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In disruptive quantum sector, Canada risks coming ‘third in a two-man race’ for IP

An illustration accompanying D-Wave System’s utility patent for input and output systems and devices for use with a supercomputing device, granted in October 2018.
An illustration accompanying D-Wave System’s utility patent for input and output systems and devices for use with a supercomputing device, granted in October 2018. U.S. Patent Office
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The benefits from quantum technology breakthroughs at Canadian startups and research labs could flow to foreign firms because of gaps in Canada’s approach to securing intellectual property, scientists and IP lawyers are warning.

The federal government has funded quantum science and companies, hoping advances in computing, cryptography and other applications will lead to major new economic opportunities. With the sector still in its early days, remedying shortcomings in policy and education shortcomings could help ensure the country profits from those innovations. “Harnessing IP is essential to actually take [market share] that’s proportional to [Canada’s] work in the field,” said Alexandre Daoust, a partner at Norton Rose Fulbright.

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Talking Point

Canadian holders are third in the world for quantum computing patents, but a long way behind companies and universities in the U.S. and China. As the sector around the disruptive technology continues to develop, lawyers and researchers are calling for more education, programs and incentives to help domestic investors and firms develop IP, so that the country’s early success produces economic outcomes.

Quantum covers a range of potential technologies, from dramatically faster computers capable of handling huge data sets and algorithms for better drug discovery and financial trading to new forms of encryption, more precise sensors and the creation of new, more versatile manufacturing materials.

A 2017 National Research Council study estimated Canada could take eight per cent of the global quantum market, double its traditional share in technology trades, creating an up-to-$8-billion industry by 2030. The country “is a recognized early leader in quantum,” John Power, spokesperson for then-innovation minister Navdeep Bains, told The Logic in October 2020, noting that it ”ranks third in the world for quantum computing patents.” 

However, Canada is “third in a two-man race,” said Jim Hinton, a Waterloo, Ont.-based IP lawyer. Data compiled by his firm, Own Innovation, shows more than 3,000 quantum computing patent applications were filed globally across 2019 and 2020, part of a sharp increase over the last half-decade that indicates “companies believe that the commercial opportunities … are on the horizon,” according to Hinton. 

U.S. assignees accounted for nearly half the total over the last two years, while Chinese peers submitted more than 400. The Canadian count, by contrast, was in the low double digits. U.S. technology giants IBM—long the top recipient of new U.S. patent grants—and Intel lead the global quantum computing patent field, according to Own Innovation’s data; Burnaby, B.C.-headquartered D-Wave Systems is fifth, while Vancouver-based 1QB Information Technologies, the only other Canadian organization in the top 50, is 16th.

Those two firms, along with Waterloo, Ont.-based cryptography company Isara, “make up the Canadian advantage” in quantum IP, according to Hinton. “Any one of these three companies could go under [or] be acquired, and you’re basically non-existent soon after.” In October 2020, The Globe and Mail reported that D-Wave’s valuation had dropped by nearly two-thirds after difficulties obtaining new financing. While the firm sold the world’s first commercial quantum computer in May 2011, its technology is suited to a limited set of problems. Both D-Wave and 1QBit declined to discuss their IP strategies. 

“It’s a matter of numbers,” said Fasken partner Alexandre Abecassis—the U.S. and China have more researchers and firms, and so more patent filers. But concerns about the commercialization of Canadian quantum innovation have also been expressed within the federal government. “Due to the long development times of quantum technologies, start-up and small firms may have difficulty in sustaining research activities until the technologies become mature,” states a deck prepared by the innovation department’s science programs and partnerships branch for deputy minister Simon Kennedy in December 2019. “Without incubation, Canadian firms may seek support from multinational firms which risks transferring Canadian owned intellectual property abroad.”

The innovation minister’s office did not directly answer The Logic’s questions about whether it continues to have the concerns expressed in the deck. “Given Canada’s early lead in quantum research, the country is home to some world-leading firms, with significant [IP] holdings,” said spokesperson Michael Power, noting that the government’s national IP strategy, launched in April 2018, is meant to help firms “leverage and protect their intangible assets, including in emerging areas like quantum.”  

That national strategy is part of a broad push to commercialize Canadian IP. Along with Ottawa, both Ontario and British Columbia—provinces with major quantum research hubs—are making IP part of their innovation strategies. By securing patents, companies can deter competitors from copying their products and features, or earn revenue by licensing them out.

It’s still early days in the sector, however. Canadian quantum companies are “very sensitive to IP,” said Daoust; while patents are the main form, some innovations may also be protected via industrial secrets or copyrighting code. Firms are spending to create new products and private investors are backing them in turn, but the sector remains closely tied to public-sector funding and institutions, which have the researchers and resources to advance the still-developing science. 

IP lawyers and faculty say innovations emerging from those labs are less likely to be patented, citing a variety of factors. Daoust, who works with universities, said their tech-transfer offices successfully encourage collaboration between scientists and firms. But whatever field they work in, researchers don’t always disclose their inventions to institutions, or may publish findings before filing patent applications, making IP more difficult to secure. 

“Today’s metrics don’t really incentivize protecting IP that [will] pay off in more than five years,” said Michele Mosca, a University of Waterloo professor and co-founder of its Institute for Quantum Computing. For most IP created in engineering departments, that’s a reasonable timeline—a less-polluting car part, say, can be licensed out quickly. Quantum computing requires longer horizons, but inventors should still “grab the real estate,” he said. “Even if the initial patents time out, you’ll have built on them.” 

Mosca suggested more support for filing provisional patents so researchers can seek protection while still publishing findings, and agreements in subsectors of quantum to pool assets to help protect participating firms from litigation. He praised Ottawa’s legislative changes to deter patent trolls, part of the national IP strategy.    

The IP lawyers see a need for more education about the importance of protecting innovations. There’s a “misconception” that software advances in fields like AI and quantum are “not patentable subject matter,” said Abecassis; by failing to seek protections, “we let the IP go.” Mosca, also the CEO of cybersecurity firm EvolutionQ, noted there’s a general understanding within the quantum field that some developments in cryptography and algorithmics shouldn’t be owned by any one firm.  

Hinton called for targeted measures to retain quantum companies and IP in Canada. “Universities will talk about startup spin-outs, but that’s not a competitive position with IBM, Intel and [the] Chinese companies,” he said. Such firms are “easy fodder for acquisitions, because we don’t have the market position in the traditional computing space” on which domestic firms could build their quantum businesses.

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In February 2020, the Committee on Foreign Investment in the United States gained permanent powers to review corporate deals involving critical technologies on national security grounds; quantum computing, sensing and encryption are likely to be added to that list. Power said the Investment Canada Act “provides for the review of all foreign investments, regardless of size, for national security concerns,” but did not say whether the government was considering making deals involving quantum technology subject to such scrutiny. 

This article has been updated to clarify University of Waterloo professor Michele Mosca’s comments about IP licensing.