a) Ensure proper definition of existing knowledge at the outset
CRA position (all work SP)
“Standard Practice refers to directly adapting a known engineering or technological practice to a new situation when there is a high degree of certainty that the known technology or practice will achieve the desired objective.
The devices and processes developed by NHC in the course of the modelling work may have been “new” in the sense of a new location (i.e. a hydraulic structure that was not there before, or the implementation of a river improvement scheme),
but all of the work described in the NHC project reports refers to standard devices and processes, which are routinely used in similar design situations all over the world.”
“Q. Could these designs have been implemented by resorting merely to textbooks?
A. No, you wouldn’t find any of that in a textbook. But there are design guides available and certainly there are suggestions there and these were used in the initial design. But not enough is available there to, I think, develop an effective design of this type.
It is true that any one of the features of the final design may have been known – rubber weirs, radial gates and walls of different types were known. It was the innovative combination and alignment of these factors that makes this project unique.”
Judge’s ruling & rationale
“The CRA’s position, was essentially that the appellant, admittedly a world leader in the field of hydraulic model testing, by its own excellence sets the standard for what represents routine engineering or standard practice.
With respect I think that this sets an unrealistically high standard – indeed a standard of perfection that would discourage scientific research in Canada.”
The Northwest Case illustrates how CRA officials may deny claims on the basis the project
o appears to be “routine engineering”
o without providing support for their position but
o identification of “variables” for experimentation
o provide adequate evidence for the TCC
b) Quantification of objectives vs. standard practice
“Systematic investigation connotes the existence of controlled experiments and of highly accurate measurements and involves the testing of one’s theories against empirical evidence.”
“The addition of these words [‘including incremental improvements thereto’] in 1995 applicable to taxation years ending after December 2, 1992 appears to have been in response to a concern that the achievement or attempted achievement of slight improvements was not covered.
I should not have thought it was necessary to say so. Most scientific research involves gradual, indeed infinitesimal, progress. Spectacular breakthroughs are rare and make up a very small part of the results of SR&ED in Canada.”
Correlate experiments to technological uncertainties (hypotheses)
“The word hypothesis in this context is normally considered to mean a provisional concept which is not inconsistent with known facts and serves as a starting point for further investigation by which it may be proved or disproved objectively.”
Maritime Ontario Freight Lines
“A hypothesis is a tentative assumption or explanation to an unknown problem and, as a rule, this requirement is met by the existence of a logical plan devised to observe and resolve the hypothetical problem.”
“I do not think that conventional engineering would be adequate to deal with the variables and the uncertainties that were inherent in the major disruption and diversion of the flow of the river resulting from the construction”
The technological uncertainty is something that exists in the mind of the specialist such as the appellant, who identifies and articulates it and applies its methods to remove that uncertainty.”
a) Ensuring work was done “systematically”
“Systematic investigation connotes the existence of controlled experiments and of highly accurate measurements and involves the testing of one’s theories against empirical evidence.
Scientific research must mean the enterprise of explaining and predicting and the gaining knowledge of whatever the subject matter of the hypothesis is. This surely would include repeatable experiments in which the steps, the various changes made and the results are carefully noted.”
“As stated in RIS-Christie, the only reliable method of demonstrating that scientific research was undertaken in a systematic fashion is to produce documentary evidence.”
“What may appear routine and obvious after the event may not have been before the work was undertaken. What distinguishes routine activity from the methods required by the definition of SRED …. is not solely the adherence to systematic routines, but the adoption of the entire scientific method, with a view to removing a technological uncertainty through the formulation and testing of innovative and untested hypotheses.”
b) Clarifying the “technological conclusions / advancements”
“Did the process result in a technological advance, that is to say an advancement in the general understanding?”
On this issue he commented,
“The rejection after testing of an hypothesis is nonetheless an advance in that it eliminates one hitherto untested hypothesis.
Much scientific research involves doing just that. The fact that the initial objective is not achieved invalidates neither the hypothesis formed nor the methods used. On the contrary it is possible that the very failure reinforces the measure of the technological uncertainty.”