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Protecting your IP 101: Developing robust strategies (Webinar)

Nov 11, 2019

Intellectual property (IP) is expensive, and all IP-related decisions must be considered within the context of the business and should facilitate the long-term success of the company. That’s why it’s particularly important for emerging and high growth (EHG) companies to start thinking about their IP strategies as soon as possible, before it’s too late and becomes even more costly. Putting the right IP risk management strategies in place from the onset will drastically reduce cost and increase awareness, paying dividends down the line.

Building a proper IP strategy involves understanding the main types of IP; the types of IP that are involved in your business; the differences between offensive risk and defensive risk; and assessing whether to protect your IP or not. This presentation by Nathaniel Lipkus, a partner in Osler’s Intellectual Property Group, and Sydney Young, an associate in Osler’s Intellectual Property Group, explains what you should consider when developing your IP strategies so you can tailor them to your company’s goals. Available in both webinar and PowerPoint format, the goal of this presentation is to help you understand the types of IP existing in your business and how to think about IP on your own terms. It includes details on the following topics:

  • What the most common types of IP protection are
  • The possible types of IP in software
  • The definition of a patent and what subject matter can be patented
  • Patent filing strategies
  • IP risk management strategies including offensive risk vs. defensive risk
  • Ensuring you have Freedom to Operate
  • When you should take stock of your IP risk
  • Proving that you own your IP


Slides: IP 101 for emerging and high growth companies

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

ALANA MCELHINNEY: But we have a very, very good presentation with Nathaniel, who's a partner in our IP group here, and Sydney Young, who is an associate in that group. My name's Alana McElhinney, for those of you that I haven't met yet. I'm a mid-level associate in our emerging companies group. So I, luckily, get to work with these too often, whenever any of our clients have any sort of IP questions.

So they're definitely very familiar in this space. Obviously, there are some unique problems and issues and foresight that goes into the emerging company space, in terms of IP. So I'll let them talk about, just generally, some things that are good to keep on your radar now and kind of with more of a forward looking approach as well.

So I think they're going to go ahead, and then, I think, questions are maybe fine, if they come up as we go. And then if you do have anything, obviously, more involved, we can-- you can always shoot any of us an email, and we can direct you to the right person, or maybe after, if there's some time and you don't want to go in the snow, you can stick around.

SYDNEY YOUNG: Thank you. OK, and just to add to that-- oh, I think the mic is good, but if you can't hear, let us know. So welcome. As Lana said, I'm Sydney. This is Nathaniel. And we will get this underway.

So the goals of our presentation today, we're going to start by going through the main types of IP, in hopes that you can really start to understand, or further your understanding, of what IP is involved in your business and how you can be thinking about it in your own terms. We'll look at types of management of IP risk, so both offensive and defensive, and talk about what you can be doing, with minimal need for external counsel, to manage those IP risks.

Something that we encounter a lot and hope we can help you avoid is where companies aren't thinking about their IP until it's too late. So we really want you to think about your IP, understand it, and, whether you decide to protect it or not, at least consciously know that you're going to protect it or not before it's too late and before mistakes happen.

NATHANIEL UPKUS: So we're going to do a little bit of a dive into what IP is, but unlike some other presentations where you really get into the nuts and bolts of each kind of IP, we tried to curate the different topics to the things that would be of most interest to and emerging companies. And so first thing I like to do is dial it way, way back. So what is intellectual property at a high level? What makes it different from other property?

And I like this cartoon because it's absurd. You have this guy, a thief, and he goes and he runs and he grabs this mathematical equation from a guy's head, and the guy turns around. On the one hand, it makes no sense. On the other hand, it actually makes perfect sense. It's exactly the thing you're worried about, when you think about IP infringement. But it doesn't make any sense for someone to take the IP.

And the reason is that IP has two characteristics that economists have pointed to that make it different from other kinds of property. One is that information, which is at the core of intellectual property, is non-rivalrous, in the sense that two people can consume it at the same time. And it's also non-excludable or very difficult to exclude. Once somebody has it, it's hard to take it away from them. And that makes it very different from a piece of real property or the sort of analogy of a purse, that you could compare this to in this cartoon. It's different. And the schemes for protecting it are different, and the schemes for managing risk are different.

What kinds of things come under the rubric of IP? Well, there's different kinds of constructs. They're all human-made constructs that we've created, to protect the fruits of people's ideas and labor. Patents protect inventions. Somebody comes up, a new way of doing something or a new machine, something functional. Copyright protects original works, things like movies and books, anything that is an expression of an idea that is fixed.

Trademarks protects the ways in which we advertise the goods and services in our business. Industrial designs protect the appeal of an industrial item. It could be something like a chair. It could also be something like the user interface for an app. And then trade secrets kind of overlap any of these, anything that is non-public, that is otherwise valuable to your business and that you take steps to keep secret.

If we were to take an example, imagine you have a piece of software. Say it's a camera app that takes a photo of your face and predicts your risk of a skin condition. I know it's a 2015 example. We're way past that now. So what do you have in that kind of app?

So you've got copyright. It's going to protect source code, so that's something that you've fixed in an expression of an idea. It's written, that, say, the source code for integrating with a camera and gathering photo information so you can apply an algorithm to make a prediction, that would be protected by copyright. You might also get copyright in the visual features of your app, how it looks to a user and also how it looks on the back end, in the selection and arrangement of your data in a database that you're maintaining in order to run this software. All that will be protected by copyright.

You'd also have a trade secret, for example, in the algorithms that you're using, parts of the software that are kept secret, that no one gets to see and then how the algorithm assesses data. You could have a patent in a new method of diagnosing a skin condition, in a new system of combining hardware and software to provide a prediction. And then you'll have know-how. In all the things that you did along the way to make your app as great as it was, there's things that you know not to do. There are ways to work to optimize it. There are things that your employees will have that is intellectual property of that person, of the business, and is protectable in its own way.

And then in trademark, you may have a name for your app, something like, say, skin tag. And then you protect that with the Trademark Office, or you use it in business. And then that's another form of protection. All those are different ways of protecting and all subject to different schemes.

One that I'd like to talk about a little bit in detail is patents because they kind of are the mystical type of IP, that people aren't sure if they need to dive in. So what is a patent? You sometimes will see a patent, and people read it and say, oh my god, this is what I'm doing, or this is close to what I'm doing. Patent has two parts-- a disclosure, which teaches somebody an invention, and then claims. The claims are the part that define the property of the owner. The disclosure is the part where the inventor has explained how their invention works.

The claims are the part that you have to worry about. If you're infringing those parts, then you have a problem. And then if they're-- and if you're trying to get a patent, the claims are the part you spend all your time on because that defines the scope of your property.

A claimed-- claim subject matter has to be new-- nobody's ever come up with it or disclosed it to the public before-- useful, in the sense that it does something of commercial value, and then inventive, that any old fool in your field of technology couldn't have done it. And then it'll issue country by country or in some place regionally.

And then you have a 20-year monopoly. That monopoly does not allow you to do the thing in the patent. It allows you to stop others from doing the thing in the patent. Because you could be building on somebody else's patent and you can't-- where you block each other. So it's a right to exclude. It's a core aspect of the right.

What kinds of things can you patent? Well, they say processes, machines, manufactures, compositions of matter, improvements, this is the language from a statute of the kinds of things you can patent. There are things that come close to the line and particularly in software, where there's a debate about, can I patent that or not, things like software defined by function rather than the way in which you're carrying out the function, methods of medical treatment, higher order life forms. You can't patent a human.

Believe it or not, in the US you could. We had to actually find a way to create an exception for that because otherwise, according to doctrine, you would have been able to. And basically, the way that the court will look at it is, they say, if it's too abstract, if you're covering such a broad field that you've preempted every possible way of using a form of human knowledge, you can't patent that thing. And so the way to get around it, is you have to have a specific implementation, not just try to-- not just be covering a natural law.

Some myths about patents, relevant in the software space is, people say, well, I don't need to worry about patents because I can't patent an algorithm. True. But you can patent software. And you can patent an application of an algorithm. And the line between those two things is not very well set. There's a lot of gray area. It's where there's a lot of value in hiring patent agents, who are dealing every day with the patent office and know where the arguments are and what might have a good chance of success.

A lot of people here in Toronto, in particular, are doing machine learning. There's been very high success rate despite a very low success rate in getting patents in the area of business methods, like just methods of doing business, some kind of business idea, in the 10% to 20% range. The machine learning approval rate has been quite high, probably too high. And then having a patent, actually, is very helpful with investment. And there's some stats showing that having an asset that is a patent can actually help with a signaling to the market, and you're building your sales and your employment.

In terms of deciding whether to patent or not, it's not as simple as patent it because I like it. You have to say, is it even eligible? If it's the kind of thing the patent office is going to say no, I don't want to teach the public how to make what I've come up with. If it can't be copied, then maybe I don't need to patent it. Maybe I can keep it as a trade secret, for example, a SAS solution, where the back end is not something people will be able to see.

If you don't have the money, maybe you need to defer somehow, maybe use non-disclosure agreements for a while or figure out exactly what you share or don't share. And then, if your competitors are patenting, this is what we often see, is there tends to be a culture of maybe we won't patent in Canada, certainly further along the spectrum than in the US. But then some US companies similarly situated is patenting. And then you get a demand letter and say, jeez, I wish I would have patented. You don't want to spend the money, but then you wish you spent the money.

If you do decide you're not going to patent an invention that you have, you really have to take measures to keep it secret. We have a little trade secret audit checklist that-- and if anyone's interested, we can share-- that's just all the things to think about, to make sure that you've actually kept it secret. Whenever people feel that they've-- something has been stolen from them, they want to go after either a former employee or a partner, and often they find they haven't itemized what is the trade secrets. Sometimes they have shared it. You've got to have a really good program in place.

And then a call that happened-- we have a couple of times a week-- is what do I do if I do want to file a patent? There's lots of different strategies. I'm not going to get into the details, just because of the time that we have, but there are ways to control costs. And there's different considerations, based on how far along is my invention? How much money do I have? How many countries am I going to be filing in? The answer can be different. So when you do decide you're going to make that call, know that it's not as simple as file or no file. There's a few more strategic calls that you have to make.

Something that people don't often think about in patents is actually looking at other people's patents, to see what their competitors are doing. If a competitor has decided to file a patent, they've disclosed a lot to the world that may not be apparent from their website or from their marketing materials. Because of what you have to disclose in a patent, if you do some searches for what you're up to, you can see who has patents or patent applications in the space, so finding out who your competitors are, how their technology works because they have to explain it in order to get the patent, what they think is valuable.

They're going to be defining claims in their patterns which they say is their property. Well, that's the part they think is commercially valuable enough to have sought protection. What markets are they pursuing? They're going to have chosen some countries. You get to see which countries they're in. If they haven't selected a country, that means they don't have a patent in that country. And that is often very significant. For example, if you're operating out of Canada, they don't have a Canadian patent, that's important. And then when they actually filed for this stuff, are they-- are you ahead or behind in the curve? If someone filed for a patent in 2016 on something close to what you're doing and you're just getting started, that's good information.

Pretty much every IP issue that comes up can be slotted as one of two kinds of risks. An offensive risk is something that-- is the risk that somebody is taking what's yours. You've come up with something. Somebody is stepping on your property. Or a defensive risk, the risk that you are using somebody else's IP without their permission and then are accused of having violated their IP. Pretty much everything is that kind of thing.

I mean, you'll see IP comes up in due diligence, as Sydney's going to talk about in a bit. But you're man-- everybody's trying to manage these two kinds of risks. One flagship example, in Canada, of managing defensive risk is BlackBerry. And it is like-- it is the cautionary tale. But it's just worth seeing because you sort of take a step back and say, what could they have done differently?

They were almost shut down in 2005 because of a patent lawsuit over wireless email. They came up with wireless email technologies in the early '90s through to the late '90s. You had their pagers in the early 2000s. And then there was-- what they didn't quite appreciate was that there were lots of different people who were patenting aspects of wireless email in different ways using different terminology, sometimes in a technical way, sometimes in a more functional way, software architecture kind of way.

And people were suing them. And they were the big fish at the time. And they were offered to settle a lawsuit for $30 million, and as you guys probably all would have done, they said no. And then the US court eventually said they were going to issue an injunction against BlackBerry, provisionally, while this case was going on. And that would have shut them down in the United States, in a period of competition.

And at that point, they ended up getting another settlement offer, which was $612 million, which they ended up accepting. And they ended to settle this lawsuit, which made them a target for further lawsuits, which they'd settled for in the hundreds of millions of dollars, all the while Apple and Samsung were coming in. They ended up reorientating their bu-- orienting their business a lot around this risk of being sued for patents.

They hadn't managed the patent landscape proactively enough. And it ended up being a real sideshow, while they should have been focusing on other parts of their business, in perhaps a more primary way. And so, you know, this is the kind of thing that happens. When you're successful you become a target. And if you're operating in a field where it's not-- like in chemistry you know if a molecule is-- you can identify the formula. It's either patentable are not patentable.

But in nascent technology fields, you often have people using their own terminology. They're patenting in parallel. The patent examiners can only do so much to try to manage the consistencies and inconsistencies. So you need to be prepared. And oftentimes, you need to have a defensive strategy to deal with patents, maybe have some of your own, in order to defend. So that's one example. Now, Sydney is going to also do a bit on trademark.

SYDNEY YOUNG: Yeah, I will jump in with definitely a smaller scale example but in the trademarks world. A file I was on recently, there was a small business in Ontario, like a landscaping company. It had started using a logo that it probably just found online, that was actually the logo of a very large sophisticated company overseas. And we were retained on behalf of this large company overseas to shut down the use of the mark here by this small company.

So that, for us, was sending a cease and desist letter. And in this case, the small company received that. It's scary. It didn't go much further than that. But obviously, that's a big deal for that company, for them to have to rebrand, maybe change their materials, change the logo on the side of their truck.

And leaving aside the question of whether this large company had rights in Canada, in those marks, which is a whole other issue, I think this is just an example of how this smaller company, if they had actually taken a second before they just started ripping off that logo, to look at who owned it overseas, probably they would see that this is a very large company. They are sophisticated. They probably have counsel around the world that are going to be enforcing their rights. So if they had proactively looked at it, they wouldn't have then ended up being-- navigating a deed offensive risk.

NATHANIEL UPKUS: So what do you do about defensive risk? You'll often-- probably all of you have heard of the concept of freedom to operate. It gets thrown around. You often have board members that say, do you have freedom to operate? And it's such a loaded question because for any business, I could spend my whole career trying to find if they have freedom to operate. It's like boiling the ocean.

It's about managing the risk that you have infringed. It doesn't have to be patent, a trademark, any kind of IP right associated with the making, use, or sale of a particular product or service or the naming, in the case of trademark. And you have freedom to operate if you're not going to infringe those rights. But how do you figure that out?

Well, you have to either avoid the patent claims, which means looking at them and parking yourself on the right side of the line or gain access, for example, by licensing. It's not-- this is a common confusion that we see-- it's not enough to have your own patent. And when someone does a search for patents, to get their own patent, it's not the same as doing a search for patents to figure out if you have the right to do what you're doing.

Those are two very closely related but different analyses, and it's important to keep them straight. And it sometimes takes time to understand the difference. But if you come away with that, that's actually a useful take away.

We try to manage the cost associated with freedom to operate, anything from doing it-- you do it yourself to the gold plated opinion, that you may one day need to have in your files. And there's different ways of-- so you can-- anything from, say, somebody says, I want to have freedom to operate. OK, well, go on Google Patents, and do some keyword searching. That's a way of managing your risk.

You have competent engineers do some searching. And they find the stuff that seems to rise to the top. It gives them a sense of what's out there. And then maybe they can't say, I definitely have freedom to operate, but I'm feeling pretty good, when I couple that with all my industry knowledge.

Then there's preliminary assessment, where we can just order a search, take a quick look, give you our preliminary impressions. It's not-- we're not going into deep dive, into a whole bunch of patents, but we're giving you an impression that will be a data point for you in managing-- in figuring out how much risk you have.

Then there's-- if you need an opinion, say, no, no, no, I need your opinion. Do I have a problem? Then we can-- we can define this-- we don't have to tell you what we think about all 10 million patents out there in the US Patent Office or around the world. We can focus on certain competitors, certain time periods of patents that are important, certain features. You can find a way to tailor it. And that is almost always necessary, in order to make it manageable. And then, in some cases, for example, pharmaceuticals, there are companies that need to know, we are not infringing any patents.

Just a couple of things to know, when you do one of these things, you're never going to get perfect information. You can-- sorry, I was just looking. I think I have one-- my slide's a bit different. Yeah, sorry, I ran too far ahead. In terms of prioritizing, ways that you can prioritize patents is pick your competitors. If you know you're not launching for three years, only look at patents that will be in force in three years.

If there-- there are-- sometimes there'll be lots of people who have patent applications out there, and you may not know if you need to worry about them. Well, it may be that you can sort of defer your look at patent applications until it looks like they have a chance of issuing. So there's a way to manage that. And then, oftentimes, we can order a search. And then your team will look at the patents first and then say, well, I only care about these three. And so that can be a way to keep costs down.

What I was going to say before, so it's not foolproof. Any patent filed within the last 18 months is secret. Patent applications can change over time before they issue. So it might look like it's not infringing but later becomes-- somebody tries to broaden the scope. And so you need to monitor, if there's a patent application you care about. And then courts can interpret patents in funny ways. But you can manage this. If there's something that is out there that you're worried about, you can manage-- you can watch it and sometimes even intervene.

And then there's some-- and you can get access to this slide presentation, to get some of these URLs. But there are some resources for finding these searches. Google's an easy one. You just type in what you want. The reason why I put the other ones out there is, it contains a record of everything that a patent applicant has said to the patent office. And so you'll-- and then what they've said back.

So you might actually find out that a patent application stands as rejected. And that could be very useful information, if you're making, for example, an investment decision. You get really high quality information in these patent offices. I'm now going to pass it on to Sydney, who's going to talk about different time periods for thinking about IP as you grow.

SYDNEY YOUNG: And I would actually just add, on that last slide, the last bullet there was about the Canadian Intellectual Property Office, their website. It's also publicly searchable for trademarks and for copyright, but it's just a bit tougher for copyright. But for trademarks, you can similarly look-- like anyone can go on and check if a mark or a mark similar to the mark you're thinking of using is already subject to an application or registration. So that's a good preliminary step to take, too.

But yes. OK, so when should you take stock of your IP risk? For emerging companies, we find there's really three main stages. And I will walk through each of them, the first one being at conception. This is especially important for invention heavy companies.

And really, what this would look like, probably, is, in discussions, making sure you have a non-disclosure agreement in place, thinking about every person that is touching your IP in every institution, so employees, contractors, researchers, profs that you're talking to, you will want to ensure that they are either assigning their rights to the company, assigning any rights they might have to the company, and being sure, also, that they're signing non-disclosure agreements. And it goes without saying, making sure all of that is in writing and signed.

The second stage is before a financing. And this is often when we get involved. As Nathaniel was saying-- or, as Nathaniel was saying, it has to do with diligence. But there's also a part before that and that is making sure that your IP strategy is part of how you are showing the value in your company to investors, so building it into your slide decks, your business plans, and using that as part of your presentations to investors.

And then turning to the diligence side, when you go through investments, the investors are going to be doing diligence. And they'll be looking for a number of things-- freedom to operate, making sure that you own all of the IP that you should, looking at any applications or registrations you have in your key territories that you're operating. And the way to prepare for this is, again, making sure all documents are signed, have them in one place, maintaining any applications or registrations you have, ensuring they're in good standing so that you can easily present that and they won't come up with marks that have actually been expunged and you haven't-- because you haven't been paying attention to their status and making sure you're on top of fees and that kind of thing.

And then this is just a more precise list of exactly what you'll probably be needing to show, when your company is being dilligenced as I say, assignments from employees, developers, contractors. Also, I've added in here moral rights waivers, which is a copyright-related concept. It's particular to Canada, but it's also in some other countries.

And these are rights that can't actually be assigned. It's like an author holds on to his or her rights of integrity. That's one example of moral rights. It's just not something that, practically speaking, can be assigned. But they can waive it. And so you'll want to ensure that you are obtaining those waivers.

And then also, it depends on the level of diligence, but they might be looking at your customer agreements, your supplier agreements, making sure that there's no weird-- there's no weird instance of the other party taking rights in your IP, that they shouldn't be. Licenses-- so that's any time that you are licensing out the rights to your IP or any instances where you are licensing IP of others, you'll need to show that you have the rights to use the IP, in order for your business to properly be conducted.

NATHANIEL UPKUS: I was going to just--


NATHANIEL UPKUS: --just a couple of points on this slide, so moral rights, for whatever reason, seem to always come up in the context of our due dilligences. It's because we use that language in Canada, and a lot of places don't. So a lot of the contracts that we'll see, that companies have entered into, don't say anything. And the risk is that some employee or developer somewhere in the world did not waive their moral rights in some small piece of software that you may or may not be using, and some lawyer at some law firm says, this is a problem for this deal. And it's a pain in the ass.

And it comes up-- and it's funny because it's always-- it's like we can-- it's like whack-a-mole for us. It's so easy to spot. It happens all the time. But it's rarely a risk that actually is a-- it's not a real risk in most cases. It's not like you're going to have some developer come in and say, I'm offended by the manner in which you used my lines of source code in your product and actually be able to convince a court that they're entitled to a remedy. So it's kind of a weird one. But it comes up. It's good to get it in your paperwork so you don't have to talk about it in the context of a diligence.

And then-- I'll take the question in a second. But one other point here is, the reason why we have this slide is because IP diligence really sucks. It's-- the schedules are-- like when you look at your schedules on these agreements, well, we've-- always finds, wow, it's all IP, people itemizing all these little things that they've never had to itemize before that are occupying people's time, when you want to be dealing with substance and you're dealing with a lot of these little formal things. So if you're keeping track as you go, it's not as painful. And that's why we put it out here.

I know there was a hand up.

AUDIENCE: So open source, is that a part of the responsibilities [INAUDIBLE]?

NATHANIEL UPKUS: Not only is it a part of it, it's one of the more important parts of it because you will be asked, if you're ever taking financing of significant money or if you're being acquired, you're going to make a representation that you're not using open source that has any of the following characteristics, except as per your schedule that you provide. And if anybody doesn't like what's on your list, they're going to talk to you about it and say, why are you using this code and with this license? Is it possible to change it, that kind of thing.

And so those conversations do come up. And we actually have a piece of code, or piece of software that one of our lawyers has developed, where you can actually run through your code on your local server through this what we call source code detect. It's on our website. And they will actually identify licenses that are likely to be a problematic, as a starting point for figuring out what to do. But yeah, it's important.


AUDIENCE: So my world is artificial intelligence, and there are a whole bunch of libraries that I use to train. So right now, you have a lot of competence, pretty much everyone, that, outside of the research labs, are using open source. In face, actually, there's a joke, how far is China behind the United States? And the answer is, 16 hours because every time we create something, we put it on open source. And of course, it's available to anyone who understands it.

So my question is, you as a-- also, you obviously have common set-up, sure, in the PI space. How do you protect them in the United States when, for instance, we're innovating and at the same time we're using libraries that are readily available to everyone, while I'm trying to raise money?

NATHANIEL UPKUS: Yeah I'm-- it's sort of two different questions. You're-- we protect you by looking at what you have that's valuable and try to figure out what can be protected and figuring out what you share and don't share, in terms of what your own posture is. But then, in terms of dealing with open source, I mean, that's normally-- by the time we talk to you guys, normally, the developers have run ahead. We're managing, what do you do about it?

In terms of-- are you talking about if you actually put your stuff out there as open source or if, just accessing open source, have you put yourself at risk?

AUDIENCE: Well, what it looked like is, you'll innovate and you'll create a-- you'll create on your own network, and you're adjusting all this data. But the training piece has already been provided in libraries. This is a cast. So in many ways, we're using these libraries in order to iterate our own algorithms. And then it becomes kind of confusing, listening to you, in terms of like, what exactly will I have [INAUDIBLE]?


AUDIENCE: Right? I mean, this is quite-- the other question I have, which I'm curious is, who was BlackBerry's lawyer?

NATHANIEL UPKUS: Lots of lawyers. [LAUGHS] And you can't pin it on a particularly lawyer.

AUDIENCE: I'd be the one that said, forget about the $30 million.

NATHANIEL UPKUS: Hindsight is 2020. I don't know-- I don't remember who was their lawyer then. I could name a firm, but I don't know if-- I don't want to put them on that case. It's hindsight is 20-20. There wasn't-- we didn't have the-- like they were the reason why everybody is now keen on this. But if you went back to 2005, people weren't as worried.

So they were the ones in the cross-hairs. And everybody's adapted since then or tried to. But they're-- back then, we didn't know that there was a small town in Texas where the judge-- the judge's kids are going up, and they're the firms that are representing the Americans against the foreign companies. Like you had some strange things happening in Texas and still do, where they are very plaintiff friendly. And you get people dragged into those court. And if you're not from around here, you've got a problem. And you know, that was a new problem back then.

All right, we're going to go back to the program.

SYDNEY YOUNG: OK. So the third stage of risk assessment-- I think a key message, that we're trying to communicate today, is think about your IP, and think about what your approach to managing your IP and your IP risk is going to be. So part of that is consciously understanding what we call your IP posture. And then having that understood will help you, not only on an ongoing basis and ongoing management of your IP, but also at times of meaningful revenue generation.

And just briefly, what we mean by IP posture, I will start from the bottom, passive. I don't think anyone here is taking a passive approach because you're here. So we don't need to talk about that one. But reactive would be, for example, you receive a letter telling you to stop using a certain trademark. And now you have to deal with it because you hadn't proactively looked at whether you'd be able to use your mark. That would be an example there.

Prudently defensive, this means taking steps to understand your IP, understand the IP in your industry but not really doing much else about it. Proactive, that would be applying to register patents and trademarks, actively enforcing your rights, monitoring the market to see if anyone's starting to infringe on your rights, and then enforcing that. And aggressive would be, probably in very, very technical industries, I'd say, that are highly competitive.

NATHANIEL UPKUS: Yeah. In terms of aggressive, some examples, just to give you a sense, so trolls, we hear about IP trolls, where people might have some copyright or patent or trademark where they try to assert against the world. So one is-- one that we've seen is, somebody who has a website for a-- a menu bar on a website, a patent for a menu bar on a website, where when you hover over the menu bar, the color changes. Everybody does that. But then they go out after everybody and then say, you're infringing my patent. And then some people might pay them some money. That's an example.

Another example, which is maybe less maligned but is still out there and still aggressive is, I've seen a couple of instances where very large companies-- so say company A patents a compound, a chemical compound, and patents another chemical compound. Company B patents a combination of compound A and compound B. They didn't invent either compound. They patent the combination. They say these two things work well together.

They've just been following what the other company was doing. And they're doing their own research. And they patent it. Then they sue company A. That has happened. I've seen it in the detergent industry. I've seen it in the pharmaceutical industry. And it's-- and why do they do it? It's unlikely they're going to win a court case on it, but you know what, sometimes it's leverage in some kind of commercial discussion that's happening. And it is real leverage.

Maybe there's a collateral entity that is involved that somehow is much more vulnerable because of that, because of some agreement they signed. And so some companies know that by having some IP right they can affect their future in the course of some commercial context. So it's aggressive but not illegal. And it's fair game in IP world.

And so it's worth being aware because there are companies that act like that. And they're the ones that we look to and say, oh, I love that company. They're doing that. And so it's good to keep in mind.

SYDNEY YOUNG: And just to tie it back to the beginning, every company's IP and every company's approach to managing their IP is different. What we've hoped we've helped to start to do today is think about your IP, understand it, and think about how you're going to approach managing it and whether you're going to take an offensive or defensive approach to risk management and how you would do both of those things, and how you can be thinking about getting ready for, if you haven't already, for investments in your company and the diligence fund that that involves.

NATHANIEL UPKUS: We've got some time. We've got 4 minutes, it looks like, if anybody has anything they want to raise.

AUDIENCE: How relevant is this to [INAUDIBLE]? I've got-- in companies where we did that, so we shipped software, we could vary the code or look at how we might be approaching their pats, based on how your software works. But in software as a service, where all my stuff is happening on my side and we can see it, how well--

NATHANIEL UPKUS: It's very situational. So I'll give you one example that's happening right now. A company, that is a SAS company, received a letter from a competitor. And the competitor said, you're infringing my patent. But they can't know that. They can't know that they're infringing. But they can know-- let's say there's 10 steps. They say, you're definitely doing eight steps. And then everything else falls or rise or falls on the other two. And the other two are the important ones.

But they hire some lawyer that says, I'm going to make their life miserable. And they send the letter. And then who-- what's the response to the letter? The company may have a reaction to it. They don't-- it's not what they want to be doing with their time. The board wants to know about it.

If they're doing it financing, they need to disclose it. The people on the other side might not be sophisticated enough to appreciate the level of risk. And regardless of whether they're 100% right, they can still be hauled into a court and then have to spend the money to prove themselves, which is a terrible situation. But it's real. And it seems-- and they've-- the Ontario government has done some consultations about IP and what their strategy should be, to protect Ontario companies.

And the story that keeps coming up, from winners and losers over time, has been, that's the IP experience that defines them, as some terrible situation where somebody unjustifiably went after them, got nowhere, but made them spend millions of dollars. So how relevant is it? It's hopefully not relevant at all. But you don't know if you're one of those unlucky few that's going to be hit. And so you want to make sure that you're at least aware of what's out there.

AUDIENCE: So to your point earlier, about IP posturing, and you're going through a different model. So I think the second one from the top was actively monitoring, exactly taking those proactive steps. So I'm just curious, from like a resourcing perspective, and could have-- under what function of a company does that normally [INAUDIBLE]? Maybe you can describe what that would look like in a resource.

NATHANIEL UPKUS: That's a really, really good question. So there's an international standard being developed on IP management. It's like a hotly debated document among different countries and what's the best way. It would never presume to say what's right in that situation. So there's no best practice. It really is about grafting process on top of your own workflow.

It could-- it needs to be-- there needs to be varied visibility at the sea level, for sure. It doesn't mean, though, that somebody at the executive needs to be the person managing it. It could be a technical person. It could be a legal person that has primary responsibility. It really-- there's no right answer. There's only a right answer for you.

Except you could talk it through and say, this is what makes sense for us, based on how we're working today. You just need to make sure you cover all the different things that they need to be thinking about. Some of them are technical, and some of them are legal. And so there is-- it is a tough one.

AUDIENCE: Yeah. And so, I guess, for a lot of smaller companies, where they don't, maybe, have researchers, it's [INAUDIBLE] partnerships.

NATHANIEL UPKUS: Yeah. And then, hopefully, some sort of self-help that you can run until you run into something, like even just having-- if it's just managing IP lists and knowing what you have as part of it, you know, this is what you need to do. Just gather this and we'll talk every so often. That can be part of it. Or it could be that you have an in-house person who, they're managing, and this is something they're comfortable with, as long as they have the ear of the right people.

AUDIENCE: Hi, a follow-up question about BlackBerry-- so it seems-- I mean, not directly on BlackBerry, but it seems that a lot of the other big players in the industry, their response with patentables-- and I'm wondering what your advice would be to startups or small companies that are trying to play in industries that have a-- have patent pools.

NATHANIEL UPKUS: Yeah, where these--


NATHANIEL UPKUS: Well, there's standards patents, which are the backbone of an area of tech, where you're supposed to be able to access them for a known price. So those are the patent pools we typically see. But then, you're right, there's a law, oftentimes these cross-license arrangements among the big players. And they all have thousands of patents. And they're giving them to each other. And how are you possibly supposed to compete?

You can't. You need to have-- and I think that people who look at patents have now gotten wise to the fact that having more patents doesn't mean you have better patents. It's-- I think you have to look at your company in the context of where they find-- where it finds itself. Are patents something that are going to be a problem for you, like just generally, is somebody doing what you're doing, which is going to make it hard for you to operate?

If there's something special that you've got and people-- then really question, is trade secret going to be enough? Or am I going to need to be able to fight fire here? And just be monitoring. Find a way to monitor in a way that you don't have to pay people on a regular basis, like some internals. But the great thing is that your tech people know the stuff better than any lawyers are going to know it. And so if you can empower them, then you get information as part of your workflow. But it's a challenging one for any small company.

AUDIENCE: And so like if Apple and Samsung have some big huge cross-links related to a smart home or like 5G or something, then should startups like worry about that and invest time and energy trying to--

NATHANIEL UPKUS: Depends if it's-- if they had a patent on what you're doing, yeah. If they don't, if you have something that adds onto it, then it would affect your strategy. You might say, well, I can't compete head-to-head with them, but I have something that's going to improve on what they're doing. And they're going to want to hear from me. And I have a patent, so they can't come into my zone unless they talk to me. And that would militate towards getting patents.

But if-- but on the flip side, if you're not worried about that, and you just want runway, and nobody sees what you're doing, maybe you don't. It really is contextual. One more?



AUDIENCE: What about data and more specifically, like analytics of data, whether it's like customer information or, you know, sometimes go into like more specific information about customers, their vendors, suppliers, their supply chain, where would that fall?

NATHANIEL UPKUS: So that-- oh, and a great question-- so data, we don't think of as IP, I guess, even as Osler, we-- even the way we line up because it's not actually-- it is IP in the big sense. It's more like trade secret IP, but it's not IP in the sense of copyright or trademark or patent.

There are rights over data in Europe. There's a certain database right that you can have that is interpreted over time. Really, that's more commercial information. And we have our data privacy team that-- it's a whole other world of a discussion that is not this, other than to say that if there's data, for example, training sets or customer information that you're building and that's becoming an asset of the company, then that would be a trade secret. And you'd want to make sure you're contracting to have all the rights you need in that data. And Sydney and I have done a fair bit, where we collaborate with the tech team on that. And I'm sure Christine has, too, yeah.

AUDIENCE: And I would just add to that, that the data [INAUDIBLE].

NATHANIEL UPKUS: That's more Christine's turf. [LAUGHS] All right, I think we're good. We're a few minutes off but only because of the questions. Wanted to answer them all. So I think we did our job and you guys can hopefully make it back to where you came from in the snow. And thanks, everybody, for coming.