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IP 101: Protecting your ideas your way

May 23, 2017

Building an IP strategy is an important part of business development, not only for large companies, but emerging companies and entrepreneurs as well. It can help you achieve commercial success and, most importantly, enable you to safeguard valuable assets that may be the driving force behind the viability of your business. Proactively managing patent risk can also help you improve investment prospects. For example, companies may need to show they have an IP strategy in order to attract investment as they reach Series A and beyond.

This presentation by Nathaniel Lipkus, a partner in Osler’s Intellectual Property Group, is available in both webinar and PowerPoint format, and covers key issues surrounding intellectual property strategy, including when to think about IP as your business grows; how you can use IP to gain a competitive advantage and manage risk; and how you can incorporate value-added IP awareness into your business. It also can help you think about IP risk on your own terms and provides self-help resources that you can use to manage patent risk, with minimized assistance of patent counsel.

Topics covered include the following:

  • common types of IP protection
  • possible types of IP in software
  • the definition of patent (including what could or should be patented)
  • how to navigate the patent landscape
  • what risks should be managed (offensive and defensive)
  • when you should take stock of your patent risk
  • defining your IP posture and ensuring your freedom to operate
  • self-help tools that are available for searching patents


For more information, contact Nathaniel Lipkus, Partner, Intellectual Property, at or 416.862.6787.

This presentation is part of Osler’s Emerging and High Growth Companies 101 series, designed to help emerging ventures navigate through the various issues and legal requirements they will encounter throughout their growth cycle.

Video transcript

NATHANIEL LIPKUS: So, in addition to the litigation, I've actually been doing more and more with the emerging companies practice in Toronto. And it's one of my favorite parts of the IP practice, because it's all well and good to help multinational companies do try to take over the world with their IP. But, as a Canadian interested in the development of IP in Canada, one of the most important things I can do in the public interest is to help Canadian companies figure out what's the right thing to do for them.

And just by a show of hands, is there anybody else in this room, other than me, who gets excited at the idea of protecting and defending IP? And I think I know the answer. [LAUGHTER]

I would expect nobody. And, you know, it's not just you. It's the big clients, too. They don't enjoy, they have to spend more money on IP, and they don't want to devote all the money that they have to, to manage their IP risk. So, when I thought about giving this presentation, the goals that I had in my mind were, how can I help you guys think about IP in a way that works for you.

I'm trying to do the slide thing, it's just not working. I tried arrow and I tried arrow. Is there something else I've got to do here? Maybe, oh, maybe I just got to pick the window. There we go. OK. So how to think about IP on your own terms, not because some IP lawyer tells you here's what I can do for you, but what do you want to do?

How to think about IP risk, and I can see an offensive risk and defensive risk, and then giving you a few self-help measures for you to manage your own risk, and then only come to lawyers when you absolutely need to. And I wrote here, spoiler alert. Most people don't think of their IP strategy when they're thinking about their business strategy. They think of them as two totally different things.

But an IP strategy only makes sense as grafted on to a business strategy. If there's something you think is going to be your key to success, then that drives what IP you need to protect. And it's important to think of IP as a business asset, not just as a legal thing that hopefully you never have to deal with. So first of all, what is intellectual property?

Here you've got a picture of a guy who's got an idea in his head. Someone comes around and grabs it. And, if you're being honest, and if you don't practice IP law, do you really know what IP is, more than that? It's really just the important thing that somebody created, and it's just kind of jumbled up. And then people write agreements and it says, the intellectual property here, the intellectual property there. But people tend not to have a very definite sense of what it is.

And it's also a little silly, because you see the thief, he's taking the equation, unlike real property or other property, this guy, he has not forgotten the formula that he had come up with. So information is something that can be consumed by many at once. So it's what we call non-rivalrous, and it's also really hard to stop people from using it.

It's one thing to erect a fence around your real property. It's a lot harder to erect a fence around the information that you create. So just I'm going to do a little bit of building blocks of IP. I promise not to make it too legalistic. I tried to focus on what might be of interest to an emerging company, and then some more strategy pieces.

So what are the different kinds of IP? You have patents, protecting inventions. That will be the main focus of what I'm talking about. But we'll talk about other stuff, too. Copyright protects works that are things that are fixed in space. It could be music, fixed on a CD. It could be a performance that is fixed on a video. It could be source code in a piece of software.

It could be anything that is a fixed artistic or video graphic. That's how it works, as we think about Mickey Mouse, but different from patents. Trademarks present distinctive marks used to advertise goods and services, like Nike swoosh, and also some more creative things. Industrial design is the design of an object that you sell. So think about these chairs, as distinct from all other chairs. And then trade secrets can really be anything that is of value to a company, but that you're not protecting using one of these other forms of rights.

It's something that you are keeping a secret, and the manner in which you protect it is what confers the intellectual property character. But it could be something that would otherwise be patentable or otherwise be copyrighted. It's just a different way of protecting it. These are the different kinds of IP that will come up over and over again.

We imagine a piece of software. You might have copyright in source code, where you write the software, object code, the manner in which certain things are arranged in a database or on a user interface, all of that can be protected by copyright. You might have some things that are within the code or algorithm, that you consider to be trade secret. You never want anyone else to find out what they are, and so you never publish them. Patents in the systems and methods of solving a problem, and then putting that out there for the world, and so an algorithm that helps how you gather data or how you process data can be patented.

And then know how, just in the way in which you conduct your business, you may have a way of creating products and managing your processes that is itself valuable, that you don't want people to know. All of that can subsist of overlapping IP rights in a piece of software. And so they will be dealt with differently according to what they are.

What I was alluding to earlier, most people, especially at the emerging company stage, when they're thinking, I don't have a lot of money. I'm asking friends and family for money. I can only raise so much. I need a competitive valuation. I definitely cannot spend money on IP.

And that's OK. But it doesn't mean that you shouldn't be thinking about what you would spend it on if you did have the money, and what you might do to properly defer the spending of the money. And what I see is a lot of companies saying, I hope I'm OK. And I was at dinner with some companies last week, and I think I understand. I think I got to understand why that is.

And maybe you may agree or disagree. I think it's because people know, if they have a problem, an IP problem, this group. They are, that's it, they're not going to be able to raise money. They're never going to be able to sell their product. If they have a really big IP problem, it kind of doesn't matter. I think that's the attitude that animates even some companies that have raised a lot of money, I learned, last week, that they just figure, I'm going to put my head in the sand, because, if somebody really does own this, then I'm screwed.

But I think that there is a better way. And there are ways of splitting the baby here. And so we'll talk about some of those. But, again, first I'm just going to get into a little bit of the basics, because I think that if you can be a little bit conversant in knowing what you don't know, then you're equipped to make some of these decisions. So, first, I think patent is the area where most VCs and other investors are going to be interested in seeing what you own, because if you own a trademark, you only have to change your company name with trademarks, and copyright is something that comes automatically when you create something and publish it.

But patent is something you actually have to work for. And it protects really your idea, your invention, what could be the lifeblood of a company. But a lot of people don't know what patents are. So a patent is a two-part document. The idea behind a patent is, you disclose to the world something that you created, your invention, and allow people to use it, or work around it, and eventually use it, once your patent rights are expired.

But in exchange you get a 20-year monopoly. And your monopoly is what is within the claims of the patent, which is literally a recitation of the property that you say you exclusively own. And so, for example, somebody might describe a SaaS product in a patent, where they describe all the ways in which a code will generate some way of working with data, that then a person is going to engage with, and all the different user interfaces that may come into play. And there are going to be a lot of pieces of it.

There's really only one piece that matters. It's the way in which they present the results of processing data in a particular way. And that's the thing that they patent, the way that they get the one piece of data. So the disclosure is going to give you everything. The claim is just going to define that one really important piece, because no matter how you do that piece, that's the part they want to own.

In order to get a patent, what you create has to be new, useful, and inventive. And you have to prove that to a patent office, and different patent offices in different countries. And if you do get the patent, then you have a 20 year monopoly to prevent others from making, using, or selling that invention. And when I say prevent others, it doesn't actually give you the right to do that thing in the patent, because somebody else might have a patent on another piece of what you're doing.

And so you can have two patents block each other. In fact, some of the most famous patent wars in history over the sewing machine and the airplane were over people who had patents on different parts of the big thing. They fought for years about it, because neither of them was actually free and clear. But you have the right to prevent people from using your invention. So that's what you need to know about a patent.

What subject matter can be patented, I wanted to cover this because, in software, a lot of people think you can't patent software. And that's a really nice thing to think, if you don't want to think about patents. And it is something that most people think. And it's true, you can't patent an algorithm, can't patent an abstract idea. In Europe, you can't patent a computer program. And so it sounds like you're safe.

But it's just, you can patent pieces of it. You can't just patent it as such. And that's the part that gets lost on people. And so, if you have a method of improving data processing, but because of a compression algorithm or a better form of encryption, or a way of transforming data no one ever thought of before, you can get a patent on it. It's commercially useful.

You just can't get a patent on the algorithm per se. It's just you have to explain, what was the thing you started with. How did you transform it? And so software, you've got to be careful, is the point. There's other areas of controversy in patents, are methods of diagnosing and treating patients.

And then you see a lot of technology in stemcells, genetics. And the higher order the life-form gets, you can patent a plant. You can't patent a human or an animal or anything that has the potential to turn into that. And so those are considered controversial.

But, apart from those, the definition of what you can patent is quite broad, any new and useful process, machine, manufacture, composition of matter, or improvements. When you're thinking about patenting, I wanted to put up some of the things that people think about in their business, in terms of whether to patent or whether to keep something secret.

So first of all, is it even eligible? Suppose you have an algorithm. The core of your business is the algorithm. You can't patent it as such. But you're not going to try to patent it, because then you're telling the world what it is, and only to be told that you're never going to get a patent, that would be silly.

If something can easily be copied, and it's going to be released to the public, it's eventually going to be made public. You're not going to be able to keep it as a trade secret. So knowing that, most people will say, well, I want to make sure I patent it before I make it public.

And that tends to be the guiding timing decision. Money, obviously, if you can't afford it, you can't do it. But it may have a downside down the line. Some people, they should patent, but they try to keep it for trade secret as long as they can, because of the money issue. And I totally understand that. But there might be a point, a do or die time.

And then, the last one, which I think a lot of emerging companies don't think about, but tends to be where they come into the most trouble earliest, is, are my competitors patenting, and will I be at a disadvantage if I don't. One client that, they know that what they're doing is marginally patentable, if that. But they're doing well. The problem they have is that they have a competitor in the US that is very, very aggressive in terms of patents.

They almost know they have nothing to patent, but they try to patent everything. What that means is, and then what happens is our client gets these emails from customers, saying, have you seen this patent? And it's not even a patent. It's a patent application that's never going to issue.

But it gets people nervous, because there's a lack of education. And so, if you're in a space where your competitors are patenting, and not just your current competitors, your future competitors. If you plan on taking on Google one day, if that's your ambition, they're patenting.

And so when it comes to that decision, these are the considerations to think about. It's probably not good enough to just say, I'm going to keep a trade secret and just forget about it, until you have money. And if you are going to keep something trade secret, there's a lot that you have to do in order to maintain the trade secret. Some question?

AUDIENCE: In order to timing for a patent, do you have to like file an application for a patent before you're going to release your product to the public?

NATHANIEL LIPKUS: So it's different in every country, which is terrible, but it's the truth. In Canada and the US, we have a similar rule which says, if you disclose something to the public, you have a one year grace period before you have to file for a patent, or even any kind, there's something called a provisional patent application, which can set you up to later file a patent. But you have one year, before the clock starts to run.

In Europe, you don't get the one year. In Japan and China, they have different sets of rules. So it depends on where you are. And, yeah, so you just to be mindful of where the clock is going to run.

So what I was saying was, there's a lot that you have to do. And what I know from experience is, nobody wants to call a lawyer to ask them, what do I need to do to not patent, because they've already decided that they don't want to do it. So I have this checklist I'll pass around. It's basically the things you should be thinking about, if you're planning on not patenting.

Well, first of all, what is valuable? And then, do you have the right employee contracts, that kind of stuff, and without going into in this presentation, so whoever wants to keep it. Another thing that I wanted to tell you guys about how you can use patent information, this isn't about the decision to patent. It's that a lot of companies don't know who their competitors are at the outset. They think they know, because they've gone, they've done some Google searching, they may be in the scientific research stage.

But the patent landscape actually tells a very useful story for startup companies. If you go on Google Patents, you can search by keyword, you can search by inventor, you can search by company, and you can find out who are your competitors, or possible partners in the space. If they file for patent protection, they've decided what they think is valuable, they told you how to make it, or partially how to make it. They told you what they think is the property they want to own for the next 20 years.

And they've elected which countries they want to own it in. So you can map, if you're so inclined, if you have enough resources, which is always an issue, you can map what your competitor landscape is in terms of their geographic and technology strategy, and figure out where you stand within that space, not just based on what you think you know, but based on what they're telling the patent office. With the caveat, which I'll get into, which there is an 18 month delay for these things to get published.

But you still get information that is current to the last 18 months. For example, there's a report recently published on the big five, Amazon, Apple, Facebook, Google, Microsoft, where CB Insights mined their patents to figure out what are these guys focusing on from a patent perspective, which and see how it maps onto what you think about these companies. So they followed more than 52,000 patents. That's a lot of patents.

And this is the rough order of who's filed, with Facebook far behind the rest. Google used to be very militantly anti-patent and they hired that way. And they were a net defendant in patent lawsuits. Today they are one of the most aggressive, particularly if you watch what they're doing with Uber on the self-driving car front. Artificial intelligence patenting activity was a particular site, with Microsoft and Google being the most aggressive in patenting in the space.

Apple was focusing on vehicle and wearables. Wearables everybody understands, vehicles may be a revelation, maybe not for people who really follow them. But that's where their patents are. And then Amazon is non-surprisingly looking at supply chain, with drones and cybersecurity as their core comparative advantages. That's all just from looking at what patents have been published.

And there are websites that will track the most interesting patents being published, because they think that that's where they're going to get the information first. So just taking a giant step back, now that I've done a little bit on basics, so when I think about IP risk, it doesn't matter if you're big or small.

I put it into two buckets, offensive risk and defensive risk. Offensive risk is something I created, what is the risk that somebody is going to copy it, steal it, take it from me, and I'm not going to be able to own the thing that I created. That's offensive risk, because if I want to deal with it, I have to go on the offensive.

Defensive risk is the risk that I'm using something which somebody else patented, or protected by a copyright, trademark, without their permission, and the risk that I'm accused of unauthorized use. You might be infringing patents every day. But you don't care about that unless someone comes after you. And so I put them into those two buckets.

And the way that you manage, because, a lot of the times people are just thinking about, should I patent. Or they're maybe a little nervous that somebody might own something that they have. They don't think about it this way. So everything fits with the need to bucket every single IP problem, all the contracts you draft, the clauses, it all comes down to, I'm trying to manage one of these two.

Examples, so Blackberry provides a great example of managing defensive risk. 2005, they were really caught in the wrong place at the wrong time. They were sued by this inventor who created some wireless email back end technology, supposedly. And they were sued. And they almost settled for about $30 million. But they really thought that they had-- they didn't think that these patents were valid, so they decided to go ahead, until they were on the other end of a potential injunction across the United States. And they were so screwed that they ended up settling for $612 million to settle that lawsuit.

They were basically snookered into it, because they hadn't managed that risk at the outset. So they were dead in the water once their product ended up on the market, and was on the receiving end of this lawsuit. What's crazy is, even though they paid that money, they're never going to get it back. The US Patent Office, when they re-examined the patents, found that the patents should never have issued.

So that can happen, where you get sued, and those patents never should have issued, yet you still end up paying money, or licensing fees, whatever you've agreed to do, which is just the way that this thing works. And it emphasizes why it's so important to deal with it early on. And Blackberry tried to then, one of Jim Balsillie's rallying cries these days is that, we shouldn't have allowed this to happen. And they've become harder and harder.

But they also started becoming very aggressive in their patenting. But they don't have much to show for it. And so they didn't manage their defensive risk. They haven't quite managed their offensive risk so far. And part of it is because they didn't, on the defensive side, they came in too late, they were already done by the time they were forced to deal with the issue. And on the offensive side it's not clear exactly why they patented so much, what they were patenting that was valuable, what they were going to do with it.

Another example is this drug company Gilead. Gilead owns a drug called Sovaldi Harvony which is I think right now quickly becoming the biggest drug in the world. And it only launched a few years ago. But it treats hepatitis C, and they charge between $40,000 and $80,000 for a 12 week course. And it's a cure, very valuable, and arguably even at that value, it's still worth it.

But they did a lot of work in advance of developing the technology. And every single company they did a deal with, and a bunch of companies they didn't do a deal with, said we created that first. Or we created the kernel of that technology. You don't own it. You have to pay us licensing fees or stop selling it, whatever it is. This puts a company like Gilead in a funny--

So with AbbVie, they did something even more brazen. They ended up filing a patent after this drug came out, saying we created the combination of two drugs, but Gilead created each one. And then they sued Gilead for their drugs. And so these guys, because they had something valuable, were on the receiving end of a whole bunch of lawsuits and arbitration.

And they had to defend them, and justify their ownership of this technology, all at the same time knowing that they're going to have generic drug companies on their heels within not a few years, maybe within five years. And so they can't say anything or do anything that is going to weaken their own patent estate. So they're stuck in this place where they have to manage both.

So the takeaway here is, if you have something valuable, people are going to say they own it, people you worked with in the past, people who are doing things in parallel. And you're going to have to manage this one day. And so you need to, say, lay the groundwork for that. One of the areas that comes up a lot with emerging companies is freedom to operate.

When you get to the stage of having investors that are looking at maybe investing in your company, or if you know that you have something that the IP is really the lifeblood of the business, you need to know they own it. And so people say, well, I want to know I have freedom, not just that I own something, freedom to do the thing that is my core business. That's what everyone's going to want to know.

And people ask for an opinion, or information, or something, that helps them manage that risk. A company has freedom to operate if the thing they propose to do won't infringe any patents, or if it's a trademark, if it's a name, that it's not somebody else's name. And so there's two ways to get freedom to operate. One is to own or license whatever property there is. The other is just work around it.

And, as I said before, having a patent doesn't mean you have freedom to operate. You might own one part of your technology, you don't own the whole thing. And so, when people, the problem that you have, and I'm particularly sensitive to this, and trying to work through how to make it work for you guys, is a freedom to operate opinion requires you to literally scour the earth for every possible patent and application that is moving in time, it's changing in scope, it's constantly evolving.

To say none of this is a problem, we're talking about literally millions of patents in multiple countries. And you can imagine, I mean, it costs a lot of money. It costs certainly tens of thousands of dollars to do something comprehensive, maybe more. And so what you guys have to do is figure out, how do you manage this risk without spending that money? That's the challenge. So the way that I present is to say, try to think of it as four levels of managing the risk.

And you manage it according to what you need at the time. You got that comprehensive opinion. You can also narrow, if you really do need to know that you're not infringing on a particular competitor's patents or a particular piece of your technology is an issue, or you can slice and dice it by some sort of the time that certain patents were out there or are going to be out there and unexpired, you can define the scope of the patents you care about. I only care about patents from this competitor. They're the only ones who I think are going to sue me.

That's one thing, you can narrow the scope. Another thing you can do is to say, you know what? I appreciate you, lawyer, trying to cover my ass. But I don't want your 50 page opinion. I just want to know what you think. And so you can ask for preliminary views.

And don't say, I need to know about this, such and such patents, number x, in Canada. Say, I want to know, generally speaking, look at what the patent office did with this patent. What do you think? Are there vulnerabilities? And it'll resonate to you if there's a vulnerability or not.

It's not going to be an opinion. But you get a feel for whether this patent is likely to be a problem. That's another thing. And then the last thing you can do, is you know your technology better than any lawyer is going to. You may not want to pay them to get up to speed. You do your own work.

You find out how to do it, and you just use search. Google Patents is going to get you probably as far as you need to go, if this is what you're doing. And get the most technically competent people to look at the claims of the patents. A lot of people look at the whole patent and say, Oh, this looks similar. But actually it doesn't really matter whether it looks similar. It matters what the claims say.

So they do a semi-educated assessment. Then you're at least managing that risk. And you can get an answer if someone comes to you and says, hey, I think this time there's an issue. So it's different levels of managing that risk. And, you know, you might get bang for your buck at the lowest level.

How do you prioritize patents? So, as I was saying, you can look at the competitors. You can look at patents that are going to be in force only when you launch your product. It's not ready yet, so you don't care about something from 20 years ago. Sometimes you'll have patent applications, I could file a patent tomorrow on a crustless peanut butter sandwich. I can draw a picture, I can make it look like a patent.

Somebody could pick it up and say, oh, man somebody's got a patent application on a peanut butter sandwich. They're never going to issue a patent, because someone's going to review it one day. The problem is a little information can be dangerous. If people see something that looks legitimate they might get scared off by that.

And so you say, well, I don't really care about patent applications. I'll monitor that one, because it may be an issue. Just see if it issues, then I'll care. But I really only care about the ones that the patent office has said are OK, because they've actually fought with the patent owner to narrow the scope already. And, like I said, have your internal tech team take a first step. Also, like I said, it's not foolproof. You've got this 18 month blind spot, where patents haven't been haven't been disclosed to the world for a while. So that's not perfect.

And if it's a patent application it can change. Someone could watch to see what you're doing and try to refashion their patent to look like your product. That's conceivable if the patent is drafted broadly enough. And then, even if there is a patent issued, a court will still have to interpret that patent to determine if you have an issue on the infringement side.

And so there's always some risk that your patent lawyer will not interpret it the way a court would, because even when you get to court, the lawyers are often not sure exactly where the scope of the patent is going to be. And so you can manage all of these risks over time. Even though these are blind spots one day, they won't be a blind spot in a year. So you can manage it internally or externally.

There are tools that you can go to, like I said, Google. There's also, sometimes, if somebody says, hey, there's a patent that I think you might want to take a look at, normally it's going to be a US patent, because that's the biggest market. And there's this portal in the US Patent Office where you can actually see every single thing that a patent applicant has said to the patent office, and the patent office has said back about a patent, including, what often happens, if there is a controversially broad patent, and the patent office says, no way you're getting that, the patent applicant will say Oh, no, no, no, I'm not trying to get it that broad. I really just want this.

And that's something that you will take to the bank. If it's something that you say, oh, it'll never issue that broadly, that's normally the problem with the application. You're nervous that it's going to be too broad. And if the patent office has identified a real problem, that will oftentimes be your real problem, in my experience.

And so you can go onto this portal and just search by patent. And then you can get similar information on a European site called Espacenet. And the reason I like that one is they actually give you all of the old prior arts that predated the patent, that is being used to try to keep it from issuing. So you can look at that stuff, too. And then the Canadian intellectual--

AUDIENCE: I wonder if they hate it, like the US Patent Office review of patent applications, is that 18 months and then they look at it?

NATHANIEL LIPKUS: No, no, no, no. It's different, so a patent, it's about as fast as the patent applicant tries to push it through. There have been examples where you get it issued in eight months or less. And then it does publish. There are patents that have been pending for 17 years. It all depends on how controversial it is, how actively it's being pushed. And sometimes you'll have appeals all the way up to some appellate board, or even federal courts.

So it can take a really long time. But that's often because, either the patent never should issue, or because the patent applicant says, you know what? I'm not content with what you're going to give me. I want it all. I want something that is broad enough that nobody can touch anything near what I'm commercializing. And so they go for broke.

And they'll play points of principle with the patent examiners. The Canadian office unfortunately doesn't have great resources. They are improving. But they don't have a level of engagement that you have from the other sites. Next I wanted to cover, and then that's sort of the end of it, and then we can go with more questions.

When should you actually be thinking about this stuff? And sign up three key times. First is when you figure out what your business is, because it may be that IP is your business. And if it is, then you should be thinking about it. Second time is when people are going to be kicking the tires of your business. And then the third time is once you're sort of, you're getting going and now you have to run your business in a way that's generating incremental growth year over year, in a meaningful way.

So first, at conception. So emerging companies come in all shapes and sizes. Some companies are based on things that really there is no IP to protect. It's just an innovative business model for delivering things that have been out there forever. Some, though, could be based on a chemical formula, where that's the lifeblood. Some are based on algorithms, where it's maybe you can't patent the algorithm, but you know that it's really in the way in which you're solving a computer problem, that is your lifeblood of your business. In which case IP is important.

You have to figure out what you are, and recognize that, if you are an IP driven business, that you at least figure out how you're going to manage that risk at the get go. You're not going to have the money to do it. So you just have to figure out, what might you need, and how can you defer getting it. One of the reasons why I say you need to think about this right up front is It's really hard to re-steer a big ship.

But if you have at the get go say, OK, I feel like what is the lifeblood of my business, what business workflow do I need to support that? Not necessarily file for patents on day one, it's figure out what could be patentable, and have somebody responsible for it, and maintaining a list. And who is the person who came up with that? And what have we done with that?

Even just tracking, making sure those people have employment agreements that have signed assignments to that IP and that kind of stuff. You just need to know that you're tracking it. You don't want to back date it because it could be too late. That's really the main reason why I think it's important to take stock upfront.

I had a meeting with one of the top 10 or 20 companies in the country. They're generating IP, and they have been for years but they never organized around it. And that goes for many of these companies. So I don't feel bad saying it.

And it's really hard to incorporate IP into the workflow of the business, and it's going to take a really long time. And when I was talking to them, I shared with them a book. It's called Rembrandts and the-- or, sorry. This one's called Edison in the Boardroom, something like that. And it's basically a pow-wow among some of the biggest companies, Samsung, Philips, Nielsen, IBM talking about what it was like to try to bring IP into the culture.

And the story is always the same. Nobody cares about IP. We're going to have to do it really slowly. Incentives are going to have to change. And it's never fast. But they do get there. And so if you start from the get go, you're way ahead of the game.

Second time you need to look is when people are telling, asking you, what's your IP? How do I know you have freedom to operate? You're going to need to show that in order to attract investment. And it's also a value-add. If your answers are, we've been thinking about this. Here is our package of IP documents. Here are the issues that we've dealt with.

And then for even more value-add, you've got your business strategy. You're telling it to everybody and their mother under NDA. Why not have a slide, saying here's how our IP strategy grafts on? A lot of times companies will just do that anyways. But thinking about it the right way is really helpful, because then you signal that you're sophisticated.

And maybe the person who did get burned is thinking about investing money and telling everyone there they should think about it. So it gets a little bit more quiet. And so this is a time where people are going to start identifying specific issues of concern. And it's good to be able to anticipate them.

And companies do that. But some don't. And so, if I think about the emerging companies practice we have in Toronto, companies run the spectrum. And it all depends on how far they've been trying to bury this issue, until it comes up. So I'll get to in effect. So the things that you need to do to prove you own your IP, well, you need to show chain of title. So IP starts, for patents and copyright, it starts with the originator of the IP, the author of copyright, the inventor of a patent.

For trademarks, it's the business, it's not somebody who came up with it, though they may own copyright in the design. And the same for trade secrets. I would vouch to say it's the originator, same as with a patent. But it depends on what it is. That one's a little bit confusing.

To show, if it's an employee who developed it, here is the agreement that shows that we own it. If you had somebody develop it for you, here's the agreement that shows that we own it. If it's something that came about after that agreement, but has now coalesced into some form of registered IP, here is the assignment of that specific thing. And then keep a repository where you can find this stuff quickly, because, when you are trying to raise money, and you're trying to prove that your business is really worth what it is, you don't want to be fishing around for all this stuff that's really nice to have in one place.

And then it can be that, hopefully you don't need to show that there's any third party patents that are an issue, but it does come up, where people say I need to know that you don't have-- that this patent is not a problem. Regardless, you're going to have to make representations to investors, that not that there are problems. It's nice to know. In the last time, and then open it up to questions, that you're going to need to care, is when you actually are running your business. Companies have an IP posture, when they run their business.

It looks like any one of these things. You're either passive-- you decide it's not important at all, reactive-- you just hope that nothing happens. But when it does happen, you're just scrambling and trying to figure everything out. It becomes issue number one. I can tell you IP messes are very big messes, most of the time, not all big messes. But oftentime, if it's your core technology, then it is a big mess.

And then, where I say most companies should park themselves, is in one of the next two, prudently defensive is say, OK, I'm managing my risk that somebody else may have IP. But I'm not trying to necessarily own a world that I'll never own. So you may not be filing patents like crazy, but you are at least figuring out what those risks are and managing them proactively. And then proactive is where you're filing patents as part of your business model. Say I'm trying to find the things I can patent, and build my patent estate.

There are businesses where that's really important. In talking with some people last week, they were saying the only way they got out of a lawsuit was by having something to fight back with. It's like a bringing a gun to a gunfight kind of thing. And then aggressive is really, I mean, a lot of people think of patent trolls as being aggressive assertors of patents. It could be, there are a lot of companies that are aggressive like that.

When I said the company that patented the two drugs created by somebody else, that happens a lot, where we have companies that they figure out how they can patent something that other people in their space are making, whether we call them a patent troll or an incumbent competitor, whatever you want. They're aggressive. And their business model depends on IP in a different way.

And you have to figure out what you are, because that's going to dictate what you do, at every step of the way, when you have an IP decision. And I could talk a lot more, but I'm going to just leave it and say, you should develop your IP strategy based on your business, and tailor it to your business, and do no more and no less than what that is. And that may mean that you have it all internal, and maybe that you're spending a lot of money on lawyers.

But that's a decision you make based on your strategy. And open it up from there, if anyone has anything.

AUDIENCE: Where should you be filing? Like what nation?

NATHANIEL LIPKUS: I didn't miss that. Where should you be filing. So I'd say there's two answers that I commonly give/hear. One is, where do you intend to be making your products and selling it. What markets do you care about? I'd love to say the whole world, but, practically, it's just too expensive, unless your product is going to be in the billions of dollars. Drug companies will file everywhere, but certainly software companies don't.

What you can do, which many of you probably know, is file what's called an international application. This is the application that gives you 30 months to decide which countries you care about. And there's very few countries that are not covered by that. The other answer that I like is, if you're thinking about being bought for a competitor that you hope to one day be like, see where they're patenting.

What countries do they care about, because, if you have a competitor that, or a potential buyer, which can be both, and they care about a country that you just don't care about, you, by preserving your patent rights in a country, you don't have to spend lots of money on it. But just file the same thing in that country and park it. They may find it valuable. And they probably will, if it's one of their countries. You can easily figure out where they're patenting. Just look at their patents.

And they're never, they're not going to patent in the same countries for every single one. Another thing, when you look at patents, you can see if they're filing everywhere for one patent, but only in the US and Canada, or the US and Europe for another, that signals how important the patent is. So if either one of those two, commonly dictated by money considerations, because ultimately you don't want someone parking their business in one of the unpatented countries, and then just doing everything from there.

AUDIENCE: Today is AI world, where basically, as an example, you start with an algorithm that maybe comes out of MIT, or whatever, and then you train it and then it's constantly learning. How do you-- what are the strategies adopted for patenting that type of IP?

NATHANIEL LIPKUS: OK, great question. I went to a talk, I think it was last January, where there was a pretty forward thinking guy. I think he was at one of those big five, talking about the creative computer, of skill in the arts, saying we've mapped our entire patent system on human inventiveness. But here you have computers solving problems and actually doing things that we might otherwise, if a human did it, call inventive. So that--


NATHANIEL LIPKUS: And so people are starting to try and grapple with this. I haven't seen anything that strikes me as the right answer. I just read an article last week that was about it, how can we get AI to be patentable? And I read it, I was like, OK, well, you're still thinking about this in the old way, where like is it an abstract idea or is it not. Ultimately, the way that the Patent Office think about it now, and I'm not convinced this is the right way for AI, if they say, are you-- they frame it differently.

In Europe they say, are you solving a tech-- is the person solving a technical problem with a technical solution, that is neither an abstract idea, nor an algorithm, nor a mathematical calculation. And if you can show that you're finding a way to process data or acquire data that is new, then that's the answer. I don't see how you graft that on to AI.

It's the self-learning parts that I struggle with. So I don't actually have an answer. I know that all they can really do is say what the inventor contributed, so they've adapted some basic algorithm to solve a problem. Normally like all they can do is say what they did, then deal with the self-learning part that shows why it's so great. That's the part I have trouble with. And I don't know, I have a feeling you'd have patent offices saying, you didn't do that or you didn't predict that, and so that's not encompassed within your invention.

But it's hard to know, because we dealt with this kind of issue of where did the inventor's part end and where does nature or whatever begin, in the genetic space, and courts have been grappling with that for decades, saying, well, you invented a cell but did you invent the whole functioning plant? Or you invented like a genetically predisposed mouse. Can you patent this? Can you patent that? Because when something else takes over, that's where the courts have trouble.

And they do draw the line at what the human contribution is. And so I'm not sure. So my law is only rambling basically, on AI. But I actually am really interested in that, because we're doing a deal where there was a lot of AI contribution.

But it ultimately is, just as you say, taking some algorithm, adapting it, using it. It's powerful. It solves some benchmark better than the last thing. What do you patent?

AUDIENCE: But it's constantly changing.


AUDIENCE: Innovation's a moving target.

NATHANIEL LIPKUS: Yeah, all you can really do is patent the part you did, and the constantly changing part is the part that I have trouble with.

AUDIENCE: Thank you.

AUDIENCE: What is the best strategy for an idea to, for example, create the software platform for the sharing economics. What is best, starting to protect--

NATHANIEL LIPKUS: Software platform for--

AUDIENCE: --for sharing economics, right?

NATHANIEL LIPKUS: So for multiple companies to share?

AUDIENCE: For almost everybody can share.

NATHANIEL LIPKUS: Oh, for a shared economy.

AUDIENCE: Yeah, shared--

NATHANIEL LIPKUS: So this is where I say you've got to map your IP strategy onto your business strategy. In a lot of cases the IP strategy is to disseminate it, as widely as you can, free of protection. A lot of people say, don't patent that. If you want it to be used in the shared economy, the world will not tolerate any kind of exclusive rights.

So you need to find a way to be the first in, and then provide a service or something where you can add value that is not based on exclusive rights. So some people would say that's the right answer. Different companies have different strategies. If you do decide you want to patent, then you just need to figure out a way to not scare people off when they come to use it.

People too often will shy away from a platform that they know that somebody might pull the rug out from under them. So maybe that's more specific. Maybe I have a better answer, but that's my initial reaction.

AUDIENCE: It is not necessarily a patent, right? It's a kind of an IP protection or kind of the agreement with the employee to develop the software, because I get to go out and do something which is where is the best solution for--

NATHANIEL LIPKUS: So there are pretty strong employment agreements that you can have, where the employee, or whoever you're dealing with, they make clear that whatever rights they have are either assigned or waived. You just have to have the right magic words in the agreement. But there's not really, there's no magic to drafting that agreement.

I think we have a pretty standard one here that we use, that depends on who you're dealing with. If you're dealing with an employee, it's going to be a little bit more heavy-handed than if you're dealing with an arm's length developer. And if you're dealing with a customer, or somebody bigger than you, than maybe it's a little bit even less onerous.

But you want to know that, whatever deal you're doing, you'll always have the right to commercialize the thing you're creating.

AUDIENCE: Yeah, yeah. But commercializing that second step, you have to have some people you open to public, correct?


AUDIENCE: You are teaching to get people copy your idea, because some bigger guy came very quickly to grab that deal and the developer really fast, right?


AUDIENCE: So, before that, I have to think how to protect myself, before--

NATHANIEL LIPKUS: Yeah, I mean, a lot of people wouldn't talk about it that much. But a lot of people, they just think, everybody signed a non-disclosure agreement, forever. They don't really spend much time on it. But they get everyone to sign the same one, and they keep it in their sort of bag of NDAs. And one day, when somebody comes and does something, they can say, hey, you signed an NDA.

But it's true. You may have a big player that can glean something, or an investor that says, I'm not signing an NDA, but you still want to talk to them. It's also contextual. It depends on the situation. I'll go to behind you.

AUDIENCE: Sorry. My question is around my co-founders and I have had this idea of IP as a thing that is not obvious to someone who is skilled in the arts. My question is like, what does non-obvious to someone who's skilled in the art mean. How do people look at that? Because to these guys who are super brilliant, everything seems obvious, once they have the idea.

NATHANIEL LIPKUS: OK, so why I love what I do in court, forgetting about this part, is, I really think it's in the eye of the beholder. And so it's how compelling a story you tell about why something is obvious or inventive or not. It really is. Some people, I find there's really, really strong, deep predispositions about what is inventive or not.

If somebody believes that all science is magic, then everything is patentable. But if somebody, but if people believe that everybody should have access to this thing, to this drug, at cheaply, then nothing is magic and nothing is special. And it's important that we poke holes.

But I do find that there are some underlying predispositions. So that is a good rule of thumb. Is something non-obvious? The way that we're supposed to do it, is say, OK, say what is the state of the art at the time of the filing of the patent, or like the first time you plant your flag.

What is the state of the art, if, using the common knowledge that is available in the art, and with the state of the art, like the best literature at your disposal, would somebody who is in your field directly and without difficulty arrive at the answer? Would they say, oh, I could have got it, this is what I would do.

So if you're saying, I need to solve a problem. I need to find a way to-- I deal with a lot of drug cases. So I need to figure out a way to formulate such and such drug, so that it's available in the body. And the number one way is to grind it down, to make it smaller, so that it fits this person.

So everybody has a patent on doing that. Every drug, there's a patent on, oh, I developed the drug, and, oh, what's more, I ground it down, literally every single one. And so, when the court looks at that, they say, that's probably what someone in the field would do. But if somebody comes up with a different way to do it, and they say, well, we didn't do that. We actually added this other thing that nobody really adds for this reason, and it actually worked.

Then the court's going to look at it and say, hmm, everyone would have done that, but these guys did this, did it, so, is it better than the other solution? Maybe, maybe not, but no one else would have necessarily done that. It wasn't obvious. And so that's how the courts tend to think about it.

And the key is you have to look at it from the perspective of that technical person in the art, that would be your competitor. What would they do? And it's not just from me, but me the lawyer, it's not the best person in the art that could solve every problem. It's somebody of ordinary skill. Would they have readily come to it?

AUDIENCE: Thank you.

AUDIENCE: I think, sorry, an invention needs to be new to be patentable. So say I have like a US provisional patent, that I'm out of time to file in Europe, because I'm already commercializing this product. And I feel protected somewhat in the European market, because I could say, like, look, we have this on the market. We have a US professional patent.



NATHANIEL LIPKUS: If you say protection in Europe, so if the issue is somebody is setting up in Europe, and they're going to use it as a platform for the rest of the world, you could probably convince a court that some of what they're doing in Europe is covered by your US patent. But in terms of if someone makes something in Europe, markets it in Europe, and you don't have a patent, then unless there's some other obligation of that competitor, then it's hard to pin them down.

Copyright is sometimes an answer. If you can prove that they've taken something that you have a legitimate copyright protection in. The trouble with copyright is it protects the actual embodiment, doesn't protect the idea. So if you have source code, and they wrote different source code that does the same thing, you don't have anything.

If it looks the same to a user, then you might have copyright in the way it looks to a user. But then maybe that's not that valuable. And so it all depends on, there may be another right assertable. It could be that if it looks, if their business looks the same as your business, and somehow you cobble together some rights that say they're competing unfairly, because they're representing themselves in a way that's confusing, that's a trademark kind of remedy.

These things bump up against each other. But oftentimes when people are saying they have five different rights, by doing this and this, because none of them is really that great. That happens. I do that.


AUDIENCE: One more question is the idea that, as an emerging company, my resources for enforcing my patents are pretty much zero.


AUDIENCE: How do I ensure that my patent is actually useful to me?

NATHANIEL LIPKUS: Good question. So if you're at that state of that infancy stage that it becomes really--

AUDIENCE: I guess the question is that, how much does it cost to defend a patent in Canadian?

NATHANIEL LIPKUS: It costs a lot, so--


NATHANIEL LIPKUS: No, it does. It does. If US or Canadian patents go all the way to trial, you're looking at seven figures. It's the truth. And so it's one of those existential things. Oftentimes you can, for a few thousand dollars, show that you're serious. And then people say, do I want to spend those millions of dollars?

So there is a bit of a game of chicken. You don't think of it as a binary one to two million, thereabouts. If you have a really, if you have a good patent, and somebody is genuinely infringing it, if you're convinced of it, and you've done everything right, there are a lot of litigation finance companies that would be very happy to help.

If there's money there.


NATHANIEL LIPKUS: How much money? It's got to be, they have to see that there's probably, certainly in the millions, and probably, I sort of say the sweet spot is $10 million of damage that would be created by somebody ripping you off. But if you're talking about an existential patent that you need people to not be using, those are the kinds of patents that these companies get really excited about, because they see a lot of garbage. If they have a good story, company is put on their heels by a brazen competitor, patent looks good, and this thing is going to shut them down, that's a good bet.


AUDIENCE: I have two questions. First one is, if my software is going to release both in the North America and in China, does that mean I need to apply for an international patent?

NATHANIEL LIPKUS: Well, you can apply in individual countries. You can patent apply just in the US and China.


NATHANIEL LIPKUS: You can use one as a basis to apply for the other. So you can file in the United States and then file in China a year later and say, this is based on my US patent. But you could do either. Or you could do an international one and then wait and then file in the US and China later. It's almost too many options, to tell the truth.

It's hard to explain, but we can do 50 different things. You say, I actually don't care. Find me a way to get my patent.

AUDIENCE: OK, another question is, you spoke about, I can patent software, right? That's one way to create. Is there any other strategy, like trademark or other software protection.

NATHANIEL LIPKUS: Trademark a name and anything distinctive to the way in which you sell the software, and you can-- and there's going to be aspects of the software that's copyrighted. You can register copyright for 50 bucks. You can register it so that the world is on notice that you take it seriously.

You just basically say, here's my software product. You don't have to disclose the software. You just say what it is, so people know that you consider it copyrighted. There is a group that's called the Business Software Alliance, that, I mean, for startups, I don't think it makes sense.

But they actually enforce software copyright on behalf of copyright owners, only on licensed versions. So say you sell five copies of something and then the company is using 29 copies. They're just reusing it. So they'll go after them. You pay a membership fee. So wait. That's one option.

But so the copyright could have teeth. If someone is making something new, not copying your product, then you can't really go after them for copyright. Copyright is about copying. That's all with the caveat that if somebody helped you or was part of the story of the development, and they rip it off, and they have an independent duty and contractor tort, some other duty to you, then it doesn't matter if there's an intellectual property right. It matters that they breached some other right to you. So that can also be another way to enforce.

And mindful of time, now that we're five minutes after. So do we do more questions or are we done? You can always ask me questions after.


AUDIENCE: We have cocktails.


AUDIENCE: Next door.


AUDIENCE: So you can have questions over cocktails.

NATHANIEL LIPKUS: Yeah, I don't want to keep people from that.