Thank you for the opportunity to provide input to the committee's study of intellectual property and technology transfer from post-secondary institutions to companies.
While I'm representing NSERC today, I have a strong personal interest in innovation policy developed through 13 years of working as a researcher at NRC, five years in a small high-tech company, and many years at NSERC.
NSERC is one of three funding agencies—my colleague Ted is from another, SSHRC—that support research activities at universities and colleges in Canada. NSERC funding enables researchers to explore ideas, develop promising discoveries, and attract businesses that can commercialize research results. This year we'll invest about $1.1 billion in grants, the vast majority of which support student participation in research. About one-third of the funding is for knowledge transfer partnerships, of which only 4% is focused on commercializing inventions.
A key part of NSERC's approach is to provide funding that enables researchers to work across the continuum between discovery and innovation—exploring ideas, working with companies to apply promising ideas—which in turn generates new ideas to explore, so it's a virtuous circle.
Some of the NSERC programs that enable universities and colleges to support business innovation and commercialization have already been mentioned in testimony to the committee so far. They include I2I or Idea to Innovation, Engage, and technology access centres or TACs. More than 3,600 companies access university and college expertise each year using our support. They can work with 30,000 students who we fund and about 10,000 faculty professors. This support for knowledge transfer attracts about $95 million in cash and $140 million in in-kind contributions. By working in collaborative projects with partners, students gain valuable work-integrated learning experience. One in three companies partnering with NSERC hires a student from the funded project.
I believe innovation is a contact sport, and NSERC's funding is focused on bringing university and college people in contact with company staff while conducting experiments, building prototypes, developing standards, and undertaking other activities that transfer knowledge. Companies report that they gain knowledge and grow their research capacity; advance the technology readiness of their products, processes, and services; and sometimes even attract investment.
A study NSERC conducted with Statistics Canada a few years ago indicated that companies that participate in our programs tend to have higher sales and employment after they start collaborating with university or college teams.
We also invest in helping university inventions attract business investment. Each year we support about 50 projects through our Idea to Innovation program, and in a context where one in 10 start-ups typically succeeds, we're pleased that about one in seven of the Idea to Innovation projects results in products or services sold by Canadian companies and, of course, the creation of jobs.
NSERC also supports centres focused on technology commercialization. These are the centres of excellence for commercialization and research. These centres often focus on commercializing the results of university research. One example is GreenCentre Canada, which applies academic inventions to develop green chemistry-based solutions to meet the needs of various industries. These centres are effective in commercializing technology and attracting funding from other governments and investors as well as generating income from successful market entry.
In 2004, NSERC began funding applied research at colleges. This funding leverages the advantages of Canadian colleges, polytechnics, and CEGEPs. They are a local presence; they have a client focus; and of course they have talented staff and students.
This year we'll provide more than 500 grants to more than 70 colleges and help about 1,000 companies advance their innovation projects. A key element of the support is a network of 30 technology access centres. Each centre supports the innovation needs of local companies in domains ranging from agriculture to advanced manufacturing. To increase the effectiveness of these centres, NSERC is supporting a networking organization that shares leads and best practices among the centres to improve their reach and reputation.
NSERC has supported research collaborations between business and university researchers for more than 30 years, and we continue to evolve to increase the impact of our support. This includes changes to NSERC's approach to intellectual property. For example, in 2009 we began permitting intellectual property to be assigned to the participating company. In 2015, NSERC implemented open access—which I believe Ted will talk more about as a general concept—which helps companies find researchers with relevant expertise.
Currently, we are working to reduce the time for funding to flow in our partnership grants, reducing the friction in our processes. We are also working to streamline the process of developing IP agreements between universities and companies.
As the committee has heard, while large companies can keep an eye out for promising ideas and researchers, small companies don't have that luxury. Recognizing these challenges, in 2009 NSERC launched a series of actions aimed at making it easier for companies to access university capabilities under the brand “Strategy for Partnerships and Innovation”.
The objective of this strategy is to double in five years the number of companies that partner with NSERC. As a result, we now fund mixer events that encourage researchers and companies to meet, support research visits to define projects, and support six-month Engage projects that do not require company cash but do assign foreground IP to the company. These changes provide a better runway for new partnerships to form, and the impact has exceeded our expectations. And, yes, we have more than doubled the number of partners participating.
Finally, the testimony and discussion at this committee have explored ways to increase the awareness of, linkage to, and use of the capabilities created by the government's investment in research at universities and colleges. The possibilities have included developing public repositories of information about research capacity, such as databases, and strengthening interpersonal connections through enhanced networks and/or concierge services. NSERC and, more particularly, its five regional offices continue to work with a wide variety of organizations on both these fronts to better mobilize the knowledge and talent at Canada's universities and colleges for the benefit of all Canadians.
Thank you, and I look forward to your questions.
Good morning, Mr. Chair, vice-chairs and distinguished committee members.
I want to thank you all for inviting me here today. Like Bert, I'm also someone who's very interested in this topic, so it's great to have an opportunity to discuss it more fully. It's certainly a very welcome mandate: identifying best practices for sharing and commercializing the amazing research that's being done in post-secondary institutions across Canada. It has real value, not only for scholars and entrepreneurs, but for all Canadians.
One of the things I want to explain, however, is that I'm not here principally as president of the Social Sciences and Humanities Research Council, or SSHRC, as we like to call it.
The Social Sciences and Humanities Research Council of Canada (SSHRC) has certainly funded research in intellectual property. Some studies we have funded include one examining the future of the Copyright Act in Canada and reconciling creator and user rights.
In fact, we have long lists of these, which I've shared with some of you, and which speak directly to some of the work that you're doing in terms of evaluation, analysis, policy, and so forth. We're more than happy to put you in touch with that research and those researchers.
SSHRC, however, unlike NSERC, is less involved in intellectual property questions or policy per se. In other words, we don't provide direction to university and college researchers with respect to ownership of IP coming from projects funded through SSHRC. Rather, we defer to the policy of post-secondary institutions. I'm not saying that's the way it necessarily should be or has to be, but that's become our policy to date.
Today, I would like to comment instead on intellectual property challenges, particularly in the university sector, based upon my experience as a former vice-president of research at Western University, in London, Ontario.
You heard from George Dixon, who is the vice-president of research at the University of Waterloo. Well, I was George's counterpart at the other “W” university down the road, and we worked together very effectively.
There is currently much discussion in the university community about intellectual property ownership—specifically, university versus individual researcher models.
We talk, and you have probably talked at some length, about investigator-owned versus university-owned IP policy. In fact, as you may know already or should know, most universities have investigator-owned policies whereby the actual investigator-researcher owns the IP that's produced from the work, regardless of who pays for it. There are some university-owned policies. It's a great source of debate, and it's something that needs to be discussed. In my view, the real issue isn't so much who owns the IP—because it ends up going somewhere and is typically licensed—but rather how post-secondary institutions facilitate or assist the commercialization of IP in terms of freedom to operate on the one hand, incentives or disincentives, and how that all plays out.
Currently, we know that the outcome, if you look at traditional tech-transfer models, is pretty limited. Royalty returns, for example, from investments in intellectual property are roughly equal to the amounts that get invested in the development of IP for dissemination or transfer.
It's not about the scope or scale of invention or patenting either, because, to some extent, universities, in my view, are sitting on a considerable volume of patents, hundreds and thousands of patents. The fact is that they're not necessarily moving, and the question is why?
In my position, it may not even be about IP policy or the legal framework of it. The real issue in the academic community, as I said, is how to move IP to market to get knowledge moving and, importantly, to de-risk the process for all the partners.
The old ways are not working; we need to look at new tools. To successfully commercialize university research, we need better collaboration between business and academics.
Certainly we need to build up demand in the private sector for the supply of the knowledge that our scholars can produce, while at the same time ensuring that the integrity of the research project remains intact in the transfer process.
How can we do that? Certainly things like contract agreement templates can be used universally. Right now we use a very broad patchwork of tools. Umbrella agreements among industry, universities, researchers, and information exchange work very well. We used these to great effect when I was at Western. These are all ways to standardize and to facilitate knowledge transfer in a broader range of ways.
There is also the bundling of technologies and the development of regional academic industry consortia. You may have heard about the Western Canadian Innovation Offices, and about CRIAQ, the aerospace consortium in Quebec. These are all ways to promote or attract industry engagement and break down barriers to commercialization.
Such strategies help to reduce the institutional impulse to competitiveness and replace it with efforts to collaborate. But collaboration needs to somehow be rewarded.
One of the suggestions that I heard about in terms of IP and technology transfer was quite interesting. Instead of universities chasing dollars through royalty agreements and so forth, we as a society, a province, or a country, should just finance the development of the IP and the transfer of the IP itself. If universities are earning only about $60 million a year or so from royalties, why don't we invest twice that and just instruct the universities to push it out? Take the money, go for it, and move it, instead of spending all the time and all the effort that we spend to develop and license all the agreements.
I've left some material with you. There can be a case for a completely open approach, open innovation, which frees research from the traditional closed and rigid proprietary licensing models.
Despite what has been said, this isn't simply about universities or investigators giving away IP. It's about inviting companies and other third parties into the early-stage discovery process from the outset, often for a fee or through cash for access, and then allowing them to protect and utilize IP at the stage that's useful for them.
This keeps early-stage research, from our public universities financed typically with public money, open to everybody, as a platform on which to build, while at the same time giving third party research partners the option to protect and to develop that IP which they are in a position to exploit.
It has been argued, for example, that a model like that could save years off the development of pharma products, since early stage research in a more protected environment is essentially lost to all but the sponsor of the research.
In fact, the research I've seen, colleagues, such as that of Aled Edwards at the University of Toronto, has shown that the time to development of pharmaceutical projects in an open innovation environment can be reduced by potentially tens of years.
These methods are currently in place within Toronto's Structural Genomics Consortium, and the Montreal Neurological Institute and Hospital. This approach may not work in all fields, especially where time to market is very short.
It may not work for software development in which things move very quickly. It can certainly work in the case of drug development.
In concluding my remarks I'd like to state the obvious. In essence, research collecting dust on a shelf has no value, and there is a considerable amount of this. Goods and services that don't connect with people or reflect consumer preferences are also equally doomed to fail. I think both academics and entrepreneurs often lose sight of this fact. To achieve the economic growth that Canada needs in this increasingly globalized trade environment, we need to get ideas to market quickly. By assessing our collaborative capabilities as this committee is currently doing, we can hopefully establish a default model that eliminates some of the obstacles to this commercialization and increases the efficiency of knowledge transfer to the benefit of all Canadians.
I welcome any questions the committee may have.
I would say there are multiple entities. We talked about IRAP and certainly the technology access centres and so forth.
A lot of this will depend on the ability of a business or a company to, in the first place, identify opportunity. That's partly an educational activity, and it's partly a selling job that universities and colleges need to do. It's what I used to do; I'd just go visit.
The structures for that are more difficult. In terms of the early access or collaborative research activity, there is quite a bit of that in Canada already, about a billion dollars' worth. What people are doing now at the Montreal Neurological Institute and particularly at the Structural Genomics Consortium in Toronto is different. They are bringing companies into the research process—particularly the Structural Genomics Consortium—at a very early stage, and they are paying to have access so they can be at the table when discoveries are made and then collaborate work with the researchers and inventors to move those to market.
All that early stage, research is never lost because it's all made public. It's all out there as opposed to research that starts in a company lab or in a company facility where it's all protected to the very bitter end. Companies have the opportunity to save a lot of money. They don't have to invest in a lot of early-stage development. They can pick up a technology at the point where they can use it and then protect it, and then off they go, and everybody's happy. That's the exception right now. If I were a vice-president of research these days in Canada, creating more of those would be my objective.
You are currently up against a cultural wall that would render that fairly difficult, in part because of the way researchers approach this, in part because of the way companies approach the exercise, and in part because of the way tech transfer offices manage that process. I'm pretty convinced, though, from having a look at this, that it make sense in that model.
Thank you for the invitation and the opportunity to present to the committee. I've been following the testimony, and throughout my statement, I will refer back to remarks made in previous testimony.
My perspective on this issue of intellectual property and technology transfer comes from a combination of areas that I have been involved with in my career. I practised IP law for 17 years, working with small high-tech firms. I have a Ph.D. in IP law, and I spent many hours trying to access IP out of university.
In my current position, my research relates to entrepreneurship strategy, regional innovation, and the role of post-secondary institutions in economic development. I hope I bring you a perspective that you haven't heard to this point.
The solution to the question that you're raising is very complicated, and I don't think there are any magic bullets. However, I do believe there is a fundamental barrier to a more successful technology and knowledge transfer. I believe this originates from the university itself, not from the researchers or the TTOs. It originates from the administration and leadership of the universities, and I will explain that.
We know that universities are complex and cumbersome institutions. They have competing demands from many different stakeholders. They face a lot of pressure, more so today with reduced operating funds, budget limitations, pressure to grow enrolment in a global context, and increased pressure to show value to taxpayers. This is relatively new territory in the world of university leaders.
Traditionally, universities have two missions: teaching and research. Many countries outside of Canada have progressed to what the academics call the third mission: economic development. In my opinion, Canada has not advanced in the same respect as some other countries have. In fact, I would argue that we are still, in many cases, trying to reach our potential in the second mission, research. Many universities in other countries have embraced the concept of what we now call the entrepreneurial university. This has many definitions in literature, but I'll just highlight some of the main components. There is to have as part of their core activities an emphasis on research knowledge transfer, which includes technology transfer and exchange; on partnerships in regional areas; on entrepreneurial pedagogy and support infrastructures, such as incubators, maker spaces, etc.; and, importantly, on governance, strategy, and leadership in organizational design to make all these things happen.
A lack of governance, strategy, and design around this leads to some of the problems that we are experiencing in Canada. Technology transfer, for example, requires significant resource allocation, capacity, expertise, patience, leadership, intensive partnerships, risk, and perseverance. These objectives cannot be reached without direction, leadership, and incentives. While we focus on the TTO, who manages the TTO? It's the university administrators. It's the university administrators who will set the university policy, the HR policy, and the goals and directions for any TTO.
Likewise, we talk about incentivizing faculty. Well, faculty are employees of a university, and it's only the university that can negotiate collective agreements. I heard some discussion earlier about incentivizing faculty with money. That has been tried in many other jurisdictions. Faculty are generally not that incentivized by more money. They get paid rather well. They are incentivized by more of their personal goals, so we need to find ways to incentivize them. It's up to the university to find those ways. I'm not sure that it is something that is within the federal government's ability to do without being a very blunt object to get there.
When we talk about industry and how do we incentivize them to work with universities, they're incentivized only when they can get relevant access in a timely manner to valuable IP with minimal transaction costs. That's their incentive. They don't need much more, but that's very hard for them to get. Again, it's the university administration that has to find the internal processes to make this technology transfer more efficient and useful.
When we talk about universities and incentivizing faculty and incentivizing the TTOs, who's going to incentivize the Canadian university? How do we make the university as a whole more interested in being entrepreneurial? I have some suggestions, and these come from what I have been researching in the U.K., in Sweden, and in other parts of Europe where they have a big push on transforming their institutions into what they call entrepreneurial universities.
I would offer the following recommendations. The federal government could establish agreements with their provincial counterparts to provide funding for those universities willing to transition into entrepreneurial universities. The federal government could provide research funding dedicated to those universities that meet predetermined criteria on being an entrepreneurial university, and the federal government could offer training programs or certification for university leaders who wish to embrace the entrepreneurial university concept and wish to act as change agents within their institutions and within their regions. And this is currently being done all over the U.K.
Next I would like to provide some insight into Atlantic Canada. I have heard great discussion about colleges and great discussion about rural Canada, so I hope to provide some insight in that regard. Atlantic Canada is home to 20 universities and colleges. These institutions are doing great work in their regions and around the world. They are critical to the success of Atlantic Canada and small business. They may not all become leading technology transfer institutions, but they surely can all become entrepreneurial institutions given the right incentives and motivations.
Atlantic Canada is fortunate to have Springboard Atlantic. This is an initiative funded by the federal government through ACOA. It acts as a central network for commercialization and industry liaison. It has 19 members, and the funding allows it to put 30 specialized positions in its member institutions. I believe that Springboard will be submitting a brief to the committee, and I think that would provide a great understanding of what's going on in Atlantic Canada for the committee.
Springboard, as I said, funds 30 positions. These positions are 65% funded by Springboard, I believe, and 35% by the institution. Very few of these have been made permanent, so they're contractual, which leads one to suggest that perhaps if the funding dries up, so do the positions. There doesn't seem to be a willingness in the universities and the colleges to make these permanent positions. Springboard plays a key role, and we're very happy to have that initiative in Atlantic Canada.
Our institutions are faced with declining enrolment, aging populations, fewer dollars and operating funds, yet they have never been so critical to our economic and social development. With the exception of Dalhousie, our institutions are not part of the U15, so they compete for the much smaller share of the research funds that are available to them. I raise this issue because of previous discussions suggesting that metrics could be used, as you just talked about in the previous session, to link technology transfer directly to research funding. That would be disadvantageous to the institutions in Atlantic Canada and those that cannot necessarily produce that level of technology transfer. If the metrics were more broad and related more to preconditions for an entrepreneurial university, then I think that perhaps we could meet the needs across Canada.
The final point I would like to make is about the unique potential for community colleges in Atlantic Canada to play a greater role in economic development. In Newfoundland, Labrador, Nova Scotia, and New Brunswick, these publicly funded community colleges have a multi-campus approach. For example, in Newfoundland we have 17 campuses reaching across the province. They reach out to some very rural areas of Newfoundland and Labrador.
What I find particularly exciting in talking about colleges is that they already have a goal of economic development. Unlike universities, they can be mandated. They don't have the autonomy that universities have. The government has more power to negotiate collective agreements. The college has mechanisms for professional development that can be purposely done to affect regional development. It's not as blunt a tool as universities to reach small businesses.
Thank you to the standing committee for this opportunity.
For those who aren't aware, Communitech is a public-private innovation hub in the Waterloo region with more than 1,000 members. We work with tech companies of all sizes, from the earliest stage start-up to global multinationals, providing support to help them grow.
Last year, we worked directly with 717 start-ups, 124 scaling mid-size companies, and 66 global enterprises. This included everything from boot camps and business fundamental programs for early-stage founders, to helping scaling companies access the funding and the talent they need, to working on corporate innovation challenges faced by multinationals such as General Motors, Thomson Reuters, and TD Bank.
I am therefore going to speak from a relatively practical perspective, based on what we see in the Waterloo region, what we have seen be successful in helping knowledge transfer between universities and companies, and what companies need to scale their commercial activities.
In our experience, the most successful technology or knowledge transfer program that exists is a co-op program, particularly the one run at the University of Waterloo, which has more than 19,000 students in full-time co-op programs and provides up to two years of work experience ahead of graduation.
What we see is that when we send students into the business world and back again, the silos that often exist are broken down. You have professors forced to better understand problems facing companies, and students bringing the latest research and thinking with them to their co-op placements. This helps create collaborations between existing companies but also encourages students to create new companies that can tackle the challenges they confront on their work terms. One of the big reasons that Waterloo companies largely face B2B challenges—boring problems that make a lot of money—is that they've seen them before and bring them out in the companies they're working on.
The other key ingredient is incentivizing professors and students to commercialize their research. This is a more difficult challenge, which I know a lot of people have talked about on this committee, but a focus on entrepreneurialism in general pays great dividends. There is a saying that “culture eats strategy”, and when you have a culture of entrepreneurism and a culture in which professors and students alike are encouraged to start their own business or to work with businesses directly, it benefits greatly.
In the Waterloo region, we can see the entrepreneurial education that the University of Waterloo has done. In particular, the Velocity program for both students and professors is paying great dividends. We've seen at least 400 new start-ups a year for the past five years being created in Waterloo region, the vast majority from the University of Waterloo.
Of course, beginning a start-up is far from a guarantee of success in commercializing patents or even making money. One of the obstacles many face is determining how to develop an appropriate IP strategy. Obtaining sophisticated IP advice is challenging as there is a limited amount of expertise in Canada, and it is generally too expensive for an early-stage start-up to access. However, if start-ups don't develop an IP strategy early enough, they often end up making decisions that prove costly down the road, whether by revealing too much information to competitors or filing too late and opening themselves up to lawsuits further downstream.
To address that problem, Communitech offers a number of IP-focused services for early-stage start-ups. These include a brief overview as part of our introductory programming, a more in-depth session with CIPO and local law firms, and most importantly, a pro bono law clinic every Thursday for companies with less than $1 million in revenue.
In that regard, we're incredibly fortunate to have the services of Jim Hinton, who I believe spoke to this committee earlier. He is the driving force behind our pro bono clinic and provides the kind of expert IP advice that very few start-ups have access to. In a lot of ways, the only thing worse than no IP information is bad IP strategy information that companies get early on. Finding ways to regularize and deepen these offerings so they don't rely on the goodwill of someone such as Jim and scaling them so more start-ups and other companies across Canada have access would be an important step in providing base education across the country.
At a broader policy level, it seems to us that Canada actually does fairly well in developing patents. According to a recent study by the Impact Centre at the University of Toronto, the number of U.S. patents with a Canadian inventor climbed from 3,661 in 2005 to 8,903 in 2015, placing us eighth against competitor countries on a per GDP basis. We could improve, but it's certainly not bad.
The same study notes, however, that the percentage of patents developed by Canadians but eventually assigned to another country has grown from 45% to 58% over the same period. One of the key reasons is the lack of large domestic companies that develop and commercialize patents here in Canada. With the decline of Nortel and BlackBerry, this problem has become even more pronounced. The study doesn't get into why this is, but you can see spikes in the years when those companies started to actually decline.
From our perspective, that means public policy should be focused on helping to scale Canadian companies, including investing in sales, marketing, IP protection, and other business activities needed for companies to grow rapidly. However, the vast majority of government investment and grants are focused on R and D and aren't eligible for those types of activities.
The SR and ED tax credit is the largest example of this. This is an incredibly important tax credit for early-stage start-ups as it helps make up for the relative lack of seed capital available to Canadian companies versus their U.S. counterparts. However, sales and marketing expenses are not eligible, which means that Canadian companies are incentivized to overly prioritize R and D activities, and not sales and marketing activities, to grow their companies.
It's a very complex program and this is probably not the place to talk about it. I don't want to say that SR and ED is not important. It's incredibly important, but you start to create these incentives that prioritize the research over the sales and marketing and growing of a company as if they're not important aspects to this discussion.
We tried to address these shortcomings with programs like our Rev accelerator, which is focused on helping to build scalable sales teams for companies. However, with limited funding to do this, the disincentives remain.
The recent budget has a number of promising programs, from the strategic innovation fund to the innovative solutions Canada program, which might help with more broad-based funding for scaling companies and increase government procurement, respectively. But we look forward to seeing more details on those.
Finally, in previous testimony you heard about the challenge one of our member companies, D2L, faced in being sued by a competitor in the U.S. There are a number of other companies facing similar challenges right now, including another member, Sandvine, which is engaged in an IP dispute in east Texas. This highlights an important point that I believe has been made by many witnesses but is worth repeating. The vast majority of Canadian growth companies will be focused on the U.S. and global patent markets. The Canadian market is simply too small, so changes to Canadian patent law will have a very limited effect on how Canadian companies behave.
While I'm cognizant that Canada's ability to influence U.S. laws or regulations is limited, we do have some upcoming opportunities with renegotiations of NAFTA: the addition of chapters on digital commerce, and the renegotiation of IP chapters.
There are two particular challenges that could help to limit patent trolls in the U.S.
The first is to ensure that the recent decision by the Supreme Court on venue for patent cases applies to Canadian companies as well. Currently, patent trolls tend to file patent cases in east Texas, where there were 2,500 patent cases filed last year alone related to the rules of the court and decisions that strongly favour plaintiffs, particularly non-functioning companies acting as trolls.
The recent decision means that the cases will need to be brought in the state of incorporation or where the infringement was made. It is not clear what this means for Canadian corporations, however, so it will be important to clarify and understand those issues.
Second, American courts do not provide the recovery of legal fees if the plaintiff loses, as is the case in Canada and many other jurisdictions. This means there is no disincentive to patent trolls bringing forward frivolous lawsuits that force many companies into settling rather than incurring expensive legal fees.
Even if influencing U.S. legislation may be difficult, it is important that we recognize that it is international patent markets that matter and that are where our focus needs to be. Creative solutions that other members have brought up such as patent collectives or a patent defence fund to help protect Canadian IP should be considered as further ways to protect Canadian IP in global markets.
Thank you for your consideration. I look forward to answering any questions you may have.