I 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.
Awards 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.
I have 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.
We have seen it many times before. A businessman or businesswoman attends our office outraged that another business is blatantly copying their product. They want action taken and want it taken now. Copyright protection has no time limitation. If we can claim copyright protection on the product, we can take immediate action. However, design protection and patent protection each have a time limitation. If an application for design protection or patent protection has not been filed within 12 months of the first public disclosure of the product, it is no longer possible to obtain design protection or patent protection. Sadly, we must sometimes advise the businessman or businesswoman that they missed their deadline (sometimes by several years) and have no recourse. We cannot over emphasize the importance of taking early action to protect your product. Unfortunately, due to time limitations, a decision must sometimes be made before it is clear whether or not your product has significant commercial potential. Equally important is the name of the business and the name of the product or service. The law recognizes “common law” Trademark rights, if a competitor is using a similar Trademark in a geographical area in which you have worked hard to establish a reputation for your business. However, you cannot rely upon a “common law” Trademark if the use by another business is not in a geographical area in which your business operates and has an established reputation. We were recently consulted by a client who received a “cease and desist” letter from a legal firm. A person, who was aware of our client, took the concept to a different city a few years ago and started using very similar Trademarks. To make matters worse, they subsequently filed and obtained Federal Trademark Registrations. The legal firm is now demanding our client change the name of their service business and Trademarks used in association with the service. In order to deal with this threat, the client is going to have to ask the Federal Court to invalidate the Federal Trademark Registration on the basis that it would never have been granted by the Trademarks Office had the facts been known. Unlike other types of property, such as real estate and automobiles, it is possible to lose control of “Intellectual Property” assets. The title of this article is “taking preventative measures”. The intended message is to caution you to take steps to protect your Intellectual Property assets as soon as you realize that you have created something of value that others may wish to take and use for their own purposes.
The patent filing strategy that our office may recommend will depend upon the circumstances of the client seeking the advice and may be modified in response to changing circumstances. There is not one size that fits all. To illustrate the concept of patent filing strategy, we will describe the circumstances of one particular client. The client contacted us when a machine that he was building was nearing completion. At that stage he was not sure where there was a market for the machine and had not had an opportunity to test the machine to ensure it would work as intended. However, within a week, the machine was to be running and he was going to be putting information up on his website and contacting representatives of companies he thought might have an interest, some of which were outside of North America. We advised him that public disclosure prior to filing for a patent would result in loss of patent rights in many countries; only a small number of countries, including Canada, the United States and Australia, allow a patent to be filed after public disclosure has taken place. The machine was complicated and he did not have drawings. Given the imminent public disclosure, our first patent filing recommendation was that a series of photographs be taken of the machine and a U.S. “provisional” patent application be filed to preserve his patent rights in foreign countries. We advised him that he would then have up to 12 months to file further patent applications claiming priority from his first filing. Approximately 10 months later, we followed up with him to see how things were progressing with the marketing of his invention. He advised that he had sold three machines: one to Australia, one to Europe and one to the United States. He felt that he could sell more machines if he could reduce manufacturing costs, and he was exploring manufacture in China. In view of this information, our second patent filing recommendation was that an International Patent Application be filed under the Patent Cooperation Treaty (PCT). We advised him that a PCT Patent Application would preserve his ability to obtain a patent in approximately 150 member countries for a total of 30 months, as calculated from the date of filing of the U.S. provisional patent application. We further advised him that he would receive an International Search Report with a Written Opinion that would be an indication of whether his patent application met the basic criteria for obtaining a patent (being whether the idea is the right sort of subject matter, and is both new and unobvious). At the end of 30 months, he would have to decide in which of the 150 countries he wished to pursue patent protection. The International Search Report and Written Opinion indicated that the patent application did in fact satisfy all of the criteria for obtaining a patent. As the 30 month deadline draws near, we have been in touch with him to determine in which countries he wishes to have “national entry” of his international patent application. Manufacturing is now taking place in China. At this stage, some major companies have shown interest in not only purchasing machines, but also purchasing his patent rights. Large companies move slowly and they are unlikely to act before 2017. Unfortunately, his deadline for filing national patent applications is sooner. In view of this information, our third patent filing recommendation is that patent filings be limited to preserve the financial resources he needs for having more machines built, while keeping alive the prospect of a sale of his patent rights to a large company in 2017. We have received instructions to complete “national entry” of his patent application in three countries, which happen to be the three countries where the large companies that have expressed interest are located.
Mike McHugh, who does work for Thompson Cooper on pharmaceutical and biochem patents, shares the following insights on the Promise of the Patent.
In the last few years there have been some interesting developments with respect to assessing whether or not a patent has met the utility requirements for patentability. The so-called “promise doctrine” is a rather controversial approach to assessing the utility of an invention, and has arisen largely in the context of pharmaceutical patent litigation. Under the doctrine, a patentee who “promises” a specific result (for example, that a compound has a specific property, utility or advantage), may be held to a higher standard of utility that that required by the Patent Act. Under the Act, the utility threshold is met if any level of utility is demonstrated (i.e. a compound has to work as described, but it does not have to work “well”).
There have been a number of decisions, both at the Federal Court and Court of Appeal level which have invalidated patents for lack of utility because the Court found that the promise of the patent had not been met. In some cases a patent was invalidated despite the lack of an explicit “promise” i.e. the Court inferred a promise, based upon statements made in the specification.
More recently, however, courts have taken a more restrained approach. In Eli Lilly Canada v Novopharm, 2010 FCA 197, the Federal Court of Appeal (FCA) described the heightened utility requirement as follows:
Where the specification does not promise a specific result, no particular level of utility is required; a “mere scintilla” of utility will suffice. However, where the specification sets out an explicit “promise”, utility will be measured against that promise. The question is whether the invention does what the patent promises it will do. (at 76)
In Sanofi-Aventis v Apotex, 2013 FCA 186, the Court held that it is improper to assume that all patents make a promise of utility and emphasized that a promise should only be construed when “the inventor makes an explicit promise of a specific result”. Otherwise, a “mere scintilla” of utility is sufficient.
However, such restraint has not been universally applied; in Alcon v Cobalt Pharmaceuticals, 2014 FC 14, the Federal Court construed the promise of the patent even in the absence of explicit language. As a result, it is still not clear how the promise doctrine will be applied going forward.
It was hoped that the Supreme Court of Canada would provide some guidance on this issue when it granted leave for Apotex to appeal the decision in the Sanofi-Aventis case mentioned above, but the case was discontinued (by Apotex) just before it was due to be heard.
The application of the promise doctrine in Canadian jurisprudence does have some serious implications for those drafting patents. Statements which could potentially be construed as a promise of some enhanced utility or advantage should be avoided. “Object” clauses (e.g. “it is particular object of the invention to provide compounds having fewer side effects”) seem to be safe, as these have been construed as being no more than a prospective aim of the invention (AstraZeneca v. Mylan, 2011 FC 1023, aff’d 2012 FCA 109).
Particular attention should be made to claim language, as statements made in claims are more likely to be construed as promises compared to statements made in the specification.
Eli Lilly have launched a NAFTA challenge against Canada with regard to the doctrine, taking the position that it has caused a dramatic and unprecedented shift in Canada’s utility standard and is inconsistent with the utility standard embodied in NAFTA. Hearings on the issue should begin some time in 2016.
There are certain steps that one should automatically take to protect a video game. Early in the development process, the proposed name for the game should be protected by filing a Trademark application in Canada. In Canada, a Trademark can be applied for based upon proposed use and the applicant is given an initial period of 3 years within which to launch. There is a 6 month foreign filing period for Trademarks. Prior to the end of that 6 month period, one should apply for United States Trademark protection claiming priority from the Canadian Trademark application . Claiming priority from the Canadian Trademark application allows you to reach back to your Canadian filing date and also enables you to slow the U.S. Trademark process down so you don’t have to pay extension fees or lose the Trademark if your launch date is delayed. As soon as there is a working copy of the game, copyright protection should be applied for in Canada, as copyright registration simplifies proving ownership. Registering copyright in Canada is a simple process that involves filling out an online form. Most clients do not automatically file for copyright protection in the United States, as the United States requires that a copy of the object code be filed with the Library of Congress. Prior to launch of the video game, unique features should be reviewed to determine whether they are sufficiently important to be considered for patent protection. If you have a unique feature that gives you an edge, patent protection can keep competitors from imitating that aspect of your video game. If you want to see what the video game industry is doing, look at recently issued patents. U.S. Patent 9,095,776 issued August 4, 2015 entitled “Video game extremity control and object interaction” discloses a skateboarding video game in which a skateboarder can grab a skateboard to do a grab trick and change position on the skateboard to do other tricks. U.S. Patent 9,089,778 issued July 28, 2015 entitled “Video game with expedited combat” recites a methodology for determining whether a combatant dies after a single hit or a greater number of hits by setting forth a scheme of “spending” parameters and “recovery units”. U.S. Patent 9,079,097 issued July 14, 2015 entitled “Video game with replaceable tiles having selectable physics”, describes a tile game in which tiles are moveable to fill spaces. The “selectable physics” for the tiles relates to specified direction of movement and speed of movement, and under certain playing conditions, the “selectable physics” of the tiles change. U.S. Patent 9,072,974 issued July 7, 2015 entitled “Game play changes to a video game based upon social network polls”, protects a concept in which a social network of players can influence game play. U.S. Patent 9,039,532 issued May 26, 2015 entitled “Interactive video game with toys having functionality unlocked through game play”; the title accurately describes the focus of this patent.
For a number of years, many US patents relating to computer implemented inventions and the internet were granted. Then, on June 19, 2014, the U.S. Supreme Court issued its unanimous decision in Alice Corp. v. CLS Bank International. It had long been established that one cannot patent an “abstract idea”, but for many years, it was possible to obtain a patent for a business method (essentially an abstract idea) as implemented on a computer. However, in Alice Corp., the U.S. Supreme Court held that merely implementing an abstract idea on a “generic computer” does not make it patent eligible. The Court further held that claims describing implementation of a method “using a handful of generic computer components” are not patentable either. The Alice Corp. decision severely weakened, if not destroyed, any business method patent that claims a demonstrably old and fundamental method with nothing more specific or “innovative” in the claims than implementation of that method on a computer. A series of cases then followed in which the Alice Corp. decision was applied. For example, in Ultramercial Inc v Hulu LLC, a claimed method of offering free streaming video in exchange for viewing an advertisement was held to be not patent eligible. A year has passed since the Alice Corp. decision and it is now time to revisit what is and is not patentable regarding computer implemented inventions. The U.S. Patent Office acknowledges that a general purpose computer, when programmed by program software to perform a series of steps, creates a new machine because a general purpose computer becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from the program software. In order for a claim to be patent eligible, it must clearly convey that the computer is programmed to perform the steps of the method. There must be integral use of the computer to achieve performance of the method, as compared to the computer being merely being an object on which the method operates. The computer must impose meaningful limits on the execution of the claimed method steps, as compared to the computer contributing only nominally to the execution of the method steps (e.g., in a data gathering). By following the method claimed, one should produce an observable and verifiable result. The foregoing can be used as a guide in determining whether a computer implemented invention is patent eligible. It is important to understand that what is being considered is the invention “as claimed” (the claims are the part of a patent application that define the exclusive rights that the applicant hopes to obtain) and that care should be taken in the claiming strategy. When preparing an application for subject matter that could be characterized as a mere abstract idea, it is important to emphasize in the claims, and fully describe, features that differentiate the claimed subject matter from a mere abstract idea, for example, specific technical details that are only possible or practical when implemented on a computer.
For years Canadian Patent Agents have urged the Canadian Intellectual Property Office (CIPO) to upgrade the Canadian Patents Database (CPD) to include some of the features that have been available for some time in the United States Patents Database. We are pleased to advise that the CIPO has announced that, as of June 15, 2015, the Canadian Patents Database (CPD) has been upgraded to include access to documents relevant to prosecution history. Prosecution history includes Examiner’s Reports send out by CIPO and Responses filed by Patent Agents representing Applicants. It is important to review these documents when determining the relative strength of a competitor’s patent. It also enables Patent Agents representing Applicants to check to ensure that they have received all correspondence from CIPO. Having the prosecution history available online will save Patent Agents like ourselves considerable time and save our clients expense. While one could be criticize the labelling of the documents and the fact that not all documents are included, we must applaud the Canadian Intellectual Property Office for taking this step and urge them to continue to improve their online databases.
A number of our clients have been asking about crowdfunding as a possible way to finance their new ventures. Here is what we have learned. Crowdfunding is a form of funding made possible by social media, in which a large number of people contribute small amounts toward a venture. In order to avoid onerous securities regulations directed to public share offerings, in crowdfunding campaigns, the contributors do not obtain an ownership interest in the venture. Each contribution is akin to a donation and typically, in exchange for a contribution, each contributor is given some form of thank you “perk”, depending on the amount of the contribution. Most contributions in a crowdfunding campaign will be under $25 and the average contribution will likely be in the $75 range. For contributions under $10 the contributor may just receive a thank you message, for contributions of $25 the contributor may receive a key chain, and for contributions of $75 the contributor may receive a t-shirt. In addition, there are usually product discounts and early purchase incentives. Generally, the amount contributed represents approximately 5 times the value of the perk. Crowdfunding was initially used for “arts” funding, relating to music, theater, art, film/video, dance, etc. Statistics released by one crowdfunding platform indicate there have been 49,000 campaigns relating to music, of which 40% reached their target goal and 84,000 campaigns relating to film/video projects, of which 24% reached their target goal. The use of crowdfunding by small business is relatively new, with only 20,000 campaigns, of which a relatively dismal 3% reached their goal. The reason for the low success rate is that initial campaigns were ill prepared. Successful campaigns tend to set forth a very specific project with a targeted appeal to contributors that have personal reasons to support it. The target should be a relatively small and reasonably attainable goal. The average campaign is conducted over a period of 35 days. It is critical that 30% of the target be obtained within the first 3 days of the campaign (presumably through existing contacts) in order to create a “momentum” that will encourage members of the public to get on board. There is much to do in advance of a crowdfunding campaign. The party seeking crowdfunding should have a website, a 3 minute video that tells a compelling story, 7-9 levels of attractive perks, over 900 Facebook friends and a full-blown publicity campaign to get the word out as the launch date approaches. In order to raise just $25,000 at an average contribution of $75, will require 334 contributors of which a third will typically be Facebook friends. There must be something about the new venture that spurs to action members of the public who were not previously aware of the venture. Perhaps the new venture sells a safety product and the campaign is targeted toward friends and family of workers who are frequently exposed to the very danger the safety product addresses. In summary, if the project is one that inspires the target audience to proudly wear t-shirts to demonstrate their support, crowdfunding may be suitable. If the project is more difficult for the public to relate to, we recommend against crowdfunding, as most of us really do not need another t-shirt and, if we did, could purchase one for less than $75.