Opening Statement to the Standing Committee on Agriculture and Agri-Food

A New Crop: Intellectual Property in Research
(Chapter 12 - September 1999 Report of the Auditor General)

Canadian Adaptation and Rural Development Fund (CARD) -
An Example of Involving Others in Governing
(Chapter 24 - November 1999 Report of the Auditor General)

Mr. Chairman, thank you for this opportunity to discuss two recent audits in Agriculture and Agri-Food Canada concerning the Canadian Adaptation and Rural Development Fund and intellectual property in research.

I have with me today Neil Maxwell, the principal responsible for our audit work at Agriculture and Agri-Food Canada.

The subjects of these two audits are seemingly different, dealing on one hand with a funding program and, on the other, the management of intellectual property. But the issues we addressed show a common challenge for Agriculture and Agri-Food Canada because both activities rely on decentralized decision making: How should the Department effectively govern and manage activities across a broad Canadian geography and still provide for local flexibility and judgment?

Let me begin my comments with the Canadian Adaptation and Rural Development Fund or, as it is widely known, CARD. This is an important element of the Department's efforts to help the agriculture and agri-food industry adapt to a greatly changed business environment. We decided to examine the provincial component of the CARD program because it represented an interesting experiment in government program delivery - the Department decided to delegate extensive decision-making authority to industry councils, which decide where funding should be directed to best serve the adaptation needs of each province.

One question was central to our work: Has the Department struck a reasonable balance between giving industry councils the freedom to make the best decisions while still respecting the public purpose of the funds? We found that, for the most part, the Department had developed an adequate framework of controls. We identified a number of good practices that allow the Department to influence and monitor the councils without placing undue control on their actions. These include:

• involvement of a federal, non-voting ex officio member of provincial councils;
• eligibility requirements whereby councils are to incorporate the objectives, principles, guidelines and criteria of the government into the council by-laws; and
• a requirement for councils to report annually on the performance of funded projects - information that is collected in a national project database.

We also highlighted areas of concern that the Department needs to resolve:

• the need to provide additional guidance to the councils and to provide a better means for councils to share experience;
• the need for a better way to ensure that parliamentarians and the public have access to performance information collected by the program;
• the need to consider and formalize a long-term strategy for its relationship with councils; and
• the need to regularly assess the capabilities of the councils.

CARD was one of 7 delegated arrangements also examined in Chapter 23 of the November 1999 report, "Involving Others in Governing: Accountability at Risk". That chapter identified a number of general concerns about such arrangements, some of which also apply to CARD. For example, CARD has not specifically required councils to set up citizen redress mechanisms.

In response to our audit of CARD, the Department noted that it was proud of the program, that it welcomed the report's recommendations and that it was committed to addressing them.

While the CARD audit looked at management issues surrounding the involvement of others in federal programs, the intellectual property audit dealt with issues within the Research Branch of the Department. Our objective was to assess the quality of its management of intellectual property. We did not look at other aspects of management in the Research Branch, or at the appropriateness of the various elements of its research program, including biotechnology research.

Federal research has been crucial to agriculture in Canada. In our report, we refer to Marquis wheat and the Shepody potato as examples of success stories that have come out of federal labs across Canada over the past hundred years. Today, the Research Branch's budget is around 250 million dollars. To conduct its research, it acquires the intellectual property of others, including patented research technologies and protected plant breeds, and in turn produces its own intellectual property.

One of our main findings is that the Branch's freedom to pursue its mandate is being challenged by its use of intellectual property developed elsewhere for which it has yet to obtain licensing rights. Should it encounter significant obstacles to obtaining those rights, the Branch may have to alter, postpone or abandon current research initiatives. The Branch currently uses about 100 technologies that have been patented by others. It appears that it makes significant use of these technologies in its research programs but, at the time of our audit, the Research Branch did not know the full extent of their use.

A second finding is that there is uncertainty within the Branch about how best to make decisions when a discovery is made. In these cases, research centres must decide whether to publish the discovery or to protect it and then license it to others.

The past ten years have seen the introduction of the Plant Breeders Rights Act and the entry of a great many new players into agricultural research. Advances are coming rapidly and whereas the Department once gave away research products, there is now a competitive market for agricultural intellectual property. The Department needs to take clear action if it is going to deal with this competitive market and preserve the role of the Research Branch in Canadian agriculture.

We concluded that a decision-making framework is needed to guide staff across Canada in decisions about intellectual property, for example in deciding which research products should be legally protected and how best to acquire the intellectual property of others. This guidance needs to be clear but still allow appropriate flexibility.

The Department responded to our report by saying it welcomed our suggestions for improvement and intends to act on them.

It is also worth noting that the Department is not alone in facing intellectual property challenges. Despite commitments made in 1996 to review its intellectual property policy, the federal government still does not have a comprehensive approach to intellectual property across departments. Work is under way on a number of components of such an approach, but the government has yet to pull these together to set clear expectations for how departments should manage intellectual property.

Mr. Chairman, we would be pleased to answer the Committee's questions.