Current Insights

Making Room for IP Strategy in the Boardroom

While IP and innovation strategy is a topic worth a periodic look by a board in any corporate context, the degree and nature of IP issues faced by a company and the importance of IP as a strategy topic can vary based on a large number of factors, including [to name just a few]:

  1. Industry – companies in some industries will rely more heavily on IP plans and strategy than others and companies in IP-intensive industries will most appropriately see IP strategy and issues visit the boardroom more often;
  2. Competitive landscape – if the corporation is involved in a business vertical where intense competition relies upon IP protection and IP-based product or service differentiation, occasional review of the execution by management of the development of the corporation’s own IP portfolio, and knowledge and anticipation or avoidance of competitive IP hurdles, is appropriate;
  3. Innovative positioning of the corporation in relation to peers; and
  4. Importance of IP assets of the corporation to the profitability of product or service lines.

The approach taken to IP issues, and the importance of the IP assets of the company, fits within the larger context of enterprise strategic planning and management and the board should work together to ensure that the risk profile of IP strategy is in line with the remainder of the corporate structure and plans.  The sufficiency of IP clearance and avoidance measures and protective considerations in the new product development workflow of the corporation is also a strategic area in which the Board should gain reasonable assurance of management’s plans and operations.

Related to product development and other business development plans of the corporation is the general position which the corporation elects to undertake with respect to their IP portfolio and the IP assets of competitors. One analogy to consider is the placement of the corporation, in terms of the type of IP position taken, along a spectrum anchored at one end by a purely defensive strategy, centred around freedom to operate and avoidance of third party IP rights, to the opposite end of the spectrum in which a corporation elects to take a more offensive strategy centered around intensive capture, development and exploitation of IP assets to either provide more aggressive exclusionary or competitive options or to add value to the company through increasing the size and depth of the IP portfolio.  This analogy of “pinning” the corporation to a point along a strategy scale oversimplifies the issues but is demonstrative of one thinking approach which might be taken both by management in development of an IP strategy as well as by the board in providing oversight and critique of same.

Insofar as the directors bear responsibility to assist management in crisis management and have a responsibility as custodians of the brand of the corporation, the board should be advised when brand-threatening IP issues such as large scale IP litigation or the like arise. Using IP litigation as an example, given the costs as well as the materiality of the potential economic outcome either in terms of damages awarded against a defendant or as a potential revenue item for a plaintiff corporation, management should work with the board to ascertain and provide appropriate ad hoc or periodic reporting in this area.

Even in terms of product development and similar issues, if certain new product pipeline items have potential IP clearance hurdles associated with them such as proximity or threat of action from third parties based on pre-existing IP, if those threats approach or exceed the predefined risk appetite or parameters desired by the board, there should be opportunity for the board to consider these items and provide guidance.  These types of issues might occur more often in an “innovation intensive” enterprise, and this is not to suggest that the board should insert their decision making in place of management, but both the board and the executive of the corporation should condition themselves to have a constructive look at these types of items should they arise, and as important as the discussions themselves to identify the existence of the issues to trigger appropriate followup.

The list of IP and innovation capture issues outlined above is only indicative of some of the areas in which directors might consider seeking feedback and assurance from management in the corporation – there are many ways in which boards can satisfy themselves that they are applying appropriate stewardship and risk management principles to the IP portfolio, assets and position of the company, including for example through assigning various IP issues into the ongoing enterprise risk management and monitoring matrix.

Every corporation has and creates IP assets – occasional strategic review and oversight of IP initiatives by the board of directors is appropriate and important.  The best likelihood of success for IP initiatives which require wide cultural adoption begins with tone at the top, and it will be important throughout a corporation to see and feel that the cultural requirements for an IP capture plan, tech transfer strategy or the like is adopted by and driven down from the highest levels of the corporate hierarchy into the operational corners below.  This begins with and includes initiative, direction and buyin at the board table.

Directors should provide their varied insight and perspective to the development of IP plans at a strategic level, and insofar as the board will ultimately bear responsibility for the value which is or is not generated in the corporation from IP decisions it is also important to gain a level of assurance on management’s development and execution of intellectual property strategy and plans.

Furman IP can help you to develop and implement strategic management of the IP elements of your corporate strategy.  Let’s chat if you have questions!

What is the final deadline to enter the national phase in Canada under the PCT? (42 months)

It is possible to make a late national phase entry of a PCT application in Canada up to 12 months after the 30 month deadline.  This is possible by reinstating the application which is deemed to be abandoned as of the 30 month national phase entry deadline.  As such, it is possible to enter the national phase in Canada up to 42 months from the priority date .  One of the things to be aware of is that as the deadline for entry is stretched out to 42 months there can be multiple reinstatement or late entry fees payable – for example maintenance fees may be due at the time of entry since they are due annually starting on the second anniversary of the international filing date.  We can provide further information and definitive advice on this should you have a situation arise.

Counterfeiting: What Is It and What Can You Do About It?

Whenever I hear the word “counterfeiting” I think about the scene in the desert in To Live or Die in L.A., where they show up to shut down the counterfeiters only to find nothing left but a washing machine.  The far less gritty definition of counterfeiting though, related to counterfeit merchandise and services, is something that impacts many of us on a regular basis.

What is counterfeiting, you ask?  There are many different definitions – this one from Wikipedia is good as any to outline the term:  “…Counterfeit products are fake replicas of the real product. …The word counterfeit frequently describes both the forgeries of currency and documents, as well as the imitations of clothinghandbags,shoespharmaceuticals, aviation and automobile parts, watcheselectronics (both parts and finished products), software, works of arttoysmovies.[1] Counterfeit products tend to have fake company logos and brands.”  Counterfeit goods are copies of your legitimate products.  They are sold by others to trade on your goodwill or other IP rights.  In many cases as the notoriety of your company and your brands increases, so does the temptation for people to copy or trade on the goodwill and value of your IP rights and planning to deal with counterfeit products is one area in which many companies can benefit from the deployment of some resources.

What types of products or services might be copied? Virtually anything – everything from the widely anticipated counterfeit consumer fashion goods such as clothing or the like, through to construction materials, safety products and others (I spoke once to a fellow who found out he had a copycat furnace in his house!).  Services can also on occasion be copied  – for example the copycat Apple store in China in which by reports the staff all thought they were working for the real company.  Appreciating the scope of the counterfeiting problem, you might ask yourself what you can do to minimize or avoid its impact on your business.  As with many IP-related business decisions, the resources you dedicate to awareness and enforcement in the counterfeiting area will vary but a starting point is to understand some of the options that you have at your disposal to detect or fight back against these problems.

Grey market goods are products manufactured by you but which are not authorized for sale in a particular market – for example if a distributor in one country to whom you ship product moves it for sale in another market in which you have another exclusive distributor. The product itself is legitimate, but is not authorized for sale in that territory. There are steps which can be taken to provide the best possible legal scenario to deal with grey market scenarios, although a good measure of common sense and positive working relationships with all your channel partners is often the best way to minimize these situations!

Monitoring:

One of the first key elements for a business seeking to implement an anticounterfeiting program is to establish rigorous monitoring in the markets of interest. The monitoring program can become more complex as the geographic footprint of your business expands into multiple countries. Your staff or local distributors in corners of the market can provide feedback and periodic information about what they see in the marketplace, and in certain cases you may also wish to retain local legal counsel or investigative help to proactively monitor activity or particular parties in the marketplace to identify when counterfeit goods or services are entering the market. The best information possible results in your best ability to enforce your rights.

 A related issue in terms of monitoring or establishing an enforcement framework is to ensure that any contracts that your company enters into with local companies, manufacturers, distributors, agents and the like establish the proper relationship of those companies to assist you with monitoring and enforcement as well as to minimize the ability of those companies to themselves become sources of grey or black market goods in the marketplace.  Establishing this documentary framework is something that you can work on with your counsel, to ensure that the extent possible you have created precedent documents and contract templates that you are using that support your monitoring program. You will also potentially need to rely on local legal counsel in the market of interest to ensure that the contract language which is created is best enforceable Oreos most efficiently drafted for the local legal framework of that country.

Enforcement:

Once you have implemented a monitoring program, or a counterfeit or infringement matter comes to your attention, you next need to develop an enforcement strategy.  You will typically have many different options at your disposal to try to stop it.  Depending upon the jurisdiction and severity of the situation, you may have a civil remedy at your disposal (ie. you could sue the counterfeiter or the vendor of the counterfeit goods for infringement of your IP rights), or in some countries and circumstances there is even a criminal avenue by which a criminal case of counterfeiting can be reported.  In Canada there are civili and criminal options available to consider although most rights holders would at present likely find themselves in the civil route for enforcement of their rights.  You can and should rely on your IP lawyer to give you some help to understand and frame your enforcement approach, since the decision is complicated by the type of business, the country or jurisdiction, the severity of the counterfeiting or infringement, and other factors.  Depending upon the level of enforcement that you elect to undertake as well as the potential geographic dispersion of your market again, you may even wish to leave standing enforcement instructions with your local counsel or representatives so that they can upon detection of the presence of counterfeit merchandise simply proceed with enforcement without the need to delay and hopefully in that fashion most quickly intervene.

Border control:

One of the primary means in many countries to exclude infringing products from the marketplace are customs and border enforcement mechanisms which exist allowing for the seizure or destruction of infringing goods at the national borders by customs officials. Many export markets, including the United States, have such a scheme in place, and they provide one of the simplest means of local market enforcement where available. In order to use these border control mechanisms it is most often the case that you will need to have registered  your trademarks or other IP rights locally, so given the time involved in completing those registration steps it is best to be prepared in advance. Canada does not currently have such a simple border control mechanism in place, but there is currently federal legislation pending.  The availability and accessibility of border control programs varies  and again there is the need to rely on local legal advice to make sure the best possible approach is taken  to interface the governmental border control mechanisms in particular jurisdictions with your own civil or criminal enforcement program.

Copy protection:

Some of the measures which can be taken to minimize the possibility or impact of a counterfeiter on your products and operations include maintaining tight control over your manufacture and distribution channel through appropriate contracts, as well as in some cases copy protection or detection of origin schemes can be implemented, so that with your brand or legitimate products, their source or authenticity can be verified.  There are many different types of copy control or  rights management systems which can be implemented from very simple to very sophisticated. In terms of sophisticated systems, for example, in polymer manufacturing, trace ingredients have been placed in plastic to allow for tracking of the origin of the plastic. In computer software everyone is aware of the various types of digital rights management or license management schemes which are typically implemented with respect to software programs. There is a strong vendor support industry in this area and to the extent that your company wishes to incorporate some type of a copy protection or  control mechanism into your day-to-day distribution plan you can find a lot of good help in this area.

To summarize, there are a number of steps which can be taken to best prepare to deal with possible counterfeit or copycat presence:

  • Ensuring proper distribution or channel contracts, dealing with IP ownership;
  • Registration of selected trademarks, patents or other IP rights;
  • Awareness of local law and requirements for use of customs interdiction or other local enforcement mechanisms;creation and implementation of a internal policing mechanism to detect counterfeit merchandise or services, including building awareness amongst your personnel; and
  • Implementation of copy protection or other schemes to help with identifying original product.

Companies addressing some of these issues in their market development plans will be best positioned to protect, exploit and maximize their own IP positions as their businesses grow. You know what they say about an ounce of prevention…

IP legal considerations when entering the Canadian market

Cory Furman spoke as a panelist at the Global Intellectual Property Law Symposium hosted by Gearhart Law in New Jersey and New York in the Spring of 2015.  His panel comments outline the Canadian legal environment for American SME’s and other companies considering entering the Canadian marketplace and the IP regime here.  The following link connects to a Youtube video of his remarks.

Canadian government introduces new anti-counterfeiting measures

On March 1, 2013, the Government of Canada introduced new anti-counterfeiting legislation in draft form for consideration to Parliament.  The Combatting Counterfeit Products Act, if implemented in substantially its present form, would amend a large number of provisions in the Copyright Act and Trademarks Act in  Canada to provide enhanced counterfeiting enforcement mechanisms and increased penalties for parties liable for the distribution of counterfeit goods in Canada.  This legislation should be welcomed by international brand holders, who have in the past been critical of the available enforcement mechanisms available in Canada, as too lax or cumbersome.

One of the primary provisions in this Act as presented is the creation of enhanced customs and border enforcement and seizure mechanisms, which would allow law enforcement officials greater ability to seize or detain suspected infringing goods.

Changes in the US patent law impacting IP business decisions

The American legislature has recently passed the America Invents Act, a long awaiting attempt at patent reform.  While this act contains a number of changes, the following are some of the most important which will impact businesses making patent filing decisions:

  1. The United States, in conformity with most other countries, has formalized a move to a “first to file”, rather than a “first to invent” patent priority system.  The formalization of the first to file priority in the USPTO reinforces the need for patent applicants to file applications as soon as possible lest another contemporaneous inventor should file before them and steal the priority to the patent for the invention.
  2. The Act also enacts a defense to patent infringement based on prior use.  This will enhance the ability of an inventor who chose not to file a patent application for their invention to practice the invention of someone else files and obtains a patent.  There are limitations to this defence but it does provide at least some limited protection for a ”prior inventor/user”.
  3. A number of other changes are included in the Act which creates a post-grant review process for patents after issue, and other changes to the US patent system.  Changes to the examination system for pending applications are also included, which should provide at least a limited ability to fast track some applications.
  4. USPTO fees in respect of a large number of steps are also increased by 15{ea562c2d293a042f3fb4f55dc480c4a82b6a9eb444caad7034b0166480393425} following enactment of this legislation.

How the changes in this Act will in practical day to day terms impact patent holders and third parties in the US remains to be seen, but the formal move to a first to file system will simplify many filing considerations for Canadian and foreign applicants doing business and seeking protection in the United States, as these changes bring that aspect of the US law more on all fours with the patent laws in other countries.