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Toronto's eastern waterfront is seen in this undated handout photo.HO, Sidewalk Labs/THE CANADIAN PRESS

Canadian governments and businesses stand to lose intellectual-property and economic benefits from Sidewalk Labs’ proposed “smart city” development in Toronto, IP experts say.

A new document obtained by The Globe and Mail asks potential building-design partners to hand over all rights to their designs' intellectual property – and with it, the potential to further commercialize that work on subsequent projects worldwide – to Sidewalk Labs. The company is a division of Alphabet Inc., the parent of Google, and is focused on using technology and data to improve urban planning.

Sidewalk has formed a partnership with Waterfront Toronto, a public agency representing all three levels of government, to spearhead the “Quayside" smart-neighbourhood project, a 12-acre site on Toronto’s eastern waterfront. But some prominent IP experts warn that Waterfront Toronto is not fighting hard enough to ensure that Toronto, Ontario and Canada get a fair share of the rights to Quayside’s innovations.

The project is intended to be a neighbourhood with advanced technology-- for instance, using sensors to capture information about users' activities -- which means that intellectual property is a crucial part of its value. To some, that value could be enormous as cities around the world make better use of data in urban planning. Sidewalk Labs envisions countless possibilities, from robotic waste-sorting systems to predictive heat-and-electricity-use programs.

Everything from the design of Quayside’s buildings, to the unique ways it collects data, to the further innovations that could be developed by harnessing so much data, has the potential to generate IP that could be licensed globally – or become the source of further innovation by Canadian companies.

Released last month, a “plan development agreement” between Sidewalk and Waterfront Toronto indicated numerous ways in which Waterfront Toronto and the many people it represents could get a stake in the project’s IP. The agreement includes language suggesting Waterfront Toronto could have a right to IP from the project simply by offering its land as a test bed for Sidewalk.

But in the design-procurement document obtained this week by The Globe, Sidewalk is already asking potential consultants to hand over any IP that’s developed to the Alphabet-owned company – and in cases where that’s not possible, to give Sidewalk an exclusive, royalty-free, worldwide licence to use it.

The design-procurement document

Here are two excerpts from the document.

George Takach, a senior partner with McCarthy Tétrault LLP in Toronto who has been advising Waterfront Toronto on IP issues, said that the new document doesn’t conflict with the previous public agreement with Sidewalk Labs. He said Waterfront is satisfied with the current IP arrangement, which was drafted by the government agency.

Mr. Takach said that many of the matters of IP would be firmed up once final agreements to go forward with Quayside are signed. “The real question about what happens to that IP, who gets to own it, use it, make money from it … will be determined later. But retroactively, they’ll apply to all the IP that’s been developed.” Sidewalk declined to comment independently, referring The Globe to Waterfront Toronto.

Other IP experts who have seen the agreements are more skeptical. Ottawa-based patent lawyer Natalie Raffoul said that the language used between the two documents was starkly different. The confidential procurement document strongly asserted Sidewalk’s IP ownership, she said, but because the public plan development agreement puts many IP decisions off until further agreements, its vagueness could risk future IP ownership possibilities for the government agency.

Ms. Raffoul regularly works with design patents and said that Canada could stand to lose a great deal of potential IP income with Sidewalk having full ownership over its project’s designs. “Sidewalk has made it very clear that they own all the design” in the procurement document, she said. “The taxpayer won’t derive any benefit.”

While there is nothing nefarious about the document itself, said Waterloo IP lawyer Jim Hinton, it reveals that Waterfront Toronto needs to step up and assert itself as a partner in the project to get a cut of IP rights.

“The governments need to be [saying], … ‘We’re a partner, a co-investor – we want to be paid out when this is implemented in Singapore or wherever else this will be done.’”

Partnering with homegrown talent is an important first step, Mr. Hinton continued: “Waterfront Toronto needs to be sophisticated enough to realize that they need to work very closely with tech CEOs who understand where they can build markets from this and commercialize opportunities."

Presented with details from the design-procurement document, the developer Julie Di Lorenzo, who resigned from Waterfront Toronto’s board this summer over frustration that it was “relinquishing our voice to Sidewalk Labs,” said the document’s language “is completely inconsistent” with Sidewalk Toronto’s assertions that local businesses will share in the project’s opportunities.

“This is saying, ‘Give me what you have and it becomes mine,’ ” she says. “If you ask people to relinquish their creative work, that’s not conducive to innovation and collaboration.” She also questioned the fact that the procurement document was issued by Sidewalk Labs alone. “I don’t understand how that cannot have Waterfront Toronto participating.”

Jim Balsillie, the smartphone pioneer who became one of Canada’s most prolific commercializers of IP during his tenure co-leading Research in Motion Ltd. (now known as BlackBerry Ltd.), said he found the IP revelations in the design-procurement document troubling.

“Here we have Google systemically building their IP and data assets by doing cartwheels around the incompetent Waterfront Toronto board,” Mr. Balsillie wrote in an e-mail. "… It’s embarrassing that the most valuable piece of land in our biggest city is handled by people with no experience in IP and data commercialization. Welcome to Canada’s smart-city strategy.”

Mr. Takach said that Waterfront Toronto did, in fact, have a long-term plan for Quayside-generated IP, including for commercializing, subject to further agreements – but admitted that building its own portfolio of IP patents was not part of its strategy.

“What we want to make sure is that the public is reasonably compensated for the technology that gets developed and gets tested at Quayside and that’s very expressly in [the plan development agreement]," Mr. Takach said. “We’re going to be getting recognition and compensation for our participation as a testbed, even though another party is bringing technology.”

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