In this presentation, FMC Partners Rob McDonald and Marlon Rajakaruna describe the importance of protecting your start-up company’s intellectual property (IP). The following topics are discussed: - Types of Intellectual Property - Patents - Copyright - Trade-marks - Other Ways to Protect IP - Protecting Your IP in Commercial Agreements

1. 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, Partner & Marlon Rajakaruna, Partner
1

2. INTRODUCTION
2

3. •What is intellectual property?
•Attributes of intellectual property;
•Comparison to tangible property;
•Importance of statutes.
3

4. TYPES OF
INTELLECTUAL PROPERTY
4

5. •Patents
•Industrial Design
•Copyright
•Trade‐mark
•Confidential Information/Trade Secrets
•Plant Breeder’s Rights
•Integrated Circuit Topographies
5

6. 6

7. PATENTS
7

8. 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
8

9. 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
9

10. Patents (con’t)
Marking – not required, but penalties for
false marking
Filing strategies – PCT filings, foreign
filings and Convention Priority
10

11. 11

12. 12

13. 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
13

14. 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
14

15. COPYRIGHT
15

16. 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
16

17. 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
17

18. Copyright (con’t)

19. TRADE‐MARKS
19

20. 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”
20

21. 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
21

22. Trade‐marks (con’t)
•Marking trade‐mark – unregistered ™ or
registered ®
•Filing strategies – claiming foreign filings and
convention priority
22

23. 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
23

24. TRADE‐MARK CHECKLIST
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
24

25. TRADE‐MARK CHECKLIST
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
25

26. TRADE‐MARK CHECKLIST
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)
26

27. TRADE‐MARK CHECKLIST
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
27

28. 28

29. 29

30. 30

31. 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
31

32. 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
32

33. 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
33

34. TOP 10 IP TRAPS
PATENT
9. Lack of ownership agreement
10. Public disclosure
34

35. OTHER WAYS TO PROTECT IP
35

36. •NDA‘s
•Other Security Measures
•IP Assignment Agreements
•Corporate Structure
•Monitoring Infringement
36

37. 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
37

38. 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
38

39. 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
39

40. 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
40

41. 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
41

42. 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
42

43. 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?
43

44. 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
44

45. 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?
45

46. PROTECTING YOUR IP IN
COMMERCIAL AGREEMENTS
46

47. •“Sponsor” Initiated Research Agreements
•Researcher Initiated Research Agreements
•License Agreements
•Contractor Agreements
47

48. “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
48

49. RESEARCHER INITIATED RESEARCH
AGREEMENTS
• Confidentiality
• 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
49

50. LICENSE AGREEMENTS
• Narrow Scope
• Confidentiality
• Address ownership of new IP
• Restrictions on use of names, marks, etc
50

51. CONTRACTOR AGREEMENTS
• Confidentiality
• Limit carve‐outs to confidentiality
• Assignment of ownership of work product including IP; waiver
of moral rights
• No modification of IP
• Non‐competition?
51

52. Questions?
Rob McDonald, Partner
780 423 7305
rob.mcdonald@fmc‐law.com
Marlon Rajakaruna, Partner
780 423 7281
marlon.rajakaruna@fmc‐law.com

53. 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.