The protection of the intellectual property (“IP“) created, developed or invented in connection with the operations of your business (“Business IP“) is essential for the growth and the success of it, especially for any business operating in the technology industry.
The term “IP” usually includes, in general, inventions, copyright, patents, trademarks, techniques, programs, data, methods, processes as well as any other form of industrial, intellectual property or proprietary right.
It is crucial to ensure that all you or your business, depending on the case, remain the unique owner of this Business IP. For any company looking for venture capital financing, one of the first elements of every investor’s due diligence is to ensure that the Business IP belongs to the company.
The staff, the contractors, and the providers for your business, among others, can have access to your Business IP in the context of the business relationship they have with your company. The protection of this Business IP is of the utmost importance because the viability of your business depends on it directly. This one could lose clients and business opportunities, not to mention that any competitor in legitimate possession of your IP would benefit from a considerable advantage.
COPYRIGHT
According to subsection 13(3) of the Copyright Act R.S., 1985, c. C-42 (the “Copyright Act“), an employer is the owner of any copyright in any work done by an employee in the course of his employment, in the absence of any agreement to the contrary. In the case of an independent contractor, the general rule in Canada is that the author (in this case, the contractor himself) is the first owner of the copyright work.
Whether it’s when the business is hiring an independent contractor or an employee, it is very important to specify in any agreement concluded with any one of them that the business (or you personally, depending on the case) remains the unique owner of the Business IP, in order to avoid any doubt or ambiguity regarding the ownership of it.
The author of an original work is also the owner of moral rights with respect to such work, including the right to the integrity of the work, to be associated with the work, and to remain anonymous. These rights, in the event that a contractor or employee is the author of such a work, cannot be assigned, so the employee or contractor concerned will have to expressly renounce it.
PATENTS
In Canada, the general rule in employment matters is that the creator of an invention holds the ownership of such invention, even with respect to an invention developed within the scope of the employee’s duties within the company.[1]
There are, however, two exceptions to this rule. The first exception applies where there is a written employment contract that expressly provides a legal consequence to the contrary. The second exception applies where it is established that the employee was hired for the specific purpose of inventing or innovating for the benefit of the company.
In the absence of an express agreement between the parties, the courts will analyze various factors to determine whether the employee was hired for the purpose of inventing or innovating.
This employment rule also applies in a business relationship with an independent contractor. The latter is presumed to be the owner of the invention unless there is an express or implied agreement to the contrary between the parties.[2] The court will analyze the particular circumstances of the case and the conduct of the parties to determine whether there is an implied agreement to transfer ownership of the invention.
For the sake of clarity, and to avoid confusion regarding the ownership of such inventions, it is strongly recommended that this issue be addressed at the outset of any employment or business relationship through a formal agreement.
JOINT OWNERSHIP
When the IP is created or conceived by more than one person, such IP will be jointly owned (meaning that more than one person will have an ownership interest in the said IP, whether in equal shares or in other proportions as agreed between those persons), unless otherwise agreement. This situation can create complications in terms of the management of the IP, including, its maintenance, protection, and the participation to benefits that can be obtained through this IP.
HOW TO PROTECT YOUR BUSINESS IP?
To protect and to retain the ownership of your Business IP, you need to deal with Business IP ownership in the beginning of every employment or business relationship. We recommend that you sign a contract with any employee or independent contractor that includes the following provisions:
- Ownership and Assignment: The agreement should provide that all IP created by the employee or contractor as part of its engagement with the company will be the exclusive property of the company, and the employee or contractor shall agree to assign all of his rights to such Business IP to the company. In the case of an independent contractor, be sure to indicate that the assignment is made without consideration of future royalty or copyright fees;
- Waiver of moral rights: The employee or contractor shall expressively waive any and all moral rights he may have regarding the IP;
- Assistance in protection and enforcement: The employee or contractor should commit to take any steps required by the employer to protect, maintain and enforce the employer’s IP rights;
- Confidentiality and non-competition: Confidentiality (non-disclosure of the employer’s confidential information) and the non-competition provisions are additional precautionary measures to help protect your Business IP;
- Legal consequences in case of a breach: It is important to expressly specify the remedies which the company may avail itself of in case of a breach of the agreement, including legal action for damages, injunctive relief or even a penal clause determining the amount for which the employee or contractor will be liable in case of a breach.
INDEPENDENT CONTRACTOR
In addition to the measures detailed above, in order to prevent any confusion concerning the ownership of IP in the case of services agreement, you can ask the contractor to provide a list of all IP that he owns prior to the service agreement, which may be attached to the contract to specifically exclude from the provisions of the contract any IP already owned by the contractor, unless otherwise agreed by the parties.
CONCLUSION
As you may have noticed, the protection of your IP and associated property rights is an essential element that must be taken into consideration when managing your business. Fortunately, there are several mechanisms that can be put in place to protect your rights. For more information and recommendations, we invite you to contact us for a consultation on this matter.
Information provided in this article is intended as general introductory information only. The information provided in this article is not legal advice. It should not be construed as legal advice and should not be relied upon as such. Should you want legal advice regarding the information provided in this article, please contact one of our lawyers.
