Intellectual Property

Watch enthusiasts: do you know what SWATCH watches are? Of course you do! But do you know what this trademark actually means? Is it: a) an invented term b) an English word c) a term that is partly in English, that is, the letter “S” combined with the word WATCH d) all of the above? This is the question the Tribunal administratif du Québec (“Tribunal”) had to answer in Groupe Swatch (Canada) Ltée c. Office québécois de la langue française1, in order to determine whether Groupe Swatch (Canada) Ltée (“Groupe Swatch”) was required to add a sufficient presence of French to the signage of its boutiques. It should be noted that this decision was rendered under the former provisions of the Charter of the French Language (the “Charter”) and the Regulation respecting the language of commerce and business (the “Regulation”). As of June 1, 2025, the requirement of a sufficient presence of French has been replaced by the criterion of the marked predominance of French in public signage visible from outside premises. For many people, the SWATCH trademark is an invented term, but the Office québécois de la langue française (“OQLF”) takes a different view… The OQLF’s Position According to the OQLF, SWATCH is a trademark composed of the following elements: S and WATCH. S for “Swiss” or “second” WATCH for “watches” Result: the trademark is composed, in part, of the English word “watch”. Consequence: the Swiss company was required, under the former provisions of the Charter and the Regulation, to ensure a sufficient presence of French on its storefront signage. Groupe Swatch’s Position According to the Swiss company, the SWATCH trademark does not belong to any language because SWATCH is an invented term, consisting of an artificial combination of letters. Therefore, no French presence is required on its storefront signage, by virtue of the “artificial combination of letters” exception set out in section 26 of the Regulation. The Tribunal’s Position First, the Tribunal rightly recalls that the exceptions provided for in the Charter and the Regulation must be interpreted restrictively. The Tribunal then adopts a pragmatic approach, putting itself in the shoes of the average consumer to determine how the public would perceive SWATCH store signage. The Tribunal accepts Groupe Swatch’s position and applies the “artificial combination of letters” exception. In the Tribunal’s view, the public will conclude that SWATCH is an invented term, made up of an artificial alignment of letters and, consequently, the requirement to add French does not apply. This reflects a pragmatic approach based on public perception, as opposed to a strict approach such as the one advocated by the OQLF, which breaks down the SWATCH trademark into two components (S and WATCH). Fortunately so! Otherwise, trademarks composed of invented terms that include a sequence of letters such as “ON,” “IN,” “UP,” “GO” could, for example, have been considered as trademarks in a language other than French rather than as invented terms. Such an approach would have required the addition of markedly predominant French wording in a public signage context. Observations This decision provides an initial and helpful clarification in a context of uncertainty regarding the interpretation of certain new provisions of the Charter and the Regulation, and it has the advantage of being favourable to trademark owners. Indeed, this decision allows for reliance on public perception where a trademark can be seen as an artificial combination of letters, even though that same trademark could be broken down to reveal words in another language. One noteworthy point deserves mention: the OQLF does not appear to have argued (or at least insisted) that SWATCH is an English vocabulary word meaning “sample.” Yet, the Charter and the Regulation expressly require the presence of French (formerly, a sufficient presence; since June 2025, a marked predominance) where a trademark appears in another language on public signage visible from outside a building or premises. Was this argument debated? It is difficult to say from reading the decision. Otherwise, would the outcome have been the same? Looking ahead, what will 2026 bring in terms of the application of the new rules? Certain data and statistics drawn from the OQLF’s2 most recent annual report lead us to believe that the marked predominance of French in public signage will be a priority. One thing is certain: the OQLF is maintaining its dialogue-based approach to encourage amicable solutions, which is welcome. Let us hope for a more pragmatic approach by the OQLF with respect to trademarks, based on public perception, as set out in the SWATCH decision. Let us also hope for a guide providing clarifications on this issue and many other questions arising from the application of the new rules. Happy New Year! Bonne Année! ¡Feliz Año Nuevo! Buon Anno! 2025 QCTAQ 10426 OQLF’s Rapport annuel 2024-2025, published October 9, 2025 (https://www.oqlf.gouv.qc.ca/office/rapports/rag2024-2025.pdf)

The importance of proactive intellectual property rights management Many companies are unaware that they possess intellectual property1 rights, so they are not proactive in dealing with intellectual property as part of their regular operations. Sometimes, these companies are suddenly faced with the issue when a third party undertakes due diligence on them. This due diligence will inevitably include an intellectual property component, which may lead to a series of corrective measures to solidify, consolidate or recover their rights. In extreme cases, the company may be forced to renegotiate the terms of an agreement in principle, to see the value of the company reduced, or to abort a project or transaction due to its failure to pay proper attention to this category of asset. Third parties do not want to invest in or purchase a company or its shares at a high price if it is likely to encounter issues that could render future projects inoperative. Moreover, case law has taught us over the years that a purchaser cannot rely solely on the representations and warranties and the indemnity provisions of a purchase and sale agreement; they must conduct reasonably adequate due diligence, failing which they may be deprived of certain remedies. This bulletin is primarily aimed to help companies and their leaders properly manage intellectual property to avoid pitfalls. It also provides guidance to companies and institutions required to conduct due diligence in the context of a potential acquisition or financing. However, it does not claim to be exhaustive. Furthermore, we hope that this bulletin will help raise awareness among organizations about the importance of IP and demonstrate that large companies and those with activities heavily focused on intellectual property are not the only ones concerned with these agreements. What is an internal intellectual property legal audit? An internal intellectual property audit is a process conducted by a company to assess all of its intellectual property rights and the protection and defence mechanisms in place. The goal is to identify its rights and gaps, thereby obtaining an overview of the status and scope of its intellectual property rights, tracking their evolution, and determining the necessary actions to identify, prioritize, maintain, protect, defend, expand and enhance these rights. It also allows for an informed assessment of their legal status and prospects. This enables the company to ensure it holds all the intellectual property rights necessary to operate its business and is protected against potential lawsuits for non-compliance with the intellectual property rights of others or any intellectual property-related commitments. Such an audit also helps guide management more effectively in various situations, including commercial and legal, in accordance with the company’s strategy. Frequency of internal audits Proactivity The frequency of an internal intellectual property audit depends, among other factors, on the size and nature of the company, the characteristics, complexity and dynamism of the industry, the strategic importance of the intellectual property assets within the company and the evolution of its assets and ongoing or future projects. Ideally, a company will ensure that this audit is carried out periodically, annually or biannually, by gathering individuals knowledgeable about the intellectual property developed within the company with those capable of making decisions on intellectual property matters. For a company with a strong technological footprint or rapid innovation, a semi-annual or even quarterly frequency may be necessary. A company with a limited intellectual property portfolio may opt for slightly longer intervals, while remaining vigilant to exceptional events. Exceptional events Of course, a company’s proactivity does not shield it from urgent or exceptional situations that may arise during its life and require immediate attention without waiting for the periodic review. There are times in a company’s life when an audit becomes necessary. These situations may occur in various contexts, including: Prior to a liquidity event or change of control of the company, such as a merger, acquisition, arrangement, reorganization, initial public offering (IPO) or asset sale, or during strategic operations such as a joint venture or equity or debt financing During the launch of a new product or a market expansion: This step must be preceded by an intellectual property audit, which sometimes includes an assessment of the freedom to operate (FTO) when the launch or expansion involves an innovation During a major structural change, including the reorganization of the company or a new strategic orientation When a significant change occurs in the market, such as the arrival of a competitor or the imminent launch of a product similar to the company’s, an audit can detect vulnerabilities and prepare the response During significant legislative changes affecting intellectual property During litigation, mediation or negotiations involving intellectual property rights in order to assess the strength of the intellectual property assets, as well as the strengths and weaknesses of the case, to facilitate quick decisions in line with the company’s strategic objectives. Additionally, the intellectual property portfolio can serve deterrent or defensive purposes. For instance, in the event of  a patent infringement lawsuit filed by a competitor, it is advisable to check whether that competitor is infringing on any of the company’s intellectual property rights During the negotiation of an intellectual property license, to ensure that the licensor owns the relevant intellectual property rights and that the terms of the license align with the company’s commercial objectives and contractual obligations Addressing intellectual property issues and continuously reflecting on intellectual property through periodic audits, a company that conducts an audit during an exceptional event will be able to respond more easily and quickly to the arising issues What are the advantages of this kind of audit? An internal intellectual property audit allows a company to: Be aware of the status of its intellectual property (IP) rights, their scope, strengths and weaknesses Collect information on the competitive market situation Identify promising IP or IP that the company is relying on to achieve its objectives Determine the projects that need to be undertaken in order to protect IP and highlight priorities Proactively manage intellectual property rights by determining the necessary monitoring Address incomplete documentation, incomplete chains of titles, ambiguous property rights, incomplete coverage of rights, and licenses to be signed Avoid poor management of open-source software Manage uncertainties relating to prior art (any information, publication or document disclosed before the filing date of a patent application relevant for assessing the patentability of the invention, including its novelty and inventiveness) Manage gaps in territorial protection of rights More easily define the direction to take in various situations, including litigation, transactions, contract negotiations, and make decisions in accordance with the company’s strategy Review compliance with laws, such as intellectual property rights marking issues, uses to avoid, and those to encourage Develop the profile of it as a serious and prudent company attentive to intellectual property assets, adding credibility and reassuring co-contractors, buyers and investors Reduce the transaction timeline in the event of an exceptional event What are the main aspects to address during an internal audit? Inventorying the intellectual property Compile an inventory of all intellectual property rights and add any new developments (innovations, new brands) Prioritize intellectual property assets if there are several, in order to allocate resources accordingly for their protection and adhere to established budgets Identify confidential data Identify potential obstacles Identify underutilized or redundant assets Include in this inventory the intellectual property held by third parties for which the company has exploitation rights, including  source codes and open-source software Organizing it in a file Organize all essential documents such as title deeds, certificates, chain of title documents, agreements, licenses, assignments, and expiration and renewal dates of rights. Confirming the ownership of each asset Confirm that official documents designate the correct holder of intellectual property rights that there are no breaks in the chain of title, and that registrations with the intellectual property offices are accurate and correctly attributed to the current holder of the rights. Completing gaps in ownership of rights Identify all relevant parties, as applicable (employees, inventors, designers, contractors, suppliers, partners, third parties) who must sign assignments of rights, confidentiality agreements, waivers of moral rights and licenses. Assessing the validity and strength of intellectual property For patents, trademarks and industrial designs, review the scope of the claims and prior art to determine the legal strength of each patent, industrial design or trademark. Legal risks in intellectual property Analyze whether the company uses intellectual property and technologies that risk infringing third-party intellectual property Assess the risks of damages and establish a strategy for intellectual property infringement by third parties Analyze the scope, validity, and enforceability of any blocking or potentially blocking intellectual property (which hinders the company’s development or commercialization of a technology, invention, or product, creating a market entry barrier) Monitor relevant published IP applications from third parties Regularly update research and analysis of freedom to operate (a study conducted  to ensure that a product or process can be legally developed, manufactured and marketed without infringing existing intellectual property rights held by third parties) Collect all documents related to past or ongoing litigation involving the company’s intellectual property (including court decisions, settlements, negotiations in intellectual property matters, cease and desist letters or notifications to third parties or concerning third-party intellectual property rights, and legal opinions) Assessing the alignment and relevance of intellectual property Determine whether intellectual property rights align with the company’s commercial objectives and the technological advancements being exploited or promising. Reviewing intellectual property contracts Establish an inventory of contracts with an intellectual property (IP) component Such as R&D contracts, collaborative research contracts, material transfer agreements, employment contracts, joint venture contracts, inbound IP licenses (licenses the company has obtained from third parties) and outbound IP licenses (licenses granted by the company to third parties for its own IP), open-source software licenses and third-party components2, franchise agreements, IP-related cost and revenue-sharing agreements, agreements on the allocation of IP rights  (past and new), IP co-ownership and joint exploitation  agreements, IP trust agreements, escrow agreements for source code, cryptographic keys or technical documents, open innovation agreements, non-competition and non-solicitation clauses/agreements related to trade secrets, contracts for services (software development, design, audiovisual), trademark coexistence agreements and consent agreements, co-branding agreements, sponsorship and merchandising agreements (IP aspects), image rights authorizations and other personality elements, publishing contracts, agreements with collective copyright management organizations, commercial agency and representation contracts (use of trademarks, materials), user-generated content agreements (involving interactive user participation contributing  to content, such as social media, video or photo-sharing sites, forums, blogs, etc.), confidentiality agreements, non-competition agreements, and agreements relating to employee inventions and invention disclosures. Verify, among other things: Whether royalty payments have been made Whether there is a need to renegotiate the terms of certain contracts Whether all the conditions are respected Whether all relevant parties have signed the contracts Identify any binding clauses Including clauses related to the following aspects: Use limitations Royalties Co-ownership, non-transferability or limited transferability of contracts Non-exclusivity of granted rights Exclusivity of granted rights Options on intellectual property rights Movable hypothec security interests on intellectual property assets Securitization or monetization of intellectual property Also, verify the conditions attached to the contracts such as the territory, scope and duration, and any restrictions that may hinder a transaction Security and intellectual property Establish or review security protocols for trade secrets and restricted access to company documents and premises. Intellectual property policies Establish or review internal policies and procedures for identifying, protecting and managing trade secrets Establish or review internal policies and procedures to enable/facilitate the development of innovations Establish or review internal policies and procedures for addressing the use of artificial intelligence within the company by employees, subcontractors and contractors Establish or review internal procedures to activate legal verification protocols (to ensure that protocols for conducting legal due diligence are in place) Consolidating developments stemming from R&D Maintain laboratory notebooks (document all the stages of innovation) Dedicate a team to investigate and analyze developments and assess their potential and intellectual property content, and determine the next steps Providing training Provide appropriate training for all the relevant individuals of the company for a better understanding of confidentiality undertakings and the use of AI and to emphasize the importance of documenting every stage of innovation. Monitoring competitors’ rights Monitor relevant published Iintellectual property applications and conduct regular updates of research and analyses of freedom to operate for innovations Review competitors’ new trademark filings Review new competitors’ websites Ensuring alignment between key territories and protection territories Make sure that the company’s intellectual property has protection with the government offices in the territories where it conducts commercial or manufacturing activities, or where intermediaries that are part of its supply chain are located. Also, it should aim for protection in territories where the company intends to expand its activities before entering those markets.  Establishing the scope of protection in these territories This must be undertaken before negotiating with suppliers, future licensees, manufacturers, etc. in a new market and when launching new products, services and innovations. Compliance Establish or review the measures in place, responsible individuals in charge, and the action plan for verifying the compliance of the company’s actions Establish a reporting and detection system for internally developed innovations Verify the company’s compliance with licenses (obligations to disclose sources; codes, copyright notices, compliance with moral rights, etc.). Any use of third-party intellectual property must be documented to ensure the company has the necessary right to exploit these elements in its products Conclusion Organizing, structuring, and managing intellectual property assets is highly advantageous. The question is not whether intellectual property (IP)-related issues will arise in the company’s operations, but when they will occur! A recent audit will help reduce the number of problematic events, and when such an event occurs the response will be faster, with minimal consequences, and may even unveil opportunities. If financing or the sale of the company is planned, conducting an audit is mandatory. In these cases, the audit can be complex, particularly if there are international portfolios or highly technical assets. Being prepared is beneficial, providing ready answers to investors' questions, strengthening the company's image, and optimizing IP valuation. An internal audit offers the company with a comprehensive global perspective on its intellectual property assets, allowing for optimized use while identifying and addressing any potential gaps. This practice mitigates risks and allows precise management of key information to establish intellectual property assets and facilitate commercial transactions involving intellectual property. Intellectual property (IP) includes patents, patent applications, trademarks (registered, pending or used without registration), copyrights, industrial designs, trade secrets, know-how, plant variety protection, domain names and other digital data (databases, software, applications, etc.). Including, in particular: any library, module, software framework, plug-in, SDK (code libraries, debuggers, compilers), script, driver, embedded software (firmware), container image (immutable file), package, and source/object code, and any of their dependencies, that are provided, owned or licensed by a third party, and used, integrated, interfaced, incorporated, distributed, or required for compilation, testing, deployment or execution of tasks, APIs.

We invite you to our upcoming webinar: “Understanding the Legal Framework for User-Generated Content (UGC).” Learn directly from Sylvain Pierrard and Ghiles Helli as they reveal their best practices and winning strategies. Moderator France Camille De Mers will facilitate this panel discussion, ensuring a rich and dynamic dialogue.  Together, we’ll explore how to legally frame your UGC strategy. We’ll tackle the complex issues of intellectual property and the critical challenges of personal data protection, illustrating every concept with concrete, real-world examples.  The right legal framework for user-generated content (UGC) is your essential defence in the current digital landscape, protecting your business and users while building transparency and trust online. This framework covers aspects such as the use of content protected by intellectual property rights and compliance with applicable privacy laws. Understanding the legal implications of using Terms of Use is crucial to effectively navigating this evolving environment.  When: November 26th, 2025, From 10 A.M. to 11 P.M. In order to receive an attestation of attendance for continuing education purposes, please use your professional email address for registration and be sure to attend the entire webinar. Register

While the world is focused on how the tariff war is affecting various products, it may be overlooking the risks the war is posing to information technology. Yet, many businesses rely on artificial intelligence to provide their services, and many of these technologies are powered by large language models, such as the widely-used ChatGPT. It is relevant to ask whether businesses should rely on purely US-based technology service providers. There is talk of using Chinese alternatives, such as DeepSeek, but their use raises questions about data security and the associated control over information. Back in 2023, Professor Teresa Scassa wrote that, when it comes to artificial intelligence, sovereignty can take on many forms, such as state sovereignty, community sovereignty over data and individual sovereignty.1 Others have even suggested that AI will force the recalibration of international interests.2 In our current context, how can businesses protect themselves from the volatility caused by the actions of foreign governments? We believe that it’s precisely by exercising a certain degree of sovereignty over their own affairs that businesses can guard against such volatility. A few tips: Understand Intellectual property issues: Large language models underlying the majority of artificial intelligence technologies are sometimes offered under open-source licenses, but certain technologies are distributed under restrictive commercial licenses. It is important to understand the limits imposed by the licenses under which these technologies are offered. Some language model owners reserve the right to alter or restrict the technology’s functionality without notice. Conversely, permissive open-source licenses allow a language model to be used without time restrictions. From a strategic standpoint, businesses should keep intellectual property rights over their data compilations that can be integrated into artificial intelligence solutions. Consider other options: Whenever technology is used to process personal information, a privacy impact assessment is required by law before such technology is acquired, developed or redesigned.[3] Even if a privacy impact assessment is not legally required, it is prudent to assess the risks associated with technological choices. If you are dealing with a technology that your service provider integrates, check whether there are alternatives. Would you be able to quickly migrate to one of these if you faced issues? If you are dealing with custom solution, check whether it is limited to a single large language model. Adopt a modular approach: When a business chooses an external service provider to provide a large language model, it is often because the provider offers a solution that is integrated to other applications that the business already uses, or because it provides an application programming interface developed specifically for the business. In making such a choice, you should determine whether the service provider can replace the language model or application if problems were to arise. If the technology in question is a fully integrated solution from a service provider, find out whether the provider offers sufficient guarantees that it could replace a language model if it were no longer available. If it is a custom solution, find out whether the service provider can, right from the design stage, provide for the possibility of replacing one language model with another. Make a proportionate choice: Not all applications require the most powerful language models. If your technological objective is middle-of-the-road, you can consider more possibilities, including solutions hosted on local servers that use open-source language models. As a bonus, if you choose a language model proportionate to your needs, you are helping to reduce the environmental footprint of these technologies in terms of energy consumption.  These tips each require different steps to be put into practice. Remember to take legal considerations, in addition to technological constraints, into account. Licenses, intellectual property, privacy impact assessments and limited liability clauses imposed by certain service providers are all aspects that need to be considered before making any changes. This isn’t just about being prudent—it’s about taking advantage of the opportunity our businesses have to show they are technologically innovative and exercise greater control over their futures. Scassa, T. 2023. “Sovereignty and the governance of artificial intelligence.” 71 UCLA L. Rev. Disc. 214. Xu, W., Wang, S., & Zuo, X. 2025. “Whose victory? A perspective on shifts in US-China cross-border data flow rules in the AI era.” The Pacific Review, 1–27. See in particular the Act respecting the protection of personal information in the private sector, CQLR c. P-39.1, s. 3.3.