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IP Licensing in Canada

Things to know

  • The structuring of arrangements that provide for the exchange and sharing of intellectual property, such as the rights held under patents, trademarks, copyright and industrial designs, is a critical component of many commercial transactions including agreements governing asset and share acquisitions, technology and software licence agreements, manufacturing and distribution arrangements, construction contracts, franchise agreements, entertainment and other media agreements and arrangements with universities and governmental authorities.
  • Considerations such as the ability to use, own, maintain and enforce intellectual property, as well as liability for intellectual property infringement and misappropriation, are core considerations in many commercial arrangements.
  • In Canada, trademarks function to notify consumers about the source and quality of goods and services. Trademark owners must exercise sufficient control in licensing arrangements to maintain the distinctiveness and validity of licensed trademarks.
  • Intellectual property rights allow rights holders to exclude others from the use of their intellectual property. However, care should be taken to ensure that any contractual restrictions that leverage the exclusive rights conferred under an intellectual property right do not raise competition law concerns.

Things to do

  • Understand exactly what intellectual property forms part of the business deal and how those rights integrate with the subject matter of the deal and the intentions of the parties. Ensure that the commercial terms properly reflect these considerations.
  • With respect to the licensing of intellectual property, ensure that all parties involved understand and agree upon the nature and scope of the intellectual property and the terms under which it will be used, including permitted uses, geographic scope, fields of use, financial terms, representations and warranties, term, right to sublicense or subcontract, technical support, responsibilities to defend and pursue claims of infringement and rights regarding future developments relating to the licensed intellectual property.
  • With respect to the creation or development of intellectual property and related subject matter, address the ownership and right to use such foreground intellectual property as well as the use of the parties’ background intellectual property and any future intellectual property.
  • With respect to the transfer of intellectual property, address the transfer of current and future intellectual property, the obligation to record the transfers with Canadian and foreign authorities, temporary or long term technical support and the transfer of supporting media.
  • Ensure that the parties involved in the transaction are properly compensated for the use or transfer of intellectual property through arrangements that may involve forms of royalty support; initial fees; milestone payments based on events, sales goals or time and/or equity participation; and protecting the parties’ interests in the event of insolvency.
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