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Report On Business To fully exploit Canadian IP, keep it tied to our innovation hubs

Karen Mazurkewich is a lead executive at MaRS Discovery District and author of the Canadian International Council's report Rights And Rents: Why Canada Must Harness its Intellectual Property Resources.

We don't design or manufacture things the way we once did. Almost anything we build out starts out on a computer – from automobiles and architecture to next-generation body tissues. It's called intellectual production and it's changing the way we think about intellectual property.

Back in 2013, I wrote a report for the Canadian International Council addressing Canada's intellectual property (IP) leakage and how Canadian startups that were IP-rich were being targeted for litigation or acquisition by overseas firms. The report detailed how our companies were being sued in U.S. courts, while Canadian startups were being scooped up in savvy M&A deals.

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But there can also be positive outcomes from the sale of our IP – when Canadian companies flourish postacquisition. While they are still the exception to the rule, they could hold the key to Canada's future.

Take the story of Alias. Coders from this Toronto-based startup once dubbed themselves the "raster blasters." They were once the digital top guns of Hollywood special effects. Alias's team was behind the 3-D rendering software that brought dinosaurs back from extinction in Jurassic Park (1992) and resank the Titanic (1997). Their tools, and their IP, were so impressive that the U.S.-based 3-D firm Autodesk acquired them in 2006.

That could have been the end of this business story – another case study illustrating the short shelf life of the typical Canadian startup that never reaches its full potential at home because its IP is coveted abroad. But rather than simply absorbing the IP and shuttering the local office, Autodesk leveraged its new Canadian asset to build a better global business.

Autodesk multiplied Alias's core research team by a factor of nine. The original posse of seven research scientists has grown to more than 60, transforming Toronto into the largest global research hub for the company. Today, Autodesk's 245-plus team is no longer devoted to just CGI special effects for the film and gaming industry.

Who could have imagined that this computer-software company would break new ground on the medical front (creating low-cost 3-D printed prosthetics for child victims of war), create apps for amateur artists and be used to help local startups in the clean-tech sector develop energy-saving products and buildings.

Autodesk's purchase of Alias has been a boon to the city of Toronto for both job growth and convergence innovation. In addition, the firm recently announced that it's relocating to the MaRS Centre (Toronto's largest innovation hub) and is planning to turn its street-level footprint into an events space and urban sandbox for 3-D creators to pursue innovative projects.

Another exception to the IP leakage pattern is Christie, a U.S. subsidiary of the Japanese firm Ushio Inc., which purchased a projection system from Ontario-based Electrohome in 2004 and proceeded to invest $40-million in the technology team. Today, Christie employs more than 1,500 people worldwide – more than half in Kitchener, Ont. – and holds 47 patents.

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There is a link, and a lesson to be learned, from these two exceptional companies. Both remained anchored in their communities because of a corporate desire to continue to locate teams near world-class researchers, next to talent pools and connected to like-minded entrepreneurs across networks. Agile, futuristic, companies cannot easily uproot and relocate their IP. Nor did they wish to.

Autodesk and Christie have taught us that another option to building walls around our IP is to build better urban districts that foster collaboration across fields of expertise. I don't think it's an exaggeration to say that such knowledge-based companies are re-engineering the economy of our cities.

Entrepreneurs enjoy interactions as well as transactions, and today's best innovation occurs at the intersection between place and people. As innovation cycles shorten, R&D strategies are becoming more closely tied to the demands of the market. Industry is seeking to forge closer ties with academics and the creators of IP. Another factor is the so-called "intrapreneural" esprit de corp. Internal entrepreneurs who work within a corporation also seek to be nimble to stay in front of innovation.

Canada's intellectual property is a valuable natural resource, but if we are to fully exploit its potential, we must find ways to keep the strategic buyers of our startups tied to our "terroir" – the unique habitat that we create within our urban innovation hubs.

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