Patents

What is the symbol of a true gentleman, if not his moustache?  The moustache guard was patented in 1876 to protect the user’s moustache during holiday feasts.  It was described in the patent application as a “curved and concave shield, which may be made of vulcanized rubber, metal or any other suitable material” and it promised to keep moustaches out of harm’s way while the user (inevitably) overindulged during the holiday season.  Regardless of the absurdity of the invention, a patent provides a time-limited, legally protected, exclusive right to prevent others from making, using and selling someone else’s invention.  An invention could be a number of things including a product, a composition, a machine, a process, or an improvement upon any of these.

Patents in Canada

An Executor of an estate that involves patent rights needs to be knowledgeable about patent law in the relevant jurisdiction to protect it from infringement.  In Canada, an invention is patentable if it has (1) novelty (the invention must be new and not publicly disclosed); (2) utility (the invention must work); and (3) ingenuity (the invention cannot be obvious to a person of ordinary skill in the technology involved).

Unlike copyright and trademark, a patent must be registered for the owner to exercise the rights associated with it.  Only an inventor or their legal representative (which includes an Executor) can apply for a patent in Canada.  An Executor can even apply for a patent after the testator’s death, thereby creating a new estate asset.

In Canada, a patent, or the right to obtain one, can be assigned in a will.  When planning an estate where a patent is involved, the drafting lawyer needs to be knowledgeable about the relevant legislation to ask the testator questions to uncover important issues such as ownership of the rights.  Under common law in Canada, an inventor’s employer can own a patent, which would be an important consideration for the lawyer drafting the inventor’s estate plan.

Cross-Border Issues

Where there are cross-border intellectual property assets, an Executor needs to understand the correct terminology and the laws in relevant jurisdictions.  In Canada, the term patent is used synonymously with intellectual property.  In the United States, industrial designs are often referred to as patents.  Therefore, when compiling information about the intellectual assets of an estate, a drafting lawyer should use the precise terms with their intended meanings.  Intellectual property laws are national, and they are not identical.  In some countries such as Canada, intellectual property laws are codified.  In some countries, such as the United States, intellectual property rights are dependant on the court’s discretion.  If an Executor is dealing with an international business, they need to understand the laws in all relevant jurisdictions.

Intellectual Property Strategy

An Executor should be aware of the different purposes of intellectual property.  Intellectual property may be used as an asset to generate revenue.  It may be used as an offence, where it is used to stop imitation and to maintain market share.  It may be used as a defence, because a strong intellectual property portfolio can deter a competitor from replicating its products or services.  It could also be used to build an ecosystem:  by sharing intellectual property or using it to set an industry standard, others may develop offerings that are complimentary.  For example, an App Store on an iPhone is attractive to customers because there are many apps available to download.  Most of the apps were created by third party developers and were built on intellectual property that Apple Inc. licensed to them for free.

One of the most fundamental duties of an Executor is to preserve the assets of the Estate.  Where there is intellectual property, that includes preserving the intellectual property strategy and to do so, it is important to understand the relevant factors in the strategy such as:

1. The nature of the industry in which the business operates.  For instance, pharmaceuticals are patent intensive, while entertainment and cultural products are copyright intensive.  The Executor needs to understand the type of intellectual property rights involved and how to best protect that type of asset.
2. The stage of the business. A start-up company that has not caught the attention of competitors may be able to avoid paying for licenses at first, while a more established company could rely heavily on its intellectual property to prevent competition.
3. The target market for the product. With a product that is available globally, unauthorized copying may be more of a problem compared to a product that is only available locally.
4. The competitive landscape. If competitors are developing complementary products or services, it might be advantageous for the business to participate in the arrangement.
5. The quality of intellectual property expertise that is accessible to the organization. Having an intellectual property strategy does not guarantee success, and businesses that fail to properly leverage intellectual property rights can suffer damages.

The inclusion of a patent in an estate creates complexities for a drafting lawyer and Executor, and expertise is often required.  A testator may wish to consult with a patent lawyer and an estate lawyer with experience dealing with patents when drafting their will.  A corporate Executor may be the right choice to administer an estate where patents are involved.

Written by Holly LeValliant, Estate & Trust Consultant, Scotiatrust