Would you care if someone copied you?

Clients always downplay their product or their mark. It's not patentable, I didn't invent the wheel, anybody could do it. A simple question changes the mind: "Would you care if someone copied you? --copied your GUI (graphical user interface), your software engine, your product name or your company name." If you would care, then it is worth protecting. Whether talking about infringement, counterfeiting, misappropriation, et al., the normal term is "copying". When phrased that way, most people do care if their work is copied. That's where IP audits and business plans come in. IP audits review the business and see what IP protection may be needed, and the current state of the IP protection, among other things. It includes a review of employment agreements, shareholder agreements, vendor agreements, products and product names, websites and web engines, processes and procedures. What is your IP, how is it protected, how much protection can you afford, and which IP is at the core of your businesses profit-making? Once the IP is identified and the state of protection determined, budgets can be set. Of course, none of this matters if you don't care if someone copies you.

So I'm an inventor, what now?

You have invented the new widget. You have decided to seek patent protection. What now? Does the money just come when the invention is patented, or the application is filed? Does corporate America send you green mail when you notify them of your impending rights? Not hardly.

Patent attorneys are frequently asked for direction on how to take the invention from the patent stage to the market stage, but the fact is, patent attorneys are generally not business people and have little, or no, marketing and product development sense. Ultimately, the inventor turned budding entrepreneur either needs to be a business person, including marketing and financial savvy, become such a person, or hire/partner with such a person.

But first things first. How to go from invention to product. If you can, make a prototype. If you cannot, make a drawing. Here, the patent application can come in handy because if your patent attorney was sharp, he or she would have made sure there would good drawings to help support the patent application. Nice perspective, exploded, and/or perspective-in-use drawings can pay dividends, not just in understanding the invention, but in explaining what you want to a product developer. Remember, a picture is worth a thousand words. In either case (preferably after a patent application is filed), take the prototype or drawings (with serial number, title and filing date redacted) to the relevant professional for commercial product speccing (and make sure you use a very good, attorney vetted NDA). Who is the relevant professional? That depends on the art area. There are tons of plastics, machine shops, rotomolders and design shops around, many providing services specifically to inventors. If you need help, start with the Inventor's Digest magazine which has a host of ads and classifieds from such professionals, and which also has useful articles. You can also go to your State small business center. In Washington, the State has several Small Business Development Centers with certified business specialists whose very purpose is to help and point you in the right direction. The U.S. Small Business Administration has similar services. Public universities and community colleges also have business departments that can usually send you in the right direction. But there is no getting around the fact that you are going to have to use some elbow grease, make calls, and attend meetings. Remember Edison's adage: Genius is one percent inspiration and ninety-nine percent perspiration. This applies equally to entrepreneurship.

How long until I have patent protection?

Inventors frequently ask how long will it take before a patent will issue. This seemingly straightforward question, however, is not so straightforwardly answered. First, you might not get a patent. Your claims might be rejected and you might decide to abandon the application. Or you might appeal to the Board of Patent Appeals and Interferences (which is becoming more frequent) and lose. Or you might seek further appeal at the Federal Circuit, and lose.

Second, depending on the type of invention for which you are seeking patent protection, the length of time it takes for the examiner to issue a first office action can vary widely. The closely followed patent blog, PatentlyO (http://www.patentlyo.com/), recently summarized in a table the average time to first office action by art area. For example, on average it takes 3.5 years for a first office action for business method patent applications, 3.2 years for computer networks, 2.2 years for machine elements, 1.9 years for amusement devices, and 1.7 years for manufacturing devices. Assuming a first office action allowance (a big assumption), you still would have to pay the issue fees and await issue, at least another 4 to 6 months. But most cases are not allowed on first office action, so there will be a second office action, and perhaps a request for continued examination, and then possibly the appeals mentioned above.

Third, much more rare, a secrecy order could get slapped on your patent, and you could be denied a patent entirely if granting a patent on your invention is considered a threat to national security.

When it comes to patenting, therefore, the old adage rings true: most people overestimate what they can accomplish in 6 months, and underestimate what they can accomplish in 5 years---that is, if they stick with it.

You dedicated What to the public?

IP entrepreneurs frequently run afoul of the one year bar, which dedicates perhaps a valuable invention, to the public. How does this occur? Section 102(b) of the Patent Act provides, all other conditions satisfied, as follows:

• A person shall be entitled to a patent unless— ...(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States, ...

This is the one year bar. Sometimes, because of the “on sale” provision, it is referred to as the On-Sale Bar. There are two parts, first, the invention must be “ready for patenting”, i.e., the invention is at the stage where a patent application could be filed. Second, it must either be (a) described in a printed publication, (b) put in public use, or (c) put on sale. These are all gray areas and if you have to look closely at them, you might already be in trouble. The safest course is to keep the invention confidential until you are ready to go to market. At that stage, file a patent application, get the “patent pending” status, and go to market. Not vice versa.

How does anyone know? Can you just keep your barring public use or barring sale secret and still get a patent? There are two aspects to this, legal and moral. The entrepreneur needs to make the moral decision for themselves.

The legal aspect is straightforward. When you file a patent application, you sign a declaration, under Federal law (thus, willful violation of which could be a Federal crime), that you know and understand your duty to disclose all information material to patentability to the Patent Office. When you don’t do so, it is called inequitable conduct. If the Patent Office finds out, it can bar your patent. If a patent issues and a competitor finds out, it can invalidate your patent and open you up to liability for bad faith patent enforcement. Every year patents are invalidated based on inequitable conduct for failure to disclose. It is not a situation you want to be in, especially since there is an easy way to avoid the problem -- apply for patent first, and then market the product. Otherwise, you could end up dedicating your invention to the public.

Note, some countries/regions don't allow a one year grace period at all. An IP entrepreneur that considers international protection will want to check the countries he or she is interested in before doing an act that starts the clock ticking. There may be less time than the one year allowed in the US, or no time at all.

Design Patents reinvigorated

Design patent holders will be thrilled withe new decision by the Federal Circuit in Egyptian Goddess, Inc. v. Swisa, Inc., _ F.3d _ (Fed. Cir. 2008), making enforcement of patent protection for design patent owners less onerous. Design patents protect the ornamental features of functional articles. Previous to the Egyptian Goddess decision, the test for infringement was (1) substantial similarity from the perspective of an ordinary observer, and (2) the accused device contains the same points of novelty as the ptented design. The second test required claim construction in words of the graphic ornamental features and was used for appeals, hearings, and other purposes in defense of a design patent infringement suit. The Federal Circuit in Egyptian Goddess did away with the point of novelty test, thus easing the burden on patent holders in proving infringement. Since design patents are often easier to obtain, and less expensive, than utility patents, this is a significant boost to the small business ip entrepreneur.

Time for a New Court

As I've mentioned numerous times, patent litigation is expensive for all concerned. The average pricess for patent litigation in attorneys fees is above $1 Million Dollars. For the overwhelming majority of patent owners, that price tag is simply too steep. Conversely, if you are unfortunate enought to be sued, the price tag is the same or higher, simply too steep. Sometimes the pre-suit negotiation or pre-Answer negotation, of a suit that has been filed, is a game of chicken where each side inches toward destruction, waiting for the other side to blink.

But protecting IP rights, and defending against claims of infringement, should not be a game solely for the rich. A new type of court is needed that significantly reduces the cost of enforcement. Some have called for a specialty U.S. Patent Court, somewhat like the U.S. Tax Court or the U.S. Court of Federal Claims, for handling all suits for patent infringement. But that doesn't resolve issues involving the 7th Amendment where a right to jury is guaranteed. Perhaps what is needed is a Federal small claims IP court, where people can plead patent and IP cases under a certain threshhold and get accelerated treatment, reduced discovery, and other procedure saving features. Some simple ways to reduce costs in IP litigation are: (1) mandatory, nonwaivable initial disclosures, and (2) combining summary judgment with Markman hearings or, where thare are no summary judgment motions, combining trial with Markman hearings.

Whatever the solution, the small business entrepreneur needs to be able to protect its intellectual property, and needs to be able to defend itseld against claims of infringement, neither of which are effectively being provided under the current IP enforcement framework.

False Marking

IP entrepreneurs typically want to get, and should get, notification of their IP rights on their product, packaging, and marketing materials. The benefits are legion, from alerting people to the claim of right in the product, the product configuration, the product name, etc., to utilizing the advertising benefit of claiming a patented, trademark registered, or copyrighted creation. For patents, failure to properly mark can preclude the patent owner from getting any damages at all from an infringer. So to, the means for marking can be legion, from Patents: "pat. pending", "U.S. Pat. _", "U.S. Des. Pat. _", "U.S. Plant Pat. PP_", to Trademarks: (TM), (R), (SM), to Copyrights: (SR), (PA), (C), among others.

But marking has its flip side. To avoid a claim of false marking, there must be, as an absolute floor, a reasonable belief that the product marked as "patent pending" is actually the subject of a legitimate patent application, that a product marked as "U.S. Patent _" is actually covered by claims of a validly issued and unexpired patent, that a mark with the (R) subscript is actually registered by the U.S. Federal government, and not by a state or foreign country.

Where this floor is not met, the penalties can be stiff. For false marking of a patent, a Federal statute imposes a fine of $500 per product, and the suit can be brought by anyone, even if you don't have a dispute with them. False marking can also constitute unfair competition and violation of trade laws.

In short, marking laws can be complex. To do it properly, the IP entrepreneur must make sure to toe the mark.

Happy Fourth of July!

To celebrate the Fourth of July, I'll give you a quick primer on the Constitutional bases for Federal intellectual property protection.

Patents and Copyrights derive directly from the United States Constitution. Our Founders wrote into the Constitution the Patents and Copyrights Clause which reads:

• "The Congress shall have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"

From that sprang the Patent Act and the Copyright Act, and all laws related to them.

Trademarks, however, were overlooked by our Founders, and are protected by the Constitution only indirectly, through the Commerce Clause, which reads:

• "The Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"

From that authority, Congress ultimately created the Federal Lanham Act governing Federal trademark rights.

Happy Fourth!

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.

Shhhh!

Trade secrets can be a valuable asset in the entrepreneur's IP portfolio. Unlike copyrights, trademarks, and patents, trade secrets are not registered nor are they applied for, granted, or issued. In a short definition, trade secrets are information that is maintained confidential and which gives the entrepreneur competitive advantage and/or derives independent value from being kept confidential.

Virtually every state protects trade secrets using some form of the Uniform Trade Secrets Act. Common law also gives some protection to trade secrets. Theft, or misappropriation, of trade secrets can also implicate the Federal Economic Espionage Act.

But trade secrets are only protectable if they are maintained as secret, and that includes the requirement that (a) the information is not easily available to competitors, and (b) reasonable precautions are used to maintain secrecy.

Customer lists are frequently claimed to be trade secret, but in many cases the customer and contact list is as easy to discern as looking in a known industry directory, or typing a well phrased Google(R) search. On the other hand, some customer lists are not accessible that easily and can only be created over time using sources not readily available. In such a case, the list may well qualify as trade secret...but only so long as reasonable precautions are used to maintain it. Is the information let out to people who are not under a written obligation of confidentiality? Is the information laying on a desk that members of the public or frequent vendors walk past? Do employees have a written obligation of confidentiality? Is the information on a computer connected to the Internet that has only the most rudimentary of security protections? Do the customers know each other and do that they know that they are all customers of the entrepreneur? These things factor, sometimes dispositively into the question of whether reasonable precautions are being used.

One easy self assessment is to ask the following questions. For (a), is the nature and reason for the trade secret status easy to state. For (b), are the precautions taken to preserve secrecy well documented and do they include documentation on the items just listed. If either of the answers are "no", then trade secret protection is not being well established and/or maintained. But don't tell anybody that, it'll be our secret.

Insurance and the Intrepid Inventor

Inventors who bring their own product to market should consider, among other insurance issues, both product liability insurance and patent infringement insurance. Product liability insurance covers liability for claims for injury caused by the new product. Patent infringement insurance comes in two flavors, offense and defense. Insurance exists for infringement offense to cover the cost of bringing a suit in the event someone infringes on the inventor’s patent. Conversely, insurance exists for infringement defense for claims that the entrepreneur infringes someone else’s patent. None of these types of “invention” insurance come cheap, so it is important to find out the premiums on these when writing the business plan.

A Rose by Any Other Name.

If patents are the heart of a business’s competitive edge, trademarks are the face. New entrepreneurs frequently seek information regarding choice of a company or product name. Despite the seeming ease, choosing a mark by which people will identify your product or company can be difficult. Opposing considerations come into play. Does the chosen mark add to marketability? Does the chosen mark infringe someone else’s mark? Can the chosen mark be protected? The more descriptive a mark is, and thus potentially more immediate marketing edge, the less protection it may receive, and perhaps no protection at all.

Marks are placed on a spectrum of protectiveness defining what must be done to make them protectable, i.e., are they inherently distinctive, distinctive only after acquiring secondary meaning, or never distinctive. While generic marks immediately identify the product, they are not protectable in most jurisdictions. Fanciful or arbitrary marks can be immediately protectable, but they give no information about the product whatsoever, so have no immediate marketing bump. A choice must be made then, whether to seek little or no protectability with a generic or highly descriptive name, little or no immediate marketing bump with a fanciful or arbitrary name, or somewhere in between. Once that choice is made, the question becomes whether someone else has the name for the same or related good, which would interfere with the ability to get protection for the entrepreneur, and open the entrepreneur up to trademark infringement or dilution liability.

How does an entrepreneur navigate these shoals? First, make the choice of whether to seek immediate marketability using a descriptive or generic name, or to go with a name less immediately marketable but more immediately protectable. Second, conduct a trademark clearance or name availability search. Third, if a name is chosen that is potentially protectable, and a search reveals no conflicting uses, decide whether to seek formal registration of the mark. Choosing a mark, like growing roses, can be thorny, but when grown correctly, be just as sweet.

Double Duty

Any business that gains a competitive edge from a custom software engine may wish to consider a multi-faceted IP protection plan. Software can be the subject of a patent, the subject of a copyright, and in some cases, the subject of a trademark (or trade dress) for a unique user interface. Engineers frequently seek patent protection on a new device, but almost invariably focus on the electrical, circuit or mechanical aspects, never considering (or perhaps considering too “soft”) protecting the unique code that runs the new widget. But the original expression in code is just as copyrightable as the novel and nonobvious useful process of code is patentable. From an enforcement perspective there is almost no richer or worse type of suit to prosecute or defend. Software code can be the hardest to convey to a judge or a jury, even without throwing in the impenetrability of patent law and claim construction. Similarly, the copyright law surrounding code and user interface protection is literally (small copyright joke) a patchwork quilt.

Small Changes and Big Realities

Isn’t it true that competitors need only make a small change and get around a patent? If so, then why should I get a patent? This is a common refrain, mistaken both in its premise, and in pragmatic reality. For patents, a small change is neither here nor there. Is the competitor’s product within the terms of any claim in the patent? That is the question. If a small change is within the terms or, in many cases, is the equivalent of the terms, then a case for patent infringement may exist.

That is the analysis on the merits. But the real analysis is on the economics.

Patent litigation is unbelievably expensive. More so for defendants, in most cases, then plaintiffs (for reasons that will be the subject of other blog entries). A defendant receiving a cease and desist letter faces an economic wake-up call. When the defendant takes it to the patent lawyer, the lawyer often will require a seemingly gargantuan retainer fee and monthly litigation budget. For most small, and even medium sized, defendants, making a patent infringement defense is not practical, and in many cases not possible. A small change (or even not so small) to a product can still nevertheless come within the terms of a patent claim, allowing a patent holder to terrify, in many cases into submission, a defendant who cannot meet the sticker price for a defense. The threat or even reality of a patent infringement lawsuit can be effective at keeping the competition in line. But, the patent owner has to be willing to enforce it.

Plan to Succeed

The new IP entrepreneur typically seeks to protect his or her new creation, whether it is an invention, a new name for a product, an original design, an artistic performance, or otherwise. At first glance, the costs of IP acquisition/protection can seem large. A successful IP entrepreneur will first create a business plan that provides a roadmap of how the new busines is going to succeed, factoring in not only the costs, risks, and advantages of IP acquisition/protection, but also costs of prototyping, manufacturing, getting the product to market, marketing the product, administrative costs, and a host of other start up costs (licensing, business formation, etc.) that go into being an entrepreneurial business. The U.S. Small Business Administration has a good site with information on how to write a business plan. The State of Washington's Small Business Development Center also has a good informative page on business plans. Once a solid business plan is created, the entrepreneur can weigh and allocate the costs for doing IP acquisition/protection right away, versus waiting until other milestones are reached. Of course, the IP entrepreneur is wise to take consultation to discover the risks of waiting for IP aquisition/protection, as some risks can be substantial and sometimes the IP acquisition/protection work must be done immediately. Making a good business plan is the best first step in succeeding in the new venture. When you fail to plan, you plan to fail.

Start Right at Start Up

The best time to avoid later problems is before the dispute occurs. For the entreprenuer, this means at the beginning. Written Assignments, Shareholder Agreements, Work for Hire Agreements, Non-disclosure Agreements, and Noncompetition Agreements, among others, are frequently desired after the fact. Putting these in place at the beginning of a business or a relationship let's everyone start on the same page, lessening the chance of a later misunderstanding. Good fences make good neighbors, and good contracts make good business.