Intellectual property rights for tech startups

For startups venturing into the tech industry, understanding and protecting your intellectual property (IP) is crucial for continued growth and success. By protecting and defending your IP rights, you will be able to achieve an edge over your competitors by being first with exclusive rights to market or becoming a household and popular choice for a relevant tech solution. Each tech startup is unique, so your IP strategy should be tailored to match your business goals and industry landscape. This article examines the main heads of IP relevant to the tech industry (Patent, Trademark, Copyright, Industrial Design, and Trade Secrets), and provides guidance on how to best protect the IP rights critical to your business.

Industrial designs

An industrial design (or “design patent” as referred to in some jurisdictions) are the visual features of shape, configuration, pattern or ornament, or any combination of these features, as applied to a finished product. An industrial design registration therefore protects the unique appearance of a product as opposed to what it is made of or how it works. Like patents, the design must be novel or original to qualify for registration.

Design protection can cover a broad range of your technology’s features. For instance, some design features on popular smart phones, such as the shape of the phone, the placement of the home button and the graphical user interface are covered by design protection.

There is no inherent protection for unregistered industrial designs in Canada. To obtain rights to their design, owners must register with the Canadian Intellectual Property Office (CIPO). The Industrial Design Act grants the owner exclusive rights for up to 15 years for 3D features, such as shape and configuration, and 2D features, such as pattern and ornamentation. Once registered, you effectively have a monopoly on the look of your product during this period, allowing you space to develop your brand known by the protected look and feel of your product and carve out your niche in the market.

Trademarks

A typical trademark is a brand name, logo or slogan. However, more broadly a trademark can include a word, name, design, letter, numeral, colour, figurative element, three-dimensional shape, hologram, moving image, sound, scent, taste, texture or a combination of these that is used to distinguish the goods or services of a company apart from others.

Trademarks help companies build their brand identity and reputation, which is crucial for startups looking to garner brand loyalty. Consistently using trademarks across all marketing materials, products, and services reinforces brand recognition and fosters customer loyalty. In fact, failing to use a trademark consistently will degrade the value and exclusivity of any registration or rights in that trademark. Over time, trademarks can evolve into valuable assets in their own right, boosting a company’s overall value. For example, the rebranding of major social media platforms shows that trademarks are valuable, and overnight changes may not reflect the reality that customer goodwill is built in a brand over time. For those startups for whom brand identity is a valuable business asset, developing a brand and protecting it with registered trademarks is an important part of the IP strategy.

When establishing your tech startup’s brand, relying on common law trademark rights based on use and recognition provides some protection. However, these rights are limited to specific geographic areas where your brand is recognized, and proving ownership can be challenging when defending against others using a similar brand.

Registering a trademark offers a stronger method of safeguarding your brand. Protection is national rather than limited to your local area and will allow you to legally prevent others from using identical or confusingly similar names or logos throughout the jurisdiction in which it is registered. Registering a trademark in Canada grants the holder with exclusive rights to use the trademark in connection with the associated goods or services. The initial period of protection is ten years, with options for renewal. Holding a registered trademark also enhances your ability to license trademark rights in Canada, initiate domain name ownership disputes, and secure .ca domains without otherwise meeting presence requirements. Internationally, the scope of protection varies, but many countries are aligned by treaty under the Madrid Protocol, which streamlines registration across multiple countries as opposed to making individual registrations, depending on your IP strategy.

Prior to applying for a trademark, conducting a thorough trademark search in relevant jurisdictions when developing your brand is crucial to avoid infringing on existing trademarks. This proactive step reduces the risk of costly rebranding efforts, including potential product recalls and profit forfeitures if challenged by existing trademark holders enforcing their rights.

Copyright

Copyright is the exclusive legal right to produce, reproduce, publish, or perform an original ‎literary, dramatic, musical or artistic work and is presumptively held by the author of the work.

Copyright protection is especially relevant for tech startups’ software code. Note that copyright covers the specific expression of the code, while patents protect the underlying functionality. Large companies often choose to copyright the source code (a “literary work”) for many of their applications, preventing unauthorized copying and distribution of their software.

If your startup deals with artificial intelligence (AI), note that works solely created by AI, even if prompted by a human, currently do not qualify for copyright protection. Copyright law currently requires a human author. However, when a human author uses AI to generate a work, and in the process contributes skill and judgment to the work, that human would be the author and first owner, and the work would not immediately fall into the public domain. With the proliferation of the use of AI to create literary works, startups should remain attuned to both changes in the law with respect to human vs. non-human contributions, as well as the policies and practices of their workforce with respect to AI use on the job.

Copyright also extends to user interface designs, icons, and graphical elements beyond the products themselves. Websites, advertisements, and promotional videos created by or for tech companies are also layered with copyright protections due to their artistic nature.

A copyright does not need to be registered in order to receive protection ‎under the Copyright Act, as the protection is granted automatically upon the creation of the work. ‎However, a certificate of registration provides evidence that your work is protected by copyright, which can be useful in an ownership dispute. In general, copyright ‎protection lasts for the lifetime of the author plus 70 years. Those who have not registered copyright may be limited from obtaining monetary damages under the Copyright Act as registration acts as a presumptive notice to defendants, overcoming an argument they were unaware and had no reason to suspect the work was copyrighted at the time of infringement. Registering copyright and obtaining a certificate in Canada is much less of a hurdle than seeking other forms of IP registration, so it may be a worthwhile step to consider in building out an IP portfolio.

On the other hand, choosing not to register or copyright a software or program code can unlock a range of positive benefits. Other than not having to pay registration fees, making code more accessible or publicly available can lead to greater visibility for your work, helping to showcase a startup’s skills and products. Open-source software or other publicly shared codes also fosters community engagement and product advancement by enabling crowdsourced development in a cost-effective way.

Note that not copyrighting code does not mean others may copy the code, or a substantial part thereof, and does not necessarily mean a decreased ability to make profit. Revenue streams will instead come in a different form. For example, many companies often leverage open-source software as loss leaders, drawing users into their platforms where they can monetize through support, services, and training. Many OSS focussed foundations thrive by providing paid training and community support, all while reducing development costs by allowing the public to contribute and improve their system. This dynamic can drive revenue growth for such groups, as customers may seek paid assistance with setup and configuration, creating additional income streams for those who embrace an open-source philosophy.

Patents

A patent can be granted for an invention, such as a specific product or process, provided it is novel, useful, and non-obvious. This can also encompass new and beneficial improvements to existing inventions. When an invention is patented, the inventor (or other rights-holders) gains the exclusive right to prevent others from making, using or selling the invention for 20 years. This exclusivity is granted in return for the inventor publicly disclosing the details of the invention to prompt further innovation.

Patent protection is key for startups as it can significantly enhance financial returns by preventing competitors from offering similar products or services for the duration of the patent. This exclusivity allows you to recoup your initial investments and achieve profitability while enjoying the period of exclusivity. Moreover, having a patented or patent-pending invention can attract investors and open opportunities for licensing or selling the innovation to others, providing additional avenues for revenue generation and business growth.

Indeed, all global phenomena, from Bluetooth to most biotechnical advancements, began as ideas on paper, protected by patents. A wide variety of subject matter in the tech industry may also receive patent protection, such as software and business methods (subject to limitations and exceptions in some jurisdictions). Recently, a major technology company filed thousands of patents for a new headset, and while this number might be unreasonable for a startup due to the cost of each filing, there may be some strategy in patenting the specific aspects of your work rather than focusing on a large, broad idea that would be more difficult to patent and risk having no protection at all.

Similar to trademarks, patents are enforceable only within the jurisdictions where they are granted, making strategic planning around key jurisdictions and treaty-based linking of patent applications essential. Patents are publicly available documents that disclose detailed information about the construction of a product or the process of manufacturing. Therefore, it is important to evaluate whether patent protection offers the best safeguard for your IP, or if maintaining it as a trade secret would be more advantageous.

Obtaining a patent can be a lengthy and relatively costly process compared to other forms of IP protection; however, for a genuinely innovative product or process, a patent remains the most effective means to secure exclusive rights to use your invention so the filing may be well worth the cost.

Trade secrets

A trade secret is any piece of business information which derives its value from being kept secret. There is no formal registry or government documentation of trade secrets in Canada, which also means that a trade secret is not time-limited and can survive indefinitely if successfully kept secret or otherwise properly protected through enforceable confidentiality obligations (although certain jurisdictions do have specific laws pertaining to trade secrets).

Some popular examples of trade secrets in tech include proprietary algorithms for search engines, recommendation algorithms used by major production companies, and manufacturing processes such as an electric vehicle’s battery production. Customer data, research and development, and software source code are also frequently protected as trade secrets.

Taking reasonable measures to maintain confidentiality includes limiting disclosure of the trade secret to employees and external partners on a need-to-know basis, and if you do disclose, enforcing a legally binding non-disclosure agreement (NDA) and controlling access to those who are bound by such obligations through secure channels. Digital secrets can also be kept confidential by passwords, two-factor authentication, encryption methods and other security measures to prevent unauthorized access.

Once a trade secret is disclosed, it loses its protection for good. A trade secret could be preferable for your technology if it has a short lifespan, or you do not wish to share through other forms of IP registration. If you anticipate that your product will become outdated quickly, pursuing a patent may not be worthwhile in terms of time, resources and costs. Instead, by maintaining the secrecy of your innovation for a few years, you can capitalize on its exclusivity without the expenses associated with obtaining a patent. On the flip side, if your trade secret can be easily reverse-engineered, opting for a patent might be a better choice to protect your invention from competitors.

Value of registration

When a form of IP exists at common law and is also registrable, you may be considering whether or not to register the relevant IP. Where the protection is stronger with a registration (e.g., for an industrial design, patent, or trademark), a formal registration (or more than one registration for each element) can significantly enhance your company’s value as part of a comprehensive IP portfolio. Protected IP with exclusive rights are more valuable as you may be able to use these defensively or offensively to limit others’ ability to compete using the same or confusingly similar IP. Exclusivity is beneficial when attracting investors, licensors, or potential acquirors as it will set your startup apart as the one entity that may use this IP (and therefore should be invested in, or from whom a licensor seeks a licence without a field of competitors). Registration of valuable IP shows the startup’s commitment to its assets and begins to form a path to monetization. IP can be licensed to generate ongoing revenue, sold for lump sum revenue, or used as collateral for a loan to broaden a startup’s avenues for funding.

Conclusion

When building an IP strategy and portfolio, it is important to consider how leveraging various intellectual property regimes safeguards your startup’s IP assets in different ways. For example, a brand specializing in smart home devices may use industrial design protection to protect the aesthetic features of its touch-screen control panels, trademark protection for its name and logo, copyright protection for its software or user manual, patent protection for its sensors for environmental monitoring, and trade secret protection for its proprietary algorithm used in the device.

Your IP strategy is essential to the long-term success of your tech startup. It is important to seek professional legal advice when launching your business to ensure you have the appropriate protections in place.