How do we know if the money in our IP budget is being well spent?
Absent knowledge, you don’t. Somebody on your team should have at least some understanding what typical services cost and what you should receive for those services. When the services are rendered, somebody knowledgeable on your team needs to ensure the level of quality is appropriate for what the company is paying.
Take patent prosecution as an example. Patent prosecution is the drafting of an application and interchange with a patent office. Your company paid significant sums of money and a patent will issue, so was that money well spent? Possibly. It depends on a number of factors including the company’s strategic goals and the skill of those involved in patent prosecution. The average patent, particularly one issued to an individual, is very often worthless. For a high-tech company with a substantial patent portfolio, fewer than 5% of the patents have some apparent value. This reality is reflected by the fact that government maintenance fees are not paid on two out of every three patents, allowing them to lapse. Notwithstanding, by many accounts, almost 75% of the value of publicly traded companies in the U.S. comes from intellectual property assets. If true, then it is understandable why the U.S. Patent and Trademark Office has now issued over 8,000,000 patents. On average, someone receives a patent grant every 3 minutes or registers a trademark every 5 minutes.
Take litigation as another example. Litigation in the U.S. is incredibly expensive when compared to litigation elsewhere. The primary reason is the broad discovery permitted in the U.S. A single case, particularly a patent one, can make a discovery vendor more money than the typical company makes in a year. Attorneys are then employed to review the material at substantial costs. Most of the attorneys on the case have never even taken a deposition; nearly all have never been to trial as nearly all cases settle before trial. Nearly all have never even prosecuted a patent application or are registered to practice before the U.S. Patent and Trademark Office. Are those monthly litigation bills money well spent? Possibly. But it is highly likely that your company is paying significant sums of money each month for an unduly expensive, paper-pushing engagement.
How do we choose which ideas are the ones we should try to protect?
Work backwards. Before spending any money or time investing in what is undoubtedly a terrific invention, ask who would buy the product or process and why. What does the product look like on the shelf? If a consumer reaches to buy the product, how much money will the company make on each sale? What is the life span of the technology involved? How likely is the idea to be copied by others? Does the invention fit within the company’s core technology? If patent protection is being considered, what is the total estimated cost for obtaining protection in each country where protection is desired?
Should your company decide to file for patent protection, remember that a patent is not the “golden ticket.” A patent merely allows the right to exclude others from practicing the invention as set forth in the claims. The patent owner must still market and sell the product through hard work; while a patent may be helpful for marketing, it is certainly not necessary. Indeed, the company that cleverly marketed and sold the Pet RockÒ had no patent protection.
In short, be absolutely convinced that your company will received the desired ROI, however calculated internally. Should your patent attorney not seek to be as convinced as you, then perhaps there is cause for concern.
Are any companies able to secure any significant income from licensing their legacy IP or is it just an “exercise” being sold by my IP attorney?
Companies have been able to secure significant income from licensing their IP assets. Prime examples include Hewlett Packard, IBM, and Texas Instruments. Licensing the company’s legacy IP may be appropriate in the right circumstances, depending for example on the financial strength of the company, the profit margins of the patented products, and the company’s current and future business strategies. However enticing and somewhat counter-intuitive the concept of licensing legacy or even core IP, a company must understand the inherent risks involved. For example, should the company’s core patents be challenged and found invalid, the company will be seen to have taken a huge gamble and lost.
Among patents, trademarks, and copyrights, what type(s) can we use with our product or service to limit competition / protect our investments?
In many cases, a future product or service may be protected by patents, trademarks, and copyrights. Take a new board game concept as an example. Design patents may be applicable to the ornamental appearance of the game pieces. Utility patents may be applicable to a novel device used to determine how game pieces are moved on the board. Trademarks may be filed to identify the source of the game board. Copyright protection may be sought on the game’s instructions. In some cases, the best protection may be to forgo patent protection and maintain the company’s confidential information as a trade secret. The formula for Coca-ColaÒ is a good example of the latter.
Where does the greatest threat to my IP come from (e.g., competition, knock-offs or grey market, defecting employees)?
A well-established company should look to its experiences to understand where future threats to its IP are most likely to originate. Protection should be put in place accordingly, if not already in place. For new or emerging companies, much will depend on the products or technology at issue. For example, if the product has a short lifespan in the market and is easily copied, while it may seem counter-intuitive, a long-term IP strategy may need to be employed.
What can my company do to identify, develop, and protect our IP assets?
If your company does not already have a comprehensive IP strategy in place, it needs to develop one. In entities where research and development plays a large role, such as high-tech companies or universities, a standard procedure is to develop an intake system for new ideas; and establish a panel comprised of individuals knowledgeable about the entities current and future business strategies to grade each idea and pursue protection for only those ideas that meet the required grade.
If your company already has a comprehensive IP strategy in place and an IP audit has not been previously or recently performed, such an audit should be considered. The audit should be stringently conducted and resemble findings and recommendations not too different that those one would typically see as part of the due diligence process before acquisition.
If our company comes up with a great new idea, should we file a patent application or keep it as a trade secret?
It depends. Both patents and trade secrets have their advantages and disadvantages. When filing for a patent, the application must contain a written description sufficient to allow those skilled in the field of the invention to make and use it. In return for disclosing this information to the public and thereby foregoing trade secret protection, should the application issue into a patent, the patentee is granted the exclusive right to work that invention in the U.S. for 20 years from the first filing date.
For start-ups and other emerging companies, patents are sometimes the most important assets and are often necessary before venture capitalists or others invest in a new company. Obtaining a utility patent typically takes a few years in the U.S. Patent and Trademark Office, so if the invention is one that has a short life span and not easily reverse engineered, a trade secret may be more appropriate. Moreover, unlike patent rights that are of finite duration, a trade secret can be kept indefinitely as long as the information is kept confidential.
Assuming we decide to file a patent application, where should protection be sought?
Patent protection is territorial. In other words, a patent must be obtained in each country. As worldwide patent protection is extremely expensive, those with limited funds should pick countries that will have significant markets for production and a need for the patented invention.
What is the typical cost to prepare and file a patent application in the U.S.?
The cost will depend on the type of application being filed, the subject matter, and the complexity. For example, the preparation and filing of a utility patent application of minimal complexity typically ran around $8,000, according to the AIPLA Report of the Economic Survey 2015. A relatively complex biotech/chemical patent application ran around $12,000.
If speed is an issue, are there certain countries that may issue a patent quicker than others?
In the U.S., an applicant can file a petition to expedite the patent process for a number of reasons including health of the applicant and possible patent infringement. The U.S. also an accelerated examination program in which the applicant is required to provide specific information to enable review of the application to proceed rapidly and accurately.
In addition, in the past, countries have offered special programs for certain technologies. For example, on December 8, 2009, the U.S. implemented a Green Technology Pilot Program in which applications that were accepted under this program saved approximately one year off the normal four-year examination time. South Korea and the United Kingdom also offered similar programs.
If patent rights are being violated, what are the options?
The options generally include doing nothing, filing a lawsuit, or putting the infringer on notice by sending what’s commonly referred to as a notice letter.
Why would my company want to give an infringer notice?
To dissuade commencement or continuance of infringement, to seek license royalties, to seek some other business relationship, to start running the damages where actual notice is required by law, or to give the infringer knowledge of the patent to set up possible liability for enhanced damages or active inducement.
Are there any issues with sending a patent notice letter?
Depending on how notice was provided and other circumstances, the recipient may choose to file a declaratory judgment lawsuit. Doing so gives the choice of forum and timing to the accused infringer. Other issues include legal retaliation such as the filing of a lawsuit asserting patent violations by the other side. Business retaliation is also a possibility.
Are there any practical tips for sending patent notice letters?
If the product is covered by a patent, mark the product; it provides constructive notice. Care must be taken here to make sure the product is indeed covered by a patent and only active patent numbers are marked.
If there is a concern with a declaratory judgment action, consider giving notice of the patent without mentioning infringement or licensing, or requesting a confidentiality agreement, or filing an infringement suit first but not serving it.
To set up a willfulness claim, elaborate with a claim chart or otherwise show why it would be objectively reckless to continue. In anticipation of litigation, appropriately label documents and involve counsel on communications. Finally, before sending, conduct a thorough litigation risk analysis.
Are there any issues with receiving a patent notice letter?
A patent notice letter may provide the accused infringer with actual knowledge of the patent and infringement, and thus set the stage for a willfulness finding or patent inducement.
Are there any practical tips with regard to receiving patent notice letters?
Immediately after receiving the notice letter, send out a litigation hold notice and label attorney-client and work product documents appropriately. Take advantage of the opportunity to make your own evidence and keep managing it. Under attorney-client privilege and work product protection, determine if a design-around is possible. If so, take remedial steps. Determine if an offensive case is possible and how best to use it. Consider reexamination or the threat of it.
What percentage of patents ends up in litigation?
Very few, roughly 2%. The Federal Judicial Statistics has specifically documented that about 1.5% of all patents are litigated, with some 93 trial patent cases annually in a system with 1.8 million active patents.
Once a patent ends up in litigation, what is the likelihood of adjudication versus the likelihood that the case will be settled?
Patent cases, like other civil matters, typically settle. For example, roughly 88% of patent cases settled in 2009. About 8% were disposed of by summary judgment; about 3% were disposed of by jury trial; and about 1% was disposed of by bench trial. From January 2005 to May 2010, there have only been 263 patent verdicts.
What is the typical period from start to finish for a patent litigation?
This depends on multiple factors including the case filing location, whether the jurisdiction has patent local rules, the court’s existing docket load, the merits of the case, the parties’ willingness to settle, appellate practice, etc. Total time can range from months to years.
Do companies typically recoup their entire cost of litigation?
Successful patent holders typically recoup their costs of litigation but not necessarily legal fees. A victory also provides a number of other intangibles including increased leverage in future settlements.
What is the cost of patent litigation?
The median cost typically depends on the amount and the location of the suit. According to the typical AIPLA Report of the Economic Survey, the nationwide average cost where less than $1 million is at stake is some $915,000. For cases between $1 million and $25 million, the average cost is almost 3 million, and for cases with over $25 million at stake, the average cost is over $6.02 million.
How should my company deal with international patent infringement?
For international patent infringement issues, your company needs to have a strategic plan of where to sue first and when to sue. While U.S. litigation is more expensive, the market is typically larger and thus more damages may be at stake.
What’s the best way to prevent a patent litigation case?
Short of completely staying out of the market, a search for patents that may pose a barrier should be performed. If there is anything close, the options include designing around, licensing, and obtaining advice of counsel. A company should also build up its own patent portfolio as a deterrent, as well as for cross-licensing and offensive position.
What industries are currently experiencing the most patent disputes?
There has been an explosion of internet-related business method patent cases. Cases involving the electrical arts and pharmaceutical industries continue to be prevalent. There has also been an uptick in litigation involving the “clean tech” area including hybrid cars, wind turbines, and smart grids.
Is registration with the U.S. Patent and Trademark Office required before my company begins to use the mark?
No, your company may begin to use a mark without attempting to register it. However, before your company invests any money or time on the new mark, a search should be done to see if somebody else is already using the mark.
Why would my company want to register a mark with the U.S. Patent and Trademark Office?
Registration on the Principal Register provides a number of advantages including constructively notifying the public of the registrant’s claim of ownership of the mark, and providing the registrant with the exclusive right to use the mark nationwide on or in connection with the goods and/or services listed in the registration.
When may my company use the trademark symbols TM, SM, or ®?
Legitimate use of the mark establishes common law rights such that your company may use the “TM” (trademark) or “SM” (service mark) designation. Use of the “®” (federal registration symbol) may be used only after the mark is registered with the United States Patent and Trademark Office and only on or in connection with the goods and/or services listed in the federal trademark registration.
Is registration with the U.S. Copyright required before my company is protected?
No, your company obtains copyright protection the moment the work is created and fixed in a tangible form that it is perceptible either directly or with the aid of a machine or device.
Why would my company want to register a work with the U.S. Copyright Office?
Registration provides a number of advantages including establishing a public record of the copyright claim, and if made before or within five years of publication, registration will establish prima facie evidence in court of the validity of the copyright and of the facts stated in the certificate. If registration is made within three months after publication of the work or before any infringement of the work, statutory damages and attorney’s fees are available to the copyright owner in court actions. However, before an infringement suit may be filed in court, registration is necessary for works of U.S. origin.
When may my company use the copyright symbol ©?
The symbol © (the letter C in a circle), or the word “Copyright,” or the abbreviation “Copr.”; may be used as soon as the work is created. No advance permission from, or registration with, the Copyright Office is necessary before copyright notice is given.
What should my company be most concerned about when it comes to trade secrets?
Maintain secrecy. If the following steps have not yet been implemented, consider doing so immediately:
- Restrict public access to your facilities.
- Institute a written trade secret protection policy within the company.
- Utilize appropriate confidentiality/nondisclosure agreements with employees and others.
- Restrict access to sensitive information to only those who need to know.
- Clearly mark information or documents containing your trade secrets.
- Maintain computer secrecy.
- Physically isolate and protect your trade secrets.
- Consider implementing procedures to handle unsolicited submissions