Telus 2011 Annual Report Download - page 102

98 . TELUS 2011 ANNUAL REPORT
programs may not be fully adhered to or parties may have a different
interpretation of the requirements of particular legislative provisions.
These various situations may expose TELUS to litigation and the
possibility of damages, sanctions and fines, and/or negatively affect
TELUS’ financial or operating results and reputation.
In 2011, the Company continued to expand its activities into the
United States and other countries. When operating in foreign jurisdictions
TELUS is required to comply with local laws and regulations, which
may differ substantially from Canadian laws and add to the legal and
tax exposures the Company faces.
Risk mitigation: Although management cannot predict outcomes with
certainty, management believes that it has reasonable policies, controls
and processes, and awareness in place for proper compliance and that
these programs are having a positive effect on reducing risks. TELUS has
instituted for its employees, officers and directors an ethics policy and
mandatory ethics training as well as a toll-free Ethics Line for anonymous
reporting by anyone who has issues or complaints. Since 2003, TELUS
has had a designated Compliance Officer, whose role is to work across
the enterprise to ensure that the business has the appro priate controls and
measurements in place to facilitate legal compliance. For example, as
a proactive measure on privacy compliance, TELUS places a control in
the development stage of major projects by requiring a privacy impact
assessment to be performed for such projects involving the use of
customer or team member personal information.
The Company has established a rigorous review process to ensure
that regulatory, legal and tax requirements are considered when pursuing
opportunities outside Canada. The Company has also launched an
enterprise-wide program to review its existing international structure,
systems and processes and to develop a future mode of operation that
mitigates regulatory, legal and tax risks as it expands outside of Canada.
Finally, external counsel and advisors qualified in the relevant foreign
jurisdictions are engaged by the Company to provide regulatory, legal
and tax advice as appropriate.
The Compliance Officer reports jointly to the Audit Committee and
the Senior Vice-President and Chief Legal Officer. This dual reporting
provides direct line-of-sight reporting to the Audit Committee to address
identified risks.
Defects in software and failures in data and transaction processing
TELUS Health and Finance Solutions provide to their customers certain
applications and managed services that involve the processing and/
or storing of data, including sensitive personal health data, and the
transfer of large funds. Software defects or failures in data or transaction
processing could lead to substantial damage claims (including medical
claims). For instance, a defect in a TELUS Health and Finance Solutions
application could lead to personal injury, while a failure in transaction
processing could result in the transfer of funds to the wrong recipient.
Risk mitigation: Management believes that it has put in place reason able
policies, controls, processes (such as quality assurance programs in
software development procedures) and contractual arrangements (such
as disclaimers, indemnities and limitations of liability), as well as insurance
coverage, to reduce exposure to legal claims. However, there can be
no assurance that the Company’s processes will be followed by all team
members at all times.
Intellectual property and proprietary rights
Technology evolution also brings additional legal risks and uncertainties.
The intellectual property and proprietary rights of owners and developers
of hardware, software, business processes and other technologies
may be protected under statute, such as patent, copyright and industrial
design legislation, or under common law, such as trade secrets. With
the growth and development of technology-based industries, the value
of these intellectual property and proprietary rights has increased.
Significant damages may be awarded in intellectual property infringement
claims advanced by rights holders. In addition, defendants may incur
significant costs to defend such claims and that possibility may prompt
defendants to settle claims more readily, in part to mitigate those 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 settle -
ment 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 intel lectual
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. As developers of tech-
nology, TELUS Health and Finance Solutions depend on their ability
to protect the proprietary aspects of their technology. The failure to do
so adequately could materially affect their business. However, policing
unauthorized use of TELUS’ intellectual property may be difficult and costly.
Risk mitigation: TELUS and its affiliates incorporate many tech nologies
into their products and services. However, except for TELUS Health and
Finance Solutions, 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 contrac-
tual protections consistent with industry practices, to help mitigate
the risks of intellectual property infringements. It is the practice of TELUS
Health and Finance Solutions to vigorously protect their intellectual
property rights through litigation and other means.