Telus 2008 Annual Report Download - page 22

costs. Both of these factors may incent intellectual property rights holders to more
aggressively pursue infringement claims.
Given the vast array of technologies and systems used by TELUS and its affiliates to
deliver their products and services, and with the rapid change and complexity of such
technologies, disputes over intellectual property and proprietary rights can reasonably be
expected to increase. As a user of technology, TELUS and its affiliates receive from time
to time communications, ranging from solicitations to demands and legal actions, from
third parties claiming ownership rights over intellectual property used by TELUS and its
affiliates and asking them to pay a settlement or licensing fees for the continued use of
such intellectual property. There can be no assurance that TELUS and its affiliates will
not be faced with significant claims based on the alleged infringement of intellectual
property rights, whether such claims are based on a legitimate dispute over the validity
of the intellectual property rights or their infringement, or whether such claims are
advanced for the primary purpose of extracting a settlement. TELUS and its affiliates
may incur significant costs in defending infringement claims, and may suffer significant
damages and lose the right to use technologies that are essential to their operations
should any infringement claim prove successful.
While TELUS and its affiliates incorporate many technologies into their products and
services, they are not primarily in the business of creating or inventing technology. In
acquiring products and services from suppliers, it is the practice of TELUS and its
affiliates to seek and obtain contractual protections consistent with industry practices, to
help mitigate the risks of intellectual property infringements.
FOREIGN OWNERSHIP RESTRICTIONS
Certain subsidiaries of TELUS or partnerships in which TELUS has a controlling interest,
as Canadian carriers, holders of radio authorizations or licences, and holders of
broadcasting licences, are required by the Telecommunications Act (Canada) (the
Telecommunications Act), the Radiocommunication Act (Canada) (the
Radiocommunication Act) and a Direction to the CRTC (Ineligibility of Non-Canadians)
given under the Broadcasting Act (Canada) (the Broadcasting Act) to be Canadian-
owned and controlled. Each of the Canadian carriers, under the Telecommunications
Act, is considered to be Canadian-owned and controlled as long as: (a) not less than 80
per cent of the members of its board of directors are individual Canadians; (b)
Canadians beneficially own not less than 80 per cent of its issued and outstanding voting
shares; and (c) it is not otherwise controlled in fact by persons who are not Canadians.
Substantially the same rules apply under the Radiocommunication Act and the
Broadcasting Act. After the 2006 legal entity restructure, TELUS filed with the CRTC the
requisite documentation affirming TCC’s status as a Canadian carrier. TELUS further
intends that TCC will remain controlled by TELUS and that it will ensure that TCC
remains “Canadian” for the purposes of these ownership requirements.
The Telecommunications Act also provides that in order for a company that holds shares
in a carrier to be considered Canadian, not less than 66-2/3 per cent of the issued and
outstanding voting shares of that company must be owned by Canadians and that such
company must not otherwise be controlled in fact by non-Canadians. Accordingly, not
less than 66-2/3 per cent of the issued and outstanding voting shares of TELUS must be
owned by Canadians and TELUS must not otherwise be controlled in fact by non-
Canadians. To the best of TELUS’ knowledge, Canadians beneficially own and control
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