made and learn from them, we're bound to repeat them. You further state that these errors will undermine the future evaluation of this policy. What are these errors specifically, and what measures are now in place to prevent this from happening again?

[Sheila Fraser]

I can talk to the kinds of errors we found.

I'll refer to paragraph 2.35 of our report. We looked at contracts that were purported to contain intellectual property, and we found contracts for acquisition of a vehicle, event planning, catering, medical services, and language training. Obviously event planning doesn't contain intellectual property, so there was miscoding of things. When you have this kind of incorrect data, it's necessary that people are trained afterwards and understand, and that more rigour is placed.

We have not audited the data set after that, and the departments are telling you that work has been done since then to try to improve that data quality. We also expect that before going ahead with an evaluation, some check will be done to make sure the data quality has improved.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Kramp.

Madam Faille.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Ms. Fraser, in paragraph 2.2, you point out that copyright infringement costs the country a lot. You mention that the government has been forced to pay for rights to use intellectual property that it developed itself, but you give no figures. Are you able to do so?

[Sheila Fraser]

We are not able to do that.

We had to present the information in quite a general way, because, as you can imagine, several of these cases are before the courts. There are restrictions on publishing information on specific cases or out-of-court settlements. That is why we were not able to provide examples. However, we are aware of some situations, which is why we presented the information in this general way.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

For the Treasury Board, can you give us an idea?

[Daphne Meredith]

Excuse me. Pour quel...?

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

I mean all situations, copyright infringements or situations where the federal government has had to pay for intellectual property that it developed itself.

[Daphne Meredith]

We don't have an estimate of that.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Is that information published in the public accounts? Can we get it?

[Sheila Fraser]

Mr. Chair, I seriously doubt that the information is published as such in the public accounts.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

You use the word “qualitative“ a lot. So I was wondering if the problem is serious, very serious or very very serious.