Protecting intellectual property. (Special Report - Business Law).

Each business based on new early-stage technology has unique considerations and several legal issues that it must deal with before it can successfully raise financing and become operational. I have always been surprised that people are not normally eager to talk to a lawyer. Contrary to popular opinion, lawyers really can be quite helpful. You have undoubtedly heard of the importance of getting your proverbial ducks in a row. Well, it certainly is much easier to place the ducks up in a neat row as they arrive, rather than rearranging a gaggle of the little guys later. Similarly, it is preferable to set up anew business correctly, rather than fixing it later.

While it is not possible to talk about all relevant issues in this article, some important considerations will be highlighted. Still, you are encouraged to talk to a qualified lawyer when embarking on a new business venture.

Before you invest a lot of time, effort and money in the project, you need to figure out the regulatory scheme, address any relevant governmental restrictions, and find out if someone else is already doing what you plan to do. You may be part of a collaborative team of researchers, in which case contracts should be drafted to resolve a number of issues that will become very relevant once the profits start rolling in, such as intellectual property ownership issues and profit splitting. If you need some material, biological samples, for example, from another person to help with your research, you may be asked to sign a "material transfer agreement" (MTA).

An MTA usually arrives at your door as a crumpled up piece of paper with really fine print that you can hardly read (like the back of a car rental contract ... have you ever read the back of a car rental contract?). BEWARE OF MTAs! You may be giving up your whole invention in that fine print.

Normally, one of the most valuable assets of a new technology company is its intellectual property, and it is therefore extremely important to make sure the intellectual property is well protected. This may require patent applications, copyright filings, trademark protection, or any of a number of different mechanisms available for protection. You will most likely need to speak to several different people, including bankers, insurance agents, landlords, potential employees, contractors and collaborators. In that case, it may be advisable to have a confidentiality agreement in place to protect your idea, especially if patent applications have not yet been filed.

Licence agreements will most likely be drafted to deal with questions such as royalty payments, to inventors, responsibility for enforcement of the intellectual property rights and several other issues.

If you decide to start a new business, it should be set up in the appropriate way, taking into account tax planning, liability considerations and other factors. Raising money to operate your business creates a whole slew of legal issues, including security and other agreements with your bank, navigating the securities law minefield and drafting the mounds of documents that you will need to satisfy your investors, the Canada Customs Revenue Agency (CCRA) and your shareholders. You need to be careful about the concept of "detrimental reliance" and disclosure of risks when drafting your business plan, creating marketing material and negotiating with potential investors.

In a nutshell, if you make a statement that is untrue or misleading and someone relies on that statement to their detriment, you could be liable for any damages that the person suffers.

The complex legislative scheme existing today makes hiring and dealing with employees difficult without proper legal advice. New technology companies must be mindful of Employment Standards Act provisions, Workplace Safety Insurance Board, CCRA source deduction issues, labour laws, occupational health and safety and environmental regulations, to name a few. A lawyer will help you to set up your employment" contracts to take into account the unique needs of an early-stage technology company, including confidentiality issues; non-competition clauses and employee share incentive programs.

A multitude of other concerns must also be addressed by new technology-based businesses, especially when the potential profitability is considered. Depending upon the technology, some new companies predict gross income in the first five years of operation to be billions of dollars. When large dollars are at stake, in-depth scrutiny by investors, regulators, and competitors is likely, making it extremely important for the business be set up and operated properly from the outset.

While this may make starting a new technology businesses appear to be a daunting task, several sources of assistance are available. Lakehead University's innovation management office assists university researchers to commercialize technology, and other universities, hospitals, and individuals across Canada and internationally have set up similar operations. The Government of Canada and the Province of Ontario have set up several funds and resources to assist new technology-based ventures.

Innovation is the fuel for our knowledge-based economy. Technology-based businesses are vital for Northern Ontario, driving future economic growth and ensuring that Northern Ontario has a strong, diversified economy.

Barb Eccles is Lakehead University's technology transfer officer, and is an Ontario lawyer practising primarily in the areas of intellectual property and corporate law.