Canada: Intellectual Property and Social Media: Guide to Legal Risk Management

Last Updated: October 22 2015
Practice Guide by McMillan LLP

Is all your significant intellectual property registered?

In today’s economy, a large portion of a company’s market value may lie its intangible assets. Despite this, many companies are unaware of, or fail to recognise the true value of, their intellectual property. Carrying out an IP audit can identify key IP assets, and notably, whether a company owns any significant unregistered intellectual property, including key trademarks, technology or trade secrets, for which registrations or appropriate confidentiality protections should be sought. An IP audit can assist in valuing, more effectively protecting, enforcing and commercializing, the intellectual property of the business. This can be accomplished through a comprehensive review of the organization’s branding, technology, key documents and confidential information. Once an IP portfolio has been created, companies should implement procedures to capture and add to that portfolio as IP is produced.

Trademarks can be highly valuable assets of a company, particularly where significant reputation and goodwill has been acquired in connection with a particular brand. The protection afforded to unregistered trademarks is typically limited to the geographical area where goodwill has been established through extensive use and advertising. Registration confers significant legal advantages, including the exclusive right of the owner to use the mark throughout Canada in association with the particular goods and services listed in the registration, the right to prevent others from using a confusingly similar trademark for similar goods or services, and the right to restrict use of that mark by third parties in a manner that tarnishes the brand or depreciates the value of the goodwill attaching to it. Registration in the national public registry system facilitates the protection of trademarks by providing public notice of those rights. Therefore, significant brand names, logos and slogans used by a company should be registered with the Canadian Intellectual Property Office.

For a company whose mainstay is innovation, patents are critical to protecting the investment into research and development. Patent rights are only acquired through registration, and therefore, ensuring your organization’s products, processes and developmental work is protected through registration is critical. However, patents are only provided for inventions which are novel and have not been previously disclosed to the public. Canada and the United States are two of the few jurisdictions in the world which provide applicants with a one-year grace period with respect to disclosure made by the applicant of the invention anywhere in the world. It would be wise for organizations to maintain absolute confidentiality of all of its research and developmental work or internal processes such that patent protection may be pursued in all jurisdictions where the organization intends to do business. A process of screening new products and processes for possible patent protection should be part of the standard process for obtaining corporate authority or capital approval to commercialize the new product or process. The screening process should involve IP counsel to help assist in determining whether there are is any patentable technology and whether it is advantageous to file for patent protection. Once a product is released on the market, it is generally considered an enabling disclosure to the public which prevents patent protection. Therefore, it is important that any patent applications be made before any product launch, trade show exhibition or market testing is conducted.

Maintaining absolute confidentiality also has the added benefit of protecting the company’s trade secrets or “know-how”, which are afforded protection only as long as they are kept confidential. Other types of intellectual property such as copyright, industrial designs and domain names should also be appropriately protected through registration.

Almost all intellectual property rights are territorial in nature. Thus, registering a brand name in Canada only affords protection in Canada. If a company intends to export its product or market in other jurisdictions (for instance, the United States) under the same name, separate registration should be sought in all such jurisdictions. In addition, it is important to obtain expert advice in respect of each target jurisdiction as intellectual property laws vary between countries.

Additionally, conducting the necessary clearance searches before a product launch or brand expansion into new jurisdictions are essential to avoiding unpleasant surprises – for instance, that the mark is already in use by another entity or that another company owns the patent rights in a technical feature or component of your product or service. Trademark clearance searches can reveal the state of the register in the target jurisdiction and assist companies in determining whether a particular name or campaign slogan is available for use. It would also be prudent to register the desired mark if it is not yet registered by another party in order to protect its rights in that name and to prevent others from doing so. Freedom to operate searches should be similarly be conducted in order to determine whether a product may be commercialized in a particular jurisdiction without infringing on someone else’s existing intellectual property rights. Companies have rushed to market only to discover that a third party owns patent rights to a technical feature or component of the product, or for the method of manufacturing such product, which could prove costly or even fatal to product commercialization and same in a particular jurisdiction.

Maintaining an up-to-date IP register of all intellectual property owned and registered by the company is useful not only in enforcement against misuse by third parties but also in maximizing the value of such IP through enhanced administration, strategic partnerships, licensing and sale.

Do you actually own all your intellectual property?

Companies often engage external service providers for development of product labelling, advertising campaigns, television advertisements, website design and other services. The intellectual property created by such external agents can be critical and at the core of a company’s brand identity. Therefore, companies should ensure that they own all of the IP rights in any copyrighted works, trademarks, logos, domain names and any other work product created by such external agents. The fact that a particular product label or trademark logo was commissioned by the company for valuable consideration, does not, by itself, create a presumption that the intellectual property in the work product is owned by the company. Quite to the contrary, the Canadian Copyright Act specifically provides that copyright in works created by independent contractors remains with the contractor unless it is specifically assigned to the company. Therefore, it is critical for businesses to put in place contracts containing appropriate transfer of intellectual property rights in the work they develop. If the independent contractor is an individual, there may be limits on the rights they are able to transfer to you.

Another consideration is moral rights which are an important yet somewhat unique consideration in Canada. Moral rights are independent of copyright and include an author’s right to maintain the integrity of the work (which includes the right to modify or edit the work or to use it in association with a product, service, cause or institution) and the right to be cited as its author. Even if a company has taken steps to provide for an assignment of copyright, the author’s moral rights cannot be assigned and would not automatically be waived. Therefore, it is recommended that a written waiver of moral rights be obtained in addition to any transfer of IP rights. Service providers can be the source of valuable intellectual property. In this context, it is essential for businesses to maintain and document proper chain-of-title for all of a company’s intellectual property, especially when enforcing its rights against third parties.

In addition to external consultants, employees are often the source of a large part of a business’ portfolio of intangible assets. The rules with respect to ownership of intellectual property created by employees differs from jurisdictions to jurisdictions and across the type of intellectual property. The general rule under Canadian copyright law is that the author of a copyrighted work is the first owner of copyright in that work. An important exception to that rule is for works made by employees in the course of employment, for which, absent any agreement to the contrary, the Copyright Act deems the employer as the first owner of copyright. Unlike copyrighted works made in the course of employment, inventions made by employees, in the absence of a written agreement, are not presumed to be owned by their employers. To establish its patent rights in a particular technical feature or technology, an employer must show that the employee was hired specifically for the purpose of innovating and that the invention was created while performing his/her job. With respect to design rights for esthetic or ornamental features of products, generally when the design was executed for another in exchange for good and valuable consideration, that person is the first owner.

In order to avoid uncertainty and ownership disputes, it is essential for companies to have proper written assignments in place with their employees and any external contractors, for all intellectual property created by them and include a waiver of moral rights from all authors.

Maintaining your registration – post-trademark registration pitfalls

You have chosen a new brand, done the necessary clearance searches and filed an application that has proceeded through to registration. But the work does not end there. You must take certain steps to maintain a registered trademark and avoid unintentionally losing your rights. The following guidelines are a suggested policy for protecting your registered trademarks.

Use your trademark properly

Trademark rights are based on use. Thus, proper use is crucial to maintain your mark and help protect the registration from attacks based on non­distinctiveness or non-use.

  1. Avoid generic usage. A registrant who allows its trademark to be used as the generic or common name of its products risks having the registration invalidated for non-distinctiveness. The marks “linoleum,” “escalator” and “zipper” all began as trademarks, but became generic through improper use or lack of enforcement. To avoid this, a trademark should never be used as a noun or a verb. Instead, trademarks should be used with the common name of the product. For example, in relation to the “Q-Tips” trademark, avoid a sentence such as “Q-tips are a useful product.” Instead, use a sentence such as “Q-Tips cotton swabs are a useful product.” Trademarks should not be pluralized, or used in the possessive form (it is not correct to refer to “Microsoft Word’s” features – it is correct to refer to the features of the “Microsoft Word” program.)
  2. Use proper markings. Proper marking through use of a “™” or “®” symbol is a way of notifying others that a mark is protected. Either the “®” symbol or the “™” symbol may be used if the mark is registered. If the trademark is not registered, the “™” symbol may still be used. In Québec the common practice is to use “MC” for an unregistered mark and “MD” for a registered mark. A registrant should also place a trademark notice on packaging or brochures that identifies the owner of the mark (e.g. ® is a registered trademark of ABC Co.).
  3. Use your mark distinctively. When setting out your trademark, it should be emphasized and distinguished from surrounding text by using special script. For instance, word marks could be CAPITALIZED, underlined, italicized, placed in “quotation marks,” or depicted in boldface type, whenever they appear in printed or electronic media. The goal is to alert consumers that this word is being used to identify your products and services.
  4. Use your trademark consistently. Consistent use of a trademark is essential. If the trademark is registered, it should be used as set out in the trademark registration. Do not alter a word mark’s spelling or add a prefix or suffix (unless you intend to create another trademark). A logo should also be used consistently without any significant alterations. Any changes in the use of a trademark from its registered form could lead to its cancellation for non­use, as it could be argued that you are no longer using the registered mark, but a different one.
  5. Internal corporate training. Companies should educate their staff on the proper use of corporate trademarks. Guidelines on trademark usage in advertising or in the media should be developed with the assistance of a legal professional. These guidelines should be distributed and followed by all employees. Additionally, any outside advertising or public relations firms retained by a company should be made aware of which trade-m arks are being used and how they should be used. Remember to review all advertising and promotional copy for correct trademark usage.

Monitor marketplace for infringers

Trademark owners should diligently monitor the marketplace for uses of similar trademarks and new applications for confusingly similar trademarks. Several legal cases have held that you may lose your trademark rights unless you take reasonable efforts to protect your trademark and enforce your rights. Remember that it is the responsibility of the trademark owner, not the government, to stop third party infringers.

A monitoring program should include periodic reviews of trademark databases, journals and other relevant publications. Regular reviews are important because there is a narrow window of opportunity to oppose confusingly similar applications. It is also prudent to monitor non-registered trademarks by examining business journals, business registries, publications and newspapers. Such reviews should consider not only exact matches, but also “sound-alikes” and variants. Legal counsel can assist you in developing an effective monitoring program.

Trademark owners who become aware of an infringing mark should take action or risk losing their trademark rights. The doctrine of estoppel may operate to prevent a trademark owner from claiming infringement where the owner delays for an unreasonably long period before initiating enforcement procedures. The infringer could argue that the owner’s actions, or lack thereof, indicated tacit approval of tile infringer’s use of the trademark.

If you think someone may be infringing your trademark, you should consult with your legal advisor regarding the best course of action. Often, a cease and desist letter may suffice. However, you should not approach potential infringers with cease and desist letters until you or your legal counsel have ascertained that your rights to the mark take precedence over theirs. It may also be necessary to follow up with a legal action which may be based on trademark infringement, depreciation of the value of the goodwill in the mark, and/or passing off.

Update the registration to add new goods or services

If marks are used with new goods or services, it is important that these new uses are protected through new applications or amendments of existing registrations. This issue is also important when entering into co-branding or cross-promotional agreements with third parties. Each party to the agreement should think about the nature of the products and services in association with which their marks may be used and update any trademark registrations accordingly.

It is advisable to do a search of the Trademarks Register before entering into any arrangement that will extend the goods and services previously used in association with your mark to ensure that any new goods and services are available for your use. It would also be prudent to file an application to amend your existing registration (if there is one) or file a new application for the mark in association with any new goods and services.

Keep using the trademark

An owner that stops using its trademark risks losing it. Make sure you continue to use your trademarks for all goods and services for which they were registered or they could become vulnerable to expungement for non-use. Under section 45 of the Trademarks Act, a party that suspects that your trademark has not been in use in the last three years may initiate proceedings to have your mark cancelled.

It is also important to maintain proper records relating to the use of your trademarks. If you are ever required in future legal proceedings to determine who used a mark first, or establish the mark’s distinctiveness, producing well-documented historical records will increase your likelihood of success. Such records should include documents related to the adoption and first use of your trademark, copies of advertisements using your mark, summaries of the volume of goods or services sold under the mark with accompanying invoices, and records relating to any changes to your mark.

Beware of unlicensed use of trademarks by related companies

A trademark will only remain valid if it is used only by the party that registered it or by its authorized licensee (or sub-licensee). If a trademark is used by an unlicensed party, it may erode the distinctiveness of the mark, if the mark is registered it could expose the registration to summary cancellation proceedings, and potentially diminish the owner’s rights against third party misuse. While a license does not need to be in writing, section 50 of the Trademarks Act (which regulates licensing of trademarks) provides that use of a trademark by a licensee will be deemed to be use by its owner provided that the owner has direct or indirect control under the license of the character or quality of the goods or services. Thus caution must be exercised when a trademark owner permits another entity to use its trademark without having a proper license and control in place, otherwise the trademark may lose its distinctiveness and the owner’s exclusive rights may be lost.

Companies may (wrongfully) presume that use by an affiliate company falls within the category of “licensed” use; however, that may or may not be the case. Unlike other jurisdictions, in Canada, the relationship between a corporation and a subsidiary or a related entity is not sufficient to comply with the control requirements prescribed by section 50 of the Trademarks Act. Courts have consistently held that that a corporation’s organizational structure is not sufficient to support an inference that the owner of the trademark controls the character or quality of the goods and services associated with that trademark. In order for the use of a trademark to fall within the scope of section 50, there must be evidence that the company which is the trademark owner actually exercises control over the character or quality of the goods and services provided in association with the particular mark.

Any licensing agreement should be in writing and contain at least the following:

  1. a notice identifying which trademarks are being licenses, the owner of the marks and the fact that they are being used under license;
  2. address whether the license will be exclusive, non-exclusive or sole;
  3. consider any market restrictions;
  4. a defined set of quality control standards associated with use of the trademarks that is expected of the licensee;
  5. a provision granting the licensor the right to inspect, audit and approve the licensee’s use of the trademarks and any marketing materials;
  6. the right to inspect the goods or services at the licensee’s premises; and
  7. any measures that a licensor may use to enforce compliance.

If the agreement in not in writing, there must be sufficient evidence of facts from which it can be concluded that a licensing arrangement existed with appropriate control requirements. Further, it is essential that the owner actually exercises this control in a meaningful manner. A quality control enforcement program should be established obligating the licensee to satisfy written standards and specifications.

For the purposes of the Trademarks Act, to the extent that public notice is given of the fact that the use of a trademark is a licensed use and of the identity of the owner (for instance, a license notice on packaging, labelling or advertisements), it will be presumed that the use is licensed by the trademark owner and that the character and quality of the goods or services is under the control of the owner. However, this presumption may be rebutted if evidence to the contrary is presented and a trademark owner should not rely solely on such public notice to support its claim that use of the mark was licensed and that the control requirements were exercised.

French language considerations for trademark use in Québec

When operating a business in Canada, there are often important considerations pertaining to the province of Québec. In particular, businesses engaging in marketing or sale of products or services to consumers in Québec should be mindful of some unique considerations. The Charter of the French Language (Québec) states that business in Québec is generally to be conducted in French.  Specifically, communications such as product labelling, publications, contracts, signs, posters, commercial advertising, and firm names must be written in French.  However, the regulations contain an exception to this general rule pertaining to the use of trademarks: if a non-French trademark has been recognized under the Trademarks Act (the “Act”), this trademark may be used in English with no accompanying French translation as long as a French version of the trademark has not also been registered.  L’Office québécois de langue française (the “Office”), the government agency that enforces the Charter of the French Language (the “Charter”), takes the view that the term “recognized” refers only to trademarks that have been actually registered under the Act (although this interpretation has not been tested by the courts). Under this view, a company engaging in advertising or other public communications may use an English trademark without a French translation only if the English trademark has been registered under the Act and a French version of the trademark has not been registered. Trademarks composed of descriptive elements may be the most likely to be challenged. Therefore, businesses operating in Québec that wish to make use of this exception should seek registration of their trademarks, especially where the mark contains descriptive terms.

Corporations should also be mindful that where the target audience of a commercial website or message (for instance, through a social media platform) includes marketing of products or services to residents of Québec may render such website or messages subject to the Charter. Accordingly, commercial web pages or communications via a company’s Facebook or Twitter page, if targeting Québec consumers, must be made available in French. The Office has taken the view that the content of corporate social media pages targeting the Québec public and consumers be made available in French. Therefore businesses should be aware of the requirement to make available social media pages and posts such as Facebook and Twitter pages/posts, in both of Canada’s official languages if they intend to market to or target Québec consumers.

Unique IP considerations in social media

Social media is increasingly used as a communication tool to disseminate information about a company’s activities and marketing initiatives, contests and promotions, and generally promote an organization’s profile and brand. Ever-evolving social media platforms have provided modern businesses a stage to expand their client base and reach audiences with their message in brand new ways. Recent surveys estimate that about 90% of businesses now use social media for business purposes. At the same time, businesses must remain cognizant of the inherent business and legal risks that accompany such platforms. Some of the key risks associated with misuse of social media include:

  • Damage to brand reputation
  • Inconsistent or conflicting messages
  • Misuse of confidential information
  • Misleading content

In order to avoid misuse of social media platforms, it is prudent for businesses to implement policies specifically addressing corporate use of social media, the key risks associated with improper use, and provide employees with training. A social media policy helps ensure that all corporate social media activity meets the organization’s branding and messaging standards and promotes the organization’s business activities. The policy should clearly define the rules and responsibilities applicable to employees, including what contributions, if any, are expected from employees, provide clear guidelines regarding to the “do’s” and “don’ts” of social media use, and prescribe any inappropriate or prohibited conduct. A robust policy should also include provisions that protect the company against misuse of social media by ex-employees. Companies should also establish official social media accounts, particularly on the most commonly used platforms, and regularly monitor them to determine compliance with its policies and guidelines.It is also a good idea to become familiar with social media takedown options so that when a problem arises, it can be addressed efficiently and in a timely manner.

Inappropriate disclosure of confidential information, whether made deliberately or inadvertently, could cause significant damage to a company’s activities and reputation. Posting a picture on Tumblr of an unreleased product or uploading an internal presentation on community sites like SlideShare could expose the organization to loss of IP rights, lost revenue and potentially breach of third party confidential information entrusted to the company. Educating staff on appropriate use of social media channels makes employees accountable for their use of social media both at work and on their own time. Another important issue is to ensure all content published through social media channels is accurate and not misleading. This is particularly important for character-restricted social media platforms such as Twitter. In these types of advertisements or communications, businesses must be more careful than ever to consider whether advertising is accurate, not exaggerated and not misleading. Businesses should avoid vague advertisements, as these can also be misleading, and whenever possible, businesses should provide a link to a site where the information can be expressed completely, accurately and in context. Additionally, disclaimers displayed in fine print, or disclaimers on a linked page, may be found invalid if they are inconsistent with the general impression conveyed by an advertisement.

The prevalence and accessibility of social media present risk. Implementing clear policies and guidelines and educating staff reduces the business and legal risks associated with misuse of social media channels.

Protecting your business information and third party information

In today’s crowded business environment information can give a business the competitive advantage needed to stay one step ahead of the competition. A company’s confidential information (sometimes referred to as trade secrets or know-how) is only protected as such as long as the information remains confidential. Therefore it is imperative for organizations to safeguard proprietary business information to reduce the risk of unauthorized disclosure or exploitation of its property interests. Prudent organizations protect their confidential information through a variety of different legal and other methods including through confidentiality covenants.

While employees have a duty at common law to refrain from disclosing or improperly using confidential information that belongs to their employer, including customer lists and trade secrets, establishing that the information in question was confidential and communicated in circumstances importing an obligation of confidence can be costly and involved. Thus, it is prudent to include confidentiality covenants in employment agreements or in separate confidentiality agreements. Written confidentiality agreements offer several advantages over and above the common law duty of confidentiality. First, confidentiality agreements permit the parties to define the scope of protection and permissible disclosure. Second, it may establish procedures for the handing of confidential and proprietary information, including requirements regarding the return or destruction of information upon termination of employment. Third, the parties may establish the duration of the confidentiality obligation. Finally, the parties may prescribe the appropriate remedy in the event that confidentiality is breached. While confidentiality agreements are generally readily enforced, parties must take care to resist the urge to define confidentiality overly broadly, as this could lead to a finding that the agreement is an unreasonable restriction on the ability to carry on business or trade. In such a case the agreement may be held to be unenforceable, and only the less onerous common law duty of confidentiality would govern a misuse of confidential information.

Another element that is sometimes overlooked is confidential information that is provided to you by others. This may include information from the manufacturer of a key product you use in your business, or information that certain customers and your licensees are required to provide to you under the terms of your agreements with them. You must ensure that you treat this information with the same care you use with respect to your own information.

Implementing written policies and regularly educating employees about their confidentiality obligations is extremely important, especially if the business relies heavily on proprietary information not generally known to the competition. Clearly identifying in an understandable manner the type of information that is considered confidential, the circumstances under which such information may be shared outside of the organization and the proper procedure for reporting any unauthorized disclosure can help reduce the risk that confidential information will be improperly disclosed.

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

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Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.