Intellectual property issues

Paris Convention

Is your jurisdiction party to the Paris Convention for the Protection of Industrial Property? The Patent Cooperation Treaty (PCT)? The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?

Canada acceded to the Paris Convention for the Protection of Industrial Property on 21 August 1923, and to the Stockholm Act on 16 March 1970, with a declaration that its accession does not apply to articles 1 to 12.

Canada ratified the Patent Cooperation Treaty on 29 October 1989, which came into force in Canada on 2 January 1990.

Canada adhered to TRIPs by the World Trade Organization Implementation Act, SC 1994, C-57, effective as from 1 January 1996.

Contesting validity

Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?

A licensee generally is estopped from contesting the validity of a licensor’s intellectual property rights during the subsistence of the licence agreement, whether by the express terms of the contract or by implication from the licensor/licensee relationship. See Curtis Wright Corporation v The Queen [1968] 1 Ex Ct 519 (Ex Ct); Deering Milliken Research Corp v Louisville Spinners Ltd (1971) 4 CPR (2d) 18 (Que SC) Rymland et al v Regal Bedding Co Ltd (1966) 51 CPR 137 (Man CA).

Such estoppel generally does not exist after termination of the licence agreement. If the licence agreement precludes the licensee from disputing validity of the intellectual property right after termination of the licence, the licensee may be estopped from disputing validity: see Campbell v G Hopkins & Sons 49 RPC 38 (Ch 1931).

Invalidity or expiry

What is the effect of the invalidity or expiry of registration of an intellectual property right on a related licence agreement in your jurisdiction? If the licence remains in effect, can royalties continue to be levied? If the licence does not remain in effect, can the licensee freely compete?

Normally licence agreements provide that the licence agreement as well as an obligation to pay royalties under the licence agreement will end if the patent is held invalid by a court of competent jurisdiction from which no appeal is taken or can be taken. Where there is no such term, the result will depend on the terms of the agreement and the nature of the invalidity judgment. If the term of the agreement or the obligation to pay royalties is linked to the duration of the patent, for example, the agreement might be interpreted to mean that such term or obligation ended with the invalidity of the patent.

Trubenizing Process Corporation v John Forsythe Ltd [1943] SCR 422 (SCC) reversing [1942] OR 271 (Ont CA) concerned a non-exclusive licence for two patents, which included a covenant that the licensor would not sue (upon any patent that it owned or controlled) as long as the licensee paid the agreed royalties. Although the patent was held invalid by a decision of the Supreme Court of Canada, the licensee was obliged to continue to pay royalties.

Requirements specific to foreigners

Is an original registration or evidence of use in the jurisdiction of origin, or any other requirements unique to foreigners, necessary prior to the registration of intellectual property in your jurisdiction?

In general, it is not required to have a prior registration in the jurisdiction of origin.

However, if an applicant applies for a Canadian trademark registration based on use and registration of the mark in the country of origin, it is essential that the trademark is used in one or more specified countries prior to the filing date in Canada.

Unregistered rights

Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?

Unregistered trademarks may be licensed in Canada. Copyright works may be licensed, and it is not mandatory to register copyright in Canada. Trade secrets, know-how, computer software and other forms of unregistered intellectual property that are proprietary in nature, may also be licensed.

Security interests

Are there particular requirements in your jurisdiction to take a security interest in intellectual property?

An intellectual property licence in general should be in writing and must not violate Canadian law. For example, if the licence is part of an illegal combine or otherwise is an illegal restriction of trade, or if the licence involves any similar anticompetitive activities, it may not be enforceable. In general, an intellectual property licence involves only the parties to the agreement, and cannot be the subject of a third-party attack unless the licence illegally restrains competition to the detriment of the third party.

There is no requirement to take a security interest in intellectual property. The law relating to perfection of security interests in intellectual property rights in Canada is uncertain. It is considered best practice for the lender to register the security agreement at the Canadian Intellectual Property Office (CIPO) against every intellectual property right listed in the security agreement. If the debtor is located in Canada, it is also best practice to register the security interest at the personal property security registry of the province where the debtor resides.

Proceedings against third parties

Can a foreign owner or licensor of intellectual property institute proceedings against a third party for infringement in your jurisdiction without joining the licensee from your jurisdiction as a party to the proceedings? Can an intellectual property licensee in your jurisdiction institute proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor? Can the licensee be contractually prohibited from doing so?

It is recommended that the issue of which party is involved in instituting proceedings is provided for in the licence agreement.

A foreign owner or licensor of intellectual property can institute proceedings against a third party for infringement without joining the licensee.

A licensee can be contractually prohibited from instituting proceedings without the consent of the licensor, but where possible can do so as follows:

  • patents - in the case of patents, a licensee or even a non-exclusive licensee can institute proceedings against an infringer if the licence agreement so provides, under section 55(1) of the Patent Act, RSC 1985, c P-4 that gives a right of action for infringement to a patentee and all persons claiming under the patentee including exclusive and non-exclusive licensees. The Supreme Court of Canada in Domco v Armstrong [1982] 1 SCR 907 held that this section gives a right of action to a non-exclusive licensee. The patentee, however, must be, or must be made a party to the proceedings as provided in section 55(3) of the Patent Act. It may be advantageous to join the licensee in order to recover damages suffered by the licensee as a result of the infringement, but unless contractually obligated to do so, the patentee, in an action for infringement brought by it, is not obliged to join a licensee;
  • copyright - to institute a proceeding, a copyright licensee must be an exclusive licensee or the copyright owner. Section 34(1) of the Copyright Act, RSC 1985, c C-42 gives the remedies for infringement to the owner of the copyright. In Milliken & Company v Interface Flooring (1998) 83 CPR (3d) 470, it was held that there is no right of action by a non-exclusive licensee;
  • trademarks - section 50(3) of the Trademarks Act, RSC 1985, c T-13 provides that an owner may be required by a licensee to institute proceedings against an infringer. If the owner refuses or neglects to institute proceedings within two months of being so requested by the licensee, the licensee may institute proceedings for trademark infringement in its name as if it were the owner, making the owner a defendant; and
  • industrial designs - section 15(1) of the Industrial Design Act provides that an action for infringement may be brought by the proprietor of the design or by an exclusive licensee, subject to any agreement between the proprietor and the licensee. Section 15(2) requires that the proprietor of the design to be a party to any infringement action.

A licensee of an industrial design can institute proceedings against an infringer, subject to any agreement between the patentee or proprietor and the licensee. As with a patent, the proprietor of the industrial design must be made a party.

Sub-licensing

Can a trademark or service mark licensee in your jurisdiction sub-license use of the mark to a third party? If so, does the right to sub-license exist statutorily or must it be granted contractually? If it exists statutorily, can the licensee validly waive its right to sub-license?

A trademark licensee (including licensees of service marks) is not permitted to sub-license use of the mark unless the licence agreement specifically permits the licensee to do so. This may be reasonable where the licensee in effect acts as a licensing authority for the licensor, finding and supervising licensees, collecting royalties, etc. Such sub-licence right exists only contractually, and is not the subject of statute.

Jointly owned intellectual property

If intellectual property in your jurisdiction is jointly owned, is each co-owner free to deal with that intellectual property as it wishes without the consent of the other co-owners? Are co-owners of intellectual property rights able to change this position in a contract?

Joint ownership of intellectual property rights may cause significant problems, and therefore there should be a contract between the parties that deals with all likely contingencies. Usually, the better alternative is to divide the intellectual property ownership rights between the parties, with cross-licences if appropriate, so that each party then is free to exploit their own intellectual property without having to refer to the other party, except as required by the terms of the agreement. A relevant case regarding the rights of patent co-owners is the Forget v Specialty Tools of Canada Inc [1993] BCJ No 822. Forget has several important holdings. First, that a patent co-owner can sell their interest without the consent of the other (and if the interest is sold the purchaser of the patent interest becomes a co-owner). Second, that there is no infringement by a co-owner when making or selling a patented article in Canada. Third, that a co-owner cannot grant a valid licence without the consent of the other co-owner (and if a licence is granted in this situation it is invalid). Fourth, that a patent is infringed when the licensee of one co-owner makes or sells a patented article without the consent of the other co-owner. If the parties are determined to jointly own the intellectual property, they should enter into an agreement that clearly sets out their respective rights and obligations. The agreement should address issues such as whether one co-owner is entitled to obtain revenue from the jointly owned intellectual property right without the consent or involvement of the other co-owner, and with or without having to account to the other co-owner for a portion of such revenue, and the extent to which each co-owner is responsible for the costs involved in enforcement.

First to file

Is your jurisdiction a ‘first to file’ or ‘first to invent’ jurisdiction? Can a foreign licensor license the use of an invention subject to a patent application but in respect of which the patent has not been issued in your jurisdiction?

Since 1 October 1989, Canada has been a ‘first to file’ jurisdiction for patents. A foreign licensor may license the use of an invention subject to a pending patent application in Canada.

Scope of patent protection

Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?

Provided it is new, non-obvious and useful, software inventions in general may be patented in Canada, but a great deal depends on the nature of the invention and the manner in which it is claimed. The provision in section 27(8) of the Patent Act, RSC 1985, c P-4 that an invention cannot be directed to a ‘mere scientific principle or abstract theorem’ excludes some software inventions that are directed primarily to performing calculations. The patentability of software is dealt with in Amazon.com Inc v Canada (Attorney General) 2011 FCA.

In Amazon.com, the court held that there is no categorical exclusion of business method patents in Canada provided the invention otherwise qualifies, which is not always easy to demonstrate.

Higher life forms were held to be non-patentable in Harvard College v Canada (Commissioner of Patents), [2002] 4 SCR 45. However, in Monsanto Canada Inc v Schmeiser [2004] 1 SCR 902, a majority of the Supreme Court held that lower life forms such as single cells or genes may be patentable.

Trade secrets and know-how

Is there specific legislation in your jurisdiction that governs trade secrets or know-how? If so, is there a legal definition of trade secrets or know-how? In either case, how are trade secrets and know-how treated by the courts?

Trade secrets are protected at common law in Canada (civil law in Quebec). There are several references to trade secrets in a number of statutes including section 20(1) of the Access to Information Act, RSC 1985, c A-1 and sections 17 and 18 of the Ontario Freedom of Information and Protection of Privacy Act, RSO 1990, c F-13, but there is no per se trade secrets legislation.

There is no clear definition of ‘trade secret’ in Canadian law, although in general the subject matter must be of a proprietary nature (ie, not generally or easily available to the public). The Supreme Court of Canada in Merck Frosst Canada Ltd v Canada (Health) [2012] 1 SCR 23, defined trade secret as a subset of confidential information. Other references may be found in international agreements such as Chapter 17, article 1711(1) of the North American Free Trade Agreement and the TRIPS agreement.

Injunctive relief is available to prevent unlawful disclosure or use of a trade secret or other proprietary information. Remedies are also available for breach of contract and breach of confidence. In situations involving parties in fiduciary roles, restitutionary remedies are available.

Employers are generally entitled to ownership of patents for inventions made by employees in the course of their employment and it is recommended that all employment agreements should deal with invention ownership in cases where employees are expected to make inventions, or which may arise out of their employment, if the employees are hired to invent.

There is a common law duty of confidence in contracts of service in Canada, including a duty to refrain from disclosing or using confidential information belonging to a former employer. It is better to provide for this in the employment contract and to remind the departing employee of his or her obligations in an exit interview.

Does the law allow a licensor to restrict disclosure or use of trade secrets and know-how by the licensee or third parties in your jurisdiction, both during and after the term of the licence agreement? Is there any distinction to be made with respect to improvements to which the licensee may have contributed?

Written confidentiality or non-disclosure agreements can be freestanding or may be a part of a licensing agreement, and they may prohibit the disclosure or use of trade secrets and know-how by the licensee both during and after the term of the agreement.

Whether third parties are entitled to use a trade secret turns on whether the third party knew the information was communicated in a breach of confidence. An innocent third-party purchaser of a trade secret for value without notice may be able to resist a claim by a plaintiff for injunction (see International Tools Ltd v Kollar [1968] 1 OR 669 (CA) at 674). A third party who is aware or who learns that information they receive is a result of a breach of confidence may be restrained from using it (see Cadbury Schweppes Inc v FBI Foods Ltd [1999] 1 SCR 142 at paragraph 19).

A licence agreement may include a clause requiring assignment of rights to improvements made by an employee-based knowledge communicated to or acquired by an employee during the course of his or her employment.

Copyright

What constitutes copyright in your jurisdiction and how can it be protected?

According to section 3(1) of the Copyright Act, RSC 1985, c C-42, copyright, in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever, to perform the work or any substantial part thereof in public or, if the work is unpublished, to publish the work or any substantial part thereof, and includes the sole right:

  • to produce, reproduce, perform or publish any translation of the work;
  • in the case of a dramatic work, to convert it into a novel or other non-dramatic work;
  • in the case of a novel or other non-dramatic work, or of an artistic work, to convert it into a dramatic work, by way of performance in public or otherwise;
  • in the case of a literary, dramatic or musical work, to make any sound recording, cinematograph film or other contrivance by means of which the work may be mechanically reproduced or performed;
  • in the case of any literary, dramatic, musical or artistic work, to reproduce, adapt and publicly present the work as a cinematographic work;
  • in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication;
  • to present at a public exhibition, for a purpose other than sale or hire, an artistic work created after 7 June 1988, other than a map, chart or plan;
  • in the case of a computer program that can be reproduced in the ordinary course of its use, other than by a reproduction during its execution in conjunction with a machine, device or computer, to rent out the computer program;
  • in the case of a musical work, to rent out a sound recording in which the work is embodied; and
  • in the case of a work that is in the form of a tangible object, as long as that ownership has never previously been transferred in or outside Canada with the authorisation of the copyright owner, and to authorise any such acts.

Copyright subsists in the following:

  • every original literary, dramatic, musical and artistic work, including every original production in the literary, scientific or artistic domain, whatever may be the mode or form of its expression, such as compilations, books, pamphlets and other writings, lectures, dramatic or dramatico-musical works, musical works, translations, illustrations, sketches and plastic works relative to geography, topography, architecture or science;
  • performer’s performances;
  • sound recordings; and
  • broadcast communication signals, among other works.

In general, copyright subsists in Canada, in every original literary, dramatic, musical and artistic work if in the case of any work, whether published or unpublished, including a cinematographic work, the author was, at the date of the making of the work, a citizen or subject of, or a person ordinarily resident in, a treaty country.