Asked to describe your company’s assets and warehouse inventory, machinery, land and buildings would likely be top of mind. But there’s another asset that’s potentially more valuable for the success of your business. It’s called intellectual property.
Intellectual property or IP is “intangible” assets that include everything from your brand logo and innovative technology to trade secrets and catchy business slogans designed to set you apart from your competitors.
Legally, no one can use your IP without your permission, but without proper safeguards in place, you could face increasing risks of misuse or theft in the markets where you do business.
“In today's knowledge-based economy, it is crucial that you use your intellectual assets strategically as you run your business,” advises the Canadian Intellectual Property Office (CIPO), the agency responsible for registering patents, trademarks, and copyrights in Canada to protect IP ownership and rights.
“If you protect them, they can give your business a competitive advantage over other players in the market.”
Here are five things you need to know about intellectual property
1. Benefits of protecting your IP
It’s simply good risk management to protect your IP through formal registration. This provides several important benefits, including:
- Brand building
Through patents and trademarks, you can create a unique brand. This will help differentiate your products and services from those of your competitors, which is an important tool for building a successful business.
- Creation of new revenue streams
You can leverage the value of your IP to create new revenue streams, like generating income by licensing another company to use a patent or a design in markets that you don’t plan to enter.
- Access to financing
You can use the value of your IP as collateral to obtain financing from your bank or other financial institutions to boost your cash flow.
2. IP and your international business
Determining if IP rights are already registered in a market can help you decide whether it’s a good fit for your company’s goods or services. It can also help you avoid infringing on another company’s rights or avoid investing in a market already monopolized by the competition.
By registering your IP rights in a new market, potential business partners and local investors will be able to identify you more easily.
“Many of the women entrepreneurs I meet don’t realize the importance of protecting their technology and/or trademark in different markets,” says Jennifer Cooke, director of Inclusive Trade and national lead for Women in Trade at Export Development Canada (EDC). “By not registering their invention, they risk missing out on potential opportunities in those markets.”
3. Dos and don’ts of international IP protection
- Do: Use confidentiality or non-disclosure agreements
Setting up your international operations may require working with agents, distributors or other business partners. If you need to disclose information to them about your IP, including unpatented technology or unregistered designs, make sure they sign confidentiality or non-disclosure agreements first.
- Don’t: Assume your IP is protected abroad
Registering your patents, trademarks or industrial designs in Canada protects them only in Canada. To protect them in other countries, you must register them there as well.
“We live in a branded world and no matter what sector your business is in, it can’t survive without significant brand awareness and exposure,” says Ashlee Froese, founder of Froese Law, a boutique law firm that focuses on cross-border branding, and corporate, commercial and intellectual property law. “This is why intellectual property laws lay the foundation of any successful brand.”
- Do: Clearly define IP ownership when outsourcing
If you outsource the design or the manufacturing of your products to another company, be sure to register your IP in any market where the other company will be selling those products. If you don’t, it could lead to disputes over IP ownership, as well as infringements on your IP.
“When you license your product, it’s really important to be as specific as possible,” says Cooke. “Are you licensing your company name, your technology or your brand as a whole? You need to be clear to prevent any confusion or misunderstandings down the road.”
- Don’t: Infringe on the IP rights of third parties
It’s paramount that you don’t encroach on the rights of third parties whose IP is part of your product or service.
“If you’ve licensed someone else’s technology as part of your product, the licensing agreement may state that you can only sell the product in specific countries. If you sell it elsewhere, you violate the agreement and could face penalties,” warns Cooke of the importance of understanding IP rights. “The other party could also cancel the licence, leading to all kinds of business disruptions.”
4. The elements of a licensing agreement
Before you sign a licensing agreement, you need to conduct due diligence on the other party or parties. This will help you determine their capabilities and intentions and make sure they fit with your overall business strategy. If they do, your licensing agreement should clearly identify several key factors, including:
- Roles and responsibilities of both parties: An agreement may include knowledge transfer or brand usage, for example, as well as other commitments. These should all be carefully spelled out.
- Percentage of royalties: Typical royalty rates range from 3% to 7% of a product’s wholesale cost. The rate depends on factors such as the importance of a patent to a product and the product’s market readiness. “Canadian businesses that want to remain competitive in the marketplace are well-served to utilize intellectual property laws as a business tool,” says Froese, one of the expert panelists on our webinar, IP strategies: Protecting your intellectual property, on April 22. “Ensuring a clear licensing agreement will help your company capitalize on your IP.”
5. Detecting and dealing with IP infringement
Infringement on your IP rights, both in Canada and abroad, can range from unwitting use of your registered trademark to outright theft of your patented technology.
To detect infringements, you need to be diligent and regularly monitor the innovations, new product releases and brand announcements relevant to your industry.
To resolve infringement issues, arbitration or mediation may be sufficient if you have an existing contractual relationship with the infringer. This means that any contract you sign should outline how disputes will be settled.
If there’s no contract, litigation to sue for damages may be necessary. It’s always recommended that a trade lawyer drafts and reviews any legal documents prior to partnering with international firms.