protecting your start up company's ip

Protecting Your Start-up Company’s IP … Without it, There’s Only One Exit Event.

Presented to TEC EDMONTON Edmonton, Alberta March 15, 2013

Presented by:

Rob McDonald & Marlon Rajakaruna, Partners at Dentons Canada LLP

INTRODUCTION

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• What is intellectual property? • Attributes of intellectual property; • Comparison to tangible property; • Importance of statutes.

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TYPES OF INTELLECTUAL PROPERTY

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• Patents • Industrial Design • Copyright • Trade-mark • Confidential Information/Trade Secrets • Plant Breeder’s Rights • Integrated Circuit Topographies

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PATENTS

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PATENTS

• Patent Act • Inventions – any new and useful art, process, machine, method of manufacture or composition of matter, or any new and useful improvement thereof

• Novel • Non-obvious to a person skilled in the art or science

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PATENTS (con’t)

• Public Disclosure – 1 year grace period in Canada and U.S. but fatal in other countries

• Must have registration for protection • Exclusive rights to make, construct, use and sell the invention – 20 years from filing date, non-renewable

• First to file – compare to U.S. first to invent America Invents Act will change this

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PATENTS (con’t)

 Marking – not required, but penalties for false marking  Filing strategies – PCT filings, foreign filings and Convention Priority

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INDUSTRIAL DESIGNS

 Industrial Design Act  Design of an article – features of shape, configuration, pattern or ornament and any combination of those features that, in a finished article, appeal to and are judged solely by the eye  Non-functional elements

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INDUSTRIAL DESIGNS (con’t)

 Public Disclosure/publication – must file application within 1 year from first publication  Must have registration for protection  Exclusive rights to apply the design to an article for sale  10 years from registration date – non-renewable  Marking - Ⓓ - can limit recovery of damages if not properly marked

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COPYRIGHT

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Copyright

• Copyright Act • New Copyright Modernization Act (November 7, 2012) • Bundle of rights – produce, reproduce, perform, publish,

telecommunicate, rent, moral rights, neighboring rights • Copyright subsists in every original work • Works – literary, musical, dramatic, artistic compilations • No copyright in concepts or ideas, fixation required

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Copyright (con’t)

• Registration not necessary for protection • Advantages to registration – presumptions, innocent infringer defense

• Marking - ©, name of owner and year of creation on publication

• Exclusive rights – 50 years from death of author (creator)

• Moral rights – integrity, authorship

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Copyright (con’t)

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TRADE-MARKS

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Trade-marks

• Trade-marks Act • Trade-marks – a mark used to distinguish one competitor’s products and services from those of another

• Words, phrases, logos, shapes of packaging, colours

• -non-traditional marks – sounds, smells, tastes, 3-D shapes, holograms, moving images, etc.

• Bill C-56 proposed revisions – “signs”

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Trade-mark (con’t)

• Registration not necessary for protection but scope of protection more narrow for unregistered marks

• Registered vs. unregistered marks • Exclusive rights - 15 year registration with perpetual renewals

• Rights are based on first use and continued use

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Trade-marks (con’t)

• Marking trade-mark – unregistered ™ or registered ®

• Filing strategies – claiming foreign filings and convention priority

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TRADE-MARK CHECKLIST

1. Selecting a trade-mark ___ Must be distinctive! ___ Not a person’s name ___ Not clearly descriptive of the product or service ___ Not the name of the product or service in another language ___ May be a word, logo, phrase, color or combination of these

•  Strong trade-marks are coined words, ordinary words given arbitrary meanings, suggestive but not descriptive words

• Weak trade-marks are overly descriptive, merely descriptive and generic words

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2. Searching

___ Cannot be confusing with existing registered or pending trade-marks that relate to the same or similar products and services

___ Should not be confusing with existing registered corporate names or trade names

___ Should not be confusing with existing unregistered trade-marks

___ Conduct industry search

___ Conduct registrability search

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3. Should you register? Consider:

___ Exclusive use throughout Canada

___ Importance of product or service

___ Length of use (short term vs. long term)

___ Estimated value of trade-mark (licensing, merchandising)

___ Ability to enforce trade-mark rights

___ Strength of trade-mark

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4. Registration Details

___ Which entity is using or intends to use the trade-mark (ownership)?

___ Will the trade-mark be licensed for use by other entities?

___ What specific products and services are being sold using the trade-mark?

___ When was the trade-mark first used in commerce (for services, the date of first advertisement; for products, the date of first sale)

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5.  Using the trade-mark ___ Always capitalize at least the first letter of the trade- mark ___ Do not pluralize trade-marks ___ Do not use trade-marks as a verb ___ Do not change the appearance of a design trade-mark ___ Use proper marking (® for registered, TM for unregistered) ___ No generic use of trade-mark ___ No use of the trade-mark by others without license and control ___ Monitor in-house and outside use of the trade-mark ___ Do not ignore infringements

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Confidential Information and Trade Secrets

• No legislation, rely on common law rights • Maintaining secrecy and non-disclosure is key • Confidentiality and non-disclosure agreements • No registration, therefore no expiry of rights • Fiduciary duties of shareholders, management and employees

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TOP 10 IP TRAPS

COPYRIGHT

1.  Ownership claim by employee/independent contractor 2.  Moral rights claims 3.  Substantial similarity not just quantitative 4.  Improper Assignment

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TOP 10 IP TRAPS

TRADE-MARKS

5.  Not registering and being restricted to area of reputation

6.  Assuming rights in corporate names and trade-names 7.  Adopting non-distinctive marks 8.  Losing distinctiveness through loss of control and

improper licensing

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TOP 10 IP TRAPS

PATENT

9.  Lack of ownership agreement 10.  Public disclosure

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OTHER WAYS TO PROTECT IP

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• NDA‘s • Other Security Measures • IP Assignment Agreements • Corporate Structure • Monitoring Infringement

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NDA’s

•  What is a Trade Secret? Confidential information that retains its value by being confidential •  Software •  Client Lists •  Procedures / methods / recipes

•  No statutory rules or protection - any rights or protection comes from contractual arrangements and the common law

•  Protection lasts for as long as the secrecy is maintained

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NDA’s WITH THIRD PARTIES

•  Confidentiality clauses and non-disclosure agreements (“NDAs”) are crucial to protecting trade secrets •  When to use •  Avoid the mistake of assuming an NDA is “standard” and then execute it

without careful review •  Remember to address oral disclosure of information, information gathered by

observation and unmarked information of a confidential or proprietary nature •  NDAs should ensure that confidential information remains confidential for an

appropriate length of time •  Carve-outs •  Watch out for IP ownership provisions •  It should also address the return of files, client lists, and other information

upon termination or expiration of the agreement

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NDA’s WITH EMPLOYEES AND CONTRACTORS

•  Can use standalone NDA or incorporate as part of EA/ICA

•  Remember to address oral disclosure of information, information gathered by observation and information of confidential or proprietary nature

•  NDAs should ensure that confidential information remains confidential during term of employment/ services contract and for an appropriate length of time after

•  Limit carve-outs

•  It should also address the return of files, client lists, and other information upon termination of employment/services contract

00 Month 2013 Region-specific footer note Document reference # 39

OTHER SECURITY MEASURES

•  Marking of documents can help establish some protection

•  Internal security procedures are necessary •  Physical and network security •  Storage of information •  Entry and exit interviews •  Disclosing information on a need-to-know basis •  Proper arrangements with independent contractors


OTHER SECURITY MEASURES (cont’d)

•  Trade Secrets cost as much (or as little) to protect as you are willing to invest

•  It takes time and money to: •  implement proper marking of documents •  Physically protect data and networks •  Educate employees and contractors •  Monitor for misappropriation of trade secrets •  Draft non-disclosure and confidentiality agreements


IP ASSIGNMENT AGREEMENTS

•  At common law, independent contractors and employees own the patent for inventions made in the course of business •  Exception for employees whose job it is to invent

•  Consider whether the common law position needs to be shifted - can be addressed by an IP assignment agreement that transfers ownership to the employer or the business.

•  As part of this transfer, ensure all IP developed in the course of employment/services contract is transferred to the employer/business


IP ASSIGNMENT AGREEMENTS (cont’d)

•  IP assignment agreements should deal with a waiver of moral rights to ensure that the IP that can be assigned is assigned, and that moral rights are waived.

•  Confidentiality

•  Non-competition?

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CORPORATE STRUCTURE

•  Incorporate

•  Use separate legal entity to “own” IP

•  License to the various corporate affiliates

•  Effective creditor-proofing

•  Caveat: Banks may want security over IP

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MONITORING INFRINGEMENT

•  CIPO is not the IP police – they do not monitor how IP is being used or stop infringement

•  You need to devote resources to monitoring for infringement •  Determine who in the organization will be responsible to monitor •  Large organizations will have a watch service to continually monitor use of IP

•  Cost-benefit analysis – if it’s really not that valuable, is it worth registering and protecting?

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PROTECTING YOUR IP IN COMMERCIAL AGREEMENTS

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• “Sponsor” Initiated Research Agreements • Researcher Initiated Research Agreements • License Agreements • Contractor Agreements

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“SPONSOR” INITIATED RESEARCH AGREEMENTS

•  Carve-outs to Confidentiality

•  Background IP

•  Other IP developed at the same time under separate research

•  Fortuitous discoveries

•  License back

•  Restrictions on use of names, marks, etc

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RESEARCHER INITIATED RESEARCH AGREEMENTS


•  Background IP

•  Other IP developed at the same time under separate research

•  Fortuitous discoveries

•  IP developed in direct performance of research (or at least license-back)

•  Restrictions on publication

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LICENSE AGREEMENTS

•  Narrow Scope


•  Address ownership of new IP

•  Restrictions on use of names, marks, etc

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CONTRACTOR AGREEMENTS


•  Limit carve-outs to confidentiality

•  Assignment of ownership of work product including IP; waiver of moral rights

•  No modification of IP

•  Non-competition?

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The preceding presentation deals with the kinds of issues companies dealing

with the protection of intellectual property could face. If you are faced

with one of these issues, please retain professional assistance as each

situation is unique.

Questions?

Rob McDonald, Partner 780 423 7305 [email protected]

Marlon Rajakaruna, Partner 780 423 7281 [email protected]

protecting your start up company's ip

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