Industry Committee on Aug. 7th, 2009

[Brian Masse, NDP, Windsor West, ON]

But do they go to Ericsson to get that, or do they go to Nortel?

[Richard Corley]

No, they go to Nortel.

[Brian Masse, NDP, Windsor West, ON]

This is almost like how cab licensing is done.

[Mark Henderson]

We don't become a licensee. We get to use the technology but--

[Richard Corley]

Nortel retains the patent, and all that Ericsson has is the ability to use the patented technology, and Nortel is free to sell that, to licence it to as many other people as it wants, but controls that patent in the future.

[Brian Masse, NDP, Windsor West, ON]

The problem, I guess, for someone else then is that now you have all the scientists, engineers, research labs, and all the expertise to expand the technology, which is exclusive then to you. You don't have to share that with someone else who goes and gets a licence from Nortel. Is that correct or incorrect?

[Richard Corley]

The nature of patents and the whole purpose of the patent system is to have sufficient disclosure in the patent itself that others who are skilled in the art can take that information from the patent and make use of it.

[Brian Masse, NDP, Windsor West, ON]

To answer my question, though, you now have all the employees and the infrastructure that has created the LTE, and if RIM or somebody a year later, company X, goes to Nortel to get that, they can only get the original patent, and you would have any advancements past that because you have the rest of the infrastructure that has now been passed off since that time, and you have no obligation to provide any of that back to the new entrant.

[Mark Henderson]

After the acquisition is complete and the employees are part of Ericsson, if new patents are developed they will be Ericsson patents.

[Brian Masse, NDP, Windsor West, ON]

I think that's what I'm trying to clear here. I don't want the interpretation to be out there that later on, a year later, somebody else can simply pick up this technology right away and be in the market. This is really high stakes, because what you're getting, just as important as the current technology information, is the research and development of the minds of those employees who have created that.

[Mark Henderson]

Exactly. And I think there was a valid comment earlier that we have to understand that these technologies, LTE included, are based on open standards. It's why these patents are openly licensed. It's not just Ericsson that is developing LTE; there are many vendors out there that are competing. This is the global telecommunications market for the world.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Henderson and Mr. Masse.

Madam Coady.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much.

Thank you for joining us here today. We know of the good work that Ericsson does do in the country. Thank you for taking the time to come visit us today.

I have just a few questions around the process of how this all transpired. Were you engaged in discussions with Nortel, prior to the stalking horse, for the CDMA business or for the LTE assets?

[Richard Corley]

Ericsson is and has been involved in ongoing discussions with many parties, but it's subject to confidentiality and non-disclosure agreements.

Within the context of the stalking horse bid, it is a matter of public record that Ericsson, together with two other parties, was involved in the auction process and complied with the court-mandated requirements to complete the auction to maximize the value of the Nortel assets.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Did you have concerns around this process, in particular the non-disclosure agreements or anything of that nature, leading into the stalking horse bid?

[Mark Henderson]

Not that I am aware of. I mean, there was a solid process put in place. Obviously it was a very closely monitored activity in both the U.S. and Canadian courts.

We were one of a few companies that complied with all the agreements that had to be signed to participate in the auction, and that's the way the process was run.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay.

Going back to Nortel, they've worked with hundreds, if not thousands, of companies in the Canadian innovation system--if I could call it a system--offering both technical as well as management expertise and knowledge. Is it your intention that you will follow through on some of that kind of activity?

[Mark Henderson]

Again, I can talk about what we have done here over the many years we've been in the market—the jobs we've created, the innovation, the billions of dollars that have been invested in innovation here in Canada, the affiliations with the universities, the community service that we've done. Of course the focus is to grow all of that, but I think our past speaks for itself, and it bodes well for what we intend to do here in the future.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you.

We heard this morning from Nortel about the future offerings they may have, including one in short order, within the next six or eight months. Are you planning to participate in future offerings of Nortel assets or patents?

[Mark Henderson]

I won't comment on any particular asset, but any asset that we feel is complementary and advantageous for us to look at, we will look at.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I want to move on to the LTE assets and the patents around those assets. I think my colleague was asking some very interesting questions about patent improvements and how you're going to move forward on those patent improvements. Of course you have the employees who are driving those, and one of the key values here is those employees.

You purchased both the CDMA business as well as the LTE assets. Do you see one as being more valuable than the other? Do you have anything in the process that you think will drive this forward in terms of patent improvement?

[Mark Henderson]

CDMA, as I think we discussed, is something that's existing in the market and is maturing. It's a technology that needs to be maintained, because it is a large telecommunications service, especially in North America.

So those patents are there, they're done, and I don't think there's work to do on patent improvements when it comes to CDMA technology. For LTE, again, I'm maybe not the patent expert, but when a patent is registered, a patent is a patent. It stays a patent, and the patent doesn't change until someone makes a new patent.

So if we are licensing the use of those patents on a non-exclusive basis, certainly any other company is capable of doing the same. If we have that competence and expertise within Ericsson, which is really important to us--we spend so much on LTE, this is such a great addition to that global research workforce, and it's based here--then if new patents are created, of course they would be registered under Ericsson.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Henderson and Madam Coady.

Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair, and thank you, witnesses, for appearing before us on what is proving to be a somewhat complex file. You've certainly shed light on many of the mysteries that surround it.

I have a line of questioning, but first, in your last round with Ms. Coady you said that you would be possibly bidding on some assets in the future. We understood from RIM that you had to wait a year for that. Is that not the case?

[Richard Corley]

It's my understanding that there is no such restriction that is applicable, so we obviously don't have any knowledge of whatever arrangements may have been offered to RIM.