100 and 1 Ways to "Accidentally" Lose your IP Rights
We hope we got your attention, because there are far too many ways for a company (e.g., a startup, SME, a larger company without a legal department) to inadvertently “lose” its rights in its know-how (including potential IP rights). Believe it or not, these issues (or what we like to refer to as “skeletons in the closet”) will most likely see the light of day when your company is the object of a merger and/or acquisition (or “M&A”, aka. “buy-out”, your “exit” etc.).
Why is that the case? It is due to the all-important due diligence phase of an M&A, which includes the preparation of the disclosure schedules. [1] You don’t want to see a hiccup there.
Being faced by the intense pressure of signing a deal and getting paid for work may push any entrepreneur to sign the dotted line of an agreement presented by a larger corporation, more often than not without getting legal advice. Unfortunately, "legal" (as a business unit within a company) is often misperceived as being: (i) too expensive (or an unneeded expense), (ii) too slow (or an impediment to deal flow and/or sales cycle), or (iii) simply too much legalese and contrary to other business units.
Durand Lawyers is here to tell you that “legal” does not need to be any of the above. Advice given by lawyers should be viewed as a potential return on investment ("ROI") as they do their best to avoid contractual mishaps. As a law firm, we are here to provide you with comprehensive legal services leading up to the signing of your agreement. We know how much the deal means to you, because we can appreciate how hard you have worked to get your business where it is today.
With that said, it is best to go into any deal informed. So before signing, consider the following:
Problems: Easy ways to lose your IP (or thinking you own your IP but don't)
1) making a public disclosure, such as talking about your secrets at a conference or to others in your field of your know-how without having safeguarded;
2) selling (and/or assigning) your know-how (product) to another company through an agreement (e.g. Purchaser tells you - “I am buying the product therefore it is mine”);
3) not verifying whether an artist, author, or programmer (among others) retained their rights to work they have done for you by effects of the law and/or not waiving moral rights in the work;[2]
4) not understanding key differences between Canadian, US and other intellectual property regimes (an example being the concept of “work for hire”);[3]
5) the IP rights belonged to a third party in the first place and this has repercussions on your own IP rights; or
6) some of your content incorporates and/or is subject to an open source license which requires you to sell your software under a similar license (known as “copyleft” licenses).[4]
Solutions: What can safeguard your IP (being safe, rather than sorry)
1) reviewing disclosure grace periods, and protecting disclosure through the signing of non-disclosure agreements (“NDA”);
2) including specific provisions within your agreements with partners and customers which dictates that the IP underlying the product remains your own;
3) performing an intellectual property audit on your products, and ensuring that all the works which you are provided by employees and contractors are assigned, or licensed for your uses and that the moral rights which may subsist on them have been waived;
4) reviewing your relevant agreements (including licenses, assignment, employment, and independent contractor agreements, etc.) against relevant provisions in applicable jurisdictions; and
5) ensuring that any licenses you inherit as a part of your team’s use of open source software is intentional and that you have understood the license’s implications on the sale of your product, whether it be software or related patents.
These are just a few of the ways in which our dedicated team can help you secure your IP rights. We like to think of the matter from the perspective of a “blockbuster” IP. You can never know if your video game, film, or software is going to become an overnight success or not. The predictable constant is ensuring that that your IP is accounted for.
Together, we can develop a comprehensive IP strategy which will integrate your assets into your business plan and give you a competitive advantage, regardless of whether you’re planning to undergo an M&A.
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[1] https://www.forbes.com/sites/allbusiness/2016/08/07/the-importance-of-disclosure-schedules-in-mergers-and-acquisitions/?sh=5450ad6f2c43. [2] Innovation Canada provides a great primer on the concept of “Moral rights” as a part of their work on copyright in Canada, see https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/wr04784.html (last modified 2020-07-06).
