Canada needs to broaden its approach to intellectual property

We live in an era shaped by digital transformation and constant innovation. In this new economic reality, the success of individual organizations and the prosperity of entire nations is increasingly dependent on the ownership of intellectual property. In Canada, government and business leaders are rethinking our country’s IP strategies. As a first step, we need a new definition of intellectual property—one that reflects our economic reality and addresses the rapid change and new types of disruption that have come to characterize the innovation economy. In the industrial economy, it was acceptable to think of intellectual property as the technical details of a product or manufacturing process. Back then, markets were smaller and slower, competition was less intense, and consumers didn’t have much choice—they bought what was available. Times have changed, and technical capabilities are no longer enough. We now face highly segmented markets and differentiated products increasingly targeted at individual niches. We also contend with accelerated rates of innovation, product and market experimentation that’s fuelled by venture capital, and frequent disruption of both products and markets. That’s why we need an expanded definition of intellectual property. This new definition—let’s call it IP 2.0—acknowledges that “technical” IP is mere table stakes, and that we must now add two equally important components to our understanding of what constitutes intellectual property: the “market” and the “process” to get new technology to market. To take it a step further, companies in the innovation economy must marry technical IP to market IP and process IP if they wish to succeed. Recent research shows that Canadian technology companies are patenting in sufficient volume, yet not generating the economic benefits that companies in the United States do. This is because Canadian firms have technical IP but not sufficient market or process IP to meet increasing needs to be competitive in the innovation economy. Market IP is the knowledge that comes from identifying a large market that is ripe for disruption, figuring out the needs of that market, and understanding the competition. For the most part, Canadians entrepreneurs are not creating the kind of research-focused technology businesses that serve very large markets, preferring vertical to horizontal markets and corporate to consumers ones. Even if they find a large market to disrupt, Canadian firms must still export to succeed. And to export successfully, a company must develop a strong understanding of the market needs in individual export regions. This can be challenging. It is likely that Canadian firms will always need to buy market IP by hiring key employees in the markets they seek to serve. The third component of an IP 2.0 involves the people on your team. Do they have the knowledge and experience to take a firm to success? Do they understand the commercialization process? Can they scale the technology, drive rapid market adoption and acquire sufficient capital? There is a lot of experience in Canada at scaling technology, but we don’t have equivalent experience at how to drive adoption and growth in export markets. Also, since there have been relatively few Canadian companies that have become unicorns—a privately held company with a value of over $1-billion—or that have gone public on U.S. exchanges, it appears that there are few Canadian CFOs who truly understand the finance process needed to create a world-class firm. This “experience deficit” in process IP is hindering Canada’s competitiveness in a world where prosperity is increasingly dependent on intellectual property. To see this play out, consider that Canada is positioned second in the OECD for the amount of venture capital invested annually, yet we are in last place at turning this investment into unicorns. The reason? Canada’s business talent pool has too little experience at driving rapid growth in export markets and acquiring the vast amounts of money required to scale efficiently. Given the powerful role of innovation in shaping global economies, it’s critical that we acknowledge the direct ties between IP ownership, job creation and prosperity. And as Canada’s government and business leaders look to strengthen our economic prospects through enhanced IP strategies, the conversation needs to go beyond technical IP and recognize that market IP and process IP are equally important components of intellectual property. Charles Plant is an entrepreneur and founder of the Narwhal Project.