Business IP Theft, Improper Patent Filing & the 18-Month Confidentiality Window Explained

There certainly seems to be a trend of rogue employees stealing business intellectual property (IP), and filing it in foreign jurisdictions. Take for example an employee who allegedly

• published scientific articles and filed patents with a foreign entity rather than with the public utility (Global News, November 2023); and

• had been listed as the inventor on a foreign patent “that might have contained scientific information produced at the CSCHAH in Winnipeg — and that she shared that data without authority” (CBC News, March 2024). A detailed analysis of this incident is available in this substack.

Other recent instances include persons who, while working for two foreign based technology companies, stole AI-related information from their employer (see the U.S. indictment and press release of March 6, 2024), and others who tried to sell battery assembly trade secrets that a U.S. automotive manufacturer had previously purchased from a Canadian tech company (see the complaint and article of March 19, 2024). 

IP theft comes from those trusted enough with sensitive business information. In line with the “five-eyes” intelligence leaders interview in the month of October 2023, Canadian CSIS Director Vigneault correctly remarks “at a moment's notice, the loss of intellectual property and commercial advantage can evaporate years of work”. 

Worse, IP theft costs businesses and government in the tens to hundreds of billions of dollars (gitnux, 2013 NBAR IP Commission_Report and 2017 Update, which states that “the annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion”), in addition to the hidden costs of an IP breach (reputational and organizational damage, etc.).

Why Steal Business IP: Understanding the Motivation

Though we may never understand what enables one to steal IP (entitlement, financial benefit, giving a competitor a business advantage, etc.), businesses need to understand the disastrous and cascading effects of IP theft, including the improper filing of patent applications in foreign jurisdictions based on stolen IP.  Before delving in, it's important to understand what the minimal (or basic) filing requirements are to obtain a patent application filing date, which are as follows:

1. an indication that the elements submitted are intended to be an application for a patent;

2. information which allows the applicant to be identified;

3. information which allows the applicant to be contacted ; and

4. a document, in any language, that on the face of it appears to be a description.

Once a filing date has been obtained, it triggers a series of time critical deadlines, including:

1. The commencement of an 18-month confidentiality period starting from the filing (or priority) date, unless the application is made publicly available earlier (USPTO);

2. Upon expiry of this 18-month window, the application is laid-open to public inspection, hence a public disclosure, which is easily available on public patent databases;

3. The commencement of the 20 year exclusivity period should the patent application move to registration upon fulfilment of the patentability requirements (i.e., patentable subject matter, novelty, non-obviousness, utility ) in the jurisdictions in which the patent application has been filed, excluding any patent term adjustments, extensions, or supplementary protection certificates (Canada, Europe, etc.). 

Anatomy and Consequences of an Improperly Filed Patent Application Based on Stolen IP

The improperly filed patent application usually:

1. makes use of false or incorrect information relating to the identity of the: (i) applicant and/or (ii) inventor(s) of the improper application;

2. creates a major administrative and legal headache for the rightful owner of the IP to rectify ownership and inventorship issues in every jurisdiction in which the improperly filed application was filed, so as to claim back what is rightfully theirs (as the expression goes). This requires significant resources, financial and other, as well as an understanding of foreign and domestic IP and criminal law, court systems, and good relationships with law enforcement in these jurisdictions, if required;

3. is a “silent killer” as it often goes undetected, further compounded by the 18-month confidentiality period commencing “from the earliest date of filing” of the improperly filed patent application, unless made publicly available earlier, as mentioned above; and

4. creates an unwanted prior disclosure of the business’ IP which can have serious ramifications on its business, innovation and IP strategy, including total loss of its competitive advantage and innovation funnels.

Recommendations for businesses and  research entities

1. Refer to your business procedure (SOP or playbook on how to deal with IP theft) as time is of the essence, and take action to mitigate business risk, including the amount of public disclosure that may be made by the wrongdoer (see below). 

2. Invest in cybersecurity solutions, including Data Loss Prevention (DLP) systems (if possible), which have the ability to identify, monitor and detect access to business data and know-how, as well as shutting down user (or wrongdoer) access to sensitive business information. In other words, mitigating against data and IP leakage. Further consider using multi-factor authentication (MFA) as it is stronger than SMS-based authentication. One-time token-based authenticators are now considered much more secure because they are tied to a specific device. Of course, there exist many other different types of systems worth considering.

3. review and inspire yourself from Canada’s research security guidelines as a way to safeguard IP and reduce business risk (available here and read our blog).

4. Frequently train your employees on innovation and IP best practices, and provide them with supporting online resources.

5. Explore procuring IP, cybersecurity and business interruption insurance. Contact us to be put in touch with one of our partner law firms.

6. Consult your IP lawyer to determine the correct course of action, which could include: (i) contacting the national patent office in which the improper patent filing was made, (ii) obtain a Court order declaring the business the rightful owner of the improperly filed application and submitting same to the national patent office, (iii) amongst other potential legal remedies.

Project management and execution of each of these action items is crucial. Contact us for further information.

Government in Action: Dealing with IP Theft and Economic Security

Though the topic of IP theft frequently surfaces (see article, 2017), the Government of Canada does not idly standby, for example:

• Amendments were made to the Criminal Code of Canada to create new offences for fraudulently taking a trade secret, as well as knowingly obtain, communicate or make available a trade secret by deceit, falsehood or other fraudulent means.

• The Canadian Security Intelligence Service (CSIS) published research security guidelines and checklist (see above).

• The Canadian House of Commons Standing Committee on Science and Research (SRSR) has studied the topic of the use of federal government research and development grants, funds, and contributions by Canadian universities and research institutions in partnerships with entities connected with foreign governments. The same SRSR Committee has also addressed this topic in Report 7 (November 2023) on the support for the commercialization of intellectual property.

• the Standing Committee on Access to Information, Privacy and Ethics (ETHI, at recommendation no. 11) and Public Safety Canada are weighing in on the topic.

Think tanks amongst other organisations and perhaps commissions are addressing the issue of economic security, including the Centre for International Governance Innovation (here, here, and discussion with the NSIA), the Business Council of Canada and the GSPIA - University of Ottawa.

However, always more can be done… 

For example, considering:

1. the adoption of a federal Canada Trade Secrets Act as referred to in Report 7 (at footnote 97) and article (2021);

2. the creation of a “hotline” in which Canadian businesses could signal suspected IP theft to a federal law enforcement agency, as in the United States before the IPRCenter, of which the RCMP is a member of the National Intellectual Property Rights Coordination Center;

3. to promote dialogue between national patent offices, law enforcement and security agencies to address IP theft, especially for improperly filed patent applications within the 18-month confidentiality period; thereby allowing for a mechanism to mitigate business risk and premature disclosure of  inventions and/or innovation funnels. However, as duly noted by the World Intellectual Property Organization (WIPO) “the granting of IP rights, which are territorial in nature, is a sovereign decision of nations and governed by national or regional laws. As such, your national or regional IP office is therefore your primary resource for all matters related to the protection of your IP”.

Need some more tips and tricks to mitigate and project manage risk of IP theft, contact us.