Industry Committee on Nov. 1st, 2012

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

You don't have an answer. So you haven't done any calculations on how SR and ED is going to affect one of the biggest companies in Canada?

[Gordon Davies]

It may very well be the case that we've done a calculation on it, but I don't have that answer.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

You don't have it, okay.

If there was a reduction, do you think that would reduce your investment in R and D?

[Rami Abielmona]

From our perspective, it would. If there was a reduction, we would decrease our investment in R and D. We are 16 employees at Larus, as opposed to some of the larger companies, so we have to be very judicious and cautious with our cashflow management. We heavily invest in R and D. We've done so since 2006-07, and we are seeing the fruits of our investments. SR and ED is a major player for our R and D investments.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Can I just follow up? So it's a cut from 20% to 15%, but you're saying that's...?

[Rami Abielmona]

Yes, from our preliminary calculations, it doesn't impact us much.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Okay.

Mr. Davies, through the chair, if you do eventually calculate a reduction, do you think that would affect your R and D investment?

[Gordon Davies]

Certainly, it goes into the calculation, but I'm not sure it would affect our investment in R and D, no.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

That's interesting. So you approve the changes?

[Gordon Davies]

We're in a slightly different circumstance. We're a much larger company. We have over $1.2 billion in revenue. We have a tremendous number of R and D engineers, both in Canada and elsewhere, so, yes, it's an important component of it. But I wouldn't be prepared to say today that this would result in a decrease.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you.

We've talked about standardization of patents. The argument has been that if we're standardized it will make us attractive for investment and for people to register their patents here. My question is, why don't we go beyond what we see internationally? Why don't we have longer patent protection in Canada? If you're following a rationale that the longer the patent, the more R and D investment you have, wouldn't it be a good idea to have longer patent protection here in Canada?

I can open that up to whoever would like to answer.

[Karna Gupta]

I think longer is one element of it. It's the other costs that go with it that are important. It's not only the filing process and going through the searches, but also the length of the patent. The big piece that also ties in with this is the enforceability. If you are going to have a patent, you should be able to enforce it if there is an infringement. So that process needs to be dealt with as well. You can't say having your patent length increased from 17 to 20 or 25 years is going to draw an investment. There are other issues that play into it.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

I'm a little confused because we've been hearing, basically across the panel, that we need longer patent times, and now you are saying that patent time doesn't matter that much.

[Karna Gupta]

It does, but it is one of many things. Only changing one variable may not be sufficient or attractive for a lot of companies. When you look at companies that are filing patents in Canada, they have Canadian indigenous companies that are filing patents here, and you also have the multinationals that are in the centres everywhere else filing patents in Canada. So the issues are slightly different. One element doesn't necessarily create a wholesale draw.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

In the hierarchy of elements, where would you put it? Is it near the top or near the bottom?

[Karna Gupta]

I think it is an important one. It's a big variable.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

I would like to ask the other witnesses if they agree with Mr. Gupta's statement.

[A witness]

I certainly agree, yes.

[Rami Abielmona]

I agree, but I think IP licensing, which was brought up by one of the other witnesses, is very important. I didn't realize that out of, I think it was, 100 patents in universities, only a few of them were actually licensed. If we can put in some measures to help the licensing to third parties, that would probably be of higher importance than lengthening the patent.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Abielmona and Mr. Stewart.

Now Mr. McColeman for five minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Chair, and thank you to the witnesses for being here.

Mr. Gupta, you made three points. On the first part, on the commercialization front—as a context for this—admittedly, we could always be better. We can always do better than we are currently doing. That's simply part of the way the business world works.

As a country, when we get the ranking of people like Forbes magazine saying we're the best country in the world to invest in right now, and the OECD and the IMF comments about Canada.... Relative to your comments about commercialization, how does that square?

[Karna Gupta]

Let me answer that from two points.

Given the economic turmoil that's currently playing havoc in the world, Canada's rank and its strengths show it is a good place to invest and is a safe place to come and build your operation.

By the same token, there are a couple of other statistics we need to be mindful of. If we are talking about the universities, if you look at the total patent and royalty revenues in Canada, the university side has only generated 1.14% of it, to be exact, based on a study by The Canadian Institute, whereas in the U.S. that number stacks around 5% and 6%. So there are some significant disconnects we're still dealing with that we need to correct in terms of the patent regime, to attract more talent and innovation into the country.

[Phil McColeman, Conservative, Brant, ON]

Good point, and thank you for saying that.

This has been one of the channels I have been asking regular questions on. I have a specific interest in post-secondary education and how we're adapting to be able to help move from the lab to commercialization. I believe you are right; I think we have a big job to do in terms of making sure the post-secondary institutions get it right.

There's a whole variety of models that are used by post-secondary right now, in terms of moving toward commercialization.

The other point I wanted to raise concerns what you said about the need to speed up the process, that we're laggards in that capacity. You mentioned the U.S. having a two-year to three-year timeframe. In your opinion, what would be the fastest possible process to use? Should we emulate the United States? Should we be developing our own that is speedier than that? What is your opinion on that?

[Karna Gupta]

Synchronizing with the U.S., not in terms of exact copying but from a timeframe point of view, is a good aspirational goal to have. It cuts our timing by half. Currently, we are sitting between five and seven years, compared with their two to three years.

I think it would be a good aspirational goal that we should have to reduce that timeframe. It does help the inventor, not only from a patenting point of view, but also from the point of view of going down from a commercialization process, and also managing the infringement process.

It is a good goal to have. Whether the exact laws and everything needs to be the same, I don't know, but it is a good aspirational goal from a timeframe point of view.

[Phil McColeman, Conservative, Brant, ON]

When you look at our competitiveness in terms of our IP and patent regimes, what other things could we do to have a more competitive advantage?