What Happens When a Franchise Agreement Ends, Part Two: Cancellation

By Richard Stobbe 

In some cases, a franchise relationship ends after many years of business. At the point of termination, the parties must wrestle with a number of issues, including customers, inventory, and (as we reviewed in Part 1) the impact of any post-termination restrictive covenants.

In other cases, however, the franchise relationship barely gets off the ground. Remember, Section 13 of the Alberta Franchises Act states that, if a franchisor fails to give a prospective franchisee a complete “disclosure document,” then the franchisee may rescind (or cancel) the franchise agreement and end the relationship. However, the franchisee must send the cancellation within certain time limits: either 60 days after receiving the disclosure document, or within 2 years after the franchisee is granted the franchise, whichever occurs first.

A failure to give complete disclosure allows the franchisee to cancel. So what does it mean to give complete disclosure?

Under the Act, a franchisor must make a number of disclosures, including (but not limited to):

  • Basic information about the name and address of the franchisor and the length of time the franchisor has operated the business;
  • The names of the directors, general partners and officers of the franchisor who will have management responsibilities;
  • Details on convictions for the previous 10 years relating to the franchisor and its associates, and any of the directors, general partners and officers of the franchisor;
  • Lawsuits or pending lawsuits involving misrepresentation, and unfair or deceptive acts or practices;
  • Details of any bankruptcy or insolvency proceedings, voluntary or otherwise;
  • The names, mailing addresses and phone numbers of all existing franchisees presently operating an outlet in Alberta under the same trade name as the franchise being offered, and the addresses and phone numbers of those outlets; and
  • Financial statements of the franchisor, among other information.

If proper disclosure is not made, a franchisee may cancel and recover any net losses incurred in acquiring, setting up and operating the franchised business.

In 1448244 Alberta Inc. v. Asian Concepts Franchising Corporation, 2013 ABQB 221 (CanLII), an Alberta court reviewed a franchisee’s claim that it did not receive proper disclosure. Specifically, the franchisee alleged that the disclosure document was deficient and therefore not ‘substantially complete’ within the meaning of the Act because the document was signed by only one director. The Regulations are clear that a disclosure document must include a certificate that is to be signed by at least two officers or directors of the franchisor. The fundamental question: Does the lack of two signatures to the disclosure document provided by the franchisor mean that it is not ‘substantially complete’ within the meaning of the Act?

Described another way: the substance of the disclosure document itself was not challenged in this case. The only complaint was that the certificate, which accompanies the disclosure document, was only signed by one, instead of two, directors.

The Alberta Court of Appeal reviewed this situation in 2008 in the Hi Hotel case. In that case, the certificate accompanying the disclosure document contained no signatures, and was therefore found not to be “substantially complete” within the requirements of the Act. In the Asian Concepts decision, the Court concluded that a disclosure document with only one signature was deficient, since it deprived the franchisee of a potential cause of action against a second signatory to the disclosure document. This finding opened the door for the franchisee to recover losses incurred in acquiring, setting up and operating the franchised business. The Court confirmed: “…the lack of misrepresentation, or the lack of reliance on representations, are irrelevant to the issue at hand. What matters is whether the disclosure document which was provided was substantially complete or not. And when the statute requires two signatories responsible for and liable for the required disclosure, yet only one is provided, the disclosure statement cannot be said to be ‘substantially complete.’ This is plain and obvious.”

What are the lessons? Franchisors in Alberta should take care to ensure that the disclosure document follows the strict requirements of the Act and Regulations, both as to form and substance. Seemingly minor gaps in compliance can result in serious consequences for the franchisor. Franchisees, on the other hand, will be reviewing compliance with a careful eye in situations where the franchisee wishes to extricate itself and end the relationship. Of course, both parties should always seek appropriate legal advice when entering into and concluding franchising relationships in Alberta.

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Enforcing Keyboard Patents (BlackBerry v. Typo)

By Richard Stobbe

A year ago, BlackBerry sued Typo Products LLC for patent infringement, based on the design of a snap-on keyboard. Typo’s physical keyboard was designed to attach to an iPhone, in order to mimic a BlackBerry-style QWERTY keyboard. The design was, in BlackBerry’s view, imitation that went beyond flattery and into infringement of U.S. Design Patent No. D685,775 and U.S. Patent No. 7,629,964 (Our original post Can BlackBerry Patent a Keyboard? gives more details).

A California granted a preliminary injunction (See: Ok… so BlackBerry Can Patent a Keyboard!) which took effect in April, 2014. Typo, after the preliminary injunction took effect, flouted the injunction by selling products, providing warranty replacements, and promoting products which were subject to the court order. In a judgement yesterday, the same California judge ordered Typo to pay BlackBerry $860,600 in sanctions, plus attorneys’ fees and costs incurred in connection with Typo’s contempt of court. See: BlackBerry Limited v. Typo Products LLC, Case No. 14-cv-00023-WHO for the full court order.The broader infringement issues have yet to be decided, and the litigation continues.

The interesting part of this case is how it illustrates the competitive use of IP protection for incremental improvements - in this case, an improvement to a basic QWERTY design (a design which has been around since the 1800s). It also illustrates the value of IP analysis in the competitive response by Typo. Their designers (undoubtedly working closely with patent counsel), have designed a “Typo 2″ product which is not caught by the original injunction.  

Calgary - 10:00 MST

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Open Source Software: The Costs of Non-Compliance

By Richard Stobbe

For software vendors, open source software (OSS) should be treated like a compliance issue - in the same way that corporate, securities or environmental compliance is a concern for many companies. The failure to manage compliance can be costly - just like it would be if a company ignored its environmental or securities compliance obligations. An environmental remediation order or a cease-trade order might result from compliance failures in those other areas.

What does it look like in the case of OSS compliance failures?

We need look no further than the Versata litigation which has spawned no less than 5 cases in the US:

  1. Versata Software Inc. f/k/a Trilogy Software, Inc. and Versata Development Group Inc. f/k/a Trilogy Development Group Inc. v. Ameriprise Financial Inc., Ameriprise Financial Services, Inc. and American Enterprise Investment Services, Inc., Case No. D-1-GN-12-003588; 53rd Judicial District Court of Travis County, Texas
  2. Versata Software Inc. v. Infosys, Case No. 1:10cv792, U.S. District Court, Western District of Texas
  3. Versata Software Inc. v. Ameriprise Financial Services Inc. et al., Case No. 1:14-cv-12, U.S. District Court, Western District of Texas, Case No. 1:14-cv-12, U.S. District Court, Western District of Texas
  4. XimpleWare Corp. v. Versata Software Inc., Trilogy Development Group, Inc., Ameriprise Financial, Inc., Ameriprise Financial Services, Inc., Aurea Software, Inc., Case No. 3:13cv5160, U.S. District Court, Northern District of California
  5. XimpleWare Corp. v. Versata Software Inc., Aurea Software Inc., Trilogy Development Group, Inc., Ameriprise Financial Services, Inc., Ameriprise Financial, Inc., United HealthCare Services, Inc., Waddell & Reed, Inc., Aviva USA Corporation, Metropolitan Life Insurance Company, Pacific Life Insurance Company, The Prudential Insurance Company of America, Inc., Wellmark, Inc., Case No. 5:13cv5161, U.S. District Court, Northern District of California (San Jose).
  6. In a nutshell, the lawsuits centre around the use of an open source component in Versata’s Distribution Channel Management (DCM) software. Versata originally sued Ameriprise for breach of a software license agreement for the use of the DCM software. In the course of that litigation between Versata and Ameriprise, it became clear that there were significant underlying issues related to an XML-parsing component called VTD-XML, distributed by XimpleWare

    While XimpleWare does offer VTD-XML under a “closed” commercial license, Versata had not obtained a commercial license for the component, and thus the component was governed by GPLv2, an open source license.  This in turn laid bare the gaps in Versata’s OSS compliance and raised questions of whether the DCM was a derivative, making the whole of Versata’s proprietary code subject to the GPLv2. XimpleWare, for its part sued Versata, Ameriprise and all of Versata’s DCM customers based on breach of the GPLv2 and patent infringement.

    We will be watching whether any judicial guidance comes out of this US litigation. In the meantime, it serves as a cautionary tale for software vendors: OSS compliance must be addressed with the same attention and diligence as a regulatory compliance issue.

Our group can assist with compliance and risk mitigation, leaving software vendors to focus on their business.

Related Reading: Lawsuit threatens to break new ground on the GPL and software licensing issues 

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An American Attorney in Canada (Part 3: Letters of Request in Patent Litigation)

By Richard Stobbe

A recent Ontario court decision (Arctic Cat Inc. et al. v. Peter Watson, 2014 ONSC 6874 (CanLII)) dealt with a foreign letter of request, or “letter rogatory” in a cross-border patent infringement case involving the invention of snowmobile prototypes. This type of request is used where a foreign (usually an American) litigant wishes to compel evidence and testimony from a Canadian witness. In this case, the testimony of the Canadian inventor was needed in the US litigation, but the Canadian individual falls outside the jurisdiction of US courts. The letter of request bridges that gap by requesting a Canadian court to order the individual to be provide evidence.

These are the factors which guide the court in Canada on whether to enforce such letters of request:

  1. the evidence sought must be relevant;
  2. the evidence must be necessary for trial and will be adduced at trial, if admissible;
  3. the evidence must not be otherwise obtainable;
  4. the order sought is not contrary to public policy;
  5. the documents are identified with reasonable specificity; and
  6. the order sought is not unduly burdensome, bearing in mind what the witness would be required to do and produce if the lawsuit was in Canada. 

After reviewing these factors, the Ontario court granted the letter of request, compelling the inventor to provide testimony in the US patent litigation.

If you need assistance with enforcing letters of request in Alberta, contact our Intellectual Property & Technology Group.

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Patent Litigation Trends in 2014

By Richard Stobbe

A recent report  shows interesting trends in US patent litigation:

  • 5,002 patent infringement cases were filed in the US in 2014, up from 2,641 filed in 2010;
  • Of those cases filed, the majority (61%) were commenced by NPEs (non-practicing entities), which is a neutral term to describe what are commonly referred to as ‘patent trolls’;
  • Of those NPEs, the overwhelming majority (82%) are PAEs (patent assertion entities), which can be defined as ”firms with a business model based primarily on buying patents and then attempting to generate revenue by asserting them against businesses that are already practicing the patented technologies;”
  • Most of this activity (patent litigation by PAEs) took place in the high-tech sector; in that sector, 83% of the patent litigation was related to NPEs of one kind or another, and involved claims against large (non-SME) companies. This figure shows the extent to which IT and software patents have become a fixture in a kind of parallel patent infringement economy, in which patent battles are not fought between market competitors (such as Samsung and Apple) but are essentially rearguard actions by legitimate businesses against entities whose only function is to assert patent rights.


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By Richard Stobbe

Who can resist an announcement laced with nerdy acronyms? Last week, the Canadian Intellectual Property Office (CIPO) announced the launch of a Patent Prosecution Highway (PPH) pilot agreement with the European Patent Office (EPO). The initial pilot will run from January 6, 2015, to January 5, 2018.

Canadians can gain access to accelerated processing of patent applications, where the claims have been found to be patentable by either the EPO or CIPO, based on a WO-ISA (Written Opinion of the International Searching Authority) or a WO-IPEA (Written Opinion of the International Preliminary Examination Authority ) or even an IPRP (International Preliminary Report on Patentability). Applications filed after January 6, 2015 are eligible to participate in the pilot agreement.

Note that applicants should be prepared to move quickly, since the response periods are shortened and any requests for an extension of time can result in the application being shunted out of the PPH program, in which case the applicant is SOL.

If you want to participate in the CIPO-EPO PPH, contact our IP&T Group.

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Not a utility patent, but a patent utility?

By Richard Stobbe

In a recent interview with The Washington Post, Jay Walker, founder of Priceline.com, has proposed a kind of neutral private-sector utility for the licensing of patents.

He argues that “We have spent trillions of dollars inventing things and 95 to 98 percent of all patents have yet to make their first dollar of licensing revenue”.

Take a small or medium-sized business as an example, let’s call it SME Corp. SME Corp. would use this so-called patent utility to create a profile of the specifications of its own products and services. The utility would contain a complete database of the over 2 million active patents in the USPTO, and would then apply “Big Data algorithms” to measure the specifications of SME Corp.’s products and services against the patent database. This method (which would presumably be patented by Mr. Walker) would identify “statistical relevance” between the products and services of SME Corp. and the claims in the patent database. From Mr. Walker’s description, SME Corp. could learn about other relevant technologies, including potential joint venture partners. A patent holder could generate licensing revenue by charging SME Corp. a “relatively small amount” under a “no-fault” license for use of those patents which overlap with SME Corp.’s products and services. This royalty amount would presumably be more than the patent is currently earning outside the utility. By paying the licensing fee, SME Corp., for its part, would incur a lower cost relative to the costs of negotiating a formal patent license agreement outside the utility, while at the same time neutralizing the patent infringement risk.

Sound complicated? 

The idea is an interesting one. Of course there are inumerable legal pitfalls, but if nothing else it illustrates the need for a more practical application of the patent system for small and medium-sized business.

Related Article:  Our System Is So Broken, Almost No Patented Discoveries Ever Get Used

Related Site: The United States Patent Utility

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Is “One Dollar” Sufficient for a Patent Assignment?

By Richard Stobbe

You may have read the recitals or introductory clauses in a license or an assignment agreement. In most cases, these clauses are just skimmed, if they are reviewed at all. In a recent decision of the US Federal Circuit Court of Appeals, the court reviewed the impact of the so-called “consideration” clause in an assignment. In patent law, an assignment is a contract transferring ownership of an invention by the inventors. This permits the assignee (the party getting the invention, such as an employer or a purchaser) to file a patent application as the applicant and owner of the invention. This assignment document is a contract, and so it must meet all the requirements of contract law. One of those requirements is that there must be adequate “consideration” - in other words, something of value that flows to each party. It can be money, or something else of value.

In MemoryLink Corp. v. Motorola Solutions. Inc., (Fed. Cir. Dec. 5, 2014)(No. 2014-1186, N.D. Ill.), the court looked at the consideration clause in the context of a patent infringement lawsuit. Memorylink sued Motorola for infringement of a certain patent. However, both Memorylink and Motorola were joint owners of the underlying inventions by virtue of an assignment which was signed by all the inventors. Memorylink attacked the validity of that assignment, arguing there was a lack of consideration.

In June 1998, all four designated inventors signed the assignment, transferring their rights to both Motorola and Memorylink. The assignment begins with this statement: “For and in consideration of the sum of One Dollar to us in hand paid, and other good and valuable consideration, the receipt of which is hereby acknowledged..

There are variations of that clause - sometimes the sum of one dollar, sometimes five or ten dollars - but they are all designed for the same purpose: to remove the argument that the contract should fail for lack of consideration. In the context of the assignment and transfer of valuable patent rights, is one dollar truly sufficient to create a legally binding contract? 

Citing decisions that reach back to the 19th century, the US court said, yes, nominal consideration will suffice to support a contract, including an invention assignment. Courts will not inquire into whether or not the consideration listed in the agreement is adequate, unless the amount is “so grossly inadequate as to shock the conscience.” In this case, the amount of $1.00 did not shock the court’s conscience. The original 1998 assignment was valid, and Motorola was a joint owner of the patent. As a joint owner, Motorola could not be liable for infringement of the patent.


Calgary - 07:00 MST 

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Copyright in House Plans

By Richard Stobbe

A couple, the Ecklunds, approached Oakcraft Homes, a custom home-builder. Based on their discussions, Oakcraft prepared a house plan and gave a copy of the plan to the Ecklunds. The couple later took that plan to a rival home builder, Toscana Developments. Toscana used Oakcraft’s house plan without confirming whether the Ecklunds had the rights to that plan.

When Oakcraft discovered that Toscana had copied and modified the original plan, it sued both Toscana and the Ecklunds.

The law of copyright in Canada is evolving to deal with changes in technology, but there are still some cases where copyright intersects with the age-old professions of architecture and house-building. In the recent case of Oakcraft Homes Inc v. Ecklund, 2013 CanLII 41981 (ON SCSM), an Ontario court addressed the question of who owns a house plan for copyright purposes.

Copyright is, at its most basic, simply the right of an author to make copies of his or her original work. The Copyright Act tells us that copyright subsists in every original literary, dramatic, musical and artistic work. The term “artistic work” includes paintings, drawings, maps, charts, plans, photographs, engravings, sculptures, works of artistic craftsmanship, and architectural works. The term “architectural works” also has a specific meaning in the Act: it means “any building or structure or any model of a building or a structure.” So we can be confident that, in general, a house plan is subject to copyright protection in Canada.

I say “in general” because copyright law is clear that in order to be subject to copyright protection, the house plan must be original. “Originality” forms the foundation of copyright. In order to engage copyright protection, a house plan need not be unique in the sense that the design elements are new to the world. But the design must be the product of skill (what the court describes as “aptitude, proficiency, know-how, knowledge, and practical experience”) and judgment (described as “wisdom, ability to assess or compare various possibilities in order to choose from them”). In other words, the design cannot be a purely mechanical exercise.

From this case, we can take away some important practical points about copyright in house plans, and (perhaps more importantly) the risk of infringement of copyright:

  • The court noted that: “Today, that art has become a science by the use of computer aided design (CAD). Can it be said that the use of CAD thereby converts ownership in the original work to the computer software technician operating the machine or the computer software programmer who programmed the CAD software? The answer is obvious….NO!” Just because a house plan is rendered with software, that does not defeat copyright that may subsist in the plan.
  • What about marking the word “Copyright” or use of the © symbol on the plan itself? Does that make a difference? The court was clear that: “The failure to mark ownership on the plan does not … defeat the right to copyright.”
  • In this case, Toscana said they were not aware that the plans were subject to copyright. They had, apparently, not inquired in any detail, and were, in the court’s words “wilfully blind to determining where the plans came from and who authored them. They chose not to ask knowing that their potential customer was not the author.” Innocent infringement is still infringement and according to the court: “The fact that a defendant may have no knowledge that copyright subsists in a work or that the work was unmarked does not constitute a valid defence.”
  • As a result, the builder and the couple were jointly and severally liable for the damages awarded for copyright infringement.

Calgary - 11:00 MST

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USPTO Patent Eligibility Guidelines

By Richard Stobbe

What is eligible to be patented in the US? This week the U.S. Patent and Trademark Office (USPTO) released Interim Eligibility Guidance on patent subject matter eligibility. In this document, the USPTO summarizes the instructions for examiners on the following categories which are exceptions to patent eligibility:

  • abstract idea,
  • natural phenomena, and
  • product of nature.

This guidance is intended to synthesize the latest Supreme Court decisions in Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013), Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) and Alice Corporation Pty. Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014). According to the document, it supercedes prior instructions issued by the USPTO on this topic and “offers a comprehensive view of subject matter eligibility in line with Alice Corp, Myriad, Mayo, and the related body of case law, and is responsive to the public comments received pertaining to the March 2014 Procedure and the June 2014 Preliminary Instructions.”

This Interim Eligibility Guidance is effective on December 16, 2014, and applies to all applications filed before, on or after December 16, 2014. The USPTO is seeking public comment on this Interim Eligibility Guidance - comments must be received by March 16, 2015.


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Copyright Implications of a “Right to be Forgotten”? Or How to Take-Down the Internet Archive.


By Richard Stobbe 

They say the internet never forgets. From time to time, someone wants to challenge that dictum.

In our earlier posts, we discussed the so-called “right to be forgotten” in connection with a Canadian trade-secret misappropriation and passing-off case and an EU privacy case. In a brief ruling in October, the Federal Court reviewed a copyright claim that fits into this same category. In Davydiuk v. Internet Archive Canada, 2014 FC 944 (CanLII), the plaintiff sought to remove certain pornographic films that were filmed and posted online years earlier. By 2009, the plaintiff had successfully pulled down the content from the original sites on which the content had been hosted. However, the plaintiff discovered that the Internet Archive’s “Wayback Machine” had crawled and retained copies of the content as part of its archive.

If you’re not familiar with the Wayback Machine, here is the court’s description: “The ‘Wayback Machine’ is a collection of websites accessible through the websites ‘archive.org’ and ‘web.archive.org’. The collection is created by software programs known as crawlers, which surf the internet and store copies of websites, preserving them as they existed at the time they were visited. According to Internet Archive, users of the Wayback Machine can view more than 240 billion pages stored in its archive that are hosted on servers located in the United States. The Wayback Machine has six staff to keep it running and is operated from San Francisco, California at Internet Archive’s office. None of the computers used by Internet Archive are located in Canada.”

The plaintiff used copyright claims to seek the removal of this content from the Internet Archive servers, and these efforts included DMCA notices in the US. Ultimately unsatisfied with the results, the plaintiff commenced an action in Federal Court in Canada based on copyrights. The Internet Archive disputed that Canada was the proper forum: it argued that California was more appropriate since all of the servers in question were located in the US and Internet Archive was a California entity.

Since Internet Archive raised a doctrine known as “forum non conveniens”, it had to convince the court that the alternative forum (California) was “clearly more appropriate” than the Canadian court. It is not good enough to simply that there is an appropriate forum elsewhere, rather the party making this argument has to show that clearly the other forum is more appropriate, fairer and more efficient. The Federal Court was not convinced, and it concluded that there was a real and substantial connection to Canada. The case will remain in Canadian Federal Court. A few interesting points come out of this decision:

  1. This is not a privacy case. It turns upon copyright claims, since the plaintiff in this case had acquired the copyrights to the original content. Nevertheless, the principles in this case (to determine which court is the proper place to hear the case) could be applied to any number of situations, including privacy, copyright or personality rights.
  2. Interestingly, the fact that the plaintiff had used American DMCA notices did not, by itself, convince the court that the US was the best forum for this case.
  3. The court looked to a recent trademark decision (Homeaway.com Inc. v. Hrdlicka) to show that a trademark simply appearing on the computer screen in Canada constituted use and advertising in Canada for trademark law purposes. Here, accessing the content in Canada from servers located in the US constituted access in Canada for copyright purposes.
  4. While some factors favoured California, and some favoured Canada, the court concluded that California was not clearly more appropriate. This shows there is a first-mover advantage in commencing the action in the preferred jurisdiction.  

Get advice on internet copyright claims by contacting our Intellectual Property & Technology Group.

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Intellectual Asset Management Best Practices – Part 2


By Richard Stobbe

In Part 1, we looked at three important steps in starting an intellectual asset management process within your organization. “Intellectual assets” can include the know-how and intellectual capital within your organization together with registered and unregistered intellectual property (IP), inventions, trade-secrets, patents, copyright-protected works, trademarks, industrial designs, and other forms of IP.

As we reviewed in Part 1, intellectual asset management starts with (i) an internal IP audit, coupled with (ii) internal education about the strategic importance of intellectual property within the organization; and (iii) the organization should establish a screening process, to weigh the various factors that influence how to innovate through “make versus buy” decisions.

In Part 2, we take a deeper dive. An organization can be innovative without being commercially successful. In other words, there is often a gap between the creative process of innovating, and the successful commercialization of those innovations. By implementing the steps in Part 1, an organization becomes more sophisticated in its treatment and analysis of intellectual assets, and an organization will develop a culture in which IP is understood and valued. That helps close that gap. However, this does not necessarily mean that intellectual assets will become an engine of economic value. That requires the development of additional skills and competencies within the organization. Consider the following “next steps”:

  1. Strategic Alignment: Let’s be clear. IP should not drive the organization. Rather, the strategic goals of the organization should inform the intellectual asset management strategy. Ensure that IP policies are aligned with the strategic goals of the organization. Consider the organization in question: is this a university? A government research lab? A medium-sized for-profit business, or maybe it’s a growing business with markets in multiple jurisdictions.
    • How is success measured for this organization?
    • Are there immediate goals of raising capital?
    • Entering a new international market?
    • Attracting investors?
    • Making a strategic alliance or partnership?
    • Should the IP policy reflect a defensive or offensive position?

    All of these organizations will have different strategic goals and must ensure that their intellectual asset management strategy reflects and supports the overarching goals of the organization. IP is only one piece of the puzzle.

  2. Gap Analysis: An IP audit is focussed primarily on taking an inventory of the organization’s intellectual assets. A ‘gap analysis’ is the next step: it’s an assessment of what’s missing from the organization’s IP toolbox. What does the organization need in order to achieve its goals? And how can the gaps in the organization’s IP inventory be filled, considering the strategic goals involved. This internal analysis can lead to an external, “outward looking” review. What is available in the marketplace, either through acquisition, in-licensing or strategic partnership? See also the “make versus buy decisions” discussed in Part 1. In connection with the analysis of “gaps” in the IP portfolio, look at any gaps in the paper: How do employment agreements and consultant agreements deal with IP ownership issues and confidentiality? Do vendor or supplier agreements need to be bolstered to address IP issues? Perhaps standard-form end-user licenses or service agreements need to be reviewed to ensure that the treatment of IP is in alignment with the organization’s overall intellectual asset management policies.
  3. IP Exploitation: As mentioned above, an organization may be adept at innovating, and it may have a sophisticated process of cataloguing internal IP, and even assessing the gaps in that portfolio. IP commercialization and exploitation is the process by which an organization extracts value from its intellectual assets. This can be from product sales, or from out-licensing of IP-protected services and processes, as well as licensing relationships and franchise agreements, joint ventures and cross-licensing. An organization must understand the steps to market, whether through its own sales channels, or through distributorships or resellers. And the process of bringing innovations to market will be supported by a well-designed intellectual asset management system.

Richard Stobbe is an IP lawyer, trademark agent and Certified Licensing Professional. To discuss the importance of intellectual assets within your organization, contact Richard Stobbe in our Intellectual Property and Technology Group.

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Copyright: Canada’s Notice-and-Notice Provisions

By Richard Stobbe

The made-in-Canada notice-and-notice provisions are coming in January, 2015. 

You may recall that in June 2012 the Copyright Modernization Act was passed by Parliament. Portions of the new copyright law came into force in November 2012, while the so-called notice-and-notice procedures were held back, to give the government time to consider regulations. (See: New Copyright Act Becomes Law… In Part) Through an Order in Council, the government has elected to proceed without regulations.

The new provisons legally require Internet intermediaries, such as ISPs and website hosts, to take certain actions upon receiving a notice of alleged infringement from a copyright owner.

Specifically, ISPs and hosts are required to forward notices, sent by copyright owners, to users whose Internet address has been identified as being the source of possible infringement. The intermediary must also inform the copyright owner once the notice has been sent.

The Copyright Modernization Act sets clear rules on the content of these notices. Specifically, they must be in writing and state the claimant’s name and address, identify the material allegedly being infringed and the claimant’s right to it, as well as specify the infringing activity, the date and time of the alleged activity, and the electronic address associated with the incident.

Related Reading: Government Backgrounder

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Update: PIPA Revived

By Richard Stobbe

As a follow-up to our earlier post (PIPA on Death’s Door), Alberta’s Personal Information Protection Act (PIPA) has been resuscitated. The Supreme Court of Canada (SCC) has granted a six-month reprieve, to allow the Government of Alberta to pass amendments to PIPA. An amended bill was tabled in the legislature last week. The amendments attempt to strike a balance to address the constitutional issues that were the cause of the Act’s downfall in an SCC decision more than a year ago.

Stay tuned.

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CASL 2.0: The Computer Program Provisions (Part 3)


By Richard Stobbe

The CRTC has released guidelines on the implementation of the incoming computer-program provisions of Canada’s Anti-Spam Law (CASL). Software vendors should review the  CASL Requirements for Installing Computer Programs for guidance on installing software on other people’s computer systems. Remember, the start-date of January 15, 2015 is less than 2 months away. Here are a few highlights:

  • CASL prohibits the installation of software to another person’s computing computer - which includes any device, laptop, smartphone, desktop, gaming console, etc.) in the course of commercial activity without express consent;
  • Downloading your own app from iTunes or Google Play? CASL does not apply to software, apps or updates that are downloaded by users themselves; 
  • Maybe you still use a CD to install software? CASL does not apply to “offline” installations by a user;
  • Where implied consent cannot be relied upon, then express consent is required. The guidelines state the following:

“When seeking consent for the installation you must clearly and simply set out:

  1. The reason you are seeking consent;
  2. Who is seeking consent (e.g., name of the company; or if consent is sought on behalf of another person, that person’s name);
  3. If consent is sought on behalf of another person, a statement indicating which person is seeking consent and which person on whose behalf consent is being sought;
  4. The mailing address and one other piece of contact information (i.e., telephone number, email address, or Web address);
  5. A statement indicating that the person whose consent is sought can withdraw their consent; and
  6. A description in general terms of the functions and purpose of the computer program to be installed.”  


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Indirect Patent Infringement in the US

By Richard Stobbe

In a recent decision in the US (Riverbed Technology, Inc. v. Silver Peak Systems, Inc.), a company was found liable for indirect patent infringement even though the infringing features of its product were disabled when the product was sold. In the post-sale period, customers enabled the infringing features.  This was enough for the court to find the company liable for indirect infringement.

This case arose between two rivals in the wide area network market - Riverbed and Silver Peak. Riverbed sued Silver Peak for infringement of a number of US patents. Silver Peak counterclaimed, alleging infringement of three US patents. A jury trial eventually returned a verdict in favour of Silver Peak. Silver Peak asserted indirect infringement against Riverbed with respect to two patents. Specifically, the jury concluded that Riverbed “contributorily infringed” one of the patents and “induced infringement” of the other.

Riverbed challenged these conclusions, arguing that there was insufficient evidence of customer use of the accused features in the United States. Riverbed pointed out that the feature of its product that was allegedly infringing - a feature known as SDR-Adaptive - was disabled before the product was sold to consumers in the US. No-one disputed that fact. However, through user forums on the Riverbed website, as well as product manuals issued by Riverbed, consumers were taught how to enable and use this feature.

The court reviewed this surrounding evidence and concluded: “In sum, Silver Peak has offered evidence of Riverbed’s high sales volume, an instruction manual describing how to activate SDR-A, and several blog entries on Riverbed’s U.S. support forum from people who used their Riverbed devices with SDR-A enabled. Taken together, this circumstantial evidence is sufficient…” Riverbed was found to have indirectly infringed the Silver Peak patents.

Lessons for business? Canadian companies selling into the US should be aware that sales of their products may form the basis for liability in the US if used by customers in the US in infringing ways.

Related Reading: A Company May Be Liable for Indirect Infringement Where Its Customers Enable an Infringing Feature Even Though the Company Sells Its Product with That Feature Disabled

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The Troubles with Patent Inventorship

By Richard Stobbe

Determining inventorship is answering the question: who contributed enough to an invention to be named as an “inventor” on the patent application? It’s critical, as reviewed by my colleague Shohini Bagchee in her article Whose Invention Is It Anyway? – Some Thoughts on Patent Inventorship and Ownership.

Although the US case Ethicon Inc. v. U.S. Surgical Corp. (135 F.3d 1456) is not a new decision, it’s worth reviewing since it neatly illustrates the troubles that can arise. In Ethicon, a first inventor, Dr. Yoon, obtained a patent covering a certain surgical device. The patent contained 55 claims. Yoon granted a license to Ethicon. On the stregth of this license, Ethicon turned around and sued its competitor U.S. Surgical for infringing two of the claims in the Yoon patent. U.S. Surgical in the course of preparing its defence found that Mr. Choi had contributed to the invention and he should have been named as co-inventor on the Yoon patent.

Mr. Choi contributed to only two of the 55 claims - two claims which were not at issue in the infringement action. In its defence, U.S. Surgical sought - and the court granted - an order that Mr. Choi be added as a co-inventor to the patent. Even though Mr. Choi had contributed to a small percentage of the overall invention (and had contributed to claims that were not at issue in the lawsuit), his status as a co-inventor permitted him under US law to grant a license to the whole patent. Ethicon’s patent infringement lawsuit was dismissed after Choi granted a retroactive patent license to U.S. Surgical.

Lessons for business?

  • Internal IP policies and invention-disclosure protocols should be designed to capture all inventors who contributed to inventorship.
  • In joint research agreements or joint development agreements, don’t ignore co-inventorship issues.
  • Remember that invention-disclosure and inventorship should dovetail with invention assignment agreements, as well as the IP provisions in employment agreements and consultant agreements.
  • Ensure you are getting legal advice regarding inventorship as it relates to the jurisdiction in which you are filing your patent application.
  • Remember that the law in Canada and the US differs on this point: A co-owner’s interest in a co-owned patent can be licensed without the consent of the other owner in the US and there is no need to account to the other owner for licensing revenue; but in Canada the patent cannot be licensed without the consent of the other co-owner.

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Two Privacy Class Actions: Facebook and Apple (Part 2)


Courtesy of Apple

By Richard Stobbe

In Part 1, we looked at the B.C. decision in Douez v. Facebook, Inc.

Another proposed privacy class action was heard in the B.C. court a few months later: Ladas v. Apple Inc., 2014 BCSC 1821 (CanLII).

This was a claim by a representative plaintiff, Ms. Ladas, alleging that Apple breached the customer’s right to privacy under the Privacy Act (B.C.), since iOS 4 records the location of the “iDevice” (that’s the term used by the court for any Apple-branded iOS products) by surreptitiously recording and storing locational data in unencrypted form which is “accessible to Apple”. The claim did not assert that this info was transmitted to Apple, merely that it was “accessible to Apple”. This case involved a different section of the Privacy Act (B.C.) than the one claimed in Douez.

The Ladas claim, curiously, referred to a number of public-sector privacy laws as a basis for the class action, and the court dismissed these claims as providing no legal basis. The court did accept that there was a basis for a claim under the Privacy Act (B.C.) and similar legislation in 3 other provinces. However, the claim fell down on technical merit. It did not meet all of the requirements under the Class Proceedings Act: specifically, the court was not convinced that there was an “identifiable class” of 2 or more persons, and did not accept there were “common issues” among the proposed class members (assuming there was an identifiable class).

Thus, the class action was not certified. It was dismissed without leave to amend the pleadings.

Apple’s iOS software license agreement did not come into play, since the claim was dismissed on other grounds. If the claim had proceeded far enough to consider the iOS license, then it would surely have faced the same defences raised by Facebook in Douez. As the judgement noted: Apple argued that “every time a user updates the version of iOS running on the user’s iDevice, the user is prompted to decide whether the user wants to use Location Services by accepting the terms of Apple’s software licensing agreement. Apple relies on users taking such steps in its defence of the plaintiff’s claims. The legal effect of a user clicking on “consent” or “allow” or “ok” or “I agree” would be an issue on the merits in this action.”

Any test of Apple’s license agreement will have to wait for another day.

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Two Privacy Class Actions: Facebook and Apple


By Richard Stobbe

Two privacy class actions earlier this year have pitted technology giants Facebook Inc. and Apple Inc. against Canadian consumers who allege privacy violations. The two cases resulted in very different outcomes.

First, the Facebook decision: In Douez v. Facebook, Inc., 2014 BCSC 953 (CanLII), the court looked at two basic questions:

  1. Do British Columbian users of social media websites run by a foreign corporation have the protection of BC’s Privacy Act, R.S.B.C. 1996, c. 373?
  2. Do the online terms of use for social media override these protections?

The plaintiff Ms. Douez alleged that Facebook used the names and likenesses of Facebook customers for advertising through so-called “Sponsored Stories”.  The claim alleges that Facebook ran the “Sponsored Stories” program without the permission of customers, contrary to of s. 3(2) of the B.C. Privacy Act which says:

“It is a tort, actionable without proof of damage, for a person to use the name or portrait of another for the purpose of advertising or promoting the sale of, or other trading in, property or services, unless that other, or a person entitled to consent on his or her behalf, consents to the use for that purpose.”

Interestingly, this Act was first introduced in B.C. in 1968, even before the advent of the primitive internet in 1969 .

Facebook argued that its Terms of Use precluded any claim in a B.C. court, due to the “Forum Selection Clause” which compels action in the State of California. The court accepted that, on its face, the Terms of Service were valid, clear and enforceable. However, the court went on to decide that the B.C. Privacy Act establishes unique claims and specific jurisdiction. The Act mandates that claims under it ”must be heard and determined by the Supreme Court” in British Columbia. This convinced the court that Facebok’s Forum Selection Clause should be set aside in this case, and the claim should proceed in a B.C. court.

The class action was certified. Facebook has appealed. Stay tuned.

Next up, the Apple experience.

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CASL 2.0: The Computer Program Provisions (Part 2)


By Richard Stobbe

In Part 1 we looked at some basic concepts. In Part 2, we look at “enhanced disclosure” requirements.

If the computer program that is to be installed performs one or more of the functions listed below, the person who seeks express consent must disclose additional information. This disclosure must be made “clearly and prominently, and separately and apart from the licence agreement”. In this additional or enhanced disclosure, the software vendor must describe the program’s “material elements” including the nature and purpose of the program, and the impact on the user’s computer system. A software vendor must bring this info to the attention of the user. This applies if you, as the software vendor, want to install a program that does any of the following things, and causes the computer system to operate in a manner that “is contrary to the reasonable expectations of the owner”. (You have to guess at the reasonable expectations of the user.) These are the functions that the legislation is aimed at:

  • collecting personal information stored on the computer system;
  • interfering with the owner’s or an authorized user’s control of the computer system;
  • changing or interfering with settings, preferences or commands already installed or stored on the computer system without the knowledge of the owner or an authorized user of the computer system;
  • changing or interfering with data that is stored on the computer system in a manner that obstructs, interrupts or interferes with lawful access to or use of that data by the owner or an authorized user of the computer system;
  • causing the computer system to communicate with another computer system, or other device, without the authorization of the owner or an authorized user of the computer system;
  • installing a computer program that may be activated by a third party without the knowledge of the owner or an authorized user of the computer system.

If the computer program or app that you, as the software vendor, want to install does any of these things, then you need to comply with the enhanced disclosure obligations, as well as get express consent.

There are some exceptions: A user is considered to have given express consent if the program is

  • a cookie,

  • HTML code,

  • Java Scripts,

  • an operating system,

  • any other program that is executable only through the use of another computer program whose installation or use the person has previously expressly consented to, or

  • a program that is necessary to correct a failure in the operation of the computer system or a program installed on it and is installed solely for that purpose; AND

  • the person’s conduct is such that it is reasonable to believe that they consent to the program’s installation.

Remember: These additional provisions in CASL which deal with the installation of software come into effect on January 15, 2015, in less than 3 months. An offence under CASL can result in monetary penalties as high as $1 million for individuals and $10 million for businesses.

If you are a software vendor selling in Canada, get advice on the implications for automatic installs and updates, and how to structure consents, whether this is for business-to-business, business-to-consumer, or mobile apps. There are already more than 1,000 complaints under the anti-spam provisions of the law. You don’t want to be the test case for the computer program provisions.

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