Are you utilizing your IP to obtain financing and grow your business?

By Kay Palmer, January 13th, 2020

Intellectual property (IP), including patents, industrial designs and trademarks, is an under-utilized business tool for small medium enterprises (SMEs).  Regardless of company size, IP may be used to:

• Obtain financing
• Generate revenue through licensing opportunities
• Protect and/or expand market share 

This is highlighted in the 2019 IP Canada Report from the Canadian Intellectual Property Office in the section entitled “[t]he impact of IP on financing and growth of small and medium enterprises” (https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr04682.html). In particular, the 2019 IP Canada Report summarized the results of ISED 2017 Survey on Financing and Growth of Small Medium Enterprises.  The following points are of particular interest:

• While more than half of Canadian SMEs are aware of patents, very few have patents.
• The proportion of Canadian SMEs holding at least one patent increases as size of SMEs increases.  In particular, 3% of SMEs having 20 to 99 employees hold at least one patent while 15% of SMEs having 100 to 499 employees hold at least one patent.
• Canadian SMEs aware of IP or holding formal IP obtained more financing as compared to SMEs not aware or not using IP.
• Canadian SMEs aware of IP or holding formal IP increased domestic and international market expansion as compared to SMEs not aware or not using IP.
• Canadian SMEs aware of IP or holding formal IP increased growth as compared to SMEs not aware or not using IP.

It is important to start a formal conversation about some forms of IP at the outset of your business, even if you don’t have the funds to invest in it right away. A strategy should be devised to plan for it in the future and allocate some budget to properly protect your IP. An intellectual property professional can help you determine what IP is appropriate for your business and how much to budget for it. Intellectual property, especially for start-ups or an SMEs, is considered to be one of its biggest business assets and as such should be treated with extreme care. An IP professional can help you maximize business opportunities out of your intellectual property if the right strategy is in place.

Common Patent Misconceptions – Myth #1

By Osman Ismaili, January 20th, 2020

This article is part of a series on commonly held misconceptions about patents. Many prospective patentees often have unfounded reservations about patenting their inventions. The aim of this series of short articles is to debunk these common myths around patent protection.

Patent Myth #1: Even if I file and register a patent, some giant company could still infringe it and would probably win in court if I sued them.

First and foremost, the likelihood of a patent ending up in court is very low. Economic studies (http://faculty.haas.berkeley.edu/shapiro/patents.pdf) have shown that of the total number of patents that are issued every year, only about 1.5% of them are ever litigated, and that only about 0.1% of them are ever litigated to trial. The association between patents and litigation in the minds of the public is likely a result of the relatively more recent patent troll cases, and the disproportionately high media coverage they have received.

If the statistics aren’t enough, businesses and startups should also keep in mind that the laws and regulations in place will not likely allow a smaller company to be unfairly steamrolled in court by a much larger infringer. A good example of this is the case of Microsoft Corp. v. i4i Ltd. Partnership, 564 U.S. 91 (2011), where the Supreme Court of the United States (“SCOTUS”) unanimously upheld a $290 million award against the tech giant Microsoft in a case brought by a Canadian software startup, i4i Limited Partnership (“i4i”). The Toronto-based i4i had alleged that a version of Microsoft Word had infringed its patented method for editing documents.

While litigation can certainly be expensive, and while Microsoft did have much deeper pockets than i4i, the SCOTUS decision, and indeed the lower courts, agreed that Microsoft had willfully violated i4i’s patent rights and that i4i was due compensation for that infringement.

A key take away from the above example is that the success of i4i would never have been possible had they not acquired patent protection for their invention. Without their patent, Microsoft would have been freely able to use the technology, with any recourse for i4i being highly unlikely.

If you are considering obtaining patent protection or have questions relating to patent protection, please feel free to reach out to MBM for a free consultation

No success for Questor in its quest for an injunction

By Osman Ismaili, March 9th, 2020

Questor Technology Inc v Stagg, 2020 ABQB 3

Despite whatever the clauses in employment agreements may read, an injunction will likely not be granted if it does not seem fair and equitable to do so.

In this decision, while the Court of Queen’s Bench of Alberta (the “ABQB”) declined to issue an injunction in favour of Questor Technology Inc (“Questor”), it did order former employees of Questor (the “Defendants”) to return to Questor any and all confidential information they had taken from Questor in breach of their employment contracts.

Background

Questor, an environmental technology company, is in the business of selling custom incinerators, used primarily in the oil and gas industry for burning waste gasses like methane. The Defendants had designed a low-pressure waste gas combustion solution for Questor, while employed by Questor. However, after departing from Questor, the Defendants launched a company of their own, offering a competing low-pressure waste gas incinerator (the “Competing Technology”).

Questor asserts it is the owner of the Competing Technology by way of either: (i) terms of the employment contracts signed by the Defendants, or (ii) application of the common law. As such, Questor sought an injunction against the Defendants from aspects such as competing in the market against Questor, or infringing Questor’s intellectual property (“IP”) – Questor claimed it owned the IP relating to the Competing Technology.

The sole issue in this decision was determining whether an interim injunction ought to be granted in favour of Questor against the Defendants.

Analysis

The ABQB ran through the test in RJR-MacDonald Inc v Canada (AG), [1994] 1 SCR 311 to determine whether an injunction ought to be granted. The test would require Questor to demonstrate: (a) that there is a serious issue to be tried; (b) that Questor will suffer irreparable harm if the application is refused; and (c) that the balance of convenience weighs in favour of granting the injunction. However, the ABQB found that this case was an exception, where a higher standard would apply for the first element of the test, namely that Questor would need to establish a strong prima facie case.

A detailed analysis of the Defendants actions led the ABQB to determine that Questor had not established a strong prima facie case for the injunction. Similarly, the ABQB was unconvinced that Questor had clearly proven that it would suffer irreparable harm if the injunction were not granted. Finally, the balance of convenience seemed to favour the Defendants, as an injunction would shut down everything they had built, while Questor, a larger, publicly-traded company, would likely be unaffected if the injunction was denied.

The ABQB remarked that as injunctions are an equitable remedy, it would not be fair and just to issue one in those circumstances.

Commentary

Different areas of the law are often much more interconnected than people may believe. Obligations to confidential information, employment agreements and assignments of inventions all affect IP rights. While the ABQB did not answer questions like whether Questor was the rightful owner of the Competing Technology, the questions themselves still played a key role in determining the outcome of the case. Even if relevant IP questions had been answered, it would still likely have been unjust to grant an injunction in this case.

If you are dealing with a legal issue where IP may be involved, please feel free to reach out to MBM for a free consultation.