- Every small business owns intellectual property (IP).
- Trade names, customer lists, website content, software, etc. are valuable assets to protect and monetize - like inventory or equipment, but often more valuable.
- Like locking the doors to your car or your office (or setting the alarm when you leave) there are things you should do to protect your IP and the value of your IP.
- IP is harder to recognize than a tangible asset like a computer - so it's easier to steal without knowing it.
- Think about IP early on, not when it's too late!
Types of IP
- Trademarks – business names, product names, logos... and in some cases shapes, sounds , colours and even smells.. used to distinguish you from other trade sources.
- Copyright – software, website content, music, photos, etc.
- Patents – inventions (machines, devices, drugs ,etc.)
- Confidential information – customer lists, secret recipes, etc... and can include information about running the business where individual elements might not be confidential (e.g. franchising).
- Industrial designs – shape of or pattern applied to a product.
- Personality rights – rights in a person's image or voice etc.
What to do with IP
- Create IP in your business through branding and innovation
- Secure ownership of IP through contracts
- Manage, administer and register your IP
- Enforce rights in your IP against others
- Monetize IP (sell, license, use as security for loans)
- Avoid infringing others' IP / defend against allegations of infringement
Choosing a Name
Key legal factors to consider when choosing a name for your business, product or service…
- approval of a business name or domain name does not give you the right to use it (a NUANS search or domain name search is not enough)
- trademark law prevents use of confusingly similar TMs
- good idea to investigate use of similar names in Canada |
- Protect-ability / Register-ability:
- must be distinctive of you as a trade source (e.g. PEPSI)
- can be suggestive but not descriptive (or mis-descriptive) or laudatory of your business, product or service
Protecting Your Name
- Trademark rights (i.e. rights to exclude others from using the same or a similar name) are acquired through consistent use of the name in commerce – "Use or lose".
- Registering your name as a trademark is not necessary but can be very important, depending on the name and the nature of your business – application to register can be filed for "proposed use" before you launch.
- 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 (a "sword").
- Registration is pro-active – prevents others from using or registering a similar name or suing you for infringement (a "shield").
- Registration is required in some cases to prevent infringing social media use and infringing use of ad words
- Budget $1400 to $2000 to register a trademark.
- compare to many times that if you run into trouble
- hire a qualified TM lawyer to help you
- Register your name as a domain name and with various social media (e.g. @ThisIsMyTrademark on Twitter) as soon as possible – whether you register as a TM or not.
Important IP issues to think about when hiring employees, contractors or consultants:
- Will they be creating IP for the business (e.g. websites, social media accounts, software, catalogues, inventions, product designs, etc.)?
- Contractual terms may be needed to assign rights in the IP they create to you the employer – before they start (and sometimes after they create it).
- Copyright law treats employees and independent contractors differently – like tax law, it looks to what they are not just what they are called.
- How much do they need to know about the business to do their job?
- Do not share more about how the business works than is necessary – especially with non-employees.
- Use Non-Disclosure Agreements (NDAs) that clearly identify what is considered confidential.
- Treat proprietary information as confidential: write it down, mark "Confidential", etc.
- What IP are they bringing to the job?
- Ensure that employee/contractor/consultant/partner has rights to use and disclose the IP that they bring to the job (e.g. photographs used by third party website developer, software codes used by programmer, customer database brought over by new employee or business partner etc.)... or that they - and not you - will be liable for infringement of any third party rights.
- What IP are they leaving with?
- Make sure that all IP remains with the company (e.g. corporation or partnership) when an employee leaves – including, especially, founders and partners.
- IP should never be controlled by or registered to an individual (unless it's a sole proprietorship)
Websites & Social Media
- Register your domain names with other gTLDs (.ca, .com, .biz, .net, etc.) and social networks – pro-active prevention against infringing use and cybersquatting.
- Clear rights in all website content (photos, copy, layout) with the source (e.g. the developer, website consultant).
- It is easy to find and hard to hide infringing content on the web (stock photos, text, personal images) and the consequences of infringement can be serious - $$$.
Monetizing Your IP
- IP can be sold, can be licensed to others and in some cases, can be used as security when borrowing money.
- A small business's IP is often its most valuable asset (and a large portion of the value of the business as a whole).
- Important to document and keep track of IP (including rights to use others' IP under license – e.g. software licenses) – can be done through a formal IP audit.
- Investors, purchasers and lenders typically require a "paper trail" connecting all IP associated with the business to its owner – important to avoid surprises (e.g. copyright in the software is still owned by a contractor who left 5 years ago and now lives in Argentina).
- Wherever there's a right there's a remedy.
- The reality is that IP litigation is expensive.
- The usual procedure:
- demand letter
- letter denying infringement
- rights owner commences a court action
- an infringement action typically takes 2 to 3 years to trial
- "default" or "summary" judgment if uncontested or no dispute
- most actions settle early on or after discovery
- sometimes rights owner brings a motion to get infringer to cease infringing in the meantime (must prove "irreparable harm" if infringement continues until trial)
- Usually a game of chicken – show you're willing to go all the way to get a favourable settlement