Intellectual Property

and Business Law in

the Digital Age
11
LEARNING OUTCOMES
Intellectual Property .380 After reading this chapter, you should be able to:
Copyright Law.. ..381 " Distinguish between copyrights, patents,
Patent Law ..387 trademarks, industrial designs, and trade secrets.
Trademark Law. " Explain how the law applies in protecting each type
..392 of intellectual property.
Industrial Design Law ..399
Identify ways to minimize legal risks related to the
Trade Secrets and Confidential infringement of various intellectual property rights.
Business Information. ..400 " Discuss legal aspects and protection of confidential
Privacy: Safeguarding Personal business information.
Information ..404 " Explain the importance of legal compliance
Electronic Communications: with respect to collection,use, and disclosure of
personal customer information.
Complying with the Law .406

Chapter Summary.. 408 Discuss legairisks associated with commercial

electronic messages and ways to minimize
those risks.

379
 CANADIAN BUSINESS LAW
380

Intellectual Property
and
Creativity, new ideas, and advances in science technology
are all
strong economy. Governments
that want to encourage innovation
by drivers of a
individuals must ensure that there is benefit for those businesses
helping to protect the products of their innovation. As we discussed
busi
and nesses and
inindividuals by
intellectual property is intangible-that is, its value is distinct from Chapter 10,
object. Although intellectual property may be associated with an object, any physical
,its real value
lies in its owner's right to prevent others from copying it. For example,
buy a CD or a prescription drug, you get a copy of the music when
of pills. you
physical item is achattel that you own. But you do not get the
or a
bottle The
to manufacture a version of the pills and sell them to others.right
Thesetorights
copy the CD toor
belong
those who own the intellectual property rights associatedI with the CD and the
druga
Society has an interest in both protecting intellectual property and ensuring
free flow of creative and innovative work. Intellectual property law recognizes that
competing interests in intellectual property-the owner's
in the arework and the public's interest in innovation-and attempts toprivate
there balance these interests
interests. Intellectual property laws are designed to provide exclusive rights and t
protection to the owners of innovative, creative, and l original works and inventions
with the s
in exchange for disclosing and sharing these works and inventions
Intellectual property rights can be claimed by creators, such as inventors. aut
engineers, and scientists, or-more commonly-they may be transferred to a
claimed by others, for example, by the businesses that employ the creators. Intel.
lectual property law recognizes the value inherent in creating software programs.
books, photographs, and scientific inventions, and it provides remedies for those
who own the property rights in these things. There are laws that protect copyright.
trademarks, patents, and industrial designs by preventing the unauthorized copying
of a protected work, invention, design, or brand.
As we saw in Chapter 1, the authority to make law in relation to intellectual prop
erty is granted to the federal government under the Constitution. Where legislation
is enacted to govern various forms of intellectual property-copyrights, trademarks,
patents, and industrial designs-it is federal law applicable across Canada. Trade
of these
secrets are protected in the common law. Here is an overview of what each
types of intellectual property protects:
Copyright in an original work grants the owner an exclusive right to use,
reproduce, sell, or perform the original artistic, literary, musical, photographic,
or other work. For example, a musician owns the copyright in an original
sound recording, and an author owns the copyright in their written work.
Val-Nam Generation Limited ("Val-Nam) will own the copyright in its
product manuals and advertising copy.
Apatent is a government-issued monopoly right to make, sell, or use a nove.,
patents for
innovative, and useful invention. For example, Apple owns many
the unique functionality and interface of its iPhone. Valery Garza will likely
want to patent the syntheticenzyme she invented. She may be willing to
transfer the patent rights to Val-Nam, for a fee.
The Lawof
1 Adapted from May Cheng, "Intellectual Property Law and Work in David Doorey,
Work: Common Law and the Regulation of Work (Toronto: Emond, 2016) 423.
 CHAPTER11 Intellectual Property and Business Law in the Digitai Age 381

Atradermnark is a unique identifier or brand used to distinguish one company's

products or services from those of another conmpany. For example,
and Starbucks are trademarks. Val-Nam's stylized "VN (see margin)Nike
is
a distinctive mark that identifies Val-Nam's products from those of its
competitors.
An industrial design is agovernment-granted exclusive right to make, sell.
and use an ornamental feature, shape, or configuration. For example, the
distinctive design of a fancy pair of eyeglasses or piece of jewellery can be
registered as an industrial design. The distinctive casing around Val-Nam's
generators may also be registered as an industrial design.
. A trade secret is the recipe, method, process, data, or know-how of a business
that is confidential and that has actual or potential value in not being
generally known. Efforts must be made to keep it a secret. For example, KFC's
secret mix of herbs and spices is a trade secret, as may be a company's market
research data. The improvements that Namid Blackburn has made to the
plastic biodegradation process may be patentable, but the business may decide
to protect the process improvements as a trade secret instead.
We willexamine these major forms of intellectual property and the
applicable law
that governs them. Table 11.1 sets out a summary that compares the various
forms
of intellectual property and the manner in which they can be protected. In
business,
many types of intellectual property may need to be protected, including formulas or
designs for products, logos, advertising slogans, brand names, and trade secrets. It
is fair to say that virtually every business has some type of
protect.
intellectual property to

Assignment and Licences

The key to understanding the legal aspects of intellectual property is to first
them as, indeed, forms of property. As such, the property owner has legal regard
means
available to protect it. Protecting it, however, does not necessarily mean that owners
of intellectual property will prevent others from using it. It does mean
can, in accordance with the protections afforded by law, determine when that owners
and how
they will allow others to use their intellectual property. Further, the fact that these
are types of property also means that the rights in them can be transferred or sold
to a new owner.

Assignment and licences are ways in which rights to intellectual property can assignment
be transferred to another in whole or in part, permanently or for a specific use or transfer of ownership in
purpose. "Assignment" means transfer in ownership, and--with the exception of intellectual property
moral rights to copyrights, which are discussed below-all forms of intellectual licence
property are assignable. Licences grant permission to use intellectual property permission to use inteilectual
according to the terms and conditions of the licence. Assignment and licences are property in accordance
forms of agreements and, therefore, are governed by contract law. with terms and conditions

Copyright Law
Copyright law is concerned with the right tocopy and recognizes the right of the
copyright owner or original creator to control the use and reproduction of the work.
t prevents people from reproducing acreative work without the permission of the
382 CANADIANBUSINESS LAW

Table 11.1 Various Forms of IntellectualProperty

Copyright Patent
Trademark Industrial Design Trade Secret
Brands: names, Visual design:
Matter Creative work: Inventions: new or
logos, symbols, shape, pattern, Commercial
protected artistic, literary,
musical, dramatic,
improved useful
composition of slogans, pictures,
product containers
ornamental
features
idata,
nformrecipes,
ation: plans,
photographic works;
recordings, software
matter or procesS
technology
iPhone interface, Nike name, swoosh Design of Acompany's
Examples Books, plays, films,
pharmaceuticals logo, "Just Do It" sunglasses,
videos, electronic
pattern on foreign market
games, architectural slogan entry plan;recipe
wallpaper or fabric for Coca Cola
drawings, website
content, music

Governed by Common law Patent Act Common law Industrial Design Common law
Trade-marks Act Act
CopyrightAct
Use, manufacture Use, manufacture
Prohibits Copying, modifying Use
Disclosure, use
Essential Original work, fixed New, useful, not Unique, Original, novel, Secret with
qualities form obvious distinguishes visually appealing economic value
goods or services (actualor potential)
Symbol Registered or Patent number Registered ORegistered Not applicable
unregistered TM Unregistered

Term of Life of creator plus 20 years from As long as used 10-year Indefinite
protection 50 years; registration; not (common law) registration; not
sound recordings: renewable If registered: 15 renewable
70 years years; renewable

Registration Optional Required Optional Required Not applicable

copyright holder. Ilegal reproduction includes copying or plagiarizing part or all

of a work. The Copyright Act is a federal statute, applicable across the country. lt
protects a broad range of works, including:
" books, magazines, and newspapers
" music, both recorded and written
" computer programs
" plays and movies
" paintings, drawings, charts, maps, and photographs
" sculptures and architectural works.
attached
The various types of works protected by copyright have different rightsexclusive
to them. Generally, however, copyright law gives the copyright holdertheincludes
right to produce or reproduce the protected work in any form. This rights-such
photocopying, file sharing, and other modes of copying Additional
 CHAPTER11 Intellectual Property and Business Law in the Digital Age 383

to translate a work, to convert it to another

publicly perform it-are also protected by copyright law.medium,
theright
as to adapt it, and to

Scope ofCopyright Protection

Copyright applies to the expression of ideas but not to the ideas
can protect the arrangement of words in an articlethemselves.
A
write, copyright
for example,
t cannot prevent others from writing on the same through copyright
subject matter. Copvrights
exclusive right to use,
nrotected in the common law, which meansthat registration is not necessary
reproduce, sell, or perform
n protect them, although they may be the original artistic, literary,
registered pursuant the Copyright Act.
Whether registered or unregistered, copyright protection to musical, photographic,
when protected, there are a number of exceptions and does not last forever. Even or other work

discuss these mattersin the sections that follow. defences to infringement. We

Copyright holders may, of
in whole or in part. Authors,course, agree to permit others to reproduce their works
for example, can profit fnancially
are made into movies because film when their books
companies are required to compensate them for
giving their permission to produce their work in film.
Canadian copyright law is enforceable outside Canada in
natories of the Berne Convention, a multinational treaty. countries that are sig
bestseller written by Canadian author Margaret Atwood is Therefore, an international
also in other countries where the book is protected in Canada and
have signed the Berne Convention. published, provided that those countries

Length of Protection
Copyright law protects copyright for a fxed period of time. Once
tion expires, a work is said to be "in the copyright protec
free to use it. Anyone may exercise thepublic domain" This means that the public publicdomain
by the copyright owner. rights that were formerly held exclusively
works not copyright
In general, unless the protected, can be used freely
a work becomes part of the Copyright Act contains a speciic provision to the
public domain 50 years after the calendar year contrary,
the creator's death. This explains why
copied and why new versions of fairythetalesmusic of Mozart may be freely following
Brothers Grimm may be freely published andbyadapted Hans Christian Andersenused and
and the
Canada recently amended the legislation concerninginto movies and plays.
ings and performances. Beginning in June
2015, the
copyrights of sound record
term
recordings is 70 years after the release date of the recording. ofNoteprotection for sound
relation to copyright of a that this is only in
particular artist's
not apply to the copyright of the music itself,performance in a sound recording. It does
which
(that is, it remains protected for 50 years after the may be much longer in duration
death of its composer).
Originalityy and Fixation
Two requirements must be met before the creator of a
work may enjoy copyright
protection:originality and fixation. Originality demands that
way and come from the creator. Fixation the work be new in some
demands
an idea. Ideas themselves are not protected by that the work be more than simply
Ideas must be fixed in a material form, such ascopyright.
written
To enjoy copyright protection,
pages,
audio recording. For example, a speech given at a conference may digital data, or a video or
less it is written doWn or recorded. Text on a not be protected un
computer monitor may not be considered
fixed until it isssaved. If afilm company has an idea for a movie but never
commissions
SCript or produces a film, copyright law will not protect the unrealized idea.
 CANADIAN BUSINESS LAW
384

Copyright Symbol
The copyright symbol ©is a mark used by the owner to alert others that the work
is copyright protected. Thereis no requirement to use it; a work is protected by
copyright whether it is accompanied by the symbol or not. However, it functions
to remind potential violators that copying the work is illegal and, because it is
universally recognized, it can enhance protection ofthe work internationally.

Law: Registration Optiongl

Copyrights Protectedin Common
Copyrights are governed by the commonlaw in Canada, which recognizes that
creative works are automatically protected in Canada when created. This remains
true even if the work remains unpublished. Copyrights can, however, be registered
with the Copyright Ofice, which is part of the Canadian Intellectual Property Offhce
(CIPO). Registration creates a presumption that the person who registered the
copyright is the owner. The advantage in registeringthe copyright is that it provides
it is presumed to be the o
an evidentiaryadvantage: the person who registeredwho has infringed the co
and the burden todisprove this would be on anyone
it.
or otherwise wishes to challenge

CASE IN POINT

Testing the Limits of Fair Dealing

Canada, 2004 SCC 13
CCH Canadian Ltd vLaw Society of Upper
court viewed this as further discouragement provided by
Facts the Law Society to its users. The court also determined that
("CCH") was in
Canadian publisher CCH Canadian Ltd an exemption under the Copyright Act applied: materials are
reports,
the business of publishing materials such as law permitted to be reproduced for the "purpose of research or
lawsuit
textbooks, and various legal publications.CCH filed a private study" without infringing copyright.
Upper Canada
because it believed that the Law Society of It is worth noting that the issue of fair dealing with respect
(now the Law Society of Ontario) violated its copyright by to photocopying in academic institutions has not been put to
allowing users of the Law Society's Great Library to copy rest. In Canadian Copyright Licensing Agency v York University,
CCH'S materials. This claim was based on the fact that the in July 2017, the Federal Court of Canada ruled against
Law Society had free-standing photocopiers for users and a York University in a legal dispute with Access Copyright, an
notice disclaiming arny liability for copyright violations above organization that compensates authors and publishers for
each copier. CCH also claimed that the Law Society violated photocopied works. In this case, the court ruled that York
its copyrights by permitting a service where its employees University had overstepped the boundaries of fair dealing
could copy materials for a fee. In trial court, it was found that works.
by allowing extensive photocopying of copyrighted
the Law Society had violated some of CCH's copyrights. The
FederalCourt of Appeal held that all of CCH's copyrights were
being violated by the Law Society's Great Library and its users. Business Lesson
materials and resources,
If you are a provider of publishedcompliance with section
Result be sure that copies are made in
to avoid any issues when
The Supreme Court of Canada held that the Law Society did 29 of the Copyright Act. Also,
in your place of business,
not violate CCH's copyrights because allowing its users to Comes to having individual copiers notice stating that your
utilize its photocopiersdid not encourage them to violate always provide a disclaimer, such as a violationsthat might
copyright. The fact that the Law Society had a disclaimer company is "not liablefor any copyright
bove each copier was given special consideration; the take place"
 CHAPTER 11 Intellectual Property and Business Law in
the Digital Age 385

Fair Dealing.and Other Exemptions

Copyright owners control the right to copy; thus, use of their work
sion is a copyrightinfringement..It is important to note that without permis-
is not
tied to commercial gain.
Copyright copyright
can be infringed even whereinfringement infringement
workis not done for monetary gain. For instance, copying the unlawful interference with
when software is duplicated and shared without
software piracy is illegal even someone's legal rights
exchange
copyrightinfringement for commercial gain presents a greater legal of money. However,
damages can be significantly higher. risk because the
Despite the legal protections afforded to copyright owners,
copVright is not absolute. The law recognizes that there is a public control over the use of
works and attempts to balance the rights between interest in creative
that the public may have in the work. As a copyright owners and the interest
Jist of exemptions or defences to infringement. result, the Copyright Act sets out a long
Copyright owners have rights over public performance of their work,
means that private performance of certain which
works
singing a song at home does not infringe copyright, but a is permissible. For example,
to perform it publicly. licence would be needed
The chief defence to infringement is fair dealing. The
fair dealing
copying of the work if the purpose is to research, privately study, defence allows fair dealing
parody, or report on the work. Where the work is used in criticize, review, defence to copyright in
research,
reporting, it needs to be attributed, which means the source has to be review, or news fringement that allows copy
sufhciently
acknowledged. The statute does not set out specific limits as to how much of a work ing in some circumstances
may be copied but,
tial part" of a work; depending
on how it is used, it can be
it is not fair dealingif use of the work isneither
a
all nor a "substan
of actually distributing the work. thinly disguised means
Other exemptions apply to educational
libraries, and to the conversion of works for the institutions, museums, archives, and
amendments to Canada's copyright law provideperceptually exemptions
disabled. More recent
for "user-generated
content created by integrating or building on the
another. Examples include uploading a video of a wedding copyright-protected
couple
work of
copyrighted song, or fan fiction. This so-called mash-up exception is dancing not one that
to a
can be relied on in a business context,
if the new work used solely for
is
however, because the exemption applies only
non-commercial purposes.
Software and Digital Media
A person or business that purchases software does not
copyright. Rather, the purchaser is given the right to use become the owner of the
the software, with certain
conditions or restrictions imposed by the copyright owner. Typically, the software
publisher is the copyright owner and the terms and conditions are set out in the
licence.
Software piracy-the illegal copying, distribution, or use of software-poses
significant legal risk to business operators. Installing unlicensed copies of software piracy
illegalcopying or
exposes a business to legal risk even if the illegal software is installed by an distribution of another's
employee without the business owner's knowledge. Canadian copyright law permits intellectual property
a user to make a copy of software for backup purposes, to safeguard against damage
to the original copy. Beyond that, it is llegal to copy or distribute the software in
iny way prohibited by the licence. It is also illegal to tamper with or break digital
hcks that are used to prevent unauthorized duplication of software, DV Ds, or other
digital media.
386 CANADIAN BUSINESS LAW

the risk of. civil

Infringement of software copyrights carries
lead to liability and, in cases
where it is done for commercial gain,
may criminal prosecution
fines and/or imprisonment if
convicted. with risk of
MINI MIZINGYOUR RISK

Use Software Responsibly

Purchase only legitimate software products.
Install and use software products in accordance with software licencee
Do not use more copies of the software product than you have licence for.
Do not byypass or tamper with digital locks or encryptions.
If you are outsourcing your information technology needs, ensure that wo.
contractor provides you with properly licenced products.
Establish employee policies and protocols for instalation of software on bucina..
computers and devices.

Ownership and Assignment of Copyright

The author or creator is deemed to be the first owner of a work and is entitled to ib
copyright. However, where work is created during the course of
employment
employee whose job it is to create the work, the copyright in the work will by an
belong
to the employer. These are the common law rules of ownership in copyright and
can be varied by the terms of a contract between the parties. For example, where a
freelance writer produces an article, a newspaper can pay the writer to publish it. The
freelance writer willown the copyright to the work (unless a contract between them
says otherwise). Conversely, the work of a writer who is employed by the newspaper
will belong to the employer (unless a contract between them says otherwise), If a
book publisher wanted to include the articles in a collection, the publisher would
need the permission of the (freelance) writer in the first case but the permission of
the (employer) newspaper in the second case.
Independent contractors, like the freelance writer in the example above, own
the copyright to their work. This may present a legal risk to businesses that use
independent contractors to create copyrights. Where a business contracts with a
software developer, for example, to create a software application for the business,
the business may want to ensure that the contract suitably addresses the issue of
ownership of the software. Conversely, the copyright in photographs taken by a
commercial photographer belongs to the photographer. Once again, this highlights
the need to ensure that the contract that governs the relationship of a
business witn
an independent contractor hired to do work addresses intellectual property rights.
Copyrights, like all forms of property, can be sold. Transfer in ownership of copyr1gnt
is called assignment. Although not required, it may be
prudent for a business tha
quires copyright ownership through assignment to register the copyright with Clro
Copyright Collectives
The Copyright Act permits copyright holders to form collectives for the purpose
of administering their rights. Several collectives operate in Canada to admin
rights to music, dramatic works, and published works. These collectives negotiate
licences with users, collect fees, and distribute royalties to the copyright holders.
Abusiness that wishes to use copyrighted materials belonging to others--such as a
nightclub that wants to play music or a school that wants to distribute photocopiesof
 CHAPTER 11 Intellectual Property and Business Law in the Digital Age 387

atextbook- -may contact the appropriate copyright collective to arrange for alicence
fee. Two notable collectives that manage licensing are:
and pay a
Access Copyright, which represents many publishers and authors and nego
tes with copy centres, libraries, and educational institutions, providing for
payment of royalties for photocopying of copyrighted works; and
. sOCAN (Society of Composers, Authors and Music Publishers of Canada),
which administers the performing rightsof its music industry members by
collecting fees in exchange for providing licensing rights to use or perform
musical works publicly.

Moral Rights
Moral rights are separate from copyright. They belong to the creator
rights may not be assigned to anyone, including an employer or alone. Moral moral rights
following are the three moral rights to the work that the creator has: publisher. The creator rights to have work
properly attributed, not
1. The right to be identified as the author or to be altered prejudicially.
to remain anonymous or use a creator and, if preferred, the right and not to be used in
2. The right to prevent changes to pseudonym.
the work that might dishonour the creator's
connection with a product,
service, or cause where
reputation, such as drawinga moustache on a portrait. the use might dishonour
3. The right to prevent the work from
being used in
service, cause, or institution where the associationassociation with a product, the creator's reputation
might dishonour the
creator's reputation.
While moral rights may not be assigned, they may be
creator can agree not to enforce their waived. In other words, a
moral rights. Consider an architect's moral
rights to a building that is constructed according to the
happens if the owner of the building later decides to architect's plan. What
If the change dishonours the renovate and build an addition?
renovating. To preserve future architects
options,
work, the owner may be prevented from
business people who hire architects should
negotiate a waiver of moral rights. To minimize legal risk, a waiver of moral rights
should be part of a written contract.

MINIMIZINGYOURRISK
Protect Your Copyrights
Use the copyright synbol to remind others to
Fix your creations--for example, by recording respect your copyright.
Ensure that those who create works on behalf your conference speech.
of your business assign their copy
right and waive their moral rights in writing.
Consider registering important works with the CIPO Copyright Office to
presumption that your business is the owner of the work. establish a

Patent Law
Apharmaceutical or technological company would not be
dollars in research and development if its competitors werewilling
free to
to invest millions of
use and sell the new
rugs or technology that it produced. Patent law protects the rights of inventors and
e companies that employ them. It encourages individuals and
the research and development businesses to invest in
necessary to pursue ideas, innovate, and invent.
 CANADIAN BUSINESS LAW
388
Patent law prevents others from manufacturing, using, or selling inventions
without the permission ofthe patent holder. However, permission is commonly
granted pursuantto licensing agreements, which allow others to use the patented
a fee.
invention in return for

Patent Protection
Like theofCopyright Acd, the Patent Act is afederal | statute enforceable across Canada.
Scope
Unlike the Copyright Act, the Patent Act requires that an application be made to the
government before it will grant a patent for an invention. There is no automatic
to one'sinventions. Inventions require registration. Patent protection demands right
more
effort than copyright protection. Protection of a patent is limitedto the country
patent in which it is registered. Generally, in order to protect a patent in other countries,
countries. However, for
government-issued
separate application must be filed in each of those those
monopoly right to make in
a states that are signatories to the Patent Cooperation Treaty, aa single international
sel or use a new, innovative application can activate national patent
and useful invention application can be filed and that single
applications in the other PCT states. proceduree 6
The Patent Act contains numerous restrictions and Complex
obtaining a patent. An expert, such as a patent agent, is generally neededI to help
process.
guide an applicant through the
Length ofProtection
patent is protected for 20 years from the day on which the patent applicationtheie
A the invention to
the patent holder must disclosemonths
filed In exchange for a patent,applications after thev
become public 18
public in its entirety. Patent about the patent is how patent law
ñled. The requirement to disclose the information
interests in the invention. Although hay.
attempts to balance the private and publicprovide inspiration for other innovations.
ing access to the patent information canbeing used, sold, or manufactured by others
the patent protects the invention from the 20-year period, however, the invention
without permission. At the expiration of used by anyone.
enters the public domain and can be freely
SCENARIO

Do You Have a Remedy?

the synthetic enzyme that she de
Valery is considering applying for apatent for university has horror stories of a patent
veloped. However, one of her colleagues from
company to develop acompeting prod
he registered that was then used by a foreign
of dollars trying to stop the infringement
uct. Her colleague spent many thousands foreign company was located had veryY
but got nowhere as the jurisdiction where the
lax intellectual property laws. remedy'Essentially, it means that a legal
saying in law:"no right without a
There is a that rign.
protects only so far as there is an effective remedy available to enforce significant
right can posea
In some countries, weak enforcement of patent infringement bring patentinfringers
expensive to
risk to businesses. In most countries, it can be very public as part of the
patent
made
tojustice. Because the details of the patent must beinformation-sSome businesses are
processand competitors then have access to this information
advantage ofthis
reluctant to patent. Unscrupulous competitors may take without expending
and the patent holder may not be able to do much about
it
considerable resources.
390 CANADIAN BUSINESS LAW

public would not have

be patentable. The fact that the general much use for
invention does not prevent it from passing the
"useful" test.
invention
such an
In addition to being new and useful, an also must not be obvious.an
Many patent applications fail this test. For example, in order to be patentable,
improvement in the manufacturing of maple syrup must not be obvious to somneone
skilled in maple syrup manufacturing. inventiveness
In summary, patentability requires (being
improved) and utility (having a useful
obvious. Patents can take several forms, as
function)
shown in
and that the something
new or
invention not be
Table 11.2 regarding i
related to door locks. ,inventions
Improvements Are Patentable
As noted above, to be patentable an invention must be benew in relation to what was
known or used previously. This does not mean it must entirely new. In fact, most
inventions build on earlier inventions. This is why the Patent Act
"improvements" are patentable. provides that
To be patentable,improvements cannot be superficial or cOsmetic. The
improve-
ment must involve an inventive step. Itis important to keep in mind that ifa
improvement is made on an invention where a patent is still in force, there can stil
be an infringement of the original patent. If a business invents an improvement to a
patented process or machine, it may be required to negotiate a licensing agreement
with the owner of the original patent. The Patent Act does provide a process hw
which the original patent owner may be mandated to provide a compulsory licence
tothe inventor of the improvement. To avoid the legal risks that may arise from
improving an existing patent, it is advisable to obtain the assistance of a patent ament

Not Eligible for Patent Protection

Although processes and methods can be patented, a theory cannot. For example, a
patent will not be granted for a new theory of aeronautics. However, a patent can be
obtained for the design of an aircraft, the product that results from the practical ap
plication of the theory. Scientific principles and mathematical formulas are also not
patentable. Consider that while a mathematical formula may be newly discovered,
it has always "existed." Similarly, the "discovery" of something that exists in nature,
like a new species of plant, is not patentable (whereas new plants invented in alab
are capable of being patented).

Table 11.2 Example:Form of Patentability

Form Example
Product A new kind of door lock

Composition of matter Chemical composition used in lubricant for door lock

Machine Apparatus for building door locks

Process Amethod for making door locks

Source: Canadian Intellectual Property y Office, AGuide to Patents (Ottawa: Industry Canada, 2010).
 CHAPTER 11
Intellectual Property and Business Law in the
Digital Age 391

Some things in Canada are not patentable as a matter of

methodlof administering medical treatment, for example, may public
not be
policy. Anew
that
the basis the tit shouldbe available for others who may benefit patentable on
from it (contrast
however, to fact that drugs as aform of medical this,
matterrof public policy, Canada does not
allow the
treatment are patentable). As a
Although Europe, the United States, and Japan allow patenting of "higher life forms.
life forms". -including the genetic material of animals---inbusinesses to patent "higher
stage of development, from fertilized eggs on, are higher life Canada, "animals at any
not patentable subject matter" Similarly, although forms and are thus
etructures may be patented on a case-by-case basis,artificial
organs
organ-like
and tissues
or tissue-like
are not patentable. themselves

Application for a Patent

As mentioned earlier, unlike copyright law, www.emond.ca/CBLBC/links
patent law does not automatically protect
an invention. A patent must be registered, and DIG DEEPER
the process starts with the filing of an The Canadian Intellectual
application with the CIPO Patent Ofice. Property Office website has a
The Patent Ofice grants a patent to the
For example, assume that Lydia and Padma party who is first to file an
are independently working application.
database of patent descriptions
and images for over 90 years
for a garbage can with a childproof locking mechanism that on a design of patents.
when an adult passes a hand over the bin in a particular releases automatically
which Lydia and Padma work each test prototypes of themanner. The businesses for
files a patent application on June 13, 2017, and products. Lydias company
Padma's company files a patent
application two days later, on June 15, 2017. Since Lydia's company
the application, Lydias invention is entitled to patent protection, and was first to file
This is the case even if Padma actually invented her garbage can Padma's is not.
before Lydia did. several months
Efficient filing is often essential to avoid having a competing invention take
priority. Consulting a patent agent can help minimize the extensive delays that an
applicant may encounter when filing a patent application. Once filed, a patent ap
plication can take several years to complete. The process is concluded with a patent
examination, which ensures both that the invention complies with the requirements
of the legislation and that it has not already been invented. Once the
invention
successfully passes the examination stage, the Patent Office issues a patent.
Once patented, manufactured goods can usethe word "patented' and display the
patent number. It is not necessary to do so, but alerting others to the existence of the
patent may minimize some risk in potentially having one'spatent infringed.

Ownership of Patent Rights

Generally, the inventor of the process or product is the first owner and is entitled to
the protection of patent law. This means that rights to patents should be expressly
addressed in contracts with consultants or other independent contractors who are
hired to do research or development work. Even where works are created in the
course of employment, the employee inventor may claim rights to the patent as first
owner. However, the employer can claim ownership if:
the invention was made in the course of employment where the employee was
specifically hired for that purpose, or
" there is a contract, express or implied, indicating that the employer has rights
to the invention of an employee.
392 CANADIAN BUSINESS LAW

Infringement of Patent Rights

A patent grants the owner the exclusive right to make,
construct,
invention. It also grants the patent owner the right to let others and
use
to selltheit.
use it
Patent infringement claims are the manner in which or
patent owners
exclusive rights over their invention. Where the nature of one's
businessenforce
these
the possible risk of patent infringement, legal risk management is crucial.exposes it to
and resulting damages of patent litigation can be fatal to a business. The costs
MINI MIZINGYOUR RISK
Respect and Protect Inventions
Negotiate contracts with employees and independent contractors that cieae.
out ownership rights to inventions.
If you determine that your invention is viable, file a patent application without
delay.
Consult a patent agent, because the application process is complex and thestakec
may be high.
Negotiate licensing agreements with patent holders if you intend to use their
inventions.

Trademark Law
Trademarks are the form of intellectual property most closely tied to commercial
trademark activity. Trademarks protect the words, symbols, and pictures associated with a
unique identifier of brand business'sname, brand, or product. Atrademark protects the trademark owner's
used to distinguish one name (where the name is itself abrand), its brand recognition, and the reputation
company's products or ser that accompanies its name and brand recognition. Consider a successful fast
vices from those of another
food, or soft drink, and the slogans associated with it. As you think of the slogans
connected to this product, an image may also come to mind-maybe it is an
advertising device, such as Ronald McDonald, or the distinctive colour and design
of a soft drink can. Each of these marketing symbols or logos can be protected by
trademark law.
Arguably, trademark law is not "intellectual." It does not protect creativity so much
as it protects marketing and advertising clout. Trademark rights have more to do with
who uses a trademark, and how this leads to brand identification, than with who
creates the trademark. Unlike other types of intellectual property law, the primary
purpose of trademark law is to facilitate commerce, not to promote innovation.

Types of Trademarks
The following types of marks are covered by the Trade-marks Act:
letters,
1. Ordinary marks. Trademarks may include the name, word or words,
numbers, symbols, sounds, slogans, and designs-or any combination
of these--that distinguish a business's goods or services. The key feature
or
of these, and of every other trademark, is that they brand the product
service in a way that distinguishes it from its competitors.
 CHAPTER11 Intellectual Property and Business Law in the
Digital Age 393

2. Distinguishing guise. The appearance, shape, colour, and packaging of a

product can be characterized as a trademark if
these
the product from those of its competitors. Examples ofattributes distinguish
icde a bell-shaped bottle of scotch, gold foil-wrappeddistinguishing guise
pink insulation. chocolates,and
2. Certification marks. This type of mark is licenced to businesses for the
purpose of showing that their goods or services have met a
particular
standard, be it the safety or quality of the goods, the place where
were produced, or the working conditions of the workers who the goods
For example, a product approved by the made them.
may be labelled as such. Unions may also Canadian Standards Association
to indicate that they were produced permit the labelling of products
by unionized labour only. Similarly,
certification marks may be used by franchisors to label the products sold by
franchisees.

Scope of Trademark Protection

Similar to copyrights,
and by statute. In othertrademarks
are afforded protection both in
words, both registered and unregistered common law
trademark be used trademarks
legally protected. Both methods require that a are
protection. in order to claim
Unlike copyrights, ownership of a trademark is not tied to the creator.
of a trademark is Ownership
determined usage.
by
Canadian trademark protection, like patent protection, does not
countries. Therefore, if you own a Canadian trademark and apply in other
Mexico, for example, you must obtain protection in want to protect it in
Unlike copyrights, Mexico as well.
for the protection of a patents, and industrial designs, there is no
mandated cut-off
trademark in Canada. A trademark can be protected
itely as long as it is in use. indefin
Common Law Trademarks
Trademarks do not need to be registered to protect their
trademarks are also referred to as common law exclusive use. Unregistered
trademark is protected where the mark is adopted bytrademarks. A common law
the business and is associated
with the product or service. Violation of an
an action for "pasing off an unregistered trademark is addressed by
intentional tort described in Chapter 3. Passing off
involves the misrepresentation of a product or business by
similar product or business. To using
is associated with another, a name or mark that
on passing off, the plaintiff must prove succeed in a lawsuit based
each of the following elements:
use of the trademark for
suffhcient time to demonstrate a market association
between the mark and the product or business;
" confusion between a business's
trademark and the use of it by a competitor, or
misrepresentation by a competitor in connection with the trademark; and
" damage to brand reputation or aloss of sales.
Recall from Chapter 3 that infringement of a trademark does not
copy used by a competitor be exactly the same as the original. It needrequire that the
Ciently similar so that confusion may result. Although no symbol onlytobe suffi
needs be used
 394 CANADIAN BUSINESS LAW

in relationto a trademark in order for it to be protected, an unregistered

can be marked with "TM° to alert others of the intention to protect it. Thetrademark
of protection of an unregistered trademark lasts for so long as the
in association with the product or service.
trademark durat
is in iousen

Registered Trademarks: Trade-marks Act

The option to register a trademark is governed by the Trade-
statute. Aregistered trademark is one that has been entered-marks
in
Act, afederal
the
RegistRegister
Trademarks throughthe Canadian Intellectual Property Office. of
trademark grants the sole right to use the mark across Canada.
necessary to do so, the symbol® can used for a registered trademark to
Although it is ration
of
not
a

the owner intends to protect against infringement. The Office of the indicate
that
Trademarks does not police trademarks. Registrants are responsible forRegistrar of
their rights in the event of any trademark infringement.
Use of a trademark without the owner's consent constitutes trademark
enforcing
ment. Infringement includes use of a trademark that is confusingly similar to a
registered trademark Where an action for trademark infringement is successh:l
infringe-
court may make any order "appropriate in the circumstances," including an order
damages and an order for destruction of the goods.
Like patent law, trademark law is an extremely specialized area; it would be in an
applicant's best interest to look to the guidance of a trademark agent. Applications
for registration are processed by the Trademarks Office examiner, whoensures
that there are no other applications for a similar trademark and that the mark is
registrable.

www.emond.ca/CBLBC/links Registration Is Renewable

DIG DEEPER Registration of a trademark is valid for 15 years, but with continued use, it can
Youcan search registered
trademarks in Canada at
be renewed indefinitely.? Trademarks are the only form of registered intellectual
property that is renewable.
the website of the Canadian
ntellectual Property Office.
Advantages of Trademark Registration
Registrationrequires an application process and payment of fees but doing so
provides greater protection over common law trademarks. If atrademark is properBy
registered under the statute, the owner can bring an action for infringement and
prevent others from using the mark, whereas owners of unregistered trademarks
must sue for the tort of passing off. The following are some of the advantages ot
registering a trademark:
Registration provides a presumption that the trademark is owned by the party
that registered it; the duty to disprove this lies with the party that wishes to
challenge it.
" Trademark infringement is easier to prove than passing off; passing off re
confusion.
quires the plaintiff to prove that use by another has caused market
introduced a bill to amend u
2 Note that at the time of this writing, the Government of Canada has withthat of other countries.
Trade-marks Actto harmonize Canadas trademark registration period
current
period will be reduced from the into i
Irthe proposed amendments become law, the renewal comes effect).
years to 10 years (for trademarks registered or re-registered after the legislation
 CHAPTER 11 Intellectual Property and Business Law in the Digital Age

registered owner of atrademark needs onlyto establish use of the trade-

. A but an owWner of a common law trademark needs to prove both use and
mark,
connection to market reputation.
Cetablishing registration infringement does not require proof of damage:
unauthorizedI usse of a registered trademark: is suficient to establish infringe-
ment. Damages in a passing off action require the plaintiff to prove damage to
brand reputation or loss of sales.
Registration protects trademarks across Canada; common law trademarks
are protected only in the geographic area where the business has established a
reputation associated with the mark.
Distinctiveness
To qualify for registration, a trademark must be distinctive. A mark is generally
something that is visible and separate from the product itself. Achocolate bar
would not be subject to trademark protection; however, its name and the logo on
the wrapper probably would be. The distinctiveness of made-up words, phrases, and
symbols is often straightforward. However, more common words and even colours
can be subject to trademark protection if their use over time has associated themn
exclusively with a particular product or brand.
Trademark: Use It or Lose It
To benefit from protection under the statute, trademarks must be used. As a result, a
registered trademark can be expunged from the trademark registry if ongoing usage
cannot be established. This "use it or lose it" requirement ties into the notion that the
purpose of trademarks is to facilitate commerce and marketing.

Ineligible for Registration

Not all marks are eligible for registration. The following are examples of the types of
marks that may be denied registration:
" an official government symbol
" an offensive mark
" the given or family name of someone who is
has died within the previous 30 years unlessliving-incuding
the applicant-or
such a given or family name is dir
ectly related to the particular good or service (made-up names are
" amark that causes confusion in relation to another registered acceptable)
trademark
a deceptive or misleading description of the product or its place of origin
" a generic descriptive word that is regularly used to describe the type of prod
uct (such as "firm" mattress) and that does not distinguish it from
products competitive
" the name of a product that is simply the word for the product in a language
other than English or French.

Trademark Infringement: (ausing Confusion

The underlying principle in trademark law is that trademarks protect how businesses
distinguish their products or services from their competitors. Trademarks are
 CHAPTER 11 Intellectual Property and
Business Law in the Digital Age 397
Figure 11.1

.Coogle

Google is continuously taking steps to

becoming a generic term for Internet protect its trademark and prevent "googling" from
searching.
When this happens, the original
trademark loses its claim of distinctiveness. For
example, "zipper," trampoline," "linoleum,
that were originally and "escalator" are examples of
trademarks but that words
terms used to describe the item instead ofhave lost protection by becoming generic
has taken steps in an effort to the specific brand.
prevent
used to describe Internet searches its trademark Interestingly,
from becoming Google
a generic term
conducted by any search engine.
Trademark Versus Trade Name
The terms "trademark" and "trade
is a distinction between the two. name" are often thought to be the same
A trade name is the
name in
but there
operates. all business names are trademarks.
Not which a business
However, a trade name may be a trade
trademark if the name is used to identify goods or services.
name
name in which a
can have great value for abusiness by linking the Abusiness or trade name
business operates
ity of its goods or services. business's reputation with the qual
in this way. For example, ifTrademark
law protects the business
XYZ Ltd is a business that produces name where it is used
product is identified with this name (that is, XYZ Ltd is on the frozen pizzas and the
then the trade name can also be a product's packaging),
trademark. However, if the consumer
identify this pizza with the trade name because the pizzas are called does not
then "Pop-A-Pizza' is the trademark and XYZ Ltd is the "Pop-A-Pizza,"
trade name. Generally,
registration of a business name is under provincial jurisdiction. Registration of a
business name does not, in and of itself, warrant against trademark
infringement.
3 See Suzanne Choney, "No Googling, Says GoogleUnless You Really Mean It"
(26 March 2013), online: <https: NBC News
Iwww.nbcnews.com/tech/internet/no-googling-says-google
-unless-you-really-nmean-it-f1C9078566>.
 398 CANADIAN BUSINESS LAW

Adoption of a trademark may prevent the use of an identical or similar trade

name. The reverse is also true: a trade name may prevent someone from using the
same or similar name as a trademark. Even where registered, a trademark may
be cancelled if someone else in Canada has made use of a similar trade name (or
trademark) in the past. To understand this, it helps to think of trademarks as a form
of consumer protection in that they help prevent confusion in the public. Akey
question to consider is the similarity of the product or service and whether use of the
trade name can be: an unregistered
will cause confusion. Because a
trademarktrademark,
name as
should search trade name registries as well the
a business
registry
before deciding on a name. Since trade names are registered provincially, there is no
single list of trade names in Canada. Hiring atrademark agent to ensure athorough
search of trademark and trade name registries can help reduce legal risk

Trademarks and Domain Names

Domain name refers to the unique address ofa website. A legal dispute can avies
domain name trademark.
unique address of a website from the registration of adomain name that is another's
Domain names are issued on a first come, first served basis by the administering
Canadi
authority. There are country-specific domains; for example, "ca denotes aAuthorit
website and is administered by the Canadian Internet Registration
(CIRA). Additionally, there are generic domains (for example, "com," "org"neth
that are controlled by a US non-profit corporation known as ICANN (Internet
Corporation for Assigned Names and Numbers).
Registering a domain name for an illegitimate purpose is known as cyber-squatting.
cyber-squatting
registering trademarks as Cyber-squatting is the registration of a domain name that is the trademark of another.
domain names in bad faith done in bad faith for the purpose of either preventing the trademark owner from using
trademark
the domain name or for the purpose of selling the domain name to the
owner. Often, cyber-squatters use the website as a means of advertising their own
website for that purpOse.
products or services directly or to redirect traffic to another the trademark
In cases where a domain name has been registered in bad faith,
domain name
owner can use a dispute resolution process available through the result in the can
issuing authority (CIRA or ICANN). A successful complaint can the complainant.
cellation of the domain name or the transfer of the domain name to
The complainant will need to establish that:
enough to cause
" the domain name is identical to the trademark or similar
confusion,
legitimate interest in it, and
the registrant of the domain name did not have a
" the registrant is using the name in bad faith.

MINI MIZIN GYOUR RISK

Respect and Protect Trademarks
slogans;search trademark and
RBe original in your packaging, brand names,and infringing the trademarks of others.
trade name registries to minimize legal risk of are abandoned are not protected.
that
Keep your trademarks in use; trademarks
becoming generic: do not use to
Use your trademarkproperly to prevent it from makes it a general term
your trademark as a verb or noun or in any mannerthat
describe the product.
 CHAPTER11 Intellectual Property and Business Law in the
Digital Age 399

orTM after
Use the symbol your mark, as
establish its use in association with your appropriate (particularly as you begin to
product or service).
Palice your trademarks: ensure that your marks are not
being used without permis.
sion, and take action to prevent use of your
Consider whether your trademarks should be trademark if this OCcurs.
Donot use the trademarks of another in any way,registered; consult atrademark
agent.
without authorization. including igital platforms,

Industrial
Industrial
Design Law
design law protects the visual appearance of a
pattern, ornament, or configuration, or a combination ofproduct,
these.
including its shape,
The law that governs
does not generally cover industrial design fills a gap left by copyright law, which industrial design
mass-produced
and an industrial design, therefore, is
goods. The difference between a copyright
government-granted exclu
is reproduced by an that industrial design applies where the design
industrial process. The sive right to make, sell, and
artistic works that are mass-produced an Industrial Design Act offers creators of use an ornamental feature,
use by others. Like the other opportunity to protect their designs from shape, or configuration
the Industrial Design Act is a intellectual property statutes discussed in this chapter,
federal statute enforceable across Canada.
Scope of Industrial Design Protection
Like patents, industrial designs must be
An industrial design cannot be registered, and protection is time-limited.
registered
filed. Aregistered industrial design is until six months after the
application is
Because industrial design is basedprotected
on visual
for ten years.
functional element. For example, the basic shape appearance, it contains a non
of
function and does not create an industrial design. a potato peeler is dictated by its
angles, and other decorative features of the However, the distinctive curves,
particular
protection as an industrial design if these features are potato peeler may qualify for
standard rectangular swimming pool may not qualify sufficiently novel. Similarly, a
as an industrial design,
pool shaped like a poplar leaf might. but a
The owner of a registered industrial
design has the sole right to use it when
manufacturing the product and can prevent
competing product, from copying or imitating theothers, design.
when manufacturing a
Abusiness that wants to
own the industrial designs created by its
its ownership rights contractually. Such aemployees and consultants can establish
contractual
risk that an employee or consultant will later claim arrangement eliminates the
company believes to be its own. ownership of a design that the
Once registered, industrial designs can carry the symbol
owner's name. There is more reason to use the industrial designfollowed by the design
forms of intellectual property protection. Whereas the symbol is symbol than in other
not necessary to
legally prevent others from infringing the industrial design, use of the symbol allows
the owner to claim damages as well as an injunction.

Registration
lo be protected, industrial designs must be registered with the Industrial Design
Office, which, like other offices that register various forms of intellectual
1S part of the Canadian Intellectual Property Office. The office will notproperty.
register
400 CANADIAN BUSINESS LAW

industrial designs that have been disclosed previously or used before the
period precedingthe application. The design must be. original and not one-year
previously registered design. similar to a
An industrial design must be applied to afinished product. This means
application must describe not only the design but also the product or that the
to which the design is applied. For example, to register a poplar leaf
design for a products
swimming pool as an industrial design, the application must also describe
Registration will apply to a pool only. It will not prevent another the pool.
manufacturing plates shaped like a poplar leaf. company from
Functional aspects of a design are not protected by industrial design law. If a
functional component of a design is a new invention, the creator can apply for indus-
trial design for the visual aspect butshould apply for patent for the new
mechanism.
Infringement
Infringement of industrial design occurs when anyone copies, sells, rents, imnes
or manufactures a registered industrial design without permission. An injunctinn
the most common order made for industrial design infringement. A successful
action for industrial design infringement can also result in an award for
damages
where the product was properly marked with the industrial design symbol oni
label or packaging.

MINIMIZING YOUR RISK

Respect and Protect Industrial Designs

Ifyour business creates designs intended for mass production, be original in your
designs; employ consultants and staff who prefer to work creatively than to recycle
thinly veiled copies of the work of others.
Don't wait too long to apply for industrialdesign protection,as eligibility for
registration will be lost after one year of the design becoming public.
Ensure that employment or consultant contracts set out ownership of the industrial
designs created in those relationships.
Register your industrial designs--it is your only way to protect them.
Properly mark design packaging or labels with the industrial design symbol.

trade secret
recipe, method, process, Trade Secrets and Confidential
data,or know-how of a
business that is confidential, Business Information
that has actual or potential of
value in not being generally Irade secrets are categorized as intellectual property because they take the form infor
known, and where efforts intangible assets deserving of legal protection. Trade secrets include technical
mation-such as recipes, formulas, or methods--that provides a business advantage
are made to keep it a secret confidential busi
of
Over competitors who do not have it. Trade secrets are a form interchangeably.
used
confidential business ness information and, over time, these terms have come to be suppler
includes financial
information Confidentialbusiness information is a term that more broadly
information that provides pricing, customer lists, planned advertising campaigns, designs, blueprints,
a business advantage information, business plans, and other types of strategic business information
tna
by being kept secret is not generally known.
 CHAPTER 11 Intellectual Property and Business Law in the Digital Age 401

Confidential business information, including trade secrets, is information a

business does not want disclosed to the public (or to competitors). Unlike with the
otherforms ofiintellectual property discussed above, no specific statutory provision
sets out rules for confidential business information. The protection of confidential
information and trade secrets is recognized in the common law principles that have
developed over time in court decisions.
Confidential information, including trade secrets, has value to a business. Its
walue is often monetary and depends-at least in part-on it remaining confidential.
sreach of confidence is atort and willhold aparty liable for violating the duty to breach of confidence
roen information confidential. The law, however, will not protect information that a disciosure of information
business has not itself taken efforts to protect. In this section, we will exanmine how that one was legally
confdential business information can be protected and what gives rise to the duty required to keep confi
of confidentiality. dential, resulting in harm

Scope of Protection
Confidential business information and trade secrets may be protected indefinitely as
long as the following conditions are met:
The information is not generally known in the industry.
" The information represents a business advantage; generally, it has economic
value (or potential economic value) as a result of not being commonly known.
" Efforts have been made to keep the information from becoming generally
known.
Secret recipes are examples of confidential business information that can be
maintained for a long time. For example, the formula for Coca Cola has been a trade
secret for over 130 years. Other types of information may be protected as confiden
tial for a relatively short period of time. Confidential business
legal protection when the information is no longer secret either information
loses its
because
has failed to protect it or because it has become generally known. For
the business
design of a new model vehicle by a car manufacturer may be confidential example, the
business
information during its development; however, once the new model is revealed at a
car show, the car company can no longer claim it as secret. Similarly,
research and
development work will often be done with a great deal of protection for its secrecy,
but if the work leads to application for a patent, the nature of patent law will
its disclosure, at which point it will no longer have the protection of a require
trade secret.

Duty of Confidentiality
The legal obligation to maintain confidential information can arise in a number of
ways, for example:
expressly stated in contract
" implied by contract
" arising from a fiduciary relationship
"created by nature of special relationship or circumstances.
Businesses that want toclaim protection over confidential information must take
seps to maintain its secrecy. On the other hand, it is sometimes necessary to share
Inlormation in confidence in order to conduct business. Investors, contractors, and
 CHAPTER11 Intellectual Property and Business Law in the
Digital Age 403

consultants, as well as higher-levelemployees, are examples of

with whominformation may need to be shared. Express business aSSociates
confidentiallinformation can be:ea vital tool in contractual terns regarding
may be a term of a minimizing
broader contract, including an legal risk. Confidentiality
stand-alone non-disclosure agreement (NDA). Either employment contract, or of a
essentialmechanism for protecting information from being way, contracts provide an non-disclosure
(confidentiality clauses are discussed in Chapter 9 under shared by the recipient agreement
Restrictive Covenants"). the heading "Contractual contract that legally
Although expressly setting out obligates a party to
oractice, confidentiality can also betheanduty of confidentiality in a contract is a best
implied term of a contract. Businesses that confidentiality
dowork for other companies that disclose
confidential information tothem
be careful with such
information and not rely on the fact that there is no should
contract or confidentiality clause. Similarly, there is written
generally an implied
confidentiality for higher-level employees who are entrusted with sensitive duty of
information. Note that express or business
employee or consultant from usingimplied confidentiality terms do not prevent an
the skills they have acquired in the
their work for another employer or client. The course
of
acquired is transferable to their next job-but the general nature of the skills they have
The obligation to maintain confidential information is not.
confidentiality exists in all fiduciary relationships and
other positionsof trust. Professionals fiduciary
who provide consulting, advice, and
services may be in a position of trust in relation professional
to the client. Partners are fiduciaries
based on trust and
each other and officers of a to confidence
corporation have a fiduciary obligation to the
agent has a fiduciary relationship with the principal. company. An
duty not to disclose confidential Fiduciaries have a common law
Beyond fiduciary relationships,information
the
and not to use it for their own benefit.
common law has expanded to recognize that
the obligation to maintain
confidentiality exists where the circumstances
create the legal duty. The Case in Point, below,
demonstrates that the dutythemselves
dentiality can arise during the process of negotiating of conf
even if the business deal falls a business deal and continues
through.
Breach of Confidence
Breach of confidence can result in damages,
injunction, and other
needed to establish breachremedies, includ
ing punitive damages. Three factors are
of confidence:
1. The information was confidential.
2. The information was
communicated to the recipient in conidence.
3. The information was misused by the
that disclosed it. recipient to the detriment of the party

CASE IN POINT

Information Obtained in Confidence

Lac Minerals Ltd v International Corona Resources Ltd, [1989] 2
SCR 574
Facts and arranged to visit the site. Detailed
Corona was a mining company investigating the gold mining information was
disclosed by Corona to Lac's representatives about the ad
Potential on a property in northwestern Ontario adjacent jacent property, including geological findings, drilling plans,
tOproperty it already owned. Lac Minerals was a mining and potential of large gold reserves over a wide area of the
cOmpany that heard about Corona's geological explorations property. Corona and Lac entered into discussions about
 404 CANADIAN BUSINESS LAW

information with the information was communicated gave rise to a duty of

ajoint venture. Corona shared financial confidentiality, that the information shared was
Lac. The issue of confidentiality was not raised.
Lac advised confidential,
and that it was misused by Lac for its own gain at
property, but the
Coronato aggressively pursue purchase of the broke down. expense ofFCorona. The Supreme Court of Canada found Lac
venture
shortly after, negotiation for the joint liable for breach of confidence and transferred
the property
information, and without
Having received the confidential to Corona.
proceeded to make a much
the knowledge of Corona, Lac went on
itself. Lac
higher offer and purchase the property be the biggest Business Lesson
turned out to
to develop the property, which
gold mine in Canada, resulting in huge profits for Lac. Corona A dutyof confidentiality can arise not only by wayof contrae
reached the Supreme Court tual obligation but also from the nature of the relationshin
sued and the matter ultimately
of Canada.
between the parties. Parties should not misuse confidential
information that is disclosed to them in confidence. Negotia.
Result
tion of a business deal can create the circumstances in which
agreement between adutyof confidentiality exists even without a non-disclos1ure
Despite there being no confidentiality agreement in place.
the circumstances in which
the parties, the court found that

RISK
MINI MIZING YOUR
Information
Respect and Protect Confidential Business
Include confidentialitycauses in employment contracts. contractors or consult
Execute non-disclosure agreements when engaging outside
ants (including IT professionals). access to it and
Safequard your confidential information by limiting who has
establishingstrict access protocols for secret information.
business
Do not misuse the confidential information entrusted to you in your
relationships.

Privacy: Safeguarding Personal Information

property, we examined the legal aspects of confidential busi
In discussing intellectual business secrets. In this section,
ness information and how a business can protect its
when it comes into possession
we turn to the legal risks a business can be exposed to of any personal
Businesses are custodians
of personal information belonging to others.obligations
information they collect. They have legal related to the collection, use,
information of others. The law
disclosure, and general safeguarding of the personal particularly in the age where
governing privacy is of critical concern to all businesses, doing business.
electronic data collection has become an essential aspect of

PIPEDAandthe Collection, Use, and Disclosure of

Personal Information
protection of fprivacy
; and appliesto
Canada has federal llegislation that regulates the oftheir own. British
alljurisdictions that don't have substantially similar legislation privacy
Columbia (and some other provinces) has enacted in its own private sector
Freedomof
Act (PIPA), as well as the
legislation, the Personal Information Protection
 CHAPTER11 Intellectual Property and Business Law in the
Digital Age 405

Information and,Protection of Privacy Act, which

provinces and territories are governed by the governs the public sector. All other
mation Protection and Electronic federal legislation: the Personal Infor-
to how Documents
businesses collect, use, and disclose
Act (PIPEDA). Such legislation applies
obligations of businesses with respect to the consumers' personal information (the
is dealt with in Chapter 9). personal information of its employees
PIPA and PIPEDA define "personal
identifiable individual. This information" as any information about an
includes
woe, jdentification numbers of any information-in any form-such as name,
ocial status; it also includes records kind, ethnic origin, blood type,
of opinions, and
employment, and so on. PIPA requiresanthatindividual including medical, credit,
businesses obtain the consent of
individuals in collecting their personal information and that the information be
used only for the
pre-identified purpose consented
information collected, used, or disclosed in the coursePIPA to. applies to all
(i.e., of "commercial personal
majorcustomer/consumer information) and it applies to small activities"
corporations, even businesses as well as
PIPA and PIPEDA werewhere businesstois conducted wholly online.
by a customer about the established promote best practices, but a
Office of the Informationhandling of their complaint
and Privacy personal information may be made to the
Office of the Privacy
Commissioner of
Commissioner for British Columbia or the
is a risk of legal Canada, an agent of
The Privacy sanction for any business that fails to complygovernment,
with the
so there
can end up inCommissioner has the power to
investigate regulations.
federal court, where damages complaints,
can be awarded to a and issues
privacy breach occurs when personal complainant. A
in a manner that was not information is collected, used, or disclosed
authorized. Privacy breaches can cause personal harm; privacy breach
result in financial loss; effect
and opportunities; and lead todamage to reputation, credit,
identity theft. business relationships,
unauthorized access
to, or disclosure of,
personal information
Information Security and Compliance
Businesses that handle information
the data they possess and pay electronically need to manage the security of
particular
intercepted during transmission. Businesses attention to the risk of information being
technology specialists should seek professionalthat do not have in-house
information
establish protocols for safely managing data and assistanceit from consultants to
data is transmitted electronically, protecting from hackers. Where
implemented. encryption and other security measures should be
Individuals from whom personal
request access to their information, toinformation
challenge
has been collected have the right to
its
to know how it is being used or accuracy and completeness, and
disclosed. PIPA requires
designate an individual who will be accountable for compliance business organizations to
framework for protecting personal information. These requirements with the regulatory
include:
" identifying and documenting the purpose for
collected; which personal information is
" obtaining consent from individuals for the
collection, use, and/or disclosure
of personal information;
"limiting the collection of information to that which is
necessary for the
purpose that has been pre-identified and consented to, and ensuring that it is
not used or disclosed for any other purpose;
406 CANADIAN BUSINESS LAW

keeping accurate, up-to-date, and lcomplete records of

information collected,
and retaining information only for so long as is necessary to fulffll the
purpose for which it was collected;
safeguarding the security of the information; and
" informing individuals of the organization's policies andI practices for
personalinformation and developing andlinmplementing complaint managing
procedures.
Where a privacy breach occurs through theft, unauthorized
disclosure,
Or a
violation of the business's security safeguards, steps to minimize risk must be tad
immediately and may require self-reporting of the breach to the Informatien
Privacy Commissioner.

MINIMIZING YOUR RISK

Protecting Personal Information
Use knowledgeable and capable information technology specialists to establish
and securely maintain data management systems.
Establish policies and protocols for the proper handling of personal information by
employees.
Use encryption and other mechanisms to safeguard electronic transmission of data
Appoint acompliance officer who is responsible for ensuring that personal informa
tion is being used, collected, and disclosed lawfully.

Electronic Communications:Complying
with the Law
Canada's Anti Spam Legislation
Businesses that use electronic forms of messaging need to be aware of Canada's
Anti-Spam Legislation (CASL), which addresses unwanted commercial electronic
messages sent by email, text, or social networking platforms. Despite its name, the
legislation'sreach goes well beyond what would typically be considered "spam";
to someone
sending an electronic message with any amount of commercial content
business.
who has not consented to receiving it can present significant risk to a
$10 million.
Organizations that don't comply with CASL can face penalties of up toparticipation
commercial electronic Acommercial electronic message (CEM) is one that encourages
example, that contain
Emails, for
message in acommercial activity, even in a minor way. business opportunities (and that
essage sent electronically information about promotions, events, offers, or
promotions) are CEMs. Mes
that contains commercial may include links to websites that contain commercial
voice, images, and video. Generaly,
promotion of any kind saging is not limited to text but includes sound, consent.
recipient's
of CEMs unless the sender has the
CASL prohibits the sending communications
law applies to sent directly or indirectly; businesses
Note that the
to market promote their goods and services will be
that use a third-party agent or complaint, the
their behalf.In the event of a
responsible for communications sent on Compliance with CASL requires
that:
CASL requires that the sender prove consent.
to
recipients need to have opted in
" all messages must be permission-based;
receive communications;