IP and clean technology: Tips for companies focused on resource recovery in a circular economy

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As the world accelerates its transition to a low-carbon, circular economy, Canadian companies developing resource recovery models need to consider how to integrate IP protection into their overall strategic plan to succeed in this increasingly competitive global market. C-level executives must consider the strategic business role of IP and understand how to build an effective IP strategy in the context of the infrastructure they are operating in and appropriate to the technological solutions they offer. Companies focused on resource recovery also face a long trajectory to commercialization, which demands a forward-looking IP strategy.

This article will outline three key IP tips to help Canadian clean tech innovators to better protect and leverage their IP as they develop technology focused on resource recovery.

Resource recovery and innovation explained

Among the many approaches to implementing a circular economy, an essential strategy is to maximize the useful life of materials and other resources through resource recovery. This refers to the extraction of useful materials or other resources from compositions that might otherwise be waste. Resource recovery is a broad field that embraces innovation both in the form of incremental improvements to widely established technologies, and in fundamental technical breakthroughs of broad applicability. Both forms of innovation have the potential to generate significant commercial value.

1. Build a licensing-friendly patent portfolio

First, clean technology innovators should always approach the construction of their patent portfolio with monetization in mind. A well-built patent portfolio can generate valuable licensing revenue for its owner in addition to establishing market exclusivity and minimizing infringement risks. It may allow licensors to access a licensee’s productive capacity and expertise in markets that would otherwise be unavailable to the licensor, thereby enabling licensors to maximize the value of patents they might not be in a position to directly exploit. Licensing can be particularly important for innovators in the resource recovery field who will look to global markets for growth in order to scale up.

A successful patent licensing strategy requires innovators to thoroughly understand their own IP. Innovators should at least take into consideration the strength, quality and scope of their patents; and whether these patents relate to their own current or planned commercial activities. It is also important to identify related patents that are suitable for being licensed as a package. Licensing revenues may be maximized by providing licensees with layered protection from several patents covering multiple aspects of their business.

Understanding and prioritizing potential markets is also crucial to targeting the most attractive licensees. In particular, innovators should consider whether their portfolio may represent value to entities outside of the innovator’s immediate industrial sector. If so, patent applications should be drafted having in mind potential applications beyond the innovator’s current operational reach.

Once innovators have identified the strongest aspects of their patent portfolio and the most promising markets, they can proceed to the assessment and prioritization of target licensees. Some of the factors to be considered include the likelihood of infringement of the innovator’s portfolio by the target’s products and activities, as well as a more general understanding of the target’s commercial goals, timeframes, and appetite for risk. These factors will guide selection of the most appropriate licensing structure to be marketed to the target.

2. Balance the use of patents and trade secrets

The second consideration is to have a balanced protection of IP using both patents and trade secrets in order to maximize market exclusivity. Market exclusivity afforded by patents requires public disclosure of the patented inventions and has a limited term, typically 20 years from the filing date of a patent application. Trade secrets, on the other hand, can keep IP in confidence without a term limit. However, trade secret protection requires systematic, enforceable and continuous measures of maintaining confidentiality. Moreover, loss of confidentiality of trade secrets may result in irreversible loss of IP rights.

Another consideration for choosing between patents and trade secrets is the shelf life of a technology. Generally speaking, if the shelf life of a technology is not expected to be longer than the typical patent term of 20 years, patent protection may be a more secure option than trade secrets. On the other hand, there are some famous examples of trade secrets (e.g., Coca-Cola syrup and KFC’s original recipe) that have been in force for a much longer time than 20 years.

For innovators in the resource recovery field, it is often necessary to establish geographically separate operation sites for logistical reasons. In some circumstances, innovators may also partner with regional enterprises that have existing infrastructure. These are some of the operational reasons that make it difficult to keep processing IP as trade secrets. Therefore, it makes sense to protect processing IP by patents, which may also serve as an attractive licensing tool.

On the other hand, another important IP component for innovators may be various chemical formulations that are used in commercial operations. If manufacture and supply of these formulations can be controlled by innovators, it may be more suitable to protect them as trade secrets than as patents, provided that they cannot be reverse-engineered.

It is important to be mindful that like any other business decision, a decision related to the form(s) of IP protection is not permanent and needs to be re-evaluated as business conditions start to change.

If processing patents are licensed to a third-party partner, what happens to trade secrets and know-how created as the third party practices the licensed IP? For example, operation manuals may be updated as a process is fine-tuned. Will the licensor or the licensee own the updated operation manuals and will it be possible to maintain confidentiality of the information they contain? In addition, who will own all the data generated during processing?

For formulations that are protected by trade secrets, is it more advantageous to protect the general scope of the formulations by a patent while keeping the exact formulations as trade secrets? Pure trade secrets will not deter competitors from developing their own formulations but patents may be able to do so.

In summary, determining the balance between patents and trade secrets is not a simple task and cannot be done without a deep understanding of all the IP sources as well as commercial operations.

3. Protect more than just the recovery process

The third tip is to obtain patents that extend beyond the core technology – in this case resource recovery – to maximize protection against potential infringers.

As mentioned above, many innovators in the resource recovery field focus on patenting the processes they have invented. However, in comparison to product claims, process claims have a number of limitations. First, it is generally more difficult to establish infringement of a process than a product. This is because while an infringing product available in the market can be directly compared to a patented product, many details of a potential infringing process may not be available to the public. Second, for a patented process having more than one step, there always exists the possibility that not all the steps are carried out by the same party. In a scenario where one party performs some but not all the steps of a patented process and the remaining steps are to be performed by a different party, it may be necessary to establish that at least one of the two parties is inducing infringement. While the law on inducing infringement varies among different jurisdictions, it tends to be more challenging to establish inducement of infringement than direct infringement.

If the product recovered at the end of an innovative process is not new (e.g., a metal extracted from waste material) and cannot be patented, it may be worth considering the patentability of intermediates produced during the process. Similar to a process claim, a claim to an intermediate may be difficult to enforce if the intermediate is not made readily available to the public. However, where inducement of infringement is suspected, it may be valuable to patent intermediates if intermediates can be shipped from one party to another for further processing.

Another possibility is that the product recovered at the end of an innovative process is a mixture of what is intended to be recycled and other components, e.g., impurities or chemicals added during the process. Such a mixture may be novel and can be characterized by its chemical and/or physical properties. For example, if the innovative process results in a higher purity of the material to be recycled, the mixture can be characterized by a minimum purity that is higher than products produced by prior art processes.

If patenting intermediates or end products is not feasible or practical, innovators should still consider how the product recovered at the end of an innovative process is to be used commercially or how raw materials used at the beginning of an innovative process are obtained. Often, if known steps are added to a patentable process, the combined process remains patentable. Thus, in some circumstances, extending patent protection beyond an innovative process to include further upstream or downstream processing steps may provide additional licensing leverage in negotiating with suppliers of raw materials or buyers of the recovered product.

In conclusion: a forward-looking IP Strategy aligning with business objectives is essential for companies focused on resource recovery

While these IP tips will help clean tech companies be aware of some key considerations in protecting innovations in resource recovery, the key takeaway is the importance of having a clear IP Strategy and a plan to execute on as you scale your company. Moreover, seeking guidance early on from qualified IP advisors with relevant industry and technological experience will ensure that you secure and leverage the appropriate IP rights, and avoid costly mistakes down the road.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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