Episode 35: How is I.P. managed when the government funds you to innovate?

Lisa Desjardins (Lisa): You're listening to Canadian I.P. Voices, a podcast where we talk intellectual property with a range of professionals and stakeholders across Canada and abroad. Whether you are an entrepreneur, artist, inventor or just curious, you will learn about some of the real problems and get real solutions for how trademarks, patents, copyrights and industrial designs and trade secrets work in real life.

I'm Lisa Desjardins and I'm your host.

The views and opinions expressed in this podcast are those of the individual podcasters and do not necessarily reflect the official policy or position of the Canadian Intellectual Property Office.

If you are working for a small to medium enterprise, chances are that you have requested or received money from the government. In fact, in 2020, more than 3/4 of Canada's small to medium enterprises requested government financing, of which 98% was approved. Much of this was support resulting from the impact the pandemic had. But nevertheless, the government is often involved in transactions as a buyer of solutions specifically designed according to specifications, or it can be a sponsor and give funds to small to medium enterprises in forms of grants and contributions for innovation, research and development or scale-up and so on. But is there a catch in the fine print that says that the government will own the intellectual property? To find out more, we meet with Grant Lynds, an I.P. lawyer with years of practice in multinational firms in the private sector and in some of Canada's largest I.P. law firms. Grant is now working as a senior advisor on I.P. matters in the government. Grant, welcome to the podcast.

Grant Lynds (Grant): Thanks very much, Lisa. Thanks for the invitation to join you.

Lisa: I think we're about to have a very important conversation because the government obviously is heavily involved in some of the management and funding of innovation. But before we go ahead and talk about I.P. in this context, tell us a little bit about yourself and what brought you to work for the government?

Grant: I guess it was interest in seeing the Crown aspect of intellectual property. I'd worked in intellectual property before and before law school I worked in in engineering, but the focus of my career was on intellectual property, mostly patent litigation and private practice and also when I was in-house litigation counsel at Nortel. And at this stage of my career, after working for a couple of decades, I knew some folks on the government side that were building the Intellectual Property Center of Expertise and kept in touch with them and through some discussions with these friends and former colleagues. Again, it looked like an interesting opportunity to help build that group within the federal government and join them and really a chance to like I say grow that group internally and experience I.P. from the other side if you will.

Lisa: So tell us a little bit more about the I.P. Center of Expertise. How does that group function?

Grant: Yeah, okay. Well, I can probably take it in 2 aspects. The I.P. Centre of Expertise, like I said, was just getting started in the last couple of years, built out from the national I.P. strategy. And the goal was to build this group of experienced I.P. individuals that had worked in I.P. in various settings, both in private practice, in law firm settings, in corporate settings and have that as a resource for the federal government. So it's internal to federal government. And the group really focuses on providing I.P. advice to people within the federal government that encounter I.P. issues and also to provide training.

So there are a number of educational, mostly online courses that have been developed by the I.P. Centreer of Expertise to supplement and complement that I.P. advisory role and provide formal education on I.P. for federal government employees that deal with I.P. issues. And that's really kind of the core aspect of the group's focus. It's within Innovation Canada within, ISED, Innovation, Science and Economic Development.

And as far as my role individually as a member of that group, I really focus on the advisory side and try to provide I.P. advice to those individuals within the federal government that deal with I.P. issues both internally and externally, and I get involved heavily when funding agreements between the Crown and companies that are applying to government programs are negotiating and reducing the I.P. obligations to the agreement, usually in a contribution agreement. So it's really dealing with the I.P. issues as we negotiate, encounter, overcome them to try and make sure we hit the right balance regarding obligations between the Crown as far as funding the programs and funding the companies and the companies that are being funded and accepting the obligations, including the I.P. obligations.

Lisa: That's an interesting and very important role. From the outside then, for companies that are interested in applying for and maybe obtaining funding, how are the I.P. considerations addressed in those programs?

Grant: Yeah. So I guess it's, it really depends on the program. So there are a number of programs within the federal government, different organizations that will provide funds to companies and they have different directions and obligations, often set-top down could be set those requirements regarding I.P. could be set for the program by virtue of Cabinet or Treasury board requirements, but so there are some obligations that are really are mandatory, I'll say, and set, and no deviation permitted. There are other obligations where the programs, perhaps, have some room to adapt and be flexible to the companies, the way they operate, and transact, and deal with their intellectual property.

So, I think when companies are applying to the programs, they really have to look at the program-specific requirements regarding I.P. and understand them. And the programs, when they're looking at the company's application, they'll look at I.P. through kind of the whole cycle from when the companies are being considered for the program against the program criteria, they are applying for the program, so they'll look at the I.P. requirements and the way the companies have applied for the program and described their I.P., and how they transact and deal with their I.P. So, there's a whole due diligence, kind of risk assessment that the program, the government program, people will look at, and understanding the I.P. requirements of the program and comparing it to the way the companies are applying to the program.

And if a company is moving ahead through that application procedure and is going to be successful, then that will ultimately get into what I touched on earlier: the negotiation between the Crown and the government regarding the I.P. obligations, and then reducing those to the agreement and then the obligations regarding reporting. So, the government programs will typically require reporting back to the program as a project is engaged and performed to understand, with respect to the I.P., what's happening in the program, what's happening by the companies? Are they licensing, are they building an I.P. portfolio, are they filing patent or trademark applications? So there'll be a reporting obligation so the Crown will get some information, that data back as the program evolves, on these success points and metrics regarding intellectual property.

Lisa: So you're mentioning due diligence and reporting and a lot of obviously very important aspects. But honestly, if I was a company and I would hear this, it would give me cold shivers and I would really wonder, why is the government looking into I.P.? Is this really the business of the government? I mean, why are you doing this?

Grant: So the way I try to explain it and in understandable terms and it makes and it makes sense to me and hopefully makes sense to the recipients is, the government or the Crown has really recognized and I think this is good, they have recognized over the more recent years that intellectual property is and can be and should be a valuable asset. And the way I explained it to companies is that if I'm using taxpayer funds and as a result of the taxpayer funds being invested in government programs to companies, there's a recognition that intellectual property will be a valuable asset that's developed and created in part through that funding process.

So my view is, the government has this interest because we want to be good stewards to make sure that that intellectual property asset that is developed with taxpayer funding is taken care of, exploited, commercialized to the benefit of Canada and Canadians. So I want to be able to explain to my next door neighbor, the taxpayer, how his or her investment in a government program through funding a company is going to be of benefit to the country and Canadians and intellectual property is one of the assets that I see it as my job to ensure that we are being that good steward of ensuring the asset is protected, exploited, commercialized to the benefit of the country.

I think it's probably fair to say that in you know, decades ago, years ago, perhaps there wasn't that recognition, but I think it is very much front and centre that there is that recognition and I see it as a responsibility to make sure that we on behalf of the taxpayers are being those good stewards with respect to that I.P. asset.

Lisa: Okay, that makes sense. But on the other hand, there's so many components of I.P., so when the funding program asks for an applicant's I.P., what do you expect? Is there some kind of strategy that I should have or what do you expect to know then about my I.P.?

Grant: Yeah, so, each program will have different requirements. Like I said regarding when companies are applying for funding through a program, what are the requirements with respect to I.P. And often, you know, generally most programs will look at the I.P., usually in kind of 2 pools: the background I.P. and the project I.P. and one thing you touched on was the strategy and we'll probably talk about background and project I.P. in the next little discussion. But if we're talking about an I.P. strategy, that's a phrase that comes up frequently and there may well be some confusion a desire to understand what does that mean if the companies are to discuss in I.P. strategy what is expected?

I would say generally the Crown wants to see that the companies who are applying for programs and that the successful ones that will be funded through programs think about I.P. in a strategic way. And what does that mean? I think that means understanding how intellectual property regime applies to the company and its project that is going to be funded, that they're applying to receive funds. An I.P. strategy that we would expect to be in place as an understanding of the company to say: “I understand in my business and in this project how the activities may be ripe for protection through patents, designs, copyright, trade secrets, some form of I.P. protection, understanding, applicable to the project. That's what we want to see as far as an I.P. strategy.

We want to have some thinking at the outset how that I.P. will be protected, how it will be commercialized. For example, would the companies expect that they are going to use their I.P. themselves and exclude competitors from practicing their I.P. or is their business model for the project anticipated to be one where they anticipate licensing in this country or other countries? Is that part of their I.P. strategy to license their I.P. to third parties as part of their business model to generate revenue. Have they thought about how they're going to deal with potential enforcement issues? Kind of the full gamut from start to finish, we want the applicants to show us if we're talking an I.P. strategy, an understanding that they have the awareness, education and knowledge to be aware of I.P., how the I.P. regime applies to their product or project and what steps they anticipate taking to really build on I.P. awareness and education within their company and make sure that they're aware of promoting that I.P. awareness all the time throughout their project to fully get the benefits out of I.P. protection and commercialization as, like say, to make sure that that asset is being used to the benefit not just of the company, but also we see the benefit to the country.

Lisa: So we have I.P. Centre of Expertise established to make sure that the programs have support in that the government can be good stewards then when we allocate money for development, we know now that that's why this program exists and why we're looking to these things… But if we if look at it from a practical sense, what kind of clauses can a business expect to see in the kind of agreements when they seek federal funding?

Grant: Absolutely, great question. So, moving on from the financing options to what are we talking about here? Like what type of I.P. asset? And your question is great because there are so many I.P. assets out there. But we're going to talk about the ones that are most commonly used as collateral. And I would say it would be the patents, trademarks and copyrights. So, legally, both an application, what that means is you know you can apply for a patent, but you still don't have it, right? You've applied and there's an examination that's done. Eventually it could be a registered patent, but legally both an application and a registered intellectual property right can be taken as collateral.The agreements are long, they can be complex because they address so many issues, many non-I.P. issues, for example the number of employees that the company may employ over a certain period of time. But if we stick to the I.P., usually the I.P. clauses will focus on kind of the 2 areas; the background I.P., what I.P. is necessary to perform the project and usually we're looking for confirmation from the company that they have access to that intellectual property, either through ownership or licensing, to practice any I.P. that is going to be necessary for them to actually perform the project activities as specified. So we want to make, get that get that understanding, confirmation that they can perform the project that they're applying for funding to perform.

And then the next item would probably be looking ahead. The project I.P. are often you know sometimes called foreground I.P. It's going to be defined in the agreement, but generally the focus is on the new I.P. that will be generated, created, developed by the company through its activities that it's being funded through the Crown funds. So, when we're talking about the project I.P. there usually there's a lot of discussion and obligations depending on the program around who's going to own the project I.P. and the licensing of the project I.P. And those are the 2 areas that may be project specific requirements. So there may be very little, if any, room to move if one enters a negotiation.

Other areas regarding I.P., perhaps on reporting or the I.P. strategy, that's just as an example or on certain licensing areas, there may be room for flexibility and adaptability. And I think this is what one area that that I would like to think that the I.P. Centre of Expertise, our group really brings, some, hopefully some benefit to the federal government project program officers who are dealing with various programs.

I always like to say is we want to bring the commercial reality to bear on our side of the agreement. So we spend a lot of time trying to understand and ensuring we do understand the project, the business model, the recipient, its requirements to make sure it is agile and conduct its business. We want to approach the agreement in a commercially reasonable manner. So the clauses often focus on the needs of the company to conduct its business and on our side to make sure that we understand the business and are being good stewards of that intellectual property asset. And then we'll try and get to an end point regarding I.P. ownership, the project-I.P. ownership, and licensing that tries to hit the right balance point for all the parties to the agreement.

That's where generally we spend a lot of our time regarding intellectual property clauses in these types of agreements. And then there's also, like I say, the reporting obligations that continue thereafter. And that's something to give us data on the success and some objective data perhaps on the success of the program as it continues from an I.P. perspective.

Lisa: So, I guess around the table then you would have people from the government, you would have somebody from the company and possibly somebody from the private industry as well who's helping them understand I.P. You're painting a pretty good picture of some of the support actually that's available to all of these players. I was wondering if you could give me the rundown of what kind of supports are available to anyone, then if they don't know a lot about I.P.?

Grant: There are a lot of groups making great efforts in in improving that awareness, education and realization of the benefits of protecting I.P., commercializing I.P. and enforcing I.P., not just in Canada, but abroad because intellectual property is international, companies are international. You've got to look at your rights in all your jurisdictions of interest. There is a lot of work being done to improve that understanding and awareness. I'd say from the federal perspective as you know the Canadian Intellectual Property Office, CIPO, there's a huge educational component to CIPO that they offer to the public, and there are courses, free courses offered online through CIPO product resources, information, all kinds of information regarding intellectual property. They also have, you know, personal contact with individual I.P. advisors available to counsecil, assist and educate businesses regarding intellectual property protection.

With respect to the private sector and there's collaborations between the private sector and CIPO and ISED, the federal government, generally, there are excellent resources in the private sector. We've discussed many in previous discussions. Just 3 I could itemize would be, Intellectual Property Institute of Canada, IPIC, it's an association of I.P. practitioners in Canada from all different facets, from law firms, from patent trademark agencies, academia, from corporations. This is a professional association of I.P. professionals and you can search their members at IPIC's website. There's a contact IPIC to help you out if there's certain I.P. professionals in a geographic location or a certain field of intellectual property you're interested in. They actually have a search feature on their website that's publicly available.

All patent and trademark agents in Canada are registered and regulated by an independent regulator known as CPATA. It's the College of Patent Agents and Trademark Agents, a very new recent new regulatory body, but they maintain a searchable list of active patent and trademark agents in Canada. If you're looking for somebody to help you with your intellectual property, I.P. strategy, counsel you on I.P. protection, those are the types of individuals you would contact to get their advice and counsel. And again, many of many I.P. lawyers are residents obviously in law firms and if you have a law firm of interest or an office in a geographic location, virtually, all the law firms with I.P. practice have a filter you can search on I.P. professionals on the individual firm websites and look for people that you think are appropriate for your background, or at least call them and get some education.

One thing about I.P. professionals, they love to talk about I.P. and they're more than willing to offer some assistance, education and counseling. Because one thing I.P. professionals hate is seeing companies and start-ups, entrepreneurs lose I.P. rights for lack of knowing the I.P. regime and understanding what rights they may have, so they want to make sure you're protected and understand the regime so you're not in that situation of having a lost opportunity.

Lisa: And you've seen that first hand coming from both the private industry and the government. So I'll mention here that we'll provide a list of links to these resources in the description of this podcast. What is the number one take-home lesson that you'd like to share with innovators across Canada?

Grant: First you have to recognize, and this is my mantra, I.P. is a valuable asset. So it really is on the same stage as any other asset. If you've got physical property, that's an asset, you're going to budget for that, plan for that, take care of say an office space or a manufacturing site. That's your physical asset. Give the same attention to your intangible asset, your intellectual property. You've got to plan for it, treat it as an asset that's to be nurtured, protected, planned for… You put it in your budget, make sure you're addressing it in a strategic way with an I.P. strategy so it's not overlooked, not forgotten, it's not an afterthought. It should be right up there with your human resources, that's an asset, your physical assets, that's a tangible asset, and your IP is an extremely valuable intangible asset. And, depending on your business, maybe your most valuable asset.

So make sure that you consider I.P. early and engage in discussions with I.P. advisors, I.P. lawyers, counsels, patent, trademark agents to make sure you understand the I.P. regime so you don't lose rights through some inadvertence or just failure to be aware of the I.P. regime. As an example, you know, if you're interested in patent or design protection, you know, time is not your friend. You don't want to start practicing an invention or telling somebody about an invention, disclosing an invention, without understanding: Have you got adequate protection? Have you protected your know-how, trade secrets adequately? And if you're interested in going for patent protection, make sure you don't disclose to anybody because there are certain timelines. If you disclose you're on the clock and you may be barred from ever obtaining patent protection if you passed that timeline and didn't realize that you should have filed your patent application before you disclosed.

And these are the “whoops scenarios” that you don't want businesses or entrepreneurs or innovators to experience. You want them to understand the I.P. regime early, and it's not just on the technical side. If you're interested in marketing before you launch a potential trademark, make sure you understand the IP regime so you don't walk into a land mine and start getting brand owners or trademark owners who have established brands, you know, asserting, claiming that you're infringing their mark. So make sure you've got an understanding of the I.P. regime, the trademark regime. Get a clearance search and opinion. Find out what's out there before you launch. These are all aspects of a business that you want to make sure you got the proper advice at the front end so you don't get in those areas down the road of saying: “Oh, I wish, I should have looked at this beforehand”. So learn about I.P. Obviously, protect yourself and then you can manage your risk accordingly as you go forth instead of being in that regretful position of not having understood it before you, promoted and launched certain technical products services or brands.

Lisa: Thank you so much. Excellent points. Lots of take-home lessons for our listeners and actually anyone working with I.P. or funding of entrepreneurs in Canada. Thank you so much for sharing your expertise and helping us all understand how to use I.P. more effectively. Thank you, Grant!

Grant: You're welcome. Thank you very much, Lisa.

Lisa: You've listened to Canadian I.P. Voices and a discussions with Grant Lynds, a lawyer and senior advisor at the government's I.P. Centre of Expertise. Grant explained the government's role in handling clauses related to intangible assets in contracts with companies performing government-funded work, potentially leading to the development of new intellectual property. It's crucial to immerse yourself in expertise to effectively manage your intellectual property—often the most valuable asset you'll likely possess. Check the episode description for additional resources.