Dana O’Born holds a law degree from the University of Edinburgh and is an executive at the Council of Canadian Innovators.
As a company evolves from a startup to a scale-up – a company that is rapidly expanding and commercializing ideas in global markets – their intellectual property (IP) requirements change.
Early-stage startups often face fewer consequences from infringing IP because they are too small to be targeted by aggressive IP owners and enforcers. Once a company begins to expand globally, it risks running into stiff competition and becoming targets of predatory IP actions by competitors or indolent non-practising entities, often referred to as “patent trolls.”
Successful companies that effectively navigate global markets have sophisticated IP strategies underpinning their growth. In Canada, a new tool has been added to the tool kit for chief executive officers looking to take their IP global – a “patent collective.”
A company’s freedom-to-operate (FTO) is defined as its right to use, test, market or sell a product or service without infringing on the IP rights of another person or company. In a world where more than three million patent applications are filed annually, having a smart FTO strategy is the difference between becoming a $10-million company and a global giant.
When a scaling company is concerned with global FTO, a domestic-only strategy is insufficient. Each country can have its own rules to govern foreign and domestic IP, tipping the scales to favour the interests of their country’s companies. This requires innovative Canadian firms to be intentional when commercializing globally and the recently announced IP collective bodes well for such strategies.
Beyond commercialization, a distinguished IP strategy includes enforcing a company’s ownership rights from its own intangible assets, including patents, copyrights, trademarks, trade secrets and contracts.
In the past two decades, there’s been a rapid rise of patent filings across all industries and sectors, especially for key emerging areas such as blockchain, artificial intelligence and machine learning. There have been 226,000 AI patents filed worldwide since 2000, for example, with Microsoft leading the race with 697 world-class patents classified as having a significant competitive impact.
Intangible assets have a direct impact on wealth and power, at both the firm level and nationally, which is why smart innovation countries focus on owning and then protecting these assets inside their firms.
While it is a sad reality of achieving success, usually the mark of a globally significant technology company is having legal disputes on their IP. For instance, by 2011, BlackBerry annually managed 400 active IP files. Today, Amazon is in litigation with 912 distinct patents.
This is where the Canadian government can play a role in helping more companies scale up rapidly by protecting their valuable intangible asset rights. The Innovation Asset Collective – the winner of the federal government’s contract for the IP collective – aims to create a shared community for IP assets. This type of IP collective will allow firms to share in IP expertise and strategy, including gaining access to previous unavailable IP that can facilitate a company’s increased FTO.
With such an arrangement, a consortium of Canadian companies will pool, acquire and generate strategic IP assets together and, in return, receive rights for use and guard against lawsuits. In the long run, this will help save costs and eliminate licensing fees between companies that work together.
U.S. companies have been advancing FTO strategies for decades and have been heavily supported by their governments to create some of the world’s most valuable IP-driven firms. Canada’s new offerings through this collective will increase FTO for high-growth Canadian companies while providing education and support, ensuring early-stage companies appropriately understand and prepare for the risks and opportunities that IP brings.
Participating companies will receive guidance on strategy, help with recognizing and protecting valuable IP and data, and support as companies expand their FTO.
As more Canadian firms scale up and receive international attention for their breakthrough innovations, they will require more sophisticated approaches to collecting economic rents on their ideas. The new IP collective has great potential to elevate Canada’s innovation outputs and set domestic innovators up for global success.