Date: 20000726
Docket: 98-1663-IT-G
BETWEEN:
KNOWLEDGE SYSTEMS INCORPORATED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
McArthur J.T.C.C.
[1] These appeals are from assessments for six of the
Appellant's taxation years, 1991 through 1996. The only issue
is whether a certain activity of the Appellant, Knowledge Systems
Incorporated ("KSI"), constitutes scientific research
and experimental development ("SRED") within the
meaning of section 37 and subsection 248(1) of the Income
Tax Act and subsection 2900(1) of the Regulations.
[2] The Appellant was in the business of providing computer
and technical services and computer systems management consulting
in Ontario. During the relevant years, it was also involved,
through its principal, John J. Leppik, in accumulating
information for a project known as Knowledge Development Systems
(KDS). The hypothesis at the root of the KDS project taken from
the Notice of Appeal, was that it ought to be possible to link a
computer user's human intelligence and experiences with the
memory, storage, retrieval, speed and indexing capabilities of a
computer, to produce a superior decision-making process combining
the best elements of the human mind with the best elements of the
personal computer. The Appellant's hypothesis evolved over
the years. In his submissions, counsel for the Appellant
stated:
... Your Honour, I freely admit that there were numerous
hypotheses, some recorded, some not, but the underlining one,
which is transparent to Dr. Gotlieb, which in my respectful
submission, it was abundantly clear in Mr. Leppik's
testimony, was that he wanted to build an ever present computer
to be able to – ... not just follow you around, but
even ultimately be stuck to you, that could be used to assist a
person. Think – not think, that's not right, but to use
the reliability ... and the breadth and the speed of a
computer and the intellect and wisdom of a mind. (Transcript page
45)
[3] During the taxation years in issue, the Appellant claimed
current and capital expenses in respect of the KDS project which
may be summarized as follows:
|
Taxation Year
|
Current
|
Capital
|
Total
|
|
|
|
|
|
|
1991
|
$14,559
|
$1,231
|
$15,790
|
|
1992
|
18,877
|
5,785
|
24,662
|
|
1993
|
31,960
|
2,433
|
34,393
|
|
1994
|
37,946
|
1,487
|
39,433
|
|
1995
|
50,460
|
5,823
|
56,283
|
|
1996
|
24,472
|
Nil
|
24,472
|
In filing its tax returns for the taxation years, the
Appellant submitted that the expenses constituted SRED
expenditures within the meaning of sections 37, 127, 127.1 and
248 of the Act and subsection 2900(1) of the
Regulations. In assessing the Appellant for the
taxation years, the Minister of National Revenue permitted the
Appellant to deduct the expenses in computing its income pursuant
to section 9 of the Act, but denied that the expenses
constituted SRED expenditures. Subsequent to the hearing,
the parties filed an agreement entitled "Partial Agreed
Statement of Facts" dated June 26, 2000, disposing of
certain issues applicable only in the event the appeals with
respect to the issue of SRED were allowed. I will refer to
this agreement at the conclusion of these reasons for
judgment.
Facts:
[4] Mr. Leppik[1] obtained a Bachelor of Applied Science from the
University of Toronto in 1961 and is a professional engineer
registered in Ontario. He worked for IBM Canada from 1961 to
1984. Before retiring, he was the director of corporate and
scientific programs. He established IBM's Canadian program
for joint information technology research with universities and
hospitals. His activities since 1984 include representing over
150 taxpayers with regard to their applications to Revenue Canada
for SRED. I believe he has been 100% successful.
[5] The Appellant's position taken from the Amended Notice
of Appeal included:
14. The technological objective of the KDS Project was to
develop a means whereby professionals and others working in
knowledge-intensive occupations would be able to use ever-present
personal computers as aids in all aspects of knowledge
processing. The focus of the KDS Project was to develop an
effective way of storing, organizing and using a
professional's knowledge base. The desired result of the KDS
Project was to develop a shrink-wrapped application program for
any such worker using an IBM compatible personal computer.
15. The KDS Project took the approach of developing a
prototype to assess how much of the technological objective could
be achieved with existing technology, to identify the
technological uncertainties, to identify where technological
advances would yield desirable results and to identify the nature
of such advances.
16. The KDS Project involved several elements of technological
uncertainty, including:
(a) establishing the full definition of knowledge
elements;
(b) identifying and characterizing knowledge domains;
(c) establishing relationships amongst data elements;
(d) determining what processing algorithms would be required
to synthesize knowledge elements into knowledge domains or
aggregates; and
(e) determining whether the problems with inclusivity and
exclusivity could be reduced or eliminated.
17. The KDS Project research was carried out by the Appellant
in a systematic manner.
18. The Appellant's research on the KDS Project resulted
in technological advances.
[6] The Respondent states that the activity in respect of
which the SRED expenditures were claimed did not constitute SRED
within the meaning of section 37 and subsection 248(1) and
Regulation 2900. In his written submissions, counsel for
the Respondent stated:
... The Appellant took existing hardware and software
technology and did not modify it. The Appellant noted
improvements to be made to the project in issue, but did not
implement or test these potential improvements. The Appellant
recorded any tests done on the project in such a way that these
tests could not be understood or reproduced. Accordingly, the
Appellant's project was not scientific research and
experimental development within the meaning of subsection 2900(1)
of the Income Tax Regulations.
[7] Both parties rely on the evidence of highly qualified
experts. Dr. C.C. Gotlieb testified on behalf of the Appellant.
He has been associated with the University of Toronto as a
student, then as a lecturer, professor and researcher since 1942.
Since 1986, he has been Professor Emiritus, Department of
Computer Science and Faculty of Library and Information Science.
His many honours and achievements fill 18 pages. He has three
honorary doctorate degrees and the Canada Order of Merit. His
expertise includes Physics, Mathematics and Computer Science. He
also acts as a consultant. He was qualified to give evidence as
an expert in information retrieval systems and databases. Dr.
Gotlieb and Leppik have had a business relationship over the
years and were friends. Upon the first request, Dr. Gotlieb was
hesitant to evaluate the Appellant's project but later
relented.
[8] Dr. Stan Matwin, also a highly qualified expert in the
relevant field, testified on behalf of the Respondent. He
attended the hearing and heard the direct evidence and
cross-examination of Dr. Gotlieb. He devoted more time to the
issue than his counterpart.
[9] In arriving at a decision, I have relied heavily on the
evidence of both experts. For that reason, I will quote
extensively from their reports commencing with that of Dr.
Gotlieb. He describes the research undertaken by KSI as
follows:[2]
The purpose of this research was to develop a system that
when, for an individual, (the user) a query arises about any item
or question that comes to his attention, he could recall all
facts or items he had previously encountered that were relevant
to the query and had been recorded into the system. The system is
intended to be a personal, rapid, portable, and reliable, memory
aid.
The way this is achieved is that when the user encounters a
(sic) item that he feels is worth remembering, to become
part of his personal knowledge base, he records this on a
portable device to create an entry. The device may be a
tape recorder, a laptop computer, a hand-held scanner, a camera,
etc. An entry consists of three parts, a locator which
points to where the entry is to be found. The locator may point
to the portable device itself, a large computer in the user's
office, a filing cabinet in his home, the World Wide Web, a
library of audio tapes, a photograph album, a book, an
encyclopaedia, etc. The second part is a set of
descriptors that the user attaches to the entry so as to
serve as headings under which the entry may be classified and
searched. One of the descriptors is a time stamp; others are
subject headings, and others may be key words or terms that help
describe what the entry is about. The third part of the entry is
the content, to be found where specified by the locator,
and which may take the form of text (perhaps typed in from the
laptop or read by the scanner), a portion of an audio tape, a
photograph, a painting, or even a musical score.
When a query is put to the system, the query is also assigned
descriptors, and the knowledge database is searched to retrieve
entries which have descriptors which match those of the query. In
effect the system is very much like a library, along with a
catalogue having subject headings for searching it. But in this
case the system is built for personal use by one user, who
carries it with him wherever he goes.
[10] In January 2000, Dr. Gotlieb spent three hours at Mr.
Leppik's office, witnessed a demonstration and asked many
questions. Later, over the telephone, he obtained more details
and obtained a better understanding of the extent of the system
and the methodology behind it. Dr. Gotlieb is favourably
impressed with Mr. Leppik's technological background and with
the equipment he has assembled. Under "Technological
Issues" Dr. Gotlieb states at pages 2 and 3:
To appreciate the scope of the system, it should be noted that
it has been in operation for 8 years now, with entries
accumulating at the rate of about 3,500 a year, or 28,000 in all.
Entries have, on the average 6 to 7 descriptors, and the total
number of distinct descriptors is more than 1000. Mr. Leppik
reports that he spends about ½ hour per day making
entries, approximately 10 per day.
[11] He explains that KDS is not an artificial intelligence
system. KDS is expected to supply the reasoning that will make
the memory retrieval useful. He writes that a system based on the
basic principles on which KDS operates will work because such
information retrieval systems have been in use for many
decades.
[12] The Appellant's present equipment is made up of
computer hardware and software known as PacRat. Both can be
obtained by anyone from commercial retailers of office equipment.
It has not altered this equipment in any way and must depend on
independent technological advancement at some future date to
provide a computer small enough for his requirements. There was
no evidence of when and by whom such a computer will be
available. Dr. Gotlieb states at page 4:
The portability of KDS is also an advance. Until the
computer came, information retrieval systems were large and
clumsy. One only has to think old-fashioned library card
catalogues to remember this. Moreover the current KDS prototype
is by no means the end achievement in what one can expect with
regard to portability. Computers continue to become smaller
and faster, and we can look forward to very compact
systems that will be correspondingly even more useful and
convenient.
The universal and portable features of KDS, along with its
simplicity, make it attractive for use everywhere, and for a long
time. The fact that it has stood the test of time and grown for 8
years make this plausible. In many ways, KDS is the ultimate
advance on the pocket organizers which are carried by so many
people for business and personal use. Ultimate, because it is
useful not only for organizing appointments and schedules, but
for almost all daily activities that depend on memory, and
because it has such a long life.
In my opinion, the factors of versatility because of
multimedia knowledge representation, dedication to individuals
and personal use, portability, along with the features of speed,
simplicity and low cost that go with modern PCs, all combine to
make KDS a definite technological advance of very considerable
interest.
From this quotation the reader might infer that the Appellant
was creating the portable hardware. This is not so. There was no
evidence that the Appellant is even in touch with any such
technological developer of computer hardware. Under the heading
"Scientific and Technological Uncertainty", Dr. Gotlieb
added at pages 4 and 5:
There are a number of uncertainties in the product that KSI is
attempting to develop. Already mentioned is whether the system
will really have high figures for both precision and
recall when it is used by others, and the measurements are made
over a large number of different queries. This is a very
important question, because it goes to the heart of the
usefulness and marketability of the product.
Almost of equal importance, is whether the system, which so
far has been tested only by its Chief Researcher, will be as
satisfying and as useful to others. Obviously it has to be tested
over a much greater number of users. Questions of the suitability
of the user interface come in here. Mr. Leppik is a very
knowledgeable computer user. Computer literacy is certainly
becoming more widespread, but will the entry, storage, and
display systems of the prototype be acceptable for the
"average" user for whom the system is intended? It
would be surprising if improvements were not found, but it is not
possible to say for now, where these improvements should be, or
what form they should take.
...
The system is useful as it is, but there are many
possibilities for improving it. The question is not whether there
is uncertainty, but which of the many uncertainties it is
profitable to explore.
Under the heading "Scientific or Technical Content"
he wrote in part at page 5:
I have personal experience of Mr. Leppik's professional
competence. For many of his years with IBM, and in subsequent
years, he worked at the University of Toronto, sometimes on
projects on which I myself have been engaged during my academic
career. I have no reason to doubt his statement that the system
has been under development for some eight years. The volume of
28,000 entries, some of whose contents I have seen for myself, is
evidence of a long-time dedication, requiring very considerable
technical competence for its achievement.
But the most persuasive evidence of technical content and
progress toward achieving the desired goal is the existence of
the prototype itself. It is, in fact, a complicated piece of
technology, built with many components, like the laptop computer
and hand-held scanner devices, which themselves are triumphs of
modern technology.
The answer to the question about showing technical content is
clearly evident.
Finally, many of the entries into the system are random
thoughts. These are very far from routine documentation.
[13] Dr. Stan Matwin wrote a rebuttal[3] of Dr. Gotlieb's report and
attended the first two days of the trial, hearing his direct
evidence and cross-examination. Like his counterpart, he is
highly qualified. He earned a PhD in Computer Science in 1977 and
since 1991, has been a professor with the Department of Computer
Science at the University of Ottawa. Presently, he is the
Director of the Ottawa-Carleton Institute for Computer Science
and head of Graduate Studies in Computer Science, School of
Information Technology and Engineering. I will not attempt to
repeat his many accomplishments but simply state that he has a
distinguished background in computer technology. He witnessed a
demonstration of KSI in March 2000. In his rebuttal of Dr.
Gotlieb's report, he describes KDS as a knowledge repository
which now contains a database of 28,000 knowledge items. Filed in
evidence were hundreds of examples,[4] five of which are picked somewhat at
random and reproduced as follows:
Page 25
Summary: KDS Experiment – How important is my PIM
Date: 07/27/93
Elapsed: 00:00:00
Key: pim
Key: packrat
Key: kds experiment
Key: information
Key: backup
Key: recovery
Key: kds find *******
Key: loss
Key: crash
Key: knowledge base
When PacRat 5.0 crapped out, I was severely impacted. I lost
many items. I did not know what I had lost. I lost confidence. I
developed a backlog of items and nowhere to put them. Eventually
I reverted to an old version and accepted amnesia for the
intervening period.
Two KDS lessons learned:
1. I knew that I did not want to recover 5.0 after I consulted
the CompuServe conference. I would have avoided the problem
entirely had I done this earlier.
2. KDS awareness and pretesting would have avoided the problem
for all of its subscribers.
Another loss Nov 98
.....................
Lost items
Recovered some phone numbers
Lost NOTES components
My knowledge base is so large and valuable now, I have no
option but to continue, with greater care.
Page 27:
Summary: KDS Experiment – Finding what I didn't know
I had
Date: 01/18/96
Elapsed: 00:00:00
Key: kds find ******
Key: forgotten
Key: retrieving
Key: propeller
Key: crawl space
Key: kds experiment
Key: kds experiment
Key:
Key:
Key:
Saw spare boat propeller in crawl space and decided to make a
kds entry so I could locate it when I needed it. Made entry and
did search on 'crawl space' to see what else I had tagged
there. Came up with an earlier prop entry that was almost
identical.
Page 28:
Summary: KDS Experiment – Doing notes on garbage can
...
Date: 11/16/95
Elapsed: 00:00:00
Key: kds experience
Key: hydrant
Key: Las Vegas
Key: kds find *******
Key: time management
Key: fire hydrant
Key: hydrant
Key: mobile office
Key: downtime
Key: KDS experiment
... while waiting for bus to Las Vegas Airport. I
wasn't wasting my time like the rest of them and the bus was
late.
... that's what you call a "mobile
office"!
... later on bus, airport garbage can and plane
THAT's MINIMIZING DOWNTIME
Page 29:
Summary: KDS Experiment – Consequences of an iterative
approach
Date: 02/19/99
Elapsed: 00:00:00
Key: cause and effect
Key: kds court *******
Key: prototype
Key: kds finding ***********
Key: philosophy
Key: fire hydrant
Key: dna
Key: knowledge
Key: context
Key:
Consequence of an iterative approach
....from item: We understand from a point of view
...
...as we learn, our perceptual models change and that
changes our point of view. Thus we see old things differently,
and we see entirely new things. Other people with different
contexts see still differently. Thus there is no reality, only
selected, limited, changing views with changing and different
interpretations.
This is why a prototyping approach is so important and why a
personal knowledge base is dynamin, needing constant
updating.
This is why many philosophers say that there is no truth,
there is no specific meaning to any book, message, why McLuhan
observed that the medium is the message, and why DNA code differs
in meaning depending on what is reading it and in what
context.
Page 32:
Summary: KDS Experiment – Broad benefits derive from
simplicity
Date: 02/22/95
Elapsed: 00:00:00
Key: kds experiment
Key: experience
Key: notes
Key: day-by-day
Key: kds find *****
Key: focus
Key: Simple *****
Key: simplicity
Key: value
Key: kds audit
950222
The Globe and Mail reports on a Business Week report to the
effect that: Industry has spent a trillion dollars on personal
computers and there is little or no productivity gain yet, but it
looks like it is coming now. Stick
950222
My use has become a habit, perhaps an obsession. I have to
limit how many tools I get into. I justify my involvement as a
cost of developing KDS and wonder if there really is a payback
and conclude that there is, provided that I keep things
simple.
There is real power in focus. Consider Susan Powter, or a
cabinet minister.
[14] The position of the Respondent, as set out by Dr. Matwin
in his Rebuttal Report dated March 17, 2000 includes:
It is my task to assess the work in terms of the specific
criteria of subsection 2900(1) of the Income Tax
Regulations and in light of Information Circular 86-4R3.
Three criteria need to be evaluated: advancement, scientific or
technological uncertainty, and scientific and technological
content.
Advancement
I fail to see the advancement of the KDS in scientific
research and experimental development. This is not basic
research, as I do not see a clear, testable goal (hypothesis)
stated anywhere throughout the history of the project, and
moreover there is a practical application in view.
The work is not experimental development, as no development in
the area of Computer Science (in terms of reusable design
documentation, algorithms or programs) has been achieved. The
documentation that is encoded in the Development Workbook lacks,
in my opinion, the degree of formality and precision which would
allow it to be a basis of software development and, furthermore,
it is unclear what this software would be.
... There is no evidence of better understanding of
science or technology, beyond the ability to better organize the
personal knowledge of one person who also developed the system.
No advancements in Information Retrieval are present in the work,
as all the information retrieval aspects of the work are handled
by PackRat.
...
The main evidence of progress is that the system helps the
developer himself to organize his thoughts and to access his
knowledge. But no systematic process has been developed which
would enable others to achieve the same effect. A collection of
items has been accumulated, but what specific functions does it
provide to the user? ...
Scientific or Technological Uncertainty
The criterion of scientific or technological uncertainty is
difficult to assess in the absence of a clear goal of the work. I
can, however, observe that the work carried out and the results
obtained so far could have been, with certainty, achieved by a
competent Information Technology professional. This is, on the
basis of generally available technological knowledge, a database
of some 14,000 text items can be built, and items can be
retrieved from it. Further, on the basis of generally available
technological knowledge, it is clear that such a system can be
ported to any modern computing environment, including laptop
computers (the term "porting" denotes the process of
adapting a software programme running on one computer system, to
run on a different, usually technologically newer computer
system). The fact that the development is well within the current
technological standards and could be characterized as a standard
technological process means the absence of technological
uncertainty.
Scientific or Technological Content
I fail to see sufficient evidence of scientific or technical
content in what has been achieved so far. When testing this
criterion of the work claimed, one looks for evidence of a
systematic process that experimentally verified a hypothesis
established at the outset of the work. There is no such
hypotheses stated. ...
... No clear function of the prototype is identified.
Dr. Gotlieb's review refers to a very recent, undocumented
experiment measuring recall and precision of the KDS. I agree
that these measures apply to the type of work performed by KSI.
One must observe, however, that both measures are to a large
extent subjective. Normally, such experiments and their
assessment of recall and precision are performed by an
independent third party. Further, it is not clear what the
influence is, if any, of recall/precision results on the KDS.
Analysis
[15] Under the Income Tax Act, SRED is defined in
section 2900 of the Regulations as follows:
2900(1) For the purposes of this Part and sections 37 and 37.1
of the Act, “scientific research and experimental
development” means systematic investigation or search
carried out in a field of science or technology by means of
experiment or analysis, that is to say,
(a) basic research, namely, work undertaken for the
advancement of scientific knowledge without a specific practical
application in view,
(b) applied research, namely, work undertaken for the
advancement of scientific knowledge with a specific practical
application in view,
(c) experimental development, namely, work undertaken
for the purposes of achieving technological advancement for the
purposes of creating new, or improving existing, materials,
devices, products or processes, including incremental
improvements thereto, or
(d) ...
The Appellant relies particularly on subsection (c).
The tax incentives are given to encourage scientific research in
Canada. Information Circular 86-4R3 has been accepted as setting
out criteria to be applied in determining whether an activity
qualifies as SRED.[5]
[16] Both experts used a similar approach and that is by
applying the criteria in Interpretation Bulletin IT86-4R3 to the
present situation. Both had difficulty defining precisely how KDS
is proceeding to obtain the objectives as stated in paragraph 13
of the Amended Notice of Appeal.[6] I do not pretend to have computer expertise and
rely on the evidence of the experts as it is applied to the
Income Tax Act. The fact that highly qualified experts
cannot agree whether the Appellant meets the criteria of
scientific or technological (a) advancement,
(b) uncertainty, and (c) content, indicates that the
question does not have a simple answer. After their comprehensive
reports are analyzed, what divided them was whether the
Appellant's activities constituted routine engineering or
whether technological advances were achieved. For the reasons
that follow, I accept the conclusion of Dr. Matwin that no
technological advances were achieved.
Scrutiny of Dr. Gotlieb's Testimony:
[17] He considered the KDS a memory aid and information
retrieval system. He compared it to a notebook daytimer that he
kept in his breast pocket. Only Mr. Leppik could perform
tests. The system, as it exists, is not accessible to others and,
because of the very personal nature of the entries, he wishes to
protect his privacy. Dr. Gotlieb felt more tests would have to be
performed, preferably with a number of users making comparisons.
Dr. Gotlieb described KDS as "an information retrieval
system". Mr. Leppik stated that KDS is not exactly
information retrieval.
Scientific Advancement:
[18] Dr. Gotlieb described KDS as a "multimedia database
whose contents may be text, sound or images". He was
mistaken in this regard since the PacRat database could not store
sound or images. Dr. Gotlieb stated: "The portability of KDS
is an advance". Portability of computers has nothing to do
with KDS and the work of Leppik. Under Scientific and
Technological Uncertainties, he questions whether KDS will have
high figures for both precision and recall when used by others
and adds this would be a useful test. If that is an uncertainty,
it has never been tested. Leppik is the only one who can test his
project.
Scientific Content
[19] He wrote in generalities stating the documentation in KDS
was not routine and evidenced technical competence. He did not
and could not do any testing personally but had to rely on Mr.
Leppik. He presumed, because of Mr. Leppik's scientific
background, that the documentation, prepared by Mr. Leppik, was
sound. Because of Mr. Leppik's history with IBM and superior
knowledge of the science of information retrieval, Dr. Gotlieb
has faith that the project is sound. I find that this is an
unsatisfactory measure for scientific content. Concluding with a
scrutiny of Dr. Gotlieb's report, it is interesting to note
that he felt any bright fourth year computer science student
could put together the components of KDS leading me to the
conclusion that the project is closer to routine engineering than
technological advancement.
[20] In RIS – Christie Ltd v. The Queen,[7] Roberston J. referred
with approval to Northwest Hydraulic, supra, for a
comprehensive analysis on the legal meaning of "scientific
research". What constitutes SRED is a question to be
determined by this Court. An expert may assist the Court in
evaluating technical evidence. SRED envisages the introduction of
a new or improved product or process. Roberston J. added the
following at page 5059-60 which is of assistance:
... Thus, research must be directed toward a meaningful
technological advancement and involve an element of creativity,
rather than the mere application of routine engineering
principles. At the same time, research objectives must be
realistic. The committed alchemist who seeks to turn base metals
into gold should not look to the Income Tax Act for tax
incentives. Assuming that a research project is eligible for
favourable tax treatment, there is no express or implied
statutory requirement that such project actually culminate in a
technological advancement. Regulation 2900 speaks of
research undertaken for the advancement of knowledge and for the
purpose of creating new products. It does not state that eligible
research must actually achieve those ends. Otherwise, the very
purposes for which the legislation was enacted would be
undermined. ...
[21] The present issue appears to boil down to whether Mr.
Leppik's work on behalf of the Appellant was directed toward
a meaningful technological advancement invoking creativity or
whether his work was the mere application of routine principles.
There is no question that to date his efforts have failed but
this is not fatal to the Appellant's position.[8] The Appellant is
attempting to devise a knowledge-based system. The question is
whether or not this is an application of existing engineering
principles. Could the Appellant's research objective lead to
technological advancement? Like Dr. Matwin, I am uncertain as to
what the technology is that the Appellant hopes to develop. I
believe even the Appellant's own witness is somewhat confused
in this regard. On page 4 of his report, Dr. Gotlieb stated that
an important feature of "KDS is that it is a multimedia data
basis whose contents may be text, sound, or images", yet the
evidence was that PacRat used by KDS could not accept sound or
images.
[22] He stated further that the portability of KDS is also an
advance yet the Appellant's work does not include development
of compact software. It is dependent on someone else developing a
tiny computer that would accept suitable software. It apparently
has no idea when, where, how or if at all a suitable computer
will be developed. He added that:
... the factors of versatility because of multimedia
knowledge representation, dedication to individual and personal
use, portability, along with the features of speed, simplicity
and low cost that go with modern PCs, all combine to make KDS a
definite technological advance of very considerable interest.
Again this is a curious comment in that the evidence was that
KDS does not have the multimedia capacity, it is not versatile,
not portable and far from being simple. How can it be simple when
the experts have trouble understanding it.
[23] Presently, only Mr. Leppik can retrieve information from
KDS and there was no evidence that it has ever served a useful
purpose for him. He chooses the key words used for entry and the
entries are apparently of no value to another person. No one but
Mr. Leppik can test KDS. After 10 years of recording entries, it
would appear that the Appellant is no closer to its objectives[9] than it was at the
outset. What the Appellant did was take existing technology,
computer hardware and PacRat software, and record personal
messages that cannot be understood or tested by anyone else but
Mr. Leppik. This does not constitute SRED.
[24] The issue is obviously complex. One expert opinion must
prevail over the other. I find Dr. Matwin's reasoning more
compelling. I share his view that any competent computer literate
person could put together the components of KDS and make entries
in a "knowledge base" using PacRat software.
[25] I have attempted to briefly set out the approach taken by
my colleague, Bowman J. in Northwest Hydraulic and apply
those tests to the present facts.
(a) Is there a technological risk or uncertainty that cannot
be removed by routine engineering?
I am not convinced there is an uncertainty. I accept Dr.
Matwin's conclusion that the uncertainty can be solved by
"techniques, procedures and data that are generally
accessible to competent professionals in the field.[10] I agree with
Dr. Matwin's conclusion that "...the
development is well within the current technological standards
and could be characterized as a standard technological process
which means the absence of technological uncertainty".
(b) Did the Appellant formulate hypotheses specifically aimed
at reducing or eliminating this uncertainty?
I agree with Dr. Matwin's position that there were several
different hypotheses put forth. Without a clear supposition as a
basis for investigation, it is difficult to evaluate the
Appellant's project.
(c) Were the Appellant's procedures in accordance with the
scientific method?
The scientific method requires systematic testing. Dr. Matwin
found that the entries lacked the degree of formality and
precision that would allow them to be the basis for software
development.
(d) Did the process result in a technological advance?
The simple answer is no. Only Mr. Leppik can test KDS. Both
experts agreed that further tests were needed to determine if KDS
constituted an advance and to determine if others could benefit
from it. Dr. Matwin emphasized that the technology used in KDS
can be purchased at a computer store.
(e) A detailed record of the hypotheses, tests and results are
to be kept including as the work progresses. No one can retrace
what Mr. Leppik has done nor measure what he has
accomplished. Dr. Matwin wrote that the entries "lacked
the degree of formality and precision that would allow them to be
the basis for software development".
[26] For research to be eligible for SRED, it does not
necessarily have to be successful yet surely it cannot go on
forever. There was little or no evidence that the Appellant was
any closer to its objectives in the year 2000 than it was in
1991. Certainly, Mr. Leppik spent many hours on his project. If
it was not scientific research, what was it? I believe it is
closer to a hobby and a recreational activity or personal daily
diary than SRED. Many of the entries are random thoughts stored
for Mr. Leppik's own personal reasons. If after almost 10
years it cannot be tested by world-class computer scientists, I
fail to see how the Appellant has satisfied the onus of proving
that the KDS project is SRED.
[27] I have dealt with the cases of Northwest Hydraulic
and R.I.S. Christie being the only Court decisions
referred to by either counsel in any detail. I have read the
remaining six cases contained in the Joint Book of Authorities
and find they are of little assistance to the present case.
Having decided that the Appellant's activity is not SRED,
there is no need to address the "Partial Agreed Statement of
Facts". The appeals are dismissed, with costs.
Signed at Ottawa, Canada, this 26th day of July, 2000.
"C.H. McArthur"
J.T.C.C.
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