Public Accounts Committee on Nov. 16th, 2009

[Sheila Fraser]

We do not know.

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

You do not know.

Does the government intend to handle the situation better, or to focus its actions better?

[Daphne Meredith]

As we said in our management response, we're taking measures to collect data and report better on intellectual property that's related to contracting and other activities. So to that extent we're improving our understanding of it.

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

So should we find goals for improving the management of intellectual property in your performance management plans?

[Daphne Meredith]

As far as departmental performance reports are concerned, the departments are the ones that should be reporting it. Deputy heads are managing it.

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

I have some other questions.

Ms. Fraser, in your review, you point out that the NRC spends $1.6 million on managing intellectual property, and that brings in about $5 million annually. That is how I understand it. Other departments invest exactly the resources that they have at the time.

Do you have any comment on that? Should more money be spent on the management of intellectual property? As I said before, if it is being managed less well, or not at all, it costs the country and the taxpayers money. We do not even know the extent of the problem, either. The federal government has no way to calculate how much it costs taxpayers.

[Sheila Fraser]

I think that the NRC is in a different position from the departments, because, for most departments, this is not a major part of their operations. However, we do note that some departments indicate in their action plan that they are going to set up an office to manage intellectual property.

Perhaps that answers your question.

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

In their action plan, they say that they will make do with their current resources. So I said to myself that, if the NRC can invest $1.6 million, it is because they have clearly defined the amounts spent to manage intellectual property.

Could we recommend that other departments do it by themselves?

[Sheila Fraser]

I think that depends on the scope of the activities. If you compare the NRC's activities with other departments, it is not such a significant part of their operations.

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

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Faille.

Mr. Shipley, five minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, witnesses.

I'd like to follow up a little bit on the question that was just raised by Madame Faille. My question is for the official from the Department of Fisheries and Oceans.

In your report, Ms. Dansereau, it said, “Furthermore, an intellectual property office”--and actually the Auditor General just mentioned that--“will be set up over the next few months. It will serve as a center of expertise.”

The comment is that you will do this within your own resources. What does that actually mean? I'm assuming you have the money and the people. Would that be correct?

[Claire Dansereau]

We certainly have the people, and we have the money to pay for them at the moment. What we mean by “within existing resources” is that there is no new source of funds to do this.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Okay. Can I follow up on that? I don't mean to cut you off, but he will, you see; that's the problem.

I want to follow up on my question. If you have the management and resources within your department now and you're going to set up a new office--this is all about the ability to manage intellectual property--what is the efficiency of those people now if they haven't been doing this job and now, actually, you're going to set up an office and you have those resources and the people? It raises a concern.

The other part of the concern would be, no, we're going to build another bureaucracy around it. But there has to be some explanation, quite honestly, to that question if you're going to be able to do it within it. I'm assuming your business plan will lay that out for us.

And I apologize for cutting you off.

[Claire Dansereau]

Thank you, Mr. Chair.

What we mean by “within existing resources” is that we currently have people who have a certain expertise in this matter. They are in an area and they have not been provided with the tools to provide education to the rest of the department, to share the information in terms of how they're managing it. They currently are the experts, and they're doing it in addition to other work, so it would be a matter of realigning priorities within a sector, workloads within that sector, to make sure the people are more freed up to be able to do this kind of work in a concerted manner.

I also said in my opening remarks that we have been doing management of intellectual property within the department, but not within one framework policy, so there was more of a sector-by-sector approach. What we are doing now with the policy is making sure we have one consistent approach across the department. We will, therefore, have certain people who will be the experts in that policy and then will provide the tools to the remainder to implement the policy as written.

We are not, as has been mentioned by the Auditor General, a department for whom this is our primary reason to exist. Most of the intellectual property we generate is as a result of something else that we are working on. The policy itself will ensure that people will even recognize when they're creating intellectual property in a way that is more consistent.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

Mr. Coulombe, when you look at the licences, and you mentioned you do 100-plus a year, is there an impact depending on the economy? Does the economy affect the innovation, the intuition, of inventors to come forward with licensing? Have those numbers varied very much? I don't think they have, but I wanted that on the record.

[Pierre Coulombe]

From time to time...what we observe is that we conclude about 100 licence agreements per year. We do not have the data for this current year, when Canada is supposed to be in a recession, so that could be a reflection if we observe a significant shift down in the licensing agreements that we have. But so far I don't think we have observed that, so this is about the number we transfer every year.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

It would be a concern if it was, because we've put significant dollars into research to NRC and research in science and technology, and I would hope that putting in, I think, a little over $5 billion would result in not having a decrease. I think everyone here recognizes the value of what we have to do to move ahead, and that was around the question, just wanting to make sure those licensing numbers continued.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Shipley.

We're going back to Mr. Christopherson for five minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

I have to say that the more I'm hearing and learning, I'm really surprised at how loosey-goosey the whole system is, especially given that we are talking about potentially of millions of dollars that could be generated for taxpayers. I'm really surprised that we're at this state of affairs. I'm going to get into this a little more in the short time I have.

Again, at the stroke of a pen, literally millions of dollars will either go to a private entity or back to the Canadian taxpayer, and that process is not at all uniform. Notwithstanding stereotypes, I don't necessarily think centralizing or decentralizing, in and of itself, is right or wrong; it depends on the case at hand. Boy, this sure looks to me like a case where we ought to be recentralizing, getting control of the processes, making sure the criteria are the same, and then putting in safeguards to make sure there's no potential abuse, because it's not an area that we traditionally think of in terms of potential conflicts of interest and the sorts of things we deal with at this committee.

What is the current process for determining the criteria for what constitutes IP; and further, the criteria for determining whether it stays in the possession of the taxpayer or goes to private enterprise? If it goes to private enterprise, what are the criteria for determining a licensing fee? If there is to be a licensing fee, what are the criteria for determining how much it will be?

There's that pregnant pause again.

Mr. Coulombe, you probably have the most refined system, I would think.

[Pierre Coulombe]

We certainly have a system.

Let me first try to discriminate a bit about IP arising from procurement and the notion that industry will own that in some circumstances.

I think we have to realize that owning an IP and making a lot of money out of that IP are two very different things. Exploiting IP is a complex process. It is also a very expensive process. It's not because you own a patent that the next day you're getting rich. Even for companies getting that IP from procurement, it's one thing to have that IP and it's another thing to exploit it. Therefore, if an industry is able to make money out of that IP, I would submit to the attention of the committee that most likely that company has invested a lot of money to get access to the market coming from the particular IP that they got from procurement.

That said, it is complicated to exploit IP. Just because you own it doesn't mean you're making a lot of money. In fact, I would say it is the exception rather than the rule.

I would give you the example in the pharmaceutical sector where pharma companies own thousands and thousands of patents, but they make money on one patent in every few thousand that gets rewarded and results in a drug that will go into the marketplace. So it's complicated.

At the NRC, it is technology that we own because we generated it. We try to have a comprehensive analysis, and when we come to the conclusion that a company is interested in our IP and it fits into their business plan, it becomes a matter of how we define the royalty rates that we get. Obviously, being a producer of technology, our first impression would be that we need to get a lot of money from that technology, so we would be looking for high royalty rates, and sometimes from the start we can see that as a little bit unrealistic.

Let's suppose we would be licensing a technology in the field of energy. First, since some of that information is in the public domain, we would have access to the licensing contracts that took place in the field of energy. So we try to determine broadly what the industry is paying in the field of energy for a particular technology. Then we assess the value of our technology compared to what has been negotiated over the last few years. Is it technology that is much more advanced and therefore would carry higher royalty rates? Is it a technology that we'll be licensing exclusively to a company?

With exclusive licences, you have higher royalty rates because you do not have the possibility of finding other licensees. Therefore, the company wanting an exclusive right will agree to pay more.

If the company was satisfied with a non-exclusive licence, obviously they would ask to pay less because we have the possibility of licensing that technology to competitors. The company may say they do not really care as they feel that they are better than their competitors and they do not want to pay extra money to get exclusive rights and are satisfied with non-exclusive rights.

Once you define that sector as exclusive or non-exclusive, you will come to the conclusion that your technology has x per cent of royalty that you can generate. That's how we finally decide.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you for the answer. That's what I was looking for.

I just wanted to say that, number one, the money that's generated is still being paid by the taxpayer to do the R and D in the first place; and number two, even if it's expensive to market a better mousetrap, having the better mousetrap is still the best starting place to make all that money. Again, I just want to make sure Canadians are getting their share. They need their cut.

Thanks, Chair.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson.

Go ahead, Mr. Weston, for five minutes.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

I want to thank our guests for being with us today.

To pick up where Mr. Lee left off, these may be the driest of times, but they are also perhaps the most exciting of times to have you all here today, as we look at Canada asserting itself on the international stage in novel ways and our Prime Minister going to Singapore and China and India and Korea in upcoming days. We're also competing on the international stage with people around the world, and much of our success in years to come will be generated by how we innovate.

I have a question for you, Monsieur Coulombe, and also for you, Mr. Boothe. Can you give us three ways you think we, as a nation, can do better in innovating?

[Paul Boothe]

I'd better start, and the reason is that things like NSERC and SSHRC--the granting councils--are under the Industry Canada umbrella. We have a number of different programs to encourage both fundamental basic research and the commercialization of research.

One of the things we can do better is come to grips with the actual process that leads from discovery to commercialization. This is something all countries are grappling with. We have great public expenditures on fundamental research and we have great results on fundamental research; our results on commercializing research are not as good as they should be.

In terms of something that we need to do better, we need to figure out how that process works. We've invested a lot of effort into it. I think we are coming to the conclusion that the way to go at it is from the demand side--that is, start with firms and their problems and then go towards the researcher, rather than start with the researcher and ask if you've discovered anything commercializable today--but it is certainly an open question, and it's something we need to improve on.

That is the first thing I would say.