Nortel Sale to Ericsson Stirs Protest in Canada

Why Does Government Fund R&D?

What Is Government Entitled to in Exchange for Funding R&D?

Nortel Sale to Ericsson Stirs Protest in Canada

A recent article in the NYT, “Nortel Sale to Ericsson Stirs Protest in Canada” by Ian Austen, describes a conflict over the sale to foreigners of patents that were developed with government funding: Nortel, a Canadian company, is currently bankrupt and its assets are in the process of being dispersed. In particular Ericsson, a Swedish company, is interested in purchasing some of Nortel’s patents. However, several Canadian politicians are objecting to the sale of Nortel patents to foreigners, claiming that the patents resulted from publicly funded research, and as such belong to Canada.

The debate over Nortel has focused on exactly what remains of value at the company and, more broadly, what Nortel owes Canadians. “People are a bit miffed that a lot of government money went into Nortel through tax credits” for research and development...

“Nortel’s intellectual property and work force, devoted to next-generation wireless research known in the industry as L.T.E., or long-term evolution, is nothing short of a national treasure that Canada must not lose” … putting it in foreign hands could endanger Canada’s national security and make it more difficult for Canadian carriers to restore future network failures…

Several Canadian politicians, echoing Mr. Lazaridis, have emphasized the value of Nortel’s L.T.E. patents. But unlike its competitors, Nortel has found no carriers that are interested in buying its technology, and some analysts question the importance of what it has developed to date. “It may be the crown jewels of Canada, but it’s no longer a jewel of the wireless industry … It’s not like Nortel has the keys to L.T.E.”…

In response to the politicians’ objections, however, a wireless technology consultant in Denmark made an important distinction: Denmark has also lost government-funded technology to foreigners. However, it was the skilled Danish workers, not the technology they developed, that were the real assets for Denmark.

Several Danish companies were once leading makers and designers of handsets. Acquisitions and failures, however, either eliminated them or put those companies under foreign control. But subsequent investments by foreign owners in Denmark, Mr. Strand said, have made the country’s wireless industry bigger than ever and based largely around high-paying engineering, research and development jobs. “If you have the right people with the right skills, you have no problem.”

The issue the lies at the heart of this debate is this: Why does government fund research and development? And in particular, what is the government entitled to in exchange for its funding of R&D?

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