Weekly, we receive phone calls from prospective clients inquiring about provisional patent applications. While provisional patent applications have a number of benefits, especially for cost-conscious startups and entrepreneurs, we too often encounter misconceptions concerning the protections that a provisional patent application provides. In this blog post we will cover what a provision patent application is, its positives and negatives.

What is a provisional patent?

A provisional patent application is essentially a placeholder patent application filed with the US Patent and Trademark Office. Once filed, you have up to 1 year to convert the provisional patent application into a full utility patent application and, if not converted, the provisional automatically expires. Once the utility patent application is filed, the subject matter of the utility patent application (ie. invention) will be granted a claim date effective as of the date the provisional patent application was filed.

There are a few formal provisional drafting requirements, including a title, the name(s) of the inventor(s), address of the inventor(s), correspondence address, and a written description. At times, a drawing on the back of a napkin can be sufficient. The provisional application is not publicly available, and the USPTO does not conduct any review of it.

It is critical to understand that no patent rights are granted by the provisional patent application, except for the ability to file for a full utility patent application within the 1-year time frame for the invention described in the provisional patent application.

Positives

There are a number of benefits to a provisional patent application, namely:

1. Preserves your intellectual property rights as of the provisional’s filing date, which is critical in advance of any public disclosures you are contemplating;
2. Relatively inexpensive, with the cost of a provisional application being substantially less than a full utility patent application;
3. Is not made publicly available;
4. You are “Patent Pending”; and
5. May appeal to investors by beginning an intellectual property portfolio.

Negatives

The downsides to a provisional patent application are:

1. Does not issue as a patent;
2. Is not a utility patent and, unless converted into one, lapses after one year;
3. Since it is not reviewed by the USPTO, no stance is taken on whether the invention is patentable; and
4. Only exists under US law with no similar structure existing in Canada or Europe.

We believe that provisional patent applications are an immensely valuable resource for our clients, especially where deployed as a cost-effective means to secure a filing date for a subsequent utility patent in advance of contemplated public disclosures of the invention. However, when considering a provisional patent application, it’s critical to keep in mind that it’s a stepping stone to a full utility patent, and not a stand-alone patent application itself.

Feel free to reach out to the Voyer Law team to discuss provisional patent applications and a filing strategy for your invention.

For most businesses, infringement of copyright is going to result in lost profits. But what about businesses where infringement of their IP could lead to more engagement and sales?

The video game industry has this issue. Developers and publishers want to benefit from the free marketing that comes with their users creating and sharing content of their Game, but they don’t necessarily want to permit users to do whatever they want with their intellectual property.

Meanwhile, streamers, video producers, let’s players, modders and other forms of video game content creators are having an increasingly difficult time navigating the complexities of copyright law in understanding what they are and are not allowed to do with Game developers IP when making their own content.

The Copyright Acts in both the US and Canada have not been updated to address this issue, thus creating a legal grey zone that results in game creators themselves having to address how users can use their IP in their own content policies.

What is a Fan-Content Policy?

We are seeing the growing use of Game companies implementing ‘Fan-Content Policies’ alongside their more standardized Terms of Service and Privacy Policy documentation. Fan-Content Policy terms could be a whole separate document or be implemented into the more standardized terms to form part of those larger policies.

Seemingly more Game companies are opting to have separate Fan-Content Policies so they can be displayed clearly and concisely to players. Common everyday language is also best to use in Content Policies to convey the information contained in a simple and easy to understand way with limited legalese.

Ultimately, Fan-Content Policies seek to address this legal grey area as best one can outside the context of statutory copyright protections, often detailing how a user can use the Game’s IP to create their own content, and the other rules and requirements surrounding its use.

Common Terms in Fan-Content Policies

Some terms that are often included in Fan-Content Policies include:

• General Rules: what you can and cannot do with the Game and its IP while creating your own content.
• Authorized Uses: detailing what uses are permitted or excluded. Like the General Rules, but this language is often much more legal and akin to a license grant. Often Commercial Uses are not accepted (but monetization via advertisements so long as videos follow the policy may be carved out and approved).
• Mods: whether modifications to the Game are permitted, and if so, how they are permitted and under what contexts (for example, overwhelmingly often they state Mods can never be commercialized or sold).
• Other Agreements: how the Fan-Content Policy works in tandem with other agreements the user is bound to, such as Terms of Service, Privacy Policies and End-User License Agreements.
• Company Property: how the User can use Company property outside just the Game, such as trademark or tradenames.
• Credit: how a User must credit the Game, Developer and/or Publisher in the making of their Game content
• Jurisdiction: what country’s laws govern the policy. Could be the jurisdiction of the user or another specified country.
• DMCA Takedowns: how the policy addresses takedowns on third-party platforms via DMCA.
• Enforcement of Rights: arguably the most influential provision, that states that despite the rules and regulations of the policy, the IP holders ultimately reserve the right to take legal action for misuse of IP as determined by the IP owner in its absolute discretion.

At the End of the Day, Enforcement of Rights Still Remains

In a way, the Enforcement of Rights provision could be the only provision of significant weight in the whole policy, as it signifies and clarifies that these Fan-Content Policies essentially operate in a copyright law legal vacuum and the decision to either withdraw or enforce certain rights as it relates to the intellectual property will always remain with the IP owner. Despite the rules and permission detailed within the policy, the IP owner still has all the power in the relationship regardless of whether content creators were following the rules of the policy or not.

Whatever proposed licensed granted by any policy as it relates to the use of the Game is always going to be (and should be) non-exclusive and revokable by the developer/publisher at any time. Selective enforcement of intellectual property can occur at any time, as is permitted by relevant copyright statutory provisions.

In summary, Fan-Content Policies seek to inform users on how they are permitted to use the Game and surrounding intellectual property for their own content creation. A well-drafted Content Policy seeks to foster a symbiotic relationship between game creators and content creators to create a healthy and more transparent community relationship.

However, developers and content creators alike should still remember that the rights owner still has ultimate power to revoke any permissions granted in a Content Policy unless otherwise stated.

For more information on Fan-Content Policies, or to get your own drafted, feel free to reach out to Voyer Law.

We frequently work with Canadian startups operating a U.S. (usually Delaware) company incorporated on their behalf by Stripe Atlas.  On the surface, Stripe’s assistance with incorporating this U.S. company seems convenient and an easy way to meet the U.S. entity requirements to use the Stripe payment processing platform.  However, a number of material issues are generated by Stripe when it incorporates a U.S. company on behalf of a Canadian startup.

Problem #1

It’s critical to understand that a U.S. company cannot operate out of Canada without registering as doing business in Canada (thus exposing the company to unnecessarily complicated Canadian/US dual taxation), which Stripe does not address in its standard documentation.

The common solution to this is to treat the U.S. company as a parent to (or as a subsidiary of) a new Canadian company and isolate each company’s tax obligations in their respective countries.

Problem #2

Your U.S. company formed by Stripe needs to transact with your Canadian company on an arm’s length basis, taking into account tax transfer pricing rules.  If you don’t engage in tax planning around the flow of cash and assets between the two companies, expect expensive tax problems in the future

These tax issues can typically be addressed through cross-border tax planning as documented in an Intercompany Agreement in which we address the flow of cash and assets between the two companies.  For example, in the agreement we can address which company books sales in which countries and how the cash from these sales moves between the companies.

While Stripe Atlas touts the ease and speed with which a U.S. company can be incorporated, it neglects the massive cross-border legal and accounting issues that forming a U.S. company abroad generates.  If these issues are understood before incorporating, Stripe Atlas can be a valuable tool but, if not understood and planned for, expect it to generate more problems than it solves for.

As your company grows, you may be looking to expand your team and add to your workforce. When hiring additional employees or engaging independent contractors you need to be well-aware that an independent contractor may actually be considered an employee, regardless of how you label the person.

Employees are entitled to rights pursuant to the applicable Employment Standards Acts (based on the province the employee resides) such as: (1) vacation pay; (2) overtime pay; (3) statutory holidays; (4) notice period or payment in lieu of such notice period upon termination; (5) severance pay; and (6) employment insurance benefits.

Independent contractors are not entitled to such benefits. However, if a government authority determines that an independent contractor is actually an employee based on the factual relationship between the parties, the independent contractor will be entitled to all of the above rights and there may be penalties that come with such determination.

There is no one test to determine whether a worker is an employee or an independent contractor, but here are some factors to consider when engaging an independent contractor:

Level of Control: Does the worker set his/her own hours of work? Does the worker determine how the services are to be completed?

Equipment: Is the worker required to provide his/her own tools and equipment for work?

Sole Income: Is the employer the sole source of income for the worker? Is the worker prohibited from taking other jobs?

Subcontractors:  Is the worker allowed to engage subcontractors for the services?

Opportunity for Profit:  Is the worker taking on a chance for profit and a risk of loss?

Compensation:  Is the worker providing monthly invoices to the company?

The above factors may all be considered when determining whether a worker is an employee or an independent contractor. If a worker who you presumed to be an independent contractor is determined to an employee, you may face fines and penalties including and related to unpaid vacation and overtime pay, severance pay, employment payroll taxes and employment insurance deductions and remittance.  All of which are costly, so way the least!

In summary, you will need to assess the relationship between the company and each of its potential workers before determining whether to commit to an employee or contractor relationship, something that your legal team is best suited to assist with to avoid costly penalties down the road.