The government may have finally come up with a program to move the needle in getting Canadian small businesses and entrepreneurs to make intellectual property (IP) a more central role in their operations.
Innovation Minister Navdeep Bains announced three IP initiatives to encourage businesses to change the way they think about patenting and to get the most commercial success out of it. The government views greater IP literacy as crucial in spurring economic growth, scaling up small businesses, and creating well-paying jobs.
“Only 10 percent of Canadian companies actually have an IP strategy,” Bains said at an event at the University of Waterloo on Aug. 1. “[This] has to increase if we want to be more competitive.”
Ample are the statistics on companies and economies outperforming that use IP intensively—trademarks, patents, and copyrights. Investors are keenly interested in patents. The funding they provide leads to more spending on research and development resulting in more inventions that have a better chance of commercial success.
One way to achieve this goal is to have businesses make IP part of their core strategies as opposed to just letting their lawyers worry about it. Bains said IP-intensive companies pay wages that are 16 percent higher on average than those with little or no IP.
The government’s latest initiatives flesh out promises made in past budgets. Targeted are the pain points that discourage companies from having an IP strategy, such as having little recourse if a big company steals their IP, not having the time or money to spend on legal bills, and not knowing what patents can be accessed.
The “knowledge economy” is not something for the future. It’s here now. Of the companies in the U.S. S&P 500 stock index, Bains said that 84 percent of their assets are intangible, which includes IP and data. In this respect, Canada is lagging, with a far lower percentage of intangible assets among companies that make up the Toronto Stock Exchange index. The most valuable assets are no longer machinery, natural resources, and computing hardware.
“We’re used to having government invest in infrastructure. Well, IP is our new infrastructure in a way, but it requires a different understanding of why IP rights are so important to drive economic growth for this country, and we haven’t tended to understand it that way,” said Myra Tawfik, professor of IP commercialization and strategy at the University of Windsor.
Having taught in the field for a long time, she and other IP lawyers have only recently awakened to this reality, Tawfik said. Thus the process of raising IP literacy in Canada is just getting started.
Strength in Numbers
The most significant of the three initiatives announced by Bains is a “patent collective,” which was first proposed in the 2018 federal budget as part of the government’s national IP strategy.
Patent holders are expected to voluntarily submit their patents to the collective, which will then give them and others the opportunity to license patents in the pool. France and South Korea have implemented similar projects.
“You can benefit from the knowledge that the patents describe. It’s a collective approach to harnessing Canadian innovation in a way that will help Canadian companies advance rather than having to acquire your own patent portfolio, which is very costly,” said Tawfik, who is a director of the Innovation Asset Collective, the non-profit leading the patent collective.
The patent collective will also help fight patent trolls, who hold patents not for commercial reasons but instead for suing others who infringe on them. This benefit was the first thing Bains mentioned when introducing the patent collective.
“What the collective does is give Canadian companies a collective approach or response—the strength in numbers—rather than having each individual small or medium enterprise in Canada trying to develop its own IP portfolio in order to leverage that in a global market,” Tawfik said.
Focus on Clean Tech
The patent collective will receive $30 million over 4 years for a pilot program limited to the clean-tech sector. Bains says the market for clean tech will be $5 trillion by 2022. The transition to a lower carbon footprint is a major push for the Liberal government.
“If this pilot project is successful in the coming years, we want to be strategic in what areas we focus on,” Bains said. He added that industry would play a role in determining where the opportunities are, perhaps cognizant of the chiding the government has taken for attempting to pick winners.
Innovation and business experts have argued that innovation should be more inclusive and that the government should lower taxes—providing greater incentives—instead of championing certain industries or companies.
Tawfik is less concerned about this criticism, saying that the education, skills, and support aspects of the collective are not limited to patents and that the benefits will be broader than just clean tech. The government is already providing a menu of different services for businesses that are not in the clean-tech space through its Canadian Intellectual Property Office.
Recognizing IP Early
There are a lot of things entrepreneurs need to keep in mind in the early stages of their product’s or service’s development, including marketing and access to capital, but having an IP strategy—even a simple one—is advisable, as it can lead to avoiding serious pitfalls.
Tawfik explains that entrepreneurs can get into dicey situations over what they disclose about their invention in journal papers or when speaking at conferences. There’s no clean approach that satisfies patent law and educational objectives. Entrepreneurs need to know what they can and can’t say so as to not compromise their ability to patent.
Similarly, a startup can create a brand name and logo and design marketing strategies but then may find out that they can’t be used due to a trademark infringement, and so it has to go back to square one. Additional costs are incurred.
“Once they develop the instinct around IP and IP protection, … [it’s] easier to think about … picking the right experts to help, so it starts with foundational knowledge,” Tawfik said.
The government is giving grants to four universities’ law schools to expand their IP legal clinics. The goal is to provide pro-bono or low-cost IP legal services to small businesses and startups.
Separate from the collective, the government is also providing a federally run marketplace of publicly owned IP. More than 2,500 patents owners can be contacted.
Canada’s ranking is actually falling in international IP rankings, indicating that it’s time for the rubber to hit the road. According to the U.S. Chamber International IP Index, Canada ranked 11th in 2015, 17th in 2017, and 19th in 2019. The United States ranks first.
Tawfik agrees that what is needed is a culture shift in the way businesses think of themselves in relation to their IP. She says the patent collective is probably the most significant step to fill IP gaps for startups and help them scale into viable businesses.