Intellectual Property Rights

Intellectual property rights (IP rights) are rights recognized by law in creations of the mind. Canadian federal policy describes intellectual property as including inventions, literary and artistic works, designs, and symbols, names and images used in commerce. The implementation guide for the Crown procurement IP policy uses this description.

In Canadian public procurement, the term covers the IP that is created, supplied or used under a contract. Every solicitation that involves developed work, software, reports or designs raises the same question: who owns what comes out of the work, and what can Canada do with what the supplier brings to it.

What a Government of Canada contract clause counts as an IP right

Government of Canada contract clauses define an "Intellectual Property Right" broadly. The definition in the Employment and Social Development Canada contracting clauses includes rights protected by patent, copyright, industrial-design, integrated-circuit-topography and plant-breeders’ legislation. It also includes rights protected as trade secrets or confidential information.

A supplier should therefore read the term widely. It is not limited to patents or copyright, and it reaches confidential know-how that a supplier brings to or develops during a contract.

Foreground IP and background IP

Two related terms appear in nearly every IP clause. Background information (background IP) is made up of rights that exist before the contract or that are supplied for it. Foreground information (foreground IP) is IP first conceived, developed, produced or reduced to practice as part of the contracted work.

The distinction drives the rest of the analysis. Ownership rules apply mainly to foreground IP, while licensing rules apply to background IP that Canada needs in order to use the deliverables.

Who owns foreground IP under federal policy

The Policy on Title to Intellectual Property Arising Under Crown Procurement Contracts governs ownership and licensing decisions. Its default position is that the contractor owns IP arising under a Crown procurement contract, as the CanadaBuys guidance on intellectual property and copyright explains. The reasoning is that the private sector is usually better placed to commercialize it.

The Crown can take ownership instead by invoking an exception listed in the policy, or by selecting that option expressly in the solicitation and resulting contract. CanadaBuys sets out separate ownership options for research and development, goods with associated R&D, goods with no expected R&D, and services with no expected R&D.

The clauses differ by model:

• Canada-owned: all IP rights in foreground information vest in Canada as soon as they come into existence. The contractor has no rights in that IP except those Canada grants in writing.
• Contractor-owned: foreground IP vests in and remains the contractor’s property, subject to stated exceptions and to Canada’s contractual rights, as in the contractor-owned clause.

Solicitations from Environment and Climate Change Canada, Natural Resources Canada and the Department of National Defence have stated that IP arising from specified work belongs to Canada. The reason is often that the work is meant to generate knowledge for public dissemination, or that an exception in the federal policy applies. The Natural Resources Canada request for proposals 5000090970 is one example.

Licences to background IP

Even where the contractor owns its background IP, Canada may need to use it. Where background information is incorporated into the work, or is necessary for Canada to exercise its rights in foreground information, the contractor may have to grant Canada a non-exclusive, perpetual, irrevocable, worldwide, fully paid and royalty-free licence. The background information clause sets out these terms.

Departments also add their own requirements. The Correctional Service Canada Commissioner’s Directive 350-3 requires arrangements involving IP to give CSC rights to use contractor-developed materiel and to have it modified by CSC or another contractor where required.

What it means for a supplier bidding on Canadian public contracts

The federal policy does not put every contract on the same ownership model, so the obligations depend on the IP clauses in each solicitation and contract. Before bidding, a supplier should:

• review the solicitation and resulting contract to determine who owns the foreground IP;
• identify and protect its pre-existing and third-party background IP;
• be ready to licence background IP where Canada needs it to use the deliverables or foreground IP;
• comply with the clauses on copyright, patents, industrial designs, confidential information and trade secrets;
• transfer, or refrain from asserting, rights in foreground IP where the contract assigns ownership to Canada; and
• obtain permission for any third-party material built into the deliverables.

Bid teams that settle these points before submission avoid disputes over ownership after award.