Is Canada losing its AI edge? Taming the Machines

Canada: an innovative AI hub

Artificial intelligence has, understandably, come to dominate the common consciousness when it comes to the future of technology. Luckily, Canada has serious artificial intelligence ambitions. With a highly skilled talent pool, acclaimed research centers like MILA, and innovation-driving superclusters like Scale AI, Canada is well on the path to becoming an AI powerhouse. [1]

In 2020, major tech players saw the immense value in Canada’s AI assets, as proven by a series of acquisitions. For example, U.S. manufacturing systems giant Rockwell Automation acquired Fiix Inc., a Canadian startup that uses AI to augment industrial equipment maintenance, for an undisclosed amount.[2] Apple acquired Inductiv Inc., an Ontario-based machine-learning company.[3] And, in a headline-grabbing deal, Silicon-valley based software company ServiceNow shelled out 230M USD to acquire Element AI, a crown jewel of the Montreal AI landscape and prolific patent applicant.[4] These transactions highlight the extent to which Canadian innovation in AI spaces has grabbed the attention of our neighbors to the south.

Clearly, a vibrant Canadian AI ecosystem has emerged, particularly in the Province of Quebec, which boasts some of the top cutting-edge research units and secondary homes of tech giants, thereby increasing their visibility in this space.[5],[6]

How should Canada protect its innovative technology?

But coming up with innovative ideas in the AI space is only part of the innovation process. Protecting the advantages afforded by the innovation becomes crucial to establishing a foothold in future markets. This is no easy task when it comes to a young and rapidly evolving field like AI. Indeed, such developments have put pressure on Canada’s intellectual property (“IP”) legislative framework to contend with the swiftly developing field. Just this past October 2020, the Canadian Intellectual Property Office released its report titled Processing Artificial Intelligence: Highlighting the Canadian Patent Landscape (the “CIPO AI Report”).[7]

Schools of thought: Patent protection or open source?

While such a rise in patent protection for AI inventions in Canada is exciting, it’s important to realize that researchers have been divided on whether patent protection is the right way to promote innovation. Indeed, there are currently two schools of thought when elaborating an IP approach to AI innovation. Some tech companies believe in open-sourcing their AI systems, which means building on intellectual precedents like the open source initiative, through which software is distributed through OSD-compliant licenses. These software licenses, particularly copyleft licenses, epitomize the principle of “paying it forward”. These licenses understand intellectual property as a joint effort, and some licenses ask that each project which is built from open source software be shared on a similar basis. While there are a wide variety of open source licenses and corresponding obligations for derived software, it is safe to say that the ethos of the project is reciprocity.

Such reciprocity, however, can clash with the concept of carving out exclusivity for a technology into which much time and effort has been invested.[8] For that reason, other tech companies prefer to rely on protection by way of some form of intellectual property rights, including trademarks, copyright, patents, trade-secrets, and contractual law (e.g., confidentiality agreements, licenses, etc.).[9]A lot of considerations feed into a tech company’s choice, and while some will operate in between exclusivity and open-sourcing, one must always keep in mind development cost.

Pioneering AI, Intelligently

It makes sense that creative efforts, such as AI projects, with a high development cost, and significant return on investment (“ROI”), would be valuable assets to companies. Indeed, estimating the impact of open source software in projects is not always an easy thing to do, and requires Canada to take a hard look at the experts who review the protections afforded to such projects. Canada should look to invest in better, ever-evolving policy and guidelines from legislative bodies which should involve AI pioneers, both within and outside academia. In a 2017 Financial Post article, Denise Deveau cites Guy Levi, a principal with a consultation group based in New Jersey who echoes this sentiment:

“‘One major issue is that AI startups typically use one or multiple open source software resources to build their solutions. But not all licence agreements are the same’, Levi notes. ‘Some don’t allow you to protect your IP; others exclude you from excluding others using the source codes; while still others allow you to get a patent, but restrict you from enforcing any claim. The problem is, most companies do not know what open source they have.”

Thankfully, Canadian policy experts and legislators are cognizant of the pressing need to tackle the issues presented by the clash of AI development projects and IP protection. The CIPO AI Report highlights this effort and acknowledges that Canada’s IP system is adopting a “whole-of-government” approach to ensure it is well equipped to support emergent and fundamentally transformative technologies.[10]

CIPO is not alone is taking steps to address the challenges posed by AI and IP. As a result of the global technological advancements in AI and machine learning, the World Intellectual Property Office (“WIPO”) launched a conversation in 2018 on AI and IP policy, seeking to determine impact of AI on all IP rights.[11]

In its third session held on November 3rd, 2020, the incoming WIPO Director-General Daren Tang, noted, rightfully, that “AI should not be looked at in silos of individual IP rights, but holistically across the entire IP system”.[12] While the WIPO seeks to proactively address the AI legal issues, the Government of Canada has taken more of a cautious approach, opining in its February 2020 WIPO submission that WIPO should focus more “on gathering evidence of the state of play in each Member State” (e.g., fact finding), and considering “the social, cultural, ethical, labour and developmental issues raised by AI’s transformational possibilities”. [13],[14]

It also stressed the wisdom of complementing other IP related initiatives being performed by UNESCO and the OECD[15], amongst other organizations.[16]It seems that CIPO is taking a step back from regulation domestically and hoping that industry practices and standards will drive how quickly AI will be implemented in the everyday lives of Canadians. Leaving creative spaces for AI research to develop is a laudable effort, but CIPO should be careful to strike while the iron is hot if it wants to have a say in how innovative AI driven solutions are protected in the future. Canadian innovators have already shown the extent of their interest, and our IP regimes should look to push the conversation and invest in collaborative efforts. However, it is hard to disagree with CIPO’s more immediate concern, namely talent and institution retention. The recent acquisition of AI innovators in Canada lend their concerns a worrying credibility.

Significant IP policy work remains to be carried out, both domestically and internationally, in order to clarify emerging legal issues. But the rate of innovation and application for IP rights is clearly increasing, so there is little time to waste if Canadians want to protect some of their most valuable intellectual assets. Staying on top of policies changes as they develop will be essential and will remain a priority for us at Durand Lawyers.

About Durand Lawyers

Durand Lawyers brings Law & Business Together. In addition to being on the board of FORPIQ, we are a law and business advisory firm specialized in intellectual property, business strategy, as well as civil and corporate law. We are uniquely positioned to help clients in emerging technology industries such as environment, SaaS, AI, and FinTech, employing both lawyers and experienced entrepreneurs to get the best possible outcomes. For more information visit our website at www.durand-lex.com.

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[1] Cutean, A., Hamoni, R., Herron, C., Schuller, K. (July 2020). Betting on Red and White: International Investment in Canadian AI. Information and Communications Technology Council. Ottawa, Canada, available at: https://www.ictc-ctic.ca/wp-content/uploads/2020/08/ICTC_Report_AI-FDI-7.2.20-ENGLISH.pdf

[2] https://financialpost.com/technology/canadian-ai-startup-fiix-inc-being-acquired-by-u-s-giant-rockwell-automation

[3] https://siliconangle.com/2020/05/27/apple-acquired-canadian-machine-learning-startup-inductiv/

[4] https://www.theglobeandmail.com/business/article-element-ai-sold-for-230-million-as-founders-saw-value-wiped-out/

[5] Montreal: why to invest in artificial intelligence, Montreal International, available at: https://www.montrealinternational.com/en/publications/greater-montreal-an-artificial-intelligence-hub/

[6] See: https://www.newswire.ca/news-releases/the-quebec-city-region-a-well-kept-secret-of-the-ai-ecosystem-on-the-national-and-international-scenes-833042649.html, as well as the IAQ Portrait of the Artificial Intelligence Ecosystem of the Greater Québec City Region (2020), available at: https://c212.net/c/link/?t=0&l=en&o=3008210-1&h=969862499&u=https%3A%2F%2Fdrive.google.com%2Ffile%2Fd%2F1RXbu8FBbGukRufiX78_G7Xc5mU7cGzhh%2Fview&a=portrait.

[7] Innovation, Science and Economic Development Canada, “Processing Artificial Intelligence: Highlighting the Canadian Patent Landscape” (October 2020), ISED, [CIPO AI Report], available online at https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr04776.html and https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr04755.html

[8] https://opensource.org/licenses

[9] https://financialpost.com/executive/patenting-intellectual-property-for-artificial-intelligence-as-complex-as-some-ai-code.

[10] CIPO AI REPORT, supra note 7, at page 43.

[11] https://www.wipo.int/pressroom/en/articles/2019/article_0017.html, https://www.wipo.int/about-ip/en/artificial_intelligence/policy.html.

[12] https://www.wipo.int/about-wipo/en/dg_tang/news/2020/news_0014.html.

[13] https://www.wipo.int/about-ip/en/artificial_intelligence/call_for_comments/pdf/ms_canada.pdf