MR. CHAIRMAN: Ladies and gentlemen, it's a little bit after 9:00 a.m. so I will suggest that we start this meeting of the Human Resources Committee. We're very fortunate today to have with us Ms. Christene Hirschfeld, who is a lawyer, who is going to talk about intellectual property for us. Maybe I will start first with Mr. Chisholm and we will go around the table and introduce ourselves and what ridings we represent.
[The committee members introduced themselves.]
MR. CHAIRMAN: With that, again, I would like to thank you very much. I understand we have bounced you around with regard to dates and we certainly apologize for any inconvenience that may have caused but we're very pleased to have you here today. Generally, the format is a presentation by yourself and then we open it up to questions and we can go from there. So, with that, thank you very much.
MS. CHRISTENE HIRSCHFELD: Thank you for having me. It's very nice to be here. I'm not quite sure what my presentation is supposed to cover. Darlene and I had a number of discussions about this. My understanding is I'm to give an overview of intellectual property, but the interest is intellectual property as it relates to the cultural sectors in Nova Scotia rather than intellectual property relating to industry in Nova Scotia.
So I'm just going to speak a little bit about what intellectual property is, why we protect it and then focus a bit on the nature of copyright. My presentation is very short. I've been told I have approximately 10 minutes. So I'm not going to cover this in too much detail but I would be delighted to take questions at the end of this, or during it as we go through.
1
The question becomes, what is intellectual property? It was interesting, when I started putting this together, I went looking for a definition. It's very difficult to find a definition of intellectual property. The best I could do to define it is, the set of rights resulting from intellectual activity in the industrial, scientific, literary and artistic industries or fields. So we have a set of laws to protect the results of activities in those fields. The question is then, why do we want to protect anything arising from those fields? We want to help promote creativity and we also want to promote the dissemination and the application of the results of that creativity. At the same time, we want to protect the moral and economic rights of the people who create these products and we also want to allow the public to have access to the results. So we have a number of goals here.
It becomes very important, since our economy seems to be moving toward a knowledge-driven economy more and more - intangibles have always been important in industry in establishing a value of a business but the importance has been increasing over the last number of years, the last few decades. If we look at the value of a trademark like Coca-Cola, it's known throughout the world and the value that is placed on that is very high. If you look at what has happened with the Microsoft empire, that is worth so very much money but it's all based, in essence, on intellectual property.
One of my partners approached me the other day in the hall and started talking about IP and he was saying it came up over dinner the night before. He was with a group of people and somebody said, where on earth did AOL come from? When you think that AOL, America On Line, has the assets necessary to purchase the Time Warner empire, if you want to call it that, it's pretty amazing and AOL is IP based.
The problem that we run into is trying to value intellectual property and also trying to finance it because, as I was speaking to Mr. Steele before we started, we have, in Canada, a split system when it comes to legislation. We have federal jurisdiction and we have provincial jurisdiction. The majority of the Statutes which govern intellectual property are federal Statutes but the property rights are governed by the province. So when we, as lawyers, look at trying to take security in intellectual property, we have a problem. We can't rely on the PPSA, the Personal Property Security Act, and we can't rely entirely on the federal Statute which governs the intellectual property. So that is where you hear lawyers going on and on, trying to figure out how to take a secured interest.
I'm going to talk a little bit about the different categories of intellectual property. At most of your seats you will see brochures from the Canadian Intellectual Property Office. Those brochures are the best general source of information that I've been able to find, general source of information. I've only brought copies of the brochures on copyright and on trademark. There are brochures on each of the other types of intellectual property as well, but given that our focus is the cultural sector I didn't think it was appropriate to bring those. As well, that information is available on-line at the Canadian Intellectual Property Office
Web site which is listed in the publications, and that Web site is an excellent source of information.
Categories of intellectual property. As I mentioned earlier, most types of IP are governed by federal Statutes. I'm just going to talk a little bit about what those types of IP are. They are patent, industrial design, circuit topography, trademark and copyright. I thought I would give you just a very brief definition of what each is.
A patent is a government grant which gives an inventor the exclusive rights to his/her/its invention. It gives a monopoly for a period of time. That's why we hear people talking about the drug industry and the monopoly over newly created drugs and what happens when the patent rights expire.
Industrial design has to do with a visual feature, almost a decoration on something that is manufactured. As I look around this room I'm hard-pressed to come up with something, but if there were a logo on one of those creamer pitchers, you could say that that logo is an industrial design. It's possible as well that just the ribs that run up those pitchers, they are not functional, they are not part of the design, but they could be said to be decorative and they might fall within the definition of an industrial design.
The Integrated Circuit Topography Act has to do with microchips and semiconductors. I confess, I have never read the Statute and I doubt that I ever will. There are many people around, in Canada, who are completely familiar with its provisions.
Trade secret, I've included in this group even though it is not governed by federal legislation. This is a creation of the common law, case law. A trade secret is confidential information which gives somebody in business an advantage, a competitive advantage. An example would be the Kentucky Fried Chicken secret formula. We know it's 11 different herbs and spices, but it's a secret. The protection that you get from a trade secret lasts as long as it remains a secret. The problem with it is once it's out in the open you're in big trouble because you don't have a secret anymore.
A trademark. I talked about the Coca-Cola trademark earlier. A trademark is a word or a symbol or a design or any combination of those that is used to distinguish your wares from somebody else's wares. It has to do with giving the public information as to the source of something. We all know that Coca-Cola, when we buy a bottle of Coca-Cola, we're going to get something made with the Coca-Cola formula. If you buy a bottle of Coca-Cola and it's not that taste, you're going to be upset. You rely on that trademark to tell you what you're buying.
Finally, copyright. Copyright, to my mind, is the form of intellectual property most of interest to us in this room today. Copyright is a statutory right which protects the expression of content, but it doesn't protect the idea. If I say to you, I have a wonderful idea
for a feature film which is going to be about a legislative committee, and this committee meets on Tuesday mornings at 9:00 o'clock in Halifax, Nova Scotia, well, that's fine. My expression of the idea may be protected, although if I just say it it's not going to be, but if I put this down and hand it to you on a piece of paper describing what happens in this room, my expression will be protected. The idea itself is not. Somebody else can go and pitch the same idea and won't be violating my copyright.
At its very simplest, copyright is the right to copy. It goes a little bit further than that, because it also covers the right to produce, reproduce and publish a work if that work is protected by copyright. It only protects against copying, so it does not protect against independent creation of the same thing. If two of us were to look out the window today and see something that was of interest and we both painted and we ended up painting exactly the same picture, we are not violating each other's copyright because we are not copying each other's work, we're creating our own vision of what we see out the window.
In order for something to be protected by copyright, that something has to be a work, and a work is defined in the Copyright Act. The work has to fall within one of four categories. The categories are: literary, and the Copyright Act was amended so that literary works include computer software programs; artistic; dramatic; or musical. The work has to be original, so it has to be my work and my work alone, but it doesn't have to necessarily be creative. I can't draw, so when I look out that window and draw my picture of what I see, it's not going to be good but it's still protected by copyright.
You can register your copyright. It gives you certain rights, but it is not necessary. So clients call me on a regular basis and ask whether they have to put copyright at the bottom of their works. No, they don't. By committing my presentation to the hard drive of my computer or a disk or to paper, I own the copyright in it. The fact that I have not put copyright Christene Hirschfeld or copyright Boyne Clarke is irrelevant. I have not, however, registered the copyright. I haven't sent my cheque for $65 to the copyright office in Hull.
The difference that makes has to do with how I can protect my intellectual property. If I feel that somebody has copied my presentation, and I want to enforce my rights, I have to prove that I'm the owner of the copyright. If I have registered my copyright, sent my $65 off to Hull, Quebec, then the responsibility shifts and the person who I say has copied my work will have to prove that he/she has not copied my work. So it does something called reversing the onus of proof.
A work does not have to be published, so I could have put my presentation on my hard drive and never printed it and never shown it to anybody. I still own the copyright because part of the copyright protection that I get is the right to control the dissemination of the information and the publication of the information.
The duration of copyright protection is the life of the author plus 50 years. So 50 years after I die this will be in the public domain and anybody who wants to use it can use it without my permission. The Statute, the Copyright Act, also creates something known as moral rights. Moral rights are a very strange creation. It's something that a lot of business people fail to deal with when they are writing contracts with their independent contractors and employees.
A moral right vests in the person who creates the work, whether that person is an employee or not. If I were an employee of Boyne Clarke and I created my presentation, I as the author have the right to say what that presentation can and cannot be used for. I also have the right to be identified as the author of the work, that is my moral right.
The example that I use quite often in the software industry is, that's wonderful, I'm working as an employee of a computer software company, we're creating an application for, say, the telephone industry. If somehow that application, that program can be taken and used for war purposes, if there's a military application, I can object to that. If I as an employee of a company have not waived my moral rights, I can stop my employer from taking that software program and selling it for military purposes because I object on the basis of the use to which it's going to be put. That is an issue which employers quite often fail to deal with.
That is my introduction to intellectual property. I would be very happy to take any questions.
MR. TIMOTHY OLIVE: Can I just follow up on that statement you just made, Christene? If you work for a company, you don't own the copyright, and yet you say, notwithstanding that, you can still take the moral objection route. How can you do both if you don't own it in the first place?
MS. HIRSCHFELD: You raise an interesting point. This is the problem with doing the condensed version of intellectual property 101. You're absolutely right, if I am an employee of a company, the Copyright Act says that my employer owns the copyright in anything that I create in the course of my employment, unless there's an agreement to the contrary. Another thing that business people often overlook is that if they hire me as an independent contractor, I own the copyright, the independent contractor owns it. That's another issue.
You've asked about the moral rights. The moral rights vest in the original author not the holder of the copyright. I as the employee have my moral rights, which I can waive. I cannot assign them to my employer but I can waive them. It's prudent for employers to be taking a waiver of moral rights so that they don't end up with this issue. Another example that I use for people in the entertainment industry is, that's wonderful, you're a creative person. You've created this concept for a wedding television series; you're going to do a nice series on this stuff. What happens if somebody takes your concept and makes it
pornographic? You're going to object. That's not what you wanted that concept to be used for. Your producer is going to be in big trouble if there hasn't been a waiver of moral rights. Does that help?
[9:15 a.m.]
MR. OLIVE: Yes.
MR. CHAIRMAN: Mr. Steele.
MR. GRAHAM STEELE: As you know, Christene, this committee is - the reason you're before this committee is because part of our mandate is oversight of the cultural affairs work of the government. Of course, we're provincial, so the questions that I have will focus on the provincial aspects of the culture sector. The first question is that you alluded briefly to difficulties of valuation and financing. I wonder if you could elaborate on that and explain exactly what you mean by that. What are some of the challenges facing people in the cultural industry in Nova Scotia with respect to valuation and financing?
MS. HIRSCHFELD: There are two separate questions there, to my mind. One is almost an accounting function, which has to do with the valuation. The second has to do with securing of financing, and in part that's a legal issue because we have to figure out, as lawyers, how to take secured interest in intellectual property.
The first issue having to do with the valuation of IP is an interesting one. We've come from a background of bricks and mortar. Every appraiser knows how to go out and look at a building and tell you, at least on two levels, how to value it: what's the reconstruction cost and what's the cost in a marketplace? We know what buildings are selling for; therefore, we can extrapolate from that. With businesses that have been running for a period of time, evaluators can also go out and look at that. The problem with the cultural sector is that we're dealing with things that are very difficult to put a price tag on. Appraisers and accountants find it difficult to value these things.
With the software industry, when I'm doing financing work, we've had some success in the past hiring companies - not in Nova Scotia, though - to give values of software. The problem is that the valuations that come back are always on the low side. So they say, the worst-case scenario, something has a value of x; the problem now with the economy and what's happened with the high-tech sector is that that value is going to come back significantly lower than it would have three years ago. I think it's an education process. As we continue to move into a knowledge-based economy, hopefully the valuation skills will continue to grow and people will be able to put a value on this, but right now we're at a loss.
The second part of your question has to do with the financing of intellectual property. Yes, indeed, that is partially a valuation issue because if you walk into a bank and try to secure financing, the bank of course wants to be able to say that the asset that you want us to finance is worth x. But the second issue that arises from that has to do with taking a secured interest in the intellectual property. I mentioned that most IP is governed by federal Statutes, yet property rights are governed by provincial law. We end up with a very split system.
While the Copyright Act, for example, has provisions about assignments of copyright, there is no provision in the Copyright Act that permits taking a mortgage. A mortgage is, of course, the type of security that a bank would want to take over copyright, say if you were financing a film or television project. If we go under the Personal Property Security Act, though - while at least we've come that far; we've brought in the PPSA, which talks about financing intangibles or all those nice things we can't touch and feel - we still have the issue that the federal government says that it has jurisdiction over copyright. So we're at a loss.
Fortunately, Nova Scotia isn't litigious enough, so we don't have any case law saying that yes, indeed, we have to take security under the Copyright Act, and even though it doesn't talk about a mortgage, you can take a mortgage under that legislation, or no, you have to be taking provincial security. The result is that bankers and lawyers really don't know quite which way to turn.
MR. STEELE: So what you have is a situation, it sounds like, where artists and other creative people have assets and yet they're stuck in this no man's land, if I can call it that, where nobody's quite sure what to do with this asset that they have. You had mentioned to me before we started that you started out partly doing work for the Royal Bank which had taken the lead in financing this kind of work in Atlantic Canada, or maybe in all of Canada. What practical steps can artists and other people in the cultural sector take to try to enhance their ability to obtain financing? I will add on another question - so that's the first one, what practical steps can people take? - and the second question is, what legislative changes, if any, would clarify this situation so that everybody would know where they stand with respect to the financing and security in intellectual property?
MS. HIRSCHFELD: As for the first question, I think that there is - as in many industries - a lack of knowledge amongst small-business owners. I find whether I'm dealing with the entertainment sector, the software sector, or just small business in general, small businesses have a problem hiring professionals to give them advice and to try to set up the proper business structure. So I talk about people hiring independent contractors and employees and not having a waiver of moral rights. Well, when somebody goes to finance your project, when somebody goes to invest in your company, one of the things that they're going to look at is the contracts which you're relying on. If you tell me that you own the software that we're trying to finance, I'm going to say to you fine, I want to look at the contracts. If you haven't done your contracts properly, if you haven't had the copyright vest
in the employer, if you haven't had a waiver of moral rights, you are going to have restrictions on what you can do.
The other problem has to do with the exploitation of the intellectual property, especially in the software industry. I find that because small businesses don't have access to professionals, professionals who know exactly what they should be doing, quite often there's an overselling of markets. For example, you're running a small business, you've developed a wonderful piece of software but you need to get some credibility - you get credibility by obtaining customers - you enter into a contract which gives somebody a right which will come back to haunt you. Anyone who has experience in licensing would recognize the shortcoming in the contract that you're about to sign, but you're so eager to get this investment and this credibility that you will go ahead and have it signed anyway.
One of the ways that one of my clients, whom I have a lot of respect for, has gotten around this problem, this inability to obtain the professional help really necessary to build up an infrastructure which will permit financing to be obtained a little bit more easily, is by setting up an advisory committee. This client has approached a number of high-profile business people in different sectors of the economy, they get together every quarter, they sit down, talk about where the company is going and what the options are. They've done a very, very good job; they have an accountant, they have a lawyer, they have a number of people involved in their industry, and they have a few people who aren't in their industry, just very good business people. They have six, seven people get together on a regular basis and talk about the future of the company, talk about what's going to happen if we secure financing from this organization, what's going to happen if we license our technology to that organization, and it gives them access to information they wouldn't have otherwise and they definitely could not afford.
The second part of your question had to do with the changes to legislation. This is a problem being faced in many places throughout the world, and my fear is that given that we're moving into a global economy in many ways, especially when you're dealing with the high-tech sector, there really are no boundaries. There has to be some type of international treaty dealing with the protection of intellectual property. One of the concerns that comes up - separate and apart from the provincial/federal issue - is the whole issue of moving outside of Canada or outside of North America. How do you protect your intellectual property rights? We're all familiar with the stories of the pirating of software in certain countries. Without some form of international treaty which will govern and protect intellectual property rights, without some consistency across the board, we're going to have a very difficult time proceeding. That's something that's being looked at by the World Intellectual Property Organization. They are trying to move towards unified treaties throughout the world. It's going to take a while, but people are focusing on it.
MR. STEELE: Just to clarify my last question - I know I have to give other people time - is there anything that Nova Scotia can do, particularly with respect to its property security legislation, that would make it easier for people in the cultural sector to obtain financing.
MS. HIRSCHFELD: I had mentioned before this session started that I was at a great conference in London, Ontario last fall where this issue was discussed. Nova Scotia, I think, has to liaise with the federal government on this issue but, again, I don't think it can be Nova Scotia alone. I think it has to be each of the provinces, because without a consistent approach across the country, we're not going to make any progress.
MR. CHAIRMAN: Are there any other questions? Mr. Olive.
MR. OLIVE: We also have here today with us Mr. Rob Cohn, who made some interesting comments last time. Just to fall somewhat into Mr. Steele's line of questioning, one of the comments that Rob made was that if we had intellectual property protection here - and I appreciate the fact that it's a federal issue, so we would have to get agreement with them. But if there was a way to do that, do you believe in your practice that as far as the ability of our arts and culture community to survive financially, that it would be a significant benefit to them here, if we had IP protection, a financial benefit, because that was one of the issues?
MS. HIRSCHFELD: Yes, although just a point of clarification, I do believe we have IP protection. It's just a problem of trying to get a connection between the federal protection, which is available, and the provincial protection. To have a consistent approach to IP across the country would be of benefit, definitely. We have some extraordinarily talented people in Nova Scotia, and in Atlantic Canada as a whole. Our artists are well respected. To have a method of financing available would be a very wonderful thing, especially to have a method of financing available in the software industry, I think, is a very important thing, as well.
MR. OLIVE: What's the Canadian Institute of Chartered Accountants doing to address this issue?
MS. HIRSCHFELD: That, I don't know.
MR. OLIVE: They're in charge somewhere, aren't they?
MS. HIRSCHFELD: They are, indeed. I suspect they're probably almost as cautious as lawyers are in this area. I don't know what steps they're taking, but I could certainly make some inquiries and let you know.
MR. OLIVE: Finally, I would interpret your earlier comment to mean that this is something that should be put on the table at Intergovernmental Affairs and become part of, perhaps, these Premiers Conferences as one of these common issues across the country, like bulk purchasing drugs and having drug lists all the same in every province and that this, in fact, should be an issue, or may be a potential issue, for Intergovernmental Affairs and movement from that group up towards the federal government, rather than a one-off from Nova Scotia and from Ontario and from British Columbia?
MS. HIRSCHFELD: Absolutely. That would be a wonderful thing and once there is a unified approach across Canada, once we have legislation in place which deals with these issues, then we will better be able to deal with the World Intellectual Property Organization and, hopefully, move towards a unified system around the world.
MR. CHAIRMAN: Mr. Clarke.
MR. CECIL CLARKE: Staying with the idea of the cultural aspect of things, as things evolve, I guess, and it's a tough thing. Obviously, you can assign value, as you have said, about a building and it's a matter of what value is placed on intellectual and trying to look at the ownership issue, but what is the value of that ownership in terms of its application. But on the cultural side, one of the things that I've seen evolve over the years in Cape Breton, of course, is the Celtic Colours Festival, which was brought together by government but has become an entity, but there were some drivers to that.
[9:30 a.m.]
For instance, when a board decides they're going to shift and have new leadership, the ownership issues of, I mean the festival is still branded the same because they contracted PR firms to do imaging and the like to help brand it, as you would say, and, subsequently, they had talent to put together the actual festival itself and who would be involved, and then they make a shift in their decision making to bring in new people. One of the challenges is a board, or people, is leaving, potentially, the liability of issues you get into.
Is there - I guess more than an outcome - structured advice in terms of how people would go into such a thing? Obviously Nova Scotia is well known for cultural festivals and the like, and you do get localized issues. As you say, a lot of them can't afford high-priced help to raise a concern or an issue. Are there steps that are pretty laid out in some of the material they have that can help people, especially when you're dealing with - because ultimately you have not-for-profit volunteers, they are concerned about liability issues, especially when staffing has to be hired and contracts have to be let. There's a due diligence factor and a liability factor that comes into this that people get concerned with.
MS. HIRSCHFELD: They're also concerned with their reputations as well. I'm not aware of any publications which deal with this issue. I've been involved with a number of not-for-profit organizations in the entertainment industry. My advice to people, when they're being asked to join a board, is to first determine whether there's any director's liability insurance in place. That's something that can be worked into the budget for an organization, and it does give your directors peace of mind. As a director you are taking on the responsibility to ensure that the money is being spent as it should be. That's a very difficult thing for us, as volunteers, to make sure. We have our professional lives where we have to make sure that we're earning a living; to take on this personal responsibility on a volunteer basis is a very tough thing.
I would think that anything like Celtic Colours, having the profile that it would, would find it very easy to attract members for an advisory committee, for example. People like being involved with successful undertakings. I think that something like Celtic Colours has enough of a following now that if the organizers were to approach different business people and say we want you to sit on an advisory committee, as opposed to a board of directors, you would be able to get your so-called high-priced help that way.
The other thing that organizations like that really should be looking at is developing a handbook for its board of directors, saying thou shalt not do these things, thou shalt do these things. It's a very simplistic thing to say, but it's something that would really be of assistance to people joining a board of directors.
MR. CHAIRMAN: Mr. Steele.
MR. STEELE: I want to go back to this issue of financing, which is so often the make-or-break issue for people with brilliant artistic and cultural ideas. They fall by the wayside because they can't get financing. You had mentioned and I had read somewhere else that the Royal Bank had taken the lead in financing this kind of business. You even said to me that you partly got your start in this aspect of law through doing legal work for the Royal Bank. What exactly is it that the Royal Bank did differently? What did they do that the other banks weren't doing that allowed them to become leaders in this kind of financing?
MS. HIRSCHFELD: I started in these industries about eight or 10 years ago doing the financing for the knowledge-based industry group for the Royal Bank for Atlantic Canada. I was very fortunate to get that work. What the bank had done at that point was decided that they were going to focus on the entertainment industries, the software industries, biotech, anything that fell within their definition of knowledge-based industry. In order to do that on a national level, they went out and hired people who were very familiar with financing these organizations.
For example, in Toronto they had hired a man named Robert Morris who had been involved with a number of smaller organizations which had focused on financing film and television projects. Robert was hired as a Vice-President at the Royal Bank and headed up their lending. He put in place a team across Canada, in different centres where they had educated lenders. I think it's the education process which gave the Royal Bank, at that point, a leg up. They would have their conference calls nationally on a regular basis and talk about issues that were arising. My example is, I think, very indicative of how they went about growing their team.
When I was approached and asked if I wanted to do their work, meetings were set up for me in Toronto. My firm paid for me to go to these meetings, but when I got there, Robert Morris had brought in representatives from the legal community, which is normal. Normally, I would sit down and talk to other lawyers, but they also brought in an accountant. They brought in somebody from what's known as a completion guarantor - it's a bonder for the film industry - they brought in someone from the insurance industry and we sat down for a full day, pulled out a few files and went through them. The people from the different industries would talk about what it was that the bank looked for when financing this. That's never happened to me when I've acted for other lenders. Normally I get a set of instructions saying, do this and take a secured interest in that. That's the very first time that my client, the lender, has taken the time to sit down and explain the process.
The other wonderful thing that came out of that was because I had met two of the bank lawyers, who were in private practice in Toronto, I was able to call them when I ran into a problem. I had mentioned to you before we started this that one of the problems that I've had working in the IP sector is that until I started doing this type of work, I was always able to walk down the hall and speak to one of my partners in my office and say this is where I am, this is where I want to be; how do I get there? I can't do that anymore. So it's been necessary for me to try to build my connections on a national level because the people doing this type of work aren't, for the most part, located in Atlantic Canada. So it's education; that's what it comes down to.
MR. STEELE: Are you aware whether the Royal Bank considers their foray into the knowledge industries to be a success?
MS. HIRSCHFELD: I don't know. I wouldn't feel at liberty to talk about that, I'm afraid.
MR. CHAIRMAN: Mr. Olive.
MR. OLIVE: I would like to go back to Celtic Colours. Celtic Colours was asked by the government to form a non-profit society. As a result of that, the owners or creators of this had to give it up. My first question is, because you made a comment that we do have IP protection - I think that's what you said; maybe I'm wrong - did they have to give it up and
if they didn't have to, what do we have here in Nova Scotia - you've been working with it here now for awhile - that would have provided them a better opportunity to secure financing to keep it going themselves so the government wouldn't have required them to give it up, so the government could lend this non-profit group some money? You say there is protection. I'm not quite sure where it is. There is a pretty good example.
MS. HIRSCHFELD: It's a good example. A couple of issues - Celtic Colours, for example. One could apply for a trademark to protect that. You would have ownership of the name. That's one form of protection that you would have. The problem is that intellectual property does not protect, for the most part, ideas. I said with copyright, for example, it protects the expression of the idea, not the idea itself. So anyone sitting here today having looked at my presentation would be able to go home and write that up themselves and they wouldn't be infringing my copyright. It's if you sit down and copy it that you run into a problem.
The concept that you're talking about - the Celtic Colours Festival - does not fall within the definition of intellectual property. It's not a patent. It's not something novel and useful which fits within the definition of patent necessary for protection. It's certainly not an industrial design like the ribs on that coffee container. It's not circuit topography, obviously. It's not copyright. Perhaps you could call it a trade secret, but anybody looking at it would be able to figure out how to run this thing, so you're not going to have any protection there and unless you've registered the trademark, it's not a trademark.
So the problem is the definition of this thing. When you talk about the creators of the Celtic Colours Festival having to give up their rights in and to the project, I suspect the problem is the government doesn't want to be financing a project for individuals' profit. Not having been involved in the discussions on this, that would just be my guess why this came about.
MR. OLIVE: That's partly where a lot of this discussion is coming from. There are creators in Nova Scotia, very creative people in Nova Scotia, developing things like Celtic Colours International Festival. Go back to the ECMAs and to the Stan Rogers Folk Festival; they're all over the province. There does not appear to be, today - and you say it's because of the definition of IP. Well, what do we do? Can we do anything? If we can, what can we do to provide some level of security so that those creators can go to the bank and do have an asset? Right now, they don't in Nova Scotia, and I presume they don't in Canada because of the IP; whereas in the States, they do.
MS. HIRSCHFELD: But the problem becomes do you really want to stop someone else from running another festival? If I come up with a great idea and call it the Human Resources Committee Festival, and we're going to bring in artists and they're going to perform each year, do you want to stop somebody else from coming along and running another festival? Once you start protecting IP, you are protecting other people from doing
other things in the field, hence the discussions about patents. The drug companies are subject to an awful lot of pressure. People are saying this is not fair. The patents on drugs allow a monopoly and allow the prices to go up. Well, you're rewarding people for creating this thing. I don't know whether you want to be protecting people and prohibiting them from starting other festivals.
That's not a decision for me to make, it's a decision for you to think about. If you do protect that type of thing, then you're going to have to think, what is it that you are protecting? Do you protect somebody from running another festival celebrating music in Nova Scotia? Do you broaden it even further than that and say that you're not going to allow anybody else to start any type of festival celebrating culture in Nova Scotia? I don't think that's where you want to go. If you're saying that Christene Hirschfeld starts a music festival, this Human Resources Committee Festival, which is going to run each April in Halifax, that's wonderful. How do I grow that? I'm going to grow that as I would grow any other business. I see we are getting a bit of interest from the back, as well.
MR. OLIVE: If you want to put on a dance at a Legion and you want to use music that's created by somebody who's registered with SOCAN, then you pay.
MS. HIRSCHFELD: Absolutely.
MR. OLIVE: What you're telling me here - and I kind of get the feeling that you would not want to see this kind of protection for somebody who creates a Celtic Colours - is that if I wanted to put on a Celtic Colours somewhere else and there was a booklet that said this is how you do it, and it's signed by me, it's my creation, and I'm protected under IP, if you want to put it on somewhere else, then you would pay me a fee. Is that an oversimplification?
MS. HIRSCHFELD: Mr. Olive, I think we've gone an extra step. I'm getting more facts now. Because initially, it was just how do we protect someone who starts a festival like Celtic Colours. I'm saying, based on that statement, I don't know whether you want to stop someone else from starting another festival in Nova Scotia. If we say we have the Celtic Colours concept and this is the bible for it, then we've gone a little bit further. If I were the creator of Celtic Colours and I created this bible, then I would own the copyright in that. If somebody wants to copy what's in this, they're going to be violating my copyright. There may be trade secrets in this book as well. The trade secrets are going to be protected by contract.
So if I think that if you are in Winnipeg and you want to run a Celtic Colours festival, I may contact you and say, we have the bible. We will enter into an arrangement and you will pay whatever it is. We will work out something, whether it's a percentage of the revenues or a dollar value, a fixed fee; we work something out. If you fail to pay that and you use the information that's in my book, then you'll be subject to breach of contract and I can sue you
on that basis. I can also sue you for violating the copyright if you've copied the material. That's a different situation, to my mind. That comes down to almost a franchise question. If we look around at all of the businesses that are run as franchises, that's how they're doing it. They do it based on contract. There's a very clearly developed set of rules governing contract and franchise work and you do it all on the basis of contract.
[9:45 a.m.]
MR. OLIVE: Mr. Chairman, so there's a big grey area because you indicated earlier that it didn't necessarily have to be written down, it didn't necessarily have to be published, so there's this grey area that I have this super idea for Celtic Colours. I don't create that book, it's my idea however and somebody else can go and use the idea and develop a parallel Celtic Colours in another part of the province and there is no protection for me under the copyright laws or under IP or . . .
MS. HIRSCHFELD: Well, when I made those comments, it does have to be written down, it does not have to be published. It's up to me if I want to leave it on my hard drive and never show it to anybody. You don't have to publish under the Copyright Act because part of copyright includes the right to control the publication and dissemination of information. That's where we get into issues with artists who die and their work is being published and the estate stops and says, excuse me, my relative never intended to publish this. So, it does have to be in a hard and fast format, whether it's on my hard drive or on a piece of paper, it doesn't matter.
The fact that something doesn't qualify for copyright protection does not mean that it's necessarily not protected in some way and that's where I get into the franchise example. But it's like everything else; it's like saying Christene Hirschfeld owns a car, she should be able to drive it. Well, if I want to drive my car I have to go and get a license. There are certain steps I have to take in order to protect myself from criminal prosecution and if I, as a business person, create the plan for Celtic Colours, then I should be getting the advice that is necessary to protect myself. There is definitely a problem trying to get financing, but that is a problem for small business people in - probably in the world, I don't know; definitely in Nova Scotia and probably throughout Canada. It's very, very difficult for someone running a small business to walk into a bank and say, I have a wonderful idea - believe in me and give me your money; invest your money in this project and it will succeed. Right now, banks are very skittish, they are not interested in investing in things where they don't see a proven track record. But that's a different . . .
MR. OLIVE: But if you had something like Celtic Colours in your file jacket and asked the same question and said here's a proven thing, now what I want to do is create another one called Irish Colours somewhere else and this is my format. Right now the bank won't talk to you because there was nothing there. There's no - it's all IP, right?
MS. HIRSCHFELD: No, but if I were the creator of this Celtic Colours and I went to the bank and said, I do want to borrow money and create this Irish Colours elsewhere, what they would be asking me for is some type of proof that there was going to be a return on investment. If I've approached you in Winnipeg and said, this is a perfect fit for you, you and I enter into a contract, then you may be able to get financing based on that. That would be straight revenue financing and that gets us back to this whole issue - how do you value something that you can't touch and feel? The banks do it by looking at the revenue stream.
MR. OLIVE: So going back to Mr. Steele's comment then, what can the provincial government do legislatively, what can we do to provide some support to the development of copyright that protects IP in Nova Scotia? Notwithstanding we mentioned about inter-government affairs, it would have to be a national sort of province, up to the feds, but is there anything in the short term that we can do here?
MS. HIRSCHFELD: I think we're talking about two different things though. I think that you can definitely protect the IP behind the whole Celtic Colours scenario and we'll use that by way of example only. You do it by putting it in writing, you have your little bible, it's all committed, it's protected by copyright, then you enter into contracts with people. You have non-disclosure agreements and you sue people if they violate their contract or their non-disclosure agreement.
Whether the banks are going to fund that or not is a completely different issue. It doesn't have to do with protection, it has to do with how the banks value things. The banks are looking for a revenue stream, something that they know they're going to get repaid out of because they are not equity participants, rather they are financiers, so they always look for their out. The smaller the business, the less uncertain the revenue stream, the less likely it is that they will be able to find a way out. Whether the government wants to be in the business of lending money to these people so that you can create your own source of funding, so that organizations that don't have the track record, organizations that don't have the guaranteed revenue stream - hopefully guaranteed - can access money through the government, I don't know.
MR. OLIVE: One more question, if I could just follow up on that. There is a third funding group out there called the private sector.
MS. HIRSCHFELD: Absolutely.
MR. OLIVE: If the government says no and the banks say no, would there not have to be something in Nova Scotia that would give some assurance to the private sector, to Aliant Telecom or whatever, to say, yes, because we know this is protected someone can't come in the back door and duplicate this the same week we're going to fund putting this on.
MS. HIRSCHFELD: I still stand by my position, it is protected if it is done properly. The problem, again, when you look at private sector investment is people want a return on their investment, they want to know they're going to get their money back. Having the Nova Scotia equity tax credit is a very good thing to assist in that. That will encourage smaller investors to put money into companies. I have seen a number of my clients relying on that. Other than that, you end up with angel investors. To my mind, an angel investor is just that, somebody who is doing something very, very good not necessarily because they're going to get a return on their investment. If they end up with a tax break because of the Equity Tax Credit Act, that's a wonderful thing. That just gives more incentive.
MR. CLARKE: I think what you really come down to is the legislative piece that there really is no quick legislative fix to that area, and the issue of providing guidance, it comes down to what you referred to before and that's how do we educate people to mitigate issues coming forward. Really, from a provincial point of view, we have a national agency or office that's mandated to oversee this. I don't know if there's any specific advice or actions that we could take. There's a guide to copyrights. Is there a way to try to provide some public information or education piece that would be helpful enough but, yet, in terms of directive, how do we address the education piece? Not to say you have the answer, but do you have any ideas or thoughts on that?
MS. HIRSCHFELD: A number of the organizations I'm involved with are trying to do educational sessions. For example, ITANS, the Information Technology Industry Alliance of Nova Scotia is sponsoring lunch-and-learn sessions. The first lunch-and-learn session this year was on intellectual property. We're very lucky in Halifax, the Canadian Intellectual Property Office has an office here. It has two employees that I'm aware of, a fellow named Tom Boyd and his assistant. Tom is one of the most knowledgeable people in IP that I've ever met. He knows his stuff and he's able to get the information across to people. He's very generous with his time.
My concern is that as CIPO, it goes through cutbacks; when Tom retires they may not replace him and we won't have that resource available to us. I think in this wired age, making sure there are links on government Web sites to things like the Canadian Intellectual Property Office would be a great service to the public. If people can find a Web site where there are links to very reliable sources of information, that will go a long way towards educating people. Some small business owners spend an awful lot of time trying to educate themselves, and to make that information readily available would be a great service for them.
MR. CHAIRMAN: Do we have any further questions from anyone? If not, perhaps, if you would like, we will give you a couple of minutes to close if you have anything else, any parting words of wisdom you would like to leave with us.
MS. HIRSCHFELD: I don't believe I have any parting words of wisdom, but thank you for the opportunity.
MR. CHAIRMAN: Thank you very much for coming in today. It's certainly been educational. I, for one, certainly did not know nearly enough or as much as I do need to know about this. This has been a great help, so I certainly appreciate your time. Thank you very much. If there's anything that the committee can do at any point in time in the future, please let us know.
With that, if there are no other comments, we stand adjourned.
[The committee adjourned at 9:55 a.m.]
