IP in business transactions: Canada overview

A guide to intellectual property law in Canada. The IP in business transactions Q&A gives an overview of maintaining an IP portfolio, exploiting an IP portfolio through assignment and licensing, taking security over IPRs, IP and M&A transactions, and the impact of IP on key areas such as competition law, employees and tax.

To compare answers across multiple jurisdictions, visit the IP in business transactions Country Q&A tool.

This Q&A is part of the multi-jurisdictional guide to IP law. For a full list of jurisdictional Q&As visit www.practicallaw.com/ip-mjg.

Antonio Turco, Athar K Malik, Anil Bhole and Thomas Wong, Blake, Cassels & Graydon LLP
Contents

Overview of main IPRs

1. What are the main IPRs in your jurisdiction? How are they protected?

Patents

A patent grants the owner the exclusive right to make, sell and use the invention disclosed and claimed in the patent in Canada.

A patent can only be obtained for certain classes of inventions, namely processes, machines, manufactured articles, compositions of matter and improvements in such inventions. However, patents are not available for things such as medical treatments, scientific principles and abstract theorems. Furthermore, the invention must also be new, useful and inventive.

Patent protection starts when the patent is issued. The term of a patent in Canada expires 20 years from the date it was filed, provided that the required maintenance fees are paid.

Trade marks

A trade mark is a word, symbol, shape or sound used to distinguish a person's goods or services from those of others. Trade mark rights can be acquired both:

  • At common law, through adoption and use.

  • Under the Trade marks Act through registration and use (either in Canada or abroad, depending on the basis of filing).

Although a trade mark need not be registered to be protected, registration will usually ensure protection throughout Canada and facilitate enforcement of trade mark rights.

A valid trade mark registration gives the owner the exclusive right to use a mark throughout Canada in respect of goods and services for which it is registered. A person who sells, distributes or advertises goods or services in association with a confusing trade mark or trade name infringes this right.

Common law rights in a trade mark can last indefinitely, from the date of first use in Canada, provided the mark is not abandoned and continues to function as a trade mark. A trade mark registration is valid for 15 years and is renewable indefinitely at 15 year intervals.

Copyright

Copyright is the sole right to reproduce, publish, publicly perform, telecommunicate to the public and effect other defined activities in respect of literary, dramatic, artistic and musical works. Copyright also includes rights of performers in their performances, and rights concerning sound recordings and broadcast signals.

Copyright protection subsists in any work capable of being so protected from the moment it is created and fixed in a tangible form (provided that conditions as to the residence or citizenship of the author and place of publication set out in the Copyright Act are satisfied).

No registration of copyright is necessary. However, registration is helpful to prove copyright and ownership in the event of litigation.

Generally, copyright lasts for the life of the author of the work plus the period to the end of the calendar year and for 50 years thereafter.

Design rights

An industrial design registration under the Industrial Design Act protects the aesthetic features of a useful article. Registrable designs are those having an original conception of shape, configuration, pattern or ornamentation. To be registrable, a design must be directed to an aesthetic feature.

An industrial design registration entitles the registrant to restrain the manufacture, importation for trade, sale and rental of any article in respect of which the design is registered and to which the design or a design not differing substantially has been applied.

A registration is valid for a period of ten years, provided the required maintenance fee is paid.

Confidential information

Confidential information arises where the information:

  • Has commercial or economic value, arising because it is not generally known.

  • Is not in the public domain or generally known in the relevant trade.

  • Is reasonably protected from disclosure by the purported owner.

  • Is communicated to others only in confidence.

The possessor of confidential information can generally require another party who obtains that information to maintain it in confidence. The existence of this legal right depends on whether there is a contractual or other relationship imposing an obligation of confidentiality. An action for unauthorised use of confidential information can arise in many situations, including:

  • Breach of contract.

  • Breach of confidence.

  • Breach of fiduciary duty.

  • Unjust enrichment.

For further information about the main IPRs, see Main IPRs: Canada.

 

Maintaining IPRs

2. What facilities are available to conduct IP searches and obtain IP information on registered IP rights?

Patents

The Canadian Intellectual Property Office (CIPO) provides an online Canadian patent database to search, retrieve and study patents and published patent applications. The database provides details on a patent or published patent application including its content, administrative status and payment history.

Trade marks

CIPO provides an online Canadian trade marks database to search and review trade mark applications and registrations. The database provides details on a trade mark application or registration including a description of the mark, its status and a listing of the prosecution history.

Copyright

CIPO provides an online Canadian copyrights database to search and review copyright registrations. The database does not store a copy of the protected work.

Design rights

CIPO provides an online Canadian industrial designs database to search and review industrial design registrations.

Additional information and searching capabilities on any of the above are available by visiting in-person CIPO’s client service centre in Gatineau, Quebec.

Confidential information

Confidential information cannot be registered in Canada.

 
3. What steps must a business take to maintain the registration and status of its main IPRs?

Patents

Annual maintenance fees are required to keep patent applications pending and issued patents in force. Although there are no requirements that an owner of a patent must practice the claimed invention, failure to make the invention available to meet the demand in Canada may be considered an abuse of the patent rights in certain circumstances.

Trade marks

Registration of a trade mark is granted indefinitely for renewable periods of 15 years. A registration is subject to expungement at the request of a third party made at any point after the third anniversary of registration, if the mark has not been used in Canada at all during the preceding three-year period.

Copyright

No steps are required to maintain a copyright registration once the registration process has been completed.

Design rights

A maintenance fee is required to be paid before the fifth anniversary of the registration. If the registration is not maintained within the five years, protection ends at that time.

Confidential information

A person who has knowledge of confidential information must take reasonable steps to ensure that the information remains confidential, including to maintain the obligation of others to not disclose the confidential information. Such steps may include physical protections such as locked premises or other safe storage, encryption and password protection of computerised data and requiring the receiver of confidential information to enter into a confidentiality agreement.

 
4. What steps can a business take to avoid committing an infringement of another party's IPRs and to monitor whether a competitor is infringing its IPRs?

Patents

A person wishing to avoid infringement can search the Canadian Patent Database and review recently issued patents and published patent applications in the Canadian Patent Office Record (a patent journal published by CIPO). On identifying a relevant patent, a number of options may be available to avoid infringement such as:

  • Challenging the validity of the patent.

  • Designing around the patent by omitting or varying essential features claimed in the patent.

  • Obtaining a licence from the patentee or acquiring the patent itself.

A patentee wishing to enforce a patent is responsible for monitoring the activities of competitors and other third parties for potentially infringing acts.

Trade marks

A person wishing to avoid infringement can search the Canadian Trade marks Database and review recently registered trade marks and advertised trade mark applications in the trade marks journal. This is published by the CIPO for trade mark registrations and applications of interest. It is also recommended to conduct a search of common law trade mark use. An owner wishing to enforce its trade mark rights is responsible for monitoring the activities of competitors and other third parties for potentially infringing acts.

Copyright

A person wishing to avoid infringement can minimise exposure by obtaining a licence to use, or acquiring copyright in, any works used by the person and obtaining appropriate representations, warranties and indemnities from the licensor or seller of copyrighted works. An owner wishing to enforce its copyright is responsible for monitoring the activities of competitors and other third parties for potentially infringing acts.

Design rights

A person wishing to avoid infringement can search the Canadian industrial designs database for industrial design registrations of interest. An owner wishing to enforce its industrial design registration is responsible for monitoring the activities of competitors for potentially infringing acts.

Confidential information

A business wishing to avoid breaching obligations of confidentiality can limit the persons (for example employees) who are granted access to confidential information and require all persons who may have access to such confidential information, to enter into confidentiality agreements and/or non-competition agreements.

 

Exploiting IPRs

5. What are the main steps in an IP audit in your jurisdiction to determine the content of an IP portfolio?

Generally, a Canadian IP audit begins by reviewing any lists of IP maintained by the entity at issue.

Once the entity’s own list of IP (if any) is obtained, the next step is to compile lists of all Canadian registered IP that subsist in the name of the entity. Using CIPO databases, one can search on the registered patents, trade marks, copyrights, industrial designs and integrated circuit topographies in the name of the entity. Subject to certain limitations, it is also possible to search for pending applications for some of these types of IP. At this stage, it is useful to consider if there may be related entities or affiliates who may have registered IP in their own name and to conduct these same searches using their names.

It is then recommended to consider un-registered IP that the entity may not necessarily be aware it has, including:

  • Copyrights.

  • Common law trade marks.

  • Confidential information.

This can be an extensive exercise, depending on the importance and prevalence of IP in the business. An analysis of unregistered IP would likely involve speaking with key personnel who may be involved in the maintenance and/or creation of such IP and a review of how the business operates (to determine where IP is created and/or used).

As copyright subsists automatically on the creation and fixation of a work (provided that conditions as to the residence or citizenship of the author and place of publication set out in the Copyright Act are satisfied), there are many documents in which an entity may own copyright. Many of these may be ordinary day-to-day documents, but some may be critical and the IP audit will attempt to list/record any important creations in which copyright subsists. Items that may contain confidential information would generally be uncovered during this process.

Common law trade marks begin to accrue rights once they begin use in association with goods or services in Canada. To determine if there are such trade marks, a review of the products or services offered by the entity should be conducted.

Other steps may be considered in an audit, based on the scope of the audit, including:

  • A review of any IP licences to determine obligations and restrictions relating to licensed-in and licensed-out IP.

  • Litigation searches to determine pending proceedings that may impact IPRs.

  • Searches of CIPO to determine security interests registered against IP.

  • Tracing ownership of IP (including whether necessary assignments from employees, contractors or third parties have been obtained).

  • A consideration of IPRs in other jurisdictions.

  • An analysis of the entity’s procedures in place to protect or maintain IPRs.

See Question 2.

 

Assignment

6. How can main IPRs be assigned?

IP rights can be assigned, in whole or in part, by the owner of the IP. Assignment of patent or copyright rights must be in writing; however, it is strongly recommended that all assignment of IPRs be in writing.

Patents

An assignment of patent rights can include the patent (or application), but also the right to:

  • File further applications (for example, divisional applications and so on).

  • Bring proceedings for infringement claims. A co-owner of a patent can assign his or her interest in a patent without needing the consent of the other co-owners.

Trade marks

An assignment of trade mark rights may be specific to particular goods/services or geographic scope and may include or exclude goodwill. However:

  • Care should be taken to maintain the distinctiveness of the mark, where only parts of the rights are assigned.

  • CIPO limits the rights of parties to have differing ownership of associated marks, which may limit the right to partially assign certain sets of registered marks.

Copyright

Copyright assignments can be for some or all of the elements that copyright protects, including for only part of the term of copyright (see Question 1). A co-owner of copyright can assign his or her interest in the copyright without needing the consent of the other co-owners. A copyright assignment must be in writing to be valid.

Confidential information

There is no statutory frame-work governing confidential information (except to the extent that it contains confidential information) as such confidential information may be assigned in whole or in part in any manner agreed to by the parties.

See Question 7 and 8.

 
7. What formalities are required to assign each of the main IPRs?

There are few formalities relating to the assignment of IPRs.

An assignment of patent or copyright rights must be in writing; however, it is strongly recommended that all assignments of IPRs be in writing. In the case of registered IPRs, an assignment should be recorded with the CIPO, however, in the case of important non-registered IP, it is still advisable and possible to record such assignments with the CIPO.

Assignment documents need not be notarised or executed by the assignee. Consideration is required, but may be nominal and, in the case of recording assignments with the CIPO, the financial terms need not be disclosed. The CIPO does not require the original assignment document to be filed and a copy will suffice.

Patents

While a specific form is not required, the CIPO requires that the assignment document contain at least the:

  • Current owner’s name.

  • Signature of the assignor and witness (who is not involved in the transaction).

  • Patent or patent application number.

  • Address of the assignee.

  • Date of execution.

  • Official capacity of the assignor (title or corporate seal).

See Questions 6 and 8.

 
8. What main terms should be included in an assignment of IPRs?

In all cases, the scope of what is being assigned, as well as sufficient particulars to identify the assignor, assignee and the IPR/IP should be included.

In most cases, there would be representations and warranties by the assignor that it has the rights that it is purporting to assign. Furthermore, there is generally a further assurances clause, obligating the assignor to execute such documents and take such steps as may be reasonably necessary to give effect to the assignment in the future.

See Questions 6 and 7.

 

Licensing

9. How can each of the main IPRs be licensed?

IPRs can be licensed in whole or in part, based entirely on the agreement of the owner of the IP and the licensee. IP licences can be:

  • Sole.

  • Exclusive.

  • Non-exclusive.

  • Perpetual (subject to when the IPR may itself expire).

  • Time-limited.

  • Royalty-bearing.

  • Royalty-free.

  • Based on a one-time-fee.

Licences (except an exclusive licence in copyright) can be oral, however, it is highly recommended that all licences be reduced to writing.

See Question 10 and 11.

 
10. What are the formalities to license each of the main IPRs?

There are no formalities required for a licence. However, a trade mark licence must contain some ability for the owner of the trade mark to exercise direct or indirect control of the character or quality of the goods or services with respect to which the trade mark has been licensed for use in Canada.

IP licences (except for exclusive design licences) do not need to be recorded with CIPO. However, it is possible to record such a licence (whether in respect of registered or un-registered IP).

See Questions 9 and 11.

 
11. What main terms should be included in an IP licence?

In all cases, the scope of what is being licensed, as well as sufficient particulars to identify the licensor, licensor and the IPR/IP should be included.

Key terms that are generally included in an IP licence include:

  • The type of licence (sole, exclusive, perpetual and so on).

  • Territorial and/or temporal scope/term of licence.

  • An acknowledgment of the licensor’s rights.

  • Marking provisions relating to use of the IPRs (particularly for patent and trade mark licences).

  • Provisions relating to notification of infringement and prosecution of infringers (who is responsible for prosecuting and costs).

  • Representations, warranties and indemnifications relating to the licensed IPRs and the use of the same, under the licence.

  • Termination provisions (automatic and/or manual), including obligations on termination and provisions that may survive termination.

  • Standard contractual terms, such as standard further assurances, entire agreement, no-waiver, severability, assignment, execution in counterparts and governing law clauses.

See Questions 9 and 10.

 

Taking security

12. Is security commonly taken over IPRs?

Security is commonly taken over various IPRs including patents, trade marks, copyrights and industrial designs as well as unregistered IPRs, in some cases. A security interest can also be taken in domain names.

An instrument granting a security interest should set out the particulars of the secured IPRs in sufficient detail to enable a third party to identify those IPRs. To effectively perfect security in IPRs, it is necessary to enforce the security interest against third parties and avail oneself of the opportunity to provide notice of such a security interest through the CIPO. It is recommended that any secured registered IPRs be sufficiently identified by serial number and filing date, or registration number and registration date, on the instrument granting the security interest.

Best practices for perfection of a security interest over an IPR can involve both federal and provincial legislation (see Question 13).

 
13. What are the main security interests taken over IPRs?

Best practices for perfection of a security interest over an IPR can involve both federal and provincial legislation.

The perfection of a security interest in Canada is governed by provincial, rather than federal law. Various provinces have enacted personal property security legislation to govern the registration of security interests and the rights of secured parties. Provinces have established personal property security registers to enable the registration of a security interest.

A secured party may further record a suitable security agreement in the CIPO in respect of registered or applied-for IPRs. However, such recordal is not mandatory for enforcing the secured party’s rights. As registered intellectual property is governed by federal law, the recordal of such a security interest does not in itself create an interest enforceable against a third party. Instead, the recordal of such a security interest serves as a notice to third parties interested in the IPR of a potential existing security interest.

An instrument, such as a security agreement, sufficiently identifying the nature of the security interest, including sufficiently identifying the IPRs which are subject to the interest, is required for recording the security interest in the CIPO. Sufficient identification of an IPR typically includes a serial number and filing date, or registration number and registration date, on the instrument granting the security interest.

 

M&A

14. What IP-related due diligence is commonly carried out in both a share sale and an asset sale?

To a large extent, the nature of IP-related due diligence is common between an asset sale and a share sale.

At an early stage, counsel for both the purchaser and the seller will attempt to identify all of the registered and unregistered IP that is owned and licensed by the seller (as well as, perhaps, its affiliates).

With respect to registered IP, the CIPO maintains internet-based publicly available and searchable databases of patents and patent applications, trade marks and trade mark application, copyrights and industrial designs. These databases can be searched to verify existence, ownership, status and administrative requirements, such as dates of required maintenance and fee payments for the various registered IP.

The existence of security interests is also available on the trade mark database, while a review of the physical file in the CIPO may be required to ascertain whether a grant of security has been recorded for other types of IP. Provincial personal property security registers should also be searched to locate any relevant security interests.

Canadian domain names are administered by the Canadian Internet Registration Authority (CIRA), which provides on its website a publicly accessible WHOIS search.

With respect to unregistered IP, the level of due diligence depends largely on the nature of the transaction. If the seller’s business is not heavily dependent on its IP, due diligence may be limited to determining whether the seller’s IP rights will continue to exist on the closing of the proposed transaction, or if such rights may be subject to the rights of third parties (particularly where the third party is a licensor, licensee or secured party in respect of the IP). Agreements with licensors, licensees or secured parties for example, may have restrictions on assignment, which would be relevant to an asset sale, or may be affected by a change of control of the seller, which would be relevant to a share sale of a substantial part of the business.

However, where the seller’s or purchaser’s business is heavily dependent on its unregistered IP, further consideration may include an evaluation of the scope, coverage and validity of the seller’s IP to determine whether it has value, infringes the IP rights of others or is used in accordance with underlying licence rights.

Where IP assets are owned by an affiliate of the seller, counsel should consider whether the assets will be transferred to the purchaser or whether a licence to the assets may be required.

Where the purchaser is purchasing a portion of the seller’s business, the purchaser may need a perpetual or transitional licence to use the seller’s business names and other trade marks, as well as for any necessary underlying rights that are not being transferred to the purchaser.

The seller’s employment and consulting agreements should also be reviewed to ensure that IP, particularly inventions and copyright works, have been properly assigned to the seller and that the employee or consultant is obligated to maintain confidential information in confidence. The employment and consulting agreements should also include a waiver of moral rights in copyright.

Any pending litigation involving the seller’s IP should also be identified. Court records can be searched to verify whether there is any such litigation. Furthermore, the seller should be required to disclose whether there is any threatened or contemplated litigation involving its IP.

 
15. What IP-related warranties and/or indemnities are commonly given by the seller to the buyer in both a share sale and an asset sale?

The purchaser must be satisfied that it is purchasing what the seller purports to sell. Therefore, the seller will typically be required to disclose to the purchaser all of its IP and, in particular, material IP. Material IP may be presumed to include all registered IP and IP that is pending to be registered. Generally, the seller must warrant that both the:

  • Disclosed IP is accurate.

  • Disclosure includes all such IP.

The purchaser also desires to reduce risk of any future challenges to the purchased IP. The seller will also generally warrant that it is the owner of all IP it discloses that it owns, and is a valid licensee of all IP it discloses to be licensed. Furthermore, the seller will generally warrant that there are no encumbrances on any IP other than those disclosed.

With respect to litigation, the seller will commonly disclose all pending and threatened litigation of which it is aware, and warrant that such disclosure is complete and accurate.

The purchaser will usually require the seller to warrant that it's IP:

  • Is valid.

  • Is enforceable.

  • Has not been challenged.

  • Does not infringe the IP rights of any third parties.

Depending on the circumstances, these warranties may be limited to the seller’s knowledge.

 
16. How are the main IPRs transferred in both a share sale and an asset sale?

Asset sale

Generally, an asset purchase agreement will set out in a schedule all transferred IP in sufficient detail to identify the specific IP assets being transferred. In the case of registered IP, the assets are usually identified with reference to application or registration numbers and filing or registration dates.

Consent should be obtained from any third party which has a consent right in relation to a transfer of an IPR.

For an asset sale or for registering a security interest, it will be necessary to record the transfer or securitisation of registered IPRs in the CIPO. Recordal can be achieved by filing an instrument evidencing the transfer or securitisation in the CIPO.

Any instrument recorded in the CIPO becomes publicly available. Since most parties to a transaction do not wish for the details of such purchase to be made public, parties typically execute a further short-form agreement confirming the transfer, and then record the short-form agreement in the CIPO.

Share sale

Generally, a share purchase agreement will set out the transferred IP to give a more accurate meaning to the various representations and warranties made by the seller concerning the IP. However, provided that the share purchase sale closes as contemplated, it is generally not necessary to set out the IP in such detail (as ownership would remain with the transferred entity).

Consents should be obtained from any third party which has a consent right in relation to a change of control of the seller.

 

Joint ventures

17. Is it common for companies to set up joint ventures in your jurisdiction to develop projects that heavily involve IPRs?

Joint ventures are often set up to develop projects that involve IPRs. The agreement should include provisions regulating the rights and obligations of the parties with respect to ownership, use, prosecution and enforcement of IPRs.

A joint venture can be structured in various ways including:

  • A partnership.

  • Creating a special purpose vehicle.

  • Nominating one of the parties to operate on behalf of the venture.

Under any structure, parties should enter into a joint venture agreement setting out who among them will own, or have other rights in, background and foreground IP. Background IP may need to be licensed among the parties.

With partnerships, the parties should consider what rights they will have to exploit the IP, without consent of the other parties. While there is little jurisprudence on the issue, one provincial court has indicated that joint IP owners cannot exploit IP in such a way as to dilute the interest of the other owners. However, this is not entirely consistent with the law in other countries or in at least one other province.

Therefore, there may only be exceptional opportunities to licence rights to third parties (particularly non-exclusive rights) as such, a licence may be deemed to dilute the other owners’ interests.

 

Competition law

18. What are the main provisions of your national competition law that can affect the exploitation of the main IPRs?

The Competition Act has taken into account specific considerations relating to IPRs. The exercise of IPRs will rarely give rise to competition law concerns in Canada. For example, an act engaged in pursuant only to the exercise of any right or enjoyment of any interest derived under any Act of the Canadian Parliament pertaining to IP is not an anti-competitive act.

However, the Federal Court of Canada may make remedial orders if it finds that a company has used the exclusive rights and privileges conferred by a patent, trade mark, copyright or registered integrated circuit topography to unduly restrain trade or lessen competition. A remedial order may include among others an order declaring void, in whole or in part, any agreement, arrangement or licence relating to the challenged use of the IPR. Remedial orders can also:

  • Restrain the exercise of rights under such agreements.

  • Require compulsory licensing.

  • Revoke a patent.

  • Direct that the registration of a trade mark or integrated circuit topography be expunged.

  • Contain mandatory provisions.

The Competition Act includes provisions dealing with:

  • Refusal to deal.

  • Abuse of dominance.

  • Conspiracy.

  • Price maintenance.

  • Exclusive dealings/tied selling.

  • Mergers.

 
19. What are the most common national competition law issues that arise in the exploitation of the main IPRs?

There are many examples of issues which may arise under competition law from the exploitation of IPRs.

Conduct that may be considered something more than the mere exercise of the IPR, include bid-rigging, conspiracy and joint abuse of dominance and mergers (or other direct or indirect transfers of IPRs).

Examples of the most common national competition situations that can arise include if:

  • A licensor ties a non-proprietary product to a product covered by its IPR.

  • A patent owner seeks to effectively extend its market power beyond the term of its patent through an exclusive contract.

  • The owner of an IPR licences, transfers or sells the intellectual property to a firm or a group of firms that would have been actual or potential competitors without the arrangement.

If these or other types of arrangements between an intellectual property holder and a third party lead to the creation, enhancement or maintenance of market power so as to substantially lessen or prevent competition, the Canadian Competition Bureau may investigate.

 
20. What exclusions or exemptions are available for national competition law issues involving the exploitation of the main IPRs?
 

Advertising

21. To what extent do advertising laws impact on the use of third party trade marks?

Depending on its content, comparative advertising can be attacked under the provisions of several statutes and at common law. Provisions of the Competition Act for example, prohibit advertising that is false or misleading. The common law tort of injurious falsehood can be used to seek redress for damages caused by a competitor’s false advertising. The Copyright Act may be used by a company to prevent a competitor from reproducing the company’s logos in advertising.

Generally, a competitor’s comparative advertising refers only to a company’s word marks (but not its logos) and cannot be said to be false, deceptive or misleading. Therefore, a trade mark owner has usually still been able to rely on the Trade marks Act to obtain relief. Cases have held that for an advertisement to be objectionable, the defendant’s activities must constitute a use of the plaintiff’s trade mark within the meaning of Trade marks Act.

Most comparative advertising of goods does not meet this test because the defendant’s use of the plaintiff’s mark does not take place at the time of transfer of the defendant’s goods. However, there are exceptions (such as where the defendant’s comparative advertising takes place on point-of-sale materials in stores).

It is easier to show that a defendant has used the plaintiff’s mark in association with services, therefore, a defendant who displays the plaintiff’s mark in the course of advertising the defendant’s services would be deemed to have used the plaintiff’s mark.

 

Employees and consultants

22. Who owns each of the main IPRs created by an employee in the course of his employment? Is compensation payable in relation to employee IPRs? What main steps can an employer take to ensure it owns each of the main IPRs?

In the absence of an explicit agreement, the common law presumes that an employee-created invention is owned by the employee. There are exceptions to the presumption, including:

  • An explicit contract to the contrary.

  • Operation of a statute.

  • Where the employee was expressly employed for the purpose of inventing or innovating.

The situation is different for copyright and industrial designs by operation of statute. The Copyright Act provides that an employer is deemed to be the first owner of copyright in works authored or created by an employee during the course of his or her employment, unless an agreement has been made otherwise. Similarly, an industrial design created during the course of employment by an employee is deemed to be owned by the employer, by operation of the provisions of the Industrial Design Act.

It is recommended that, at the outset of the employment relationship, employers enter into a written employment agreement with employees that deals with, among other things, ownership of inventions and other works created or developed during the course of employment.

 
23. Who owns each of the main IPRs created by an external consultant? What main steps can a business take to ensure it owns each of the main IPRs?

Without an express or implied agreement to the contrary, an external consultant is the first owner of any IPR he or she creates.

Companies should ensure that any external consultant has entered into a written agreement that deals with ownership issues related to IPR, including an agreement to execute further assignment documentation or otherwise assist the company ensuring that its ownership of the IPR is recognised.

 

Tax

24. What are the main taxes payable by a licensor on the licensing of the main IPRs?

Any royalty or other amounts received by a licensor related to the use of an IPR are taxable as income. Income tax is therefore payable on those sums at the applicable rate. If the sums are paid to a non-resident licensor by a Canadian licensee, they may be subject to withholding tax. Similarly, if the non-resident licensee pays such sums to a Canadian licensor, the sums may be subject to withholding tax. This rate will vary by country and may be subject to a tax treaty between Canada and the non-resident’s country. A licence may also be subject to application goods and services taxes.

 
25. What are the main taxes payable by a seller on the disposal of the main IPRs?

The amounts received by a seller from the disposal of IPRs in Canada may be subject to income tax at applicable rates, including recapture of depreciation, receipt of eligible capital amounts, and capital gains.

 

Cross-border issues

26. What international IP treaties is your jurisdiction party to?

The major IP treaties to which Canada is a party are the:

  • Paris Convention for the Protection of Industrial Property 1883 (Paris Convention).

  • Universal Copyright Convention 1952.

  • Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations 1961 (Rome Convention).

  • Convention establishing the World Intellectual Property Organisation 1967 (WIPO Convention).

  • Patent Cooperation Treaty 1970 (PCT).

  • Strasbourg Agreement Concerning the International Patent Classification 1971.

  • Berne Convention for the Protection of Literary and Artistic Works 1971.

  • Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure 1977.

  • World Trade Organisation Agreement Implementation Act 1994.

  • World Trade Organisation's Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS).

Canada is also signatory to:

  • Convention for the Protection of Producers of Phonograms against Unauthorised Duplication of their Phonograms 1971.

  • WIPO Copyright Treaty 1996 (WCT).

  • WIPO Performances and Phonograms Treaty 1996 (WPPT).

  • Patent Law Treaty 2000.

 
27. Are foreign IPRs recognised in your jurisdiction?

Canadian courts do not enforce foreign IPRs. However, there are many ways in which foreign IPRs are recognised in Canada.

Patents

Canada recognises an application filed under the Patent Cooperation Treaty, provided that Canada has been specifically designated. Furthermore, in applicable circumstances, Canada recognises priority rights from foreign-filed applications where the Canadian application is filed within 12 months of the foreign filing date.

Trade marks

A Canadian trade mark registration may be obtained that is based solely on a registration in the applicant’s home country, without the need to show use in Canada. This is provided that use of the mark by the applicant has commenced in a Paris Convention or WTO country at the time of filing. A certified copy of the corresponding registration must be filed with the CIPO.

A foreign applicant may also claim priority based on an earlier-filed application, provided the Canadian application is filed within six months of the first foreign application, and that other conditions set out in the Trade marks Act are met regarding residency of the applicant in the foreign country.

 

Reform

28. Are there any proposals for reform?

Amendments to the Copyright Act are expected to become law in 2012. A bill has already been introduced into Parliament and is close to being passed.

The CIPO is seeking consultation on amending its practices which will streamline opposition proceedings, as well as permitting the registration of sound marks, and change the way in which certain other non-traditional marks are dealt with. It is expected that those changes will occur.

The CIPO is also consulting regarding its practice respecting inventive concept, statutory subject matter under the Patent Act, and claims to diagnostic methods and medical uses.

 
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