Industry Committee on Oct. 18th, 2012

[Diane Lank]

Not really. We were not faced with piracy or the issues Mr. Kee is faced with.

I think an IP office might be helpful in a variety of ways if it were given a broad mandate.

[Dan Harris, NDP, Scarborough Southwest, ON]

Great.

One thing that was mentioned earlier was government funding of initial patent filing. How strongly do you feel about this? How much do you think this would actually help start-ups?

The education component you were talking about is certainly critical. Anybody going into business school or engineering who might be likely to start up a business or go to workshops should find out about that stuff.

Do you think that's the right role for government to play?

[The Chair, Conservative, David Sweet]

Be as brief as possible, please.

[Diane Lank]

When our company was 5 or 10 people, there would not have been the $8,000, $10,000, or $12,000 sitting around to file for a patent. It's a tough question because I know we like free enterprise, but some way of encouraging the start-ups to file for the first patent might be very useful.

[The Chair, Conservative, David Sweet]

Thank you very much, Madam Lank and Mr. Harris.

Now we go on to Mr. Norlock for five minutes.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you, Mr. Chair, and through you to our witnesses, thank you for appearing today.

My background is not in anything to do with IT. My seven-year-old grandchildren, who got an iPad for Christmas, can beat me at most games because I don't play them, but law enforcement is my background, so I'd like to talk about piracy and what the government can do about it.

I'm on the public safety and national security committee. We found that extension cords, and all those similar things that you can get at the flea market really cheap, and in some cases even have the CSA mark on them, are actually counterfeit. We further learned from expert witnesses that it's actually organized crime behind most of that.

Would that be a safe assumption to make in your business, sir, or is this sort of entrepreneurial from the pirate side of things?

[Jason Kee]

I think it's both. Certainly there is an organized crime element to it, especially when it comes down to the modchips or the physical components, where the organization of a business that's operating in illegal trade is, by definition, organized crime. The online elements tend to be less organized crime and more entrepreneurial. It's basically the hackers who also obtain the first copy, maybe even a pre-release copy of the game, which they'll distribute online. They're actually distributing it for credibility within their own hacker community as opposed to doing it with the commercial gain in mind. Organized crime typically isn't that interested in that element of things, so it tends to be more of an enthusiast that may start the ball rolling.

Organized crime comes into play when they find a way of exploiting that circumstance to commercialize it, to make money for themselves. That's when you tend to see organized crime step in.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Would a reasonable enforcement regime, from an anti-piracy perspective, and I think that's included in this bill, be advantageous for your industry?

[Jason Kee]

Absolutely.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Ms. Lank, I'm surprised a lawyer would be surprised at the litigious attitude of the United States. From my background in law enforcement, it doesn't matter how good the law is; you can always hire somebody who, if they're good enough and smart enough in the legal industry, can get you off. I don't think anyone should be surprised if they do business in the United States, whether it's in agriculture or softwood lumber, that they're going to be taking you to court, because it's from a business perspective. They hire a pantheon and the bigger the company, the larger the legal department. They hire these guys to put little guys like you out of business. The good thing is that we have good guys like you to help stop that.

When I look at legislation, I always look at it from a regulatory perspective. I wrote down a note down as you were talking: regulation versus strangulation. At what point do we make enough rules that they actually stifle innovation? Are we anywhere near that? Does the proposed legislation stand a chance of strangulation? You never want to create a regulatory regime that actually doesn't allow people with good, new ideas. I'm thinking of patents and those other things. Most lawyers I know in the criminal field say patent lawyers are the rich guys on the block. At what point do we really stifle innovation with regulation?

[Diane Lank]

With that, I want to emphasize that I'm not a patent lawyer, so I'm not one of the rich guys on the block.

We have not faced any stifling at this point with any regulatory regime that I can think of offhand in Canada, be it IP related or not, and we have not found that in the IP area in the U.S. There are some other tweaks that we sometimes struggle with. It's a very fine line. It's important when regulations are issued that they are clear and easy to understand. You shouldn't have to go out and hire an outside law firm to tell you what they say. I think that clarity is of utmost importance.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Great.

Mr. Kee, I just attended a graduation. It is usually held around Thanksgiving because all the recent grads are home. Some of them are actually going into the industry you're talking about. They're heading down to Kitchener-Waterloo and those places. We have a business incubator in my riding patterned after Kitchener-Waterloo but for an eclectic mix of businesses. From your perspective, regulation versus strangulation, are you there yet? From the young person who wants to get involved in creating that new game, I call it the Slaughterhouse Five game, does regulation enter into that at all?

[The Chair, Conservative, David Sweet]

Mr. Kee, before you answer, I want to advise Mr. Norlock that he's into the next round of time, and Mr. Lake is giving him whatever time he needs, but the clock is running.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Okay.

[The Chair, Conservative, David Sweet]

Go ahead.

[Jason Kee]

As with all things, I think a careful balance is important. I agree that in terms of the issue of clarity, it's critically important. It's also making sure that you have smart regulation. When there's a policy objective you're attempting to obtain, you're attempting to obtain it to be, again, as minimally invasive as possible.

In the specific elements of intellectual property, there are areas where different companies will have different points of view. I certainly see the patent area would be one. I can say that I know companies on both sides of the equation. When it comes to business method patents, it depends on what drives their business. From the small start-up perspective, which is really the kind of companies that you're talking about here, frankly any regulation is seen as invasive, anything that is seen as stopping them from doing what they want to do. Part of functioning in a civilized society is that you learn to adapt to that. In my view there are a couple of regulations specifically that are potentially challenging. I know the business community has had some challenges with the prospective anti-spam bill in terms of it being very wide in its scope. There may be some issues there, but the regulations are still being hammered out.

Generally speaking, though, we haven't reached the point where Canada has become unpopular as a destination to establish a business.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much.

Mr. Wallace mentioned his business. I'm dealing with a local business. I'm not going to mention the particular product because it will identify this fellow who is inventing something totally different. He says there's no way he will get a patent because all that would do is tell his competitors where he's going. He told me that they always try to have a new product. They know they're going to be good for two years. By the time competitors figure out how they did it, they're on to a new product.

The reason I mention this is that I figure that is what the electronics industry has been doing all along. I grew up in an era of eight-track tapes, which came from reel-to-reel tapes, and look what we have today. I have a friend who says this is all a plan. What I'm trying to say is that I believe in both of your industries. As soon as you have the product that you want, do you not immediately—like Apple—know what's coming up next? From a governance perspective, you never want to stifle that by making the regime too strict, yet you want to protect those people who have spent a lot of research and development dollars to get where they are.

Canada is recognized as one of the countries that spends the most per capita on R and D, and yet as I tell high school students, using their vernacular, we suck at commercialization of that. That's what this government is trying to do so, from your perspective, how do we do that? Maybe you could take a minute each to say how we should use those research and development dollars that everybody wants to make sure we get the kind of commercialization that actually will drive our economy and give my grandchildren a place to work.

[The Chair, Conservative, David Sweet]

How about 35 seconds each?

[Diane Lank]

My response would be very short: encourage universities to tech-transfer to companies like ours at a reasonable price.

[Jason Kee]

I agree, and I put an emphasis on any kind of funding, be it tax credits or direct funding, for the commercialization element of it, as opposed to pure research and development. Pure R and D is important, but it shouldn't necessarily have the lion's share of the funding.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you.

Now we move on to Madam LeBlanc for five minutes.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you, Mr. Chair.

I have just found out that Bill C-14 on interprovincial trade is included in the omnibus budget implementation bill.

Do you feel that the interprovincial trade bill should be studied separately?

I was also wondering whether your federal-provincial businesses are affected by interprovincial trade matters.

[Diane Lank]

I'm going to plead ignorance.

[Jason Kee]

While certainly there's an interprovincial component to our business, I'm just not sufficiently familiar with the legislation to be able to comment, unfortunately.