Spell it Out

Sometimes it is tempting to sell, or attempt to sell, an invention without filing a patent application for it. This can be budget wise and economical. But it is also very dangerous. The Washington case in Oliver v. Flow International, 137 Wash. App. 655, 155 P.3d 140 (2006), exemplifies some of these dangers. Oliver sold his invention to Flow for $150,000 plus royalties. Flow never filed any patent application on the invention and never sold any products under the invention, and consequently there were no royalties. Oliver sued for failure to commercialize the invention and file patent applications on the invention which duties he claimed were implied by the contract and the reason for the royalty language. The Washington court ruled that there was no such language in the contract, and the court would not imply that duty. Thus, Oliver lost. Not discussed was that due to the one year “on sale” bar of patent law, because Flow never filed a patent application, the invention became dedicated to the public. The bottom line, if you want the contracting party to have a duty, such as to commercialize or seek a patent, you need to spell it out. Oliver could have included language that Flow was required to make verifiable concrete efforts to commercialize the invention. Oliver could have included language spelling out who had obligation to file and prosecute patent applications and maintain them. Olive could have required milestones relating to commercializations and sales such that if the milestones weren't being met the invention reverted back. But, as the case shows, if it isn't spelled out, it might not be enforceable.

Generic Trade Names and Trade Marks not protectable in Washington

The Washington Court of Appeals, Division II, ruled today in Custom Auto Interiors v. Custom RV Interiors that generic trade names and trade marks are not protectable. To the extent that the 1926 Electric Supply case held generic names were protectable, subsequent cases and legislation have rendered that position invalid. Custom Auto Interiors involved an interlocutory appeal of a preliminary injunction enjoning the defnendat, Custom RV Interiors from using the name Custom RV Interiors for its business of providing custom RV interiors. Custom Auto Interiors contended it had used the name Custom RV Interiors for over 15 years in the same locale for the serice of providing custom RV interiors, and that, generic or not, the potential for, or existence of confusion, rendered the name protectable, and the defendant's use of the name enjoinable. The trial court accepted this proposition. The defendant petition for review. Review was accepted and the trial court's injunction was reversed. The firm of Rylander & Associates PC (which this blogger manages), represented the defendant on appeal. This is also an important note for the small or start up business--the smaller party does not have to surrender in the face of an adverse decision

Buying the Cow

IP entrepreneurs frequently seek to acquire intellectual property from other entities, whether as a straight license or assignment, or as party of a merger or acquisition of assets. If a substantial portion of the value relies upon the intellectual property, the entrepreneur needs substantial due diligence to avoid buying the cow rather than just the milk.

First, intellectual property is subject to wide variations of valuation. Never take the seller’s word for it. Proven sales or established licensing rates help. Experts exist to give a fair market appraisal, to the extent that it can be done, for intellectual property.

Second, intellectual property can disappear. Patents and trademarks can be invalidated or rendered unenforceable. Copyright registrations can be invalidated, and/or the copyright protectable expression can be found to be non-existent.

Third, ownership is rarely clear cut. Ownership where employees or contractors are involved can be a nasty mess requiring tracing back through each person and each agreement to determine what, if anything, was effectively assigned, what was obligated to be assigned, or what might be hanging out free and clear. Like buying the cow, when buying intellectual property due diligence can sometimes show that the milk is free.

Invention Promotion Companies.

Frequently consumers report problems with invention promoters or invention promotion firms. Congress passed the American Inventors Protection Act of 1999 to deal with the problem of scam invention promotion firms. Congress recognized that a growing number of invention promotion firms do not provide accurate statistics to the inquiring inventor of unsuccessful invention promotions, but instead typically provide nice shiny packages to inventors, giving misleadingly glowing suggestions of rewards to be reaped if only the inventor will pay substantial money for the marketing.

The American Inventor’s Protection Act requires invention promotion firms to disclose in writing to the inventor the following: (1) the number of positive and negative evaluations of inventions the invention promoter has given over a five-year period and (2) the success of the invention promoter’s customers in receiving net financial profit and license agreements as a direct result of the invention promotion services.

Not all invention promoters are “bad”. Some are reputable and may perform a useful function. The Patent Office keeps track of complaints filed against invention promoters. The Federal Trade Commission (FTC) also keeps a record of its enforcement actions against invention promoters—just type “invention” in the FTC search engine to see FTC press releases related to invention promotion firms and enforcement actions. Additionally, the FTC has an information website explaining invention promotion firms as well as a useful “consumer alert”.

Please post any comments regarding experiences with invention promotion companies.