Archive for September, 2013

USPTO During Shutdown

Canadian patent and trade-mark applicants take note: the  USPTO has indicated that it will remain open despite the pending shutdown of US government offices and agencies. Therefore, prosecution of US patent and trade-mark applications should be uninterrupted by the current political drama in Washington.

Calgary – 12:00 MDT

Update: October 4, 2013

As the shutdown drags towards the end of week 1, the USPTO maintains that it has reserves to continue operations and accept new applications. As of October 3, 2013, the U.S. Copyright Office has shut down.

Calgary – 9:45 MDT

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All Tied Up: Restrictive Covenants After Sale of a Business

Restrictive covenants attempt to tie up a business person who sells a business, in order to restrict that person from competing against the business they just sold. In an earlier post (Are Non-Competition Restrictions Enforceable?), we reviewed restrictive covenants in the context of employment agreements. The Supreme Court of Canada recently weighed in on the topic of restrictive covenants in the context of a commercial transaction. While this is not specifically an intellectual property law topic, it is a very common issue faced by technology companies.

In Payette v. Guay Inc. , 2013 SCC 45, the court reviewed the enforceability of non-competition and non-solicitation clauses in an asset purchase and sale agreement. While there was also a restrictive covenant in place in an employment agreement, the case really turned on the enforceability of the restrictions arising from the purchase and sale agreement. The court was clear that different rules apply to each type of agreement. The court provides the following guidance for those negotiating restrictive covenants:

  • “In the commercial context, a restrictive covenant is lawful unless it can be established on a balance of probabilities that its scope is unreasonable having regard to the context in which it was negotiated.”
  • “A non-competition covenant will be found to be reasonable and lawful provided that it is limited, as to its term and to the territory and activities to which it applies, to whatever is necessary for the protection of the legitimate interests of the party in whose favour it was granted.” In this case, a five year period was reasonable in light of the highly specialized nature of the business.
  • “While it is true that in the case of a non-competition covenant, the territory to which the covenant applies must be identified, a determination that a non-solicitation covenant is reasonable and lawful does not generally require a territorial limitation.” In this case, there was no territorial limitation in the case of the non-solicitation clause, but the clause was still upheld as reasonable.

This decision is good news for buyers who are acquiring a business and wish to impose enforceable non-competition and non-solicitation restrictions on the seller. The Supreme Court of Canada is clear that different rules apply in the employment context and anyone negotiating these agreements should take note.

Calgary – 07:00 MDT

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How to Lose Patent Rights

Thinking of patenting, but waiting for some customers first? Tread carefully. By merely offering your invention for sale, even if the invention has not even been manufactured, you may lose patent rights.

The recent US case of Hamilton Beach v. Sunbeam Products Inc. (Case No. 11-CV-0345, Decided: August 14, 2013) dealt with a challenge to Hamilton Beach’s patent for a slow-cooker design. The critical event was a transaction between Hamilton Beach and a foreign supplier in early 2005.  The offer occurred before the patent filing date – to be specific, it occurred more than 1 year before the filing date. This offer by Hamilton Beach was considered by the court to be an offer for sale of a product that anticipated the asserted claims and the court found that the invention was ready for patenting prior to the relevant date. The court noted that “An actual sale is not required for the activity to be an invalidating commercial offer for sale… An attempt to sell is sufficient so long as it is ‘sufficiently definite that another party could make a binding contract by simple acceptance.'”

As a result, the patent was held to be invalid.

Remember:

  • If such a sale or even an offer for sale is made when the invention is ready for patenting, that will start the 1 year clock running for patent filing in Canada and the US. The inventor would have 1-year from that date in which to file a patent.
  • This may result in a loss of patent rights outside Canada and the US, for countries in which there is no 1-year grace period.
  • An invention is “ready for patenting” when prior to the critical date:
    • The invention is reduced to practice; or
    • The invention is depicted in drawings or described in writings of sufficient nature to enable a person of ordinary skill in the art to practice the invention.
  • In Canada, the courts have come to similar conclusions – consider this case  dealing with a device that was manufactured and rented to a third party for use in drilling an oil well in Texas prior to the relevant date of the Canadian patent. This earlier device invalidated the patent, since it constituted an “enabling disclosure” of the invention more than 12 months prior to filing of the patent application.
    Calgary – 07:00 MDT
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Click Here to Transfer Copyright

When you upload your pictures to a website, you might click through some terms of use…Did you just transfer ownership of the copyright in your pictures?

In a recent US case (Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., No. 12-2102, Fourth Circuit Court of Appeals) the court dealt with a copyright infringement claim over photos uploaded to a real estate website. Users were required to click-through the website terms of use (TOU) prior to uploading, and those terms clearly indicated that copyright in the images was transferred to the website owner.

In the course of the infringement lawsuit, this was challenged, so the court had to squarely address the question of whether copyright can be validly transferred via online terms. “The issue we must yet resolve,” said the Court, “is whether a subscriber, who ‘clicks yes’ in response to MRIS’s electronic TOU prior to uploading copyrighted photographs, has signed a written transfer of the exclusive rights of copyright ownership in those photographs consistent with” the Copyrght Act.

In Canada, the equivalent section of the Act says “The owner of the copyright in any work may assign the right, either wholly or partially …but no assignment or grant is valid unless it is in writing signed by the owner of the right…”.

The Court in the Metropolitan Regional case decided that yes, an electronic agreement in this case was effective to transfer copyright for the purposes of the Copyright Act.

Calgary – 07:00 MDT

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