To Sell or Scale Up:

Canada’s Patent Strategy in a

Knowledge Economy

Nancy Gallini (UBC)

Aidan Hollis (Calgary)

Institute for Research in Public Policy

Webinar
November 12, 2019
 Policy Concern:
Canadian SMEs tend to sell their IP rather
than scale up and commercialize

Outline of Presentation
1. What is the evidence?

2. Why is this occurring? Should this be a policy

concern in Canada?
3. What policies might incentivize efficient
retention and commercialization of Canadian-
invented IP?
1. What is the evidence?
 USPTO Patents with
at least one Canadian Inventor
10000

9000

8000
Canadian-Invented Patents
7000

6000

5000

4000

3000

2000

1000

0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Gallini-Hollis (2019)

 Canadian Invention vs. Ownership
of USPTO Patents
10000

9000

8000
Canadian-Invented Patents
7000
45%
6000

5000

4000

3000

2000
Canadian-Invented
1000 and Retained Patents
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Gallini-Hollis (2019)

 Canadian Invention vs. Ownership:
“Inventive Capacity” vs. “Scale-Up Capacity”

10000

9000

8000 Canadian-Invented Patents

7000

6000

5000

4000

3000

2000
Canadian-Invented
Canadian-Owned Patents
1000
and Retained Patents
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Canadian Invented Canadian owned Canadian invented and not foreign assigned

Source: Gallini-Hollis (2019)

 Canadian Invention vs. Ownership:
“Inventive Capacity” vs. “Scale-Up Capacity”
10000

9000

8000 Canadian-Invented Patents Net Loss

7000
of IP
6000

5000

4000

3000

2000
Canadian-Invented
Canadian-Owned Patents
1000
and Retained Patents
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Canadian Invented Canadian owned Canadian invented and not foreign assigned

Source: Gallini-Hollis (2019)

9000
Canadian Inventions and Ownership
8000
per $100b GDP, 2013-2017
7000

6000

5000

4000

3000

2000

1000

Invention Ownership
Source: Gallini-Hollis (2019)

Net Loss of IP
(Inventions minus Ownership per $100b GDP)
3441.4

893.5 783.8
433.8 317.1 312.3 259.5
9.1 4.9

Israel Canada U.K. Germany Australia Italy France South Korea Japan Sweden
-11.8 U.S.
-65.3 Netherlands
-317.5
2. Why is this occurring?
What are the incentives to
Sell vs. Scale Up?
 Possible Explanations

“Lack of managerial experience and IP skills in Canada

required to guide technology firms as they go through
periods of rapid expansion into global markets.” (Council
of Canadian Academies, 2018, p.167)

Obtaining, maintaining and defending international

patent rights can make scaling up and operating in
global markets too costly. (Gallini-Hollis, 2019)
 Changes to U.S. Patent Policy

1. Expansion in Patentable Subject Matter:

• Genetically modified bacteria (1980),
• Transgenic animals (1988),
• Software (1981),
• Business methods (1998).

2. Creation of Centralized Court of Appeals for the

Fed Circuit (1982)

3. Adoption of Trade-Related Aspects of Intellectual

Property Rights by WTO (1995)
 Increase in US Patents and Litigation
Cases per 1000 Patents Granted

25

20

15

10

0
72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

Source: Gallini-Hollis (2019)

Cumulative Innovation and Modular Technologies
(Heller-Eisenberg, Scotchmer)

Input 1
Application

Input 2
Application Invention
Application

Input 3
Application
 Some products, like mobile phones,
involve thousands of individual patented
technologies.

Photo by Sam Goldheart,

https://www.ifixit.com/Guide/Image/meta/hxaPSHf1DQddSZco.
Creative Commons BY-NC-SA.
 Impact of Patents on Scaling Up
Galasso-Shankerman, Sampat-Williams, Murray and Stern

Firms without patents will have less incentive to engage in

follow-on (scale-up) innovation if:

A. They are Small Firms requiring large firms’ patents

B. They are in technology areas requiring a large number of

patented inputs (e.g. ICT, electronics)

Firms with patents will have greater incentive to engage in

follow-on (scale-up) research if:

They are Small Firms operating in markets with large

incumbents, where patents are in firms’ core technologies and
pledged as collateral.
3. What policies can facilitate
efficient retention of
Canadian-invented IP?
 The National IP Strategy

OBJECTIVE

“To help Canadian businesses, creators,

entrepreneurs and innovators understand, protect
and access intellectual property” (National IP Strategy)
COMPONENTS of STRATEGY
1. Education and Legal Advice: IP Clinics

2. Strategic Tools: Patent Collective (clean technology)

3. Legislation to Enforce IP Rights: Patent Troll

Restrictions
 Patent Collective

Applicatio
Input
n 1

Input 2
Application Invention
Application

Applicatio
Input
n
3
 The Way Forward:
Policy Discussion

 National IP Strategy

 Canada’s Patent System

 Policies on IP Sales to Foreign Firms

(including Subsidiaries)
 Complementary Policies (Direct vs. Indirect
Government Support)
 Direct vs. Indirect Support
Data on tax incentive support not available Tax incentive support for BERD
Direct government funding of BERD

0.18
0.28

0.07

0.13

0.00
0.17 0.00
0.13
0.18 0.15 0.12
0.17
0.13 0.00
0.11 0.11 0.04
0.10
0.07
0.03 0.04 0.03 0.04
0.02

ITA
ISR
KOR

GBR

NLD

JPN
CAN

DEU
SWE
FRA

USA

AUS
 The Way Forward:
Policy Discussion

 National IP Strategy

 Canada’s Patent System

 Policies on IP Sales to Foreign Firms

(including Subsidiaries)
 Complementary Policies (Direct vs. Indirect
Government Support)
Thank You!