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Simon Sunatori's Submission in Response to Joint Finance Canada – Canada Revenue Agency Consultation Improving the Scientific Research and Experimental Development Tax Incentives:
Patent as Technological Advancement
I had a disagreement with a Scientific Auditor regarding "technological advancement" for the SR & ED Programme. I had assumed that one of my projects was eligible for SR & ED because it was a patentable subject matter, while the Auditor rejected it to be technological advancement because there were no equations!
Previously, another Scientific Advisor had told me that he regards a utility patent as a "barometer". My interpretation was that any project for which a utility patent was filed is eligible for SR & ED as long as there are also "uncertainty" and "systematic investigation" because patentability for a "utility patent" is "new, useful, and non-obvious". The Advisor's logical attitude was in stark contrast with the Auditor's subjective opinion. Please note that a "design patent" covers aesthetics, so it is not technological advancement at all.
The Auditor also declared that another one of my projects is "ergonomics". He insisted that anything to do with human is not eligible, even if the project is a patentable subject matter for a utility patent (not a design patent). However, CRA's documentation explicitly states that "psychological research" is eligible.
Therefore, I am confused as to how patentable ergonomics is not eligible for SR & ED, but psychological research is eligible.
In order to avoid inconsistent application depending on which Scientific Advisor/Auditor assesses the project, I would like to request that the CRA accept the "new" in patentability for a utility patent (not a design patent) as "technological advancement" by definition for the purpose of eligibility of the SR & ED Programme.
Such automatic recognition of "utility patent" as "technological advancement" will streamline the SR & ED Programme's administration.
I would like to point out that NRCC's IRAP and CRA's SR & ED used to have completely separate eligibility, separate documentation requirement, etc. Now, the CRA more or less automatically approves IRAP projects. Also, there used to be a completely separate survey for Research and Development activities by Statistic Canada. Now, Statistic Canada takes data directly from the CRA SR & ED Form (T661). Such consolidation provides simplicity and consistency for everybody involved.
At present, the SR & ED Programme specifically excludes assistance for patent fees. Form T661 reads: "Activities such as ..., patent search and registration, ... are also not eligible". Considering that Intellectual Property (most notably patents) is so essential for innovation, I would like to request that patent fees be eligible for SR & ED, at least the filing/examination/final/maintenance fees to the Canadian Intellectual Property Office (CIPO), etc. Patent agents/ attorneys/lawyers fees for litigation may not be eligible, of course.
Large Corporations versus Small Businesses
Form T661 states: "If you have more than 20 projects, you only need to provide project descriptions for the 20 that are largest in term of dollar value." So, large corporations can present 20 projects with best prospect of approval by the CRA, while the other projects are automatically approved. On the other hand, small businesses which have only a few projects may receive micro-management inspection by the CRA, e.g., the Auditor's interrogation: "How did you solve (or circumvent) the singularities in Earnshaw's theorem?"
SR & ED Auditor's Attitude
I had thought that the whole idea of the SR & ED Programme was to encourage innovation. However, a viewgraph in the SR & ED Seminar
says: "Innovation is not enough". Together with the Auditor's discouraging comments: "Thinking does not qualify", "Trial and Error is excluded", and "This programme is not for you (independent inventors)" regardless of the context, it seems that the SR & ED Programme does not seem to encourage innovation in practice. To be fair, other Advisors were open-minded to explore any possibility of SR & ED eligibility in order to encourage innovation.