Who owns Nortel ? I say the Canadian taxpayer. Why ?

by Jeff Wiener on September 23, 2009

money-puzzleDoes an organizations intellectual property belong to the organization itself ?

That depends on how much of the intelectual property was funded using taxpayer dollars. The amount of ownership should depend on the percentage of government grants that the organization used to to build the intelectual property in the first place.

If the Canadian government hands out billions of dollars to a Canadian company and assists that company in developing their intellectual property with R&D tax credits, tax grants, and EDC loans, then that property is NOT, and should not belong to the sole domain of the organization itself. Technically, the Canadian tax payer helped fund the business. As long as the business remains in Canadian hands then the property belongs to the owner / shareholder. And as soon as the assets are sold to outside foreign interests then this property should revert, (as a percentage of the total amount “donated”) back to the Canadian taxpayer. Furthermore, there should be laws in place that protect the Canadian taxpayer as a secured creditor in the event of a foreign sale or bankruptcy.

The US government is standing in line with their hands open, waiting for their billions in proceeds from Nortel’s bankruptcy sale.

Where is the Canadian government and why aren’t they protecting Canada’s interests in the Nortel debacle ?

At this point it’s probably too late to deal with the Nortel issue – they’re done. But, this philosophical discussion should be happening at senior levels of our bureauracy.

Why am I bringing this up ?

I read a post on AllAboutNortel.com yesterday, and I quote Mark Evans:

Second, the federal government made the right decision when it decided not to review the Ericsson’s deal. The CDMA business was not of “national interest” so it made little sense to review it.

Mark references a Bloomberg article which states Michael Ignatieff as follows:

Canada needs an investment law “that protects our national interests” Liberal Party Leader Michael Ignatieff said today at a speech in Toronto. Conservative Prime Minister Stephen Harper “dropped the ball” when the government declined to review Ericsson AB’s purchase of some Nortel assets, Ignatieff said.

Mark – YOU ARE WRONG. Canada made the WRONG decision when it decided not to review the Ericsson deal. This is Canada’s asset – it belongs in many respects to the Canadian tax payer. Well, not entirely, but, we are entitled to our fair share of this asset. We should be waiting in line, ahead of all of the other creditors. We should be protecting our intellectual asset, and if it gets pilfered in a bankruptcy then we should review the process.

Don’t you think ?

Written by: Jeff Wiener. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Identi.ca, or Friendfeed

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{ 1 trackback }

Who owns Nortel ? A response from Mark Goldberg | TheTelecomBlog.com
September 24, 2009 at 7:36 am

{ 2 comments… read them below or add one }

Mark Goldberg September 23, 2009 at 8:59 am

There are a number of problems with your way of thinking, not the least of which is the fact that much of Nortel’s intellectual property stayed with Nortel – the Ericsson deal licensed the intellectual property. Let’s also keep in mind that Nortel has not been able to take advantage of tax incentives, since they haven’t been profitable.

Does Nortel (and its owners) own the companies assets or does the government seize possession by virtue of having ever provided an incentive? Do you own your home or does the government now get a piece because of a home renovation tax incentive?

The xenophobic views on foreign ownership (nationalizing assets if acquired by a foreign company) are outdated. Modern societies encourage foreign investment. Canada’s own industrial policy and numerous treaties ensures that we don’t discriminate in the manner you propose; we provide tax credits for R&D performed in Canada by Canadian firms and those that are foreign owned. Why wouldn’t we?

Ontario recently gave more than a quarter of a billion dollars to recruit a foreign gaming software company. Ericsson didn’t ask for cash handouts and it is maintaining skilled jobs in Canada. The Canadian taxpayer will benefit from payroll taxes being remitted to both levels of government, property taxes, and all sorts of economic benefits from having stability for these employees.

There was no “pilfering” of any public or private assets – the sale conformed to the law with judicial oversight. Political interference would have sent a message to the investment community around the world that we are no better than banana republics that change the rules and nationalize assets on a whim. Just imagine the impact that would have on jobs, investment, the dollar, stock prices.

The government got it right by looking at the big picture and resisting the temptation to score short term, cheap political points.

Mark Evans September 23, 2009 at 1:46 pm

Jeff,

My take is the Canadian government provided the grants and tax incentives to encourage and support of Nortel’s business, which, in turn, would create benefits such as employment and more jobs in Canada. There was never any consideration about getting an “equity stake” in Nortel in exchange so it’s off the mark to suggest the Canadian government has any claim to Nortel’s assets.

Mark

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