Canadian Patent Database Upgrade

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.

Financing Ventures Through Crowdfunding

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.

Patent Searching (Simplified)

Michael Cooper explains how to conduct a patent search. The United States Patent and Trademark Office has two useful features. The first feature is a series of links in each patent record providing the patents the Examiner found when conducting his search. The second feature is a “referenced by” button giving a list of patents that were subsequently issued that are related to each patent record.

I’m just going to give you a brief bit of information about patent searching. In order for something to be patentable, it has to be the right kind of subject matter, which is an inherent quality and something we can determine just by evaluating the invention. It also has to be both new and unobvious. “New” means that no one has done exactly the same thing before, which practically means that there isn’t a single document that fully describes the significant aspects of the invention. It also has to be, “unobvious”, and what that means is that there isn’t some collection of documents that, taken together, in light of the common general knowledge in the field, would make the idea obvious in light of a patent examiner. Anyone can do their own patent search and they can determine, or fairly readily make a determination, whether something’s new in light of what they’ve found. If you find a single document that fully describes your idea, you know where you stand – you’re not going to be able to patent it. But when you get into the question of obviousness, that’s more difficult, and that’s where you typically need professional advice. What I recommend to almost anyone who contacts me about, or is interested in patenting something, and has never been down the patenting road before, is that they do some of their own patent searching, and I strongly urge people to search first at the U.S. Patent and Trademark Office. There are two reasons for that. It’s one of the largest patent office and is still the single largest English-language patent jurisdiction in the world. More applications get filed there than anywhere else. In addition to being searchable using key words, it’s searchable using the patent classification system, which is a very detailed system of categorizing patents based on their technical subject matter. The details on how to use the patent classification system are set out on the U.S. Patent and Trademark Office’s website. So, if you go to that website and then enter “Patent Searching” in the search facility for the whole website, that will take you to a few pages that provide information on how to do patent searching. This includes an online video tutorial and information on the classification system, which I strongly recommend that you use. To illustrate the difference between doing a conventional key word search (the sort of thing you would do on Google) and using the classification system, if the application or patent in the U.S. is based on an original German application, it may be a poor translation, and you may be using key words that are common among English speakers but would not be used by somebody making a translation from the German. So that’s one reason why it’s very useful to use the classification system. If the results you get are that you are clearly dead in the water – you’ve found a single patent document that fully describes your idea, then you know where you stand – you don’t need to talk to someone like me. But if your results are inconclusive, and what you found are patents that describe different ways to get a similar solution, or patent documents that have part of your idea but not all of it, then you are into the question of whether your idea is “obvious” or not. The next step is to meet with a patent agent/patent lawyer. Bring to that first meeting a full description or a full summary of the search you did, meaning all the key words you may have used, plus a list of all the classes and sub-classes that you looked at, plus at least the cover page of any patent documents that may be relevant to that question of obviousness. If you bring those things to the first meeting with the patent agent, that meeting can be far more productive than it would be otherwise. So that’s a brief summary of how to do your own patent searching.

The Intellectual Property (IP) Audit

You have an idea that has potential and decide to become an internet entrepreneur.  You secure a domain name.  You hire a programmer to write the code to make your website function, a graphics firm to create a logo and a web design firm to set up the content and “look and feel” of the website.  You raise some money from investors, create a start-up corporation and approach a large corporation about “partnering”.  Initial discussions are positive, and you are told that a legal firm for the large corporation will be contacting your lawyer to make some due diligence inquiries.  The first group of questions the lawyer is going to ask relate to the domain name.  Is it owned by the start-up corporation or is it still sitting in your personal name?   It should be owned by the start-up corporation.  Did you have any searches performed in Canada and the United States in order to determine whether your use of the domain name could potentially infringe someone else’s rights?  The large corporation does not want any problems. Have you taken steps to file a Trademark in Canada and the United States to protect the domain name?   The large corporation wants protection against copycat websites.  The second group of questions the lawyer is going to ask relate to the content of the website. Do you have an agreement transferring all rights in the software code from the programmer to the start-up corporation? Do you have an agreement transferring all rights in the logo from the graphics firm to the start-up corporation?  Do you have an agreement transferring all rights in the website content from the web design firm to the start-up corporation?  Many of the contracts used by programmers, graphics firms and web design firms, make them the owners of the copyright. Moral rights prevent alteration of copyright materials without express permission from the creator.  Have “waivers” of these moral rights been obtained, so changes can be made in future?  Is there patent protection, or has this at least been explored before public disclosure deadlines preclude patent protection?   The third group of questions the lawyer is going to ask relate to employees, subcontractors, and shareholders.  Did the subcontractors sign non-disclosure agreements with non-compete provisions?  Do the employees have employment contracts with non-disclosure and non-compete provisions?  Is there a shareholder agreement in place, with termination provisions in the event of a dispute with non-compete provisions?  It all comes down to whether the Intellectual Property and Contractual provisions that the large corporation expects to see are in place.   If so, are the Intellectual Property and Contractual provisions with the correct legal entity, i.e. the start-up corporation?  Look at your own business.   Are you ready for the call?

Patent Protection (A Simplified Explanation)

There are three simple tests for obtaining patent protection. Your invention must be 1) new, 2) useful and 3) not obvious. It is this “obviousness” test that is the battle ground of patent law. The accompanying video is intended to provide a simplified explanation to assist persons considering patent protection.

Here is a transcript of the video

There are three tests for obtaining a patent.  They are best explained by way of example. So let’s assume for the moment you’ve got a garbage can, and that garbage can telescope upwardly and swivels back and forth.  The first test you have to have is – Is that garbage can new?  And that’s pretty easy to determine.  What one does is conduct a search to see if you can find a garbage can that telescopes up and swivels, and if you can’t, you pass the first test.  You’re new.  The second test is that it has to be something’s that useful so you have to explain to the Patent Office why having a garbage can that telescopes up and swivels is useful.  If you can do that, you’ve passed the second test.  You’ve got something that’s useful.  The third test is that your invention must not be obvious.  The danger there is that an Examiner can conduct a search and find a garbage can that telescopes up, and another garbage can by somebody else that swivels back and forth, and suggests that it is obvious to combine the two garbage cans into one. If, in fact, those two garbage cans existed and could be combined into one, you’ve got a problem.  The Examiner is going to clearly find that your invention is “obvious”.  Your patent lawyer will do searches to try and make sure that doesn’t happen.    The big danger in patent law is that sometimes the Examiner goes and searches for other things that swivel back and forth, and other things that telescope.  They’re not garbage cans at all, and he then comes back and suggests that your invention is obvious because of these other devices.  That’s the difficult part of patent law and it is something that even the patent lawyers sometimes have difficulty searching because the Examiner can find these swiveling and telescoping examples from something that’s completely different.  It is very difficult to anticipate.  That’s patent law simplified.

A New Perspective on Craft Sales

Large chain stores generally do not want to create a listing for a single product. That means that an inventor seeking to sell a product through the chain store, must do so through a distributor who already is doing business with the chain. In exchange, the distributor charges 30%. The chain store will have a standard mark up, typically 50%. The chain store has high fixed expenses and need a constant turnover of inventory in order to make money. If inventory of a particular product does not turn over within a reasonable time period, the chain store will cease carrying the product. In order to ensure turnover, products must be priced to sell. This results in the chain store dictating to suppliers what the retail price must be. For example, if the chain store determines the retail price is to be $10.00, the wholesale price must be $5.00 in order to do business with the chain store. Once the distributor’s 30% is deducted from the $5.00, this leaves the inventor with $3.50 Out of the $3.50, the inventor must pay for materials and labour; the remainder (if any) the inventor retains as profit.
When products are mass produced, there are “economies of scale” that results in the per unit price being reduced. However, in the early stages of a product’s development, the product runs are typically small. There are a number of reasons for this. The first reason is that the product is still in development and changes are being made. The second reason is that most inventors have limited resources, they cannot afford to produce in mass quantities. The third reason is that it has not, as yet, been confirmed that there is a market for the product. The inventor does not want to end up with 10 boxes full of products gathering dust in the garage.
In order to survive in the early stages, the inventor must look for ways to test the market for the new product that will see the inventor receiving a higher return which will offset the higher cost of producing products in small runs. Selling the product on a website dedicated to the product is the modern answer to that dilemma. However, while the internet allows the inventor to potentially reach a global audience, products can become lost on the internet. The most effective way to interact with the buying public while retaining most of the sales proceeds is still at small venues; what are commonly referred to as farmers markets, flea markets, and craft sales. The public vote with their dollars. If they do not have an interest in your product, that will be painfully apparent and you will barely recoup the cost of your market stall. If there is a lot of activity, the public will tell you if the price is too high or it will become apparent by poor sales numbers. I hope that the foregoing will give you a new perspective. The Xmas craft sales season is upon us. If you see a new and innovative product as you wander around the craft sales, I hope you will remember this article and treat the vendor with respect. He or she may be a budding entrepreneur who is merely passing through a test market stage on the way to greater success.

What It Takes To Be Successful

I have worked for a number of persons who established new businesses and, eventually, became multi-millionaires. This gives me some insight as to what it takes to become successful. Any advice I may give in this article must be taken with a grain of salt for, although I am modestly successful, I am not in the same league as the successful clients of whom I speak. Contrary to popular opinion, hard work is not enough. My successful clients studied trends in the industries they served. They then surmised that there would be an ever increasing demand for a particular group of products or services, should that trend continue. When they guessed correctly, they rode the “wave” of that trend to success. The greater the impact of the trend on the industry, the greater the degree of success. As my client/friend, Bill, puts it “We planned carefully and I knew we were going to be successful, but I had no idea that we would be this successful”.

For Bill, the trend hit stronger than he had imagined and carried his business to heights beyond his wildest dreams. What if the trend does not materialize to the extent you imagined? Another client, Steve, built his business on a need for products and methodologies for the non-destructive testing of integrated circuits. Unfortunately, there was a downturn in the sector and his potential market dried up. Steve had to either shut down the business or refocus. He took stock of the sensor technologies he had developed for the purpose of non-destructive testing and has now refocused selling sensor technologies for the purpose of wireless equipment condition monitoring.

If you are considering establishing a new business, you will want to give yourself every opportunity to be successful. If you are interested in starting a high-tech business, or any business based on an innovative idea, I recommend that you take advantage of any available programs aimed at assisting high-tech start-ups. For example, the Accelerate Tectoria program offered by VIATeC (based in Victoria) and the SquareOne program offered by Innovation Island (based in Nanaimo). These organizations work with the B.C. Innovation Council to increase the number of successful companies that start and grow in the region. Their 6-month programs are designed to help new businesses overcome any obstacles and accelerate their go-to-market strategy. They provide access to business mentors in the community and professionals (accountants, lawyers, marketers). They have Entrepreneurs-in-Residence who have start-up experience in management positions. They provide access to a work station & workshops put on by experts on topics of interest to managers/owners of new ventures. To check out ViaTec go to viatec.ca. For more information about Accelerate Tectoria go to acceleratetectoria.com or contact Patrick Woodward (pwoodward@viatec.ca). To check out Innovation Island go to Innovationisland.ca. For more information about SquareOne go to thinkbigatsquareone.com or contact Josh Brocklebank (joshua.brocklebank@gmail.com).

When to Fight and When to Settle

I received a settlement cheque today on a patent infringement action. Although the cheque is for several thousand dollars, I estimate that the other side would have paid as much in legal fees had they chosen to fight. You can say what you like about the manner in which the other side found themselves in that position; I am of the opinion that the opposing lawyer acted with integrity in extracting his client from a difficult situation. The opposing lawyer’s client also gets full marks for accepting his lawyer’s advice and making the decision to write the cheque to end the dispute. I have another file on my desk in which the response to the infringement claim has been much different. The opposing lawyer is being as difficult as possible, hoping that my client will get discouraged and will go away. This strategy undoubtedly works in some situations where the infringement has ended anyway and further legal action to recover damages for past infringement may seem to be just not “worth it”. However, in this case, the infringement continues. Far from being discouraged, my client is irritated and becoming more determined; I have received instructions to move the litigation forward. I will first seek to have their defence struck and to obtain a summary finding of infringement. I will then seek an order for recovery of all of their profits. The other lawyer and his client appear to believe they are in a safe position, because on paper the client has been losing money. However, in calculating profits, the court takes revenues received and deducts only materials and labour. The court will not consider the fact the owner of the business has monthly payments on a bank loan, overhead costs, and draws a management salary in order to survive. I am just as often on the other end of these type of disputes. I am currently acting on behalf of Lighthouse Brewing regarding a controversy with one of their brand names. I have great respect for Michael Bierman of Lighthouse Brewing who made the tough decision early and is currently in the process of changing the brand to avoid the controversy. Making these kind of decisions early in a dispute serves to prevent a small problem from becoming a huge problem. Win or lose, it always costs money to fight.

Ownership Rights vs. Public Domain and User Rights

This article is intended to be a brief outline of aspects of Canadian law relating to intellectual property and the public domain.  When intellectual-property ownership rights exist in a product, a purchaser of the product will generally only obtain limited “user rights”.  In contrast, when something is in the “public domain” there are no ownership rights and it is available for any member of the public to use without permission and without limitation.  As an intellectual-property lawyer, a general failure by members of the public to understand this distinction and how ownership rights are created or lost, keeps me busy.
When an inventor creates a patentable invention, the invention enters the public domain 12 months after public disclosure, unless an application is filed with the Patent Office within that period.  A patent gives the inventor ownership rights, subject to payment of an annual fee, for a period of 20 years from the filing date of the application; after which the invention will enter the “public domain”.   For example, Alexander Graham Bell’s patents relating to the telephone are all public domain.
When a person creates an attractive design for a functional object, such as a chair; the design enters the public domain 12 months after public disclosure unless an application is filed with the Industrial Design Office within that period.  An industrial design registration gives the designer ownership rights in the design, subject to a 5 year renewal fee, for a period of 10 years; after which the design will enter the “public domain”.   For example, when one sees the same chair made by numerous companies, it is a strong indication that the design is in the public domain.
When a user purchases an article that is protected by a patent or industrial design registration, the user acquires a “user right” to use that article without paying further payments to the inventor.  The user also acquires a “user right” to conduct normal maintenance to keep the article in good condition.  However, the “user right” does not include the right to reconstruct major components of the article.
Regrettably, inventors and designers attending our office to seek protection are often shocked to discover that they have missed their time period and that their creations are now public domain.
Another form of intellectual property, copyright, relates to written works, recordings, software, music etc. Unlike patents and industrial designs, copyright arises automatically upon the  creation of a suitable work; registration is merely an optional public notification that need not take place within a specified time period.  The usual term of copyright is the life of the author plus 50 years; once copyright in a work has expired, the work enters the public domain.  For example, the works of  Shakespeare, Jane Austen and Charles Dickens are all in the public domain.  The rules concerning photographs are slightly different; the photographer acquires rights for a period of 50 years from the date the photograph was taken.  “User rights” in the copyright area are primarily limited to personal use, the user may not distribute or make a commercial use of the literary work, although the law has carved out special exceptions, such as: news reporting, persons with disabilities (e.g., audio books for the blind), libraries, and education.  The most common legal issues in this area relate to users using text or photographs for commercial purposes, such as on a commercial website.
In your personal and business dealings you will encounter some items or materials that are clearly public domain, some that clearly have limited user rights and some that you are uncertain into which category they fall.  If in doubt, I urge you to seek legal advice and avoid potential legal problems.

Border Enforcement of IP Rights by Customs Officers

Businesses can obtain assistance from the United States government to prevent the importation of counterfeit goods into the United States (19 CFR 133).  On March 1, 2013 first reading was given to a proposed Canadian law (Bill C-56) which would give Canadian businesses a similar right to obtain assistance from the Canadian government to prevent importation of counterfeit goods into Canada.  The proposed law sets forth a procedure for Canadian businesses to follow and protects government officials from liability for steps that they may take in intercepting shipments and holding them for a period of time.  This law is long overdue and I hope for speedy passage.