Jim Hinton: Why we must abandon Canada’s uniquely troubling approaches to innovation

Jim Hinton,  

Commuters in the financial district of Toronto. PHOTO BY COLE BURSTON/BLOOMBERG FILES

Canada’s innovation approaches have not been serious.

I won’t call them innovation strategies because, as a senior government official has recently admitted, no strategies actually exist for many of these programs.

Initiatives including the so-called “first AI strategy in the world” were not strategies, but funding announcements in a sea of “chaotic” initiatives.

The knowledge-based economy is now in its fourth decade and there is plenty of evidence around the world to show how successful countries can lead in this changed economy and why we must abandon the uniquely troubling suite of Canadian approaches to innovation.

What does a real innovation strategy for Canada look like? After decades of failed strategies, we should first understand what success does not look like:

To achieve these objectives, we need to start with acknowledging where our entrepreneurs and companies are currently positioned in global markets, where they want to get to and to understand the obstacles they will encounter on their way to commercial success.

Not surprisingly, Canada is starting from a position of weakness. Using IP as an indicator, despite one of the most educated populations in the world, Canadian companies own one per cent of global IP stocks. This means that new Canadian companies will have limited freedom-to-operate (FTO) when they sell their technology. In the knowledge-based economy, patents are a tool for market capture and control. While they are only one form of IP, their public registry makes them easy to see. And because they require proof of novelty, they have been used as a solid proxy by economists to measure innovation outcomes for both companies and countries.

The current executive head of Canada’s so-called national AI strategy, Elissa Strome, recently said that patenting “is not a major course of action in this sector nor relevant.” Yet, there is a global race for AI patents across the world. The World Intellectual Property Office reported that over 350,000 patent applications have been filed for artificial-intelligence-related technologies. Canadian AI researchers such as Geoffrey Hinton and Yoshua Bengio continue to be named as inventors on patents owned by foreign companies such as Alphabet Inc.’s Google and Samsung Electronics Co. Ltd.

The reason we are witnessing smart countries and companies focus on ownership of AI is because it allows their entrepreneurs to manage and expand their freedom-to-operate. Global value chains are highly contended because profits from ideas can be enormous, so each company is working not just to build its castle but a moat around that castle – and then to expand that moat outward as far as it can go. Their home government is an extremely active and sophisticated partner in this corporate objective.

To have a strong FTO position in global markets, Canadian companies need more IP literacy which can help educate innovative entrepreneurs about different types of IP assets they can use to commercialize their ideas, insert them into global value chains and then protect that position. They need access to comprehensive IP collectives which are shared holdings of strategic IP assets and can provide IP litigation insurance among other services. The Canadian government can also create strategic data collectives (sometimes called data lakes or pools) to give strategic access to key data sets to Canadian entrepreneurs. Foolishly, Canada’s current AI program makes no mention of data assets in relation to Canadian companies, even though data is a critical AI intangible asset and companies use IP to block access to data even when that data is not proprietary.

On the literacy front, Canada is playing a 40-year catch up so more and faster education programs delivered by experts in the knowledge-based economy is key. The pilot Innovation Asset Collective (which I co-founded) needs to be scaled to more sectors, particularly those that are foundational to Canada’s economy such as agriculture and resources. There needs to be a national data strategy that guides the use of public and private data in a way that allows innovative Canadian companies to responsibly access data while preserving civil liberties, especially privacy. Finally, Canada can develop a standards strategy because technology standards are the new battleground for dominance in global value chains. Companies with strong IP positions have a disproportionate advantage in standards setting.

“I don’t think those patents that exist are generating value for the people who do own them,” Ms. Strome added. It’s high time that we start questioning the capacity of Canada’s AI leadership and its ignorance against expertise inside trillion-dollar AI companies around the world such as Microsoft Corp., Google, Amazon.com Inc. and others who are now using their IP assets to generate enormous wealth for their countries.

As a small, open economy, Canada can compete with global tech powerhouses and implement innovation strategies developed by our peers such as Finland, South Korea and others. We can become a country that is a net exporter of our ideas, where our companies scale globally and bring significant private and public wealth to our shores. But that will require an entirely different approach than what Ottawa is currently doing.