The single most defining factor underlying the development of sustainable high-tech clusters is the ability of the local economy to support innovation and entrepreneurship which has also often described as the startup or entrepreneurial ecosystem. This is true irrespective of which cluster location is analyzed – Ottawa, Waterloo, Calgary, Montreal or San Jose / Silicon Valley. A strong ecosystem is highly collaborative and fosters innovation through the sharing of ideas and fostering partnerships and networks. The startup ecosystem can be comprised of several key elements including the presence of federal government research labs, strong university linkages to private industry, presence of major anchor technology firms, accessibility to venture capital, and availability of specialized professional and technical services. Such communities also tend to be very resilient whereby failures of individual companies like Nortel can spin-off new technology firms.
Patents or patent applications are a commonly used indicator of innovation in terms of both individual firms or industry sectors and urban economies or technology clusters. Although the majority of patents are seldom transformed into tangible or profitable products and therefore are not perfect measures of economic performance, they still provide a useful measure of the strength of the local ecosystem and innovativeness of an urban economy.
In this post, I will examine patent activity as a performance indicator for measuring the innovation strength of Canadian cities over time. The patent data are collected from two sources – the US Patent and Trademark Office (USPTO) and the Organisation for Economic Co-operation and Development (OECD).
The Canadian Intellectual Property Office does maintain a Canadian Patents Database but the database does not allow for searches by cities. Searches are only available by patent owner location by country. Nevertheless, for many advanced technology companies, selling their new ideas in the United States or in the world is critical to their sustained business growth and as such require patents to protect their investment and creativity. The USPTO and WIPO patent databases do permit searches by the city of residence of the inventor at the time of the publication.
In the case of the USPTO database, using their online search engine, I collected both the number of patents granted or issued on an annual basis starting in 2000. It should be noted that, according to USPTO’s FY 2012 performance report, it took an average of just under 3 years (34.7 months) between filing and issuance or abandonment of utility patent applications. The search criteria included the city location of the inventor as well as individual communities within the metropolitan area in order to capture all potential locations e.g. the search for inventor’s located in the Ottawa metropolitan area included not only Ottawa but also Kanata, Gatineau, Nepean etc using boolean operators. I did not make any distinction between the types of patents (e.g. utility vs design) or between government, university and commercial patents.
The following series of charts shows the annual total of patents issued for selected Canadian metropolitan areas between 2000 and 2013. The graph displays two distinct phases in the trend lines. Overall, the level of Canadian patents issued by USPTO increased moderately during the first of the first decade. For most cities like Toronto, Vancouver, Calgary and Kitchener, the annual totals declined slightly while Ottawa and Montreal experienced modest gains. Ottawa’s patent activity level does not appear to be negatively impacted by the fall of Nortel or the dot-com / Internet bubble collapse.
Since about 2006, US patent issues increased significantly on an annual basis especially since 2009. The global ‘Great Recession’ in 2008/09 and the weak post recession recovery did not negatively affect patent activity during this period (keeping in mind that there is a time lag between application and issuance of USPTO patent approvals). With the exception of Calgary which only experienced moderate year-to-year increases, the remaining selected cities all had significant gains in annual issued patents during this period. Toronto still maintained its overall dominance in patent activity which is not unexpected given the larger economic base and population of that metropolitan region. Ottawa’s patent activity level also displayed substantial increases over the last five years as did Vancouver. However, the emergence of the Kitchener-Waterloo-Cambridge region as a technology growth centre is clearly demonstrated by the exponential increases in the annual number of issued patents since the late 2000s. Indeed the Kitchener area overtook Ottawa as the second largest concentration of patent inventors in both 2012 and 2013 although the margin was relatively small (e.g.1,244 patents issued to Kitchener inventors compared to 1,232 for Ottawa in 2013). Still Kitchener’s rise as a technology growth centre is impressive when considering that the population of the metropolitan area was an estimated 505,000 in 2012 compared to 1.3 million for Ottawa-Gatineau (Statistics Canada).
The OECD patent database covers data on patent applications to the European Patent Office (EPO), USPTO and patent applications filed under the Patent Co-operation Treaty (PCT) agreements. Annual EPO and PCT patent applications are available online from the OECD data library for Statistics Canada census divisions (which are similar to counties) based on the inventor place of residence. The patent data are shown as fractional counts which captures those applications where there are more than one inventor in multiple locations. The following table summarizes the annual PCT applications from 2000 to 2011, the latest available year for selected Canadian metropolitan areas.
The OECD patent data also show that the Greater Toronto Region is still the primary source of innovation in Canada although not as dominant as for the USPTO patents. The OECD patent trends also indicate greater sensitivity to global economic conditions – for example the decline in patent applications during the Great Recession year of 2008. Ottawa and Toronto also experienced a decline in the number of patents in 2003. Ottawa has maintained a strong position as an innovation centre relative to other key Canadian cities throughout most of the last 12 years. In 2011, the number of PCT patents for Ottawa inventors even surpassed Vancouver’s total for the first time. The most noticeable shift in rankings is found, once again, in the number of Waterloo patents.
The conclusion that made from the above analysis is similar to the ones reached in the previous two Ottawa High Tech update postings. Ottawa’s strength as an innovation centre in Canada does not seem to have weakened since 2000 despite the negative economic events of the dot-com bust and Nortel collapse at the turn of the century and the financial crisis during the second half of the decade. The Kitchener region also stands out as an emerging technology cluster and growth centre.