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.