Trademarks and the Evolution of Software

Picture of computer discHistorically there has always been a difference between “goods” and “services” under Trademark law. Section 4(1) of the Trademarks Act states that a Trademark must be marked on the goods themselves or on the packaging. Software was always a type of “goods”. For those of us old enough to remember, software used to be sold on floppy disks. As technology evolved, the floppy disks were replaced with a CD-ROM format. The Trademark for the software could be found on the CD-ROM, on the written instruction manual and on the box that held them. With the rise of the internet, software came to be sold “on line” with the software and the instruction manuals only available through electronic download. The “goods” remained essentially the same, just their mode of delivery changed. The Trademark still appeared on the “goods” at the time of download and on the boot-up screen every time the software was initialized. This was captured in the catch all portion of Section 4 (1) of the Trademarks Act that indicates that marking can be “in any other manner so associated with the goods that notice of the association is given”. In recent years, the software business has increasingly evolved into a “service” arrangement (referred to as Software as a Service or SaaS). Customers pay a fee to access software that is resident in the “cloud” accessible over the internet. There are no longer “goods” changing hands in the traditional sense. No software is downloaded. This “cloud” environment sets the backdrop of the recent case of Specialty Software v. Bewatec. Bewatec was successful before the Registrar of Trademarks in invalidating Speciality Software’s Trademark MEDINET on the basis that the Trademark was not being used for “goods” as claimed. Specialty Software asked the Federal Court to overrule the Register of Trademarks and declare the MEDINET Trademark valid based upon the sale of licenses for use of software in the cloud. February 18, 2016 Justice O’Reilly rendered his decision indicating that software licenses are “goods”, albeit “intangible goods”. Wikipedia defines an “intangible good” as a good that is intangible, i.e. incapable of being touched. I have now read a number of articles on the recent decision of the Federal Court of Canada in the Specialty Software v. Bewatec case. The case is being heralded as a ground breaking decision that “demonstrates that courts will adapt legal concepts to modern technology”. I think the fanfare is premature. Firstly, the case may be overturned on appeal. Secondly, if the case stands it could give rise to some unintended consequences. I can certainly understand Justice O’Reilly wishing to uphold the MEDINET Trademark. However, his decision blurs the traditional distinction between “goods” and “services”, by including “intangible” goods in the definition of goods. The “intangible” good was a license. We use licenses every day in various forms. A license is simply a form of permission to use. For example, a ticket to ride on the ferry is a form of license. B.C. Ferries provides a transportation “service”. I am of the view that the Specialty Software v .Bewatec decision is just the start of the discussion and not the end. I am currently contacting my software clients to review their Trademarks. If they are now delivering their software through the “cloud”, I am recommending that they update their Trademark Applications to specify “services” in addition to “goods” and avoid the controversy altogether.

Trans Pacific Partnership (TPP)

The-TPPI was listening to the radio the other day and caught the tail end of an interview concerning the Trans Pacific Partnership (TPP).  The comment that attracted my attention was a statement that the Intellectual Property provisions of the TPP agreement would cost Canada 57,000 jobs.  The same evening the TPP agreement was on the evening television news and the person interviewed indicated that the ability of Canada to change its laws would be hampered.  I have now read the Intellectual Property provisions of the TPP agreement, which are found in the 75 pages which comprise Chapter 18 and accompanying schedules.   The agreement indicates that countries may change their laws “provided that such measures are consistent with the provisions of this Chapter”.   As indicated by the television commentator, Canada would be in breach of the agreement if, after signing, the government chose to pass laws that contradict the provisions of the TPP agreement.   Looking for the lost 57,000 jobs, I found that most of the 75 pages are consistent with the laws of Canada as they presently exist.  The copyright term has been lengthened, but that change is unlikely to cost any jobs.  Canada’s previous copyright term was the life of the author plus 50 years after his or her death.  The TPP agreement provides for a copyright term of the life of the author plus 70 years after his or her death.   In Canada, there is a government approval process before a company can sell agricultural chemical products, pharmaceuticals, or biologics (complex molecules such as proteins that are isolated from plants, animals or micro-organisms, or made using biotechnology).  The TPP agreement provides for a “patent term adjustment”, lengthening the term of a patent when there are delays in the government approval process.  This change will give drug companies a few more years of protection and will slow the introduction of generic drugs into the Canadian market.   As part of the government approval process, companies must submit test data and, where applicable, data from clinical trials.  There is presently no law, prohibiting subsequent applicants for government approval from using test data submitted by an original applicant. The TPP agreement provides that subsequent applicants are prohibited from using the test data submitted by the original applicant for a period of 10 years when seeking government approval for agricultural chemicals, 5 years for pharmaceuticals, and 8 years for biologics.  This will also slow the introduction of generic products into the Canadian market, as generic manufacturers are forced to either wait or develop their own test data and conduct their own clinical trials.  I have no way of assessing whether 57,000 jobs will be lost.  However, it is reasonable to assume that there will be a loss of jobs in the generic drug industry as these provisions begin to affect generic drug manufacturers based in Canada.  However there are some answers missing from the dialog, that would help me decide whether or not I am in favour of TPP.  How many jobs may be gained in other sectors with the signing of TPP?   How many jobs may be lost if we do not sign TPP?  We rely upon our exports, being frozen out of TPP may not be good for Canada in the long run.

Angel Investor Event

Picture of Mayor HelpsIn Victoria, we love to criticize our local politicians from our safe seats on the sidelines with respect to everything from bridge replacement to sewage treatment.  A common complaint is that they don’t “do” anything.  I thought I would take some time to comment on an Angel Investor event entitled “A Capital Mission” that took place February 17 – 19.  This is an example of local politicians trying to make things happen for the local economy by showcasing our tech community to both local investors and investors from elsewhere in Canada and the United States. The event began the evening of Wednesday February 17 with a welcome reception at which Mayor Lisa Helps assumed the role of gracious host, first by giving a welcoming address and then by inviting Amrik Virk, BC Minister of Technology, Innovation and Citizens’ Services, and United States Consul General Lynne Platt to add their comments.  Tim Catlin of Change.org, one of the U.S. based organizations that has invested locally, indicated that with our existing infrastructure and the comparatively low Canadian dollar, Victoria is a very attractive place for a U.S. citizen to invest.  There followed a “pitch night” with the following entrepreneurs making pitches to secure capital for their ventures. LlamaZoo produces software that provides anatomy training for veterinarian students.   Cooler Heads produces auto-deploying head and face flash fire protection.  OrangeDox produces a software that adds greater functionality to Dropbox.  Craftt Technology produces a beer keg tracking system for craft brewers.  Social Nature promotes peer to peer marketing.  Chatter High is a web platform to allow junior high and high school students to explore post-secondary career options in an entertaining way.  Industrial Plankton produces low cost algae bioreactors for aquaculture. Vertical Organic Garden produces space-efficient vertical hydroponic systems for  in-home use. Plurilock produces biometric security systems that monitor keyboard dynamics. Island Circus Place is seeking to start a circus school.  On Thursday, February 18, the Angel Investors were organized in groups and taken on tours that included a number of technology incubators and co-working spaces.    In the morning on Friday, February 19, an Investor Education Workshop was held with a presentation by Josh Maher, the author of Startup Wealth: How the Best Angel Investors Make Money in Startups.  The assembled Angel Investor were then invited to spend Friday afternoon, at the Discover Tectoria trade show with over 70 exhibits located at the Crystal Gardens.  This three day event will have some modest benefits short term, but may lead to some tremendous advances long term.  Congratulations to all who had a role in making this event happen including: Mayor Lisa Helps, Victoria City Council, University of Victoria, ViaTec, Tourism Victoria, the Downtown Victoria Business Association, the Capital investment Network and the Urban Development Institute.

News From Canadian Internet Registration Authority (CIRA)

On Monday February 22, 2016 local members of CIRA were invited to a meeting for an update on the activities of CIRA.  We were advised that CIRA is dealing with a number of problems.  A first problem is a shortage of IP addresses.  Internet Protocol Version 4 (IPV4), one of the core protocols of the Internet, uses 32-bit addresses which limits the address space to about 4.3 billion addresses.  There is currently a move to Internet Protocol Version 6 (IPV6).   With IPV6 the platform has been increased to128-bit addresses. This will provide enough IP addresses for the foreseeable future.  However, one cannot move seamlessly from IPV4 to IPV6, as the technologies do not talk to each other.  IPV4 will be supported for a number of years to allow users to switch over to IPV6 and then IPV4 will be discontinued.  Of 2.4 million .ca websites, only 40,000 have been built on the IPV6 platform to date.  There are websites still being set up using IPV4.  If you are working with websites, it is important that IPV6 be used, as IPV4 will be obsolete in a number of years.  The transition to IPV6 will be slow, as IPV6 is not compatible with some hardware.  There is, of course, a reluctance to spend the money to upgrade hardware, until the date for discontinuing IPV4 is drawing near. The incentive for switching to IPV6 is that it reduces network access bottlenecks that currently are experienced.  A second problem relates to routing. The Canadian internet uses many United States based internet exchange points.  This results in most Canadian internet traffic being routed through the United States.  There was a discussion regarding further developing more Canadian peer to peer shortcuts so that Canadian internet traffic can be more autonomous.   A third problem relates to domain name system security.  There are individuals who make their living by “highjacking” domain names.  They change domain name system authorization information and then redirect internet traffic.  To avoid having your domain name “highjacked” CIRA has provision for “locks” to secure your information.  There is a configuration test you can perform at the CIRA website to determine whether your information has been “locked” [dntests.CIRA.ca].   Security can also be upgraded by using “anycast” as opposed to “unicast” systems.  There are digital signatures that can be used for authentication.  There is a configuration test you can perform at the CIRA website to check to see whether  digital signature authentication (DNSSEC) is enabled [performance.CIRA.ca].https://cira.ca/soi

Kickstarter Campaign for Cable Organizer

A client of our office is launching a Kickstarter campaign at 6pm on March 3 with respect to  a family of cable organizers.  There is one cable organizer that handles the power cord for a smart phone.  There is another cable organizer that handles the earphones that are used with a smart phone.  We are happy to help “get the word out” .  The Kickstarter campaign will run just over 30 days.  We ask that you give this new product a look.   https://www.youtube.com/watch?v=XcLyLsXLc1s

Transitioning from Angel Investment to Venture Capital

Picture of Tipping Point BookVenture capitalists are generally not interested in business “start-ups”.  With business start-ups there are too many unanswered questions regarding the product or service, and the market.   That is why “angel” investors are needed to bridge the gap and assist the entrepreneur, both financially and with business advice, until a track record is developed.  If things go well, there will likely come a stage when the business needs a major injection of funds to take the business to the next level.  Rapid growth can be a curse.  Without adequate financial backing, rapid expansion of a successful business can involve an immediate increase in costs with a delayed increase in revenue, and may result in bankruptcy.  The venture capitalist is looking for a business with rapid growth potential and is prepared to provide the funds to fuel that growth.  I compare angel investment to a small stakes poker game played among friends and compare venture capital investment to a high stakes poker game played with people whose only interest is the game.  In the small stakes game, it is real money; but the small stakes moderate the tone. Within limits, the angel investor will try to accommodate the entrepreneur when problems are encountered.   In the high stakes game, the amount of money at stake increases the intensity of the players.  To make matters even more intense, expectations are sky high.  There are also time limits, as the venture has a monthly “burn rate” and must reach set milestones before the allocated funds are exhausted.  The venture capitalist is gambling.  He or she knows that out of ten businesses that receive investment capital, only one or two will realize their potential.  The potential return must, therefore, be multiples on the investment to cover the losses on businesses that do not succeed.   Those multiples can be between ten and thirty times investment funds.  It is not acceptable for the business to merely create a living for the entrepreneur and jobs for a handful of employees.  The investment must result in the business “scaling up” to provide significant returns.  If the entrepreneur does not have the skill set to guide the business to the next level, he or she may be demoted and replaced by someone who does.  If the business is unable to meet expected milestones, the business will be cut off from further funding.   Those are the rules of the game.  Sorry, it is just business.

Traps Associated With Social Media In Business Context

Picture of phone for posting with social media articleI love social media.  I will not pretend that I am as heavily involved as many of you, but I can say that I enjoy the exchanges.   Every day there is some Facebook posting by a friend that shows up on my smart phone.  This keeps me informed as to what my friends are up to, so I don’t lose touch.  I also like interesting articles and videos that my friends post on Facebook or bring to my attention through a “tweet”.  In turn, I like to reciprocate.  When I encounter something interesting, I make my friends aware of it on social media or sometimes I attach it to a text or email.  I am aware of the paramount rule, that you don’t post anything through social media that might place you in a bad light with your employer, members of your church, and persons you care about.  One of my outlets is in preparing articles (occasionally videos) that are posted on the Thompson Cooper website.  However, I avoid the possibility of copyright infringement; as I have been consulted numerous times by persons facing “cease and desist” letters with respect to content on their websites. Copyright includes the copyright owner’s exclusive right to make copies of, or publish, a work or any substantial part thereof, and, subject to some exceptions (discussed below), it is infringement of copyright to do these things without the permission of the copyright owner.  For that reason, all articles posted on our firm website are written by either myself or my partner, Michael Cooper.  All posted photos are taken by myself or I obtain permission and confirm that permission by email. Once the articles are completed, I disseminate them via social media.  The platforms I use for business are generally LinkedIn, Google plus, and Twitter.  To date I have been reserving Facebook for friends, but I am told that I should establish a business presence on Facebook.   This brings me to the point of the article.   The other day a friend emailed a wonderful video with a Xmas theme.  I loved it and did not hesitate to forward it to selected friends, although I did not post it on social media.  I was subsequently looking for an end of the year message to post on the Thompson Cooper website.  I immediately thought of that wonderful video with the Xmas theme, but then I stopped in my tracks and pulled out my copy of the Copyright Act.   Section 29 of the Copyright Act sets out exceptions to infringement.    As I review the “fair dealing” exception found in Section 29, it is for the purpose of “research, private study, education, parody or satire”; clearly not applicable.    As I review the “reproduction for private purposes” exception found in Section 29.22, can I say it is for “private purposes” if it is for my business?  I think not!   I note that even the section on “private purposes” does not apply if the copy that has come into my possession is “an infringing copy”.  In many cases, I have no idea whether the copy sent to me by friends is or is not an infringing copy.  To make matters worse, it ceases to be for “private purposes” if I share it.  What is the take away for the reader?  The advice I give to you is the advice I give to myself.  I will continue to circulate interesting articles and videos to my friends and my business contacts.  If I have concerns about possible liability, I will ensures that two conditions are met.  The first condition is that I must receive the article or video directly from the source, so I know it is not an infringing copy.  The second condition is that I must receive the article or video in circumstances under which it is reasonable to assume that I am authorized to pass it along.  By way of example, if I send an article that I have written out on social media via LinkedIn, Google plus or in a tweet; it is reasonable to infer that I have given you permission to retweet the article to your contacts. However, when a friend emails you a video from an unknown source, you are taking a small risk in forwarding it on to a handful of persons and a huge risk in posting it on your business website for all the world to see.

ANGEL INVESTORS FINANCING INNOVATION

Venture Capital photoI recently had lunch with a banker friend . He related some of his daily struggles in approving loans and summed up by indicating that his bank hired him to fund viable businesses, not “dreams”. The reality of the banking business is that a banker will only grant you a loan to launch an innovative project if you have the pre-existing financial strength to financially back the new business. After the business has being operational for two years or more, the financial performance of the business over that period will clearly indicate whether or not you have a viable business rather than just a “dream”. Persons who do not have such financial strength are forced to seek assistance from investors. The quest for investors usually starts with family members and personal acquaintances who trust and believe in you. There are some investors, referred to as “angel” investors, who invest in projects of complete strangers for fun and profit. The angel investors that I have known are relatively wealthy and have a past history of entrepreneurial success. Their angel investments are like a hobby to them. The number one criterion of the angel investor is that he or she must like you and feel he or she can work with you. If you are difficult to work with, it takes the fun out of the project and the angel investor doesn’t want or need the hassle. The number two criterion is that the angel investor must believe that the project has substantial growth potential and is not merely a “create a job” project. The ultimate object of the investment is to make some money at the end of the project. Ideally, the angel investor has contacts or knowledge that can contribute to the project and help make that happen. The number three criterion is that there must be some logical jumping off point at which the angel investor can cash in on his investment. If you have a good fit with an angel investor, you may well develop a life-long friendship. You will have to do most of the work, but at critical times the angel investor will be there to assist you. The angel investor will give you advice which will help you avoid mistakes you would otherwise have made. As he or she gets to know you, the angel investor will assess your strengths and weaknesses and get others to help cover your weak areas. The angel investor will set and expect you to meet performance milestones. Consider it tough love. It is for your own good. A controlling interest (over 50% of the venture) is not essential to the angel investor, although the angel investor can exercise a measure of control by simply withholding additional funds if he or she does not approve of the way the business is being run. If all goes well, the relationship with the angel investor ends at the planned exit position. On small projects, this is often the sale of the business, at which time you both “cash in”. On large on-going projects, you will progress to the “next stage of financing” in which a venture capitalist steps into the shoes of the angel investor and puts serious money into the business to take it to the next level. I have nothing but respect for angel investors, the ones I have worked with are special people indeed. There are a number of differences between angel investor funding and venture capital funding. Those differences will be explored in a separate article.

LAMP AWARDS 2015

Buechert photoAwards are a time to stop our hectic pace and recognize how far we have come (regardless of how far we may yet have to go). I was delighted to hear that the one of our clients, AVI Inc was nominated as a finalist for the LAMP awards (Lighting Architecture Movement Project). I attended the LAMP Awards, which were held in Vancouver on November 12, at the invitation of Matt Kennedy, the President of AVI Inc. I met the other members of the AVI team including accountant Michael Manley, photographer Darryl Bueckert, and SR&ED consultant Ken Bell. The theme of the LAMP Awards for 2015 was “Crystallize”. I urge you to see some of the marvelous entries at www.welovelamp.ca . I have attached a photo of the AVI entry. I would like to thank Darryl Bueckert for allowing me to use this photo. If you like Darryl’s work, check out his website www.darrylbueckert.com. I will post some further material on how you can purchase the products of AVI Inc and about the Crowdfunding campaign of AVI Inc at a later date. Matt Kennedy has been a great guy to work with and I look forward to continuing to work with him in future.

What IP professionals are talking about

I Convention name taghave just returned from the annual convention of the Intellectual Property Institute of Canada (IPIC).  This is two-day event with numerous educational workshops for Patent Agents, Trademark Agents and IP Lawyers.  There were plenary sessions that everyone attended and breakout sessions where the audience broke into smaller groups.  The plenary sessions included an address in which Mr. Justice George Locke of the Federal Court provided “tips for having a better relationship with your Judge”, an address by the President of the Canadian Bar Association, Janet Fuhrer, concerning the future of the profession entitled “Reimagining the Ways We Practise”, a panel of experts discussing Crowdfunding, and a panel discussing the issues and opportunities which are being created by 3D printing.  I find Crowdfunding interesting in its various forms.  You can Crowdfund through social media to solicit pre-orders for your product. You can Crowdfund by making an emotional appeal through social media to solicit donations.  Subject to legal limitations imposed by securities regulators, you can also use social media to Crowdfund by selling small equity interests in a start-up venture.  3D printing is considered a “disruptive” technology, because it has the potential to dramatically change the way we do things.  For example, currently there are numerous people employed in the transportation industry.  However, shipping costs can be avoided entirely by simply having a 3D “print shop” in your neighbourhood.  Instead of shipping a replacement part for one of your motor vehicles or household appliances, the part can be “printed” for you.  As with the current issues related to genuine and “pirate” internet sites for music and videos; there will soon be a problem with genuine and “pirate” internet sites that supply the files necessary to print out these parts.  The patent breakout sessions included: a review of key court decisions concerning “the promise of the patent” which have changed the way patents should be prepared; and a session called “Gotcha” which reviewed patent infringement remedies in Canada and the United States.  The trademark/copyright breakout sessions included: a review of changes which are coming to Trademark Law as a result of Canada having  signed a number of treaties ( Nice, Singapore and Madrid); and several sessions on dealing with copyright and trademark issues in  light of the Internet and social media.  It was explained that in this age of social media, the old approach of sending a nasty “cease and desist” letter may backfire.  An unnecessarily heavy-handed cease and desist letter may well be posted on social media and attract comment. Before one can stop it, the matter may go “viral” with the possibility of substantial negative publicity.  An example that was discussed as an alternative approach, was a dispute between the makers of a juice called “Pom Wonderful” and a television host by the name of John Oliver.  The humorous (although somewhat off colour) video can be viewed on YouTube a link for which will be provided below. Why am I relating this information to you?  I believe that by reviewing issues being discussed by IP professions today, you gain insight as to issues which will be touching our lives tomorrow.

Link to Video