This blog was originally written by Dmitry Brusilovsky, CEO, SRED Unlimited.
Two key criteria for SR&ED eligibility are the presence of Technological Uncertainties and Technological Advancements. When faced with the former, a company presses on in hope of the latter. But that definition is very relative, short, and not terribly comprehensive, so let’s explore more exact definitions of the meaning of Technological Uncertainties and Technological Advancements.
Scientific or technological advancement is the generation of information or the discovery of knowledge that advances the understanding of scientific relations or technology. One implication of advancement is that the new knowledge could be useful to other situations or circumstances beyond the current project in which the advance was made.
Scientific or technological uncertainty means whether a given result or objective can be achieved or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience. This definition encompasses the definition of scientific uncertainty, technological uncertainty and technological obstacle. The only difference is that scientific uncertainty relates to science whereas technological uncertainty and technological obstacle relate to technology.
Let’s explore these ideas a bit closer to a layperson’s perspective.
When your company is chugging along with its project and encounters a problem that can’t be resolved with your proprietary knowledge or standard practices, and you can’t readily find the answer via Google or Stack Overflow or any other source of generally available scientific or technological knowledge or experience, you’ve just encountered Technological Uncertainty. This might not be at the beginning of your project, but it does mark the beginning of the SR&ED project.
When your company has already encountered Technological Uncertainty, worked through its iterative scientific developmental approach, and generates reusable scientific or technological knowledge you didn’t previously possess and was not available from the public domain, you’ve reached a Technological Advancement. Your advancement might result in developing a newer or improved process or product, or it can even be comprehensive knowledge about why a process or product will not work. You can then reuse the process or repeatedly make the new product with this new knowledge you’ve gained; or in the latter case, avoid wasting resources on a given approach because you conclusively understand why you shouldn’t.
A Key Point: Outcome of Work vs Technological Advancement
Sometimes, claimants confuse the outcome of their work with the technological advancement. It’s not difficult to see why, but a distinction needs to be made. The outcome of your work may be reduced complexity of a process, or increased efficiency of a process, but the Technological Advancement lies in the how of what you achieved. It’s the specific knowledge you gained to advance the given area of technology or science, proving you know and have recorded for future use how you managed to reduce complexity or increase efficiency of a process. For SR&ED purposes, the expression of knowledge and understanding, and how it’s unique to your industry or wasn’t publicly available at the time, is more important than the result of your gained knowledge and how it helped your bottom line.
Technical vs Technological Advancement: A Helpful Way to Look at It
Technological Uncertainty requires some doubt about how a problem can be solved for a process or product. However, the source of the doubt is a key point of distinction.
A technical problem is something that can be solved with the existing technological or scientific knowledge base—you can look up how to fix it and find a readily available solution, or ask an expert within your company who has run into this technical problem before. Once you overcome this problem, that hasn’t resulted in a scientific/technological advancement, though it did help fix your process or product and may even help you make the process/product slightly better than before in some cases.
That’s why describing your final product and what it can do, doesn’t describe a technological advancement. What you need to identify in your SR&ED report is how you couldn’t have solved the problem with existing knowledge readily available to you, and therefore couldn’t have been completely sure that what you would try to do would actually work—you could only form hypotheses to test, and observe the results, hoping something would work.
If you or your company has a project that you feel might have encountered Technological Uncertainty, resulting in a Technological Advancement, but you’re still not completely sure, feel free to contact the experts at SRED Unlimited.