Intellectual property (IP) is one of the most valuable assets that a startup can own. Whether you are developing software, designing a new product, creating artistic content, or building a brand, understanding how to protect your IP from the start is fundamental.
Yet many early-stage founders overlook the importance of IP protection until much later, sometimes when it is too late to secure essential ownership rights. A famous example that speaks to the importance of startups protecting their IP as soon as possible is the legal dispute between ZeniMax Media and Oculus VR, which was later acquired by Facebook, over the virtual-reality technology behind the Oculus Rift headset. ZeniMax alleged that Oculus had incorporated code and ideas which were developed by one of its own employees, without acquiring proper IP assignment. The case resulted in a $500 million USD judgement against Oculus in 2017.
This guide is intended to introduce entrepreneurs to the main forms of IP protection in Canada, to examine their importance for early-stage businesses, and the ways Quebec entrepreneurs can begin to develop an effective IP strategy early on in the business formation or product development process.
The Importance of IP for Startups
The main federal statutes which govern IP are the Patent Act, the Trademarks Act, the Copyright Act, and the Industrial Design Act.[1] IP refers to intangible creations of the mind. For startups, IP can take many forms, such as:
● Software code
● Branding and logos
● Artistic or written works
● Product designs
● Technical inventions
● Confidential business information
Strong IP ownership is a critical factor for attracting financing.[2] One of the first questions that investors usually ask is whether the startup actually owns the IP it relies on. Just as importantly, startups must ensure to avoid infringing on the IP rights of others. Using a name, design, or invention that another business owns can lead to costly and time-consuming legal disputes.
IP registration can be costly for startup businesses which are strapped for cash. Governments recognize how fundamental IP is to early business innovation, which is why programs such as ElevateIP have been created in order to help startups fund their IP registration processes.[3]
Introducing the Main Types of IP
Most IP protections fall into the following five core categories:
Copyright (creative and original works);
- Trademarks (brand identifiers);
- Patents (technical inventions);
- Industrial designs (aesthetic product features);
- Trade secrets (confidential business information).
- Each of these IP categories protects something different, and serves a unique role in helping a business grow. Below we will provide an overview of each of these five categories.
Copyright
Copyright protects original literary, musical, dramatic, and artistic creations. This includes everything from photographs and architectural drawings to marketing graphics, website copy, and even software code.[4] For many startups especially those building digital tools or content, copyright is the first form of IP that they interact with.
Key features of copyright protection include:
- Copyright arises automatically when a work is created;
- Copyright registration is optional, but it offers important advantages such as proof of ownership and enforcement rights;[5]
- The duration of copyright protection lasts for the lifetime of the author, plus 70 years.[6]
Copyright covers a broad range of works. For instance, it applies to software interfaces, product packaging, user manuals, pitch decks, and artistic assets. It protects works from any unauthorized reproduction, distribution, and public performance, subject to limited exceptions. For example, fair dealing allows certain uses for research, private study, criticism, review, education, parody, satire, or news reporting.[7] Copyright registration can be completed online through the Canadian Intellectual Property Office (CIPO).[8]
Trademarks
If copyright protects the expression of a work, then trademarks protect the identity of your business. This includes your business name, logo, slogans, designs, and sometimes even sounds or product shapes. CIPO describes a brand as the “image and reputation” that your customers associate with your business, and trademarks are the strongest tool used to protect that brand.[9]
Why does trademark registration matter for your business? According to CIPO, registering a trademark provides many important benefits, such as:
- Registration provides legal proof of ownership over your mark;
- It grants exclusive rights to your mark across Canada for 15 years, renewable indefinitely;
- It helps prevent imitation and misuse of your mark by competitors;
- It enables enforcement under the Trademarks Act;
- It strengthens licensing opportunities.[10]
Before you Apply
Prior to applying to register your trademarks, startups should begin with a trademark search using the Canadian Trademarks Database in order to confirm that similar marks do not already exist.[11] Startups operating in Quebec must also ensure to comply with the Charter of the French Language with regards to their packaging, signage, and advertising.[12]
Patents
Patents protect inventions which are new, useful, and inventive. CIPO explains that patentable inventions may include products, compositions, machines, processes, or improvements on any of these.[13] To qualify for a patent, an invention must ensure to meet the following core requirements:
- The invention must be new. This means that it must be the first of its kind in the world;
- The invention must be useful. This means that the invention must work as intended;
- The invention must be innovative. This means that the invention must be not obvious to someone who is skilled in the applicable field.[14]
Canada uses a first-to-file system, which means that the first person to file has the right to the patent.[15] Startups should therefore avoid public disclosure of their invention prior to filing for a patent, otherwise they risk losing patentability. For this reason, it is important to prioritize filing as early as possible to decrease the risk of someone else filing for the same patent before you.
Prior to filing, startups can assess whether their invention is new by conducting a search of existing patents using CIPO or Google Patents.[16] A patent provides the owner with a 20-year monopoly from the filing date of the patent, giving the owner exclusive rights to manufacture, use, and sell the invention.[17]
When filing a patent, it is important to understand that a failed application will become public. Startups should therefore ensure they get it right the first time, and consulting a patent agent can be extremely helpful for this reason.
Industrial Designs
As for industrial designs, they protect appearance. This includes visual features such as shape, ornamentation, pattern, or the configuration of a finished product. Examples include textiles, shoes, bottles, furniture, or decorative consumer goods. It is important to note that industrial designs must be original, and cannot be purely functional.[18] In other words, they must appeal to the eye. Some important key rules to remember with regards to industrial designs are that:
- Industrial design applications must be filed within one year of the first public disclosure of the product;
- Protection lasts up to 15 years, depending on whether registration and maintenance fees are upkept.[19]
Marking products with the registered design helps the owner to enforce rights over the design. Industrial design protection is especially important for hardware startups, consumer product brands, as well as fashion or industrial design companies.
Trade Secrets
Some valuable business assets are not meant to be patented or published at all. Trade secrets protect confidential information that provides a business with a competitive advantage, such as formulas, manufacturing processes, datasets, and marketing strategies. Trade secrets must be actively kept confidential, and protection can last indefinitely as long as secrecy is maintained.[20] To ensure secrecy, startups should implement strong confidentiality policies and non-disclosure agreements (NDA’s) with employees, founders, and contractors who have access to the secret information that the business wishes to keep confidential.
Licensing and ensuring you actually own your IP
IP rights can be commercialized through licensing agreements. There are multiple types of licensing agreements, such as exclusive, sole, and non-exclusive agreements.[21] Licenses can be restricted by territory, duration or scope of use over a product.
However, before licensing anything, a startup must ensure it actually owns the IP. Contractors may retain ownership of work they produce, unless the contractor explicitly assigns the IP to the company. This means that founders should consider including assignment clauses and confidentiality terms in all of their agreements with employees from day one.[22]
Assignment means transferring ownership of IP from one party to another, such as from a creator to a company. Founders often create the earliest types of IP for their business, and ownership of IP should therefore be established from the very beginning in founder agreements.[23] Both founders and employment agreements should:
- Confirm that all IP developed for the startup is assigned to the company through IP assignment clauses;
- Specify what happens to the IP if the founder or employee departs;
- Address future improvements or derivative works which may result from the IP;
- Describe clearly what IP rights are being assigned; and
- Confidentiality provisions which prevent the disclosure of trade secrets.[24]
Enforcing Your Rights
IP is infringed when someone uses, reproduces, distributes, or manufactures your protected work without authorization.[25] To ensure that this does not happen, startups should:
- Monitor the market for any unauthorized use;
- Register their IP when required;
- Take enforcement action against competitors when necessary.
Conclusion
IP should be a core component of any startup strategy. Understanding how to protect the creative work, branding, technology, product aesthetics, and confidential information of their business can help founders build value, attract investment, and avoid costly disputes against imitation in the future. By integrating IP considerations early, startups can secure and protect the innovations which are at the heart of their business, and position themselves for long-term success. For more information on how to protect your IP, the Chamber of Commerce of Metropolitan Montreal is an excellent resource.[26] CIPO has also developed a guide to help businesses plan their IP strategy.[27]
Whether you’re drafting your first contract or launching your next big business idea, don’t forget to safeguard your most important asset: your intellectual property!
This blog post is authored by students of McGill University’s Faculty of Law. The content of this blog post is provided for general informational purposes only and does not constitute legal advice. The authors are students and are not acting as lawyers or legal professionals. Reading this blog post, or contacting its authors, does not create a solicitor-client relationship. Laws and regulations vary by jurisdiction and may change over time, and the information provided in this blog post may not be current or applicable to your particular circumstances. You should not act or refrain from acting based on this content without seeking advice from a qualified legal professional regarding your specific situation.
Sources
[1] The Trademarks Act: https://laws-lois.justice.gc.ca/eng/acts/t-13/page-2.html ; The Copyright Act: https://laws-lois.justice.gc.ca/eng/acts/C-42/Index.html ; The Patents Act: https://laws-lois.justice.gc.ca/eng/acts/p-4/ ; The Industrial Design Act: https://laws-lois.justice.gc.ca/eng/acts/i-9/index.html
[2] McMillan, Tips for Startups - Intellectual Property and its Value to Your Company: https://mcmillan.ca/insights/tips-for-startups-intellectual-property-and-its-value-to-your-company/
[3] Mbm intellectual property law http://mbm.com/about-you/smes-startups/? ; Elevate IP: https://ised-isde.canada.ca/site/elevateip/en
[4] CIPO, A Guide to Copyright: https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/guide-copyright
[5] CIPO, Copyright: https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/copyright
[6] CIPO, A Guide to Copyright: https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/guide-copyright
[7] Gowling WLG, Guide to Doing Business in Canada: Intellectual Property https://gowlingwlg.com/en/insights-resources/guides/2023/doing-business-in-canada-intellectual-property
[8] For more information, see CIPO’s website: https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en
[9] CIPO, Whats in a name? https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/trademarks/whats-name ;
[10] For more information, see CIPO’s Guide on Trademarks: https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/trademarks
[11] CIPO, Search Intellectual Property Databases https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/search-intellectual-property-databases
[12] Gowling WLG, Guide to Doing Business in Canada: Intellectual Property https://gowlingwlg.com/en/insights-resources/guides/2023/doing-business-in-canada-intellectual-property
[13] CIPO, File a Canadian patent application: Before you start - https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/patents/patent-applications-examination-and-patents/file-canadian-patent-application-you-start
[15] BLG, Intellectual Property law in Canada: Protect your Innovations here: https://www.blg.com/en/insights/perspectives/doing-business-in-canada/intellectual-property-law-in-canada
[16] CIPO, Search Intellectual Property Databases https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/search-intellectual-property-databases
[17] Gowling WLG, Guide to Doing Business in Canada: Intellectual Property https://gowlingwlg.com/en/insights-resources/guides/2023/doing-business-in-canada-intellectual-property
[18] BLG, Intellectual Property law in Canada: Protect your Innovations here: https://www.blg.com/en/insights/perspectives/doing-business-in-canada/intellectual-property-law-in-canada
[22] McMillan, Tips for Startups - Intellectual Property and its Value to Your Company: https://mcmillan.ca/insights/tips-for-startups-intellectual-property-and-its-value-to-your-company/
[23] University of Pennsylvania Law School, Founders’ Agreement: A Startup Kit for Entrepreneurs (PDF), Entrepreneurship Legal Clinic (University of Pennsylvania), online: https://www.law.upenn.edu/clinic/entrepreneurship/startupkit/founders-agreement.pdf
[24] Government of Canada, Intellectual Property Considerations for Canadian SMEs: Employment Contract IP Ownership (Web Page), Trade Commissioner Service (Government of Canada), online: https://www.tradecommissioner.gc.ca/en/market-industry-info/search-country-region/country/canada-united-states-export/intellectual-property-considerations-canadian-smes/employment-contract-ip-ownership.html ; Smart & Biggar / Fetherstonhaugh, Do You Actually Own the IP Generated by Your Canadian Employees?, online: https://www.smartbiggar.ca/insights/publication/do-you-actually-own-the-ip-generated-by-your-canadian-employees ; World Intellectual Property Organization, Enterprising Ideas: A Guide to Intellectual Property for Startups (WIPO Pub No 961, 2021) (PDF), online: http://wipo.int/edocs/pubdocs/en/wipo_pub_961.pdf
[25] Shorey Law LLP, How Does Intellectual Property Work in Canada?: https://shorylaw.com/how-does-intellectual-property-work-in-canada
[26] The Chamber of Commerce of Metropolitan Montreal: https://www.ccmm.ca/en/create/?sujet=intellectual+property&utm_source=chatgpt.com&pagesize=25&page=1#mresults
[27] CIPO, Plan your IP strategy: https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/plan-your-ip-strategy-html-version