Nikki Johnson No Comments

Protection of Intellectual Property in a Manufacturing Environment

Some of the most important assets in your business may be your intellectual property. These are intangible assets, including patents, trademarks and trade secrets. The Canadian government created these protections to keep your intellectual property safe from infringement.

Patents

What is a patent?

A patent is a legal protection granted by the federal government to an inventor to encourage progress and prevent others from benefiting from the invention.  Patents cover inventions new to the marketplace or improvements on existing inventions.

There are three basic criterion an invention must meet in order to be patentable in Canada: novelty, utility and ingenuity. An invention is novel if it is the first of its kind in the world. Utility is established if an invention has a useful and functional purpose. Lastly, an invention’s ingenuity is demonstrated if an invention represents something new to an industry that is not already available and readily apparent to someone skilled in that industry.

What does patent protection provide?

Patent protection involves the right to exclude others from making, using or selling anything that would fall under the claims of the issued patent. Canadian patents have a maximum life of 20 years from the date the patent application is filed.

What factors are considered when determining whether a patent has been infringed?

Determining whether a patent has been infringed entails the court examining the claims of the patent and comparing them to the invention or evaluating the validity of the patent. This may be more complex in situations where the claims terms are unclear or ambiguous. The court can determine that infringement exists even if the invention isn’t identical to the original. If the device performs substantially the same function in largely the same way to produce substantially identical results, a court may find infringement.

What are my rights if someone infringes my patent?

You may file a lawsuit for damages in the appropriate court to enforce your patent against an infringer. If you are successful, there are many possible outcomes. Courts have the authority to compensate the patent holder for losses associated with the infringement.

Copyrights

What is a copyright?

A copyright is the legal protection granted by the government to an author. In the case of works created by an employee during the course of his or her job, the copyright would belong to the employer.

What can be protected by a copyright?

The Copyright Act of Canada sets types of creative works to be protected. A non-exhaustive list of material that may be protected under copyright includes:

  • Books, magazines, advertising copy and computer programs
  • Songs
  • Dramatic works, including any accompanying music
  • Paintings and designs
  • Motion pictures
  • Sound recordings (CD, cassette, digital audio tapes, MP3 files)
  • Architectural works

The Copyright Act of Canada provides immediate protection for creative works. As soon as works are written down or recorded, they are immediately copyright-protected.  The copyright protection lasts until the author’s death and for an additional 50 years after the date of the author’s death.

What does copyright protection provide?

Copyright ownership grants the author or owner of the work the sole and exclusive right to reproduce the work in any form. These rights can be limited by some doctrines, like fair dealing.

What factors are considered when determining whether a copyright has been infringed?

A copyright can be infringed by violating any of the rights granted: reproduction, modification, publication, performance and public display of the work.

However, “fair dealing” is allowed without the author’s permission if an individual uses a copyrighted work or a portion of copyrighted work for personal use, or for limited instances of news reporting, criticism or review if certain requirements are met.

What are my rights if someone infringes my copyright?

The Copyright Act of Canada gives you the right to receive civil remedies, including court costs. Additionally, an infringer may be subject to criminal prosecution. If convicted of copyright infringement, an individual may face criminal penalties of $25,000 or imprisonment up to six months, or both.

Trademarks

What is a trademark?

A trademark is a mark that is used by a person for the purpose of distinguishing wares or services manufactured, sold, leased, hired, or otherwise entered into commerce from others in the marketplace. Canadian federal law and common law allows for the protection of trademarks.

What does trademark protection provide?

The scope of the protection can vary widely, depending on the strength and fame of a mark. For instance, many brand names are famous marks that are very strong. The length of time that a mark can be protected is indefinite because it is based upon use, but registered marks in Canada have an initial term of 15 years. A mark may be renewed in successive 15-year increments as long as the mark is still in use.

What factors are considered when determining whether a trademark has been infringed?

Whether a trademark has been infringed is most often dependent upon whether a likelihood of confusion has been found. In determining whether there is a likelihood of confusion, courts generally look at factors like the inherent distinctiveness of the marks, the extent to which the marks are known, the time the marks have been in use, the nature of the goods or services associated with the marks and the degree of resemblance between the marks.

What are my rights if someone infringes my federally registered trademark?

Remedies are available for trademark infringement under both federal law and common law. After a finding of infringement, damages can include, but are not limited to, a temporary or permanent injunction, damages and legal costs.

Trade Secrets

What is a trade secret?

A trade secret is any information that is or may be used in business that is not generally common knowledge in that trade or business.  The information must also have economic value because it is not common knowledge in the trade or business and the holder of the information must make efforts to keep it from becoming generally known.

What factors are considered when determining whether a trade secret has been misappropriated?

The owner of the trade secret must prove that a misappropriator owed an express or implied duty of confidentiality or some other fiduciary duty to the owner, or that the misappropriator obtained the trade secret through some improper means.

What are my rights if someone misappropriates my trade secret?

A lawsuit may be filed for trade secret infringement, depending upon the circumstances. Individuals may be subject to injunctions, may be ordered to pay damages and will be subject to any other remedy the court finds appropriate if convicted. 

Are there applicable common laws?

Quebec also has its own trade secret laws which may need to be considered when developing your policy.

Protect Your Business

Patents, copyrights, trademarks and trade secrets may be integral parts of your business. It is vital that you understand the laws associated with these concepts to protect your intellectual property. You also need to ensure that your behaviour does not infringe on someone else’s intellectual property. This piece is not exhaustive and should be read as an overview. For more information, consult legal counsel.

Dan Reith, Principal Broker
Dan Reith, Principal Broker

Principal Broker
Reith & Associates Insurance and Financial Services Limited
https://reithandassociates.com

Nikki Johnson No Comments

Insuring Your Intellectual Property

Insuring Your Intellectual Property

As intellectual property becomes a vital part of more firms’ assets, businesses must consider the additional exposures they face. There are several types of intellectual property protected under federal law: trademarks, copyrights, patents, trade dress and trade secrets. To help protect your business, there are two types of intellectual property coverage available: the first protects a company sued for infringement by paying for legal defense, and the second helps pay the legal expenses of suing an alleged infringer.

If your company could be sued by a competitor for infringement or intellectual property theft, or you do not have the funds to cover legal fees associated with defending your patent or trademark, it is vital that you purchase coverage. Defending infringement litigation can cost hundreds of thousands of dollars, not including the cost of damages and prejudgment interest. In patent infringement cases, attorney’s fees can easily top $1 million.

Budgeting and planning for the protection of intellectual property rights may not only save your company a significant amount of capital; it may also help keep your business viable when legal bills accumulate rapidly. There are several options to cover these exposures: the “advertising injury” provision in the standard Commercial General Liability policy, endorsements to Errors and Omissions policies and specialized policies offered by certain insurers specifically designed for the protection of intellectual property rights.   

Commercial General Liability Policy – Advertising Injury

The Commercial General Liability Policy, or CGL, is a standard liability policy offering broad coverage. Coverage for an advertising injury often falls under Coverage B in a CGL. Any act by the insured that somehow violates or infringes on the rights of others (referred to in the policy as an offence) is the subject of personal and advertising injury liability coverage, although only those acts that are specifically listed in the policy are covered. The coverage under the “advertising injury” provision is limited to those injuries that are directly related to the advertisement. Therefore, the policy covers debts owed by the insured party due to claims filed against it.

Coverage B policyholders are sometimes covered in cases relating to trademark infringement; however, copyright claims are only successful where they are directly related to advertising, and patent claims are rarely covered under the “advertising injury” provision. The cases which allow for coverage in a patent infringement case are generally limited to instances in which a court finds contributory infringement or inducement to infringe through an advertising medium. Since the “advertising injury” provision in a standard CGL is rather limited, many businesses consider additional coverage.

Special Endorsements and Policies

Beyond the CGL, specialized policies can be better suited to a business’s unique exposures. These are Errors and Omissions liability policy endorsements that can vary in focus from media and communications to patent infringement. Note that these policies have not been the subject of much litigation, and therefore, judicial guidance on coverage determinations is comparatively limited. It is important to consider multiple carriers, since available coverage varies widely from carrier to carrier.

Infringement Defence and Abatement Insurance

A third option relates primarily to patents, though riders for copyrights and trademarks may be available. Carriers have developed policies specific to intellectual property, generally with patents in mind. In relation to patents, there are three basic policy types: defense and indemnity, defense only and offensive, or infringement, abatement insurance.

A defense and indemnity policy provides defense coverage in a patent infringement suit and, if the party in question is found liable, pays for damages, including prejudgment interest. A defense only policy, much like it sounds, covers only the cost of defense and does not cover damages awarded to the successful party. In addition, an offensive policy covers only the costs of pursuing an infringer. Certain carriers will amend some of the above-mentioned policies to include endorsements for trademark and copyright infringement for an additional premium.

Exclusions to Coverage

In addition to special exclusions, there is a general exclusion to the CGL stating that there is no coverage “for an offence committed by an insured whose business is advertising, broadcasting, publishing or telecasting.” With the increase in claims, many carriers are drafting exclusions that specifically omit coverage for copyrights that fall outside of infringement of copyrighted advertising materials, patents, trademarks and the like.

It is important to be aware of the exclusions to any policy that you purchase. The most common exclusions specified in intellectual property policies are for willful infringement, anti-trust violations, infringement existing or known on the effective date of the policy and criminal acts.

Asserting Coverage

To maximize coverage, there are a number of steps that your company should follow. Failure to investigate the existence of coverage in a timely manner can absolve a carrier of liability and create grounds for a malpractice case against the intellectual property legal counsel. While courts have held outside intellectual property counsel liable for failure to pursue coverage determinations, companies should still proactively recognize and review the potential for insurance coverage for protection of their intellectual property assets.

  1. If a claim has been asserted against your company, you have a duty to notify your carrier. In fact, notifying your carrier immediately is in your best interest because a delay could be grounds for denying coverage. In the case where a formal complaint has been served on the company, the following six steps are recommended.
  2. The policy or policies should be analyzed by counsel to determine under which policies the claim may be covered. In this step, the complaint should be closely examined for types of issues raised and should be compared to the relevant policy clauses.
  3. The company should promptly tender defense to the carrier. In the tender, all policies that may provide coverage should be identified, including the specific clauses.
  4. Demand a prompt response to the tender. If a sufficient extension of the time to answer is not granted, it is possible that a response to the complaint will be due prior to the issue of coverage being resolved. If that is the case, then defense counsel should be retained until the issue of coverage is determined.
  5. Review the carrier’s response to the company’s tender. The carrier may accept defense; it may defend under a reservation of rights; the carrier or the policyholder may seek a declaratory judgment for a coverage determination; or it can reject tender.
  6. If there is a conflict in the interests of the carrier and the policyholder, the policyholder should insist on the right to control the litigation and should further insist upon independent counsel.
  7. Be diligent about which documents are shared with the carrier, especially in cases where the carrier has reserved its rights to deny coverage. While the policyholder has a duty to cooperate with the carrier, in a case where a reservation of rights to deny coverage has been tendered, the production of certain documents to the carrier could result in the waiver of the attorney-client privilege as to the subject matter of the produced documents.

Comparing Policies

Insuring your company’s intangible assets and its liability is a vital part of risk management. Insurance for both infringement of intellectual property and for an assertion of infringement against your company can provide financial security and peace of mind.

Reith & Associates will compare your desired coverage to the specifically named offences in policies based upon enumerated risks and will examine any exclusions that may weaken the coverage you seek. We are skilled at identifying the perils associated with intellectual property and high-technology companies, and we can assist you in selecting the right policy. Let us help you protect your most precious assets. Contact us today to ensure that the coverage you buy meets your needs in today’s marketplace

Dan Reith, Principal Broker
Dan Reith, Principal Broker

Principal Broker
Reith & Associates Insurance and Financial Services Limited
https://reithandassociates.com