Refresh Annapolis ValleyTechnology Start-Ups, Licensing and the LawpresentsWith…Martin Glogier -and- Marc Comeau
AgendaRefresh Annapolis Valley May 13, 2013 Slide 2
Part 1: Organizing Your Business• Models for Organizing Your BusinessRefresh Annapolis Valley May 13, 2013 Slide 3Sole Pro...
Part 1: Organizing Your Business• Sole Proprietorship• Business entity that is owned and run byone individual.• Owner rece...
Part 1: Organizing Your Business• Partnership• Sole proprietorship with multiple people.• Direct taxation of each partner;...
Part 1: Organizing Your Business• Joint Venture• Two or more parties agree to pool their resources/skills for the purposes...
Part 1: Organizing Your Business• Incorporation• A separate legal entity under the law; exists as its own “person”.• Owned...
Part 1: Organizing Your Business• Which Business Entity Should I Use?• Two key considerations:• How much money are you mak...
• Protecting Creativity: Intellectual Property Rights• IP rights relevant to computer programs:• Patents (limited applicat...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents• A patent grants a monopoly to the patente...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Patent granted for any “new” ...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Patentable subject matter:• S...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Patentable subject matter – c...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Practical Considerations:• Ob...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (and Trade Secrets)• Just because your c...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (and Trade Secrets)• Test to determine w...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright• Copyright:• Protects personal expressio...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• Copyright protection exists...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• Infringement (illegal repro...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• In any economic transaction...
Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• Practical difficulties with...
Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses• Licenses are the means by which you sh...
Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Key pieces of a good and v...
Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Your options:• No license•...
Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Your options (continued):•...
Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Scale for open source lice...
Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet:• Intellectual property issues• T...
Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet(Continued):• Privacy issues• E-co...
Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet (Continued):• Defamation and user...
Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet(Continued):• Web site or content ...
Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet(Continued):• Web site or content ...
Part 4: Discussion• Any questions?• Contact information:• Martin Glogier Marc ComeauAssociate Lawyer Associate Lawyermutta...
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New Media Legal Q&A

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Getting your new webby project or business online is easier than ever. But what are some of the legal issues you should concern yourself with? Martin Glogier and Marc Comeau of muttarts law firm offer an overview of some of the legal landscape in New Media.

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New Media Legal Q&A

  1. 1. Refresh Annapolis ValleyTechnology Start-Ups, Licensing and the LawpresentsWith…Martin Glogier -and- Marc Comeau
  2. 2. AgendaRefresh Annapolis Valley May 13, 2013 Slide 2
  3. 3. Part 1: Organizing Your Business• Models for Organizing Your BusinessRefresh Annapolis Valley May 13, 2013 Slide 3Sole ProprietorshipJoint VenturePartnershipIncorporationLess FormalRequirementsMore FormalRequirements
  4. 4. Part 1: Organizing Your Business• Sole Proprietorship• Business entity that is owned and run byone individual.• Owner receives all profits directly(direct taxation).• Owner has unlimited responsibilityfor all losses and debts.• No legal distinction between the ownerand the business.• Key advantage: easy to organize andno formal formation or reportingobligations.• Key disadvantage: unlimited, personal liability.Refresh Annapolis Valley May 13, 2013 Slide 4
  5. 5. Part 1: Organizing Your Business• Partnership• Sole proprietorship with multiple people.• Direct taxation of each partner; and• Partners have personal liability for losses and debts.• Deemed to exist where two or more persons:• Are carrying on a business;• In common; and• With a view to profit.• Types of partnership: (1) general (most common); (2) limited; and (3) limitedliability (LLP).• Every partner is an agent of the partnership (unless modified by agreement).• Key advantage: ability to raise capital is better vis-à-vis sole proprietorship.• Key disadvantage: unlimited, personal liability and implied authority to bind allpartners.• Manage this risk by creating limited partnership.Refresh Annapolis Valley May 13, 2013 Slide 5
  6. 6. Part 1: Organizing Your Business• Joint Venture• Two or more parties agree to pool their resources/skills for the purposes ofaccomplishing a specific project.• Each participant responsible for its own profits, losses, and costs and taxesassociated with the venture.• No transfer of ownership (not a merger).• Venture can be its own entity, separate and apart from participants’ otherbusiness interests.• Way JV is set up affects how the JV is managed and how profits are shared and taxed.• Key difference from partnership: not a continuing relationship.• Key advantage: “two heads are better than one”.• Key disadvantage: potential for abuse/power imbalance and limited recourseunder the law outside the bounds of the Joint Venture Agreement.Refresh Annapolis Valley May 13, 2013 Slide 6
  7. 7. Part 1: Organizing Your Business• Incorporation• A separate legal entity under the law; exists as its own “person”.• Owned by shareholders.• Run by directors and officers (can be the same as shareholders).• Key advantages:• Flexibility to shield personal income from income tax (corporate rates, dividends,expense write-off);• Limited liability (instead of unlimited, personal liability); and• Ability to raise funds (share issuance).• Key disadvantages:• Legal responsibilities and obligations on directors and officers;• Procedural requirements (formation and reporting obligations); and• Start-up costs (fees for incorporation).Refresh Annapolis Valley May 13, 2013 Slide 7
  8. 8. Part 1: Organizing Your Business• Which Business Entity Should I Use?• Two key considerations:• How much money are you making and how much do you need?• Revenues• Ownership of business assets• Financing• Complexity and scope of business – multi-jurisdictional• How much exposure do you have to being sued?• Nature and complexity of contracts• Nature of services and equipment• Negligence• Occupiers’ liability• Employees/employment lawRefresh Annapolis Valley May 13, 2013 Slide 8
  9. 9. • Protecting Creativity: Intellectual Property Rights• IP rights relevant to computer programs:• Patents (limited application)• Copyright• Not relevant:• Industrial Design• Trade-marks(domain names)Part 2: Protecting and Sharing Your CodeRefresh Annapolis Valley May 13, 2013 Slide 9IntellectualPropertyPatentsCopyrightTrade-marksIndustrialDesign
  10. 10. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents• A patent grants a monopoly to the patentee to exploit an invention for20 years.• Patentee gains an exclusive right to make, construct, use and sell the invention.• Patentee is the owner of the patent; not necessarily the inventor.• Entitlement to a patent is determined on a “first-to-file” basis rather than a “first-to-invent” basis.• If there are two pending patent applications claiming the same or overlappinginventions, the application with the earlier filing date will be entitled to the patent.• Indicates importance of secrecy!• U.S. and Philippines only 2 remaining countries with “first-to-invent” system.Refresh Annapolis Valley May 13, 2013 Slide 10
  11. 11. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Patent granted for any “new” and “useful” invention.• “Invention” includes processes, machines, manufactures or compositions of matter.• Invention will not be “new” if there has been “enabling disclosure” to the public (inCanada or elsewhere) more than 1 year prior to date of application.• Also indicates importance of secrecy!• “Useful” means the invention must have practical application (useful in theory isinsufficient).• If a patent is infringed, patentee can recover money, including:• Any damages suffered as a result of infringement; and• Disgorgement of the profits made by the infringer as a result of the infringement.Refresh Annapolis Valley May 13, 2013 Slide 11
  12. 12. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Patentable subject matter:• Subject matter that has been excluded from patent protection:• Computer programs if the discovery involved is a method of calculation;• Methods of medical treatment;• Higher life forms;• Professional skills and methods;• Printed matter producing only an artistic, intellectual or literary result;• Mere human conductor mental steps or instructions; and• Architectural plans.• Therefore, patents are not available for all types of software and do not protectsource code underlying that software.Refresh Annapolis Valley May 13, 2013 Slide 12
  13. 13. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Patentable subject matter – computer software:• The practical application of source code for a new purpose is patentable, but thecode itself is not protected by patent.• Best way to explain the distinction:Refresh Annapolis Valley May 13, 2013 Slide 13If a computer program does something in the real world,you can patent how it does what it does(e.g. Google’s PageRank algorithm).But the program itself (and its components, including thecode) may be rejected as being “mathematicalalgorithms” or “purely mental steps”.
  14. 14. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Patents (Continued)• Practical Considerations:• Obtaining a patent is not practical for the small business owner.• Astronomical costs.• Highly specialized area of the law – “patent agents”.• Only 1 in all of Nova Scotia!• Only makes sense when potential revenue from the invention reaches six figuremarks.• Products that are the “next best thing”.• Cost hurdles mean that patent protection is typically reserved for the realm of themega-corporation or independently wealthy.Refresh Annapolis Valley May 13, 2013 Slide 14
  15. 15. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (and Trade Secrets)• Just because your code or software is not patentable or under patent,that does not mean it is not protected from reproduction under the law!• Computer programs and code can also be protected by:• The common law relating to “trade secrets”; and• Copyright.• “Trade Secret”:• Protection for confidential information.• Arises more from an obligation of good faith and fiduciary relationship rather thanfrom a proprietary interest.• Any formula, pattern, device or compilation of information that is secret, unique, andis developed by expending time, effort or money.• Must be communicated or acquired in circumstances where an obligation ofconfidence is imposed.Refresh Annapolis Valley May 13, 2013 Slide 15
  16. 16. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (and Trade Secrets)• Test to determine whether there has been a breach of a “trade secret”:• Was the information that was conveyed confidential?• Was it communicated in confidence? and• Was it misused by the party to whom it was communicated?• Therefore, where you are developing a new product/program for acommercial purpose in concert with others, ensure that confidentiality ornon-disclosure agreements are being used to protect againstunauthorized reproduction of your work.Refresh Annapolis Valley May 13, 2013 Slide 16
  17. 17. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright• Copyright:• Protects personal expression.• Distinct from patent protection, in that patents cover function.• An author of an original artistic, literary, dramatic or musical work (and compilationsof such work) is given an exclusive right to produce, reproduce and sell the work orany substantial part thereof.• Code generally protected as “literary” work, encompassed by statutory definition of“computer program”.• Software protected as a compilation of “literary” works (fragments of code which create anoriginal result).• Note that copyright protects the form of expression of an idea, not the idea itself.• Unique feature of copyright in Canada: protection of moral rights associated with anoriginal work.• Right to prevent distortion or mutilation of the work and the right to prevent the use of thework in association with a particular product, service, cause or institution.Refresh Annapolis Valley May 13, 2013 Slide 17
  18. 18. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• Copyright protection exists automatically from the moment of creation,and lasts for life of author plus 50 years from date of author’s death.• Despite automatic protection, there are benefits to registering copyrightwith the Canadian Intellectual Property Office (CIPO).• Prima facie evidence of ownership in copyright if a dispute arises.• Infringement of copyright is doing anything with a copyrighted work (orauthorizing this conduct) which the owner of the copyright has theexclusive right to do.• There are exceptions, including:• Fair dealing for purposes of research, private study, criticism or news.• If copyright is infringed, owner can sue for:• Damages and an accounting of profits; or• Statutory damages (penalty).Refresh Annapolis Valley May 13, 2013 Slide 18
  19. 19. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• Infringement (illegal reproduction) of a computer program can happenin numerous ways:• Literal infringement• When the code of the computer program is copied on a one-for-one basis; or• Used in contravention to provisions of a licensing agreement.• Non-literal infringement: “look and feel” copying• Where the code has not been copied line-for-line; but• The “look and feel” (e.g. screen prompts, keystrokes, menus) of the program is substantiallycopied.• This protects against reproduction through the use of different programming language.• “Look and feel” is subjective and difficult to quantify.• Don’t forget about moral rights!Refresh Annapolis Valley May 13, 2013 Slide 19
  20. 20. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• In any economic transaction involving copyrighted works, the transfer ofrights becomes essential:• Partial or total assignment of copyright (transfer of ownership in work); or• Exclusive or non-exclusive licensing (rights to use the work).• Therefore, marketing, selling or sharing code generally requires anassignment or license agreement.• Implied licenses may arise where work is done on behalf of another person (e.g. webdesign).Refresh Annapolis Valley May 13, 2013 Slide 20
  21. 21. Part 2: Protecting and Sharing Your Code• Intellectual Property Rights: Copyright (Continued)• Practical difficulties with copyright and software/code:• Are pieces of code actually “expression”? Difficulty of separating purely functionalaspects of code from expressive elements of codebase.• Who is the “author” of software where one person creates the concept andspecifications for the program, and another creates the code (independently)?• Serious enforcement issues – impossible to police, particularly with onlinedissemination and digital media.• Coders interested in protecting their work should seriously consider taking preventativeaction rather than relying on copyright “protection”.• Use products to obfuscate source code or resist or detect tampering.• Nature of copyright is in conflict with the shared nature of culture.• An inappropriate model to deal with open-source software, creative commons, etc.Refresh Annapolis Valley May 13, 2013 Slide 21
  22. 22. Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses• Licenses are the means by which you share or distribute your intellectualproperty rights.• When a consumer buys a computer program, they generally do not buythe program itself, but a license to use the program.• Terms of this use are set out in the EULA, Terms of Use or General License Agreement.• A “license” is simply a binding agreement (or contract) that sets out howthe IP can be used.• Three fundamental features of any IP license:• Gives people permission to use someone else’s intellectual property;• Allows IP holders to put bounds and conditions on the use of their IP; and• Allows IP holders to exercise their property rights if the bounds and conditionsof thelicense are not met.Refresh Annapolis Valley May 13, 2013 Slide 22
  23. 23. Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Key pieces of a good and valid license:• Grant of the license;• Grant of Copyright License. Subject to the terms and conditions of this Agreement, [IP holding party] hereby grants to [theother party] a worldwide, non-exclusive, royalty-free copyright license to reproduce, prepare derivative works of, publiclydisplay, publicly perform, sublicense, and distribute the work and associated derivative works.• Limitations on the scope of use; and• Common examples:• Exclusivity;• Sublicensing;• Field of Use/Product;• Term; and• Territory.• Reservation of rights.• Reservation of Rights. All rights not expressly granted under this Agreement are retained by [the IP holder]. Any use notexpressly granted is reserved. Further, this Agreement does not restrict or limit [IP holder’s] rights to utilize or license theworks in any manner.Refresh Annapolis Valley May 13, 2013 Slide 23
  24. 24. Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Your options:• No license• Relying on traditional copyright protection and preventive measures; or• Keep in mind the practical difficulties with this.• Putting your work into the public domain (free use).• Generally where the rewards of seeing others enjoy your work is more valuable than the financialrewards associated with copyright.• This applies to work provided for Creative Commons.• Public domain declaration:• The contents of this file are dedicated to the public domain. To the extent that dedication to the public domain isnot available, everyone is granted worldwide, perpetual, royalty-free, non-exclusive license to exercise all rightsassociated with the contents of this file for any purpose whatsoever. No rights are reserved.• Include moral rights declaration.Refresh Annapolis Valley May 13, 2013 Slide 24
  25. 25. Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Your options (continued):• Traditional proprietary software license• Shrink-wrap or click-wrap licenses are acceptable under Canadian law.• Be careful of the browse-wrap license – may not be enforceable on grounds that reasonablenotice of the terms of the license were not brought to the attention of the user such thatthere is no mutual agreement to those terms.• Open source license• Middle ground between public domain and proprietary licensing.• Options for open source licenses fall on a scale regarding complexity of the license and theamount of control that the IP holder wants to exercise.• When choosing license for new code incorporating existing code, ensure license you chooseis compatible with pre-existing license.• If your code is intended for use with an existing open source project, use the predominantlicense.Refresh Annapolis Valley May 13, 2013 Slide 25
  26. 26. Part 2: Protecting and Sharing Your Code• Managing and Sharing Your Code: Licenses (Continued)• Scale for open source licenses:• Academic Licenses;• Permissive Licences;• Partially Closed Licenses; and• Reciprocal Licenses.• Examples of the most comprehensive and common open source licenses:• 2-clause BSD License (academic);• Apache License v. 2.0 (permissive);• Mozilla Public License (MPL) (partially closed);• Lesser/Library GPL (LGPL) (partially closed);• GNU GPL v. 3.0 (reciprocal); and• If you work with reciprocally-licensed code, know the risks!• Open Software License v. 3.0 (reciprocal).Refresh Annapolis Valley May 13, 2013 Slide 26
  27. 27. Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet:• Intellectual property issues• The internet and associated technology have made the storage, reproduction andwidespread distribution of protected works inexpensive and fast.• Hence the development of open source and creative commons concepts.• To minimize your risks of being found an infringer, check licenses of all products youuse/incorporate into your own work.• In order to minimize the risk of your work being infringed, implement acomprehensive licensing system and protect your work as “trade secrets”.• Register your copyright with the Canadian Intellectual Property Office (CIPO).Refresh Annapolis Valley May 13, 2013 Slide 27
  28. 28. Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet(Continued):• Privacy issues• E-commerce activities often involve the exchange of personal information or data.• Direct submissions from internet users and “hidden” date – e.g. cookies, sniffers,internet logs.• If your business is involved in the collection, use or storage of personal information, itmust follow obligations outlined under PIPEDA and provincial privacy legislation.• Consent from user; and• Use information only for specific purposes which have been disclosed to user.• Unsolicited emails may infringe privacy legislation.Refresh Annapolis Valley May 13, 2013 Slide 28
  29. 29. Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet (Continued):• Defamation and user-generated content:• The law generally protects the website host from defamatory content published by itsusers (see U.S. case – Tamiz v. Google):• It is no doubt often true that the owner of a wall which has been festooned, overnight, with defamatory graffiticould acquire scaffolding and have it all deleted with whitewash. That is not necessarily to say, however, that theunfortunate owner must, unless and until this has been accomplished, be classified as a publisher.• The standard practice for web host in Canada is:• (1) Ensure that it is not involved in the publication of the defamatory content (e.g. websiteadministrator created the content), such that it is purely “user” generated; and• (2) Remove content if asked by another user.• Legally, however, it may be that the host has no obligation to remove content unless it wasinvolved in creating it.Refresh Annapolis Valley May 13, 2013 Slide 29
  30. 30. Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet(Continued):• Web site or content development services – key risks:• Liability for its third-party suppliers (e.g. errors in content, failure to deliver on time);• Liability for customer-supplied materials or information (e.g. defamation, IPinfringement).• Especially if developer has some control over the content used in its developed works.• Failure by customer to meet its own obligations;• Loss of ownership (right to re-use) developed or supplied works; and• Ongoing changes by customer for which developer incurs additional expenses.Refresh Annapolis Valley May 13, 2013 Slide 30
  31. 31. Part 3: Legal Issues Relevant to Tech• Common Legal Issues – E-Commerce and the Internet(Continued):• Web site or content development services – mitigating key risks:• Have a Website and Content Development Agreement which addresses:• Dependencies of the developer which would affect the scope of its obligations, thedeliverables and the timetables/schedules included in the agreement;• Remedies for causes beyond the developer’s control;• Limitations on liability and disclaimers;• Requirements, restrictions, warranties and indemnities for customer-supplied materials orinformation;• Ownership, licensing, confidentiality and assignment terms;• Change order procedures; and• Testing criteria and procedures.Refresh Annapolis Valley May 13, 2013 Slide 31
  32. 32. Part 4: Discussion• Any questions?• Contact information:• Martin Glogier Marc ComeauAssociate Lawyer Associate Lawyermuttarts law firm muttarts law firm902-678-2157 902-678-2157mglogier@muttartslaw.ca mcomeau@muttartslaw.caRefresh Annapolis Valley May 13, 2013 Slide 32
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