Current Intellectual Protection practices by Manufacturing firms in Canada

The OECD estimates that between 1970 and 1995 more than half of the total growth in output of the developed world resulted from innovation, and the proportion is increasing as the economy becomes ever more knowledge intensive (European Commission, 2001). Protection of intellectual property is the oldest and one of the principal instruments of innovation policy. The objective of this study is to determine how the utilisation of intellectual property rights (IPRs) by Canadian manufacturing firms is related to their characteristics, activities, competitive strategies and the industry sector in which they operate. One of the related questions, that are also addressed, is the extent to which Canadian firms patent in Canada and abroad and especially in the United States. Patents and other IPRs were once believed to provide an effective protection of inventions and innovations against imitation and thereby provide strong incentives for innovative activity. A path breaking study of appropriation of benefits from innovation in US manufacturing industries by Levin at al.(1987) has shown that in fact industry experts rarely consider patents and other IPRs to be effective means of protecting intellectual property. Other strategies, such as being first in the market, are often a more effective means to appropriate benefits from innovation. Since the protection of intellectual property is one of the cornerstones of innovation policy in all industrial countries, questions regarding the use of intellectual property and their effectiveness are now routinely included in innovation surveys conducted by statistical agencies. The concept of innovation used in these surveys covers a broad range of innovations, from the introduction of major, original, path-breaking new products or production processes to incremental improvements and introduction of new products and processes new to the firm but already in existence in Canada and/or abroad. These surveys are based on a common methodology1 and typically ask firms : “Did your firm offer new or significantly improved products (goods or services) or did your firm introduce a new or significantly improved production/manufacturing process? “ This broad definition of innovation not subject to strict objective criteria and relying on self-evaluation of surveyed firms may lead to inflated statistics of innovation incidence and originality. On the other hand it has the advantage of recognising that even though R&D activity is among the most important “inputs” in the innovation process, it is not the necessary, nor the sufficient condition for innovation to take place. Thus for example, almost one third of manufacturing firms that introduced in Canada an innovation in the 1997-1999 period did so without conducting any form of R&D. On the other hand, over 7 percent of firms that conducted R&D did not introduce any innovation. The realisation that innovation is far from being synonymous with R&D is one of the reasons behind the recent interest in innovation surveys as a means to a better understanding of how firms innovate, the information sources and strategies they use and the impact innovation has on their activities. The principle source of information used in the present study is the most recent Statistics Canada Survey of Innovation 1999 which included several questions on the protection of intellectual property. Complementary information comes from an earlier Statistics 5 Canada 1993 Survey of Innovation and Advanced Technology. Since the two surveys were addressed to different target populations and were different in several other important respects, we present a brief methodological overview in note #11 to help the reader to interpret correctly the findings of both surveys.