Science and Research Committee on April 27th, 2023

[The Chair, Liberal, Lloyd Longfield]

We'll go on to the next panel.

Welcome to our witnesses, who are here in person, which is a delight to see. I don't have to tell you about Zoom and all of that, but I'll just mention that any questions or comments should be directed through the chair.

Now I'd like to welcome both of our witnesses. As an individual, we have Todd Bailey, who is an intellectual property lawyer, and from the Agri-Food Innovation Council, we have Serge Buy, chief executive officer.

The first presenter is Todd Bailey. You have five minutes. The floor is yours.

[Todd Bailey, Intellectual Property Lawyer, As an Individual]

Mr. Chair and honourable members, thank you very much for the invitation.

Who am I? I am a lawyer, a patent and trademark agent and an engineer. For the last 20 years, I've been working on the business side of intellectual property in Canada. I’ve filed thousands of patents, and I've personally trained over a thousand engineers, technologists and business leaders about intellectual property. Today I am the chief IP officer at the Scale AI supercluster, where I’ve been involved with more than 100 Canadian AI projects. It’s all these experiences that bring me before you today.

IP law is complicated, but as a tool of business, IP is not complicated. Canadian entrepreneurs, business people and legislators all have incredible common sense and business judgment, and all of this knowledge is equally applicable to the world of intellectual property.

For example, tonight some of us will go home and relax with our favourite streaming service—Netflix, Crave or whatever—but what are you going to choose to watch? Will you choose the streaming service that has the most copyrights? Will you choose the most innovative, avant-garde show out there? Probably not, because we already know from our everyday experiences that IP and innovation alone do not make customer choice. To be successful, you need innovation that customers want, and then to get the full commercial benefit, you need the right IP measures to support.

Technology innovation and patents work exactly the same way. It's market-relevant innovation that's the driver, and IP plays a very important supporting role.

What else do we already understand about commercializing innovation? Economics 101? It's supply and demand. Almost every witness at this committee has agreed on one thing. Although Canada’s supply of innovation is pretty good, the industry demand is weak.

You’ve heard that our university research is robust, but finding industry partners is hard. Our start-up and VC community is one of the best outside of Silicon Valley, but they can’t find the Canadian customers who are essential for scale-up.

Commercialization is all about stimulating demand. We can’t start selling more unless Canadian companies start buying more. Scale AI’s recent research report, “AI at Scale”, comes to the same conclusion in Canadian AI. However, fostering innovation demand isn’t just about supporting financial risk. That’s why Scale AI is connecting industry customers to academia and to start-ups, because those connections foster demand and they provide a customer focus to direct innovation. The Canada innovation corporation could play a similar role for Canada.

Turning to patents, what do we already know? Patents leverage the business value of innovation. That means patents sit at the intersection of innovation, IP law and business. What you might not know is that well over half of all patents miss their business target, which severely impacts their strategic value as an IP asset. The inventor and the legal professional working together cover the technology and legal angles, but more than half the time, there’s no ongoing business guidance to direct the creation of that asset.

If we just increase Canada’s patent output, we can expect a very high ongoing failure rate to meeting our IP goals. Reducing that failure rate by even a small amount will help Canada build a higher-quality IP position versus our global peers. As a smaller country, Canada must work smarter.

The last thing I want to touch on in particular is education. What does common sense tell us about education? What we teach and how we teach matter. If we want to build the next generation of chess grandmasters, is it enough to teach them how chess pieces are made and the basic rules of the game? If IP is a business tool, then we need to open the door to market-specific business tactics on how IP builds competitive advantage.

Developing champions and role models will also have a major impact. I’ve seen this first-hand in my career. Teaching IP rules and generic strategies does not move the needle, but when I switched to having champions lead their peers, the effect was incredible.

Crucially, we need to empower our entrepreneurs to see IP as a lever of business so they can apply their wealth of business experience to how they use IP. That’s also how we get at that failure rate I mentioned a moment ago. Again, I think the CIC has a role to play here.

To wrap up, I have three simple messages. Commercializing innovation needs demand, and demand needs relationships. We can supercharge Canadian IP by fostering business-relevant IP. On education, what we teach and how we teach matter.

I didn't have any time to get into artificial intelligence, but I'm happy to take questions.

Thank you very much for your kind attention.

[The Chair, Liberal, Lloyd Longfield]

Thank you, Mr. Bailey, for being right on time.

Over to you now, Mr. Buy. You have five minutes.

[Serge Buy, Chief Executive Officer, Agri-Food Innovation Council]

Thank you very much, Mr. Chair. I'm going to try to be on time as well.

Thank you for inviting the Agri-Food Innovation Council to present today in front of this committee.

You, along with a number of your colleagues, are well aware of the opportunities and challenges facing the agri-food sector in Canada.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Mr. Chair, I’m sorry, but there is no interpretation.

[The Chair, Liberal, Lloyd Longfield]

I'm sorry. We have a point of order. We don't have interpretation.

Is your mike on?

[Serge Buy]

My mike is on. It shows that it's on.

[The Chair, Liberal, Lloyd Longfield]

Okay. Thank you.

[Serge Buy]

As you are looking at how to support the commercialization of intellectual property, and given that I'm not a lawyer, my comments will limit themselves to observations and policy options. At the end of my presentation, I will offer recommendations that I hope you will consider.

The Agri-Food Innovation Council is an organization that advocates on behalf of agri-food research and innovation in Canada. Our history is long, going back to 1920. We were founded by individuals who believed that research in agriculture would fuel Canada's economic growth, and, indeed, at that time they were correct—and they would be correct again today.

So much innovation has taken place in Canada.

Mr. Chair, you will remember the breeding and development of the new asparagus varieties that have now become the most popular in North America and beyond. That was done in your riding of Guelph, I believe.

Mr. Tochor, you're joining us via Zoom, and so much innovation is done in Saskatoon thanks in good part to the incubators and organizations that exist, such as Ag-West Bio and the Global Institute for Food Security.

However, more is done, and even more can be done. Our organization just had a two-day meeting in Ottawa with dozens of experts and stakeholders to discuss how Canada's agri-food system can feed the world in a sustainable manner. I can assure you that there were not only great ideas but also real, tangible projects that deliver results. There were so many ideas that percolated to the surface, including some that I'll mention today.

Do we rank well in innovation? No. The fact is that we rank poorly. We're ninth in terms of input and 21st in terms of output. That should already give you a sense that there are some issues. We are far below where we should be in terms of commercialization of innovation based on various indexes and reports from the OECD, Bloomberg, etc.

Could we do better? Yes, absolutely. Let's look at what's holding us back.

There's a cumbersome and burdensome regulatory process. To be clear, if the process is too cumbersome and too much of a burden, companies will look at innovation elsewhere, and they already have. You may have a great intellectual property protection regime, but if the regulations or the regulatory guidance is delayed, nothing takes place and we lose traction.

A great example is the long-awaited Canadian Food Inspection Agency guidance on plant-breeding innovation. The delays are concerning innovators and investors, especially when they see the delays as being the result of non-scientific influential lobbies within certain parts of the government. Please don't take my word for it: You can use a recent Senate report that says, “In terms of regulatory burden, Canada is one of the worst-performing countries in the OECD, ranking 35th of 38 member countries.”

Is a regulatory burden unfair to SMEs? Absolutely. When you're looking at how cumbersome it is, SMEs can't compete with large companies that have millions and millions of dollars and teams of experts to deal with this. It makes it much more difficult for them. We can't be talking out of one side of our mouth and praising SMEs for fuelling our economic growth and on the other side saying we'll put on a regulatory burden that will make it very difficult for them to compete against large companies. We do have to be careful on that.

We need to protect our IP. Canada has invested in the development of innovation. A multitude of funding programs—and I'll get back to that later—support the development of innovation, but commercializing innovation often means selling the IP to a foreign company. While Canadian taxpayers have invested in it, the benefits of this innovation often escape Canadians.

Another issue to look at is how Canadian IP is protected. I understand that in the U.S., if there are sufficient grounds to believe that imported products are fraudulently using American IP, they get seized at the border. In Canada, the government washes its hands and tells a company whose IP has been stolen to sue. I talked to a company just a few days ago. They have a number of cases. They've just invested $350,000 for legal fees in one case alone. While I'm sure that my colleague with the legal community, who is right beside me, would be happy to hear that, I can tell you that companies are not happy to hear that.

On supporting innovators, incubators have played an important role in supporting innovators and especially in helping them commercialize intellectual property. The AIC supports the role played by incubators and believes that the government should continue to fund them. Their proximity to innovators builds credibility and confidence. Incubators have demonstrated time and time again that they deliver economic benefits to Canada.

We would—

[The Chair, Liberal, Lloyd Longfield]

We'll have to wind up on that. Perhaps you could work your presentation into some of the answers you give. I gave you a bit more time because of the technical difficulties.

We will move to our first round with six minutes each, starting with Mr. Williams.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you very much, Mr. Chairman, and thank you to our witnesses for joining us here in person today. It's very important.

Mr. Bailey, you mentioned some great examples. I want to expand on much of what you talked about. Our failure to commercialize our IP is a failure of ownership of IP in Canada. I did like your example of Scale AI. I want to hear more about that.

Specifically, we've had witnesses talk about Canada needing more IP collectives, so is Scale AI an IP collective? Is that something we see as a good model? How do we really see ownership come together with the IP that's sitting out there so we can see commercialization of IP in Canada?

[Todd Bailey]

That's a great question.

Patent collectives are about freedom to operate. To quickly answer the question, within the AI sector there's already pretty good freedom to operate, and there may not be many benefits there.

With respect to freedom to operate, think about yourself separated from a commercialization opportunity by a field full of land mines that are patents, essentially. You want to get across that field. Either you need to navigate carefully between all of those potential dangers or you need to clear a path by acquiring patents, knocking them out or whatever else. This is freedom to operate.

Patents touch each industry differently. If you're in pharmaceuticals, they're going to be very up front and personal, and at the other end of the spectrum, in software and AI, it's different.

It's important to understand a few things about AI.

First, AI is not a technology. It's an idea, and it's essentially a basket of a bunch of different kinds of math.

The second thing to understand is that AI is really old. The people who invented it are all dead, and the people who came after them have really long, white hair. From a patent perspective, we patent things that are new, not things that are old. That means a lot of stuff is already out there available to be used, without fear of patent rights.

The third thing to understand is that it's really hard to patent AI because it falls in this funny space where patent law says you can't patent math, algorithms and stuff like that, so it can be quite difficult. There are many patent applications being filed, but the failure rate on just getting those patents from application to a granted patent is extremely high.

The point is that when you talk about a collective trying to create this freedom to operate a corridor across a field, you have many different fields because there are so many different types of AI. The patent population in that field is not at the same level as you might have somewhere else. If you turn, for example, to a burgeoning technology like quantum computing, on which Canada is really at the forefront, it's going to be very hardware-focused, and this a potential opportunity.

I should back up quickly. I neglected to mention one really important thing about AI, and that is that the whole AI infrastructure is built on something called open source, which is software freely available to be used. I could open my laptop right now and, with just a few lines of code, create an AI that would parse, for example, all of the testimony of this committee and help generate some reflections and so on. Open source creates large corridors of freedom to operate already, and when you have all that, the addition of a patent collective doesn't seem to offer much further benefit. However, there may be some other areas where it does.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Do you think a patent collective idea is something Canada needs to adopt, or at least with AI?

[Todd Bailey]

I'm saying with AI. If you looked at certain technologies.... We have it in green technology already. I'm not that close with how well it's working.

Quantum computing is going to be very hardware-focused. It's going to be very technology-focused, and an area where there will be many patents, and there probably are already. There may be opportunities there. I don't know.

[Ryan Williams, Conservative, Bay of Quinte, ON]

When we look to who is doing it best with centralizing commercialization, obviously Germany has the Fraunhofer institutes, which are embedded with universities. Do you see that as being something Canada needs to replicate?

[Todd Bailey]

The Fraunhofer institutes are an interesting idea.

I am really excited, actually, about the Canada innovation corporation. That's an opportunity to centralize much of what we're doing. Much will depend on how that thing actually gets off the ground and the kinds of people who are involved.

I know my friends over at the Council of Canadian Innovators have made a lot of noise about the kind of person who needs to be the CEO of that organization. I have certain opinions on what kind of intellectual property advice should be coming out of that organization. When you have a central organization with the ability to reach out, it may have the opportunity to do some kinds of things that Scale AI is doing.

[Ryan Williams, Conservative, Bay of Quinte, ON]

The other big problem we have with Canadian IP is that normally when we get the IP developed, we allow international companies or VCs from the U.S. to come in and just buy it. We even have the problem where Canadian companies will buy smaller companies that have started up and have something going. They seem to be bought up as well.

How do we tackle that? How do we get around that?

[Todd Bailey]

To me, it's a good problem to have. If we're developing intellectual property that people want to buy, we're starting from a good place. I think the goal of trying to get to more Canadian ownership is a good, solid goal.

As to where we are right now, my own research in the “AI at Scale” report, which I've provided to our clerk to share with all of you, shows that we're not on par with the United States or China. However, they're not our peers. We're on par with Israel, and we're on par with France. We're ahead of most of the other G7 countries, so we're not starting from a bad place.

We want to get better, but even now, when we have start-ups, let's say, being bought by American companies, there's money coming into Canada. That money is coming in through entrepreneurs, who now have what they call a liquidity event, and they are becoming angel investors. I think we can do more to encourage that money. I mentioned entrepreneurs and role models, and there's an opportunity there.

[The Chair, Liberal, Lloyd Longfield]

Thank you, Mr. Williams. That was a great set of questions.

I worked in machine learning and machine intelligence, and my hair isn't that long. It might be white.

[Some hon. members]

Oh, oh!

[The Chair, Liberal, Lloyd Longfield]

Now we'll turn it over to Ms. Metlege Diab for six minutes.

[Lena Metlege Diab, Liberal, Halifax West, NS]

Thank you very much, Mr. Chair.

Welcome to our witnesses who are here in person. I'm usually there in person, but today I'm not.

Mr. Bailey, I want to continue with one thing you brought up, and that's the Canada innovation corporation. How can we use that corporation to support Canadian business investment in research and development and foster economic growth? Clearly you have some ideas on that. You've been in the field for a while. What suggestions would you have for us?

[Todd Bailey]

The first suggestion—I think this came up in the last session with one of the previous witnesses—is on how we connect our researchers and our start-ups with the customers and the Canadian industry that can use that. I mentioned in my comments that it's not just about financial support. It's not like there are a bunch of companies on the sidelines that are just saying it's a bit too expensive so they're not going to do it. At least in my experience, they honestly don't know where to start. They don't know who's in their field. They don't know who has the expertise they need.

What Scale AI has—and I think it's on a much smaller scale, but I see the CIC being able to do this on a national scale—is expertise on which researchers are working in which area and which start-ups are doing which kind of work. Companies come to us and say, “We want to do AI. Where do we start? Who should I talk to?”, or they come and say they have a plan, and our business experts look at the plan and say the plan is set to fail. When you have companies doing innovation for the first time, you do not want them to fail. You want them to succeed, so they start small and they grow bigger.

The CIC, if it becomes a central clearing house for government funding—and I'm not on the front lines of the CIC, but one of the ideas being floated is that the SIF and others will be brought under one umbrella—then you have an opportunity to be developing expertise in different areas and playing the matchmaking role. One of the honourable members mentioned earlier that it is really about matchmaking. It's about finding the right resources and supporting them.

[Lena Metlege Diab, Liberal, Halifax West, NS]

Thank you for that.

You talked a lot about market relevance, innovation, supply and demand, and connecting. It's this interrelationship between the different players.

I have another question for you. It's on education but also on connection. What role do you see the different levels of government playing here versus the educational institutions—universities and colleges—versus private business?

[Todd Bailey]

The reason I think the CIC has a role to play in education is that right now.... ElevateIP is a federal government program that supports the education of intellectual property, but from my perspective, there's not really any driver on content. Each organization and maybe each teacher is left to teach what they think is relevant, and there is a whole business piece to it. If you think about it, all of business has a legal framework to it—banking, real estate, you name it—but there's no other area of business where we ask the lawyers to do so much without contact with the business pieces of it. If I wanted to become a real estate tycoon, I am probably not going to my real estate lawyer to ask for advice. The CIC role can be about setting a curriculum, training the trainer and that sort of thing.

You asked about coordination between governments. I think one thing governments can do best is to try not to step on each other's toes. One thing we've tried to do at Scale AI is not duplicate what other organizations are already doing in the AI sector, because duplication is duplication.