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Intellectual Property And Business Law

Presented toFraser Milner Casgrain LLP Business Law Department

November 5, 2012

Presented by: Rob McDonald and Stephen Parker

1) IP Due Diligence in Commercial Transactions 2) Common IP Disputes that Arise in Business 3)  The New Copyright Modernizaton Act

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IP DUE DILGENCE IN COMMERCIAL TRANSACTIONS

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Identify the Type of Transaction

•Merger or acquisition•Share purchase vs. asset purchase• IPO•Out source contract• Initial financing•Bridge financing• Licensing

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Identify Parties to the Transaction

•Buyer• Seller•Bank•Underwriter• Licensor• Licensee•Angel Investor•Receiver/Trustee

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Specific IP Due Diligence Issues

Types of Intellectual Property: Trade‐marks (Including domain names) Copyrights Patents Industrial Designs Confidential Information and Trade Secrets

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Identify Relevant IP Documentation

Identify all existing intellectual property rightsDetermine potential encumbrances on such rights Review representations and warranties in respect of IP rights Review covenants and indemnities relating to IP rightsDetermine ownership of IP rights Review and assess infringement claims Review and assess strength and value of IP rights

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Typical IP Agreements

Confidentiality/Non‐disclosure Agreements Employment Agreements IP ownership Agreements Licences Assignment Agreements Co‐Branding Agreements Software Development Agreements Manufacturing and Supply Agreements Security Agreements  Releases Software Escrow Agreements Co‐existence Agreements Forbearance Agreements

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Conducting Due Diligence

• Checklist• Manual Document Review• Electronic document and data review• Interviews• On‐sight tours• Field Visits• Product Demonstrations• Searches of Intellectual Property Registers• Searches of Security Registers• Internet Searches

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Trade‐mark Due Diligence

• Review trade‐mark portfolio• Consider multi‐jurisdictional issues• Assess validity and enforceability of trade‐marks• Assess scope and strength of trade‐marks• Assess potential infringement of trade‐marks• Assess potential infringement of third party marks• Review all registered and unregistered trade‐marks • Review Co‐existence Agreements• Review corporate names, trade names, domain names

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Patent Due Diligence

•Review registered patents•Review status of pending applications•Evaluate prior art and competitor’s patents•Prepare patentability opinion•Prepare registerability opinion•Prepare freedom to operate opinion•Assess validity and enforceability of patents•Analyze prior disclosures/confidentiality and non‐disclosure agreements

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Copyright Due Diligence

•Ownership•Moral rights• Joint Authorship•Works created in course of employment v. works created by independent contractor

•Assess potential infringement by third parties•Assess potential infringement of third party copyrights

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Confidential Information/Trade Secret Due Diligence

•Assess means by wish the entity protects confidential information and trade secrets

•Determine reliance on and value of confidential information and trade secrets

• Identify potential risks of disclosure• Identify who has access to such information•Review employment agreements•Review confidential information for proper marking and restrictions on availability

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Common IP Disputes that Arise in Business

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TOP 10 IP TRAPS

COPYRIGHT

1. Ownership claim by     employee/independent contractor

2.Moral rights claims3. Substantial similarity not just quantitative4. Improper Assignment

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TOP 10 IP TRAPS

TRADE‐MARKS

5. Not registering and being restricted to area of reputation

6. Assuming rights in corporate names and trade‐names

7. Adopting non‐distinctive marks8. Losing distinctiveness through loss of 

control and improper licensing

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TOP 10 IP TRAPS

PATENT

9. Lack of ownership agreement10. Public disclosure

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TYPES OFINTELLECTUAL PROPERTY

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• Copyright•Trade‐mark•Patent• Industrial Design•Confidential Information/Trade Secrets•Plant Breeder’s Rights• Integrated Circuit Topographies

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DEFINE INTELLECTUALPROPERTY  RIGHTS

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• Important to properly define what types of IP are included inan Agreement

• May want very broad or very narrow definition depending onthe nature of the Agreement

• ex. Some Agreements may deal only with patents orpatentable inventions, others may include concepts, ideas andmethods, whether patentable or not

• ex. Some Agreements may deal only with registered trade‐marks, others may include unregistered trade‐marks goodwilland domain names

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OWNERSHIP OF IP RIGHTS

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COPYRIGHT

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•General Rule‐ the author of a work is the first ownerof the copyright in that work (s.13.(1))

•Author is not defined but means the creator of work•Exceptions to the general rule include:

– Work made in the course of employment•Contract of service = employment•Contract for services = independent contractor

– Photographs and engravings– Crown copyright

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Major Exception:Work Made in the Course of Employment

13 (3) Where the author of a work was in the employment ofsome other person under a contract of service orapprenticeship and the work was made in the course of hisemployment by that person, the person by whom the authorwas employed shall, in the absence of any agreement to thecontrary, be the first owner of the copyright, but where thework is an article or other contribution to a newspaper,magazine or similar periodical, there shall, in the absence ofany agreement to the contrary, be deemed to be reserved tothe author a right to restrain the publication of the work,otherwise than as part of a newspaper, magazine or similarperiodical.

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TRADE‐MARKS

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General Rule:

•The first to use a trade‐mark in commerce in a particular jurisdiction acquires certain rights in such mark

•Several exceptions:  – foreign registrations – loss of trade‐mark rights,– territorial limitations

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REGISTERED v. UNREGISTERED TRADE‐MARKSAND

EXCLUSIVE RIGHTS

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PATENTS

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General Rule:

•The inventor is the first owner

MAJOR EXCEPTION:– Inventors often assign ownership rights to other entities– No rule requiring an inventor to assign rights to an employer– Inventions created or conceived within the scope of the inventor’s

employment

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LOSS OF TRADE‐MARK RIGHTS

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• It is critical to continue to use a trade‐mark properly in order to retain rights

• Several events can result in loss of trade‐mark rights, including non‐use, improper registration and loss of distinctiveness

• Distinctiveness is the ability of a trade‐mark to distinguish the products and services of one owner’s mark from those of another

• AVOID CONFUSION!

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TRADE‐MARK CHECKLIST

Using the trade‐mark___  Always capitalize at least the first letter of the trade‐mark___  Do not pluralize trade‐marks___  Do not use trade‐marks as a verb___  Do not change the appearance of a design trade‐mark___  Use proper marking (® for registered, TM for unregistered)___ No generic use of trade‐mark___  No use of the trade‐mark by others without license and 

control (see s.50(2) – presumptions if public notice is given)___  Monitor in‐house and outside use of the trade‐mark___  Do not ignore infringements

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MORAL RIGHTS

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•Copyright is actually a bundle of several exclusive rights that exist by virtue of the Federal Copyright Act, R.S.C. 1985, c‐32:

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•Part I Rights

•Part I rights are set out in Section 3 of the Act andinclude the right to produce, reproduce, perform, orpublish a work or any substantial part of a work, theright to communicate a work to the public bytelecommunication, and the right to rent out certainworks. Part I copyrights also include the sole right toauthorize or permit any of these things.

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Moral Rights

• The bundle of rights also includes moral rights, which areessentially the author’s right to the integrity of the workand the right to be associated to the work by name (s.14.1).Moral rights accrue only to the author of a work, not theowner.

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S. 14(1) – Defines the rightS. 14(2) – cannot be assigned, but can be waivedS.  28.2(1) ‐ Infringement

The author’s right to the integrity of a work isinfringed only if the work is, to the prejudice of thehonors or reputation of the author,

(a) distorted, mutilated or otherwise modified; or

(b) used in association with a product, service, cause orinstitution.

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• Always deal with moral rights in a written agreement with the author

•Employers cannot waive moral rights on behalf of an employee

•Consider carving out reasonable exceptions to a general waiver, ex. attribution rights, portfolio rights

The preceding presentation contains examples of the kinds of issues companies dealing with Intellectual Property Law could face. If you are faced with one of these issues, please retain 

professional assistance as each situation is unique.

Thank You!

Rob McDonaldFraser Milner Casgrain LLP | www.fmc‐law.comT: 780 423 7305 | F: 780 423 7276E: rob.mcdonald@fmc‐law.com

Stephen ParkerFraser Milner Casgrain LLP | www.fmc‐law.comT: 780 423 7368 | F: 780 423 7276E: stephen.parker@fmc‐law.com