Did You Say Arbitration in Kazakhstan?

It’s not that far-fetched. Companies who sign a contract can agree in advance to resolve their disputes through arbitration.  The law that governs that arbitration, and even the place of arbitration, can all be determined in a “dispute resolution clause”. These kinds of clauses are often overlooked while the parties focus on the business points – such as price, delivery, and deadlines. However, a dispute resolution clause will suddenly be front-and-centre when the parties start squabbling, and one of them wants to get a remedy in Canada. For example, in one recent Alberta case (PetroKazakhstan Inc. v. Lukoil Overseas Kumkol B.V.), arbitration was triggered by one of the parties, and the Alberta Court decided that the breach of contract questions fell within the scope of the arbitration under the law of Kazakhstan.

What about intellectual property licensing agreements?  The same idea holds true. Canadian courts will uphold arbitration clauses. When negotiating your license, spend some time considering the dispute resolution clauses and the potential advantages of arbitration: for example, confidentiality, neutrality, and a resolution process that can be – compared to litigation – relatively quick and inexpensive.  In Bad Ass Coffee Co. of Hawaii Inc. v. Bad Ass Enterprises Inc., a Canadian licensee was held to a clause that compelled arbitration in Utah. The Canadian Court refused to grant a remedy and the licensee was bound by the decision of the US arbitrator.

Related Event: November 4, 2010 – The Licensing Executives Society – Meeting of the Calgary Chapter on the topic of “Arbitration and ADR Clauses in International License Agreements” Presented by Stephen Burns, Bennett Jones and Jim McCartney, McCartney ADR; panel moderated by Richard Stobbe: Link to Register

Calgary – 09:00 MT

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The Perils of Co-ownership of Intellectual Property


When parties are negotiating a new business deal – maybe an investment, joint-venture, research or a pilot project – they often agree to joint ownership of the resulting intellectual property, as an easy starting point.  Let’s look at one case involving trade-marks. 

Trade-mark law in Canada is clear that each trade-mark should have one owner.  That means one company, one person, one entity can own the mark… or, if there are two people who co-own a trade-mark, they must apply to register the mark as a partnership.  In JAG Flocomponents N.A. c. Archmetal Industries Corporation, 2010 FC 627 (2010), two companies entered into a contract in which they agreed to co-ownership of the mark FUSION. This flowed from the catch-all clause in their agreement that: “Any new products, designs, patents, inventions, calculations, and other intellectual property which arise directly or indirectly pursuant to or in consequence of this agreement shall be deemed to [sic] equally owned by the parties hereto.”  The FUSION mark was part of the “other intellectual property” caught by the agreement.

After a falling-out, one company registered the FUSION mark in its own name.  After a court battle over ownership, the court decided that the registration should be expunged. Since the parties agreed to co-ownership of the mark, the trade-mark application by one party rendered the registration invalid. 

Lessons for business?

  • Beware of catch-all “joint ownership” clauses, as they should be carefully considered. Should any of the intellectual property be jointly owned? And if so, think through the implications of each situation. Important rights will flow from jointly owned patents or trade-marks, for example.
  • As a practice point, a material misrepresentation in a trade-mark application (in this case, that little detail about joint ownership was left out) can result in expungement of the mark.  

Calgary – 09:00 

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Who is liable under an End-User Agreement?

photo3.jpgYou download the software…you click “I accept”.  Now, who is on the hook? 

Two recent cases illustrate the different ways that End-User License Agreements (EULAs) will be upheld by the courts.

  • Canada: In Bérubé v. Rational Entertainment Limited, 2010 ONSC 5545 (CanLII), a user in Ontario clicked through a license agreement when she opened an account with PokerStars, an online gaming site. The user later sued the site operator, claiming various damages. The user attempted to avoid the terms of the end-user license agreement by arguing that it was a standard-form contract that was against public policy because it was an online gambling site. (Online gambling is not legal in Ontario…though governments in Ontario and BC are getting into the business themselves). The court disagreed. A clause in the EULA was clear that “…the Software is not for use by …individuals connecting to the Site from jurisdictions from which it is illegal to do so.  PokerStars is not able to verify the legality of the Service in each jurisdiction and it is the User’s responsibility to verify such matter.” The case was dismissed based on the terms of the EULA, to which the user had assented.
  • US:  A software vendor hired a subcontractor to install its software at the offices of the end-user – in this case, the US Air Force. The subcontractor allegedly made unauthorized copies of the software, so the software vendor sued the subcontractor, claiming breach of the terms of the EULA. The subcontractor denied that it was bound by the EULA. In BMMSoft Inc. v. White Oaks Techology Inc., 2010 WL 3340555 (N.D.Cal. August 25, 2010), the court decided that the subcontractor was not bound by the EULA, since it had clicked acceptance on behalf of the end user – the US Air Force – not on its own behalf.  The subcontractor had clicked through the EULA as agent for the end-user customer.

Software vendors and online service providers can take comfort that properly-worded end-user terms are binding. They also need to get advice so they know who will be bound by those terms.

Calgary – 09:00 MT

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When A Facebook App Breaches Privacy

In my review of iPhone App Law, I have discussed the case of Turner v Storm8 (Complaint), a 2009 US federal class action lawsuit that alleged a privacy breach by an iPhone app developer.  The lawsuit alleged that Storm8, creator of “iMobster” and “Vampires Live,” wrote its software to collect phone numbers automatically when players downloaded the games. The developer blamed this privacy breach on a software glitch. 

The Wall Street Journal has reported a similar breach by Facebook app developers. Many of the most popular Facebook apps have been transmitting Facebook ID numbers to at least 25 advertising and data firms.  This information can be cross-referenced to compile detailed profiles of Internet users. In this case, the breach goes far beyond phone numbers, and appears to implicate a range of rich personal data that makes up the Facebook world. The practice would violate the terms under which Facebook permits developers to sell apps, and may violate the app developers’ own privacy policies. But that is cold comfort if it’s your identity that is compromised.

Lessons for business?

  • A risk of this type is not confined to Facebook apps – privacy breaches could be caused by any third-party app developer, whether it’s on the Facebook, Android or iOS platform;
  • If you engage a developer to create an app for your company, make sure your terms clearly address privacy issues. A breach of this type can be fatal to the app, and can spread to implicate the whole company if the breach is serious;
  • If you are a developer, ensure that you carefully manage privacy issues. If the collection of information is warranted, it should be done properly. In Canada, the collection of personal information can be permitted if there is informed consent by the end-user. And you need to compare your information-handling practices against the terms of the SDK – for example, Apple’s iOS terms are clear that developers will be liable in the event of any breach of a user’s privacy rights.

Calgary – 10:00 MT

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Business Method Patents in Canada

In our post earlier this year (Business Method Patents: Amazon Clicks Through) we reviewed the story of Amazon’s battle with the Canadian patent office over its famous  1-click patent. South of the border, the USPTO confirmed the patentability of many of the Amazon’s claims earlier this year.

Yesterday, the Canadian Federal Court handed down its decision upholding the patent. The court was clear: “At its core, the question is whether a ‘business method’ is patentable under Canadian law. …the Court concludes that a ‘business method’ can be patented in appropriate circumstances.”  The court scolded the patent office for rewriting patent law in its rejection of the application. This is a major (and long-awaited) clarification of the law in Canada and will require time to assess its practical impact on patent applications. It is important to note that the Court sent the application back to the patent office to be re-examined, so the patent has not yet issued.

On that point, the Canadian Intellectual Property Office is currently reviewing its Manual of Patent Office Procedure (MOPOP) Chapter 16 – Computer Implemented Inventions. This chapter will need some re-thinking in light of the court’s guidance in Amazon.

In both the Amazon case in Canada, and the recent Bilski case in the US, the courts have indicated that the “machine-or-transformation” test should not be applied to patentability analysis in all cases, and that each application must be determined on its merits. In other words, there has been some guidance but no clear rules to apply to all applications. The state of Canadian law (unless this decision is appealed) is now clear that business methods can be patented in Canada, with careful drafting.

Calgary – 11:30 MT


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Clean Energy Patents on the Rise

The Clean Tech sector is IP-intense, and patent protection strategy is front and centre for most clean tech companies. According to the Clean Energy Patent Growth Index (CEPGI), patent filings are on the rise in the Clean Tech sector. Results from the second quarter of 2010 show that U.S. issued patents are up in this sector almost 60 percent over the second quarter of 2009.  For Canadian companies in the Clean Tech industry, intellectual protection strategies will often start with patent prosecution in the US and internationally through the PCT international patent application system.  Canadian inventors can take advantage of the “IPC Green Inventory”, which was developed by the IPC Committee of Experts to facilitate patent searches relating to so-called Environmentally Sound Technologies (ESTs). 

Patent filings are up, and stock-market performance is encouraging in an otherwise rocky financial landscape. The Canadian S&P/TSX Clean Technology Index (launched in March, 2010) has now been up for 6 months tracking the results of TSX-listed companies whose core business is in “green technologies and sustainable infrastructure solutions.” 

Calgary – 09:00 MT

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Trade-mark Paperwork

wallpaperpattern.gifdaisypattern.gifTrade-marks can appear almost anywhere. But you have to be able to see them at the point of purchase for the brand to function as a trade-mark under Canadian law. Take this example. A purveyor of fine bathroom tissue tried to registered the floral pattern at left as a trade-mark. It’s the design that’s embossed onto a popular brand of “hygienic paper products” (that’s legalese for toilet paper). A competitor complained, saying the design was confusing with its own registered trade-mark – the floral design at right.

In the recent case of Scott Paper Ltd. v. Georgia-Pacific Consumer Products LP , 2010 FC 478, the court examined the competing trade-mark claims and decided that marks must be seen to develop a reputation and to be distinctive of their owner. In this case Georgia-Pacific’s mark (the one at right) was not visible to consumers through the packaging.  Since it was not visible at the point of purchase, it could not function as a trade-mark, regardless of how many times people saw the mark after purchase when they opened the packaging to use the product.

Lessons for business?

  • There are many design elements that can function as a trade-mark to distinguish you from competitors… from the brand displayed on the package to designs embedded into the product itself.
  • When reviewing trade-marks in your business, ensure that your packaging strategy dovetails with your brand strategy. In this case, the packaging may have changed over time to “hide” the trade-mark.
  • Get advice on your brand-protection strategies and watch your competitors – in this case, the complaint failed and Scott Paper’s design (the one at left) was allowed to proceed to registration. However, this case also illustrates that Georgia-Pacific was vigilant about brand protection in a competitive business.

Calgary – 08:00 MDT

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