Industry Committee on Nov. 1st, 2012

[Dan Harris, NDP, Scarborough Southwest, ON]

Given that it was a huge part of it, do you think that Canada should take more steps to protect its intellectual property, either through the Investment Canada Act or through other processes, when it's being looked at by foreign companies?

[Gordon Davies]

Again, we're drifting into a different topic a little bit, from my perspective.

I do believe it is important to protect the intellectual property of the country and the companies within Canada. We have certain cost barriers, and we have uncertainty within that regime today that I think causes companies to look elsewhere to ensure that their intellectual property is protected.

OpenText is an example of that, where most of our patents are filed in the U.S., although admittedly that's in part because we're an acquisitive company and many of the acquisitions were in the U.S., and there was already a robust patent regime there. There are definitely disincentives and barriers to also filing our patents within Canada.

[Dan Harris, NDP, Scarborough Southwest, ON]

Also, of course, as a software company, to bring it back to the Open Text context, software is not patentable in Canada. In Europe it's not. In the United States it is.

Does Open Text have an opinion as to which direction Canada should go?

[Gordon Davies]

We certainly believe that software should be patentable. We have a defensive strategy, and as a result of that, companies such as Open Text would typically focus more on prior art than on the filing of patents. But you're absolutely correct that it is patentable within the U.S., and we think that's an important component of protecting intellectual property in Canada as well.

[Dan Harris, NDP, Scarborough Southwest, ON]

Great. Thank you.

Monsieur Lavoie, during your opening statement you said that one of the issues your sector is facing is with respect to counterfeiting and changes that could be made at the border.

In 2007 this committee did a study on counterfeiting and came up with a large number of recommendations. Are you familiar with that study?

[Martin Lavoie]

I wasn't at CME at the time, but I am familiar with the study.

[Dan Harris, NDP, Scarborough Southwest, ON]

Has there been any consultation with Canadian Manufacturers and Exporters about actually implementing recommendations from that strategy? It has been five years now, and we've not yet seen any action from the government.

[Martin Lavoie]

Not specifically, no.

[Dan Harris, NDP, Scarborough Southwest, ON]

That goes to my next point, which is in regard to consultations on the current process. I think you indicated that the industry wasn't really consulted in a fulsome way before changes were proposed in this budget.

[Martin Lavoie]

Do you mean consulted about SR and ED?

[Dan Harris, NDP, Scarborough Southwest, ON]

Yes.

[Martin Lavoie]

You can argue that the Jenkins panel was a consultation. We did submit at the time, along with many others. We saw a bit of a disconnect between what we as an organization, and a lot of other associations, expressed and what we saw in the report. That being said, we didn't write the report. But we did express these concerns to the government, mainly about their recommendation to use a labour approach only and to make the SR and ED credit labour based. We expressed our concerns to the decision-makers about the fact that we were a capital-intensive industry.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Lavoie. I'm sorry, the time is up. Thank you very much.

Now we'll go on to the next questioner. It will be Mr. Wallace, for five minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair, and I want to thank our guests for being here today. This has been very interesting.

I know I seem to be a bit distracted, but I have a flooded basement. We're getting that resolved.

First I have a basic question, and any one of you can answer it.

A number of you have talked about harmonization of the patent system. I don't know a lot about what happens in other countries in terms of the patent system. Would you say that other countries use their patent system as a competitive advantage and that they use it as a reason for you to go there to use their patent system? When you say harmonization, does that mean us matching them? Are they matching us? Should we have a North American patent system that's all the same?

My concern about the United States is that it's a very litigious system down there. The government likes to claim that they're laissez-faire, but I think the government in the United States is fully engaged in the business down there, at all levels, much more than we are in Canada.

I would like an opinion on what you mean by harmonization and whether other countries would even be interested in that. Any of you can answer that.

[Karna Gupta]

I'll answer your question first.

To answer your first question, on whether a patent is used as a competitive advantage, it doesn't exist in isolation. It's part of the broader issues on the table. Most countries are larger than Canada in terms of market size, so in terms of attracting talent, capital, and innovation, the patent is only one piece.

They do offer an easier patenting process. When I was in the private sector, we patented in the U.S., in European countries, and in Japan before we came back to Canada to patent it, because the markets were larger, they provided the incentive, and it was easier to get done.

It's part of a broader piece, not done in isolation, that's used as a strategy to attract. There are several things at play now.

[Gordon Davies]

I would agree with that, but I guess I would expand on it, perhaps to balance it. You mentioned that the U.S. is more litigious. Part of the reason, in a defensive strategy, for filing patents and making sure that you have robust prior art is to protect yourself in that circumstance. It's undeniable that in the U.S., given the measure of litigiousness of other IP owners and the potential damages and outcomes as a consequence of that, we focus on making sure that we're particularly protected in that competitive environment.

[Mike Wallace, Conservative, Burlington, ON]

My friend, Ms. Gallant, talked about the commercialization program, and we did a study of that in another committee I'm on. Our recommendation was to make it permanent and so on, which has happened.

In your view, is taxpayers' money at risk, really? Your response was that it went so far, but we could do other things. When does it become the taxpayer's responsibility for commercialization of product, and when is it the entrepreneur's responsibility for commercialization?

[Rami Abielmona]

That's a good question. I think the taxpayers themselves.... I come from the high-tech market, so when we look at the high-tech market, Ottawa's been dubbed Silicon Valley North, and there are a lot of high-tech businesses operating in Calgary, Toronto, and Montreal. In the end, the taxpayers are most likely employed within some of these markets. Especially in Ottawa, there are a lot of SMEs coming out due to the fallout from Nortel and JDS back in the nineties and other big businesses that were collapsing in Canada. A lot of SMEs have been uprooted because of that trend.

If we're saying that the taxpayers working in the high-tech market are also forming their own SMEs, in the end, those SMEs have to be given a hand, they have to be lent a hand, so they can bring their products to market.

I think the question should just go back to how many SMEs exist across the Canadian landscape. Are we giving them a fair chance to compete on the national as well as the international stage? Our opinion is that we are not.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

How much?

[The Chair, Conservative, David Sweet]

You have ten seconds left.

[Mike Wallace, Conservative, Burlington, ON]

I just wanted to make a comment on the SR and ED. I know you've had a lot of questions on it. The envelope is not changing based on the Jenkins report, and it was a consultation. We have heard that IRAP is a good program of direct funding, and we are going to continue with that.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Wallace.

Mr. Stewart, for five minutes.

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

Thank you, Mr. Chair, and thank you to the witnesses for coming today.

It's my understanding that the envelope is changing, actually, on SR and ED and there will be some reductions, and some of that money will be put towards other means, so I'd like to continue on with questions about that area.

Last week, I believe, we had representatives from Research in Motion come before us, and when we asked them about the reduction in SR and ED benefits they said it would reduce their direct benefit by about a third. That was their statement. I'm wondering, perhaps Mr. Abielmona and Mr. Davies, if you could say, perhaps in the same terms, how this change would reduce your benefits.

[Rami Abielmona]

In our preliminary calculations, I don't think we'll see a reduction. We don't have many capital expenditures, so we don't anticipate any major reductions.

[Gordon Davies]

I'm afraid I don't have an answer to that question.