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Business Commentary For economic outcomes of Sidewalk Toronto we need to talk about intellectual property

Jim Hinton is a patent lawyer and principal at Own Innovation based in Waterloo, Ont., and Natalie Raffoul is a patent lawyer and managing partner of Brion Raffoul, an IP firm based in Ottawa.

Last fall The Globe and Mail revealed that Sidewalk Labs is taking steps to control the intellectual property (IP) generated through its partnership with Waterfront Toronto in the Sidewalk Toronto project. While most of the public discourse about this controversial project has focused on data privacy and governance issues with Waterfront Toronto, we need to be equally concerned with the intellectual property rights (IPRs) arising through this public-private partnership (P3) agreement.

The economic opportunity for Canada from smart cities is enormous, with Arup Consulting estimating the current value of the smart-cities segment at $1.3-trillion and growing at 16 per cent a year. If Canada wants to capitalize on smart cities and other artificial intelligence (AI) market opportunities, we need an IP strategy that allows Canada to exploit such opportunities.

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Smart cities are all about IP and data because they rely on both of these assets to make the vast array of city sensors functionally valuable. Owning the IP is critical because having access to the raw data being captured is insufficient. This raw data needs to be cleaned and, for machine-learning purposes, training data sets need to be created before the AI algorithms produce valuable insights. The transformations of the data to produce useful outputs may be patentable or these may be kept confidential as a trade secret. Such AI-related patents can be used to create proprietary access to the data. Since 2000, more than 226,000 AI-related patent applications have been filed globally – and yet Canada’s patent record is lagging in this regard.

While the suggestion that Google or Sidewalk Labs will not have exclusive access to the data may sound like a fair proposition, Sidewalk Labs can use its IP to either lock out Canadian access to that data or to render the data meaningless without ownership or use of the patented algorithms. Google, a sister company to Sidewalk, already owns a gargantuan IP portfolio, including thousands of smart-city patents. How much of that existing IP could be used to block Canadians from participating in future smart-city development, both here and abroad?

To be able to negotiate on behalf of Canadians, Waterfront Toronto needed to have expertise in IP procurement and commercialization that matches that of its “partner.” Valuable IP rights such as industrial design rights (or design patents as they are known in the United States) were not even a consideration in the Plan Development Agreement (PDA).

Under the PDA, all patentable inventions will be owned by Sidewalk Labs, except for co-created inventions. For these co-created inventions, the PDA states that ownership will be mutually agreed upon. However, any patent expert will tell you that ownership defaults to the inventors (in this case Sidewalk Labs’s engineers, who have an obligation to assign ownership to Sidewalk Labs) and so, effectively, Sidewalk Labs will hold all the patents.

Waterfront Toronto, as the public agency, must now work to assert its authority to ensure that, at the very least, any IP derived from the project will be available to all Canadians and, by extension, to all Canadian companies. When negotiating these P3 agreements, we can look to other successfully negotiated agreements. For example, the city of Louisville, Ky., created a P3 initiative that used data from sensors in asthma inhalers to create city maps of asthma risk for each neighbourhood. This initiative helped participants reduce inhaler use by 82 per cent. In this public-ownership model, the government entity owned the data and provided free access to a business to, in turn, generate a public good.

A public-ownership model for P3 agreements ensures that the government maintains control of valuable data and IP. On the other hand, a private-ownership model presents many challenges. What happens if the private company changes ownership or becomes insolvent? Who then owns the valuable data and IP? Another friendly foreign actor? A strong P3 agreement in favour of Canadians should be the price of admission to build this smart city, as this can ensure an economic return for the taxpayer.

What happens on Toronto’s waterfront is a precedent-setting project of national concern. When other Canadian cities look to develop their own smart cities, will they have to pay a multiplier to Alphabet for Google’s IP? There is a tremendous economic opportunity in building smart cities, but Waterfront Toronto’s current management of the IP locks Canadians in as rent payers to their new and smarter IP landlords.

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