To Register or not to Register

The Value of Registering Intellectual Property

We’re all familiar with the basics of property law to some extent. We encounter it when taking the leap into home ownership or putting down a down payment on your first car. But what does that ownership really mean? Without a legal structure dictating the parameters of what you own how would you go about protecting what is yours? How could you leverage what you did own to create more value for yourself in the future?

Property law deals with these questions with a system of registration. Property purchased in Canada is registered at the Land Titles Registry (or, in the case of car or other moveable goods, at the Personal Property Registry). Registration allows the government to act as the gatekeeper of an official record of ownership. Thanks to this record, if your neighbour builds a fence across your lot, you are able to prove they are on something you own by referencing the boundaries noted in your land registration. Registration equates to protection of your rights.

In addition, registration offers the commercial certainty required for leverage and monetization. A bank will advance the funds you need to build a house in exchange for the right to scoop ownership of your land should you default on repayment. Without the ability to register that mortgage right on the title to your property, the risk that you might turn around and sell your land to an unsuspecting third party and leave the bank hanging would greatly discourage lending and, in turn, your ability to expand the value of your ownership.

These are widely understood concepts as they apply to real and personal property. Less recognized is the importance of registration of intellectual property to the monetization and production of brand value.

Intellectual property is by its very nature more complicated to pin down. How you do protect rights to intangible things? Three main areas of law answer this question:

Let’s focus on trademarks.

A trademark is a word (or combination of words), design, taste, texture, mode of packaging, hologram, scent, 3D shape, or colour that is used to identify the source of a consumer product or service. Over time, a trademark comes to stand for not only the source but also the reputation of the producer. Trademarks allow consumers to choose your product over those of a competitor because that consumer has had a good experience with what you are selling or has heard good things about you from others.

Example:

Because success in business is all about repeat clients and expanding market share, having a recognizable brand identity is extremely valuable intellectual property.

Unlike real property (land or other types of real estate), there is no requirement that a trademark be registered in Canada. Your right to the exclusive use of your trademark evolves naturally once that mark has been used long enough to have established a reputation in the marketplace. That being said, an ever-present truth in our legal system is that there is an unfortunately large gap between having a legal right and having the ability (read: funds) to enforce it.

What do you do if a competitor uses your trademark to deceive the public and garner a benefit from the positive brand identification you’ve built?

If you have an unregistered trademark the recourse available to you lies in the common law action of ‘passing off.’ To successfully stop your competitor in these circumstances you’ll be required to prove:

1. The existence of ‘goodwill’ (a reputation in the mind of the consumer);
2. The deception of the public due to your competitor’s ‘misrepresentation’ (an imitation of your brand that confuses consumers); and
3. Damages (loss of sales, reputational damage, etc.).

Passing off makes it possible to enforce your rights as an unregistered trademark owner but is akin to proving the boundary of your land in the face of a neighbour’s encroaching fence without a land title registry to rely on to prove where your property line lies. In a court action, who bears the burden of proof bears the burden of cost. The time and effort involved in compiling the evidence to prove each of the three elements listed above is often so unduly high in relation to the value of what you’re trying to protect that more often than not an unregistered trademark owner is forced to abandon or negotiate away their hard-earned trademark rights.

Registration to the rescue.

The registration process available under the Canadian Trademarks Act solves this problem by shifting the burden of proof (and in so doing, the burden of cost) onto the brand infringer. Once registered, a trademark is deemed to be the exclusive property of a trademark owner Canada-wide. In that case, it will be the infringer’s responsibility to prove that it had a right to use the brand despite your ownership. Shifting litigation cost onto an infringing party puts you in a better position to be successful in a court action and deters competitors from using your trademark in the first place.

Many other benefits follow. Registration provides the certainty of ownership necessary to solidify a trademark’s value in the eyes of a potential purchaser. Licensing a registered trademark to a third party allows a trademark owner to monetize its intellectual property without degrading the exclusivity of their right to it outside of that limited arrangement.

Trademark registration is brand insurance – an upfront investment allowing you to protect and cash in on the value of your reputation in the market. If you would like to chat about whether or not registration makes sense for your business, check out our other articles on this topic or get in touch with Aly L. Fry.

Material in this article is available for information purposes only and is a high level summary of the subject matter. It is not, and is not intended to be, legal advice. You should first obtain professional legal advice prior to taking any action on the basis of any information contained in this article. This article is copyrighted. For permission to reproduce this article, please email Swainson Miki Peskett LLP: info@smpllp.ca