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Objective of the guide

 

This guide provides considerations based on your business objectives that will put you on the path to developing a detailed intellectual property (IP) strategy that you can integrate into your business plan.

1. Developing an IP strategy

An IP strategy is a plan that is created to align your business goals. You can do so by obtaining IP rights for your products and services and by leveraging existing IP assets, in order to gain a competitive edge in the marketplace and drive sustainable growth. An IP strategy may be focused on a single IP asset type or a mix of many (patents, trademarks, copyright, trade secrets or industrial designs).

Developing an IP strategy can be generally considered in the four following stages and may be applicable to your business as a whole or developed for a specific product or service:

  1. understand your business and IP
  2. develop your IP operations
  3. execute
  4. iterate

Figure below – IP strategy process steps

There is a process that can be scaled as you grow your venture to generate your IP strategy. You may apply this process to consistently generate useful updates to your IP strategy for your business.

IP strategy process steps
  1. Business and IP analysis

    • IP alignment Understand your IP assets and how your IP strategy framework relates to your business objectives
    • Portfolio assessment Take inventory of intangible assets and IP
    • Positioning Know the IP strategy of your market and competitors
    • IP analysis What is the best way to maximize the impacts of IP on revenues, competitiveness and reputation
  2. IP operations

    • Develop Create an IP strategy using all information collected during the alignment stage
    • Operationalize Establish IP goals and infrastructure in line with business objectives
  3. IP execution

    • Execution Carry out and communicate the course of actions in your IP strategy
  4. IP realignment

Stage 1: Business and IP analysis

First, to develop your IP strategy, you should understand the types of IP and decide which strategy to pursue, based on your business goals. The type of IP strategy you pursue will depend on the following:

  • the type of intangible assets your business currently has or will generate
  • the known IP strategy of your competitors and the broader marketplace
  • an IP assessment to understand the best way to maximize the value of your IP for your business

The result will be an IP strategy that is aligned with your business needs.

You should consider that various types of IP strategies exist, that the specific IP strategy and supporting actions will be unique to each business and that each may generate a different respective return on investment for your business. However, there are several general strategy frameworks that can be considered by any business, such as the following:

  • Defensive: Creating and generating a defensive position against competitors and the marketplace to have a stable IP position against external threats (for example, using open-source or patent strategies to give a freedom to operate position, deter competitors through defensive patent filing based on your product or service, or develop a robust trade secret program to ensure the protection of your confidential information from competitors).
  • Offensive: Creating and generating an offensive IP position against specific markets or competitors (for example, filing blocking patents to prevent competitor growth or amassing a strong IP position to enable the enforcement of market leadership, which is often done through targeted patent or trademark filing strategies).
  • Financial: Pursuing and protecting IP assets based on the ability to reduce IP costs or increase your financial position using IP assets (for example, continuously reviewing active registered IP assets and maintaining only those you need while the remainder is divested or moved into the public domain). Financially driven strategy may increase financial benefits for the company (for example, building an IP portfolio in anticipation of a future business objective, such as an investor event, a merger and acquisition action or an initial public offering).
  • Licensing: Creating, acquiring, or managing IP assets for the purpose of generating revenue through enforcement, commercialization or licensing opportunities (for example, offering or negotiating access to the market through patent licensing, brand (trademark) licensing, information (data under copyright) sharing and licensing, or open source sharing).
  • Strategic: Creating and leading the marketplace with respect to IP assets, which gives you control of the market as it evolves (for example, generating IP assets for use in cross-licensing or joint ventures, acquiring broad patent protection for foundational technology that may be embedded in standards, or creating market-critical IP assets [trademark on brands, copyright on data, patent on technology] in combination with early market leadership).

Due to these various general IP strategies, your business's IP strategy should take into account the vision and mission of your business as well as how it will operate in the marketplace. You can then define the appropriate approach or mix of strategy frameworks around which to build the IP strategy.

Stage 2: IP operations

Second, you should develop the IP strategy and operational details for your business. This includes creating the IP strategy (i.e. vision, mission, guiding principles, supporting metrics and IP asset type needs) as well as setting operational goals and developing a business infrastructure (i.e. budget, headcount resources, risk profile and decision hierarchy) that align with your business strategy. These details depend on the information collected during the alignment process and will result in an operational plan that can be executed on.

Figure below – Overview of your operational plans

Operationalizing your IP strategy is critical to any business or entrepreneur looking to reap the most value from their intangible assets. Consider the following IP tasks or reach out to a Canadian Intellectual Property Office (CIPO) IP advisor if you have questions about which avenue is right for you:

operational figure
Overview of your operational plans

IP protection
IP protection obtained to:

  • Guarantee exclusive use
  • Gain a competitive advantage in the marketplace
  • Prevent counterfeiting and copycats
  • Ensure confidentiality

IP business development
IP can be leveraged to:

  • Generate income through selling or licensing
  • Used as leverage for financial grants or negotiations
  • Create barriers to marketplace access for your competitors

IP commercialization
Your IP can be turned into dollars by:

  • Selling your IP to another individual or business
  • Licensing to another individual or business (rent IP for a price)

IP open source
Sharing or open source licenses

  • Increase uptake of content
  • Combine open source and propriety IP

IP inventiveness
Researching 'prior art' can lead to:

  • Learning about new technologies
  • Creation of new innovative ideas
  • Avoiding duplication efforts
  • Finding partners or infringers
  • Identifying license and technology transfer opportunities

IP monitoring
Monitoring your competitors to:

  • Gain insights into your competitors' market strategies
  • Serve as an information source (i.e. innovation trends)
  • Obtain evidence for legal action against infringement

Stage 3: IP execution

Third, you should communicate and carry out the IP strategy within your business. From an operational or implementation perspective, an IP strategy should not be a standalone plan to execute, nor should it be the responsibility of the legal or research and development (R&D) team to manage alone. Your IP strategy should be an essential and integrated component of your business strategy and should therefore be communicated to staff and senior management during execution. It should also be understood by your advisors and board members (where applicable) so that you can better assess the risk profile and required risk management of all employees. In all cases, the organizational structure, corporate policies and cultural environment of your business should both support and be supported by your IP strategy.

Stage 4: IP realignment

Fourth, you should continually revise and refine your IP strategy. The development of your IP strategy in these three stages is not a single task that is completed only once. Your IP strategy should be developed and evolve over time, and you should refine your IP strategy as frequently as you evolve your business strategy. This is important, because as your business grows your IP assets over time, your branding or technology may also evolve. Costs to maintain and manage your IP assets may also grow over time, so you may need to consider regular actions of trimming and refocusing. Your business position may change, and your IP strategy may mean considering the acquisition of IP assets to secure the desired or additional IP coverage and levels of protection for your growing business.

 

2. Alignment with corporate policy and corporate culture

Corporate policy and culture will have an impact on the specific types of intangible assets that can be created and managed. For example, many mature businesses have their own sub-business units with varying market needs, and many high-growth businesses with specific priorities and policies on short-term budget decisions may not be aligned with long-term IP needs. As a result, the IP strategy and IP assets should be managed with the corporate policy and culture in mind.

Strategy: To enable the execution of a robust IP strategy, you must consider the corporate policy limits when creating and managing both the strategy itself and the operational components under it. If your business is just beginning, you should consider setting the policies and culture that match both your IP needs and corporate capabilities. If your business exists, you should consider the potential impacts on your business of implementing any IP strategy, such as adding IP policies that may alter existing relationships with contributors, employees, contractors, partners and advisors.

Figure below – IP policies align under corporate policy

...
IP policies align under corporate policy

Corporate Policy & Business Strategy

  1. Human Resource Policy
  2. R&D, Marketing, Finance Policy
  3. Legal Policy
  • IP valuation
  • IP quality and IP culture
  • IP asset creation, management, and maintenance
  • Confidentiality & non-disclosure policies
  • Partnership development and interaction with 3rd parties
  • IP personnel resourcing
  • Education & skill training
  • Onboarding & exit interviews
  • IP asset management, infringement monitoring, and freedom-to-operate considerations
  • Open innovation vs. closed innovation

IP policies should align under corporate policy and business strategy

For example, policy strategies may take into account the following:

  • the use of open innovation culture vs. closed innovation culture
  • the level of trade secret management
  • the implementation of copyright management tools
  • the requirement for a freedom to operate analysis
  • the engagement with IP legal experts to maintain infringement and enforcement programs

Implementing these corporate policy strategies requires an understanding of how the policies and their respective processes impact various individuals and their business departments. It also requires finding the optimum balance for your business needs vs. policy objectives. In all cases, you should ensure that your business's established IP policies align with corporate policies and support the corporate IP culture that is required by your business.

The list below comprises examples of considerations for IP policy and culture-based objectives for businesses. Each assessment policy and cultural position will be unique for each business, so consider talking with an IP expert or a CIPO IP advisor if you have questions about which types of policies may be right for your business.

Overall considerations for alignment with corporate policy or corporate culture

  • IP assets: IP assets should be developed in line with corporate IP policies through the entire IP lifecycle of creation, management and maintenance of such assets. In addition, well defined corporate policies may be valuable for external advisors, such as legal experts, who can use such policies to streamline costs and work outputs for your business.
  • R&D policy (open innovation vs. closed innovation): Some business cultures have open innovation policies, which allow employees and partners to share and use both external and internal ideas. This often involves including customers or other researchers early on in the development process, and it may increase the potential for the product or service to have market value. However, the policy may result in a reduced ability to acquire ownership to register rights for your business, or it may increase the chance of disclosure, which may also limit the ability to protect the IP asset in the future. Other business cultures have a closed innovation policy, which relies solely on IP developed internally within the business. This policy may require additional focus on confidentiality and nondisclosure corporate policies until new products are launched.
  • Disclosure policy: Linked with the trade secret policy for your business is an understanding of which information or materials may be disclosed or communicated, both internally and externally, which is important. This includes, for example, disclosure by publishing materials or information that can be accessed externally online or even internally to your business's private network. The impact and risk associated with disclosing improper materials should be clear for all levels of your business.
  • Partnership policy: Many businesses and sub-business units require partnerships to get access to technology, markets or other business-relevant information. In a partnership policy, employees, contractors and other advisors should consider the level of authorization they may have to create a binding or contractual partnership with another business, as well as the contractual requirements and limitations of the partnership. For example, a strategic partnership may require the assignment of project IP assets to one partner (i.e. the transfer of IP ownership to another party), while another may require limitations on disclosure or even exclusivity or non-exclusivity by another. Each partnership or joint venture (JV) may be unique, so corporate policy may dictate the limits and alignment required on partnership agreements.
  • IP quality: Understanding the "quality" of IP for a business is a subjective matter and is therefore a product of the IP culture that is often directly fostered by corporate policies. For example, a business that focuses policy on high-volume patent generation (at a low cost) may encourage employees to forgo patent quality in an effort to maintain the filing pace. However, a business that focuses policy on advancing "business relevant" IP assets or critical know-how through IP processes for approval may be better able to create a supporting culture that understands how "IP quality" is defined and rewarded.
  • Infringement and freedom to operate: To ensure a product, a service or a third party is not infringing on your rights, your business may implement a policy to both search for infringers and ensure clearance from infringement. Policies surrounding infringement and freedom to operate clearance should be done in collaboration with IP expertise or legal resources. The depth of policy may differ on the various levels of a business (i.e. where different business units have varying strategies, business objectives or even innovation strategies, such as open vs. closed innovation or IP).
  • Sales and marketing: Many businesses establish sales and marketing policies for employees and business partners who consider limiting premature or permanent disclosure of products or services to protect IP rights, such as patent or trade secret rights. Businesses may also define policies on how products or services can be displayed to customers or visually branded or marked in the industry to protect the brand and goodwill associated with a trademark. This may include guidelines outlining the quality and scope of the goods and services that may be sold in association with the trademark.
  • Human resources: Policies based on human resources (HR) to address IP considerations can be established to ensure onboarding of new or departing employees and to adequately cover the trade secret or IP ownership policies for your business via contractor or employment contracts (i.e. outlining background IP and foreground IP for the arriving or departing employee or contractor). HR may be further involved in policy creation and execution by ensuring skilled IP resources are available to support the effective management of all IP processes. This includes, for example, considering policy and education programs to raise awareness of IP in your business and the risks associated with neglecting IP, or specific education programs to build or embed IP competence for all employees, contractors and advisors, where IP is related to their work outputs. HR policies may also support employee engagement, through inventor recognition or financial reward or promotion programs. As a result, HR policies are often a fundamental component of setting the groundwork for the IP culture that is required by your business.

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.

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.

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.

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.

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.

 

3. Business goals

3.1 Starting a business

Introduction

To ensure your business has a sustainable competitive advantage, it is important to understand how each type of IP can strengthen the competitiveness of your business and how you can use that understanding to develop an IP strategy. It should be closely tied to your strategy to grow your business. You will use your IP strategy to direct your organization's decisions on how, where and when to protect, manage and monetize your intangible assets.

Definition of IP

IP refers to specific types of intangible assets. Each country has its own set of IP laws and regulations that may differ from Canadian legislation. To qualify for protection, IP must fall under one of the following general categories (more information on the different types of IP and how they should be protected is available on CIPO's IP for business webpage).

  • Patents provide an exclusive right to make, use and sell an invention. Patent protection applies in the country or region that issues the patent. In Canada, a patent lasts for 20 years from the date the patent application is filed. To be eligible for patent protection, the invention must be new, useful and inventive.
  • Trademarks can be letters, words, symbols, designs, tastes, textures, moving images, modes of packaging, holograms, sounds, scents, three-dimensional shapes, colours, or a combination of these used to distinguish the goods or services of one person or organization from those of others. Once the trademark is registered, the owner has the sole right to use the mark in Canada for 10 years. After that, the trademark registration can be renewed every 10 years indefinitely. It should be noted that a trade name or business name (the legal name under which a business is federally or provincially registered) and a domain name (Internet address) do not have the same protection.
  • Copyright is the exclusive right to produce, reproduce, publish or perform an original literary, artistic, dramatic or musical work. Generally, copyright exists in Canada during the author's lifetime and for an additional 50 years from December 31 of the year of the author's death. However, there are some exceptions. For instance, the protection period for performances and sound publications is 70 years from the release date of the recordings.
  • Industrial designs are based on the unique appearance of a product—its shape, configuration, pattern or ornament, or any combination of these features. Examples of industrial designs include the contour of a car hood, the graphical user interface on a phone and the shape of a stylish piece of furniture. An industrial design registration lasts for up to 15 years, provided the maintenance fee is paid.
  • Trade secrets cannot be registered with an IP office. They are proprietary information that is protected by confidentiality. Proprietary information can include secret formulas, processes and methods used in production. It typically includes information that may give the owner a competitive advantage but has not been publicly revealed and is not generally known in the industry. Trade secrets last as long as the information is kept secret.

Benefits of an IP strategy

Having a cohesive IP strategy can help you do the following:

  • build and enhance the value of your business
  • enhance your business's reputation by distinguishing it from others
  • establish your sole ownership of your IP assets and help secure an exclusive competitive advantage in the market
  • prevent competitors and counterfeiters from copying or imitating protected aspects of your goods or services, including your brand (trademark), designs (industrial design), inventions (patent) and original artistic works (copyright)
  • use your IP assets as collateral to obtain investments or loans
  • increase your revenue by licensing, franchising, selling or divesting your IP assets
  • pool your IP assets with other entities through joint ventures or other strategic alliances to bolster your overall competitiveness

When thinking about these benefits, you must keep in mind that IP rights are negative rights, which means that they prevent others from using your IP. You do not need registered IP protection to sell your product or service.

Basis for an IP strategy

Section: Developing an IP strategy, defines a full set of steps for developing an IP strategy. When starting a business, you can consider the approach below to understand your IP position and to develop your IP strategy and the operational details required to build and develop your IP strategy:

  1. Identifying IP opportunities and pursuing protection

    You should understand and decide on the type of IP strategy to pursue, based on your business goals. General strategy frameworks, such as defensive, offensive, financial, licensing, and/or strategic, can be considered by any business. These are outlined in detail earlier in Section: Developing an IP strategy. However, all strategies will involve the following in the protection of your IP assets:

    • Become informed: Learn the advantages and disadvantages of each type of IP protection, and the strategy to pursue for each type. Make sure your investment in any IP protection is justified by the projected return that exclusivity will bring. To do so, consider the value of your products' exclusivity to customers, investors and business partners.
    • Clear your right to use your IP by searching databases: To avoid inadvertently infringing on the IP rights of others, search regional or international IP databases. CIPO provides free guides to help you search the following Canadian IP databases:
    • Geography of protection: IP registration in Canada does not protect you in other countries. If you want to do business in another country, you must obtain IP rights in that country to secure protection. International filing mechanisms can facilitate IP registration in more than one country.
    • Act in a timely manner: Make sure your IP is protected early to avoid losing your competitive advantage. CIPO provides a number of free tutorials on obtaining a copyright (see also fees), a patent (see also fees), a trademark (see also fees) and an industrial design (see also fees) in Canada. If you are exporting to foreign countries, make sure IP protection is secured in each of these countries. For more information, see CIPO's guides on doing business abroad.
    • Get protection for offensive purposes: Use your IP protection to aggressively enforce your rights against competitors and counterfeiters.
    • Get protection for defensive purposes: Rely on your IP protection as a deterrent to competitors who may accuse you of infringing on their rights.
  2. Identifying business IP assets and IP types

    Next, the type of IP strategy you pursue will depend on the following:

    • the type of intangible assets your business currently has or will generate
    • the known IP strategy of your competitors and the broader marketplace
    • an IP assessment to understand the best way to maximize the value of your IP for your business

    The result will be an IP strategy that is aligned with your business needs. To understand this, you should perform an assessment of IP types relevant to your business and an IP audit to identify your assets and IP gaps.

    • IP types and IP audit: An important step in your IP strategy should be to conduct an audit of the intangible assets your business owns. Once you have identified your IP assets, you can determine if you should invest to protect and manage them. It does not matter if your IP is registered when you carry out your audit. However, you should not include intangible assets that are licensed from or owned by other companies at this point. As part of this IP audit, you should identify the IP gaps you have, based on the types of IP owned by known competitors and the broader marketplace. This will set the foundation for an IP assessment to understand the best way to maximize the value of your IP for your business as well as the type of IP you need, compared to the type of IP you may have.
  3. Executing IP strategy and performing risk management

    Finally, you should begin to develop your IP strategy within your business while understanding the IP risk profile and required risk management.

    • Integrating IP into the business: From an operational or implementation perspective, an IP strategy should not be a standalone plan to execute, nor should it be the responsibility of the legal or R&D department to manage alone. Instead, your IP strategy should be an essential and integrated component of your business strategy that is supported by all areas of your business.
    • Promoting IP awareness internally: Your employees should be aware of their responsibilities in protecting your IP. They should learn the fundamentals of IP protection. Once they are IP literate, your employees can participate in the identification of key IP assets and help you strategize on how, where and when to protect, manage and monetize your intangible assets to add value to your business.
    • Ensuring IP can be maintained: Have employees, investors and business partners sign nondisclosure or confidentiality agreements to protect your trade secrets, know-how and inventions or designs that are not protected by patents and registrations for industrial designs.
    • Monitoring the market and defending your rights: Your exclusive IP rights secured upon registration are only valuable if you prevent others from infringing on them. If you discover your rights are being violated, you can, with the help of IP experts, send cease and desist letters, negotiate cross-licensing or settlement agreements, or enter into litigation, arbitration or mediation proceedings.

    By understanding these details, you may formally begin to develop your IP strategy as described in Section: Developing an IP strategy.

3.2 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 TM, ®, 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.

3.3 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 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.

3.4 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.

3.5 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.
  • 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.
  • 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.

3.6 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.

 

4. IP ownership

IP refers to specific types of intangible assets. Each country has its own IP laws and regulations that may differ from Canadian law. To qualify for protection, the assets must fall under legally defined parameters. More information on the different types of IP and how they can be protected is available on the CIPO website.

Strategy: Ensure you own or have been assigned your IP rights. Many costly disputes involve the question of IP ownership. When your business succeeds based on market exclusivity or a competitive advantage afforded by your IP, contributors, employees, contractors, partners and advisors may dispute your ownership. Thus, it is important to protect your IP ownership from the start. Ownership of an IP right depends on several factors, including the following:

  • your contract with a partner or an employee
  • the date the application for IP protection was first filed
  • the identity of the first inventor, author or designer.

IP rights may be obtained through a grant from an IP office or by the transfer of ownership and licensing where an individual or company obtains IP rights from the owner.

4.1 Patent ownership considerations

  • To establish ownership and other rights or obligations relating to an invention with an employee or external contractors, document the ownership or patent transfer in a written assignment agreement. If this is not done, the contractor or employee may own the patent rights by default.
  • Similarly, enshrine your ownership of inventions in an employment contract and in contracts with external contractors. To do so, use invention-assignment clauses detailing how the company's IP may be used. While your business will own the inventions that employees are paid to develop by default, invention-assignment clauses may afford you additional protection.

4.2 Trademark ownership considerations

  • To establish and safeguard ownership relating to a trademark or a brand, track the ownership and control of the trademark in licensing or franchising agreements.
  • To avoid losing control of a trademark, set guidelines outlining the quality and scope of the goods and services that may be sold in association with the trademark.
  • If there are competitors using the same or a similar trademark or brand in a similar industry, this should trigger a "fight or flight" response. Either establish your ownership and fight to prevent the competitors from using your trademark, or abandon its use (if another company has used it before you did) and opt for something else.

4.3 Copyright ownership considerations

  • Copyright is established the moment an original work is created.
  • The owner of a copyright is usually the author, unless there is an employee-employer relationship or a contract stating otherwise, such as a contract of sale.
  • Ensure that moral rights associated with the copyright are waived in the transfer of 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. Moral rights cannot be transferred.

4.4 Industrial design ownership considerations

  • In Canada, industrial design rights are established once they are registered with CIPO.
  • If multiple applicants seek protection for the same design, the designer who first created the design is entitled to registration.
  • If others are making, selling or using your registered industrial design without your permission, you can sue them for infringement. This could allow you to seek an injunction on further use of the industrial design as well as monetary damages.

4.5 Trade secret ownership considerations

  • Trade secrets are not registered. Therefore, their ownership can only be maintained through secrecy. You should maintain rigorous confidentiality by, for example, signing nondisclosure agreements with those who have knowledge of your trade secrets. This includes employees and external partners, contractors, advisors and consultants.

 

5. IP assessment and prioritization

To ensure the IP strategy of your business is successfully defined and executed, you should make a clear and concise plan for assessing and prioritizing IP assets to be managed and maintained, both at their creation and at relevant points in the IP assets' lifetimes. There should be an assessment of innovations with respect to the type of IP that is critical for your business (i.e. patent, trademark, industrial design, copyright). This assessment should be considered at the early stages (i.e. when ideas and innovations are in the process of being formed into IP assets) as well as the mature stages of the assets (i.e. when the assets are formally registered). Finally, there should be a dedicated team with IP skill sets and knowledge to assess and prioritize the IP assets, and this should be done on an ongoing basis.

5.1 IP assessments: Identifying and assessing

After the creation and identification of the IP asset by your business, there should be documentation and IP assessments of any new IP assets that could impact business value. This could include identifying and assessing all registered IP assets (patents, copyright, trademarks, industrial designs) as well as unregistered IP assets (unregistered trademarks, trade secrets, know-how). You can identify assets by implementing IP harvesting sessions (i.e. brainstorm or ideation group sessions) within your business for innovations or idea sources, or by performing an IP audit of the organization. This could include identifying new or existing products or services for branding opportunities, trade secrets or technical and updated technology solutions to protect.

An assessment of the new IP assets should be done in conjunction with the IP strategy, which supports the types of IP that are important for your business. For example, your business may be focused heavily on branding and thus assess all opportunities to protect assets via unique registered and unregistered trademarks. Another business may be focused heavily on trade secrets and assess all opportunities that rely on secret processes or data that are not to be disclosed to customers, to ensure they are adequately protected. Your business's IP strategy may be a mix of patents and trade secrets, requiring that each innovation or idea be associated with the appropriate IP asset so it can be protected properly.

5.2 Prioritization of assets

Prioritizing IP: Once assessed, IP should be prioritized in terms of the IP strategy and business resources to match the highest business opportunity. Potential IP assets may be prioritized differently by different businesses and their IP strategies, and by the teams that manage the process. For example, a priority may be set by an IP review committee or an IP team, with the following considerations:

  • Strategic position: Does the idea or innovation align with the IP strategy for your business? What is the planning framework (defensive, offensive, financial, licensing, and/or strategic?)?
  • Jurisdictional differences: What are the legal variations in other jurisdictions, and will these variations impact your priority? Does one country have a "first to file" or "first to use" system for a trademark that advances the priority of your asset?
  • Strategic value: What are the strategic partnership opportunities and the value of the innovation or IP asset? Is pursuing IP protection required by contractual obligations or to ensure the continued value of your business by other strategic partners? What is the return on investment value for your business for the innovation or idea, and how will the IP protect this investment? Does the asset hold value now, or is it still at the innovation stage and not fully formed into an IP asset that can be used?
  • Business value and support: What is the relative business value of the idea or innovation, and do you have the support from the legal, business, executive and marketing teams to allocate resources to management of the asset? Is this an idea or innovation to prioritize highly, based on strategic sales or target market opportunities? Will it offer short-term or long-term benefits, and which is of value to your business?
  • Financial limits or benefits: What are the financial resources required to register and/or manage the asset, and does your business have the resources to maintain the asset over time? How does this change if it requires protection on a global scale or if this is a potential strategic IP asset? Is the return on investment value for the innovation or idea higher than the cost of the IP protection?
  • Ownership: Do you have ownership of the idea or innovation? Will there be a legal risk in pursuing registration or claiming ownership of the asset?
  • Operational capability: What are the human and operational resources required to turn the idea into a managed asset? If it is a patentable idea, do you have the skill set to ensure the patent will be drafted and filed?
  • Operational impact and risk assessment: What is the operational impact and legal risk to protecting vs. not protecting the asset? Will this asset provide clear freedom to operate from a key competitor? If it is a trade secret, do you have the resources to manage and protect it, or will it require operational changes, such as the implementation of a trade secret program to accommodate the protection of the innovation or information?

These types of questions should ensure your business is prioritizing assets in the context of ensuring that IP gaps are filled, that IP risks are weighted (ownership, resourcing) and that IP considered fundamental or strategic to the business is prioritized highly.Each assessment for priority will be unique for each business, so consider talking with an IP expert or CIPO IP advisor if you have questions about which types of priorities may be right for your business.

5.3 Operational considerations

For some businesses, it may not be enough to do a one-time assessment or to have such an assessment done only by a limited team within your business.

Team to assess and prioritize: The best legal and business team to assess and prioritize is often a business-centric team with at least three skill sets:

  1. a legal skill set, to understand the local and global legal issues to consider with respect to the IP assets in question
  2. a business and technology skill set relevant to your market, to bring understanding of the innovation or idea's product or service (for technology-heavy businesses that may rely on patents, the technology skill set is critical in ensuring the priority of key technical assets, while for brand-heavy businesses that may rely on trademarks, the business skill set is critical in ensuring the priority of the current and future branding plans)
  3. a strategic or competitive market skill set, to bring understanding of the competitive or market impacts the IP may bring to your business

In combination, these skill sets will ensure the IP assessments and prioritization results have the optimum balance of strategic and market needs that benefit your business, while adhering to the relevant legal requirements necessary to maintain your intangible assets.

Prioritization over time: Prioritization should be continually revised for your business. It should not be restricted to incoming IP assets for your business, but should also include the prioritization of existing assets from the perspective of business value. There are several factors for this reasoning:

  1. Business objectives may evolve or change over time, and new competitors may enter the market and disrupt the current market dynamics. This may require a change in resource allocation concerning how assets are prioritized.
  2. Businesses themselves may evolve over time through mergers and acquisitions, strategic partnerships or unexpected product or service changes. This may bring additional IP assets into the portfolio that require management and re-prioritization of resources.
  3. Some IP assets, such as patents or trademarks, continue to accrue annuity charges once granted/registered. Over time, these annuity bills from registrations in various countries may become costly and require review and prioritization so that their business value and the resources allocated to manage the assets can be assessed.

To address these factors, regular review and re-prioritization of incoming and active IP assets should be considered a normal course of action for your business. The timing for review may vary for different businesses and their IP portfolio sizes, but annual, quarterly or even monthly reviews to update and verify portfolio direction are not uncommon in many global businesses.

 

6. IP protection

Strategy: It is often difficult for those who are not experienced in IP law to know which assets merit protection. That's why it is important to familiarize yourself with IP principles and develop an IP strategy for your business. Knowledge is power. Doing your own research and/or consulting an IP expert will increase your awareness of the IP protection that has already been granted in your area of interest and help you narrow your options. It may also save you time and money.

Once you have identified the intangible assets you may want to protect, you must determine which aspect of your intangible assets is protectable IP. To qualify for registration, an intangible asset must fall within the legal definition of protectable IP.

6.1 Patent due diligence

  • In Canada, a patentable innovation must be new, non-obvious and useful.
  • To explore whether an invention can be patented, you should conduct a preliminary search of patents disclosed around the world. Because novelty and inventiveness are key factors in determining whether a patent may be granted, it makes sense to try to determine whether your invention is novel by conducting searches yourself before taking on the expense of hiring a patent expert.
  • You can search the Canadian Patent Database on the CIPO website. Once you have searched online, you may also wish to visit CIPO's Client Service Centre in person. There, you can take advantage of more functionality and wider data coverage.
  • You can also search other databases, such as the following:
  • You may also wish to search literature in your field to find journal articles, tradeshow brochures, manuals or other documents that could help you determine whether your invention is novel.
  • Once you are ready to move ahead, you should consider hiring a registered patent agent, because preparing and following through on a patent application is a complex process.

Patent application process

6.2 Trademark due diligence

  • Conduct a preliminary search of the web and trademark databases. Is your proposed trademark different from other trademarks in a similar industry in the country where you intend to use it? If you intend to use your trademark in the Canadian market, search CIPO's Canadian Trademarks Database and WIPO's Global Brand Database to ensure that no one else is already using a similar trademark in a similar industry.
  • Before you go any further, you should also search trade names. Trade names are often used as trademarks, even when they are not registered as trademarks.
  • You should also consider hiring a registered trademark agent, because preparing and following through on your trademark application may be a complex process.

Trademark application process

6.3 Industrial design due diligence

Industrial design application process

6.4 Copyright due diligence

  • Copyright is established the moment an original work is created. However, you may wish to register your copyrighted work with CIPO for use as evidence in the event of a dispute over ownership.
  • Registration with CIPO also serves as a disclosure to the public, indicating when the copyrighted work was created and who its current and previous owners are.
  • You can also search the Canadian Copyrights Database. To search pre-1991 copyright registrations, which are not online, visit CIPO's Client Service Centre.

7. Fees and timelines

Strategy: Creating an IP strategy for your business will help you invest your money effectively. The cost of obtaining and maintaining IP protection should be weighed against how much competitive advantage, market exclusivity and investor confidence it's likely to bring you.

The cost will vary, depending on your needs and the nature and complexity of the work required. The following is for information purposes only:

Approximate cost range for CanadaFootnote 1
  IP agent feesFootnote 2 CIPO fees (administrative fees)
Trademark $500 to $2,000 Please see Canada.ca/IP-fees for information about CIPO's fees.
Patent $5,000 to $25,000
Industrial design $500 to $2,000
Copyright $0 to $500

 

8. Commercialization and monetization of IP

IP commercialization allows a business to buy or in-license needed IP assets for business needs or to out-license IP assets with the goal of creating value through revenue, business growth or profits.

  • Commercialization may require financing or resources to secure freedom to operate, create additional IP assets or enforce against infringement. Monetization creates revenue through the direct selling or licensing of IP assets.
  • Monetization may require financing and resources to prepare assets for a successful sale, or IP expert resources to facilitate out-licensing programs.

Both commercialization and monetization activities should be done while considering the strategic importance of the IP assets (for example, whether they are core assets for your business or non-core assets that do not directly contribute to your business value).

Figure below – Approaches to commercialization and monetization and sample outcomes

strategy figure
Approaches to commercialization and monetization and sample outcomes

Commercialisation and Monetization actions (both core and non-core should be considered)

CORE ASSETS
Commercialization:

  • IP asset purchase
  • IP in-licencing

Monetization:

  • IP asset sale
  • IP out-licensing

Commercialisation and Monetization business outcomes

  • Licencing Agreements
  • Technology transfer of IP assets
  • Franchising of your business model
  • Spin-off creation for a new product or service
  • Revenue through asset sale or out-licencing
  • Business growth through in-licencing or purchase

8.1 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 license: 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 license: 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 license: 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.

8.2 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.

8.3 Purchase 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. After 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:

  • 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.

8.4 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.

 

9. IP valuation

Intangible assets can be bought, sold or secured against like tangible property. Generally, the value of an IP asset lies in your ability to prevent others from making, using or selling a product or service in a specific geography or market. Businesses should consider valuation so they have an understanding of the value the asset contributes. However, assessing or calculating the value of an intangible asset in this context has many variables, and there are many reasons within a business for performing the valuation.

9.1 Overview of valuation methods

Despite the variety of ways value can be recognized by interested parties, your business can consider the typical accepted qualitative approaches to valuation methods for the IP assets as one of the following:

  • Cost method: You can value your IP assets at the cost to replace or recreate those IP assets. Replacement costs may be quantified in various ways, such as design-around technology costs for patents or brand premiums for trademarks. The cost method may be simple, but a challenge it poses is that it may ignore secondary economic benefits or costs associated with your IP assets as well as future earnings growth potential associated with the IP assets.
  • Market method: You can value your IP assets by benchmarking them against similar IP assets sold under similar circumstances in the open marketplace. This approach often requires an IP expert who may compare your IP assets to outside evidence sales and then adjust the valuation and associated royalty based on differences between the comparable IP assets. Adjustment variables may include, for example, asset geography (important for trademarks and patent sales), IP legal strength and the length of the asset's life. A challenge with the market method is finding comparable data and transactions to compare your IP assets to.
  • Income method: You can value your IP assets by the income or cash flow they bring to your business. This method considers the projected cash flow associated with the IP over the legal life of the IP asset (i.e. approximately 20 years for patents, the lifetime of a trademark if it is maintained, and in perpetuity for properly protected trade secrets). In some circumstances, the method includes analyzing this income using a discount cash flow rate over that life. Various income method approaches are used in the calculation of the projected future cash flow, such as relief from royalty income, incremental income and residual profits. A challenge with the income method is there may be some subjective assumptions made for the projections, and depending on the use of the valuation, some projected future cash flow methodologies will not be acceptable as a standard.

You should consider the challenges associated with each of these methods and confer with an IP expert to determine the appropriate valuation method for your business.

9.2 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.

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.

Industrial design considerations when valuing your IP rights

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

 

10. Working with third parties to develop IP

A joint venture (JV) is an independent business entity with ownership being held by two or more businesses. JVs are formed to reduce the costs and risks associated with a new project by sharing the resources (capital, employees, industry expertise and IP) of two or more business partners. The IP owned by any one of the partners can be contributed to the JV through a licensing agreement (fee for use) or through assignment (outright sale).

Considering your joint venture scope

Strategy: When you consider entering into a JV with another company, it is important to understand the scope of IP use and ownership, as well as the benefits and ownership needs of any new IP that may be developed as a result of the JV.

Even before forming a JV, businesses should consider the appropriate level of IP asset contributions and compromises they are willing to have. This includes but is not limited to specific IP topics that should be considered in the creation of a joint development agreement (JDA) for the JV and the development of the right contracts to protect your business and the IP. These terms should be considered in defining the IP scope and definitions for the JV, which should include background IP, project IP, foreground IP and third-party IP.

The following recommendations are relevant for all types of IP (patent, copyright, trademark, trade secret, industrial design) during the creation of contractual agreements to both form and operate a JV:

  • Consider defining background IP (pre-existing owned IP, third-party licensed rights and/or third-party IP) by all parties and access rights by the JV parties. It may be important to define what IP assets are not contributed as background IP to the JV.
  • Consider defining project IP or joint IP, as well as ownership terms of IP rights associated with project IP. This may include defining ownership, assignment, and license-back terms to any business-relevant IP. It may also include considering how changes in the JV structure (such as dissolution of the JV) will impact project IP use, the rules for enforcement and the collection of IP royalties, ongoing IP maintenance costs and other financial risks or legal liabilities associated with the project IP.
  • Within the project IP, consider IP limitations by defining the intent, product, service or outcome of the JV from the perspective of contractual or IP rights associated with the JV's project IP. This may include exclusive or non-exclusive rights to the JV businesses, limitations on the field of use, geographic limitations or restrictions on the use of project IP outside of the JV purpose.
  • Consider defining future rights and obligations for all parties for foreground IP or for other forms of derivative IP that may be created or developed on top of the project IP.
  • Consider ensuring confidentiality and nondisclosure clauses of information required for JV due diligence to determine the contributions and strength of IP and business contributions. For a business, determining the contributions may include a legal analysis of the strength of the patent rights that one party is contributing to background IP, or it may include confirming encumbrances or other third-party IP rights that may affect the JV scope or the JV's future freedom to operate. Consider extending such confidentially into operation of the JV.
  • Consider defining the IP termination provisions of the JV, such as how background IP is accessed and how project IP and foreground IP will be owned, used and managed once the JV is terminated. This may include embedding limitations on terminations or adding restrictions on licensing or use if the JV is terminated in certain circumstances.

An understanding of these IP topics should enable your business and the partner business to define the scope of a JDA that aligns with their IP strategy and corporate needs, which will clearly define the IP ownership, use, restrictions (i.e. license rights, confidentiality requirements), liabilities and protection (i.e. financial risk and infringement liability) and maintenance costs of the JV outcomes.

10.1 Finding the right joint venture

Locating the right JV partner is often linked to a business, technical or marketing strategy for a business, and there are many public resources to help identify JV opportunities for your business needs. For example, look for opportunities to sell or buy solutions for your business needs:

  • Within CIPO's IP Hub, you can find a list of credible business and innovation experts who would be able to help you make the right connections.
  • WIPO Match is an online tool that can match those with specific IP-related development needs with potential providers offering resources.
  • The Enterprise Europe Network helps small and medium-sized enterprises make the most of business opportunities in the European Union and beyond.

However, IP assessments or IP landscapes can generate partnership opportunities not found in many traditional public resources. Consider using IP intelligence or data to find or build stronger JV partners. If an IP gap is identified during the IP strategy creation process, IP landscaping of the marketplace or IP assessments of the technology or branding space may offer an advanced way for a business to generate high-quality JV leads to fill or collaborate with to fill such an IP gap. For example, during an IP strategy analysis, IP gaps for your business may be identified where comparable IP assets may be assigned to a second company in a related market space, forming the basis for collaboration opportunities.

When reaching out to a potential JV partner, consider the following from an IP perspective:

  • Understand the value of the IP that both partners need to bring to address complementary IP asset gaps, and that both the IP strategy and corporate direction are aligned.
  • Evaluate potential partners' IP for the value the IP assets may bring to the venture. Some businesses may have IP assets, but these could be determined to be of little legal or economic value for the JV's intended scope.
  • Consider the IP strategy of the JV that will be needed to support success. An IP strategy analysis may indicate that a mix of IP assets by geography or by type is necessary or that it must be heavily supported in only one area.

10.2 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.

 

11. For more information

You may wish to hire an IP professional to write and follow through on your application for IP protection and to help you develop effective IP use strategies for your business. These would include when and where to apply for IP protection and how to avoid common IP pitfalls. IP professionals—registered patent agents and trademark agents—are regulated by the College of Patent Agents and Trademark Agents (CPATA). If you are exporting to foreign markets, the Find a Trade Commissioner page provides a list of trade contacts.

For additional information, you can check out CIPO's IP Hub, which is a digital platform where you can navigate through the four stages of an IP journey and connect with services in the marketplace. Discover the world of IP and find experts and funding to help you bring your ideas to life.

Find more programs and support for Canadian businesses and innovators at Innovation.canada.ca