Strategic use of intellectual property (IP) for growing your business

Intellectual property is often thought of as an asset owned by sophisticated businesses. However it is vital for starts ups and small companies to also consider whether intellectual property should be strategically used as a sword or a shield, or perhaps both, to grow their business potential. While some types of intellectual property don’t require any active registration, other types of intellectual property will not even be possible without securing registered intellectual property rights in jurisdictions of interest. The purpose of this short article is to outline various areas of intellectual property and how they can be strategically leveraged to grow the business.

Patents

Patents are registered rights where the government provides the patent holder with a monopoly over an invention for a limited time as a bargain between the state and the patent owner. In the bargain, the state provides a barrier for entry to competitors in exchange for publicly disclosing the invention to incentivize innovation with a time limited monopoly. After the monopoly ends, the general public benefits as a whole from the innovation to advance technology in the broader society.

Obtaining patents provide protection of innovation generated by the business related to functionality of a product or method. Once an issued patent is obtained, it is enforceable against any party that makes, uses, or sells anything with the claimed invention regardless of whether they independently developed it. 

Four common strategic purposes for building a patent portfolio are:

• Barrier to entry - An issued or granted patent provides a strong deterrent to any potential competitors from entering. This is especially true in markets with a strong patent system and courts that are willing to enforce patent rights, such as the United States, Europe, and Canada. This barrier to entry may be crucial to businesses to prevent competitors from stealing the innovation and implementing the innovation without having to develop the innovation themselves because it is much easier to copy a good idea than to come up with the good idea‎.
• Licensing opportunities - Owning issued patents allows the patent holder to enforce their patent rights against infringers. If another party makes, uses, or sells anything that is covered by an issued claim, the patent owner has a right to demand a license from the party. This may provide an additional revenue stream for the business.
• Valuation of a business - Patents and patent applications are considered assets of a business.Accordingly, by filing more patent applications, additional assets are added to the business. In addition, patents are attractive to investors because it demonstrates that a business is willing to protect the innovation that provides them with a competitive edge over their competition.
• Defensive patent strategy - In contrast to providing offensive strategies, such as creating a barrier to entry or demanding licensing fees, a robust patent portfolio may also be used defensively to discourage competitors from attempting to enforce their patents against a business.

It should be noted that the above reasons to seek patent protection are not exhaustive and that other reasons may exist depending on a businesses unique position.

When to file a patent application is a complicated decision. A patent application needs be filed before any disclosure of the invention and before anyone else files a patent application for the same invention. In active areas of research and development where innovation constantly happens independently and in parallel, such as in consumer electronics and pharmaceutical fields, it is possible that a third party may develop the same invention to solve a problem independently. On the other hand, filing too early, such as before a proper disclosure can be made, can be detrimental to the patent application. In this regard, an idea must have progressed sufficiently such that the invention can be adequately described in the patent application with sufficient details to support the claims you want to make.

Patents are limited to the jurisdiction in which it was issued or granted. To enforce patent rights in multiple countries, patents must be issued or granted in those countries. To prosecute and maintain a patent application across multiple jurisdictions can become costly. Accordingly, strategic decisions to evaluate which jurisdictions offer the best value must be made based on the facts.

Trademarks

A trademark includes any words, designs, tastes, textures, moving images, ‎mode of packaging, holograms, sounds, scents, three-dimensional shapes, ‎colours, or a combination of these that are used to distinguish the goods and services of one entity from another. Trademarks allow the public, in particular customers, to easily identify your business from competitors, and as such can be an incredibly valuable asset.

Trademark rights can accrue automatically in Canada through use; however, a registered trademark is advantageous to common law rights based solely on use, and is relatively inexpensive to obtain.  Moreover, trademarks technically never expire, as long as the mark is in use in commerce. In order to keep a trademark distinctive, it is vital for small businesses to police the marketplace and ensure that any infringers are stopped so that trademark rights are not lost from acquiescence to confusing use.

As with patents, trademarks can be used to leverage licensing opportunities, value the business, and to discourage competitors from enforcing their trademarks against a business.

Copyrights

Copyright protects the expression or form of ideas, and essentially gives one the right to copy the expression or form of ideas. As such, copyright ‎subsists in every original literary, dramatic, musical, and artistic work, if it meets certain ‎requirements set out in the Copyright Act. ‎Examples of copyright protected works include literary works, artistic works, dramatic works, and musical works.

Copyright automatically subsists upon creation of a copyrightable work or other subject matter. ‎Therefore, there is no requirement to register a copyright. However, a copyright may be ‎registered by filing the requisite form with the Canadian Copyright Office. A copyright registration raises presumptions under Canadian law that copyright subsists in the ‎work and that the owner shown in the certificate is the copyright owner. ‎Copyright exists for the duration of an author’s life, plus 50-75 years.

Copyrights may also be licensed or sold to increase a business’ market share or profits. In addition, they can be used as a sword to stop infringers from copying copyright-protected works that are key for a business.

Industrial designs and design patents

Similar to patents, industrial designs and design patents (referred to collectively as “Design Registrations”) are registered rights where the government provides the design holder with a monopoly over a new design for a limited time as a bargain between the state and the Design Registration owner.  The Design Registration generally protects the ornamental and aesthetic features of new designs. In particular, it prevents other parties from using a design that is the same or “substantially” the same as the registered design. It should be noted that Design Registrations do not protect any functional features or features beyond their ornamental and aesthetic appeal.

Since the design must be new in order to obtain a Design Registration, it is important to consider this prior to selling any item where you may want to protect the designs. While Canada and the United States provide a one year grace period to register your design, other countries may not allow for that.

Design Registrations are significantly cheaper and easier to obtain than utility patent rights. Accordingly, if a design is important to the products your business is selling, you should consider seeking Design Registrations in the countries where you would expect to have a significant market share. By registering your designs, you can prevent other parties from copying your product designs.

Confidential information and trade secrets

There may be intellectual property value in confidential information, which may include trade secrets. Confidential information is any information that has commercial value that is derived from the fact that the information is secret. For example, confidential information may include recipes, internal processes, client lists, training data, research and development, computer code, etc. While some confidential information may be registered, such as patent applications for research, not all confidential information may be registered, such as client lists.

Confidential information will only maintain its value to the owner of the information as long as it remains confidential. Accordingly, once confidential information is disclosed, either intentionally, accidentally, or through theft, the value of the confidential information or trade secret is lost. While you may have recourse against the party that disclosed the confidential information, the value will remain lost.

If you choose to rely on confidential information and trade secrets to protect your intellectual property, care must be taken to safeguard the confidential information. Steps may include executing proper agreements with parties who have access to this confidential information, tracking the confidential information and the medium on which it travels, such as a data storage drive, and controlling physical access to systems where confidential information may be used. At the end of the day, confidential information must be handled carefully because if a party has access to the confidential information, there is always an opportunity to lose confidentiality via negligence, misuse or misappropriation.