Plan your IP Strategy

Considerations for your intellectual property strategy

Patent considerations when aligning with corporate policy or corporate culture

• Patent policies may extend to requiring inventors to submit a formal invention disclosure document and assignment form and validating the innovation through a corporate invention committee before filing is approved, or they may consist of a simple approval process where the inventor works directly with an IP expert to file the patent on their behalf. Patent approval policies should align with your corporate culture on how innovations are developed and collaborated on, but they should also support the legal requirements needed for assignment and documentation of the invention.
• Corporate policies regarding inventorship remuneration for patents and a requirement for engineering notebooks to be maintained will set the tone for the IP culture, while also creating corporate policy benchmarks to adhere to.
• Product or service invention clearance policies that ensure freedom to operate from other patents are assured before a new product or service is launched. Freedom to operate may be a legal matter, so consider consulting an IP or legal expert.

Trademark considerations when aligning with corporate policy or corporate culture

• Trademark policies may extend to defining the types of marks that are registered and those that are left unregistered for a business IP strategy, as well as the process for employees, contractors or advisors to follow when embarking on a new trademark or branding idea for your business.
• Freedom to operate searches may be part of a standard policy that will reduce the likelihood of future headaches, such as lawsuits, the need to rebrand or reformat your new product to avoid infringing on someone else's trademark rights, or having to pay for licenses to use a trademark belonging to someone else.
• Corporate registration policies to define the standard countries of registration and categories of use may streamline the corporate process of filing for trademark registrations, both in Canada and abroad.

Copyright considerations when aligning with corporate policy or corporate culture

• Copyright policies may also impact your ability to use internal or external materials owned by your business or to use third-party works. For businesses that need to utilize third-party works, the policies should define the factors and processes to ensure rights are used appropriately against the original owner's rights.
• If content is created, you should ensure copyright ownership for your business is clear for contractors and employees and that topics such as the waiving of moral rights associated with the copyright are embedded in employment contracts. As each country has its own copyright law, if your business is working with or using content created by others in various countries, you may need to ensure your business copyright policy respects international rights.

Industrial design considerations when aligning with corporate policy or corporate culture

• Freedom to operate searches may be part of a standard policy that will reduce the likelihood of future headaches, such as lawsuits, the need to rebrand or reformat your new product to avoid infringing on someone else's industrial design rights, or having to pay for licenses to use an industrial design belonging to someone else.

Trade secret considerations when aligning with corporate policy or corporate culture

• The depth of a trade secret policy may impact the ability to operationally manage and maintain the secrecy of the IP asset efficiently. Trade secret policies that require robust categorization, marking and control of the materials may increase the capability of a business to seek redress for a breach but may also increase the organization friction in sharing trade secrets among business units or increase the organization cost in implementing and maintaining an Information Technology (IT) system capable of supporting such a process.

Starting a new line of business

Strategy: As your business grows, you may decide to introduce new and innovative products or services. To protect your investment and avoid infringing on the IP of others, make sure to identify, protect and manage your new IP assets at the earliest possible stage in their development.

Overall considerations when starting a new line of business

• To ensure your new product or service is not infringing on someone else's rights, research existing IP rights by conducting online searches and/or obtain clearance or freedom to operate opinions from an IP expert. This will reduce the likelihood of future headaches, such as lawsuits, the need to rebrand or reformat your new product to avoid infringing on someone else's IP rights, or having to pay for licenses to use IP belonging to someone else.
• To increase customer, shareholder and investor confidence, publicize or "mark" any IP applications or registrations on advertising materials associated with your products or services with such marks as ™, ®, trademark, ©, copyright protected, D, design, industrial design, patent and patent pending. Marks can be especially important in some countries that provide notice to other businesses of your IP rights.

Patent considerations when starting a new line of business

• To maximize your return on investment, make sure to protect the innovative aspects that are central to a new product or service. Patents will enable your business to mark out and defend an exclusive market advantage. This is a powerful benefit. Properly used, patent-protected products or services can lead to enhanced market share, higher profit margins and the development of other innovative products.
• Make sure to maintain the confidentiality of any inventions that have not yet been protected by signing nondisclosure agreements with employees, partners and contractors. Inventions are not patentable if they have already been publicly disclosed. While you may apply for a patent within one year of a public disclosure in Canada and the U.S., other countries do not have such grace periods and require absolute novelty.
• Routinely review which of your inventions should be patent protected. This process, when conducted at regular intervals, will help you optimize your return on your investment by ensuring the following:
  1. that core inventions are patent protected
  2. that peripheral inventions are patent protected to generate additional revenue through licenses or sales
  3. that other IP is reviewed to determine whether it should be abandoned to cut costs

Trademark considerations when starting a new line of business

• Register new trademarks when launching products or services to help build customer recognition.
• If you are unable to obtain trademark protection in jurisdictions where your business operates because it would infringe on the registered trademarks of a competitor, you may be forced to rebrand if you launch your product or service and the competitor chooses to enforce their IP rights against you.
• However, if your product or service has a short lifecycle, or if you cater to a knowledgeable clientele with a strong understanding of your industry, there may be no need to apply for trademark protection.

Copyright considerations when starting a new line of business

• Your copyright is established when a work is created, and many countries will honour it based on the Berne Convention. However, copyright registration makes it easier to prove your ownership if a dispute arises over ownership.
• To ensure that others are not infringing on your copyright, you should search for and prevent infringement. There are tools available to detect infringement online.

Industrial design considerations when starting a new line of business

• Uniquely designed products can grab the attention of customers, leading to enhanced market shares. To maximize your return on investment on a new product, get protection for important novel design elements by registering an industrial design. If your design is distinctive in the marketplace, you may also register it as a trademark for further protection. The fluted coke bottle silhouette design is a popular example.
• To ensure your design remains unique, keep it secret until it is registered. Maintain confidentiality relating to any unregistered designs by signing nondisclosure agreements with employees, partners and contractors.

Trade secret considerations when starting a new line of business

• To maintain trade secrets on such items as formulas, data, client lists, blueprints, algorithms and processes, have employees, contractors and business partners sign nondisclosure agreements. To maintain secrecy, protect confidential information through regular auditing or monitoring systems. Be highly selective when revealing information. Try to use supply agreements or demonstrate outputs rather than disclose the trade secrets themselves.
• Although trade secrets may be kept out of the public domain indefinitely, confidentiality will be lost if secrets are accidentally disclosed or reverse engineered by a competitor or other external party. Additionally, it may be costly to seek redress for a breach of confidentiality through the courts.
• To protect your trade secrets internally, record their existence, catalogue the parties who have access to them and restrict the distribution of the information by way of confidentiality agreements. The information should be kept under lock and key and/or encrypted electronically.

Financing and Loans

Strategy: You may be able to use IP assets to help you obtain financing from banks, venture capitalists, angel investors, government agencies, etc. In fact, the presence of IP assets often indicates to financial partners that your company has a certain degree of market exclusivity or competitive advantage and that it therefore has a higher likelihood of success. IP assets may help investors or lenders gain confidence in your business's competitive advantage and the validity of its market opportunities. It is, therefore, important for you to understand your IP assets and how they support your growth, branding and marketing strategy.

While IP is intangible, it is a business asset. This means equity investors will have a stake in its ownership, while debt holders could lay claim to it in the event the business fails.

Overall considerations when seeking financing

• To help attract and secure investments and loans, consider attributing a value to your IP (an IP valuation). This will help you leverage your intangible assets fully in negotiations with financial partners. There are IP valuation experts who can help you carry out an IP valuation analysis.
• In addition to traditional financing and loans, there are several ways to obtain IP-based financing:
  • IP-backed loans: Your business may be able to borrow a percentage of the value of your IP assets, using the assets as collateral. This may be a desirable option if your business has valuable IP but lacks tangible assets to secure traditional loans.
  • IP royalty securitization: Your business may pool and sell its future IP-related income streams in exchange for immediate financing. Rather than borrowing money, your business is selling a stream of anticipated revenue generated from patent, trademark, trade secret or copyright licensing.
  • IP sale and license-back: Your business may sell its IP assets in exchange for immediate financing, while retaining the option of using the IP assets through a license-back arrangement. You may include an option in the agreement to buy back the ownership of the IP assets at a fixed price at the end of the license period.
• To be able to demonstrate the quality of your IP assets to potential investors and lenders, conduct an IP audit on your own or with the help of an IP expert. The IP audit should do the following:
  • verify that you retain ownership of the IP
  • confirm that the IP is properly registered or protected
  • identify third-party rights or obligations
  • determine whether your IP is infringing on the rights of others or is being infringed upon
  • identify unused IP assets that may be divested (sold or licensed)
• To maintain confidentiality, especially for trade secrets and unpublished inventions or designs, use confidentiality or nondisclosure agreements when dealing with prospective financial partners. Public disclosure may jeopardize the success of a patent or industrial design registration.
• To qualify for tax incentives, consider the Scientific Research and Experimental Development Tax Incentive Program, which provides tax credits to entities conducting scientific research or development in Canada. Also, Quebec's patent box tax incentive allows for a tax deduction from income derived from patents after March 17, 2016 , for qualifying innovative manufacturing corporations in Quebec.

Patent considerations when seeking financing

• To maximize the value of your patent portfolio, provide prospective financial partners with both quantitative and qualitative valuations of your patent holdings. Highlight the importance of the features your patents protect.

Trademark considerations when seeking financing

• To demonstrate the value of your trademarks to potential financial partners, show the strength of the marks (registration and market reputation) and your willingness to enforce their protection to prevent the dilution of your brand.

Copyright considerations when seeking financing

• To help secure financing or attract financial partners, highlight the value of your copyrighted material as an IP asset. While original works are automatically given copyright protection, the registration of the work provides evidence of ownership, which may reassure prospective financial partners.

Industrial design considerations when seeking financing or loans

• To help secure financing or attract financial partners, highlight the value of the aesthetic uniqueness of your products as well as any industrial design applications or registrations you have. This will showcase your business's capacity to develop unique products. Unique designs may add value by increasing the price premiums you can charge or by providing you with other market advantages.

Trade secret considerations when seeking financing

• To maintain the confidentiality of your trade secrets, share the outputs of the protected process, service or data with investors, rather than the trade secrets themselves. Highlighting the existence of trade secrets may boost the confidence of financial partners.

Operating a business

Strategy: As your business requires continual operation, you should continue to maintain your investment in IP. To protect investments, remain vigilant concerning competitors' IP to ensure continued freedom to operate, and continue maintaining IP assets as your products and services are offered or as they evolve to match the marketplace needs. An IP strategy should be considered from two perspectives: first, to ensure the strategy protects the current products or service offerings, and second, to ensure the strategy is matched for new revisions or updates to your products and services.

Overall considerations when operating a continued business

• To collaborate with legal resources, ensure your ongoing products or services are not at legal risk by monitoring for IP infringement to ensure continued freedom to operate.
• To develop a process for keeping and maintaining IP and innovation records, consider including the monitoring of IP contractual requirements (i.e. nondisclosure monitoring, trade secret maintenance) and associated records (i.e. ownership assignments, registration certificates, product marking on advertised products or services).
• To ensure your IP does not lapse prematurely, consider monitoring the available life of IP protection for the innovations (for example, expiration or abandonment of the registered IP assets).
• To ensure your IP assets remain updated, consider establishing internal operational processes to account for new revisions or updates to your products and services, as well as updating the IP that may reside with these revisions or updates (for example, filing new patents or trademarks).
• To account for new operational or resource changes to your business and to ensure the IP is maintained, consider establishing IP-specific operational processes for your business. This includes establishing human resources processes to address IP considerations for onboarding new employees and for departing employees (i.e. for trade secrets confidentiality).

Patent considerations when operating a continued business

• Routinely review your patent portfolio to help you optimize your return on your investment by ensuring the following:
  1. that core inventions still maintain patent protection
  2. that peripheral inventions are patent protected to generate additional revenue through licenses or sales or blocking competition from entering the market
  3. that other IP is reviewed to determine whether it should be divested or abandoned to cut costs

  Reviewing your portfolio should include doing the following:

  • Continue to review your granted patents in all jurisdictions to ensure the available IP protection is still relevant and in-force to protect your products and services. If granted patents are found not to be of business value, they should be assessed against your IP strategy to make a determination on the continued maintenance of the patent or on the possibility of divesting or abandoning the patent.
  • Continue to review pending patents in all jurisdictions and ensure that the prosecution of the patents is aligned with your IP strategy and that the patents provide protection to the product or service. With proper IP coverage, patent-protected products and services can lead to enhanced market shares, higher profit margins and the development of other innovative products.
  • Where possible, consider filing continuations or divisional applications to expand the current portfolio size and protection. This includes extending patents around the core inventions, as well as peripheral inventions that may be used in the market but not directly by your business.
• Maintain confidentiality for inventions not yet filed for patent protections but that are protected by nondisclosure agreements signed with employees, partners and contractors. Inventions are not patentable if they have already been publicly disclosed. While you may apply for a patent within one year of a public disclosure in Canada and the U.S., other countries do not have such grace periods and require absolute novelty.

Trademark considerations when operating a continued business

• Continue with ongoing registration and, where possible, expansion of geographical registrations based on new or evolving products or services, where customer recognition has been built.
• Review existing portfolio trademarks to ensure marks are in use as registered. If your product or service is not in use as registered, the registered mark may be at risk of being lost or abandoned. If your product or service has deviated from the registered mark, it may also be at risk of being lost or abandoned.

Copyright considerations when operating a continued business

• To ensure your copyright is owned by your business, ensure the copyright is appropriately assigned.
• When it is deemed necessary, continue to file for copyright registration, as it will be easier to prove your ownership if a dispute arises over ownership.
• To ensure that others are not infringing on your copyright, you should search for and prevent infringement. There are tools available to detect infringement online.

Industrial design considerations when operating a continued business

• As your uniquely designed products are altered, continue to file for protection for important novel design elements by registering an industrial design. If your revised design is distinctive in the marketplace, you may also register it as a trademark for further protection.
• Where possible, continue with ongoing industrial design or trademark registration and with expansion of geographical registrations based on new or evolving products or services, where customer recognition has been built.
• If your design is evolving, keep it secret until it is registered. As with a new product or design, maintain confidentiality relating to any unregistered designs by signing nondisclosure agreements with employees, partners and contractors.

Trade secret considerations when starting to operate a continued business

• Continue to maintain trade secrets on such items as formulas, data, client lists, blueprints, algorithms and processes. Employees, contractors and business partners should sign nondisclosure agreements, and such items should be monitored for both marking and breach of confidentiality.
• Continue to maintain the protection of confidential information through regular auditing or monitoring systems, which includes processes to ensure all confidential information that is disclosed is done so under nondisclosure agreements. This includes ensuring information disclosed is appropriately marked and managed by your business.
• Continue to record the existence of trade secrets, catalogue the parties who have access to them and restrict the distribution of the information by way of confidentiality agreements. The information should be kept under lock and key and/or encrypted electronically and/or have its access digitally tracked and monitored.
• If a breach of confidentially is discovered, seek advice from IP legal experts. Not obtaining such advice in a timely fashion may reduce your ability to seek redress for a breach of confidentiality through the courts.

Growing your business into new markets

Strategy: The strategic use of your IP assets may enhance your business's competitiveness when you expand into international markets. There are increased costs as well as paperwork, linguistic or cultural barriers and competition associated with exporting. An effective IP strategy may help you manage some of these challenges. Because IP rights are territorial, registration in Canada will not protect your IP assets in other countries. If you want to protect your IP abroad, you must register your IP rights in each country where you want to do business.

To export successfully, you will need the capacity, resources and management capability to sell and deliver your products or services abroad at a competitive price. You may want to consult CIPO's guides on doing business abroad.

Overall considerations when exporting

• To identify potential partners and competitors in your target market, search international or regional IP databases in the country you intend to enter.
• To signal confidence and build brand value in the country you intend to enter, advertise the IP rights you have obtained for your products or services.
• To avoid problems and streamline the process of IP registration, consult an IP expert in the country you intend to enter. Each country or region has its own set of IP regulations that may differ from Canadian regulations.
• To avoid conflicts with other IP rights owners, conduct a "freedom to operate" search in the country you intend to enter before exporting your goods or services. To avoid making any false assumptions, make sure you have a clear understanding of the IP rights you need to obtain in that country.

Patent considerations when exporting

• To avoid losing inventions to competitors, identify patentable inventions and maintain confidentiality (on a global level) through nondisclosure agreements with your partners, advisors and employees until a patent application has been filed in the jurisdictions you wish to enter. If the invention is disclosed to the public, there is a risk the invention will not be considered new due to early disclosure.
• To streamline the initial filing process when targeting more than three countries, you may file a Patent Cooperation Treaty (PCT) application. Although there is no such thing as an international patent, a PCT application allows you to file a single document to begin the process of entering multiple countries and gives you more time (up to 30 months) to determine whether pursuing the patent application in each individual member country is worthwhile.
• Alternatively, you may file a foreign patent application based on the patent application filed in another country. Generally, there is a 12-month period to claim priority from the date the original patent application was filed. Other foreign countries may have different periods, so you should identify and understand if there is a period to claim priority for the country in which you intend to do business.
• To clarify the ownership of future improvements to your technology, specify the IP ownership rights in a contract with your exporting partner.
• To secure additional market exclusivity or a competitive advantage, apply for patent protection for customizations or improvements even when your invention has already been published.

Trademark considerations when exporting

• Trademark registration is done on a country-by-country basis, but there are streamlining tools to facilitate registration in multiple countries.
• To protect your brand equity, register your trademark before launching products or services in a foreign country. In use-based countries, such as Canada and the U.S., there is limited protection for unregistered trademarks. However, in registration-based countries, only registered trademarks are protected.
• To avoid using inappropriate brand names or logos that have undesirable meanings in a foreign language, check trademark databases and consult an IP expert in the country you intend to enter.
• To avoid being forced to change your brand or logo on your products, website and advertising material, conduct trademark clearance searches (different from a business registration) to ensure that you are not infringing on another business's trademark rights. This will reduce the risk and expense of having goods stopped at the border due to trademark infringement concerns.

Copyright considerations when exporting

• Copyright is established when a work is created, and most countries will honour it based on the Berne Convention. Registering your copyright makes it easier to prove your ownership if a dispute arises.

Industrial Design considerations when exporting

• A foreign industrial design application (otherwise known as a design patent application) may be filed based on the priority date of a unique design application in Canada. However, it must be done within six months of the date the unique design application was filed.
• The Hague Agreement allows you to file for industrial design protection in multiple countries through one application and to pay fees in one currency through a single transaction with the World Intellectual Property Organization (WIPO).

Trade secret considerations when exporting

• To maintain the confidentiality of your trade secrets, ensure that your foreign partners agree to nondisclosure agreements and regular auditing or monitoring systems. Be highly selective when revealing information. Use supply agreements or demonstrate outputs rather than disclosing the trade secrets themselves.
• Although trade secrets may be kept out of the public indefinitely, secrets can be accidentally disclosed or reverse engineered by a competitor or other external party. Additionally, seeking redress for a breach of confidentiality may be costly in court.
• To protect your trade secrets internally, record their existence, catalogue the parties who have access to them and restrict distribution of the information by way of confidentiality agreements. The information should be kept under lock and key and/or encrypted electronically.
• To protect your trade secrets in partnerships, use confidentiality agreements.

Enforcing your intellectual property rights

Strategy: To fend off copycats, make sure your IP rights are protected. A business may enforce its IP rights when someone infringes on, obtains or uses its IP assets, including trade secrets and confidential information, without permission. Because most IP rights are territorial, securing IP rights in one country will provide you with protection only in that country. CIPO does not enforce the rights of registered IP owners. It is up to the owners of a registered patent, design or trademark to take steps to prevent IP infringement and enforce their rights when it occurs.

Here are the steps you can take to prevent violations of your IP rights:

• Monitor the market: You must actively monitor the market for unauthorized use of or infringement on your IP rights. A lack of awareness that your IP rights are being violated may lead to financial losses, damage to your business reputation and an erosion of the value of your IP assets.
• Prevent the flow of pirated or counterfeit goods: You can record your registered trademarks and copyrights with the Canada Border Services Agency. At the request of an IP rights holder and upon approval, border services will temporarily detain suspected counterfeit goods at the border while IP rights holders investigate and take steps to resolve the matter.
• Send cease and desist letters: Sending a warning letter can be a cost-effective way to stop IP rights infringement, start a dialogue with a counterfeiter, facilitate an out-of-court resolution or identify the ultimate source of an infringement.
• If necessary, use alternative dispute resolution mechanisms or litigation: When an alleged copycat refuses to cooperate, you may have to enforce your rights through legal means. Deciding to go this route can be expensive, so you should seek advice from IP legal experts.

Note: It is always a good idea to consult a legal service professional to determine the best course of action.

Patent considerations when enforcing your IP rights

• To block competitors from using your patents, you must prove that all (or essential) elements in a patent claim are being infringed. This determination is costly and complex, and it requires expert legal analysis.
• To prevent competitors from patenting alternatives to your patented solution, you can publicly disclose those alternatives. Your competitors will not be able to obtain patent protection for them because they are already in the public domain.

Trademark considerations when enforcing your IP rights

• Trademark infringement occurs when there is a likelihood of confusion between the goods and services associated with your trademark and those of an alleged copycat.
• To block a competitor from using a trademark that will likely be confused with yours, you may file an opposition to the competitor's trademark application or trigger an expungement proceeding based on concerns related to trademark ownership, the distinctiveness of a trademark, the abandonment of a registered trademark or the fact that a trademark is not in use.

Copyright considerations when enforcing your IP rights

• Copyright infringement may include copying, adapting, distributing or transmitting a copyrighted work. There are some exceptions to copyright infringement. For example, under the fair dealing exception, the use of copyrighted materials for research, private study, education, parody, satire, criticism or review and news reporting is allowed.
• To prevent online copyright infringement in Canada, the IP holder can use the "notice and notice" mechanism to write to an Internet service provider (ISP) and provide notice of a potential infringement. The ISP is obliged to respond by passing along the notice to the person who posted the alleged infringing content.
• Domain name disputes may be resolved under organizations such as the Internet Corporation for Assigned Names and Numbers, which regulates dot-com, dot-org, dot-net, dot-info and other registry systems, or the Canadian Internet Registration Authority, which regulates Canada's dot-ca registry system.

Industrial design considerations when enforcing your IP rights

• Infringement of industrial designs (known as design patents in other countries) occurs when someone uses a registered industrial design without the permission of the owner for the purposes of making, selling or renting a product. If you are the owner of a registered industrial design in Canada, you can take legal action against anyone who infringes on your design.

Trade Secret considerations when enforcing your IP rights

• Trade secrets may be inappropriately disclosed or used by unscrupulous employees, contractors or partners.
• To prove in court that there was a wrongful disclosure or use of a trade secret, the owner must show they took the proper steps to keep the information confidential (through confidentiality or nondisclosure agreements, restricted access systems or notifications to recipients). If the trade secret was independently discovered by a third party or accidentally disclosed, courts will not award damages or prevent other parties from using the information.

Licensing

Strategy: Commercialization or monetization via out-licensing of your IP rights may be an effective and low-risk way of growing your business, improving your products or services and increasing your profits. Commercialization via in-licensing or acquisition of other IP rights may also be an effective way of growing your business, improving your products or services and increasing your profits.

A license is a legal agreement between an owner of IP ("licensor") and another individual or group ("licensee"). The licensor permits the licensee to use the IP without transferring the ownership of the IP, in exchange for an agreed fee.

Overall considerations when deciding whether licensing your IP rights is the best fit for your business plan

• To grow your business, you can license your IP rights in different markets and geographical locations. You should ensure you have the necessary IP protection in each country in which you intend to license. You may also license other IP rights to increase your IP rights and benefit your business.
• To improve your products or services, you may benefit from exchanging the use of IP rights with another business or individual, which is known as "cross-licensing." You may also benefit from separately licensing-in IP rights owned by another individual or business (for example, licensing someone's product for commercial purposes in exchange for royalty fees).
• To maintain control over your IP rights, you should monitor the use of your IP by licensees for misuse or infringement by the licensee or a third party. You should be prepared to take action if you IP is being either misused or infringed upon.
• To minimize interference or competition, you can limit the extent of use of your IP (or "scope" or "field of use") in your licenses. The field of use can be limited in several ways, such as by restricting the total number of licensees, the term of a license or the field of use, market or geographical locations of each of your license agreements. Another way of reducing competition involves negotiating licenses with companies you know to be infringing on your IP rights.
• To license your rights, your business may need to accept financial and legal obligations of enforcement against third-party infringement in return for royalty payments from your licensee.
• Licensing revenue structures may vary; they can be based on upfront license fees on a per-unit royalty basis, lump-sum or annual fixed royalty rates, licenses based on performance goals or back-end licensing arrangements negotiated by a licensee linked to their ability to sublicense.
• There are different kinds of license agreements. They confer different kinds of rights onto the licensor and licensee.
  • Exclusive licence: Only one licensee has the right to use the IP; not even the licensor can use the IP after they've licensed it to the licensee.
  • Non-exclusive licence: The licensor retains the right to use the IP and grant additional licenses for use of the IP to third parties that can use the IP as well.
  • Sole licence: The licensee can use the IP, and so can the licensor, but no additional licenses can be issued to third parties.

Patent licensing considerations

• To avoid confusion about the ownership of future improvements to your invention, you should ensure your license agreement clearly specifies ownership rights to any improvements or derivative works. The agreement should also ensure that confidentiality is maintained until patent applications for any improvements are filed.
• A field-of-use limitation is a provision in a patent license limiting the uses available to a licensee (e.g. limiting the use of the patent to one market).

Trademark licensing considerations

• To maintain the rights to, and the value of, a trademark, you should have a license agreement that specifies the type and quality of products or services that can bear the trademark. You can lose rights to your trademark if the quality or character of the mark is not maintained. Also, the value of your trademark can decrease if the products or services bearing the mark are unsafe, low grade, environmentally damaging or associated with unethical practices. Make sure to monitor the use of your trademark after a license is granted.

Copyright licensing considerations

• To earn revenue from copyright licensing royalties and fees, you should ensure the ownership and moral right of the copyrighted work are established. It is important to determine whether there are obligations attached to third-party rights (in open source or object codes, pictures, graphics, music or text) that will limit your ability to commercialize, license or make modifications to the work.

Industrial design licensing considerations

• To maintain the value of products bearing an industrial design, you should have a license agreement that specifies the type and quality of products that bear the design. The value of the product will likely decrease if the product is unsafe, low grade, environmentally damaging or associated with unethical practices. Make sure to monitor the use of your industrial design after a license is granted.

Trade secret licensing considerations

• To maintain secrecy, you should ensure confidential information is protected through regular auditing or monitoring systems. It is recommended that your license agreement clearly stipulate the terms and conditions for maintaining confidentiality. You should also use nondisclosure agreements when dealing with potential licensees.

Franchising

Strategy: Commercialization or monetization via franchising your business model along with your IP rights can be a low-risk, low-cost way of expanding your proven business model.

Franchising is an agreement wherein an individual or group ("franchisee") is granted the right to use a business owner's ("franchisor") proven business model, plus associated IP, and is also given training and support, in exchange for fees. Franchising involves a special type of IP licensing arrangement.

Overall considerations when deciding whether franchising fits within your business plan

• Your franchise business may include several types of IP, such as trademarks, copyrights, industrial designs, patents and trade secrets. It is likely that your business will need improvements or changes as time progresses and the market evolves. Your franchise agreement should have the necessary provisions to allow you to make these improvements or changes.
• To expand your franchise system internationally, you should ensure that, for each country where you intend to set up units, you research the IP legal system and obtain the necessary IP protection for your business.
• To maintain control over your IP rights, you should be prepared to take action if infringement by a third party occurs. You should also be prepared to monitor the overall use of your IP to avoid dilution or infringement. You should be aware that enforcing your IP rights through litigation can be very costly and that the legal system for enforcing your IP rights in each jurisdiction is different.

Franchising and patents

• One person might own an original patent, and a different person might own patents on improvements. To avoid confusion about the ownership of improvements to your patented inventions, specify the IP ownership rights in the franchise agreement and ensure that confidentiality of improvements is maintained until the necessary patent applications have been filed.

Franchising and trademarks

• To maintain the rights to, and the value of, trademarks, ensure your franchise agreement specifies the type and quality of products or services that may bear the trademark. You can lose rights to your trademark if the quality or character of the mark is not maintained. Also, the value of your trademark can decrease if the products or services bearing the mark are unsafe, low grade, environmentally damaging or associated with unethical practices. Make sure to monitor the use of your trademarks, and have the ability to enforce the use as intended, or the franchisee agreement can be withdrawn.

Franchising and copyright

• To justify the fees for use of your copyrighted works, ensure your franchise agreement specifies the ownership of the copyright and moral right to the work. It is also important to determine whether there are obligations to third-party rights (i.e. in open source or object codes, pictures, graphics, music or text).

Franchising and industrial designs

• To maintain the value of products bearing an industrial design, ensure your franchise agreement specifies the type and quality of products that bear the design. The value of the product will likely decrease if the product is unsafe, low grade, environmentally damaging or associated with unethical practices. Make sure to monitor the use of your industrial designs.

Franchising and trade secrets

• To maintain secrecy, protect your confidential information through regular auditing or monitoring systems. The franchise agreement should clearly specify the terms of confidentiality. You should also use nondisclosure agreements when dealing with potential franchisees. If possible, you should avoid sharing trade secrets with a franchisee.

Purchasing or sale

Strategy: Monetization through the sale of IP assets for your business may be an effective strategy to maximize the value of your business. Likewise, the purchase of IP assets to add to your IP portfolio to allow for more effective commercialization of your business may be an effective strategy. IP assets should be assessed, valued and transferred strategically to realize their full value in a sale.

A purchase, acquisition, sale or divestiture refers to the transfer of tangible or intangible assets through a purchase or sale to another entity. To streamline the purchase or sale of an IP asset, an IP broker may be utilized to facilitate the transfer. As an independent third party and IP expert, they may assist in IP valuation, assist in negotiating a fair market price for the IP asset and provide support for the operational considerations of the transfer.

Overall considerations when buying or selling assets as part of your business

• To demonstrate the quality and strength of the IP rights being transferred, conduct a due diligence assessment of your IP assets. The assessment should identify the following:
  1. the ownership rights to the assets
  2. their protection status
  3. third-party obligations (including royalty or license agreements)
  4. whether the IP is infringing on the rights of others or is being infringed upon

  You may also identify unused IP assets that can be sold or donated for tax purposes. Following your assessment, consider attributing a value to your IP assets, based on an IP valuation analysis. IP valuation is a fairly complex subject and there is not yet a standard way of assessing the value of a piece of IP. For further information, we suggest you consult the following documents:

  • the European IPR Helpdesk's Intellectual Property Valuation fact sheet
  • Richard Razgaitis's Pricing the Intellectual Property of Early-Stage Technologies: A Primer of Basic Valuation Tools and Considerations
• To clarify the ownership of IP rights, outline the rights and obligations in an assignment or license agreement. Verify that all employees and contractors have signed a written agreement that assigns any IP to your company before your company transfers it in an IP transfer deal. The lack of signed written agreements may lead to disputes with employees or contractors who have created products or wish to lay claim to the IP.
• To retain the right to use IP assets when selling them, consider negotiating a grant-back provision in the assignment agreement for the transferred IP assets. A grant-back provision gives you the right to use transferred IP for a fee.

Patent considerations when buying or selling assets as part of your business

• To protect your use of assigned patents when selling an asset, consider negotiating a grant-back provision in the assignment agreement. To retain the patentability of new inventions, consider filing new patent applications before a sale or spin-off process begins. Once you start the sale process, it may be difficult to maintain the confidentiality of new inventions that is required to file patent applications.
• To protect your purchase of patents when purchasing an asset, consider restricting grant-back provisions with sub-license or transfer rights from the original business.
• To balance costs and control of the patents, let the new owners decide whether to convert a domestic patent application into an international one. However, before selling, you should also consider filing a Patent Cooperation Treaty application in order to give the new owner the ability to choose whether to make the filings international.
• The purchase of patents may require a validity analysis as a component of the due diligence assessment, as well as ensuring that the maintenance fees have been paid and the patent is still in force.

Trademark considerations when buying or selling assets as part of your business

• To ensure there are no overlapping trademark rights between a parent company and a new entity, compile a list of trademarks (both registered and unregistered) being transferred. Include the geographic scope of the marks and the protection associated with any goods or services.
• When buying a trademark right, ensure the registered brand is in use as registered in the markets and that the mark's use has not evolved beyond the registration.

Copyright considerations when buying or selling assets as part of your business

• To strengthen the value and reliability of copyrighted material being transferred, consider registering the copyrighted work as evidence of ownership. While copyright protection is established upon the creation of the work, registering the copyrighted material being transferred ensures ownership is documented in case disputes arise later.
• Ensure that moral rights associated with the copyright are waived when transferring copyrighted material. Moral rights are defined as the right to maintain the integrity of the work free from modifications and the right to be or not to be named as the author of the work.

Industrial design considerations when buying or selling assets as part of your business

• To protect your use of assigned industrial designs, consider negotiating a "grant-back" provision to assigned industrial designs. A grant-back provision gives you the right to use the designs for a fee.

Trade secret considerations when buying or selling assets as part of your business

• To maintain the protection for your trade secrets, complete confidentiality or nondisclosure agreements before revealing secret information to external parties. If this is not possible, consider only sharing the outputs of the protected process, service or data with external parties, rather than the trade secrets themselves.

Spin-off or Technology Transfer

Strategy: The spin-off or technology transfer of your IP rights may be an effective way of growing your business, improving your products or services and increasing your profits. A spin-off is a buzzword that typically refers to transferring some tangible and intangible assets from an existing entity to a newly created business. Technology transfer is similar and typically refers to transferring the technology from your business to a secondary business. It may involve a sale but may often include registered assets such as patents, skills, know-how or other trade secrets required to operate the technology as intended.

Overall considerations when creating a spin-off or undertaking the technology transfer of your IP assets as part of your business

• To clarify the ownership of IP rights, outline the rights and obligations in an assignment or transfer agreement. Verify that all employees and contractors have signed a written agreement that assigns any IP to your business before your company transfers it in a technology transfer or spin-off deal. The lack of signed written agreements may lead to disputes with employees or contractors who have created products or wish to lay claim to the IP.
• To retain the right to use IP assets when transferring or spinning off an asset, consider negotiating a grant-back provision in the assignment agreement for the transferred IP assets or rights to improvements created by your business after the spin-off or transfer. A grant-back provision gives you the right to use transferred IP for a fee or for no fee.
• Transferring IP rights for successful implementation by the start-up or the secondary business may require transferring a mix of IP rights: patents, copyright, trademarks (registered and unregistered), trade secrets or industrial designs. Ensure a spin-off or transfer agreement clearly defines the IP assets or IP rights that are being transferred.
• Consider payment structures for IP rights and assets. Similar to royalty payment agreements, spin-off or technology transfer payment structures may vary; they can be based on upfront lump-sum or annual fixed payments, payments based on performance goals or back-end financing arrangements negotiated by the spin-off or secondary business linked to their ability to commercialize.
• Consider that the spin-off or secondary business may require warranty disclaimers, such as indemnification against damages of infringement. Considerations must be given on your business's ability to support such disclaimers.

Patent considerations when creating a spin-off or undertaking the technology transfer of your IP assets as part of your business

• To protect your use of assigned patents, (i.e. patents related to the transferred technology or when spinning-off an asset) consider negotiating a grant-back provision in the assignment agreement. This may include clarifying the ownership of continuations or divisional applications deriving from the assigned patents.
• To retain the patentability of new inventions, consider filing new patent applications before a transfer or spin-off negotiation process begins. Once you start the process, it may be difficult to maintain the confidentiality of new inventions that is required to file patent applications if the transfer or spin-off does not proceed.

Trademark considerations when creating a spin-off or undertaking the technology transfer of your IP assets as part of your business

• To protect your use of associated trademarks, such as business brands, associated with the technology transfer or spin-off, you should specify the type and quality of products or services that are being transferred and consider if they will cause confusion with the existing trademarks you are retaining. You may dilute or lose rights to your business trademarks if the spin-off or trademarks associated with the technology transfer cause confusion to the marketplace or to a consumer.
• To protect your use of future trademarks, consider negotiating a coexistence agreement to define how your business and the spin-off or secondary business may co-exist without interference. This may be useful if the spin-off or secondary business considers using the same trademarks as your business, but in a different jurisdiction.

Copyright considerations when creating a spin-off or undertaking the technology transfer of your IP assets as part of your business

• To protect your use of derivative works when creating a spin-off or undertaking a technology transfer, consider if you need to retain rights to make modifications to the work.
• Ensure that moral rights associated with the copyright are waived when transferring copyrighted material. Moral rights are defined as the right to maintain the integrity of the work free from modifications and the right to be or not to be named as the author of the work.

Industrial design considerations when creating a spin-off or undertaking the technology transfer of your IP assets as part of your business

• To protect your use of assigned industrial designs, consider negotiating a "grant-back" provision to assigned industrial designs. A grant-back provision gives you the right to use the designs for a fee or for no fee.

General considerations for having an IP valuation report

Strategy: You may be able to use your IP assets to help you obtain financing from banks, venture capitalists, angel investors or government agencies, to build corporate value through joint venture agreements and strategic partners or to build revenue by licensing royalty income. You may be required to value your assets for accounting, compliance or infringement damages reasons. It is therefore important for you to understand the types of IP valuation reports and the considerations when valuing specific assets.

Below are the considerations for valuing your IP assets. Varying standards or types of valuation methods apply in each case.

• Licensing or asset transfer valuation: Your business may require or may be doing an independent analysis on an in-licensing or out-licensing royalty calculation, or you may be considering transferring the IP assets to another jurisdiction for business purposes.
• Litigation reporting: Your business or your IP advisors may need to calculate a valuation for damages awards, usually as part of an infringement lawsuit. In this type of valuation, case-specific standards to the jurisdiction in question may apply, or there may be restrictions on the type of methodologies used.
• Internal return on investment or cost control valuation: Your business may define an internal value for internal business use, in making decisions on research and development investments or on the prioritization of IP assets to maintain or divest.
• Bankruptcy or liquidation valuation: In the winding down of your business, the bankruptcy court or trustee may require a valuation for the reorganization or sale of the IP assets.
• Financial valuation (accounting, tax, compliance and other transactions): Your business may require valuation for a financial transaction, such as investor valuations, joint venture considerations or contract negotiation points. Your business may also require valuation for financial reporting, such as year-end balance sheets or similar accounting reports, or for the donation of IP assets for tax benefits. In this type of valuation, accounting standards may apply, as well as tax code standards in the jurisdiction in question or transfer pricing reasons.
• IP-backed loans or financing: Your business may be able to borrow a percentage of the value of your IP assets, using the assets as collateral. This may be a desirable option if your business has valuable IP but lacks tangible assets to secure traditional loans.
• IP royalty securitization: Your business may pool and sell its future IP-related income streams in exchange for immediate financing. Rather than borrowing money, your business is selling a stream of anticipated revenue generated from patent, trademark, trade secret or copyright licensing.

Businesses should consider that there are both negative and positive implications for defining a value to their IP assets. For example, a low valuation calculated for tax or transfer pricing purposes may trigger a similarly low valuation for future litigation damage assessments when you enforce your IP against an infringing third party, and vice versa.

Patent considerations when valuing your IP rights

• A patent is a negative right, meaning that its value is in preventing others for making, using or selling a product or service that is claimed in your patent.
• Patents may lose value over their lifetime and hold value only in jurisdictions where they are valid.
• Patent value may be split by field of use (technology sectors or geography) and may only be applicable to one selected component or service in the value chain of the offered product or service.
• Licensed patents may only retain value for a licensee if they are held to remain valid and kept enforced. A licensor may be responsible for the financial costs associated with maintaining and enforcing a patent for a licensee, or the value the patent brings to a licensing agreement may be reduced.

Trademark considerations when valuing your IP rights

• Branding value may increase or diminish over time, based on the market value of the trademark and goodwill associated with the trademark in use.
• The value of a registered trademark may be limited to the geography and field-of-use categories of the registration.

Copyright considerations when valuing your IP rights

• Value may lie in independently splitting the various forms of the copyright use, such as the right to copy, distribute, publish or perform.
• Value may lie in derivative works.

Industrial design considerations when valuing your IP rights

• An industrial design may only hold value in jurisdictions where the industrial design is valid.

Trade secret considerations when valuing your IP rights

• Value may be tied to the business's ability and effort in protecting and managing the trade secret.
• Value may be based on the indirect or direct loss of business if the trade secret was to be disclosed.
• Value may only be maintained if the trade secret is kept secret and has economic value for the business.

Entering into a joint venture

Strategy: When you enter into a JV with another company, it is important to define and negotiate the use and ownership of your existing IP and any new IP that is developed as a result of the JV.

Overall considerations when entering into a joint venture

• Identify which IP assets each party is contributing to the JV (the background IP) and establish the scope of protection each IP asset has. This will involve performing an audit to identify IP assets, determine their ownership (and any third-party obligations), establish what protection they have and determine which country or region the protection covers.
• Determine the overall value of the JV. You may find it useful to attribute a quantitative value to the IP assets, based on an IP valuation analysis.
• Avoid future disputes over the ownership of any IP assets developed by the JV. Outline the ownership rights of the contributors in the JV agreement. In other words, define who owns what, for all types of IP, such as the project IP and the foreground IP. You should ensure the agreement indicates that employees, contractors and advisors cannot prevent you from using any IP arising from the JV.
• Ensure you retain control over the IP assets you contributed to the JV. Establish IP termination rights or whether the IP is licensed (subject to a fee or royalty) or assigned (sold) within the JV with the possibility of a buy-back if the JV dissolves.
• The finances and management capabilities may also be different, and this may make it difficult for the JV to bring the IP to the market.
• To protect your reputation in the market, ensure that for any IP right you license to the JV, the field of use, geographical restrictions and termination conditions are defined in the license agreement.
• Define which business partners have rights and obligations to manage IP assets on behalf of the JV, and establish IP governance terms.
• To add value, the JV may develop and execute its own IP strategy, as well as enact IP policies or IP programs specifically for the benefit of the JV. The businesses should consider setting guidelines for IP strategy or IP policy for the benefit of the JV.
• To ensure confidentiality, establish and enforce confidentiality agreements between all partners and their associated employees, contractors and advisors.

Patent considerations when forming a joint venture

• To maintain confidentiality and preserve the patentability of an invention, ensure that clear reciprocal requirements for confidentiality are part of the JV agreement. If the invention is disclosed to the public, it may not be patentable because it is no longer new. There is a grace period in Canada and the U.S. that allows you to file for a patent within one year of public disclosure, but other countries do not have a grace period and require absolute novelty.
• To clarify exploitation rights of improvements or new inventions arising from the JV, ensure that the JV agreement outlines the patent filing and prosecution rights of the contributors. If the inventing contributor refuses to obtain patent protection, outline whether the non-inventing party is allowed to obtain patent protection and at whose expense.
• Consider securing rights to undisclosed inventions through patent protection before forming a JV. It may be easier to track and more lucrative to license or assign patents covering these inventions to the JV rather than to license or assign them as trade secrets or "know-how."

Trademark considerations when forming a joint venture

• To clarify the rights and obligations of each contributor, define the terms of use of new trademarks owned and registered by the JV. This may include use in geographical and product and service areas during the lifetime of the JV and upon its termination.

Copyright considerations when forming a joint venture

• To protect software, databases, manuals, original drawings and other works subject to copyright, outline the rights and obligations of each contributor. Consider registering your copyrighted material to provide evidence of your ownership in case disputes arise later.

Industrial design considerations when forming a joint venture

• To maintain confidentiality and preserve eligibility for registration of an industrial design, ensure that clear reciprocal requirements for confidentiality are part of the JV agreement. If the design is disclosed to the public, it may not be eligible for registration because it is no longer unique. If your industrial design application was filed less than six months earlier in Canada, you may be able to extend your coverage internationally through applications in other countries. Canada will also register a design that has been published for less than 12 months. However, keep in mind that not every jurisdiction allows for such a grace period.

Trade secret considerations when forming a joint venture

• To maintain the confidentiality of your trade secrets, ensure that third parties agree to nondisclosure agreements and put in place security and monitoring systems. Be highly selective when revealing secret information. Use supply agreements or demonstrate outputs rather than disclosing trade secrets themselves.
• Although trade secrets may be kept out of the public domain indefinitely, confidentiality will be lost if they are accidentally disclosed or reverse engineered by an external party.
• To protect your trade secrets internally, record their existence, catalogue the parties who have access to them and restrict distribution of the information by way of confidentiality agreements. The information should be kept under lock and key, encrypted electronically and/or digitally tracked and marked.