Vancouver Tech Journal, New Ventures BC, and Venture Labs recently co-hosted a webinar on the basics of intellectual property. As part of the session, Roger Kuypers, a lawyer at Fasken’s Vancouver office, shared insights on the value of intangible assets and the four pillars of intellectual property. This post highlights the most important points, and acts as an introduction to our new AccelerateIP program.
The value of intangible assets
Over the past 50 years, the importance of IP in business has grown significantly. For example, in 1975, intangible assets accounted for just 17 percent of the value of the S&P 500’s total assets.
As of 2020, 90 percent of the value of the S&P 500’s company assets are attributable to intangible assets — not real estate, inventory, or buildings.
This reflects the importance that technology plays in all of our lives. It’s also a reminder to startup founders that as your company grows, you need to take steps to protect your innovations and know-how.
Pillars of intellectual property
There are four ways companies can protect their intellectual property. They are (1) copyrights, (2) trade secrets, (3) patents (4) trademarks.
Copyright is the sole right to produce or reproduce a “work” or a substantial part of a “work.”
It protects the expression of ideas, not the ideas themselves
So what are works?
In technology, this includes software and data, photos, videos, recordings, graphic designs, study protocols, or website designs.
The question you’re probably asking is, “How can I get copyright?”
It’s actually easy and free. You must meet two requirements. Firstly, your work needs to be sufficiently original. In Canada, that means that it needs to reflect the exercise of skill and judgment, but not creativity.
Secondly, it must be fixed, as in expressed in some material form.
If you go to a hockey game and you watch a bunch of people skating around the ice, there’s no copyright present. What you see exists for a moment, and it’s gone. But if you take a videotape of it, you have a recording of it that is protected by copyright, because it’s fixed.
Moral rights in Canada
Moral rights mean that the author of a work has the right to prohibit modification of a work and to limit how it is used. These moral rights can only belong to people, and they cannot be assigned, only waived.
For example, let’s say you hire someone to create a website or write code for you. If you want to modify it or hire someone to update it and make a new version, that’s technically an infringement on the original coder’s moral rights. So, you need to have a provision in an agreement that says they’re going to waive their moral rights.
If you meet the criteria for copyright, it arises automatically, which means you do not need to register copyright. You can, but the benefits are limited, so the vast majority of works are unregistered.
Trade secrets are essentially IP rights on confidential information. For something to be a trade secret, it must satisfy the three criteria:
- The information must be secret
- It must have commercial value because it is secret
- Your company must make reasonable efforts to maintain its secrecy
Examples of trade secrets include formulas, business plans and strategies, new product names, marketing plans, cost and pricing information, and customer lists.
There are many advantages to how trade secrets work. They never expire, as long as the secret remains secret. You are not required to file a trade secret to get government approval for them. And lastly, history has shown us that they can be very successful (e.g. the Coke recipe and the formula for WD-40).
However, there is one significant downside to trade secrets: once disclosed, they are lost. The secret is no longer a secret.
In the realm of technology, there are multiple ways trade secrets could be lost:
- Someone else might discover your innovation through independent R&D
- An engineer might reverse-engineer it
- Bad actors or competitors might steal it through hacking or theft
- An employee might disclose a secret by mistake
In fact, 80 per cent of trade secret loss is through employees, contractors, and even trusted insiders disclosing the information.
How to protect trade secrets?
There are at least four obvious steps you can take to protect your trade secrets:
- Carefully identify your trade secrets
- Implement company protection and confidentiality policies
- Mark documents as secret (duh!)
- Restrict access to digital and analog files
In simple terms, a patent is a deal you make with a government where it gives you exclusive rights to your invention for 20 years in return for you describing it — and publishing it in sufficient detail — so people can understand and practice it.
In a way, it’s the government encouraging you to share your knowledge, but also giving you a limited monopoly on it for a set period of time.
Practically speaking, a patent is a document that describes an invention and how to put it into practice. It can include an abstract, a summary of the invention, drawings, a detailed description, and more.
What makes something patentable?
There are three tests applied. They are novelty, non-obviousness, and utility.
- Novelty is the most important one. It states that the invention needs to be new. It can’t ever have existed. This is why, prior to applying for patents, people often conduct what’s known as a pri-art search. You want to check patent databases to ensure the thing you want to patent doesn’t already exist.
- Non-obviousness says that the patent cannot just be a minor tweak on something that already exists.
- Finally, the patent subject matter needs to be useful or educational, in a way. For example, you cannot get a patent for pet rocks.
What else can’t be patented? Abstract ideas, science principles, products of nature, pure mathematical algorithms, or mental processes.
The patenting process is straightforward but can take a significant amount of work and cost a lot of money. There are essentially three steps:
- You prepare/file a patent application
- Examination: The process of searching for other patents; the government’s (examiner’s) report, which considers the validity of your application; and persecution — responses and amendments to your patent application.
- You get a patent granted
Buying extra patent time
What can make the patent process tricky is the reality that patents are territorial. This means that you must apply for separate patents in different countries. As a founder, you must decide whether or not you want to spend the money to do this before you know if there is a market for your invention.
One option in this scenario is to file a provisional patent, which costs less money but enables you to delay the final patent step until a later date. It buys you time to determine if you want to spend the money to file a full patent.
The final pillar of IP is the trademark. Trademarks are more important for companies once they’re in the marketplace and they’re consumer-facing.
Trademarks are used to indicate the origin of goods and services. They can be words, designs, and the shape of goods and packaging. For example, Mastercard has trademarked its colours.
What’s critical to note is that trademarks are used to indicate where goods and services come from.
Ultimately, a trademark is a signpost that people carry around in their heads to direct them towards or away from certain products. As a result, some would say they are the most valuable type of intellectual property.
Picking a good trademark
The best trademark is distinctive, which means it distinguishes your goods and services from competitors. Ideally, it does not have meaning until you’ve used it for your product in the market. For example, using an apple logo for your computer company can be confusing for consumers, since everyone thinks of apples as the logo for Apple. (Apple would also obviously sue you.)
Intellectual property: Where to begin?
The first step in determining what type of protection you should seek for your company is making an inventory of the IP you think you have.
Consider all the items that give you a competitive advantage that are different from what other companies have and that you can protect. Do you have a technology that you can effectively keep secret? The source code of a SaaS product, for example?
Where to get a patent?
If you are wondering if you should file a patent in Canada or the U.S., there is no right answer. However, many countries around the world consider the U.S. as the gold standard for patents. What that means is that patent office examiners in other countries often look at what the US has already considered. This may help you as you expand across the world to other jurisdictions.
Patent success with software
Many tech company founders must consider how to best protect their software inventions. The patent success rate for pure software is low; however, one way to protect unique software is to break it down into a business process that can be described. For example, Amazon got a patent for its “one-click purchase” button on its online marketplace.
Software is not often patentable, but your software is a trade secret by nature — so take the steps listed above to protect it.
Scale up your understanding of IP
Want to learn more about IP and how it can help grow and protect your business? Join AccelerateIP.
AccelerateIP is a new initiative that supports hundreds of innovative startups in B.C., Yukon, and the Northwest Territories to grow and protect their ideas and intellectual assets.
Led by New Ventures BC and prime collaborator Innovate BC, the program provides enhanced access to education, skills development, and financial support for protecting, managing, and leveraging your intellectual property. AccelerateIP is offered through three streams of programming:
- Education and awareness: Gain foundational IP training
- Strategy: Get 1:1 mentorship and select costs covered for legal strategy development
- Implementation: Access financial support to cover select legal implementation costs