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McCarthy Tétrault LLP / mccarthy.ca George S. Takach McCarthy Tétrault IT.CAN Annual Conference October 2014 DOUBLING DOWN ON DIGITAL: CANADA AS INNOVATION.

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Presentation on theme: "McCarthy Tétrault LLP / mccarthy.ca George S. Takach McCarthy Tétrault IT.CAN Annual Conference October 2014 DOUBLING DOWN ON DIGITAL: CANADA AS INNOVATION."— Presentation transcript:

1 McCarthy Tétrault LLP / mccarthy.ca George S. Takach McCarthy Tétrault IT.CAN Annual Conference October 2014 DOUBLING DOWN ON DIGITAL: CANADA AS INNOVATION NATION DOCS #

2 McCarthy Tétrault LLP / mccarthy.ca “DOUBLE DOWN” “Double Down” Verb phrase: (a)(in blackjack) to double an initial bet, on the condition that one can be dealt only one more card: “Will you double down and beat the dealer?” (b)to increase one’s efforts or hold to a position or opinion, especially when vulnerable or taking a risk: “He has continued to defend his controversial interpretation of the document, doubling down on what he sees as the truth.” Source: Dictionary.com DOCS #

3 McCarthy Tétrault LLP / mccarthy.ca WHY CANADA NEEDS TO DOUBLE DOWN ON DIGITAL  We are falling very far behind our key trading partners  Our digital deficit threatens our prosperity, community and liberty  What we have to do is raise our digital game, by a factor of 2x  And we need to do this NOW DOCS #

4 McCarthy Tétrault LLP / mccarthy.ca TIME IS OF THE ESSENCE  Agrarian revolution – 2,000 years to unfold  Industrial revolution – 200 years  Computing revolution – 40 years  Internet – 20 years  SMAC (Social, Mobile, Analytics, Cloud) - Now DOCS #

5 McCarthy Tétrault LLP / mccarthy.ca WHY DIGITAL INNOVATION MATTERS  An example: from Encyclopedia Brittanica to Wikipedia  Encyclopedia Brittanica  65,000 articles (years between updates of content)  100,000 sets sold a year  $1,400 cost  six weeks to deliver  Wikipedia  4,300,000 articles (content constantly updated)  13,000,000 regular users  essentially free (crowd sourced donation model)  download in second  Wikipedia improvement over Encyclopedia Brittanica  depending on metric, 8,600% to 3,600,000,000% (3.6 billion) DOCS #

6 McCarthy Tétrault LLP / mccarthy.ca DIGITAL INNOVATION WILL HELP US MEET OUR BIGGEST CHALLENGES (1)  Healthcare: our unique system of publicly funding healthcare is in deep trouble (in some provinces like Ontario, it soaks up about half the government budget, and that’s without including drugs, vision care, and a range of wellness therapies); digital can play a significant role in promoting the wellness of Canadians, and in reforming and improving our healthcare system, while making it affordable over the mid to long term.  Education: educators in this country are tasked with solving so many of our challenges, from: integrating hundreds of thousands of New Canadians each year; preparing our teenagers for the world of work, especially in the STEM (Science, Technology, Engineering, Math) curriculum; fostering a civic culture that instills tolerance and mutual respect; helping narrow the gap between rich and poor by providing a common platform of opportunity; in all these ambitious endeavours, digital will be a key driver for helping educators achieve these necessary goals. DOCS #

7 McCarthy Tétrault LLP / mccarthy.ca DIGITAL INNOVATION WILL HELP US MEET OUR BIGGEST CHALLENGES (2)  Sustainability: Canada has always been a land of abundant natural resources – years ago Harold Innis’ staple theory explained the model – first fish, in the 1600’s, then trees, beaver pelts, minerals, wheat, and today oil; and the development of natural resources has given the country a fairly comfortable life style, but now it’s clear these industries, together with our factories, smelters and oil fields, have to be developed in a more sustainable manner – and digital will play an important role in that.  Civic Engagement: we have dangerously low rates of voter turnouts in elections at all levels; if this trend keeps up, there will come a day when the legitimacy of our democratic institutions will come into question; digital can play an important role as a “political glue”, including by enabling e-voting, and facilitating open data/open government initiatives. DOCS #

8 McCarthy Tétrault LLP / mccarthy.ca DIGITAL INNOVATION WILL HELP US MEET OUR BIGGEST CHALLENGES (3)  Productivity: relative to our key trading partners, our productivity in the manufacturing of goods and the provision of services is lagging, and in some sectors very badly; underinvestment in ICT and other digital assets, technologies and techniques is a major cause of our poor productivity growth.  Manufacturing: one industry that is on virtual life support in this country (and is only saved from time to time by reducing the value of our currency, which of course hurts everyone else, and even manufacturers by making their foreign sourced inputs more expensive) is manufacturing; the good news is that digital, if implemented well, could save this sector, by moving it up the value chain to “high tech manufacturing”. DOCS #

9 McCarthy Tétrault LLP / mccarthy.ca DIGITAL INNOVATION WILL HELP US MEET OUR BIGGEST CHALLENGES (4)  Youth Unemployment: while the figure varies by region and urban centre, generally youth unemployment is twice as high (about 15%) as the general unemployment rate; add in under-employment, and the figure jumps to about 28%; digitally oriented and enabled jobs – both in tech companies, and throughout the economy more broadly - can bring a good number of these young people high-paying, value-added, interesting employment.  Lifelong Training: for various reasons (mostly due to necessity), about 2/3 of people will continue to work after the age of 65; this older workforce will require additional training, and often wholesale re-skilling; the best hope for doing this is an ambitious infrastructure of digital training, ideally part of a lifelong online training system, so that formal, structured learning in fact never ends for Canadians. DOCS #

10 McCarthy Tétrault LLP / mccarthy.ca DIGITAL INNOVATION WILL HELP US MEET OUR BIGGEST CHALLENGES (5)  Digitizing Canadian Business: a tsunami of digital business models will be hitting the Canadian economy between now and 2020; we are already witnessing this next wave, with the likes of Uber (for consumer transportation), Airbnb (temporary accommodation), Netflix (online content) as simply three of the better known examples; we have to ensure that Canadian businesses that are not yet with the digital program (including about 50% of small and medium sized (SME) businesses) get on quickly, and that the even larger companies that have started up the digital ladder move higher much more quickly.  Public Safety: we need credible digital skills, at scale, to allow us to combat cyberwarfare and cybercrime, and generally ensure cybersecurity; but always in a manner that protects Canadian civil rights and liberties. DOCS #

11 McCarthy Tétrault LLP / mccarthy.ca CANADIANS AS DIGITAL CONSUMERS Not a bad picture  No. 1 in web-pages visited per month  No. 1 per capita social networking users  No. 2 in online screen consumption – 41.3 hours per month  No. 2 in online video consumption  75% smartphone penetration, higher than most other countries (but, at end of 2012, Canada had 80 mobile connections per 100 population, whereas 18 OECD countries were at 100 or more!)  80% of Canadians have reasonably fast broadband access  80% e-banking adoption 11 DOCS #

12 McCarthy Tétrault LLP / mccarthy.ca CANADA AS A DIGITAL PRODUCER?  Not so much  A good, but not great ICT capability 12 DOCS #

13 McCarthy Tétrault LLP / mccarthy.ca CANADA’S ICT SECTOR  ICT = Information and Communications Technologies  ICT Manufacturing (computer and peripheral equipment manufacturing; communications equipment)  Software and Computer Services (software developers; data processing)  Communications Services (telecom services; cable and other distribution)  BUT, ICT is by no means Canada’s entire digital information economy, where value generated by intangible information and the efficient use of information (see Richard Florida’s “Creative Class”) DOCS #

14 McCarthy Tétrault LLP / mccarthy.ca THE CANADIAN ICT SECTOR, 2011  33,000 companies  87% in software and computer services  only 75 ICT companies with more than 500 employees  28,300 companies (85%) with less than 10 employees DOCS #

15 McCarthy Tétrault LLP / mccarthy.ca CANADIAN ICT SECTOR REVENUES  From $134 bn to $155 bn from 2007 to 2011  2011 growth 3.2% over 2010 (economy generally was 2.6%)  Growth of ICT sector between 2007 and 2011 was 1.6% (economy generally was.9%), over a very challenging period (i.e.- the Great Recession) DOCS #

16 McCarthy Tétrault LLP / mccarthy.ca CANADIAN ICT WORKFORCE  500,000 Canadians in ICT sector  3% of total employment  45% of ICT workers have university degree (generally in the labour market, 26%)  average annual earnings 50% higher in ICT: $68,231 (and software $71,533) relative to all Canadian industries at $45,488 DOCS #

17 McCarthy Tétrault LLP / mccarthy.ca ICT and R&D  ICT is largest private sector contributor to R&D, at $4.8 bn in 2011  Comprises 30% of all private sector R&D expenditure in Canada  BUT … (the following screens contain disturbing metrics – close viewer attention is required) DOCS #

18 McCarthy Tétrault LLP / mccarthy.ca CANADA’S DIGITAL DEFICIT (1)  Leading digital countries have about 8% of the workforce in ICT – roughly 2 x that of Canada  45% of Canadian business, especially SME’s, still not meaningfully online  Only 3% of Canadian retail economy is online: UK (23%); US (7%) – result, 68% of Canadians shopping online buy from non- Canadian e-tailers  Hence, the need to “double” down 18 DOCS #

19 McCarthy Tétrault LLP / mccarthy.ca CANADA’S DIGITAL DEFICIT (2)  Internet activity contributes only 10% GDP growth in Canada: Sweden (33%); UK, Germany (25%)  Canada underinvested in R&D, including ICT investment, by about 50%  Between , Canada experienced zero growth in innovation-related productivity improvement  Most Canadian tech/Internet businesses too small, far too timid  Hence, the need to “double” our efforts, our investments, our results 19 DOCS #

20 McCarthy Tétrault LLP / mccarthy.ca CANADA’S DIGITAL DEFICIT (3)  World Economic Forum ranks Canada 24 th on Internet usage index, comprising broadband subscriptions, innovate capacity of business, and degree of government adoption of online service delivery  Canada 22 nd in International Technology Union’s international ICT Development Index  Again, the need to improve our performance by a factor of 2x 20 DOCS #

21 McCarthy Tétrault LLP / mccarthy.ca CANADA’S INNOVATION DEFICIT  We are not yet a truly “Innovation Nation”  The following metrics are also very troubling 21 DOCS #

22 McCarthy Tétrault LLP / mccarthy.ca HOW WE RANK IN INNOVATION  R&D as a % of GDP (1)  Top Tier Country Top Tier (greater than 2%) South Korea Israel Japan Finland Sweden Denmark Germany Austria Slovenia United States France Belgium Estonia Netherlands Singapore Iceland DOCS #

23 McCarthy Tétrault LLP / mccarthy.ca HOW WE RANK IN INNOVATION  R&D as a % of GDP (2)  Mid Tier Country Mid-Tier (between 1 and 2%) China Czech Republic Canada United Kingdom Ireland Norway Portugal Luxembourg Spain Hungary Italy Russian Federation New Zealand Brazil Malaysia DOCS #

24 McCarthy Tétrault LLP / mccarthy.ca HOW WE RANK IN INNOVATION  R&D as a % of GDP (3)  Bottom Tier Country Bottom Tier (below 1%) Serbia Lithuania Poland Malta Slovak Republic Croatia Latvia Bulgaria Romania Turkey Ukraine Argentina Mexico DOCS #

25 McCarthy Tétrault LLP / mccarthy.ca BUSINESS ENTERPRISE EXPENDITURE ON R&D (BERD)  BERD as % of GDP, and ICT Share of total BERD  Top tier CountryBERD as % of GDP ICT BERD as % of Total BERD Finland1.758 Taiwan1.574 Korea1.553 Israel1.133 DOCS #

26 McCarthy Tétrault LLP / mccarthy.ca BUSINESS ENTERPRISE EXPENDITURE ON R&D (BERD) (2)  Mid Tier 26 DOCS # CountryBERD as % of GDP ICT BERD as % of Total BERD Sweden.7530 US.7033 Japan.6021 Singapore.4036 Ireland.4032 Denmark.3020 Switzerland.3013 France.3021

27 McCarthy Tétrault LLP / mccarthy.ca BUSINESS ENTERPRISE EXPENDITURE ON R&D (BERD) (3)  Bottom Tier 27 DOCS # CountryBERD as % of GDP ICT BERD as % of Total BERD Netherlands.2526 Belgium.2518 Austria.2513 UK.2521 Portugal.2530 Canada.2021 Norway.2023 Germany.209 Australia Spain Italy Source: OECD, 2010

28 McCarthy Tétrault LLP / mccarthy.ca WHO IS MAKING THE R&D SPENDING, 2013 (1)  % of R&D spending by Private Sector, Higher Education, Government  Top Tier CountryPrivate SectorHigher Education Government Israel80134 Japan77138 Korea China758NA Switzerland Finland70209 Sweden70264 Ireland70265 DOCS #

29 McCarthy Tétrault LLP / mccarthy.ca WHO IS MAKING THE R&D SPENDING, 2013 (2)  % of R&D spending by Private Sector, Higher Education, Government  Second Tier CountryPrivate SectorHigher Education Government US Austria68285 Denmark67302 Germany Belgium67239 France UK61279 Russia61930 DOCS #

30 McCarthy Tétrault LLP / mccarthy.ca WHO IS MAKING THE R&D SPENDING, 2013 (3)  % of R&D spending by Private Sector, Higher Education, Government  Third Tier CountryPrivate SectorHigher Education Government Australia Italy Spain Norway Canada Netherlands Source: OECD, 2013 DOCS #

31 McCarthy Tétrault LLP / mccarthy.ca TOP 250 ICT COMPANIES BY COUNTRY OF ORIGIN, 2012 CountryNo. of Firms2011 Revenue (millions) Employment Top Tier US821,637,5174,084,060 Japan49855,4042,910,346 Mid Tier Taiwan18315,4781,789,186 France10195,291621,402 UK8152,008373,806 Spain3100,961301,359 Bottom Tier Brazil768,47780,488 Netherlands688,062255,039 Canada665,832193,500 India439,398498,140 Sweden347,928137,031 Switzerland220,16873,129 Turkey317,75054,627 South Africa321,84948,437 Ireland342,811311,191 China349,942417,785 Belgium212,95027,442 Source: OECD, 2012 DOCS #

32 McCarthy Tétrault LLP / mccarthy.ca THREE BIGGEST INTERNET COMPANIES IN EACH COUNTRY, 2014 RankCountry Combined Market Value (in billions) Companies Top Tier 1.United States$801Google, Facebook, Amazon 2.China$417Alibaba, Tencent, Baido Second Tier 3.Japan$88Yahoo Japan, Line, Rekten 4.South Africa$52Naspers, Yola, Mxit 5.South Korea$43Naver, Nexon, NCsoft Third Tier 6.Russia$26Yandex, Mail Ru, VK 7.Israel$15Check Point, Conduit, Wix 8.Britain$17Asos, Rightmove, Just Cat 9.Germany$13Rocket Internet, Zaland, Big Point 10.Sweden$12KING, Spotify, Klanna Bottom Tier 11.Australia$9REA, AHarsion 12.Finland$8Rovio, Supercall, Grand Cru Games 13.Canada$8Opentext, Hootsuite, Shopify 14.Argentina$7Mercadolibre, Despegar, Navent 15.New Zealand$6Xero, Diligent 16.Ireland$6Paddy Power, Fleetmetics, Hostel World 17.France$6Critex, Vente Privee, Seboger -Market value of the three biggest Internet companies DOCS #

33 McCarthy Tétrault LLP / mccarthy.ca INNOVATION CULTURE (1)  Nobel Prizes for Physics and Chemistry (362 individuals, 196 in physics, and 166 in chemistry): Country%No. of Winners Top Tier US32115 Mid Tier UK1243 Germany1035 Bottom Tier French415 Canada27 Australia13 South Korea00 Source: nobleprize.org DOCS #

34 McCarthy Tétrault LLP / mccarthy.ca INNOVATION CULTURE (2)  Field Medal for math: Country%No. of Winners Top Tier US2112 France148 Mid Tier UK95 Germany74 Bottom Tier Canada21 Australia21 DOCS #

35 McCarthy Tétrault LLP / mccarthy.ca COMPUTER TECHNOLOGY PATENT APPLICATIONS, Country of Origin Number Top Tier US231,206 Japan160,422 Second Tier Korea60,955 China45,047 Germany26,702 Third Tier France15,946 Netherlands11,819 Canada10,417 Finland6,572 Sweden6,410 Switzerland4,359 Australia2,920 DOCS #

36 McCarthy Tétrault LLP / mccarthy.ca PATENT APPLICATIONS BY $100 BN USD GDP, 2012 Country Korea10,584 Japan7,160 China4,980 Germany2,596 Switzerland2,575 Finland2,090 US1,988 Sweden1,722 Denmark1,667 Luxembourg1,414 Belarus1,410 Austria1,348 Russia1,339 New Zealand1,251 France1,248 Netherlands1,213 UK972 Ukraine854 Italy760 Belgium730 DOCS # That’s right, Canada is not among the top 20 countries

37 McCarthy Tétrault LLP / mccarthy.ca PATENT APPLICATIONS PER MILLION POPULATION, 2013 Country Korea2,962 Japan2,250 Switzerland1,013 Germany902 US856 Finland665 Sweden605 Denmark539 Austria489 Netherlands444 China396 France372 North Korea337 UK318 Norway312 Belgium238 Russia203 Singapore203 Italy200 Belarus189 DOCS # Again, Canada not in the top 20

38 McCarthy Tétrault LLP / mccarthy.ca EARLY STAGE FUNDING OF ICT  ICT Investment as a % of total capital formation (OECD, 2010)  Again, need to double Canada’s efforts Top Tier US33 Second Tier Sweden25 Denmark25 UK24 Third Tier New Zealand22 Belgium21 France20 Fourth Tier Netherlands18 Canada17 Finland15 Fifth Tier Australia14 Spain14 Japan14 Ireland13 Germany13 Austria13 DOCS #

39 McCarthy Tétrault LLP / mccarthy.ca A CULTURE OF INNOVATION  The irony of our digital deficit  We have plenty of risk taking prospectors in the natural resources space – especially junior mining companies  On tech and digital, a culture of risk tolerance – let alone audacious risk taking - not yet sufficiently developed  And the opportunity is huge, at home and especially abroad 39 DOCS #

40 McCarthy Tétrault LLP / mccarthy.ca ICT LARGE AND GROWING GLOBAL MARKET  ICT spending worldwide between 2003 and 2012 grew from $2.4 trillion to $4.4 trillion  ICT spending by country, 2012 CountryUS$ Trillions US1.2 Japan.4 Germany.25 UK.2 France.17 Italy.12 Canada.11 Korea.9 Spain.76 Netherlands.6 Australia.6 DOCS #  Double edge sword of huge US market: a great place to sell, but also a huge magnet of Canadian talent

41 McCarthy Tétrault LLP / mccarthy.ca GROWTH OPPORTUNITIES IN GLOBAL ICT India22% China15 Russia15 Brazil14 Australia8 Canada7 Spain6 Netherlands6 UK7 France6 Korea6 Italy5 Germany5 US4 Japan3 Source: OECD, Largest ICT spenders by growth (OECD, 2012): DOCS #

42 McCarthy Tétrault LLP / mccarthy.ca FASTEST ICT SPENDING GROWTH  Growth in ICT spending between (OECD, 2010):  >25% - Nigeria; Bangladesh; Sri Lanka  20-25% - Senegal; Iran; Zimbabwe; Morocco; Indonesia; India  15-20% - Romania; Egypt; Cameroon; VietNam; Venezuela; Philippines; Saudi Arabia; Ecuador; Slovak Republic; Russia; China  Canada’s multicultural make up as a comparative advantage in accessing these markets DOCS #

43 McCarthy Tétrault LLP / mccarthy.ca IT’S NOT JUST STEM  It’s also about digitizing every aspect of how we do business, education, government, etc.  A low tech, but very digital example: Mabel’s Labels  Virtually all sales of this kids (and now broader) label maker driven by Internet-based marketing, including social media.  Over 40 staff, 40,000 sq. ft. plant in Hamilton  A solid performance, and a role model for Canada’s digital deficient SME sector 43 DOCS #

44 McCarthy Tétrault LLP / mccarthy.ca HOW TO DOUBLE DOWN ON DIGITAL  How to ensure more – and even bigger – Mabel’s Labels  The solution has many moving parts  No single silver bullet  It’s some specifics … but it’s also culture, self- perception 44 DOCS #

45 McCarthy Tétrault LLP / mccarthy.ca SELF PERCEPTION MATTERS (1) "A few years ago I landed at Stockholm`s Arlanda airport (I was with the M&A acquisition team of a Canadian tech company; we were in Sweden to buy a Swedish tech business). In the 10 minute walk from the airplane to immigration control, I was impressed by the large images on both sides of the walls of the airport corridor of the great and good of Swedish industry, culture and sports. By the time I got to the passport control official, I was totally blown away by how successful this small country of 8 or so million people has been over the last century, especially in terms of contributions to the global economy (Volvo, IKEA, Saab, Ericsson, all highlighted in the images). My previous view of Swedes as largely egalitarian, healthy outdoors, crunchy granola people was superseded by a sense of them as smart, driven, savvy business people.” 45 DOCS #

46 McCarthy Tétrault LLP / mccarthy.ca SELF PERCEPTION MATTERS (2) “When you arrive at Toronto`s Pearson airport, and walk the same sort of route to the exit of the airport, there is no pantheon to Canada's impressive history makers (industrial, cultural or otherwise). Rather, just before you leave the building, there`s a video of a bush plane landing on a lake, with a backdrop of trees and rocks. As pretty as the video is, it unfortunately reinforces the stereotype of Canadians as hewers of wood and drawers of water; unlike the impression one gets walking the same type of corridor in Sweden‘s principal airport, which shouts knowledgable, creative citizens who have left their imprint on the world. Self-perception matters (as do the first impressions of a country left on arriving foreigners!). Toronto's airport, and Canada more broadly, needs to update its branding, to reflect a new, vibrant country.” 46 DOCS #

47 McCarthy Tétrault LLP / mccarthy.ca THE KEY TO DIGITAL SUCCESS  Canada needs to develop top tier management talent that can build success for enterprises on a global scale  Strong STEM capability  Global management experience  Livable cities to attract and retain top talent; for example, must solve gridlock in GTA (15 million people by 2040)  And an appetite for swinging for the fences – for doubling down 47 DOCS #

48 McCarthy Tétrault LLP / mccarthy.ca DOUBLING DOWN ON DIGITAL EDUCATION  Start in primary school, not only kids as consumers of digital, but as producers  Junior Achievement example in Saskatoon – coaching aboriginal youth on app development – lighting an entrepreneurial spark  In high school, more emphasis on successfully teaching STEM (Science, Technology, Engineering and Math), but not to the exclusion of humanities, social sciences  In high school, also teach entrepreneurialism – it can be done  And the role models are not just business entrepreneurs, but social innovators as well, especially those in the social sector who are using digital tools, channels and methods with success 48 DOCS #

49 McCarthy Tétrault LLP / mccarthy.ca BUILDING COMMUNITY THROUGH DIGITAL  Need to address the digital divide, both in terms of income disparity (lower technology adoption rates in lower income households), geographic distance (rural adoption rates are lower/more expensive) and age disparity (many seniors are not yet connected)  A major role for high school students to gain their required community hours through digital outreach with these three communities  Importance of wired digital libraries in bridging these gaps 49 DOCS #

50 McCarthy Tétrault LLP / mccarthy.ca POST SECONDARY EDUCATION  Curriculum delivery through sophisticated digital platforms – the medium is the message  Digital co-ops, but not just engineering and code development, but the broad range of effort required to digitize businesses, governments, other public sector organizations, not-for-profits, etc.  University/college connections with incubators, accelerators, and early stage tech company financing eco-systems  Every school needs a Digital Media Zone; and not just for techies, but for sparking/enabling new business models where tech is just a support 50 DOCS #

51 McCarthy Tétrault LLP / mccarthy.ca THE EDUCATION IMPERATIVE FOR DIGITAL  Only 20% of Canadian degrees are in STEM – low relative to countries with a science culture  Create a science culture, even among non-STEM students and alumni  Develop capable business people who are not afraid to swing for the fences  University/colleges should give inventors unencumbered ownership of resulting intellectual property  De-stigmatize business failure (bankruptcy is just another year of learning) 51 DOCS #

52 McCarthy Tétrault LLP / mccarthy.ca GOVERNMENT FINANCIAL SUPPORT  Government should not try to pick winners  R&D tax credit should be neutral; all qualifying effort should be eligible for the tax credit  Proposal: - a digital renovation tax credit, especially for SME’s  Proposal: - flow through shares 52 DOCS #

53 McCarthy Tétrault LLP / mccarthy.ca THE PATENT IMPERATIVE  Patents are the thermonuclear weapons of the digital era  It will be very difficult for Canadian tech companies to succeed in foreign markets – especially the huge US market – without their own patents  Need to raise awareness in post-secondary education  Patent clinics for early stage tech entrepreneurs  Focussed government support for patents 53 DOCS #

54 McCarthy Tétrault LLP / mccarthy.ca DOUBLING DOWN ON PUBLIC FINANCIAL ASSISTANCE  Currently, annually about $1.5 billion for ICT SRED, and over five years $200 mn for SME digital adoption; $300 mn for venture capital for ICT; and $100 mn for accelerators  On a federal budget of around $280 bn, this $2 bn a year is a very low figure  One single, major energy project can easily run $10-12 billion; lots of government assistance extended to the energy sector, and the non-ICT sector – ICT needs to be given its fair share  Goal – double federal assistance to $4 bn a year, right away 54 DOCS #

55 McCarthy Tétrault LLP / mccarthy.ca SMART REGULATION FOR DIGITAL (1)  Government needs to build trust in our digital world, not mistrust  Warrantless searches of non-public information by public authorities must end. Period.  The process of judicial oversight of lawful access must be reviewed, and improved (judicially approved lawful access should become as quick and agile as that of the cybercriminals)  Public oversight of intelligence data gathering must be improved 55 DOCS #

56 McCarthy Tétrault LLP / mccarthy.ca SMART REGULATION FOR DIGITAL (2)  Kudos to e-commerce statutes:  minimalist, but very effective  technology neutral  Canadian regulations synchronized with global initiative  Supports and enhances online activity, in a measured and responsible manner  CASL as poor example of regulation for digital:  vastly intrusive (not minimalist)  overly complex  out of step with approach taken by key trading partners  dampens economic activity unnecessarily 56 DOCS #

57 McCarthy Tétrault LLP / mccarthy.ca FUTURE REGULATORY CHALLENGES  Regulation must protect competition, not competitors  The salutory role of disruptive technologies  payment systems  virtual currencies  Uber  Airbnb  International standards on privacy (i.e.- data “closets”); these fast becoming trade barriers  The role for government in addressing cybersecurity, cyberwarfare, and cybercrime  The need to act globally 57 DOCS #

58 McCarthy Tétrault LLP / mccarthy.ca George S. Takach (1) George is a senior partner at the McCarthy Tétrault law firm. George brings significant value to clients in their tech company M&A/financing deals, their sophisticated tech licensing, IT procurement and other tech commercial transactions, and their more challenging e-commerce activities, including projects involving cloud computing, big data and social media. George’s deep experience in tech M&A/financing allows his clients to get deals done more quickly and cost effectively. Past deals where he has brought his value-added skill set to clients include: IPO and multiple acquisition transactions for Constellation Software Inc.; multiple acquisition transactions for Aastra Technologies Inc., including purchase of Telepo, and purchases from Ericsson, Nortel, EADS, DeTeWe and Ascom; merger transaction between Aastra and Mitel; multiple sale transactions acting for private Canadian technology companies being sold to multi- national public tech companies, including: Optical Systems Group, Inc. to Ocuco Ltd.; CPAS Systems to Xerox; Kobo Inc. to Rakuten Inc.; Kanetix Ltd. to Monitor Clipper Partners; Opalis Software to Microsoft; Cybermation Inc. to CA Inc.; Chantry Networks to Siemens; InSystems to Standard Register; Jewelstone Systems to AGF; and Rockwell Automation acquiring Rutter Hinz; venture and related-type financings of earlier stage Canadian tech companies, including Kobo Inc., Fresco Microchip (Celtic House, Ventures West); CPAS Systems (Tier Technologies); Cube Route (CIBC); a range of other M&A/financing transactions involving technology companies and tech-related assets, including: acquisition by Exact Software of Longview Solutions; acquisition by Kobo of Aquafadas; and sale by Scotiabank of its fixed income indices business to TSX Group. 58 DOCS #

59 McCarthy Tétrault LLP / mccarthy.ca George S. Takach (2) In the area of sophisticated tech licensing, IT procurement and other tech commercial deals, George’s creativity and broad experience allows clients to resolve difficult issues more quickly and to get the relationship off on the right foot. In the tech commercial area, George has a national practice with the following illustrative clients whom he has assisted with a broad range of agreements: a Montréal-based bank; an Atlantic Canada insurance company; a Calgary-based energy company; a Toronto-based retailer; three Toronto-based banks; a Montréal-based communications company; a Toronto-based public sector agency; and a public sector consortium with members in BC, Alberta, Ontario and Quebec. George helps clients craft sensible and workable solutions to complex e-commerce-related legal and compliance challenges. He brings a steady and experienced hand to bear on the invariably unprecedented legal issues generated by novel e-commerce business processes. In the e-commerce/Internet law area, his extensive practice includes: advising companies on how to create legally compliant online customer experiences, including enforceable “click consent agreements,” workable electronic voting processes, etc.; advising governments on law reform initiatives aimed at facilitating e-commerce; helping organizations comply with privacy and data protection laws; and crafting and negotiating co-branding, Web-linking and other e-commerce-related agreements. 59 DOCS #

60 McCarthy Tétrault LLP / mccarthy.ca George S. Takach (3) George is the author of three books: Computer Law, second edition; The Software Business, second edition; and Contracting for Computers, fourth edition. For 20 years he was an Adjunct Professor at Osgoode Hall Law School, York University, where he taught an evening course in Computer Law. George is in demand as a speaker to legal and technology industry audiences and a regular writer on legal technology topics. George is listed in the 2014 edition of Chambers Global: The World’s Leading Lawyers for Business, as the only “Eminent Practitioner” in the area of information technology for Canada. Since its inception (and most recently in 2014), George has appeared in the LEXPERT/The American Lawyer Guide to the Leading 500 Lawyers in Canada, as a leading lawyer in the areas of technology and corporate mid- market. George is recognized in The Best Lawyers in Canada as a leading lawyer in information technology law and technology law. Since its inception in 1997, he has been listed in the Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, as a leading lawyer in the areas of technology and computer & I.T. law. George received his BA and his JD (Dean’s Honour List) from the University of Toronto. He also has his MA in international relations from the Norman Paterson School of International Affairs, Carleton University in Ottawa. He was called to the Ontario bar in George has been on the Board of, and continues to raise money for, Lake Scugog Camp, an organization serving underprivileged and “at risk” children/youth and their families (a camp that George attended when he was a child). George S. Takach McCarthy Tétrault – 60 DOCS #

61 McCarthy Tétrault LLP / mccarthy.ca VANCOUVER Suite 1300, 777 Dunsmuir Street P.O. Box 10424, Pacific Centre Vancouver BC V7Y 1K2 Tel: Fax: Toll-Free: CALGARY Suite 4000, 421 7th Avenue SW Calgary AB T2P 4K9 Tel: Fax: Toll-Free: TORONTO Suite 5300, TD Bank Tower Box 48, 66 Wellington Street West Toronto ON M5K 1E6 Tel: Fax: Toll-Free: MONTRÉAL Suite De La Gauchetière Street West Montréal QC H3B 0A2 Tel: Fax: Toll-Free: QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7e étage Québec QC G1R 5G4 Tel: Fax: Toll-Free: LONDON, U.K. 125 Old Broad Street, 26th Floor London EC2N 1AR UNITED KINGDOM Tel: +44 (0) Fax: +44 (0) DOCS #


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