Science and Research Committee on March 7th, 2023

[Mike McLean]

That's a great question. I agree. Without measurement, we don't have data to act on.

I would build on that, though. When I get engaged with other government funding programs in looking at how they evaluate intellectual property as part of that—never mind commercial success if that's not being measured—the IP measurement is an identification of what is foreground IP and what is future IP or background IP, so that they can track what money has been used to create what IP.

There is no consideration or evaluation of the value of that IP and how it's going to be used to further their business. There's no framework for that evaluation. That skill set is not in that math, so that's something that needs to be built.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

If I'm hearing you right, the government could do a better a job in monitoring the outcomes of these funding initiatives right through the whole process.

[Mike McLean]

Monitoring the outcomes and understanding what the inputs are in the proper context....

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Mr. McLean, is your organization the only group the government contracts with to help SMEs with their IP needs?

[Mike McLean]

We are the only not-for-profit that is fully funded to pursue IP needs. Yes, there is funding available for other programs that flows to service providers, etc.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Okay.

Is there anything that other countries are doing better than Canada when it comes to the commercialization of intellectual property and what can we learn from them? We've talked about the U.S, but it's a big world. Is there something else we're missing here that could come out in the study?

[Mike McLean]

The one example when it comes to intellectual property that I really like is Germany and their Fraunhofer institutes. They centralize the management and commercialization of intellectual property in a single group. Rather than having a diverse set of actors, all with different motivations and different skill sets, they've concentrated intellectual property into a single licensing practice, with very skilled expert people running that, and that has had a lot of success. That would be something I would look to as a model that can be used here in this country.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Mr. Binette, do you have anything to add to that?

[Louis-Félix Binette]

To one of your first questions, it's an obvious flaw that a company that gets government funding, from whichever level, does not have a dossier, a file, that we can track over time and that assumes.... Very few start-ups succeed without government support at some point, but if we can't see the pipeline, we can't manage the pipeline of start-ups. That's an obvious flaw, and it shouldn't rest on the start-ups' shoulders to provide that data.

We work on some solutions that we could bring to this. We work with Canadian partners through ElevateIP and others to try to share common standards in measuring the progress of start-ups and to have an ecosystem-wide view of how our—

[The Vice-Chair, Conservative, Corey Tochor]

Thank you so much. We're out of time on that one.

[Louis-Félix Binette]

Thank you very much.

[The Vice-Chair, Conservative, Corey Tochor]

Moving on, for the Liberals, we have Mr. Sousa.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Thank you very much, Mr. Chair.

Thank you, witnesses, for your presentations. I appreciate how you were able to identify and prioritize some of the challenges faced within the industry—in IP, start-ups, scaling, commercialization and monetizing these initiatives. I appreciate some of the solutions brought forward in terms of co-operation, collaboration and enabling us to have more resources.

Those are nice words, but practicality has to be taken here. We've heard other members talk about measurements—what gets measured gets done. What I'm hearing is that, on one hand, we're not doing enough to start up and facilitate small businesses, IP and ventures. On the other hand, we're not getting any success. You just referenced the fact that, for IP, start-ups and new ventures, the ability to succeed is minimal. Perhaps one in 10 or one in 50 has that big bang and big payoff.

There is a great degree of risk. There is a need for risk tolerance and appetite. Because of the relationships we have in the legislature, there is no risk tolerance in government. The moment things lose, we don't do them. This is a real dilemma for us, I presume. That's why academia and the private sector seem like a good mix as we go forward with these initiatives. It's because the private sector....

Mike, I think you explained how the U.S. has great tolerance and enablement in building those partnerships as they go forward.

I want to look at this in a couple of ways. The white-glove approach has been talked about quite a bit, here: that the government needs to be there to facilitate and provide resources. I have an issue, though, with the adjudication of these deals. We don't want government being the one to adjudicate deals, so we're reliant on outside sources. However, we're then going to be criticized that we're providing money and we're not getting any payback. The payback is seven years down the road, in most cases, in my understanding.

Perhaps, in the next round of questions, we'll talk about enforcement, the whole notion of piracy and all the other stuff, such as China. I need to better understand their strategy and also their enforcement. To what extent are we protected, as a result of some of those initiatives?

Let's go back to start-ups and adjudication.

How do we measure and support government initiatives, without prejudicing the government for not being the ones adjudicating? Do you get my meaning? You want the government to participate, but you don't want it to put its hands in the deal. How do you do that? How do you find that solution?

I'll go to you first, Mike.

[Mike McLean]

It's giving freedom to people in the marketplace who have the expertise and risk tolerance to go out and build solutions—

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

In the private sector...?

[Mike McLean]

I'm with a not-for-profit, so—

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

You're both not-for-profit. That's the point I'm trying to make. Is that the solution?

We have to find a way to enable these IPs, new ventures and Ph.D.s, because if they don't get it done through government supports, they will go to the U.S. They're going to Silicon Valley. They will get sold out, and then our scaling opportunity is gone. We have MaRS, Communitech and things at Ryerson. We have all kinds of people trying to incubate and accelerate some of these deals.

You're telling me, though, that it's not working. I suggest it probably is working. It's taking a bit longer than we need. How do we get the private sector to assume some of that risk? How do we get those pension companies to participate?

[Louis-Félix Binette]

That's such a good question, and a tough one. You're asking the tough questions.

Obviously, we're not-for-profits, but we're in the private sector in our way. We decided to band together, not to make profit but to try to bridge the gaps we see between where we are now and where we'd like to be. In other countries.... Israel has an amazing system, but the army and military service contribute a lot to the sort of dynamics they have.

I think government money should act as a bridge to bring us to where we need to be in terms of knowledge and understanding, to get the first success stories and a critical mass. However, that's not going to happen by putting in more weight and saying, “I'm going to help you with your IP, but if you sell, you're going to have to give me that money back.” No. It's “I'm going to help you with your IP, but if you sell your company for $50 million, I'm going to tax you when you buy a house, yacht or whatever with this $50 million, but I'm going to incentivize you to reinvest that $50 million in risky projects.” We need to create skin in the game and incentivize.

It's all right. We will lose some and we will buy some. We will also buy IP that was developed in Germany and Israel to feed the growth of our companies. We need to do this and incentivize, rather than make everything heavier or create a heavier load.

[The Vice-Chair, Conservative, Corey Tochor]

We're out of time on this one. I apologize.

We're now moving on to the two and a half minute rounds with MP Blanchette-Joncas.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

I'm coming back to you, Mr. Binette. In concrete terms, what are the consequences for companies, for the Canadian economy, of not developing IP?

[Louis-Félix Binette]

The main problem is that if we create companies without intellectual property, we will create X's Uber, then Y's Airbnb, then some other platform from Z that is the flavour of the day. Not all companies that test the ability of real inventions—that's what intellectual property really is—to succeed in the marketplace will prevail. However, those inventions will remain with us, and out of every industry's 10 or 15 failures, there will be one that succeeds by building on the failures of others. So, investing in companies that produce and attempt to commercialize knowledge is investing for the long term in order to create an asset class that gains value and increases the potential for new entrepreneurs and new companies on these projects.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

I would like to return to a more economic perspective. Yesterday, we learned that according to the latest economic study on Canada by the Organisation for Economic Co‑operation and Development, or OECD, Canada must increase its productivity, not only to become wealthier, but also to improve its standard of living. I'm trying to explore with you what correlation there may be between the development of intellectual property, the development of innovation, and how the federal government can play a concrete role in all of it. We are well aware that we are lagging behind in development, as Mr. McLean mentioned earlier, when you compare Canada to all the other OECD countries in terms of gross domestic product.

What can the government do to support the development of productivity, innovation, and, of course, intellectual property?

[Louis-Félix Binette]

At its core, productivity is the piece of the pie we are able to produce in this country, based on the work we do.

Obviously, large companies must improve their productivity. How will they achieve that? They will achieve that by acquiring technology solutions. If they acquire foreign technology solutions, their performance comes at the cost of foreign acquisition. If they buy technology developed by Canadian startups, their performance will increase because of Canadian-developed technologies, the benefits of which will be seen when that technology is commercialized in the rest of the world.

So this already provides opportunities for large companies to innovate, and for SMEs to continue to innovate and to undertake their digital transformation, called Industry 4.0, among other things.

However, there is a piece of the pie that we don't see, because it doesn't exist yet, and that is what startups are building. They're building what could become 20, 25, 40% of Canada's economic pie; that slice is going to be a value-added slice, because we're going to come in and address issues like climate change and provide solutions to health issues, socio-economic issues, etc.

That slice of pie doesn't exist yet. It may be tempting not to invest because we don't see the benefits in the short term. Yet there is a real risk in not doing so, and it is the one I was criticizing: we will become consumers of solutions invented and produced elsewhere, whose profits will go into the pockets of foreign investors.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

[The Vice-Chair, Conservative, Corey Tochor]

Thank you so much for that.

Next, we have MP Cannings for two and a half minutes.