Canadian Lawyer InHouse

Feb/Mar 2010

Legal news and trends for Canadian in-house counsel and c-suite executives

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FIT is just one of a dizzying array of government programs designed to support green and other investments. The LoyaltyOne initiative is one example of how larger corporations can use the incentives. "There are a number of agencies out there" helping to finance clean tech development, says David Pamenter, who leads Gowling Lafleur Henderson LLP's technology industry group practice. His team consists of lawyers with various specialties such as tax and securities law. It does not do work in areas people might traditionally associate with clean tech, namely alternative energy includ- ing wind and solar power production; a separate energy group works on those projects. Instead, it works with the less obvious side of clean tech, saying "almost half of the activity in clean tech is actu- ally not in renewables, it is in everything else. It is in the process efficiency things, treatment, monitoring, radiation, that sort of thing." A major attraction for the firm is most technology firms have a clean tech aspect to their operations. Pamenter gives the example of an Ontario company's development of a control device to attach to the electrical panel of a major power consumer such as a warehouse, factory, or shopping mall to reduce the amount of electricity con- sumed for lighting. The device is expect- ed to reduce electricity consumption by 30 per cent and pay for itself within 18 months. "We are actually doing the full-court press for that particular client so we are doing the patent work, we are doing the distribution agreements, we are doing their manufacturing agree- ments, all their internal corporate stuff, licensing, and all that sort of thing." These are often smaller companies that face budget challenges and are too small to have in-house counsel. One of the biggest challenges for clean tech firms is securing funding to work up prototypes or in later stages start up production. While venture capital and angel investor money is starting to flow back into clean tech, it is com- ing from "a very low base." That leaves governments as the main source of funding, with the most popular being the Scientific Research and Experimental Development tax incentive program. Administered by the Canada Revenue Agency, SR&ED encourages Canadian businesses of all sizes, and in all sectors, to conduct research and development in Canada and it is the largest single source of federal government support for industrial research and development. "If you are a Canadian-controlled private company, and depending on the vari- ous provincial programs that are con- nected, it can refund 30 to 35 per cent of the financing and the capital-raising of certain technology companies or energy companies and the acquisition matters. There is some advice but it is really the transactions they do that is how we get involved," says Jason Kroft, head of Stikeman Elliott LLP's emissions trading and climate change group. A knowledge of science and emerging technologies can "help," says Kroft, "but at the end of the day what lawyers do is often very similar across industry groups. What we write and think and negotiate seems to be really transferable." The feedback that we were getting from employees and [Air Miles] collectors was . . . green was very important to them and they really wanted LoyaltyOne to be doing leadership things that would make associates proud of the company and collectors proud of the program. DEBBIE BAXTER, LoyaltyOne Inc. the money that you spent on scientific development," Pamenter says. "In terms of government programs, that is as gen- erous as almost any, anywhere." Eligible claimants receive cash refunds and/or tax credits for research and development outlays under the SR&ED program. Other popular programs include the National Research Council's Industrial Research Assistance Program for research and development, and commer- cialization of new products and services. "Of course they get so many applications and they pretty quickly run out of their annual funding," Pamenter says of the program. There is also the Sustainable Development Technology Canada tech fund program which "can be very good for larger projects." Helping to tap into public and pri- vate funding in the clean tech space is rapidly becoming an area of specializa- tion within big law firms. "Clean tech to us is the transactions associated with What sets clean tech work apart is the usually key involvement of third parties such as government agencies and the requirement to guide clients through the process. "That is probably what is a bit different, understanding that there is a path and being able to give your clients an idea what the path is and not just responding to issues as they come up, actually being able to help them with strategy. With emerging or newer busi- nesses there is more of a role to be an adviser in a broader sense and a little more strategic," says Kroft. He agrees with Pamenter that secur- ing funding for clean tech businesses is a major hurdle. "That is the biggest issue in kind of anything that is innovative right now access to capital," he says. "What we are seeing is deals get done, capital is available if you have a well-structured, well-reasoned sound project, sound company, or sound initiative. You will get the access, but things take time." IH INHOUSE FEBRUARY 2010 • 29

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