Canada’s key military systems are at risk without intellectual property control

The COVID-19 pandemic has had dramatic effects on Canada and the vital industries that are pillars of our economy. While much of the public focus has been on sectors such as health and tourism, no business, small or large, has been immune to impacts of the pandemic. Canada’s aerospace and defence sector, which pre-pandemic contributed 215,000 jobs and more than $25-billion in annual GDP, is no exception. The pandemic’s damage to the civilian aviation business and the slow pace of defence procurement have cost jobs and delayed deliveries, which presented significant challenges across the sector. COVID-19 gave many in Canada an education about who owns critical intellectual property (IP) and the impact this can have on supply chains. Due to Canada’s weak position on vaccines at the outset of the pandemic, our government had to enter into negotiations with little leverage to achieve the best outcomes for Canadians. Canada’s national security is no less important, but our defence and aerospace industry is operating with many of the same weaknesses, which are now obvious in the health sector. Without control of IP, Canada puts itself at risk when it procures major systems for the Department of National Defence. These ships, planes, etc., will be in service for Canada for 20 to 30 years or longer. If we don’t own the IP vital to these sectors, the country’s industrial sovereignty is at risk as we will be dependent on the goodwill of other countries. Canada will have to “get in line” any time products or services are in short supply, and we will have no control over the price we pay or delivery schedules. Finally, without IP ownership, Canada is in essence creating jobs offshore rather than creating employment at home. Of primary concern should be ownership of foreground data (data for which Canada has paid the development cost) for all critical systems. If Canada develops the technology with its partners, it should be given a royalty-free right to use such data so that it might exploit it in other markets, including exports which would drive employment. From Canada’s perspective, owning the foreground data provides two distinct advantages. First, should Canada ever encounter difficulty in securing support from the party who developed the technology, it has the unfettered right to go to a third party for assistance. This makes it much easier to efficiently manage system support. In the 30-year lifespan of these systems, such circumstances will almost surely surface somewhere in the supply chain. Second, if Canada owns the foreground data, it will be much easier to attract other parties who might be interested in playing a role in the In-Service Support (ISS) portion of the procurement. As such, where feasible, Canada will want to create price competition for ISS to effectively manage the costs of ownership. If, on the other hand, the foreground data is owned by a third-party developer, the developer’s commercial motivation will be to ensure that no other entity has access to the technology. Canada needs to be equally cautious in how it deals with background data, which is all relevant pre-existing IP owned by the Crown or contractor that is not created through the Crown procurement contract. Background data is nearly always a much more difficult issue as the data in question is probably someone else’s lifeblood. Yet due to the extended period of ownership of most major DND assets, Canada must ensure it has sufficient access to background data to support its systems. In practical terms this means that if the owner of the background data could not or would not support a specific system, Canada would have rights to use the data itself, but for that purpose only. Securing appropriate data rights to Canada’s assets on a long-term basis with a reasonable risk profile will allow DND to support its systems at a fair cost while creating and maintaining strong employment in Canada. We need to heed the lessons learned from our COVID-19 experience if we expect to procure systems with reasonably secure supply chains while creating well-paying jobs in Canada for the future. Brian Mersereau is the chair of Hill+Knowlton Strategies Canada. He has more than three decades of experience serving as a strategic counsellor and business adviser on many of the federal government’s major projects. He has played a key role as trusted adviser on programs for a wide variety of goods and services in both the military and commercial sectors, including many of Canada’s major mergers and acquisitions. The Hill Times