1. COPYRIGHT © 2009 OGILVY RENAULT LLP Tax Measures Relating to Commercialization More to be Done Paul Carenza, Ogilvy Renault LLP

2. 2 COPYRIGHT © 2009 OGILVY RENAULT LLP Federal and Provincial SR&ED Credit Regimes  Not directly related to commercialization but effect can be beneficial to shelter income  Refundable and non-refundable tax credits in respect of eligible expenditures  Carried forward for 20 years to apply to income  Are they benefits of the regimes fully utilized?

3. 3 COPYRIGHT © 2009 OGILVY RENAULT LLP Ontario’s OTEC  Introduced in 2008 Budget  10 year corporate tax exemption  New corporation  Earning 90% of its income from an eligible commercialization business

4. 4 COPYRIGHT © 2009 OGILVY RENAULT LLP Eligible Commercialization Business  an advanced health technology business  a bioeconomy business  certain telecommunications, computer or digital technologies production businesses, or  any business that satisfies conditions to be prescribed by future regulations that has as its sole purpose:  the sale of property that derives more than 50 % of its value from eligible intellectual property,  the sale of property an essential element of which is eligible intellectual property,  the licensing of computer programs that are eligible intellectual property, or  any other purpose as may be prescribed by future regulations.,

5. 5 COPYRIGHT © 2009 OGILVY RENAULT LLP Eligible Intellectual Property  Property that was developed in the course of employment or academic study at a qualifying institute, by one or more individuals each of whom is an inventor for the purposes of the Patent Act (Canada), an author for the purposes of the Copyright Act (Canada), or certain individuals prescribed by the Ontario Minister of Finance,  that has never been owned by anyone other than one or more of (i) the qualifying institute (ii) one or more individuals who created the property as an employee or a student of the qualifying institute, or (iii) the qualifying corporation,  that was disclosed to the qualifying institute where the research was conducted in a timely manner under the institute’s official intellectual property disclosure policy, and  that is (i) a patent issued under the Patent Act, (ii) intellectual property in respect of which an application for a patent was filed under the Patent Act and in respect of which a patent is issued no later than 10 year after the incorporation of the qualifying corporation, (iii) the copyright in a computer program that constitutes a technological advancement at the time the computer program is completed or (iv) certain intellectual property prescribed by the Ontario Minister of Finance.

6. 6 COPYRIGHT © 2009 OGILVY RENAULT LLP OTEC Restrictions  New corporation cannot be related to another corporation  Cannot sell the IP to an existing corporation  Restrictions on VC investment

7. 7 COPYRIGHT © 2009 OGILVY RENAULT LLP OTEC Restrictions Inventor New Corporation IP Inventor’s Relative Unrelated Business are related

8. 8 COPYRIGHT © 2009 OGILVY RENAULT LLP OTEC Restrictions Inventor New Corporation IP Investors Other Investees may be Associated Owner

9. 9 COPYRIGHT © 2009 OGILVY RENAULT LLP Flow Through Shares?  Adapt FTS mechanisms for IP/IT use  Incentivize investors

10. 10 COPYRIGHT © 2009 OGILVY RENAULT LLP Contact If you have questions or would like further information, please contact: Paul Carenza T: 416.216.1885 E: pcarenza@ogilvyrenault.compcarenza@ogilvyrenault.com W: www.ogilvyrenault.com