Patents and the Crown: Building Business Infrastructure "Businessesin Canadaplanned to spend $15.

6 billion on industrial research and developmentin 201I. That isfive per cent higher than the $11.9 billion they had planned to spend in 2010, but still below the $16.8 billion they spentin 2007"

. Canadian firmsplanned spend to moreon R&D in 201 : Spending I relative GDPdeclining, to lagsother OECDcountriesBy CBCNews- Posted: 9, 20111l:24AM ET,LastUpdated: Dec Dec ; 9 .20 1 112:33 M E T P
Canadastill has not recovered from Nortel. Nortel was a world leaderin telecommunications it put and Canadaon the map. So much so that Alcatel-Lucent,Cisco,Microsoft, RIM and Nokia are amongthe few companies that have bid for patentsheld by the former telecomgiant. Around Nortel, other companies grew. TheseincludedBridgework Networks, and The first time I realizedthe size of Nortel was when I was in Jamaica a young lad. I turned over the as phonemy Grandmother had because was similar to the one I had at home. It was a Northern Telecom it phone.However,that wasjust the beginning. If one looks at Norlel in FebruaryZOOS, ot?would find that the companystill employedover 32,000 peopleworldwide.This included,q.800 employees Canada in Nortel had and I1,900 in the United States. a significantpresence Europe!1(4iddle in East,Africa, the Caribbean, and Latin America. They also deliverednetwork infrastructure and communication acrossAsia including services customers to Mainland_C[iq4 Hong Kong, Taiwan, SouthKorea,Japan,Singapore, Thailand,Malaysia,India, Pakis,tanf,{rittlf;liu, N"* Zealand,and Turkey. Nortel was a nationaltechnology championand they spenilmore on Research and Development than any other firm in the country. Yet, evenwhen they were around,Canadadid not spendas much on Research and Development most G8 countries. as A paft of that comesfrom the fact that we do not spenda lot of money on defencespending. The US developed SpaceShuttleProgramme the and the Internet,in part, because they were looking for military solutions.Nuclear and Solar EnergyDevelopment can be tracedback to military projects;so can most rocket,missile and other projectileprojects. Canadausedto spenda lot of money atff"oitlt on technological development. During the 1950's,and 1960's,governmental actionwas responsible a lot of technological for development. example, For the ShuttleProgramme usedCanadian Expertise. did the F-14,F-15,F-16 and F-18 fighterjets. They are So in fact relatedto onejetfthe AVRO Arrow. The Arrow actuallywas the basisfor many Westernjets. The Concorde- A British and FrenchCo-Operative Venture- also usedCanadian expertise. Cancelledby the just as Nortel developedour DiefenbakerGovemment,the AVRO Arrow pushedaerospace knowledge, telecommunication expertise. So today, Canadiancompanies and governments not doing the Research are and Development requiredto maintain our societyand level of wealth.And the evidenceis clear,Canadian EconomicEfficiency is at historic lows. Sincethe mid 90's, the FederalGovernmentindicat&hat it would lower corporate taxesto increase EconomicEfficiency. Yet, after cuts in the GST, individual and corporate taxes,we have not seenmuch of a movement the numbers. fact,on Jan. 19 201l, CTV News repofted, an article in In in entitled "Strong loonie, low productivity restraining recovery", that the Bank of CanadaGovernor Carney said, "We havenot madethe productivity gainsthat we would needin orderto retainmarket share,let alone sain market share."

While the Bank of Canadanoted in a statementthat"'the cumulative fficts of the persistent strength in the Canadian dollar and Canada'spoor relative productivity performance ore restraining this recovery in net exports and contributing to a widening of Canada'scurrenl account deficit to a 2}-year high,' the bank said, reiterating the statementsissuedin its interest rate announcement one day earlier." With all of that being said,what are the policy consequences? What can a Liberal Governmentdo with this information?Simply put, Canadais not developingpatents and useful IntellectualProperty.My suggestion that the Crown developsthat type of Property. is Like the Royal CanadianMint (RCM), the Crown could createa corporationthat creates valuable property.Unlike the RCM, insteadof coins,IntellectualPropertywould be created. However,RCM model is a good example.For the RCM cog[rqctsitself to the Canadian Governments, Foreign Governments and PrivateMarket Entities.ffientity would do somethingsimilar. But beforewe go on, let us put someflesh on theseideas.For now, this new entity will be calledthe Royal CanadianIntellectualPropertyDevelopment (RCIPDO). The RCIPDO would have Organization principles:to developCanadianEconomicActivity throughresearchrand do so without costingthe two to tax payer.antr4lring. Consequently, while any development costswould be fronted by the FederalGovernment,it would be recovered throughthe provision of services: Throughthe creationof IntellectualProperty.For example, RIM has severalthousandpatents. Thosepatentshavea life time of between5 and 50 years.These patentsprovide income because they can be "lent out" or "rentedout" through licensingagreements. As we have seenthrough a variety of lawsuits,patents preciousand valuable. are For without patents, companies cannotmakeproducts. Samsung found that its productswere removed, for a timerr from Australia and Germany.This occurredwhen Apple suedthem for copying their product line. Something similar hashappened RIM, Microsoftand IBM. This is why a numberof technology to companies formed a consortiumto buy Nortel's last ma.iorasset: approximately 6,000 patentsand patent appficationsencompassing technologies suchas wireless,wireless4G, datanetworking,optical, voice, Internet,and semiconductors. patents The were sold for $4.5 billion to a consortiumincluding Apple, EMC, Ericsson,Microsoft, Research Motion, and Sony.So why not developpatentsso that companies In basedin Canada, foreign or domestic,can havea leg up. If this is the case,our domesticeconomywill havea leg up. So how would it work? Most of our tradedealsallow for fair deferential treatment. long as all As companies have a chanceto gain underthoseaffangements. Consequently, could allow companies one with "substantialoperations"in Canada buy a licensefor cost or a minor profit. While foreign to companies would be expected pay the "full marketcost" for licensingarrangements. one can see, to As companies would make a decisionbasedon a "cost benefitanalysis".In somecases, companylike a Ericsson,Apple or Airbus might set up manufacturing development or operations Canada gain in to access relevantIntellectualProperty.While in othercases, to firms basedin Europe,Brazil, China, Russia and India might just pay to useCanadianIntellectualProperty.They would pay for our scientists do to

research. would for orr i'ffiiry$to pay They

workin a great country.

This is importantbecause, a country,we needmore economicinfrastructure. as This is the way that Canadacan developit, sinceour presentsystemof developingintellectualpropertyis not doing a great job. Universitiesare not designed market,developand build productsor companies, to while companies as noted earlierare not putting the necessary dollars into Research and Development. Canada- relativeto the US - has fewer angel investors, venturecapitalists and startfund dollars.So, it is not a surprisethat our country has a lower economicefficiency when compared our G8 partners. Nor, is it a surprisethat to China is going to graduate more per capitaengineers than any other country in the G8. As a country we needto do more.

Furthermore, this idea of a Crown Corporation, a non-share or legal entity, which developsintellectual propertyhasother advantages. Firstly, unlike tax breaksor grants,the useofintellectual properly is not short term in nature.Patents the medicalfield, for example,havea minimum of a twenty year life span. in plant is in a particularareafor twenty years,it is reasonable that plant to developspin off If a for industries.For example,Canada'sauto part manufacturing sectordevelopedin part because GM, Ford and Chryslerhad plantsin SouthernOntario and Southern Or put differently, Magna's Quebec. development was enhanced having three hugecar manufacturers its backyard.So attracting by in companies Canadawith long term incentivesprovidesa hugeeconomicbust. to However, lookatthesaleofStelcotoAmericanSteel. In,2007U.S.Steelpaid$1.1 billionforsomeof 4,o' StelcoCorpoj4lion facilities.At the time, Stelcowas going throughthe Bankruptcyprocess, its assets so were likel)lrftlblb'than selling price. Besides value of the facilities,the deal was attractivebecause the the of the tax breaksand grantsthat were available.When the economicdownturnhappened 2008, the in economicsof the deal changed. So, the deal becameunprofitable. American Steelstartedlaying off its employees: act which ran contraryto the deal struck.In fact, the FederalGovernmenthad to go to an Court to secure return of the grantsand tax breaksmadeavailableto American Steel. At the end of the the day, the two partiessettleout of court. US Steelpromisedto make a $50 million capital investment into two of its facilities and donate$3 rnillion to local communityand educational programs. Compare,the American Steeldeal to the purchase Noftel's patentportfolio. In American Steels'case, of afterspending $l.l billion dollars;2,400workerspof the 3,105workforce- were beiry laid off. While, Apple, EMC, Ericsson, Microsoft,Research Motion, and Sonywerewilling to spend$4.5billion USD In just to ensureaccess patentsof a long deadtechnologyfirm. None of thosefirms receivedany to employees other benefits.Surelythosesametechnologyfirms would havepaid lessto hire staff they or alreadyneedto ensurecheaperaccess strongpatentporlfolio. Even1 that portfolio were held by the to if CanadianCrown. $f".ing cheaperintellectual properly offers a better return than tax breaks. Wifuentlt, Additionally, it can be a cost effectivetool. Canadians makethe development IntellectualProperty can of cheaperby having a single research institutionto rebalance cost of R&D. Just look at battery the technologyfor Automobiles.Movementon the topic has beenvery slow eventhoughthere have been experimental designs the bookssincethe 1970's.Experimental on companies havecomeand gone.Stable companies have changedtheir opinion more than once.For example,GM introduced EV-One in the Californiain the 1990's.It was the first massmarketed electriccar in the world. Yet yearslater,the technologywas scraped. it was not for a bail out from the US and Canadian If GM would Governments, not likely haveeverpursued technology the again.With all of that beingsaid,their new electriccar - the Volt - was redeveloped without usingthe older technologya4#rErffu+t. GM startedfrom scratch. Imagineif the technology was public domain.Any car company could havegoneto the Crown and asked for licensingrights. The new companywould havepaid backthe Crown and might haveestablished a new plant in Canada. get Our scientists paid and our economyflourishes.Our workersmight have another job to go to and more peoplewill turn to economyfor knowledge.It is a virtuouscircle. It is the way we shouldgo. Our major citieswould attractworld classcompanies world classemployees. provinces All would see and more companies Most studieshave shownthat from the 1990'sto developingoffices and institutions. now, EconomicEfficiency has beenmarginal.This is eventhoughtaxeshave beencut significantly.The though,of an IntellectualProperlyBasecan havea direct effect on our economyby development, providing new ways of operatingand new technologies. not Why would the federalgovernment act in this manner?