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Intellectual Property 101

March 12, 2024

For many startups and scaleups, intellectual property (IP) is crucial to the company’s competitive advantage and, therefore, its overall success and value. This bulletin provides a refresher on the common categories of IP in Canada and best practices for protecting and leveraging IP that companies should implement and investors should seek.

What Constitutes IP in Canada?

Intellectual property refers to intangible creations of human intellect from which legal rights, akin to other property rights, may result. There are four common types of IP:

  • Patents protect inventions, the solutions to technical challenges. Inventors must apply to the Canadian Intellectual Property Office (CIPO) to obtain patent rights.
  • Trademarks protect brands, the source of a product or service. The use of trademarks can provide some rights automatically (i.e., at common law), but these can be difficult to prove and enforce without obtaining registered rights from CIPO.
  • Copyright protects creative works such as art, music, movies and literature. The creation of a copyrightable work can provide some rights automatically, but these, too, can be difficult to prove and enforce without obtaining registered rights from CIPO.
  • Trade secrets protect valuable information not generally known to the public. The value of this information depends on its secrecy. Often, inventions for which patent protection is not sought are instead protected as trade secrets. There is no registration or application system for trade secrets in Canada.

While startups and scaleups have limited resources, they may employ several precautions and practices at relatively low cost to retain and increase the value of their IP and, therefore, their company as a whole. 

IP Best Practices

Set IP Terms in Employment and Contractor Agreements

At the start of their employment or engagement, enter into agreements with all employees and contractors that contain robust IP provisions. These provisions should include details about ownership and assignment of IP (e.g., in favour of the company) developed by employees and contractors, obligations to help protect the IP, confidentiality, and restrictions on what types of IP the employee or contractor can use. 

By default, employees and contractors have ownership of the IP they develop, barring specific criteria or explicit agreement otherwise. IP provisions in employment and contractor agreements change this default position in favour of the company. As well, some patent offices require assignments for a patent application. Failure to enter into assignments at the outset of employment or engagement, or upon filing patent applications, can create complications; tracking down former workers can be difficult and, in some circumstances, workers may demand additional compensation for assigning IP.

Formulate and Execute on Your IP Strategy

Strategic issues to consider include whether to protect IP through patents or trade secrets, how to proceed given the risks from third-party IP, and whether the IP is commercially valuable or a mere technical curiosity. The company should continually assess the value of its IP assets in view of current and projected market conditions and adjust its IP strategy accordingly. In addition to discussions with IP counsel, engage with cross-functional stakeholders to ensure alignment with the broader business objectives. When size and resources permit, forming an IP committee can be a good way to enact disciplined procedures.

Protect Trade Secrets

Do not disclose secrets or inventions with third parties (e.g., investors, service providers and contractors) before entering into a confidentiality agreement or non-disclosure agreement (NDA). Only novel inventions can receive patent protection, and trade secrets are only valuable if they are kept secret — they are lost if there is a disclosure outside an NDA.

Monitor IP Assets

Implement IT and physical access controls so that only those who need the IP can access it, and only to the extent that they need it. Consider whether IP, or portions thereof, can be compartmentalized and de-identified, with workers only gaining access to the portion they are working on or that impacts their work. When an employee departs, have them sign departure agreements and acknowledgements, and review records of what was accessed leading up to their departure. If the employee is going to a competitor, consider notifying the competitor that the departing employee had access to certain IP and that the competitor’s activities will be monitored. Remember that protecting trade secrets requires a proactive approach: one of the criteria to establish a trade secret at law is to demonstrate that reasonable efforts have been made to keep the information secret. Merely referring to certain information as a trade secret is not enough.

Educate Employees

Foster a healthy IP culture by having regular IP education and training for your employees. IP education can come at different times, such as during employee onboarding, before starting key projects, through continuing education and while managing employee departures. Recurring IP education, including refresher training, helps to remind employees of their IP obligations, such as disclosing IP they have developed, preventing confidential information from leaking outside the organization and, for departing employees, not sharing trade secrets with their subsequent employer.

Enforce IP Rights

Exclusive rights to IP assets may deter some from infringing. However, IP owners should be prepared to enforce their rights if an infringer stumbles or marches into a protected domain. Good counsel will help navigate the options, which may be relatively simple (such as sending a cease-and-desist letter) or complex (such as conducting multi-jurisdictional litigation).

As with all legal matters, protecting IP can be complex and nuanced, and companies and investors should consult their legal counsel before making important IP decisions. 

For further information, please contact:

or any other member of our Intellectual Property or Emerging Companies & Venture Capital groups.