Dual-use technology refers to technologies that have both civilian and military applications. The Canadian government, along with its NATO allies, has committed to an increased annual defence spending target to 5% of GDP by 2035. This presents a real opportunity to support new and ongoing development of dual-use technologies in Canada and abroad.
What is dual-use technology?
Dual-use technologies may be initially developed for military purposes and then find important applications in the private sector (with examples including the Global Positioning System (GPS) and the internet), or vice versa. Dual-use technologies span a wide range of sectors, including the computer technology, energy, telecommunications, logistics, and medical fields. Emerging technologies such as quantum technologies, artificial intelligence, and cybersecurity are prime examples of dual-use technologies with vital importance for both military and civilian applications.
Increased defence spending presents opportunities for businesses developing dual-use technology
Canada has played a leading role in early research and development (R&D) relating to technologies such as AI and quantum. However, translating R&D success into successful operating companies has been a recurring challenge. Increases in both R&D and core defence spending may provide an opportunity to overcome this challenge.
The Canadian government’s defense spending commitment represents a significant increase from the approximately 1.37% of GDP in defence spending in 20241. Up to 1.5% of this spending target can be allocated towards applications such as protecting critical infrastructure, defending networks, innovating, and strengthening the defence industrial base – an annual commitment of over US$33 billion2.
Along with increased spending commitments, the Canadian government released a new defence plan that includes investment into dual-use technologies. A Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS) was announced to help advance research in emerging technologies such as artificial intelligence and quantum computing that have clear dual-use applications.
Increased defence spending will also include increased spending on procurement, from both Canadian and foreign companies developing technologies with military applications. This presents an opportunity for ongoing revenue as the government purchases dual-use technologies for the military.
Beyond the government, numerous accelerators and investors have launched programs focused on the defence sector in Canada including: the Creative Destruction Lab Defence Stream, a startup defence stream for companies developing dual-use, defence-relevant technologies3; Vimy Forge a new defence-focused incubator in Atlantic Canada; the North American Office of NATO’s Defence Innovation Accelerator for the North Atlantic (DIANA); and the Calian Ventures fund to help SMEs test, validate and scale technologies for acceptance into Canadian and allied defence procurements4.
Using IP to remain competitive when developing dual-use technologies
A major challenge for innovative companies is remaining competitive in the global marketplace. Significant investments are being made worldwide searching for breakthroughs in technologies such as AI and quantum computing. To remain competitive, innovative businesses will need to maintain their technological advantage through ongoing innovation and appropriate safeguards, both legal and technical.
For emerging technologies, intangible assets such as code, know-how and algorithms often represent a significant amount of the value of a business. Intellectual property tools are crucial to protecting these intangible assets and carving out a niche in the marketplace. Canadian companies operating in emerging technology sectors tend to lag in patent filings5. This seems to be particularly pronounced as these sectors transition to commercialization with a recent study finding that Canadian ownership of quantum-technology-related patents filed in Canada had dropped from more than 50% in 2014 to about 14% in 20246.
Developing an IP strategy early is essential to ensuring appropriate protections and safeguards are put in place to protect investments in R&D. While startups and SMEs may be resource-constrained at the early stage, funding programs are available for IP strategy development and IP filings for Canadian entities. Establishing an IP strategy early can help attract private investors and maintain a competitive advantage.
A key IP consideration is the trade-off between patent and trade secret protection. For innovations that can be kept secret (and are not reverse-engineerable), secrecy may be preferable to filing a patent application that discloses the substance of an invention. For dual-use technologies, the desire for secrecy may be heightened because of potential defence applications. This increases the importance of having rigorous trade secret (where appropriate) and IP strategies and policies in place from the early stages of development. Beyond legal protections, these strategies should also cover the physical and technological tools needed to secure crucial intangible assets such as know-how and data.
While trade secrets will always be an important part of an IP strategy for companies developing dual-use technology, patent protection can be advantageous when competing for government contracts. Government procurement rules require avoiding infringement on the IP rights of third parties, so a patent can act as a barrier to the Government sourcing technology from competitors.
Companies developing dual-use technologies will also need to navigate additional legal and technical hurdles, such as export controls and other regulatory requirements that apply to technologies with military applications. Canadian companies will need to remain vigilant when establishing partnerships and supply chain relationships to ensure they remain compliant with these additional legal regimes and maintain their trade secret protections.
Conclusion
Increases in defence sector spending mean more opportunities for businesses developing dual-use technologies. However, companies developing dual-use technologies face added legal and strategic considerations. Developing clear strategies for managing these legal and technological challenges, including a comprehensive IP strategy, is important to support the continued growth and success of the business.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.
References
- https://www.rbc.com/en/thought-leadership/economics/featured-insights/what-does-greater-defence-spending-mean-for-canadas-economy/
- https://www.nato.int/cps/en/natohq/topics_67655.htm
- https://creativedestructionlab.com/streams/defence/
- https://www.calian.com/ventures/
- https://www.lexology.com/library/detail.aspx?g=ea64fdb2-6d82-4cb3-9c44-ec0d96f0ed95
- https://www.qai.ca/2024-quantum-ecosystem-report