Mandatory Disclaimer
- Despite this excellent introduction to IP protection, it will not make you an expert.
- Important property rights may be at stake, time may be a critical factor, and every situation is different – therefore:
- Always consult an attorney.
THE THEORY (a very short detour)
There is one kernel idea that permeates all living things – Survival. Survival is often the protection of property.
- Some plants grew taller than others to get the sunlight.
- Some cavemen clubbed others to keep them out of their cave.
- Then there was land (real property). It had several unique characteristics including that it was hard to move (i.e. steal). Protection took the form of possessing it.
- Then there were goods. Tangible property that could be moved. Its protection required new laws, such as those against theft.
- Eventually along came ideas. Intangible (intellectual) property that could be even more easily stolen. Newer protections were needed.
- Then came the Internet …
The idea for protection is that without it there is no incentive for someone to spend the time and effort creating something.
So how do you erect barriers to theft? Easy – pass laws that have punishments that fit the crime.
However, from real property we get the idea that “turnover” is a good thing, that is, no one should be allowed to keep something forever.
So, the bargain that was struck, was that for a limited time you may have exclusive rights.
TABLE OF CONTENTS
Protection Available For Intellectual Property Rights.
- Trade Secrets
- Copyrights
- Mask works
- Trademarks
- Patents
- Intellectual property may be viewed as having a bundle of rights. It can be assigned, sold, licensed, etc.
- Protections can be combined to yield greater protection (i.e. copyright and patent the same invention).
Trade Secrets
Trade secret law protects “confidential” information from being taken or used by another party without the consent of the party owning the trade secret.
- Requires reasonable steps be taken to protect the secret, such as limiting access to the secret and obtaining signed NDAs from those to whom access is given.
Trade secret protection does not prevent independent development (including reverse engineering).
- Competitors may file blocking patents on their independently developed technology (and prevent you from using your trade secret).
Trade secret law requires that the protected information be kept secret and that “reasonable steps” be taken to do so.
- Protection is lost if the secret becomes public.
“Reasonable steps” to protect include:
- Using “reasonable efforts” is YOUR responsibility.
- Mark information as “Confidential” upon creation
- Do not leave “Confidential” information lying around.
- Distribute internally strictly on a need-to-know basis.
- Distribute externally ONLY under a Non-Disclosure Agreement with an established need-to-know.
Beware of, and maintain use restrictions on received “Confidential” Information.
- Check NDA for any special handling requirements.
- Protect as you would your own confidential information.
- Preserve owner’s “Confidential” markings.
- Make copies only if permitted.
Institute and Maintain Procedures to Protect Trade Secrets with:
- Employee Agreements.
- Communication with new employees.
- Exit Interviews.
- NDAs with consultants, business partners, etc.
- Visitors.
- Marking and Security.
- Approved personnel distribution/access lists for certain information.
Avoid contamination that results from mixing confidential information of your own with that of another entity. This contamination may lead to:
- Impaired development or restrictions on shipping a product.
- Being sued for damages.
- A tarnished reputation that hurts future partnerships.
COPYRIGHT
Copyright law protects original works of authorship that are fixed in any tangible medium. Examples include a printed source code listing, memory-resident object code, displayed user interface, operation manual, etc.
Copyright protection attaches automatically when a work is created. Copyright protection is not contingent upon the granting of the right as in a patent case.
- Duration is life of author plus 70 years.
- Works for Hire - shorter of 95 years after publication or 120 years after creation.
Software is not a considered a “Work for Hire”
Copyright protection does not prevent development of similar or competing works embodied in different expressions. Copyright extends only to literal or near literal copies.
- Copyright infringement occurs when a party creates a work which is substantially similar to the protected expression and where the infringing party had access to the protected expression.
Copyright does not cover the useful or functional characteristics of a work.
Notice is not required, but it is good to use it to protect against an “innocent infringer” defense during calculation of damages.
- © 1995-2005 Your Corp
- (c) 2003-2005 Your corp
- © 2005 Your Corp.
Registration is not absolutely required until just before suit but strongly advisable soon after creation.
- If you did not register before infringing activity started then you are precluded from obtaining an award of statutory damages.
- Registration is useful for corporate asset valuation.
MASK WORK
The Copyright Office grants owners of original mask works (i.e., semiconductor chip layouts) exclusive rights to make, import, or distribute semiconductor chip products made from the mask works.
Protection lasts for 10 years (non-renewable).
Think of them as copyrights.
- Does not protect ideas, procedures, or processes.
- Does not protect against reverse engineering.
- Does not protect against independent creation.
Provides protection for direct knock-offs.
- Ex: your foundry decides to use your mask work (or someone else who obtained it) to make your chips for others.
TRADEMARK
A trademark is any word, name, or symbol/logo that is used by a company to identify its goods and distinguish them from those manufactured or sold by others.
Trademark law prevents a party from adopting a mark to represent its products which is “likely to lead to confusion on the part of the purchasing public” as to the source or origin of the products.
Trademark protection does not, in general, prevent a product itself from being copied.
Trademark protection can prevent a party from unfairly benefiting from or damaging the customer recognition and goodwill developed in a product or company name.
Lasts forever if you continue to use it and renew registration!
Mark products with ® , if the mark is registered.
Mark products with ™ if in use, but not Federally registered with the Patent and Trademark Office.
- Provides limited protection in the US.
- Not valid in all countries.
Maintaining and preserving trademark equity by adhering to proper use rules lends itself to the ability to stop unauthorized uses of your trademark.
Failure to do so may result in the loss of the trademark!
- Bayer Co. lost their trademark to “Aspirin”because they allowed it to become a generic term.
- Xerox - came close to losing their trademark.
ALWAYS use a trademark as an adjective accompanied by the appropriate noun. Never use trademarks as a noun, in plural form, or as a verb. Do not join a trademark to other words or with hyphens.
- Bad: “I need a Xerox of this presentation.” (used as a noun or verb is bad)
- Good: “I need a Xerox photocopy of this presentation.” (adjective is good)
ALWAYS use proper spelling.
ALWAYS use trademarks and brand names in the ways they were intended to be used.
- Do not use them for goods and services for which they were not originally intended.
- Do not alter them, make puns out of them, or portray them in a negative light.
PATENTS
A grant to an inventor is the right to exclude others from making, using, selling, offering for sale, or importing the claimed invention for 20 years from the first filing date of a utility a patent application.
- Not enforceable until the application issues into a patent (however, you may be able to get reasonable royalties from the date of publication to the date of issuance).
A patent does not necessarily grant the owner the right to practice the invention, since this might require the use of technology patented by someone else.
Patents are considered the strongest form of intellectual property since, unlike copyrights and trade secrets, independent creation is NOT a defense to a claim of infringement (this is KEY to understanding the power of a patent).
Patent rights in the U.S. accrue to those who are first to invent. (The rest of the world is first to file.)
Patents - Why Pursue Patents?
Other companies are obtaining patent protection on their ideas.
As a result of patents being held valid increasingly more often, companies are showing more and more willingness to pursue enforcement of their patent rights.
As a result, many companies are actively pursuing increased patent protection.
For example, Microsoft in the last several years has increased its patent application filing rate by at least a factor of ten.
As companies gain larger and larger patent portfolios, they will attempt to gain a return on their investment in research and development, not only through product development and sales, but also through use of patent enforcement.
Patent royalties go directly to the bottom line.
One of the best defenses to an assertion of patent infringement is the offer of a cross-license.
Cross licensing with others: Two parties agree to license each other under all of the patents of each party or under some portion of their patent portfolio covering a certain class of products or technologies.
Without the ability to cross-license patents, you may be forced to pay royalties on your products or methods to others that hold patents.
- In the case of a patent owner seeking royalties, the amount of such royalties may be decreased or eliminated entirely if you have a patent portfolio available for cross-licensing.
Cross-licensing provides design freedom in licensed technology areas.
- I,e., Not forced to spent time and $$ to design around other’s patents.
Force open monopolies with your patents.
- In some cases, patent owners are unwilling to routinely grant licenses under their patents - preferring to retain a monopoly on their invention. By asserting patents against monopoly patent owners you increase the likelihood that the patent owner will allow you to take a license in return for a cross license. Taking the offensive may increase the certainty of your future, thereby raising investor/market confidence.
Summary: A patent portfolio creates leverage that may be used to inexpensively defeat attacks by patent owners, open up stubborn monopolies, and provide design freedom for the engineering development team.
Patents offer valuable protection against third parties using the results of your R&D efforts.
Given the level of R&D expenses which you spend in the development of products, you will have difficulty remaining price competitive against manufacturers who take the results of your R&D effort and do not incur similar R&D expenses of their own.
If you have patents covering such R&D efforts, you then have the option of using your patents to:
- Force a competitor to stop producing products that include technology based on your patents.
- Force a competitor to take a license and thereby generate a money royalty stream from the manufacturer in order to help offset your R&D costs.
Recognition and Valuation.
A corporate developer and its inventors receive recognition for their contribution to a technology area through the issuance of patents.
Analysts, market research groups, journalists, and industry watchers routinely use patent information to track industry activity. Patents create a corporate asset considered during corporate valuation by analysts and fund managers.
Patents provide a potential revenue bearing asset independent of products.
Cadtrak, formed in 1980 to develop graphics processing, went bankrupt in 1985.However, Cadtrak went on a licensing road trip.
Made $50 million in licensing revenue with 5 people, two computers, the cost of airline tickets, hotels, and one patent.
Patents - What Patents should be pursued?
Protect features which distinguish your product in the marketplace.
Patents should be sought for ideas which give your products a technological or other competitive advantage over competitors.
Protect ideas which are easily identifiable.
It is important to have patents for inventions which, when embodied in a third party’s product, can be readily identified or that can be easily determined through reverse engineering.
Protect ideas that have a relatively long product life (greater than 2 years).
A patent will take approximately 2-3 years to issue and is not fully enforceable until then.
Do not discount “business method” patents.
- Amazon’s “One-Click” patent. Obtained injunction against Barnes&Noble and forced them to redesign their site.
- Priceline.com obtained a patent on on-line reverse auctions. Suit filed against Microsoft in late 1999.
- FantasySports.com obtained patents for on-line fantasy football games. Suit filed against Sportsline.com, Yahoo, ESPN, and others in late 1999.
- Simple inventions make strong patents
- If you have spent any reasonable amount of time designing, or working on a problem, the odds are there was IP generated that needs protection.
Patents - The Legal Standard For Patentability
The idea must be “useful”
The idea must be “new” (novel)
The idea must be “non-obvious“
The idea must fall within one of the categories of patentable subject matter.
- Apparatus or article of manufacture
- Processes or method
- Composition of matter
The idea must not fall within certain other categories.
Pure Mathematical Algorithms
Software is patentable as are business methods.
Basically anything under the sun can be patented.
Patents - When To File A Patent
MUST file in the U.S. within one year of a first sale, first offer for sale, publication, public disclosure, or public use of the invention sought to be patented.
Normally, file prior to first publication or sale of the invention to preserve foreign filing rights. Foreign patent offices do not provide the one year grace period provided in the U.S. The foreign standard generally hinges on when the invention was “made available” to the public.
Typically, it is not desirable to file a patent application until the invention has begun to be “reduced to practice.” That is, the invention should be more than merely a vague idea. (Ideas are not patentable – however embodiments of ideas are patentable.) However, filing a patent application is a constructive reduction to practice and if one of skill in the art without undue experimentation can practice the invention, then it is enabled.
It is quite common to begin work on the patent application 4 – 6 months before a product release or scheduled trade show demonstration.
Patents - Patent Development Strategies
Conduct patent training classes to inform the engineers about the patentability of their technologies and the process for submitting their invention disclosures.
Form a corporate Patent Committee comprising key business or product managers, engineering leads, in-house counsel, and patent counsel to consider invention disclosure submittals from inventors.
- Create a "New Product Features" List.
- Review product Functional Specifications.
- Consider what competitors may be doing.
- Review invention disclosure submittals and other ideas submitted by inventors.
Advise engineers to always keep engineering notebooks and early design materials to document the earliest dates of invention. Sign, date, have witnessed, and archive any significant work product.
Prepare and prosecute patent applications.
Patents - Documentation Of The Invention
The U.S. Patent System is based on first to invent, not just first to file.
ENGINEERING NOTEBOOKS
Keep notes on everything you work on (i.e., possible inventions) in an engineering notebook in order to be able to show that you created the invention in the way you say you did and at the time you say you did.
Patent disputes arise years after the invention is created or a patent is filed. Since you never know which work may end up in dispute, you must get into the habit of making entries for everything. If you don’t record something that later turns out to be important, others will argue you didn’t do it because its not in your notebook.
Preserve the “integrity” of the notebook.
Avoid anything that alters the book or that gives someone a way to argue that you altered it. For example:
- Never remove or add pages to the notebook.
- If you cross-out or change information, simply line-out the info. Don’t blank it out so it cannot be read.
- Do not leave pages blank: write on each page.
- Date each entry and make sure there is a date on each page.
INVENTION DISCLOSURE FORMS
Another key element in documenting conception.
“Chicken-scratch” in Engineering books may not be detailed enough to document a date of invention.
Date and signature of two witnesses provides corroboration of invention.
Used by Patent Committee to select inventions for filing patent applications.
Aids patent attorney in drafting patent application.
Patents - Patent Application Process
Determine which invention disclosures you will file on.
Invention Disclosure Meeting
- Typically this meeting is between at least one of the inventors and the patent attorney who will be preparing the application.
- Discuss the prior art (e.g., patents, articles, conference papers, etc. of relevance to the invention).
- Discuss the invention.
- Compile drawings, flowcharts, references, and other documentation that may be helpful.
Preparation of a draft of the patent application.
- The inventor(s) review the draft
- Patent attorney generates revised patent application.
- Final draft is reviewed and inventors sign declaration and assignment papers.
Patent application gets filed with the Patent and Trademark Office.
Patents - Application Format And Legal Requirements
A patent is NOT a conference paper!
After a patent application is filed, if appropriate, write and submit conference papers, white papers, press releases, etc.
A patent is a legal document written with legal objectives in mind. It has two main parts:
Specification: what the public gets in return for granting the monopoly.
Background Section: Discuss problems with prior art/reason for the invention.
Summary of the Invention – Broadest claim written with proper syntax.
Description Section – MUST
Provide a detailed description of the invention.
Enable others skilled in the art to make and use the invention.
Describe the best mode which the inventor contemplates for practicing the invention.
Abstract – Broadest claim rewritten without legalese.
Claims : the legal document that defines the boundaries of the monopoly
Broad independent claims followed by successively narrower dependent claims.
Patents - How To Evaluate A Draft Application
Make sure the patent attorney is aware of all prior art that is known to you.
No requirement that you actually perform a search for prior art.
However, there is a requirement that you inform the PTO of any prior art that you are aware of. (Done by the attorney through an information disclosure statement (IDS)).
Make sure the specification (and claims) are accurate and includes alternative ways that a competitor might use to get around the invention.
When reviewing the claims keep in mind that the patent attorney’s job is to broaden and expand the invention until the claims run into the prior art.
Check whether each recited element, and word, in a claim is necessary in order to distinguish over the prior art.
Provide specific feedback.
Don’t just answer questions you find embedded in the draft. Mark changes/corrections/additions anywhere they are needed.
Patents - Procedure At The U.S. Patent Office
I. Patent Application is received and assigned a filing date and serial number. The Patent Application is kept confidential in the Patent Office during pendency (unless published at 18 months).
II. Application is assigned to an Art Group and an Examiner.
III. Examination commences after a long delay after filing, sometimes up to 18 months.
IV. Examiner issues an Office Action, which is the Examiner’s Report of the results of their examination of the patent application. The Examiner cites all prior art found that relates to the claimed invention. Typically, the Examiner rejects the claims the first time.
V. The patent attorney responds to the Office Action by making arguments why the claims are patentable over the prior art and/or amending the claims if necessary to get around the prior art.
VI. Steps IV and V may be repeated.
VII. Application is allowed or finally rejected.
VIII. Patent issues if allowed – Appeal is possible if finally rejected.
Patents - Patent Portfolio Development/management
Typical Inventor Incentive Program
- $500 for invention disclosure submittal.
- $1,500 for patent filing/$2,500 for issuance.
- Commemorative plaques to inventors.
- Letter of commendation to personnel file.
- Award dinners or other inventor recognition.
- Involve management for inventor time allocation.
Create patent database and support staff. Database can be used for generating management reports and for performing searches.
Create a docketing system for tracking important actions required in patent cases (or let the attorney do this).
Conduct internal patent awareness and training programs to encourage and enable submission of invention disclosures.
Become involved early in the product development cycle.
Some level of in-house patent prosecution capability may ultimately be desirable.
Consider patent acquisition from related businesses or individual patent owners.
Use an annuity service to pay patent maintenance fees. (An attorney can set this up.)
Monitor patent expenditures. It is not unusual to spend $50K – $100K over the life of a patent for U.S. and foreign prosecution and annuities.
Patents - Considerations For Foreign Filing
U.S. filing date can be used as foreign priority date by treaty.
Invention cannot have been made available to the public prior to the priority date.
Consider which foreign countries or regions may most likely make, use, or sell the invention.
Countries requiring translation will be more expensive.
In general, file 25% of the U.S. applications in appropriate foreign countries.
Patent Cooperation Treaty (PCT) applications can be used to defer national filings for up to 20 – 30 months after priority date.
Use foreign associates to assist foreign prosecution and to pay foreign annuities.
Monitor foreign filing expenditures.
Patents - What To Look For In A Well Drafted Patent Application
The claims are the critical part of an application.
Claims should be broad to narrow.
There are a series of different types of claims, which offer different types of protection as well as bases for infringement damages. A well drafted claim set will have all of these, particularly on what are considered key patents:
Method – a procedure
Apparatus – an implementation
System – an implementation in a system
Beauregard – computer readable medium for method
Heimlich – computer readable medium for apparatus/system
Business – transfer of credit/debit
Summary
IP rights are critical to a company, from a technical, business, and valuation standpoint. After all, at the end of the day, most companies value is in the IP they have generated. Without protection a company opens itself up to someone else patenting the IP and possibly shutting the company down.
Trade secrets – protect well kept secrets
Copyrights – protect original authorship creations
Mask works – protect mask patterns on a chip
Trademarks/Service marks – identify the source for a product/service
Trade names – identify producers
PATENTS – protect inventions
How to Make an Attorney Rich
Before filing an application, tell the public about your great invention, or better yet, offer it for sale.
File applications late, or better yet, none at all.
“Hide the ball” from the Patent Office by not telling the whole truth, or better yet, lie to the Patent Office.
Seriously – your rights can easily be lost and you should consult an attorney.
Intellectual Property & The Startup – A Strategy For Success
Background
The public policy behind US Patent Law favors the small inventor.
a. First to invent vs. first to file.
b. No mandatory publication of patent application.
Form A Business Entity
Place all partners, members, contractors, employees, etc. under an obligation to assign intellectual property (IP) created in the course of the entity’s business to the entity.
a. Avoids a host of problems – Establishes “Common Ownership” at the time the invention was made. Avoids possible rejections.
b. Can avoid some IP ownership issues.
Create A Business Plan
Analyze Your Business Plan To Determine What IP Protection Is Needed
Trademark/Trade Dress – Protects: word, logo, look and feel of business.
Patent – Protects: idea implementation; ornamental design of article of manufacture.
Trade Secrets – Protects: business data, formula, process, etc.
An issued patent can turn a trade secret holder into an infringer.
Copyrights – Protects: creative expression, no idea protection at all.
Integrate IP Into The Business Plan To “Preserve” Rights
Rights are “time sensitive.”
Trademark – “first use in commerce” or “first to file intent-to-use application.”
Patent – US is “first to invent.” FOREIGN is “first to file.”
Diligence considerations.
Execute Business Plan & Adapt IP Integration As Necessary.
Perspective
View the “value” of your business from a future perspective, not the “value” as measured today. Think success. Very few start-up companies can afford patent litigation when they file their first patent application; don’t let this fact prevent you from pursuing patent protection from the beginning of your business endeavor. Remember that over the 20 year life of a patent much can change. What would have been impossible when it was filed may now be commonplace or even obsolete.
(Remember when a 10MB disk was large, or when a music player could only store 100 songs rather than the 10,000 or when phones screens were black and white and did not have cameras?)
Foreign IP Issues
Trademarks
Madrid Protocol allows you to file in most countries. US priority date recognized.
Patents
Easiest approach is to file PCT (Patent Cooperation Treaty) within 1 year of first filing date. Wait 30 months then drop into national stages of individual countries or regional groups such as European Patent.
Enforcement
A real issue in developing countries. Balance business objectives and costs versus licensing or not pursuing protections. Annuity costs can be very high. Watch out for critical technologies that governments might seize and be aware of “working rights.”
Rough Costs/Protections
| Form of IP Protection | Hard cost | Soft cost | Enforcement Cost | Protects |
|---|---|---|---|---|
| Trade secret | Low | High | Infinite (can’t) | Company secret |
| Copyright | Low | Low | Medium | Creative expression |
| Mask work | Low | Low | High | Mask of an Integrated Circuit |
| Trademark / Service Mark | Medium | Medium | Medium | Source of goods / service |
| Trade dress | Low | Low | Medium | Product look or image |
| Patent | High | Medium | Very High | Implementation of idea |
Random Thoughts
Trademark/service mark is any word, symbol, or design adopted and used in commerce to identify the source of the goods/service. An ITU (intent to use) application can be filed if based on a bona fide intent to use. TMs can be registered under state and federal law. If can’t get on the principal register, then go to supplemental register for 5 years of use then reapply for principal. Get a state TM (use only), faster to get and can be used for legal proceedings (WIPO, UDRP, cybersquatting, etc.) TM term is 10 years, renewable forever every 10 years if using and pay fee. Infringement based on “likely to cause confusion” in the average consumer as to the source of the product/service.
Trade dress is the whole package “image”. Image needs to be inherently distinctive or acquired though secondary meaning to identify the
Copyright protects original works of authorship fixed in a tangible medium of expression. Use © on all except phonorecords which use (P) (Circle P). Attaches immediately to any work, however need to register with Copyright Office (Library of Congress) to commence civil action for copyright infringement. Infringement based on reproducing, derivative works, distributing, performing, or displaying material.
Trade Secret anything. Lasts as long as the secret. Can be lost if discovered independently (reverse engineering allowed). Infringement almost always an employee no longer with the company and now with a competitor. TS can be lost if another gets a patent, then you could be an infringer.
Mask work basically a copyright on the mask sets.
Design patent essentially a photo of the product. Ornamental design protected (not functionality) so any minor variation is not an infringement. Term is 14 years from grant.
Provisional patents – stay away if possible. Great cost attraction, however, support, enablement, best mode, and a host of issues. If going to file make it robust and as if a full utility application. Include a very broad method and apparatus claim to preempt any foreign countries from abridging your right to amend. A provisional will get you a priority date, however NEVER convert a provisional to a utility as you will lose a year on the patent term. Also don’t forget that you have only one year from the filing of a provisional to file a regular utility application AND any foreign applications.
Patent most expensive, most profitable, protects against independent creation (KEY). 20 year life. Software and business method patents pursue them as countries finally coming to reality. Infringement make, sell, offer for sale, import, induce, etc. Innocence no excuse. Inventor has rights. No shop rights so obligate inventor to assign to company. Do not have to license in the US, and can shut a competitor down. Be very careful on wording of cease and desist letter or you may find yourself defending against a declaratory judgment action. Do not license individual patents because if declared invalid the royalty stream stops. Instead license an intellectual property portfolio (know-how, contacts, procedures, patent applications, and possibly some patents), then if patent invalid can still get revenue stream. If licensing is an uphill battle then do a run-up licensing scheme. Don’t automatically give up other countries, look at licensing opportunities.
