The IPL newsletter: Volume 20, Issue 407

Experimental Governance:  Conceptual Approaches and Practical Cases

David A. Wolfe, Innovation Policy Lab, Munk School of Global Affairs and Public Policy
This paper is part of a workshop series of the OECD/EC project on “Broadening innovation policy: New insights for regions and cities.” The paper explores the topic of “Experimental Governance” as it relates to the goals, priorities, and work of the European Commission’s Directorate-General for Regional Policy (DG REGIO). It examines a variety of perspectives on the concept of “experimental governance” and links it to prior work on the concepts of learning by monitoring, collaborative governance, and networked governance. The paper then examines several case studies from North America and Europe to illustrate how the concept is relevant for the study and understanding of different approaches to regional development policies, with a focus on regional innovation policies.

The Road to 5G Networks: Experience to Date and Future Development

OECD Digital Economy Papers
This report examines the development trajectory of 5G wireless networks in terms of investment, good practices in spectrum management, competition, coverage and meeting the increasing requirements of the digital transformation. Case studies from OECD countries address both 5G national strategies and technological trials of 5G development. The report also explores how 5G may represent a paradigm shift, as it is the first standard conceived with the Internet of Things (IoT) world in mind, where different connected devices have diverse network requirements.

Securing 5G Networks: Challenges and Recommendations

Robert Williams, Council on Foreign Relations
This report from CFR’s Digital and Cyberspace Policy Program outlines the cybersecurity risks involved with adoption of 5G networks.  After summarizing the cybersecurity threats involved with China’s rise as a leading provider of 5G infrastructure, the report provides policy recommendations for U.S. policymakers to respond using technical and regulatory measures, diplomacy, and investments in cybersecurity skills training.

Industrial Policy in Context: Building Blocks For an Integrated and Comparative Political Economy Agenda

Antonio Andreoni^, Ha-Joon Chang, & Roberto Scazzieri,  Structural Change and Economic Dynamics
This article introduces the special issue of Structural Change and Economic Dynamics entitled ‘Frontiers of Industrial Policy.’  The editorial summarizes recent policy debates on industrial policy and advocates the need for a renewed industrial policy agenda centred on the ‘structure-institution-policy nexus’.  This requires analysis of industrial policy that is more perceptive to the role of context-specific factors of a given country’s economy, including: the historic structural dynamics of production, the institutional complementarities comprising its political economy, and a more holistic view of the policy domains relevant to ‘industrial policy.’ The editorial concludes by summarizing the articles in the special issue.

To Sell or Scale Up: Canada’s Patent Strategy in a Knowledge Economy

Nancy Gallini & Aidan Hollis, Institute for Research on Public Policy
IRPP’s recently published study by Nancy Gallini from UBC’s Vancouver School of Economics and Aidan Hollis from the University of Calgary examines the role of patents in Canadian innovators’ decisions to scale-up versus sell their intellectual property.  In particular the study seeks to illuminate the role played by patents as a barrier and/or aid to the successful scaling up of promising Canadian innovations.

Patents as an Aid to Scaling up: The authors stress the importance of pat­ent ownership for small and medium enterprises (SMEs) to successfully signal their invention’s value to potential investors, to ward off competition and to protect them­selves from patent trolls.

Patents as a Barrier to Scaling up: Patents held by much larger multinational competitors can function as a deterrent to firms scaling up.  Significant costs can be incurred to access complementary IP that is essential for their product develop­ment, through either royalties or legal battles.

Canada’s Structural Disadvantage: The authors identify structural barriers posed by Canada’s position in the global innovation economy that hinder Canadian innovators’ ability to scale up, thus increasing incentives to sell. First, SMEs account for a significant share of innovation activity in Canada. Second, recent years have seen the ascendance of much larger, vertically integrated US firms that are competitors and potential buyers of Canadian-owned IP assets.  These firms are much better resourced to navigate and benefit from patent thickets – technological areas where densely overlapping patents require a costly process of identifying possible infringements and negotiating licences with multiple patentees.

Canadian-invented, Foreign-owned: The report finds that the majority of US patents filed by research teams with at least one Canadian inventor are assigned on the date of issue to firms outside Canada or to foreign subsidiaries in Canada.  Notably, the share of patents transferred to foreign entities more than doubled from 18% in 1998 to 45% in 2017.  Furthermore, of the patents that are assigned to Canadian residents, a significant proportion are subsequently sold to foreign entities. Comparative analysis reveals that other small, open markets perform much better on patent ownership (ex: Israel and Korea).  The authors identify a “free fall from invention to ownership” in Artificial Intelligence, where Canada ranked third by USPTO-granted patents that included at least one Canadian inventor during the 2013-17 period but only 7 percent of those patents remained with Canadian residents on the date of issue.

A Silver Lining?  In addition to expressing concern about the dearth of Canadian IP ownership, the authors also point out that research investments in Canada by foreign subsidiaries can provide long-term benefits. Specifically, these investments can enhance innovative capacity in Canada through the development of entrepreneurial expertise and scientific infra­structure, especially relative to an alternative scenario that might involve the exodus of Canadian talent.

Policy Implications: The authors doubt the effectiveness of efforts to strength­en Canada’s intellectual property laws due to the small size of the Canadian market that makes it a less strategically-important jurisdiction for patenting.  Similarly the authors do not endorse policies that raise the cost of IP sales such as a tax on international IP transfers due to the benefits derived from foreign R&D investments.  Instead, the authors stress the importance of policies that enhance the ability of inventors to obtain and retain ownership of inter­national patents in order to operate in global markets, such as: educating innovators on the value of patent ownership, reducing the cost of searching technical literature, and existing patents for prior art.

The authors commend the federal government’s Intellectual Property Strategy, with its $85 million in funding for providing (1) education and legal advice around patent practices, (2) strategic tools for inventors and (3) legal rules to enforce Canadian patent rights.  The federal government’s Patent Collective pilot holds the potential to offer legal advice to firms (as with Japan’s IP Bridge); support in negotiating IP licensing contracts (as with France Brevets); and provide access to essential patents (research tools), and expertise on defending IP in legal battles (as with South Korea’s Intellectual Discovery).

Gallini and Hollis conclude by recommending further research on additional policies and incentives to support patent retention:
-Study the potential of a ‘patent box’ tax incentive that lowers the corporate tax on profits earned from IP assets researched and developed in Canada.
-Study the role of different IP licensing schemes in public-private research collaborations within the context of university technology transfer
-Study whether Canada should rebalance direct and indirect innovation incentives: preliminary comparative analysis reveals that direct funding (grants) appears to be more closely associated with patenting across peer countries than indirect support (for example, tax credits).