Betting Canada’s future prosperity on the “invisible economy”
Debbie Lawes
Ottawa-based science writer

You can’t see, touch or taste them, but Canada and the world’s future prosperity depends on them. Intangible assets such as patents, trademarks and copyrights represented over 86% of the net worth of S&P 500 companies last year – up from just 16% in 1976.

“The global economy is roughly 30 years into a shift from a production economy of tangible goods to a knowledge-based economy of intangibles,” says Jim Balsillie, Chair of the Council of Canadian Innovators based in Toronto, and former chair and co-CEO of Research in Motion (now BlackBerry). “If Canada wants to compete in the global marketplace in the future we need to have large, valuable IP (intellectual property) stocks and big data stocks,” like Google, Facebook and Amazon.

Balsillie has been a vocal and persistent advocate on the need to reform Canada’s approach to IP to stimulate innovation. While he would have preferred those changes to have happened 25 years ago, he’s optimistic the federal government is now moving in the right direction.

A new IP strategy launched in April aims to help Canadian businesses understand, protect and access IP. It includes the creation of a third-party IP or “patent collective” where homegrown firms could access patents, expertise and advice. The government is also establishing a searchable and centralized portal for all IP held by government and academia, and investing in programs to improve IP literacy among Canadians.

“I would like to see our national IP strategies and national data strategies implemented with haste and probably to a greater scale than announced to date. I would like to see the strategies for IP and data fully factored into the supercluster funding agreement and I would like to see them factored into university research funding that is publicly funded. All of this could be done before Christmas,” says Balsillie.

The government’s largest research enterprise is also evolving its approach to IP, betting that less red tape and greater flexibility will result in more and bigger Canadian companies. The National Research Council’s new “four doors” approach allows industry partners to choose the IP arrangement that works best for them, while also protecting the freedom of NRC researchers to continue working in a particular research area.

“We’ve been trying to simplify and speed up how people interact with us,” says NRC President Iain Stewart.

The NRC can decide to freely share technology that’s in the public good, or it can allow several companies to access the IP as part of a consortium. IP may also be developed jointly with the NRC and transferred to a single company.

These are just first steps. The NRC also wants the federal government to amend the NRC Act, which currently requires the organization to wait until technology is developed before transferring it. The legislation also limits licensing to “inventions”, with no provision for software-based technologies like artificial intelligence and blockchain.

“That creates uncertainty in the relationships,” says Stewart. “It would be nice if we could agree upfront that we will transfer that IP to you, if that’s the scenario that makes sense for them.”

Governments and universities take different approaches to IP. While the Public Servants Inventions Act states that any IP created by an employee of the Crown is owned by the Crown, universities are free to enact their own policies.

Who owns the ip?

In 1957, the University of Waterloo became the first academic institution in Canada to adopt an inventor-owned IP model.

“Each IP policy really needs to be a function of the institution’s history, its culture, its research theme and the regional resources around the university that can support commercialization,” says Scott Inwood, UW’s Director of Commercialization.

UW’s long history of industry collaboration, combined with its emphasis on co-ops and experiential learning, has fueled its reputation as Canada’s most entrepreneurial university. Its biggest IP successes have emerged from two departments: its math faculty is a software-generating powerhouse and its engineering group, where patentable discoveries have led to the creation of over 700 start-up companies. UW’s commercialization office currently has 275 patents under management.

UW’s spin off successes include OpenText, Teledyne DALSA, and more recently, wearables manufacturer Thalmic Labs, which in 2016 raised $158 million – one of the largest venture capital investments in Canadian history.

The global economy is roughly 30 years into a shift from a produc­tion economy of tangible goods to a knowledge-based economy of intan­gibles.

Jim Balsillie, Chair, Council of Canadian Innovators
McMaster University has what it describes as a “flexible IP policy”. By default all McMaster research is university-owned, but it will assign the IP to researchers or company partners who prefer to manage their own commercialization. If McMaster continues to own the IP, it will share any revenues generated from licences with the creators.

“I find this approach simpler,” says Dr. Gay Yuyitung, Executive Director, McMaster Industry Liaison Office. “When you’re doing sponsored research you will know in advance that the university will own the results of the research from our researchers. We can then transfer, license, or assign that technology to the sponsor company or to the researcher.”

One recent success has been Turnstone Biologics Inc., a biotech startup that is developing cancer-fighting viruses. McMaster, Ottawa Hospital and the Children’s Hospital of Eastern Ontario pooled their patents to form the new immune-oncology company, which has so far raised $50 million in venture capital financing.

McMaster generated more than $22 million in licensing revenues over the past five years, much of that from its quality of life questionnaires in fields such as irritable bowel syndrome and congestive heart failure. The questionnaires are used by academic researchers, government agencies and pharmaceutical companies around the world. Many of these are non-exclusive licenses with small, one-time fees ranging from $50 to $20,000. Exclusive licences often have higher, ongoing royalty and milestone payments.

“I don’t think any university is trying to generate big revenue based on the IP,” adds Yuyitung. “We’re trying to maximize benefit and encourage researchers and companies to work together.”

Sometimes you strike gold

Every so often an academic invention comes along that turns out to be a revenue blockbuster. For the University of Saskatchewan, it was a vaccine (PCV2) licensed to Merial that protects pigs from a devastating wasting disease. The vaccine hit the market in 2007 and continues to generate about $14 million in annual licensing revenue. While USask owns all IP generated at its institution, any resulting revenues are equally shared between the university and the inventor.

USask has since taken steps to make it easier for companies of all sizes to partner with its researchers. This summer it launched the Fast License program to dramatically reduce the time it takes to acquire a licensing agreement from the university.

“Licences can be negotiated and signed in a day rather than having lengthy, cumbersome negotiations,” says Dr. Johannes Dyring, Managing Director of USask’s tech transfer unit Innovation Enterprise.

USask has also introduced Academy Industry Meeting Days (AIMdays), a concept borrowed from Sweden that brings dozens of entrepreneurs and researchers together to discuss potential solutions to “real-world” problems in a series of one-hour workshops held in a single day. About one-third of these workshops result in new research partnerships.

“Often it’s not about access to the patents, but access to the people who created those inventions – their networks, their knowledge base and their experience in working with those kinds of technology. The patent is just a tool. It’s a means to an end,” says Dyring.

Sometimes universities will spin off a new company to commercialize its IP. In other cases, it makes sense to license a technology to large firms with established customer relationships, particularly in risk-averse sectors like healthcare.

“To reach the bigger market you really need a vendor to do it for you … someone that can go into any institution, and because of their name, people will listen to them,” says Dr. Ting-Yim Lee, Director of PET/CT Imaging Research at Lawson Health Research Institute.

Lee invented CT perfusion, a software that can be used on existing CT scanners to measure blood flow in the body. More than 8,000 hospital imaging departments worldwide now use this sophisticated yet easy-to-use technology, which has transformed the way stroke is assessed and treated around the world.

A 2013 socioeconomic study commissioned by the Canada Foundation for Innovation and the Canadian Institutes of Health Research showed public investment in Lee’s work not only expedited this innovation, but also yielded a 2:1 return on public investment.

The software was licensed to GE Healthcare in 1999 and is now available on a non-exclusive basis to companies globally. Lee, along with Lawson and its affiliated institutions (Robarts Research Institute and Western University) share about $2 million annually from some 1,000 copyright licences.

Often it’s not about access to the patents, but access to the people who created those inventions.

Dr. Johannes Dyring, Managing Director, Innovation Enterprise,
University of Saskatchewan
“The institution reinvests part of their share back into my research program. That’s why we’ve been able to extend this software beyond stroke to cardiac and now the lung,” says Lee.

Supporting entrepreneurial inventors

Research hospitals develop a range of healthcare technologies, from medical devices to new drugs. With more than 3,000 employees involved in research, the Hospital for Sick Children in Toronto is ranked the top research hospital in Canada for licensing revenue generated. But as their Chief of Research explains, the bigger priority is creating value from the research.

“Some of that value is about improving health, some of it is financial and some is reputational,” says Dr. Michael Salter.

SickKids’ research blockbusters include the discovery of the cystic fibrosis gene in 1989 which led to new therapeutics, and a device that improves recovery of heart function after a heart attack, which resulted in a new spin-off company, CellAegis Devices.

SickKids works closely with its faculty to help identify and commercialize promising technologies. “We have many junior faculty members who are very entrepreneurial,” says Salter, who holds nine patents. “They’re interested in seeing their discoveries used to improve health. It’s an exciting time to be in this space.”

That entrepreneurial spirit is also being cultivated at Queen’s University where a new program, the Foundry, pairs researchers who have developed a commercially promising invention, software or idea with entrepreneurial students and recent graduates. Student teams with strong proposals are granted a short-term limited license to develop the technology. Teams also receive training, mentoring, seed funding and an opportunity to fully licence the technology later.

“One of the challenges we see regularly is that the level of technology readiness for early-stage research is often too low for a company to license,” says Dr. Jim Banting, Assistant Vice-Principal (Partnerships and Innovation) at Queen’s. “This program helps close that gap by having student teams launch start-ups to advance the research to a proof-of-concept stage and beyond.”

If Canada wants more IP commercialized, it will need to support more start-ups, adds Banting. He has joined a growing chorus of companies and innovation experts calling for the creation of programs like the Small Business Innovation Research and the Small Business Technology Transfer – perhaps the largest source of early stage/high-risk funding for start-ups and small business in the U.S.

“Figuring out a way to provide that funding to elevate the level of technology readiness will certainly help mobilize and capture the value of early-stage research happening at universities in Canada,” says Banting, who worked in the U.S. pharmaceutical sector for several years before moving back to Canada.

The University of Alberta is also supporting students and researchers who want to see their science used in industry and society. The university took an important step in that direction 12 years ago when it partnered with the City of Edmonton to launch a new commercialization arm. U of A has an inventor-owned policy but researchers can opt to split licensing revenues with TEC Edmonton in exchange for training and business services.

“TEC Edmonton creates a supportive environment where researchers can get much closer connections to the end user community so they can see value in what they’re doing,” says Dr. Matthias Ruth, VP Research at U of A, which has generated many technology successes, including antiviral agents that led to the first oral hepatitis B antiviral Lamivudine that is now licensed in over 200 countries, and black-leg resistant Quantum canola that has contributed over $20 billion to Canada’s economy.

While IP has become a hot topic these days within government, industry and academia, Ruth cautions that being fixated on IP unnecessarily narrows perspectives on what it takes to create an innovation ecosystem. Fueling future discoveries and innovations requires that we support the fundamental research from which these discoveries and innovations stem.

“We don’t know at the outset if there will be a great product for which there is a market 5, 10 or 20 years down the road so we need to support the research enterprise in a very healthy and sustainable way,” says Ruth. “From that will come the benefits for society.”

Debbie Lawes is an Ottawa-based writer specializing in science, technology and innovation.