Most small businesses have a presence in the e-commerce marketplace. Online marketplaces provide small business owners an opportunity to reach many new customers around the world, which may not be possible by selling their products solely through their own websites. Undoubtedly, one of the most popular online marketplaces for small business owners is the Amazon marketplace. The issue of counterfeiting on online marketplace platforms is not new. Widespread counterfeiting on Amazon once deterred many businesses from selling on its marketplace. To combat this problem, in 2017 Amazon released a new and improved program for brand owners to easily identify and stop counterfeiters, namely, the Amazon Brand Registry 2.0.

According to Amazon, there are many benefits to enrolling in its Brand Registry program. Some of those benefits include: giving trademark owners more control over their product listings and product pages, which means allowing owners to customize their product listings; providing enhanced search and report tools which enable trademark owners to easily identify potential infringers and to report violations accordingly; and using information provided by trademark owners to automatically and proactively identify and remove product listings containing infringing content. [1]

A trademark registration in one country does not entitle protection in other countries. This same concept is adopted by The Amazon Brand Registry. The Amazon Brand Registry requires that there must be an active registered trademark in each country of interest. This also means that the trademark owner must submit an application to enroll in the Brand Registry of each of those countries. One exception is if the trademark owner holds a North America Unified Account (NAUA). A holder of a NAUA is only required to successfully enroll in the Brand Registry in either the United States (i.e., amazon.com) or Canada (i.e., amazon.ca). Approval in the Brand Registry on amazon.com means automatic approval for the Brand Registry on amazon.ca, and vice versa for such owners.

Currently, the Amazon Brand Registry is only accepting trademark registrations granted by the following trademark offices: Australia, Brazil, Canada, the European Union, France, Germany, India, Italy, Japan, Mexico, Spain, the United Kingdom, and the United States. [2] However, the Amazon Brand Registry does not accept all types of trademarks that are registered. The registered trademark must satisfy the eligibility requirements set by Amazon for each country. [2] In general, the Amazon Brand Registry accepts two general classes of trademarks: text-based marks and image-based marks. What constitutes “text-based marks” and “image-based marks” differ for each country. [2]

Based on Amazon’s criteria, for enrollment in Canada, the registered trademark must either be a “word mark” [3] (which Amazon considers to be a “text-based mark”) or a “design mark” [4] (which Amazon considers to be an “image-based mark”).

For enrollment in the United States, the registered trademark must fall into one of the following mark drawing codes established by the United States Patent and Trademark Office (“USPTO”). In respect of “text-based marks”, the registered trademark must fall into either code 1 (i.e. typeset word(s), letter(s), or number(s)) or code 4 (i.e. standard character mark). In respect of “image-based marks”, the registered trademark must fall into either code 3 – an illustration drawing which includes word(s) or letter(s) or number(s) or code 5 – words, letters, or numbers in a stylized form. Interestingly, Amazon does not accept registered United States trademarks that are coded as mark drawing code 2, i.e., those trademarks comprising only a design with no letter(s), word(s) or number(s).

Another obstacle to overcome in order to successfully enroll in the U.S. is that the trademark registration must be active on the Principal Register. In other words, the trademark must not be registered on the Supplemental Register. A common reason for why a trademark is registered on the Supplemental Register instead of the Principal Register is that during examination, a USPTO examining attorney may consider the trademark to be “merely descriptive” [5] but nonetheless allow the application if he or she still believes that the trademark has the potential to identify the source of the goods or services as the applicant. Such trademarks must be registered on the Supplemental Register, and can only be registered on the Principal Register if the trademark owner can later show that the trademark has acquired brand significance and files a new application to register the trademark on the Principal Register.

Once the trademark requirements are met, the remaining steps to complete the Brand Registry application are relatively straightforward. The trademark owner must have an account with the Amazon Brand Registry if it does not already have an existing account on Seller or Vendor Central. The Amazon Brand Registry will then seek the following information: the registered trademark number issued by the respective government office; a list of product categories in which the brand should be listed; and a list of countries where the brand products are manufactured and distributed. Once the Amazon Brand Registry has verified the accuracy of the submitted information and approves the application, Amazon sends a verification code to the contact information listed on the trademark registration. In situations in which the trademark application was filed by a representative for service, it will be necessary for the trademark owner to contact its representatives for the verification code in order to complete the brand registry application.

The Amazon Brand Registry offers many advantages to protecting a brand in the e-commerce Amazon marketplace. If you are an owner of a trademark registration, you may be eligible for enrollment in the Amazon Brand Registry. If you do not yet own a trademark registration but wish to enroll in the Amazon Brand Registry, you should consider applying for a trademark registration. The trademark application processing time varies between the various government trademark offices. In the U.S., it may take up to six months to one year for an application to register, while in Canada the process generally takes more than a year. In some cases, the processing time may be longer.

[1] https://brandservices.amazon.com/benefits

[2] https://brandservices.amazon.com/eligibility#

[3] According to Section II.5.3 of the Canadian Intellectual Property Office’s (CIPO) Trademarks Examination Manual, a trademark is considered to be a word mark if it consists of: a word or words in upper case letters; a word or words including lower case letters; a word or words including numerals; a word or words including French accents; and a word or words including any of the punctuation marks found on standard English or French keyboards.

[4] Ibid, a trademark is considered to be a design trademark if it consists of: a word or words in a special form; a word or words which incorporate foreign accent marks; a composite mark comprising word and design elements; a mark comprising foreign characters; and a word or words appearing in colour (when colour is claimed as part of the mark).

[5] A trademark is considered to be “merely descriptive” if it describes an ingredient, quality, characteristic, function, feature, purpose, or use of the specified goods or services: see section 1209.01(b) of the Trademark Manual of Examining Procedure.

This article discusses changes to income tax treatment of patent acquisition costs in Canada. These reforms are a welcome change for Canadian companies acquiring patent rights as they allow for an investment in purchased patents to be recovered earlier for tax purposes.

On November 21, 2018, the Department of Finance Canada issued its Fall Economic Statement (FES).  As part of the FES, the Accelerated Investment Incentive allows for a larger first-year deduction for capital assets purchased after November 20, 2018, provided the asset is available for use before 2028. This permits businesses to deduct costs of purchasing assets sooner, allowing businesses to recover investment costs earlier.

Capital assets are assets that are useful beyond the year they’re purchased. Because of this, Canadian income tax law generally requires that acquisition costs of a capital asset be gradually deducted over the asset’s useful life. The amount that can be deducted each year is known as the capital cost allowance (CCA). The Income Tax Regulations delineate different classes of capital assets and specify the annual CCA for these various asset classes. The CCA that can be deducted in the first year is generally limited to half the amount otherwise available (the “half-year rule”). First year deductions are increased by 3 times for most capital assets (including patents) with the Accelerated Investment Initiative.

Patents are capital assets, and costs incurred through their purchase can be recovered in subsequent years. Schedule II of the Income Tax Regulations permits businesses to deduct patent purchase expenses under one of two schedules.[1] Class 14 provides a flat 5% CCA deduction of the patent acquisition cost (straight-line CCA), with the half-year rule not applying.[2] The alternative is Class 44 which provides a 25% CCA deduction of the balance remaining after prior year deductions (declining-balance CCA), the half-year rule applying to the first year’s deduction.

When a greater current deduction is desired, Class 44 for purchased patents is preferred because 90% of the patent’s cost can be deducted as CCA within 8 years with the new changes. However, if a business’ profits are expected to be low in the near future but are expected to pick up thereafter, a deferred deduction may be desired. In this scenario where future profits will be taxed at a higher marginal tax rate, Class 14 would be preferred. The table below illustrates the difference in annual CCA deductions according to Classes 14 and 44 in an example scenario where a patent is purchased for $10,000, taking into account the accelerated first year deduction:

Other aspects of taxation involving patents remain unchanged. Costs incurred for research and development are fully deductible in the year they are incurred.[3] Furthermore, current year deductions are permitted for any costs related to obtaining a patent, including government fees and amounts paid to patent attorneys.[4]

These changes ultimately improve Canada’s competitive position in generating innovations. A tax regime that helps businesses to acquire patents stimulates a more robust intellectual property marketplace.

A general summary of the Accelerated Investment Incentive from the Government of Canada can be found here.

Disclaimer

This article is not intended to provide any legal or tax advice. The assistance of a qualified tax professional should be sought for any tax planning advice.

[1] A patent automatically falls within Class 44. The taxpayer can elect to be subject to Class 14 under regulation 1103(2h) of the Income Tax Regulations, C.R.C., c. 945

[2] Trademark purchases are deducted strictly under Class 14 (5% straight-line CCA)

[3] Income Tax Act, R.S.C., 1985, c. 1, s. 37(1)

[4] Income Tax Act, R.S.C., 1985, c. 1, s. 20(1)(cc)

The cannabis market continues to grow with Canada legalizing cannabis for recreational use last fall. The retail value of the recreational cannabis market is estimated to be $6.5 billion by 2020. Due to the large market value, cannabis companies are racing to protect their brands. A keyword search in the Canadian Intellectual Property Office (CIPO) trademark database for active trademark applications or registrations wherein the description of goods and services contains “cannabis” or “marijuana” revealed 4419 results, 2788 of which were filed since last year.

Rights holders and potential rights holders of cannabis brands now need to adapt to several regime-changing amendments to the Trade-marks Act that will come into force on 17 June 2019. These amendments aim to modernize Canadian trademark law and practice, as Canada moves to accede to major international IP treaties, including the Madrid Protocol and the Nice Agreement. These amendments will affect how trademark applications are filed, examined, registered and maintained.

Use and Cannabis Brands

Currently, a trademark application is generally filed on the basis of actual use or proposed use in Canada. A trademark application based on proposed use will not mature into a registration until the mark is used in Canada and a declaration of use is filed.

For goods, “used” means that (i) the goods are sold in Canada in the normal course of trade; and (ii) the trademark is displayed on the goods themselves or on their packaging, or at the point of sale of the goods in such a way that the trademark is clearly associated with the goods at the time the consumer takes possession. For services, “use” means (i) the services are provided in Canada in the normal course of trade; and (ii) the trademark is displayed in the advertising or performance of the services. The requirement for use of the trademark in Canada prior to registration has historically acted as a deterrent to the filing of overly-broad trademark applications in Canada, and has meant that many foreign companies with no concrete plans to enter the Canadian market have not secured their trademarks in Canada via a registration.

The amendments that will come into force on 17 June 2019 eliminate filing grounds and commencement of “use” as a registration requirement. An application can be filed without identifying any filing grounds and may mature into a registration even if the mark has not been used in Canada. To build a defensive trademark portfolio, some businesses have filed applications for marks that they may never use. A search in the CIPO trademark database for active trademark applications covering all 45 Nice classes of goods and services revealed more than 150 applications filed since last year, some of which cover cannabis-related goods and services. The filing of 45-class applications is generally indicative of an overly broad trademark filing in which the trademark owner cannot possibly intend to sell all of the goods and provide all of the services covered in Canada, since few (if any) companies actually sell goods and services spanning all 45 Nice classes.

In the absence of a use requirement, the legislative amendments may lead to more broadly registered marks. However, registrations can be challenged via an opposition proceeding where the applicant was not using and did not intend to use the mark in association with the listed goods and/or services at the time of filing. Further, use is required to enforce a trademark registration within three years of registration.

It may be advantageous for cannabis brand owners to carefully prepare trademark applications now to include broad lists of goods and/or services but be mindful that an intention to use is required, i.e. an overly broad filing may impact the validity of any eventually granted registrations. Further, it would be advantageous to file such applications early to block the registration of later-filed confusing marks by others. This strategy would help to minimize any negative impact from trademark “trolls” filing overly broad applications before the new cost structure (as explained below) comes into force in June.

Application Fees and Renewal Fees

Currently, filing and renewal fees are flat and not based on the number of Nice classes of goods and services. When the legislative amendments come into force, the filing and renewal fees will be assessed on a fee-per-class basis. For example, the new filing fee will be $330 for the first class and $100 for each additional class of goods and services. This is to be contrasted with the currently flat filing fee of $250 combined with a $200 registration fee, regardless of the number of classes of goods and services.

It would be cost effective to file multi-class trademark applications before the amendments come into force on 17 June 2019 to benefit from the current flat filing fee. Similarly, payment of renewal fees prior to 17 June 2019 will allow holders of multi-class registrations to benefit from the current flat fee regime regardless of the number of Nice classes covered by their registrations, whereas payment of renewal fees after 17 June 2019 will involve higher costs for multi-class registrations.

Madrid Protocol

The Madrid Protocol provides a centralized system for filing, registering, and managing trademarks worldwide. A single application under the Madrid Protocol can afford trademark protection in up to 119 countries. The legislative amendments permit Canadian applicants to file applications under the Madrid Protocol with the International Bureau of the World Intellectual Property Association starting on 17 June 2019.

To use the Madrid Protocol, a trademark application needs to first be filed with the office of origin, i.e. the basis application in the applicant’s home country. Canadian cannabis brand owners may wish to develop filing strategies to secure key trademarks in Canada first, and then expand their trademark portfolios worldwide via the Madrid Protocol to minimize foreign filing fees.

Concluding Remarks

Identifiable IP assets, such as goodwill and trademark registrations, are very valuable for cannabis brand owners. It would be desirable for cannabis brand owners to understand how the upcoming amendments to the Trade-marks Act will affect their rights and build a defensive trademark portfolio to protect their brands and deter encroachment from their competition.

As is often said, “a picture is worth a thousand words”. In the patent realm, having quality patent drawings is advantageous. Quality patent drawings make inventions easier to understand, reduce costs of prosecuting applications, assist judges tasked with interpreting patents that are the subject of disputes, and so on. Not only are quality drawings incredibly useful in conveying inventions, often times including at least one drawing in a patent application is mandatory. Under Canadian patent practice, an invention that is capable of illustration must be illustrated by at least one drawing. Patent practices of other nations vary in nuances but are generally similar. While there is no “standard” or set of conditions defining what a “good” patent drawing is, we highlight some factors that in our view result in higher quality patent drawings.

Tailor Drawing Format to Invention

Patent drawings can take on many formats. For example, patent drawings can include line drawings (e.g. two-dimensional drawings using lines/contours to illustrate an object), flow charts, process flow diagrams, electric circuit schematic diagrams, signal timing diagrams, graphs, topographical maps and many more. Selecting an appropriate format to convey an invention is important. Using a drawing format that is used in the technical field to which the invention relates is generally a good idea. For mechanical inventions, line drawings are typically used. For a new chemical or software process, flow charts could be used to illustrate the process. Having line drawings illustrating the machinery used to carry out the chemical process or the computer that will run the software process is likely unnecessary and could cloud the disclosure of the invention. Electric circuit diagrams are often used when the invention relates to a new circuit.

Remove Unnecessary Details

Features such as shading, superimposing one part of an invention over another part of the invention (e.g. in a three-dimensional model of the invention), etc. are unnecessary for patent drawings. Moreover, including such features could result in a patent office Examiner objecting to the drawings and requiring replacement drawings to be filed. Responding to such objections increases the cost of prosecuting the application.

In Canada, for a patent drawing (or a set of patent drawings) to be proper it must clearly show all parts of the invention. In the United States, the drawings must show all claimed features of an invention.

When an invention forms a part of a greater whole, it is typically not necessary to illustrate every detail of the greater whole. For example, if an invention relates to a new computer keyboard, it is not necessary to illustrate every detail of a computer which has the new keyboard installed.

For most inventions it is often appropriate to include one or more high-level drawings showing the invention as a whole (e.g. a perspective view of a mechanical invention) in combination with one or more additional drawings showing more detailed features of the invention (e.g. more detailed planar views of the mechanical invention).

Avoid Colour if Possible

Using colour can be a very effective and efficient illustrative tool especially when comparing data. However, many intellectual property offices do not accept drawings in colour and will convert any submitted drawings to black and white. Further, many intellectual property offices are not equipped to faithfully reproduce colour variations (including greyscale variations) when processing submitted drawings into the offices’ black and white formats. This frequently results in loss of detail from the drawings and potentially a loss of subject-matter from the application. In Canada, the Canadian Intellectual Property Office physically scans any submitted drawings into a black and white format. In the United States, permission may be granted to file colour drawings in special circumstances where colour is necessary (i.e. in circumstances where it is not possible to convey the intended information without the use of colour). At least currently, it is a good idea to avoid using colour (including greyscale variations) in patent drawings if possible.

Some potential ways to substitute colour features with black and white equivalents include:

• • • Replacing different colours used to represent different data sets/data types with different characters and/or shapes. For example, a ‘+’ may be used to represent one data type, an ‘o’ may be used to represent a second data type, etc.
    • Replacing different colours used to represent different curves with different line types. For example, a solid line could represent one curve, a dashed line could represent a second curve, a line made up of circular dots could represent a third curve, etc.
    • Representing different regions represented by different colours with different black and white hatching patterns. For example, a different black and white hatching pattern could represent each different region in a topographical diagram.
    • Redrawing photographs showing experimental results as black and white line drawings (e.g. to show the position of samples on an SDS-PAGE gel).

Where it is not possible to avoid using colour by changing the drawing format (e.g. where photographs showing experimental results that cannot be redrawn in black and white are included), it is important to ensure that the description of the application adequately describes in words what is shown in the submitted images, to ensure that the support provided by the experimental data will be available to support the claims if necessary.

Concluding Remarks

No two inventions will have an identical set of drawings. What drawings will be required, what format they will take and who is responsible for providing them (e.g. an inventor, a professional draftsperson, etc.) are topics best discussed with patent counsel early on in the patent application drafting process.

There is currently keen interest amongst tech companies, investors, and research institutes in both artificial intelligence and blockchain technologies. The buzz has reached corporations and financial institutions looking to tailor these technologies for their own businesses in order to keep pace in our increasingly digitized economy.  This excitement has implications for securing patent protection – Canada and the United States (as well as many other countries) operate on a “first to file” basis.  That means you will want to file a patent application before other inventors monopolize protection for the technology in your area, potentially curtailing your competitive business advantage.

The United States Patent and Trademark Office (USPTO) has issued revised guidelines on what constitutes subject-matter that is eligible for patent protection (under 35 U.S.C. § 101), effective January 7, 2019. These guidelines will likely have the largest impact in the area of computer-implemented inventions, including artificial intelligence and blockchain technologies, and may make it easier to patent some of these inventions.  Indeed, the USPTO gives specific illustrations of how the guidelines would be applied to an example artificial intelligence technology (training neural networks for facial recognition) and to an example authentication method that conceivably could be implemented in a blockchain system.

As background, in general terms, laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection in the United States. Similarly, in Canada, any mere scientific principle or abstract theorem cannot be patented.  The courts in both countries have considered this prohibition as posing a problem for patenting computer-implemented inventions.  The revised guidelines from the USPTO aim to provide clarity in the United States by (1) defining subject-matter that the USPTO considers to be abstract ideas and noting that it will be rare for others to exist; and (2) clarifying that a claim in a patent or patent application is not “directed to” a patent ineligible concept, such as an abstract idea, if the concept is “integrated into a practical application” of that patent ineligible concept.  Only if the claim is “directed to” a patent ineligible concept is further analysis under the existing framework required to determine whether the claim is eligible for patent protection.

The bottom line is that the USPTO will now consider a claim that recites a patent ineligible concept to be eligible for patent protection if the claim, when considered as a whole, integrates that concept into a suitable practical application. Notably, when making this assessment, the USPTO must give weight even to any claim elements thought to represent “well-understood, routine, conventional activity”.

In Canada, the analysis would be different – in general terms, the practice of the Canadian Intellectual Property Office (CIPO) is to instead consider whether the computer is essential to the solution provided by the invention, including whether the same result could be arrived at without the computer, even if inconveniently (e.g., with pen and paper). The CIPO typically concludes that if the computer is essential, then the claim is eligible for patent protection.

In the context of artificial intelligence, the USPTO illustrates its revised analysis using an example method for training a neural network for facial detection and concludes that the method is eligible for patent protection. Key features of the example technology are that it uses an expanded training set and that it iteratively retrains a neural network using the incorrectly classified facial images. The USPTO concludes that the claim is eligible for patent protection because it does not recite any patent-ineligible concepts, including any of the categories of abstract ideas outlined in the revised guidance.

The USPTO also illustrates the revised analysis using an example method for establishing cryptographic communication – a type of method in an area that provides the security and authentication cornerstones in a blockchain system. A key feature of the example technology is that it avoids needing to securely share a private key used to encrypt and decrypt a message.  The USPTO concludes that the claim is eligible for patent protection because although it recites a patent ineligible concept by reciting an encoding step with a mathematical formula (considered to be an abstract idea), it is integrated into a practical application because the other claim elements use the mathematical formula in a way that limits the math to the practical application of transmitting a ciphertext word to a computer.

The revised USPTO guidance also gives other select examples of patent eligible subject-matter in several other computer-related areas, such as those involving adaptive monitoring of a network based on network performance, notification systems for updated medical records, manipulation of graphical user interfaces, and digital simulation of high-quality audio.

Theoretically, the revised USPTO guidance provides a new way for the USPTO to conclude that a claim is eligible for patent protection. However, the revised USPTO guidance and the practice of the CIPO do not have the authority of law, although they do define the considerations for whether a patent will be granted by the respective office.  It remains to be seen whether the revised USPTO guidance will result in more computer-implemented inventions being successfully patented in the United States and whether such patents will withstand scrutiny in a court of law.

As far as patent protection in Canada is concerned, the practice of the CIPO remains unchanged from that outlined above and continues to rest on the office’s interpretation of the existing legal framework set out by the Federal Court of Appeal in Canada (Attorney General) v. Amazon.com Inc., 2011 FCA 328.

Whether your innovation involves convolutional neural networks, distributed ledgers in a blockchain system, or another computer-implemented technology, it may be commercially strategic for your business to protect your invention with patents. Careful contemplation of the technology and persuasive argument during prosecution will be key to that end.

by Larissa Leong