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Understanding the value of IP for small businesses

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Every small business owns intellectual property, Toronto IP lawyer John Simpson of Shift Law pointed out at the start of a presentation he delivered at City Hall on Feb. 5, hosted by Enterprise Toronto. “Trade names, customer lists, website content, software, etc. are valuable assets to protect and monetize – like inventory or equipment, but often more valuable,” he explained to attendees. 

Simpson outlined several ways small businesses encounter or should engage with IP, from creating it (e.g. choosing a name), securing ownership of IP (e.g. through assignments from employees or founders), managing it (e.g. through registration or non-disclosure practices) and monetizing it (e.g. by licensing or selling it or using it as security for loans).

He cautioned that small businesses need to think about IP early on before it’s too late, when issues can become much more costly to resolve. In particular, he noted that there are several important IP issues that small businesses must think about when hiring employees, contractors or consultants and when deciding on what basis to hire them. For instance, where employees or contractors will be creating IP for the business, such as websites or software, contractual terms may be needed to assign rights in the IP that they create to the company – “before they start and sometimes after they create it,” he said.

“Registering your name as a trademark is not necessary but can be very important, depending on the name and the nature of your business,” said Simpson. “Registration gives you the right to exclude others from using a similar name with similar products or services anywhere in Canada and is a powerful weapon in litigation.”

Simpson also stressed the importance of tracking and documenting the IP that the company generates, acquires and uses over time, especially for small businesses that may be looking for investors or purchasers down the road.

“You want to avoid a situation where you’re about to sell the company and suddenly it’s discovered that copyright in some valuable software is owned by a contractor who left five years ago and can’t be found,” he said.

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