Cleantech and the protection of intellectual property

Kirk: Welcome to BIV Today, the daily podcast from the newsroom of Business in Vancouver. I'm Kirk LaPointe, Publisher and Editor in Chief. British Columbia's cleantech sector is emerging as one of the Province's industrial advantages. It's efforts throughout to mitigate climate change and produce a more sustainable economy that derives far less from fossil fuels and more from renewable forms in our environment. All sorts of impacts there but critical to its development are important questions about how to not only share the technology that emerges but protect the integrity of the discoveries and innovations through its intellectual properties. Our guests today are going to explore this with me. They're two experts in this field. Roch Ripley is a partner at Gowling WLG, the Head of the Vancouver office's intellectual property department and a member of Gowling WLG's hydrogen group, and Jeanette Jackson is the CEO of Foresight. It's a cleantech ecosystem accelerator. So they're joining me and Jeanette, by the way when we're recording this, is in Glasgow at COP26. Good to see you both.

Jeanette: Nice to see you.

Roch: Nice to see you as well.

Kirk: Jeanette, start me off here. Give me a little bit of a primer, give our audience a bit of a primer on the basic objectives of cleantech in the economy, and where are BC's emergent areas of excellence emerging out of?

Jeanette: Absolutely. Great question and thank you for having me. To start off, really the objectives of anything cleantech related is to help reduce the carbon footprint or impact on water when it comes to industry producing, using any products or services that we're accustomed to using. In terms of what that looks like, that can be preventative. It can be adaptive. As a society we now have some climate change that we need to manage and adaption technology as part of the cleantech will also be a part of that. In terms of where BC is emerging, it's quite a list. Given sort of the inherent economic drivers in our Province; forestry, mining, there's certainly some great developments happening in those two spaces. We're also seeing a lot of thought leadership in carbon capture, utilization of storage, hydrogen, which I'm sure Roch will touch on, water and transportation. There's actually, if you're familiar with the Ballards and the fuel cells, loop energy, a lot of great things happening on the transportation front as well.

Kirk: Is our presence in the resource sector a bit of a prod for us, and in British Columbia, to actually then champion cleantech?

Jeanette: Exactly. It's an opportunity, right? With groups like Tech and many others that are investing in solutions that can help them operate in a net zero capacity. It's coming down top down now so from a governance perspective the boards and the leaders in those organizations are saying, look, to compete locally we need to be green, and quite frankly, those investments are happening and we're seeing that now as opportunities for us to export more products and services as a result.

Kirk: Roch, when there is emerging technology and when there's investment and when there's a quick growth, as there really are in all of these, there emerge some very significant legal issues that these emergent firms need to watch. What's the big basket of issues that firms have to take care of here as they start?

Roch: Well, a lot of the issues we're seeing, like Jeanette mentioned, result from the growth we see in the industry. What happens when a company grows? You get more people. So you change from that small group of founders, that very intimately know each other, to a much larger group of people that haven't yet coalesced as a team. You have a lot more innovation because to get that funding you had to tell your investors what you were going to do with the money. Which inevitably means develop new products with that larger team and you have more impact. You get press. You start to take business from people, and that changes your risk profile, and that results in a lot of new legal issues. So on the innovation side, you've got to manage all this additional innovation with all these new people, and it's really hard if you just rely on the ad hoc processes that you developed when you were a small little firm. So we find a lot of clients benefit from having someone in, for example some kind of IP manager role, someone to liaise even if it's not a full-time inside counsel. That's quite a big jump but someone who's a point person there. You know, on the IP side, someone to sit in on meetings to see what all your new people are developing. How they interact. Education. Make sure that the people who come into your business are on the same page. They have the same culture. They know the direction the company's going. So again, on the intellectual property side, why are you doing, what are you doing? What kind of things do you historically protect? What are you doing with the IP? Is it to partner with new people? To give you a better footing when you're liaising or negotiating with much bigger companies than you. To prepare you for the next round of investment. Is it to cross-licence with people? Some kind of innovation committee, because when you scale you've suddenly got to make choices about what of all these great things you're creating, what do you protect? Because you always have limited resources. You've got an IP manager. You've got someone from business like marketing. You've got someone on the product side who knows where the product is going. Finally, on the exposure side, I mentioned the higher profile you get, you're going to start attracting attention from other people. So you want to be smart about doing searches, making sure you have freedom to operate, seeing what the patent and IP portfolios of other people are so that you don't tread on their property accidently and then, because you're suddenly a competitive threat, you might not be able to fly under the radar anymore. They're going to come after you.

Kirk: Yeah. That's a great series of issues to explore here and, Jeanette, I wonder whether you can pick up on this and talk a little bit about, in your experience in watching other companies grow and being part of an accelerator yourself, where do you notice the gaps right now in operational expertise that are perhaps prompting some of these legal vulnerabilities?

Jeanette: Yeah, great question, and I'm reflecting on my time as an entrepreneur as well, in the garage drafting patents and figuring out how we're going to protect our IP with such limited resources. So I've kind of identified four areas. The first is around the human resources and human resource management, both full-time employees, part-time staff and contractors. A lot of start-ups use contractors to fill gaps. You need to make sure that those contracts are outlining sort of who owns the IP, and you need to make sure that you have someone on your team that really has the capacity to manage HR related issues through the process, from beginning to end. Another operational area to reflect on is pilots. A company can't sell anything until they pilot the technology and often that process includes working with industry partners, other organizations that are also competing for space in the industry, and so you need to make sure that when you're doing pilot agreements that you have sort of the right elements of what your IP will be and how new IP developed will be shared. A third element that I have here is around project funding. Borrowing, for these early stage companies to get access to non-diluted capital, they need to disclose elements of their IP and so how do we ensure that that intellectual property is maintained and confidential through that whole process of being shared with the different folks that will be reviewing these applications for potential approval? Then the last bucket is outsourcing. Engineering firms play a critical role in the ability to scale up technology. So if a start-up has to outsource part of that process, again, you need to make sure that you have an understanding of who's going to own the IP and how you're going to be protected through the process.

Kirk: I want to stay with you on this one, Jeanette, but I also want Roch to add something to it as well. It's a curious tension, isn't it, in cleantech as it is with any emergent technology? Which is on the one hand you want to be competitive, you want to be first, you want patent as much as you can, you therefore want to protect that. But there is also a form of collaboration of sharing, to some degree, of working off each other's advancements in some of this technology. I wonder how much that tension is prevalent right now and whether the industry is, as a whole, coming to terms with that as it tries to protect what it needs to protect and shares what it needs to share? Jeanette?

Jeanette: Well, I know Roch has been doing a lot of IP work so he might have a bit of a better lens, but we supported over 325 cleantech companies last year and the reality is over 80%25 of them require some form of intellectual property in their portfolio to secure that strategic valuation, when they're going out and raising money, and engaging customers and trying to get the best price for the product or service that they're trying to sell. So on the flip side many people that are in sustainability, they want to give it away. They want everyone to adopt it. They don't want to be a barrier and so it's certainly a fine line and I think there's a thoughtful way, the way we look at it. There's short term intellectual property, sort of immediate protection, and then there's the big blue sky stuff. So as an organization you have to decide, in terms of your culture and what your long term play is going to be, how heavy do you want to lean in on the intellectual property and how long can you sustain it? As Roch mentioned, given the amount of capital that is required in the event an issue ever occurred, you have to protect your IP and that comes at a cost.

Kirk: Yeah. Roch?

Roch: I think that's right. To take a step back, I agree with you. There is a tension. There is a tension between how close you keep your cards to your vest and how much you disclose to further your business and further adoption of your technology. So there's really three ways you can protect the IP we're talking about. Or rather three things you can do. One is you don't protect it all. So you just go in there and you say, we're just going to talk to people. We're going to release it and effectively we're going to be okay if it goes into the public domain. The second way to do it is before you liaise with people, you do it contractually. You would, for example, with confidentiality agreements or you govern it with some kind of joint development agreement. You go in with another party and you say, regardless of whether it's patented or not, maybe it's not, but this is how we're going to divvy up the IP we create, and all the IP we bring to the table we're going to basically say you've got to use it in these ways, and that's our only recourse, by contract. The best way to do it is to head in with a contract and with patent protection. So you go into a joint development agreement. You have your patent protection filed before you go in so that there's no doubt as to what you entered the relationship with. You filed for it. There's not going to be a credible dispute after the fact, and if someone breaches the contract you're not stuck just suing for breach of contract, which can be difficult to succeed on, but you've got breach of contract and a patent infringement action which gives you a lot more leverage if you ever into a dispute.

Kirk: But, Roch, that sounds like, in a lot of ways, these kinds of factors come in at a certain phase of a company's development. What about firms that are so new that they don't necessarily have a good grip yet on what it is they're protecting and yet they also know that they need to reach out to other companies, other innovators, in order to essentially advance the technology they're trying to use?

Roch: Yeah, those are tough decisions. You've got to know, as an entrepreneur I think, what the most valuable part of your technology stack is and apportion resources appropriately. If you want to protect something with contract, for example with a confidentiality agreement, a confidentiality agreement itself is not particularly, it doesn't have to be super complex and it's something that, I think, is par for the course now if you want to do certain kinds of business. I don't think resources or being early stage is a reason not to protect your technology with that. Patent protection is more expensive but if you've itemized your technology stack, you've prioritized it, you've got at least 5 or 10 different innovations you want to protect and you know your crown jewels are 1 and 2, maybe you've just got to do it. It's what you've got to do to lay a solid foundation to go forward. You've got to be smart about it. These are difficult decisions. I recall I was watching a TV show, Silicon Valley, once where our protagonist, the team was getting VC Investment, or it was strategic investment by another company, and they were disclosing all their secrets in this meeting and I'm yelling at my television set, No! Stop it! Don't do this! Of course the TV show evolved, as I knew it would. I had to stop watching the show. It was too stressful. But you've got to be smart about it. You've got to know where your value is. There's no reason not to get at least some contractual protection in place and, if you've got to pay for the patent protection, you've got to do it.

Kirk: Jeanette?

Jeanette: Yeah, I was going to comment, building on that. Absolutely agree. Every dollar is key when you're starting out but you've got to make the right investments. We see that the more important thing is that the ventures understand how to communicate their technology, that engages the audience, the partners, the potential buyers, the investor community without disclosing everything. You can look at Simon Sinek, 'Start with Why'. If you can get people hooked on the why, and get emotionally engaged to the solution without disclosing the solution, you're 10 steps ahead. Then or course credibility of your team. Some entrepreneurs, they're starting first time. Everyone's wondering who they are. That's okay. That's great. We want to see that innovation community thrive and continue to put new people into the ecosystem. But if you surround yourself with a strong advisory board, it doesn't need to be formal to start, keep it light. We don't want those legal issues down the road either. But you can build credibility that you know what you're talking about, on how you communicate the technology, and with the team that you have surrounding you. That will put less focus on having to disclose your IP and more focus on the business.

Kirk: Okay. I think we've done a good job here in explaining what is lost here when we don't protect IP but I want to get, from each of you, a bit of the early advice that you provide firms about the security of their ideas. Roch, let me start with you on that.

Roch: Sure. The biggest issue I come across is people who have disclosed too much, inadvertently. Because one you've disclosed you generally can't put smoke back in the bottle. So we talk about keeping information confidential but you can't make something confidential once you've demo'd and told people how it works. The conference. We've talked about getting patent protection but you only get patents for something that's new and it's not new if you've told the world how it works. So a lot of what counts as a disclosure under law is counter-intuitive. Under US law, if you have a product and you publicly demo it, even if you don't think someone could figure out how it works, that is prejudicial. Jeanette talked earlier about pilot agreements, beta agreements, or how you may have to disclose elements of your IP for project funding. Well, there are beta tests and pilot agreements, where the agreements say you're going to be very careful about how you beta test this, so that you can beta test properly without shooting yourself in the foot. Controlling your disclosures, knowing how your technology is getting out there, getting that early advice so that six months, a year down the road, you don't find out you're in a worse position than you were.

Kirk: Yeah. Jeanette, apart from hiring a good lawyer like Roch, what kind of advice do you have?

Jeanette: Yeah, for sure. At the end of the day IP provides pretty critical strategic value for your business, if that's what you're going after, and if you give it away as Roch mentioned, someone else is going to take the opportunity from you. So it's still business, right? Climate is business, and now even more when you hear the trillions of dollars being invested in this space, I think it's only going to get more cut-throat. Something really simple that folks can do is look at the provisional patent applications. Now, Roch, you may have some different feedback on that but we leverage that, and a lot of our ventures leverage that, because it gives you a bit of a period to disclose a general idea of something, without it being published, and then you have 12 months to actually go forward, find the funding, to really get your final submission right. Because there are issues if you go too quickly, and it doesn't have the right sort of IP, and you're IP is constantly developing that there could be challenges there as well. So I think working with your legal team to leverage the right IP strategy can help you get the protection you need, save some money and give yourself a little bit of runway as you're navigating your business model and go to market strategy and all those other important things.

Kirk: Well you mentioned money and money is, of course, a big issue for a lot of start-ups. How significant is this protection as an expense?

Jeanette: For a provisional application?

Kirk: Mm-hmm.

Jeanette: It's about 1,000 bucks now plus the drafting. Roch?

Roch: Well the filing cost for a provisional is just a couple hundred dollars, then the drafting on top of it and the drafting can be, you've got everything from people drafting their own provisionals. So you could draft it as well as you would a full on application that you file early, with your risk profile changing from fairly high risk if you draft it yourself, to pretty low risk if you get a professional to do a full job on it. So the government fees on the provisional are relatively inexpensive and then your risk tolerance governs the rest of it.

Kirk: But I guess I want to loop back to the earlier part of our conversation where we talk about the necessity to have a little bit of an infrastructure in your company as you develop, and to make sure you have essentially, whether it's an expert on staff, or a contractor available to you around IP. Jeanette, in the end do you just have to build this in as part of your evolution as a company in order to ensure that you've got the proper protection for your IP?

Jeanette: Yes. If you cannot keep it as a trade secret, which is rarely the case, then you need to build that into your financial model and into the conversations you're having with anyone who's financing you. For sure.

Kirk: Yeah, and Roch, is it a significant amount that you have to invest here in order to keep that barrier up?

Roch: For trade secret protection? To keep things confidential? On the legal side, confidentiality agreements are relatively inexpensive. You do full joint development agreements, that can get expensive. That would get into thousands of dollars but confidentiality alone, typically is less than that. One really important thing that I do want to emphasize is it's not just the legal agreement. It's practically how do you control or enforce the legal agreements, right? Because if you ever have to enforce one of these legal agreements, a court or a judge is going to do more than just say, you have the right legal agreement. They're going to say, did you actually have cyber security in place? Do you have physical security? When you gave a tour did you let people just walk through your facility? Did people abide by the agreements? Did your employees, culturally, did you have an education program to tell them you can't go and talk to people about these things you're working on? So that part is also part of the cost and once you get that infrastructure in place, which I think is just part of running a good business, a benefit of trade secret protection is the marginal cost is low because you've got your foundation.

Kirk: Last area I want to explore with you and it has to do with, I think, long standing concern that this country is not all that effective at times in protecting it's intellectual property, and watches a lot of it move into other countries. It can't keep IP resident here. I want to get an early sense of status report from each of you on how well we're doing in the cleantech sector around IP and how much it really matters, do you think, in terms of sustainability and the strengthening of that industry as it emerges here in British Columbia? Jeanette, why don't you start.

Jeanette: Yeah, well BC set the tone in Canada with CleanBC. We have the most companies in the Clean 100 list in the country, by Province, and even Canada as a whole punches above its weight. At the end of the day, over 50%25 of the technology required to meet that zero climate target, either hasn't been developed or isn't implementable in its current state at the right cost for mass adoption. So there's greenspace out there and the reality is investment communities and industry partners, potential acquisition partners, they are going to look at IP as a box to check when it comes to attracting that type of investment, attracting industry to the Province to build and scale here, especially if that foundational IP started here and the team is strong enough for them to keep building here as well. We don't want them to take the team, or the IP, and run it out of Canada as well, or BC. So we're always navigating that. The opportunity's big.

Kirk: Roch?

Roch: I think we do a pretty good job, in BC here, protecting our cleantech IP. I think we could do a better job. I usually am reminded of that when I talk to a lot of clients from different countries. I mean if I talk to clients from California or other places in the United States there does, just sort of anecdotally, seem to be more of a history or culture, or knowledge or awareness of protecting that IP. I think they're quite successful because of it and I'd love to see that success replicated here. In terms of the importance of IP to sustaining the industry here, yeah, I think it's very important. You look at the history of our society. We do have a track record of leveraging technology to solve really big problems. You look at the last green revolution with agriculture. We never thought we could feed 7 billion people. It's only because of technology that we were able to do it. So I hope that in 50 years we'll look back and say, we didn't think we could control XYZ environmental problems. Climate change being probably the biggest one but technology let us do it. I think we're going to have to leverage technology created by the private sector. I think the private sector is driven by profit and I think IP helps increase profit because it protects your technology. So I do think it's really important for sustainability.

Kirk: Alright, well let's all get together in 50 years. See if you're right.

Roch: I look forward to it.

Jeanette: I'm in.

Roch: I'm in. Book it.

Kirk: Roch Ripley and Jeanette Jackson, it's been a great conversation. I really understood a lot more as a result of it. Thanks so much for your time today.

Roch: Thank you.

Kirk: I'm Kirk LaPointe, Publisher and Editor in Chief of Business in Vancouver. Thanks a lot for watching.