Brian: Hello and welcome to our webinar which we are holding in recognition of World Intellectual Property Day. This year's theme of "Innovate for a Clean Future". My name is Brian Lee. I am here, well virtually, with my WLG partner, Roch Ripley. Roch heads our Vancouver office's intellectual property department and I manager our firm's China practice, although I am based in Vancouver. Before we start, I want to just mention a few housekeeping matters. In addition to showing you our obligatory legal disclaimer. There will be an opportunity to ask questions by using the Q&A button on your screen. We will collect these questions and try to answer as many as we can fit during this session, at the end. You can also use this button to alert us if you have any technical difficulties and one of our technicians will try to help you out. This webinar counts for 1 hour of CPD credits. If you are a lawyer you should be able to find this webinar in your Law Society's CPD list. With that out of the way, let's get started.
The storm is coming. Or is already here. Roch and I have helped Canadian Cleantech businesses protect their IP for many years. While we've been through many ups and downs with our clients we've never seen the kind of economic challenges like those we are now facing during this COVID-19 pandemic. We are awash in COVID-19 news and there are predictions of a deep recession. Businesses are being forced to make difficult cost control decisions. But where does a leader cut costs? Will there be layoffs? Shutdowns? Bankruptcies? Does it even make sense to spend scarce money on something as abstract as IP? I would venture that these are questions that keep Cleantech business leaders up at night. These people are probably asking whether history will look back at them as leaders who made the right decisions, and rose up to the challenge, or made wrong decisions which hurt the company, or worse, led to its demise. Roch and I are here to propose that despite unprecedented challenging economic conditions it remains critical for Cleantech businesses to continue to protect their IP rights. There are ways to do so, economically and responsibly, without losing rights. I will talk about the importance of weathering the storm, and we'll explain why protecting IP rights is key to financial success, and failure to do so will lead to a permanent loss of valuable rights. Roch will share tips and strategies to economically, and responsibly, manage Cleantech IP in these challenging economic times.
Our objective today is to make you, as leaders of your organizations, feel reassured that you are indeed making the right decisions to invest in protecting your businesses innovations, and to give you information that you need to make those decisions. As is captured well in this cartoon, it's important to remember that the climate change fight will remain after COVID-19. As dire as our current COVID-19 battle is, it is just a preliminary round and we will still need to take on the main event, that is climate change. The UN inter-governmental panel on climate change has declared that climate change is a defining issue of our time and we are in a defining moment. The IPCC has calculated a CO² budget for future emissions that limit global warming to less than 2° Celsius. However, about half of this maximum melt has already been emitted by 2011. In October 2018, the IPCC issued a special report on the impacts of global warming of 1.5° Celsius and concluded that limiting global warming to 1.5° would require rapid and far reaching transitions in land, energy, industry, buildings, transport and cities. Now with everyone sheltering in place, and our economy slowed to a crawl, the current Coronavirus pandemic is on course to deliver the steepest annual fall in CO² in history, with a larger reduction in emissions expected in 2020, and seen even during the Second World War. Projections suggest that global CO² reduction of 16 hundred million metric tonnes, compared to 2019, which would roughly equate to a 4% fall in global emissions. Even if emissions do end up 4% lower in 2020, and last year, such a reduction still would not even come close to bringing the 1.5° global warming target, set out in the Paris Agreement, within reach. That is why it remains important for us to continue developing innovations and solutions to address climate change.
Governments around the world have committed to fighting climate change with legislation to curb emissions and with investments to develop cleaner solutions. In Canada, the Federal government in 2016 launched a joint Federal, Provincial, Territorial working group on Cleantech and produced a working plan called the Pan-Canadian Framework on Clean Growth and Climate Change. This yielded a number of commitments in the 2017 budget including allocating 1.8 billion dollars for investments in clean technology. In fact, clean energy is already one of the fastest growing sectors in the Canadian economy. In 2016, the cleantech sector account for 3% of Canada's GPP, employing more than 55,000 people in more than 800 businesses. Cleantech Canada is a global cleantech leader, ranking fourth overall in the global cleantech index, scoring highly with a strong research ecosystem and a skilled force, but scoring low on access to investment. Not having access to investment is a common complaint for many Canadian tech companies. But there are some resources available especially for cleantech companies. One good source for these resources is Industry Canada's Clean World Hub, which describes itself as a whole of government focal point for clean technology focused on companies and pro tips, coordinating programs and tracking results. Services are available to firms of all sizes in the clean tech space and across all sectors of the economy. It's website provides some useful links including clean technology programs and initiatives. I poked around and found some interesting programs including the Sustainable Development Tech Fund, which supports the development and demonstration of pre-commercial clean technologies, and which was renewed for 400 million dollars over 5 years in budget 2017. The Strategic Innovation Fund, which is not limited to clean tech per se, but provides financial support to projects which will improve Canada's innovation performance while providing benefits to Canadians. Finally, the Innovation Solutions Canada Challenge Stream. Which is specifically directed to very early stage businesses and provides up to $150,000.00 to develop approvable concepts, and up to one million dollars to develop a working prototype. There are many other programs and resources here and I encourage you to check out this Clean Growth Hub webpage.
Another interesting resource is WIPO GREEN which is an online platform for technology exchange that was established in 2013. WIPO stands for the World Intellectual Property Office. The purpose of WIPO GREEN is to connect providers and seekers of environmentally friendly technologies. It assembles in one place, technologies at all stages of development, from prototypes to marketable products. These technologies are available for licence, collaboration, joint ventures and sale. All technologies uploaded to the WIPO GREEN database remain the property of the rights holder and it's up to the rights holder, and the collaborating parties, to structure agreements in the manner they feel is most appropriate. So there are some quick facts on the WIPO GREEN website, which are interesting, right now being over 3,800 listed technologies, over 100 partners and 1,500 users, and over 700 connections were made. There is no registration fee but users must apply for membership.
In 2017 the Canadian Intellectual Property Office, or CIPO, conducted a detailed study on clean tech patenting trends in Canada, and produced a very dense 82 page paper titled, "Patented Inventions In Climate Change Mitigation Technologies". In this paper CIPO defines clean tech, at least for pattens, as technology that helps resolve or mitigate environmental impact, or conserves the natural environment resources. This paper observed that the Canadian clean tech sector scores low in global IP benchmark with only 21% of SMEs holding patents. Most clean tech patents in Canada are in fact assigned to foreign multi-nationals. The leaders in clean tech filings in Canada are in order, Samsung, Panasonic, Qualcomm, LG, Fujitsu, Huawei, Toshiba and ZTE. These companies are from the US, Japan, China and Korea. These nations are the leaders in global clean technology exports and indicated interesting correlation between a nations innovation and their global competitiveness. Unfortunately, Canada's global competitiveness has been declining with it's global market share of clean tech exports actually declining from 1.6% in 2008 to 1.4% in 2015. The CIPO paper also made a number of interesting observations that support my proposition that there's a direct correlation between patenting and commercial success. I quote, "World first innovators patent more frequently. Firms that patent infrequently tend to be imitators. SMEs that patent are more likely to be high growth firms. Firms that are aggressive innovators have higher profits. Finally, while some inventions are not patented, patents are obtained for almost all economically significant inventions." I suggest that these observations support the proposition that for we, as Canadians, to be competitive globally in the clean the sector, we must continue to innovate and protect these innovations. The CIPO paper also featured a number of patent landscape maps that provide visual representations of patent trends in Canada. To the right of your screen are two patent landscape maps of particular interest. The top map showing clean tech patent applications filed around the world with at least one Canadian inventor and the bottom map showing international clean tech patent families that are linked to Canadian businesses and institutions. These maps indicate that Canadian researchers and businesses are particularly active in the areas of buildings, clean energy enablers, renewable energy, transport and traditional energy. To a lesser extent they are active in smart grids and carbon capture. In terms of clean tech patent filings in the Canadian patent office, 75% of clean tech patents are focused on six areas. Advanced materials, energy efficiency, energy storage, biofuels, fuel cells and hydrogen and transportation. These filings are growing in geo-thermal, nuclear, energy storage and conventional fuels. They're large but slowing in solar, transport and energy efficiency and are slowing in hydro and marine power. When concerning statistics for Canadian clean tech innovators is that between 2011 and 2015 global clean tech patent applications grew to more than 217,000. However, Canada's global share of patent applications fell during this period from 1.6% to 1.3%, which represents a 19% decline in Canada's global clean tech patent filings over that period. I attended a CIPO presentation a few days ago, also on clean tech and IP, and learned that China has over 40% of patent ownership in global clean tech IP. In terms of patents filed between 2000 and 2015. In contrast, Canadian applicants only accounted for about 1.1%. In fact patent filings from Chinese applicants are growing rapidly at a 10 year count down annual growth of 30%, compared to the rest of the world at just 4%. It is clear that Canadian innovators are falling behind globally in protecting innovative clean tech IP. I suggest we both need public and private sector investment in our clean tech sector to remain relevant.
Now I have to admit that talking about patent trends and abstract statistics does not feel particularly relevant when the economy is shutdown and we're likely heading into a major recession. I'm sure all of us has friends and colleagues and clients whose economic situation is already grim. Businesses have laid off staff, cut travel and delayed other spending to preserve cash. I'm sure that many tech companies have been thinking of delaying patenting their innovations or abandoning their existing rights to reduce spend. While thoughtful targeting of deadwood IP is a useful a strategy, and which Roch will talk more about later, generally speaking, delaying filing for patent protection is risky and may lead to a permanent loss of rights. That is because all patent offices today are based on a first to file system. There are no more first to invent patent offices. Some of you may remember that some jurisdictions, including Canada and the US, granted patent rights based on the earliest invention date. The system of first to invent may have been the reason that popularized the practice of mailing a date stamped letter to yourself with a description of your invention to prove your invention date. However, Canada switched from first to invent to first to file in 1989, and the US did so more recently in 2013. In a first to file system a patent is granted to the first application to file regardless of the invention date. Delaying filing for patent protection for your invention is risky because someone else developing the same innovation, independently, may beat you to the patent office and get rights to that invention. Delaying patent filing may also cause other problems. Especially when the innovation is incorporated into a commercial product. Most patent offices in the world require innovations to absolute novelty in order to be granted a patent. That means that the invention cannot be publicly disclosed before the patent application is filed. Some countries, like Canada and the US, offer a grace period. But generally speaking it is not advisable to delay patent filing, especially if the innovation will be incorporated into a commercial product, or otherwise made publicly available. The exception is when they innovation can be kept as a trade secret. In that case, one may be able to protect the IP without the need for patent protection. However, trade secret protection is only available if it is not to possible to reverse engineer the technology. Generally speaking, it is practically impossible to protect an innovation that forms part of a product that is sold or otherwise made public ally available. Now there are some exceptions. Ones that I can think of include technologies that are in internal manufacturing processes, software that runs an internal server, or compositions where the key ... cannot be reversed engineered from the final product. But generally if your innovation is incorporated into a machine, or a product, that has access by the public, it will be difficult to protect by trade secret. In a nutshell, if you can't protect your innovation by trade secret, and you haven't filed for patent protection or you filed for inadequate patent protection, you have effectively donated your technology to the public domain. I've been involved in a number of a financings and acquisition deals, with tech companies, where I've seen deals killed because our IP due diligence has revealed inadequate IP protection on innovations.
So I'll conclude my presentation with a repeat of my opening comments. Even though we are going through some challenging economic times, and it is tempting to stop spending on IP, it remains important to continue protecting your innovations. It is important to do so for the financial success of your organization and it is important to Canada's part in our global fight against climate change and our efforts to limit global warming. Thank you for listening to my talk. I'm going to hand over to Roch and we'll field some questions at the end. Roch?
Roch: Thanks, Brian. I'm just going to take control back. So, I'll talk about various ways to manage IP spend and what's the context in which I'm going to be talking about this. Well, first, today's April 30th. I know it feels like April 300th, but it's important to remember that the crisis will pass. No one knows exactly how long it will be. 12, 18, 24 months, but eventually, it will. When it does you'll be in a position with your company to go and seek additional financing to go and attempt to get acquired, or ... or to further commercialize your technology. You definitely don't want to be in a position where techniques or strategies you've applied during this crisis period will come back to haunt you when this crisis passes. The context is going to be, yes, we're in a crisis now, cash flow is uneven, it can be uncertain. It's prudent to conserve it, if only for the sake of liquidity, but eventually it will end and we'll go back to a time when you need to commercialize these rights and protect your technology.
Another aspect of the context, I think, in the clean tech sector is a lot of times, most of the times, you are dealing with tangible products. You're manufacturing fuel cells, or batteries, or electric vehicles. Stuff you can touch. I think this has two implications. One, for tangible products, it's generally speaking, a little easier to get a patent then for more abstract inventions. For example, if you are comparing patenting challenges with respect to a fuel cell that you can touch, or a battery management system that is hardware that is installed in a vehicle, that faces a different set, and often a less complex set of challenges, before the patent office than something more abstract like general purpose software, or more intangible ... that we have tangible product that is being shipped often means that it's a little more amenable to patenting. Also, if you're shipping tangible product, like Brian mentioned earlier, you have to think if someone can buy and touch my product, can they also reverse engineer it? If they can, and you want to protect that product, then you're really in the patent realm.
Clean tech is very export oriented for this country. In 2017 exports exceed domestic revenues ... different jurisdictions then proprietary rights in the jurisdiction your technologies being used in is what you need as a legal backstop to prevent someone from copying you there. You're going to have, because you're sending product to all these different place, different laws in different jurisdictions. Which can make understanding how strategies you may employ that work in one jurisdiction. It can make it important to understand why that strategy may be applied or may not work in a different jurisdiction. And for clean ... tangible products is that you have high capital costs. That means you have significant investment to protect. Those who are able to compete with you may very well be larger companies that have their own patent portfolios. That means they may be more likely to have done due diligence, to be aware and of and to respect yours, and they may see your portfolio, should you have one, as a reason to partner or invest with you as opposed to simply copy you. That's the general context that's laying the framework for what I'm going to talk about next.
The first think I'm going to talk about are patent grace periods. Brian said a couple of slides ago that what you want to do as a best practice is apply the patent before you publicly disclose, or commercialize, your invention. And that is absolutely correct. Sometimes you find yourself in a non-ideal situation. That is, after all, why Brian and I are webcasting from our houses. So if you find yourself in a non-ideal situation you may have to rely on grace periods which are exceptions to the rule that you can't have disclosed your invention before applying to get a patent. That sounds great. There are some places where you can, for example, sell your product, publish a white paper on your product and told customers about your product, and still apply and get a patent after you've done that. So what are the problems? What are the issues with grace periods? Well, there are certain things you have to remember. First of all, most countries don't have them. That's very key. So if you're starting from a position of I want to rely on a grace period, the presumption should be your market where you want to sell, or have an IP right, doesn't enjoy a grace period and you want to do your diligence to see if that market in fact has one that you can rely on. Those that do have them, importantly, Canada has one. The United States has one. Australia has one. So the United States, in particular, very large market, great. Have them in varying lengths. Those three countries I just mentioned, each of them has a 1 year grace period. But there are other countries that offer grace periods, if they offer one at all, of differing lengths. For example, 6 months. So even if you hear that a country has a grace period it's important to know it may not have a 1 year grace period. Some jurisdictions that offer them, it's important to remember, only offer them under extenuating circumstances. Europe also a very large market. They do offer a grace period but only for, I should say only but most commonly, the most commonly extenuating circumstance is for breach of trust. So for example, you may have entered into a confidentiality agreement with somebody, that other person may have breached the agreement leading to a disclosure of the invention. That can sometimes allow you to still file your invention in Europe within 6 months of the first disclosure. So there you've got a nuance between different jurisdictions. 6 month grace period as opposed to 1 year and not a blanket grace period but one that applies only for breach of trust. In some places, when you want to rely on the grace period, you have to positively tell the patent office, when you file an application in that jurisdiction, that you want to rely on that grace period. For example, Japan and Mexico and have grace periods, but if you don't tell the office when you actually file your Japanese or Mexican patent application that you want to rely on the grace period, you won't receive the benefit of it. Some jurisdictions, as well, require you to supply evidence of disclosure so that the office knows exactly what disclosures you're trying to accept from the absolute novelty law. One more thing to remember is that if you want to rely on the benefit of a grace period, within the duration of the grace period, you may have to actually file a patent application in the country in which you're seeking protection. As I'll talk about in a couple of slides there are various filing strategies. You don't have to file an application directly in the country you want protection in right away. You can start, for example, with what's called a provisional application, or a PCT application. A provisional application, in some jurisdictions, may be enough to secure the benefit of the grace period in that jurisdiction. In others it may not be. So that's another nuance to keep in mind if you're going to rely on this. While the best practice, like Brian said, is to file before you disclose or commercialize, in which case you can entirely forget about the last 2 minutes of my talk, if you don't find yourself in that position for whatever reason, and you want to rely on grace periods, remember to do your diligence.
Provisional applications, which I just mentioned, are a relatively inexpensive tool you can use to secure a filing date. Why do you want to secure a filing date? Because you need to show that your invention is new in order to be granted a patent. The question arises, new relative to when? The answer is your filing date. So that sounds great. You can use a provisional application which at the US only costs a couple hundred US dollars, in terms of an office fee. To file, that's an order of magnitude less than a non-provisional US application. So you can defer the cost of filing a non-provisional application, save a couple of thousand dollars at least, up front. The cost of that, because everything has a cost, is deferring patent examination and grant. In the normal course, if you file an application in the US, you're waiting about 12 to 16 months before you get an office action, before an examiner actually picks up your application and tells you whether or not he or she thinks your invention is worthy of being granted a patent. If you start with the provisional application, which allows you to defer costs for up to a year, you're adding a year to that 12 to 16 months. So you're looking at 2 plus years before you even get your first office action. Whether or not that is too long for your purposes is something you need to decide if you're going to start the process with the provisional application. Now, you can take a provisional application and use it to defer a patent filing costs. Another thing you can do, if you're more risk tolerant, is actually draft a provisional application in a way that it does not fully claim all the potential embodiments, or fully describe all the potential embodiments of your end product that you might end up selling in a year or two. That is pretty risky and that is something which, although I find in the market place is common, I would advise you to consider very carefully before adopting. For example, I've got a little arrow here that shows, let's say at day one, you file a US provisional. I just picked some kind of technology, let's say a battery management system, you've got a prototype. You file a US provisional to save costs that describes a particular prototype, a particular example of your battery management systems. Your provisional is on file. You then, within the 1 year, sell that battery management system and at the end of the 1 year cost deferral period, apply the patent of battery management system in Europe. And that non-provisional application you flush out the battery management system a little bit. For example, perhaps your prototype talked about a battery management system in conjunction with only a particular type of battery, battery chemistry. It may not even have been the battery chemistry was particularly important. But that was the prototype you had and that's what you described in the application. Now, you sell that within the 1 year period. For your non-provisional application, if you broaden that and you make clear, well you know what, my invention is not limited to a particular type of battery chemistry. In fact, the battery chemistry is irrelevant. The battery management system works for any type of battery that satisfies other criteria. Will your European invention, in that aspect, be valid? I think that's an open question. There's a very real risk there that may come up during due diligence that, because there's not a match between your non-provisional application and your provisional application, the difference between those two applications renders your own sale, and that intervening priority here, we call it, anticipatory of your non-provisional European application. There's a risk there you have to consider if you're going to try to be a little more aggressive and defer costs by not drafting your provisional application to be identical to your non-provisional application. Now to give you an idea of how this intersects with the grace period I just talked about, if you were filing a US application there, because you would be within the 1 year grace period, your earlier sale during that priority year would not serve to potentially invalidate your later patent. There's a nuance depending on the markets your involved with. Depending on the nature of your product and depending on your risk tolerance.
PCT applications are another kind of application. You can use to further defer costs. If you file a provisional application, wait the full year, you can file a PCT application which is a type of non-provisional, at the end of the year which will further defer costs for a year and a half. Now, PCT applications in and of themselves, I would say are fairly expensive to file. It's a very common cost there because filing costs depend on length. You can spend around $5,000.00 to file a PCT application. That buys you another year and a half of cost deferral. It also buys you an initial patentability search and opinion from probably a Canadian examiner. So, you get value there. It's not inexpensive but it can be not inexpensive considered, I would say, in isolation, but it can be good value in contrast to what may have otherwise been your filing strategy. If you want protection, for example, in let's say the United States, China and Europe, and you were going to file those applications tomorrow, when you factor in official fees and translation fees, it would be pretty easy to get to a filing cost there of $20,000.00. So, if you're in a place where you want to preserve your right in those jurisdictions, but you can't afford to file in those jurisdictions right now, the PCT would allow you to do that. Another benefit of the PCT filing is, earlier I said that in order to invoke the benefit of the grace period, sometimes you actually have to file in the country in which you are seeking protection, while the general rule, the PCT application is deemed to be that kind of application. If you are relying on the grace period you may be able to do so with a PCT.
Here's another example I have here to build on the earlier one I just gave, again, let's start at day 1 with the US provisional application. In this case, at the end of the 1 year, you draft your non-provisional application, which is the PCT. That is a fully fleshed out application that describes all the various combinations and permutations of your battery management system. After that PCT is filed you then sell the BMS. After that you file in Europe. 2 and a half years from your first filing there, because your PCT was on file before your sale, you're not going to have an issue with validity. At least as a result of your own sale.
Extensions of time are also something that you can take advantage of. In particular, now, the COVID-19 crisis has caused a lot of IP offices around the world to offer COVID related extensions of time. The Canadian office, for example, as a general rule, is giving a blanket extension of all deadlines until, right now, as of Victoria Day. They have said they are willing to extend that further although no announcement in that regard has been made yet. The US PTO has various COVID related extensions that are available as of June 1st and patent offices, intellectual property offices around the world, are talking to each other. So you'll find that offices, where you may be interested in filing in, I would not be surprised at all to find they've offered a COVID related extension. You may have to pay a bit of money for it, you may not. You may have to declare that you've been negatively affected by COVID, you may not. So the nuances can vary, but as a general rule, there are extensions right now available. Even without COVID, again it's a general rule, extensions are often possible. There may be no official charge or, if there is one, usually it's on the order of hundreds of dollars. They may let you defer cost that can often be on the order of thousands of dollars, at least for a few months. A few months may, in this time of crisis, may be what you need.
Culling, like Brian mentioned, is also a technique you can use to manage your IP spend. You can let applications you've already filed lapse. You may not pay a maintenance fee. You may not respond to an office action. Often what happens is you have a particular product that you may have launched several years ago. At the time you launched it you filed a series of applications covering a number of different inventions embodied by that product. In the years that have passed, perhaps that product has taken off like you've desired, or perhaps you just found that your business has evolved so that that product is not as important as it was 5 or 6 years ago. Now can be a great time to revisit your portfolio, and to see what your carrying costs for that portfolio are, and decide is that cost still justified by the benefit I receive. Now, that applies to applications that are already filed. You can also choose, of course, to cull by not filing an application in the first place. You can combine this with a deferral of a release of a product or service that you were going to file for so that you can still preserve the right to file later, if you so desire. You may be able to commercialize your technology without publishing it. Now, in some jurisdictions the rule is that your technology or a publication is only citable against you, if it is in fact public. If you've got a business model, or you can pivot for a short time to a business model where you can commercialize without publication, you may be able to commercialize and generate a bit of revenue without necessarily prejudicing your patent rights down the road. So, an example here is you've got a software based invention. Instead of shipping software to end users perhaps you can offer it as a service, where the black box of exactly how the software is outputting data, is done on your owner servers. Or you have a manufacturing process where, instead of licencing that process out to the world, you're now performing it yourself and not showing anyone outside the confidential confines of your company how that process or method is being carried out. In that case, it may be possible, at least for a while to commercialize and to patent after. Now, a very important caveat here, I would be very, very, very careful about using this, particularly in the United States. The US has what I would call a relatively unique set of jurisprudence about secret sale and commercialization so I would always presume there that a commercialization starts your 1 year grace period. Also, for clean tech, this may not be feasible for certain types of inventions. If your business model is predicated on selling millions and millions of electric vehicles you probably will not be able to commercialize that without publishing or disclosing the electric vehicle. It may work, it may not. That's something that's going to depend on your particular circumstances. If you do employ strategy like this I would certainly recommend you do some research on grace periods, to start, and figure out, okay, let's presume that the first commercialization was in fact a disclosure to be cautious, and jurisdictions that have a grace period, let's file before the expiry of that grace period. Be extra cautious and to rely on the benefit of that grace period should we require it. I'll end this section on patents to say one thing that, in my opinion you can't defer, is papering ownership. This is something Brian mentioned during financings, you do due diligence. This comes up all the time. Everyone will always check, do you have your ownership ducks in a row, so to speak. Is all the IP that is supposed to be owned by the company in fact owned by the company. The time to take care of this is now. Even if your employee created it, even if you paid for it, you want it papered. You may not own the invention if the employee created it. That's doubly true if you've commissioned a consultant, at arms length, to create the invention for you. This can be very difficult to rectify after the fact. Relationships can fray. The company can, on the verge of a financing, the person who you have a frayed relationship with may see this as a opportunity to exert some leverage, and demand a payment much higher than they would demand right now. I would recommend not deferring papering ownership. To always take care of that at the outset.
Moving on from patents to trade secrets. Trade secrets are really the flip side of patents whereas patents are a registered right where you have to disclose your invention in order to get the right trade secrets. Or an unregistered right, where the entire way in which you get protection, is by keeping the information secret. You can protect technical information by keeping it secret. You can also protect non-technical information by keeping it secret. You may protect business plans or customer lists, for example. Stuff that you can't patent can still be protected as a trade secret. In order to benefit from trade secret protection, you need to take reasonable steps to keep your information confidential. So for example, confidentiality language in employment and consulting agreements, sufficient IT and physical security systems, appropriate confidentiality policies at work, so people know in fact that they're supposed to keep information confidential, and they in fact do so. If you don't do this you may find that a court doesn't recognize your claim to confidentiality of information. So someone may misappropriate your information. You go to enforce and say they've stolen my confidential information. That person comes back and says, "You know what? The plaintiff is saying that information is confidential, they never treated it as confidential, and in fact it wasn't confidential." And the court agrees with the person who's taken the information. That's something you want to avoid. Once you've got a framework to protect confidential information in place, so for example, once you've got employees who are bound by proper legal agreements, working on VPN's that are properly secured, the marginal or incremental cost to keeping additional information confidential is low. This is a benefit to using trade secrets as opposed to patents. With patents, in order to protect something you need to prepare and draft and file an application, examined. That costs thousands of dollars. Once you've got a trade secret or confidentiality framework in place, the incremental costs of protecting additional information, is effectively zero. Just to reiterate a point I alluded to earlier, if you want to rely on this protection it's important to get that confidentiality or trade secrets framework protection in place from the outset now. Because you can't put smoke back in the bottle. Once information has lost it's quality of confidence, as a general rule, you're not going to be able to persuade someone that you've been able to successfully make it confidential again. So you want that framework in place now, after which you may be able to rely on it for at least certain aspects, technology and other business information.
I'll move on now to trademarks. For a clean tech company I think trademarks are important but I would say often you're not going to find them as important as protecting the proprietary nature of your technology because you're selling and exporting to sophisticated buyers of technology who are going to do their due diligence. The marks are important for reputational purposes but if someone's going to spend millions and millions of dollars on a plant, or tens of thousands of dollars on the first in a series of equipment purchases, chances are you're dealing with a sophisticated buyer that is really going to do some due diligence on how good your technology is and how good it performs. Now, with that being said, trademarks are certainly still something you want to protect and, ideally, you apply to register your trademarks before you begin using them. That is your best case, best practice. If that's not possible there are various fallback positions. One, you can delay applying for registration. Unlike with patents, use actually strengthens rights in marks. So you won't find that your own use has prejudiced your ability to file. The risk here, and now it gets to what Brian mentioned earlier about a third party potentially filing for your patent while you've delayed filing, or sorry, filing for an invention very similar to yours while you've delayed filing your own application, is you may find after you started using your mark, a third party has filed, perhaps in bad faith, a mark that is confusingly similar to yours. In a lot of jurisdictions trademarks are also first to file which means that person would be entitled to the mark, even in jurisdictions like Canada and the US where we have a first to use regime for trademarks. It can be very expensive, and annoying, to get your mark registered by virtue of your earlier use, if you have a later filing date. In some common law countries, like Canada, usually rely on common law rights that are rights that arise from use alone. Now, these are pretty limited. Both geographically, like I said they're limited to certain countries, and even in those countries they are limited to areas in which you can establish you have good will in your marks by virtue of use. They're hard to establish and they're hard to enforce. I would, as a blanket rule, recommend registration. But if that's not an option you should know those rights are there. There's a Madrid Protocol which is an international convention of protocol that Canada has relatively recently become a signatory to, or has implemented. This is at a high level trademark's version of the PCT, which I earlier described. So if you're looking to do a big set of international filings, this could be a relatively inexpensive way of doing that. You've also got extensions of time in culling which is analogist to what I described earlier for patents.
The last IP right I'm going to talk about right now is copyright. Now, copyright is something that is, it's an IP right that's created automatically and internationally and any original works. So works you haven't copied from other people that require skill and judgment to create. So for example, software, source code, including firmware, designs, drawings. The issue of copyrights is a relatively narrow scope of protection. It protects, as it's name implies, just to copying, not functionality. So you may have copyright in software that implements a particular type of functionality in your product or your particular device. If someone literally copies that software, that's a violation of copyright. If they see that your software, your device, is something really cool and neat and valuable, and they independently replicate that functionality, there you've got to rely on patents and not copyright. Copyright registration is something that can be very beneficial. It's very useful if you want to sue someone, for example, it can make it administratively easier to sue in terms of not having to separately establish you own. It can result in a presumption of ownership. It can also open various avenues to you for increased damages and in some jurisdictions, might be US, you need to actually, as a general rule, have a registration before you sue. With that being said, I can't recall, personally, an experience where failure to register has been a significant impediment in financings, and that's in large part, I think, because by failure to register at one point in time, you've not prejudiced your ability to register in the future. You've got that right. There is a risk. You may have to commence a suit before you have a registration which may be more costly, or impossible, but if you don't register today you can still register in the future. So it's an attractive means for cost deferral. You're not going to save a ton. To register a copyright in Canada and the United States you're looking, generally speaking, in the order of hundreds of dollars. If you want to do it in a different jurisdiction, like China, it can be more. It's something that I think is a good idea to do but it's certainly attractive for deferral. But again, I'll emphasize here just like I did for patents, one thing you don't want to defer is papering ownership. Especially if you are contracting with third parties to do things like code software for you, you want to make absolutely sure that the contracts you have with those third parties, in place before they start work for you, say that your company's going to own the IP in whatever they create, including the copyright.
To conclude, like Brian said, demand for clean tech is going to remain strong even after this crisis ends which it will. Protecting IP rights to priority, even in challenging economic conditions, because when they crisis ends you want to make sure that someone who is looking to invest in you, or acquire you, they're going to see due diligence on what you did during this crisis period and you want to make sure you don't shoot yourself in the foot. Managing spend is a risk allocation exercise. You can do the best practice. You should absolutely do the best practice, but if you can't, then you have to understand where you're willing to tolerate risk in your business. Where you have flexibility in your product development, in commercialization strategy, and apply the legal tools and techniques to arrive at the best business outcome possible for you. With that, Brian, do you want to handle any questions that have come up during our talks?
Brian: Yes. Sure. I think we have time for a couple of questions. Just reading them now. I can direct one or two to you and I'll take the others. The first question was how do you suggest protecting against patent trolls? Roch, maybe you can answer that and I can also offer some feedback.
Roch: Sure. So patent trolls, I would say that is a ... topic to what Brian and I talked about today. What we were talking about today was generating your own IP assets and making sure the IP assets you're creating are in good shape for after the crisis passes. The fundamental issue with patent trolls is that they don't care what IP assets you have because you can't counter-sue them because they don't have an operating business. Protecting against trolls really involves doing freedom to operate searches to see what other patent rights are out there, and if you find rights that potentially cover the product or service you're going to release, to consider whether those rights are valid and/or to consider changing your products and services to avoid those rights. That goes into your risk allocation calculation.
Brian: I would add that even if you haven't done thorough freedom to operate, or any freedom to operate before you released your product, there are ways to deal with the awful letter that a troll or a non-practicing entity may send to you. I've been involved in a share of those types of situations. What one would be to be skeptical. Test of the strength of the patent that's been asserted against you. Not surprisingly the examiners that examine these applications don't have a very large time budget. I think it's like less than 20 hours in total to receive the application, do a ... search, conduct examination, do an examination report and grant the patent. When you compare the amount of time that an examiner, a single examiner, has in reviewing an application to the kind of resources that you would have at your disposal to challenge the validity of a patent, see if it is possible to knock out the claims. If not all the claims of the assertive patent, at least enough of the claims that you're no longer infringing. There's always that. And another tactic that we found some success in is these trolls will not just be targeting one company. From our experience we've seen them target many companies. We've engaged in joint defense agreements with other recipients of the troll's letters and pooled our resources to try to fight their assertions.
Another question which I'll field is regarding China and my earlier comment about how China has an overwhelmingly high percentage of clean tech patent filings in the world. The commentator noted that Chinese applicants tend to focus on patent quantity, rather than quality, and that does skew the values and commercial potential of those products. I would absolutely agree. In fact, I've seen that. It's not just China. I think that that practice is more prevalent in a number of Asian countries including Japan. There are mechanisms in China which do allow them to kind of flood the patent office with filings. They have another type of instrument called a utility model which we don't have in Canada. They're quite a bit less expensive to file and they don't go through substantive examination. So I do agree with you that the numbers can be inflated because of that. Now that being said, it is relatively expensive to file patent applications outside of China. When I looked at the stats for Canadian patent filings and seen how many of those were filed by Asian applicants, including those from China and Japan, it does, I think, show a strong correlation between how important those companies are looking at their innovations. Especially because, unfortunately, Canada's not really seen as a tier 1 jurisdiction for patent protection. So if they have filed in Canada it provides a strong correlation between how strongly they value their innovation.
Next question is for you, Roch. Does a sale of a service, which uses a product on which a patent application is desired to be filed, constitute a public disclosure and a need to be considered within a grace period?
Roch: Yeah, it could. This goes to what I mentioned during the presentation, in particular about the United States, and commercialization. So I would treat that, for US patent purposes, as starting my grace period clock. In other jurisdictions, again as a general rule, I think it goes to how you're commercializing the service. If you can actually deploy the service without making anything about the underlying product publicly available, and where the outputs of the service, the stuff that is publicly available, can't be used to reverse engineer how you got there, then I think you've got a case there has been no disclosure. Regardless, I would still do a double check and deep dive before the expiry of any grace period. It's what I would classify as a fairly high risk strategy. So I would always doublecheck, and in that particular example, I would presume the answer is yes for US purposes.
Brian: Alright. So that's, I think, all the time we have for questions. I just wanted to thank all of the attendees for listening in today. It's my first ever virtual Zoom webinar so I appreciate your patience. I think we've managed to implement it successfully, hopefully. So, thank you. I believe that a recording of this webinar will be made available. I know that I saw a question about that and we will be reaching out to the attendees about how to access that. Alright. Thanks very much
Roch: Thanks everybody.
Brian: Signing off.
Roch: Stay healthy.