I recently took part in a webinar hosted by EDC on Protecting Your intellectual Property in Global Markets. You can view it on-demand to learn more about intellectual property as well as hear from other panelists, such as: Grant Lynds, President of the Intellectual Property Institute of Canada; Fiona Hawkshaw from the Trade Commissioner Service; Norma Rossler, Owner and CFO of Blot Interactive and Red Meat Games; and Carolyn Carson, an Advisor with the Stakeholder Relations group at EDC. The webinar provided a great overview of intellectual property issues, especially as they relate to Canadian companies looking to go global.
Knocking off the knockoffs
As an IP litigator, it’s my job to help both domestic and international companies with a presence in Canada protect their hard-earned intellectual property (IP) assets. In short, I represent companies who’ve experienced the theft of their IP including through the production and sale of counterfeit goods. While knock-off designer handbags or other luxury items often spring to mind when people think of this issue, knockoffs can appear quite literally and regrettably in everything and anything.
Trade in Counterfeit and Pirated Goods, a 2016 OECD report, quantified the annual global trade in counterfeit goods at half a trillion dollars. What’s more, this illegal activity cuts across all industries. From food and pharmaceuticals to electrical products like hair straighteners and surge protectors, I’ve seen it all. A recent survey found some 99 per cent of trademark counterfeit USB chargers tested failed basic safety tests and all but three of the 400 tested presented a fire and shock hazard. There are construction boots that come with third-party certification stamps that are counterfeit right down to their substandard steel toes. And there are air bags that fail to deploy, or emit dangerous substances upon impact. As you can see, IP abuse and counterfeits don’t just hurt honest businesses—they put all of us at risk.
Oftentimes these illegal products can be traced to organized crime, and to the financing of terrorist activity. Their profits in no way contribute to R&D or the taxes required to support our infrastructure. And counterfeits don’t just swim in the consumer goods stream; they’re rampant in the intermediary products of B2B global supply chains as well.
What does that mean for the average Canadian business? Let’s say your company unwittingly incorporates an input that is counterfeit, and then you turn around and export your product. You could then be held responsible for the export and sale of a counterfeit product—even if you were completely unaware of the input’s lack of authenticity. It’s a very big problem, and no company is immune, including yours. This means it’s always a good idea to be aware of the companies you do business with and that feed into your supply chain.
On the other hand, if you have a product that’s being counterfeited, the loss to your company can be extreme. And it’s not just revenue loss. You could end up having to stand behind your warranty and replacement program for a counterfeit good. This results in two losses—the first being the lost sale, and the second being the cost of warranty and/or repair. There’s also the loss of goodwill and the hit to your brand’s reputation, not to mention potential harm to a consumer. If your trademark is on the counterfeit product, it’s your name that becomes associated with the problem, and your company that is investing the time, energy and resources in both proactive and reactive, internal and public-facing damage control.
Before you go global
Going global is the best way to grow your business, and for Canadian companies with a small domestic market, it’s almost a must. As with any other critical business decision, you need to take certain pre-emptive steps to avoid costly missteps.
Fellow panelist and President of the Intellectual Property Institute of Canada, Grant Lynds, says one best practice is to perform an internal audit of your company to determine what intellectual property you have that’s worth protecting, both domestically and internationally. Then be sure to register your trademark in all markets of interest, well before you venture abroad.
For Norma Rossler, owner and CFO of Blot Interactive and Red Meat Games, IP is part of the company’s DNA and is an intrinsic element in its overall business strategy. In fact, she’s become an expert at registering her own trademarks in Canada, the U.S., and the EU. Small businesses on a tight budget would do well to learn from her experience.
Before you sell internationally, invest the time to explore the market you’re entering; specifically, who’s already taking up space in your space. You may have registered your IP rights here in Canada, but that doesn’t mean those rights extend beyond our borders. Start by looking into your ‘freedom to operate’—the investigation required to ensure the commercialization, production, marketing, and use of your product, process, or service doesn’t infringe on the IP rights of other companies already operating in your export market of interest.
Even if your search reveals a valid patent or other IP protections exist in that country, with the advice of good counsel, you may be able to explore alternative commercial avenues. Perhaps you can purchase the rights to enable you to sell your product in that market, negotiate a co-existence agreement, or even license your product to them, or vice versa.
It’s critical to determine the robustness of your intended market’s IP enforcement regime. Take China, for example. As TCS trade commissioner Fiona Hawkshaw pointed out, while a vast quantity of counterfeit goods come from China, their IP landscape is undergoing rapid change for the better. They now have a comprehensive system of IP laws in place that generally align with international standards. Newly established IP courts in China have even awarded damages to international companies who have succeeded in their claims against domestic counterfeiting companies.
Be aware of Canada’s border regime with respect to IP infringement, as well as the rules and regimes that apply to your various export markets. And while you’re at it, take advantage of the protective measures available for free through the Canada Border Services Agency—they can assist you in the monitoring of counterfeits coming into or going out of Canada.
Never underestimate the value of your IP
When companies consider their most important assets, they usually tally up the tangibles like inventory, machinery, or buildings. But the fact is, a company’s intellectual property—or its intangible assets—are potentially vastly more valuable. Consider this: your IP is the cornerstone of your brand. Your registered trademarks, patents and designs can be licensed to create additional revenue streams for your company. For smaller or start-up companies, securing your IP rights and assessing a value to them can help attract investors, not to mention boost your valuation. Similarly, IP assets can be used as collateral for third-party lenders. By way of analogy, you wouldn’t leave your warehouse of goods unprotected. So take the time to learn more about the issues from the professionals featured in this webinar, and put a lock on your IP assets as well.