Patents are a key measure of a country's ability to turn research into viable products, and Canada is slipping.
Per capita patent filings in Canada have been on a steady decline since 2000, according to a study of more than one million applications to the Canadian Intellectual Property Office by the C.D. Howe Institute.
The overall number of patent applications peaked at more than 41,000 a year in 2007, but has fallen in the years since to 39,000 a year in 2012.
Canada's patenting record shows the country is "struggling with the commercialization aspect of the innovation process," according to the 13-page report, Measuring Innovation in Canada: The Tale Told by Patent Applications, being released Friday.
The authors – Robbie Brydon, Nicholas Chesterley, Benjamin Dachis and Aaron Jacobs – said the results suggest Canada should lower taxes on revenue from intellectual property to help spur commercialization.
"This policy could encourage Canadians to more energetically develop commercial applications for their innovation in Canada," the report said.
Ontario and Alberta are the top patent performers, recording 150 and 140 patent applications per million people respectively in 2012. Atlantic Canada trails the country with just 39 per million.
Among industry sectors, the report identifies the technology sector, construction and utilities as strong patent performers. The weakest performers were pharmaceutical and medical equipment manufacturers.
Another study released this week by the University of Calgary's School of Public Policy makes the case that Canadian tax breaks for research and development are already too generous.
The study estimates that Canada provides a "subsidy rate" of more than 30 per cent for R&D expenditures – one of just five developed countries with "user rate" of more than 25 per cent.
"Canada appears to be at risk of excessively subsidizing R&D investment," the 44-page study concludes, based on a comparison to other member-countries of the Organization for Economic Co-operation and Development.
"At these rates, the cost of intervention could easily exceed the benefits."
The report also recommends a uniform R&D tax rate, regardless of company size. In Canada, small companies get a refundable credit of up to 35 per cent. Larger companies get a 15 per cent credit.
Federal and provincial R&D tax breaks cost as much as $5-billion a year. Tax credits make up the bulk of the government's contribution to R&D in Canada.