Jim Balsillie is a businessman, philanthropist and Chair of the Council of Canadian Innovators.
As the post-pandemic future comes into focus and Canada’s policy makers grapple with a historic stimulus, there is urgent need to shift the discussion of our economic affairs toward prosperity. Hand-wringing about deficits or inequality is not a strategy to generate the new wealth needed to set our country on a road to recovery that deals with debt and redistribution. Even before COVID-19, Canadians held a record amount of government, corporate and household debt, and despite our highly educated population, Canada remains a small exporter and large importer of intellectual property (IP) – the currency of today’s global economy.
Canada’s IP trade deficit
In billions of dollars
$15
Outgoing
payments
10
5
Incoming
payments
0
-5
Net deficit/
surplus
-10
1995
2000
2005
2010
2015
2019
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: Warren
clarke, “A Worthwhile Intervention? The Potential
Role for a Sovereign Patent Fund in Canada”
Canada’s IP trade deficit
In billions of dollars
$15
Outgoing
payments
10
5
Incoming
payments
0
-5
Net deficit/
surplus
-10
1995
2000
2005
2010
2015
2019
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: Warren
clarke, “A Worthwhile Intervention? The Potential
Role for a Sovereign Patent Fund in Canada”
Canada’s IP trade deficit
In billions of dollars
$15
Outgoing
payments
10
5
Incoming
payments
0
-5
Net deficit/
surplus
-10
1995
2000
2005
2010
2015
2019
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: Warren clarke,
“A Worthwhile Intervention? The Potential Role for a Sovereign
Patent Fund in Canada”
This is why the new Patent Collective Pilot Program from Innovation, Science and Economic Development (ISED) represents a major move in reversing economic trends that continue to erode our national prosperity. The program launches Dec. 9 and marks a true step toward Canada building capacity for the global innovation economy. The Patent Collective was announced in the spring of 2018, and this fall the government finally gave the green light to an independent group, called the Innovation Asset Collective, to start Canada’s first dedicated IP program and help small and medium-sized businesses better understand, generate, commercialize and protect their IP.
Decades ago, centralized, government-backed IP resources became a feature of industrial strategies as advanced countries geared up for the global race to own and control valuable IP. France, South Korea and Japan established sovereign patent funds to assist their businesses in monetizing IP and protected them from predatory patent claims by foreign firms. Germany’s Fraunhofer Institutes and Singapore’s IP Office created centralized expert-led authorities to assist their researchers with IP strategies. Such initiatives have helped propel those countries to the top of global innovation rankings.
In 2008, the United States, whose industry owns half of the world’s most valuable IP, established the Office of Intellectual Property Enforcement, reporting directly to the President, and used it to help grow the country’s IP assets. The efforts included inserting favourable rules in trade agreements via a decades-old alliance between policy makers and businesses called the “Iron Triangle.”
The Iron Triangle advances U.S. economic interests globally, most importantly its IP-intensive industries. According to the U.S. Chamber of Commerce, those industries contribute about US$7-trillion a year to their economy. Consequently, the overwhelming majority of the text in the new Canada-U.S.-Mexico “trade deal” is about marketplace frameworks that extend and entrench the IP and data rights of American owners – so much so that the words “free trade” do not even appear in the agreement.
Digital policy infrastructures such as IP collectives enable entrepreneurs and companies to access collective IP assets and use them to fortify their IP war chests, and to address freedom-to-operate issues with competitors who block their access to new markets. IP collectives are even more important in this era of “dual-use” technologies that generate valuable economic outcomes but also affect non-economic capabilities of a country, including national security, pandemic preparedness and election integrity.
Canada has struggled to create strategies for the global economy driven by IP and data. Successive initiatives aimed at promoting innovation either had no strategy for generating and commercializing IP, or were designed to transfer taxpayer-funded IP to foreign firms. In February, Statistics Canada reported that since 2000, amid a global race to accumulate IP and data, intangible assets as a percentage of Canada’s economy shrank. Meanwhile, these assets as a portion of the global economy soared. Canada continues to run a large IP trade deficit, paying out significantly more in IP royalties than it collects abroad. These IP flows underpin the enormous market capitalizations of successful foreign companies and contribute wealth to their home countries.
The Decline of Canada’s
Intangible Capital
Intangible capital share of total capital stock
between 2000 and 2016
40%
39
38
37
36
35
34
33
2000
2002
2004
2006
2008
2010
2012
2014
2016
JOHN SOPINSKI/THE GLOBE AND MAIL
SOURCE: Jim Balsillie (data via statscan)
The Decline of Canada’s Intangible Capital
Intangible capital share of total capital stock
between 2000 and 2016
40%
39
38
37
36
35
34
33
2000
2002
2004
2006
2008
2010
2012
2014
2016
JOHN SOPINSKI/THE GLOBE AND MAIL
SOURCE: Jim Balsillie (data via statscan)
The Decline of Canada’s Intangible Capital
Intangible capital share of total capital stock between 2000 and 2016
40%
39
38
37
36
35
34
33
2000
2002
2004
2006
2008
2010
2012
2014
2016
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: Jim Balsillie (data via statscan)
The new Patent Collective will try to reverse these prosperity-eroding trends. The Innovation Asset Collective will try to acquire or generate IP assets from third parties. This includes acting as a defensive aggregator – buying patent portfolios that come onto the market and might be included in the products or services of Canadian businesses. It will provide IP education to key stakeholders in Canada’s innovation ecosystem, so that Canada can grow its own IP-intensive companies. And it will offer support to executives in high-growth firms with advice on licensing, prior art libraries and freedom-to-operate strategies so these companies can scale up globally.
The collective will also assist in financing or subsidizing patent filings and IP portfolio creation, and help with strategies such as non-disclosure agreements for IP-generating workforces and trade secrets, which companies in data-intensive sectors use to gain competitive advantage. And it will help with standard setting, the critical new frontier where IP rights owners fight for dominance of value chains.
An added bonus is that Patent Collective Pilot Program is focused on clean tech. The global clean-energy market is estimated to be worth between US$22.5-trillion and US$28.4-trillion, depending on greenhouse gas emission goals. It presents an enormous opportunity to advance economic growth and a green transition. Key sectors include transportation, food, agriculture and energy from bio, solar and geothermal sources.
Smart cities are crucial as well. They represent the largest segment of the global clean-tech market, at US$1.3-trillion annually, and this is growing at 16 per cent a year. Canada and Brazil have the highest concentration of urban populations in the world: About 80 per cent of people live in cities. A good part of the post-COVID-19 economic and social recovery strategy needs to focus on cities.
By helping to grow and scale Canadian clean-tech innovations, we can also avoid repeating past mistakes such as the devastating hit on our prosperity from Ontario’s Green Energy Act of 2009, which managed to transfer billions of dollars to South Korea’s Samsung and impoverish the province for generations. The architects of that strategy did not understand the domestic imperative of owning our fair share of clean-tech IP.
Finally, ISED deserves credit for delegating the Patent Collective Project to an independent group of professional IP strategists, most of whom have built impressive careers globally advising the public and private sectors on the innovation economy, including sovereign patent funds. With an expert-led program that helps Canadians generate, commercialize and protect IP, we can look forward to our country developing IP sophistication, building IP assets and know-how, and using that to fulfil our clean-tech innovation potential, grow our economy and reverse climate change.
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