Canada needs IP incentives to be globally competitive

In its 2019 pre-budget consultations, the federal government’s House Finance Committee wanted to focus on ensuring Canada’s competitiveness on the global stage. Improving Canada’s business and economic competitiveness is key to the work of the Intellectual Property Institute of Canada (IPIC), the association that represents patent agents, trademark agents, and lawyers practising in IP law across the country. IPIC has long recognized that Canada, a nation that generates numerous inventions and innovations, does not sufficiently protect and commercialize its intellectual property, such as patents, trademarks, designs, copyright, and more. Not doing so comes at a significant cost to Canada’s economic competitiveness. To the credit of Innovation Minister Navdeep Bains, he recognizes that intellectual property is at the foundation of Canada’s potential for economic growth. While IPIC and others have welcomed the government’s Innovation and Skills Plans, and in particular their National IP Strategy with its investment of $85.3-million to support intellectual property awareness activities, innovators and entrepreneurs with shoestring budgets need incentives to take the necessary step of protecting their rights. The strategy needs to usher in new policy to make it easier and more affordable for Canadian startups and small businesses to patent inventions. If we are to establish Canada as a fiercely competitive force in the global knowledge economy, we need to implement new financial policy incentives that encourage Canadian businesses to develop, protect, and then be able to commercialize their IP. The House Finance Committee did align the recommendations with the IPIC’s in 2016 and 2017, which were that the government should establish incentives for IP development and commercialization. However, these did not see the light in the federal government’s last two budgets. In fact, Finance Minister Bill Morneau’s own Advisory Council on Economic Growth recommended in December 2017 the establishment of a lower corporate tax rate for revenue derived from Canadian patents, yet the recommendation was not adopted in the 2018 budget. As others have noted, policy, like IP, needs to be applied to make a difference. Canada’s tax system must be modernized so that Canadian innovators can be incentivized to patent their inventions and commercialize those patents here in Canada and into global markets, driving made-in-Canada economic growth. More specifically, IPIC has been recommending that the government create a ‘First Patent Program,' similar to the one launched in Quebec in 2015, that assists small and medium-sized businesses with expenses while obtaining their first ever patent. We also recommended that the government implement an ‘IP box’ tax incentive with a 50 per cent reduction to the corporate tax rate on revenue derived from intellectual property, for a period of five years following the commercialization of the Canadian-issued IP rights. With a nod to the check box that one would have to tick off on tax forms, the ‘IP box’ strategy would easily and directly promote innovation throughout the country. The Canadian Chamber of Commerce agrees, having recommended several times in the last few years that such a tax incentive be federally implemented. The “innovation box” recommended by the chamber has an even broader definition of intellectual property than some of the European programs focusing exclusively on patents. It would reduce the corporate tax rate on income derived from developing and commercially exploiting inventions, services, and related innovative functions where IP rights were assigned. Incentivizing the development and commercialization of intellectual property in this way would help drive Canadian innovation and economic growth for years to come. It would also help return Canada to a more respectable standing on the Global Innovation Index, making our country a more attractive destination for global innovative businesses to establish operations. This thought has not been lost on our major trading partners, who are not waiting to act on it. The U.K. over the last couple of years is starting to see dividends from introducing a similar tax incentive, and the United States introduced a new tax incentive program last year, lowering tax rates for eight years to 13.12 per cent on foreign-derived income from licensing their IP. The US initiative follows those of other European countries who have had such policies and programs in place for a few years; policies that have been fiscally rationalized and encourage IP activities, requiring that manufacturing and research and development remain local which in turn increases the attractiveness of their marketplaces to investors and innovative global businesses. A Canadian equivalent would reduce the likelihood that research and development, and its associated jobs, would move offshore. Its further advantage is that it positions Canada as an attractive place to grow and invest in innovation. We cannot afford to kick the can down the road any longer, and risk being too late to the party. The 2019 federal budget presents Canada with the opportunity to position us as a country that recognizes, through its fiscal policy, that competitiveness depends on innovation and leveraging intellectual property. A favourable tax treatment of intellectual property, and a rebate program aimed at encouraging first time filing of patent applications for IP, would help Canadian innovative industries grow and increase our global competitiveness. If the government were to adopt these recommendations, it would send a clear message to companies around the world that Canada is an attractive market for IP rights, making us more serious competitors within the international marketplace. A federally-mandated IP incentive program, within our National IP strategy, would allow Canadian inventors, start-ups and small and medium-sized businesses to see that the government’s IP strategy is robust and has their success top of mind. Growing innovation and harnessing its application is key to economic success. Incentives for companies to protect intellectual property, and bring innovations to market, are critical to helping Canada realize its competitive potential. Adam Kingsley is executive director of the Intellectual Property Institute of Canada. The Hill Times

Canada needs IP incentives to be globally competitive

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Canada needs IP incentives to be globally competitive

Incentives for companies to protect intellectual property, and bring innovations to market, are critical to helping Canada realize its competitive potential.

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