Thank you, Mr. Chair.
We thank you for this opportunity to meet with the committee today to discuss the chapter on intellectual property in our May 2009 report.
As you mentioned, I'm accompanied today by John Affleck, the principal who is responsible for this audit.
Intellectual property is important, and the federal government needs to pay attention to how well it is managed. The creation, development, and protection of intellectual property are critical early steps in the innovation process. The 2007 federal science and technology strategy, entitled Mobilizing Science and Technology to Canada's Advantage, recognizes that intellectual property is a critical component of the overall innovation system. Ongoing monitoring of the federal intellectual property regime is important to ensure that the intellectual property arising from federal investments in research translates into value for Canadians.
The federal government creates intellectual property in two distinct ways. It is created either internally by federal government employees during the course of their work or externally by contractors during contracting activities. This audit examined both of these aspects.
Our audit looked at how intellectual property is managed in three federal science-based organizations: the National Research Council, Health Canada, and Fisheries and Oceans Canada. We also looked at the roles played by Industry Canada and the Treasury Board of Canada Secretariat. The audit work was substantially completed by the end of September 2008.
In terms of the intellectual property that is generated internally, we found that the National Research Council had mechanisms in place to adequately manage its intellectual property assets, including an entity-wide intellectual property policy and mechanisms to identify intellectual property, while Health Canada and Fisheries and Oceans Canada did not.
We also looked at the Treasury Board of Canada Secretariat's Award Plan for Inventors and Innovators Policy, which is an important policy that provides incentives to government employees and encourages the commercialization of internally generated intellectual property. We found that the federal government did not know how effective the policy was nor whether it had the appropriate financial incentives in place. For example, the entities we audited did not give financial incentives for inventions used by the government. In addition, we looked at intellectual property that is generated by contractors during contracting activities.
In the past, the federal government retained ownership of all intellectual property resulting from crown procurement contracts. However, this changed in 1991, with the introduction of the Policy on Title to Intellectual Property Arising Under Crown Procurement Contracts, which allowed the contractor to keep ownership of the intellectual property developed through contracting activities. The rationale was to increase the potential for commercialization of intellectual property developed by a contractor.
This policy also provided exceptions for the Crown to retain ownership of the intellectual property, but only under specific circumstances. These exceptions were intended to ensure that the Crown's interest was protected. In 2000, the policy was revised to expand its application and to include greater reporting requirements in an attempt to monitor compliance with it.
We found that National Research Council Canada, Health Canada, and Fisheries and Oceans Canada did not accurately identify or report their intellectual property resulting from crown procurement contracts. For Health Canada and Fisheries and Oceans Canada, we found that these departments did not accurately justify when the Crown took ownership of the intellectual property and that they were not fulfilling their obligations as contracting authorities.
The federal government does not know if the objective of the policy is being realized. Industry Canada and Treasury Board of Canada Secretariat have not adequately monitored the application of the policy, with a focus on cases where exceptions were invoked.
In addition, Industry Canada and the Treasury Board Secretariat have not yet evaluated the policy on title to intellectual property. Preparations for an evaluation of the policy in 2011 are ongoing. Our audit work in the National Research Council, Health Canada, and Fisheries and Oceans Canada found that there were significant errors in the data due to a lack of understanding of intellectual property management. These errors will undermine a future evaluation of the policy unless data validity is established at the entity level.
We are pleased to report that all the entities have agreed with our recommendations. Health Canada has shared their action plan with us, and we believe it will address the issues raised in our chapter. The committee may wish to inquire about the actions taken by the other entities to respond to our recommendations.
This concludes my opening remarks. We would be pleased to answer any questions the committee members may have.
Thank you.