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Written by Kathlene Ingham   
Thursday, 30 June 2011 15:20

The patent circuit: from application to enforcement.

On the surface, a patent is a fairly simple concept. It protects an invention. However, just as designing, engineering and manufacturing a product is a complex process fraught with potential risks, a patent is much more than simply protection for an invention.

The concept behind the US patent system goes all the way back to the original US Constitution ratified in 1787. Even before there was a Bill of Rights and such American concepts as freedom of speech and due process, Congress had the 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 Constitutional authority, the US patent system was founded. A patent is a time-limited monopoly granted by the federal government to inventors. A patent encourages innovation by giving a patent owner exclusive rights to his or her invention.

A US patent always names an inventor or inventors. If the patent was developed by inventors working for a business or researchers working for a university or other institution, the patent is often assigned to the inventors’ employer. In such cases, a patent has both an inventor or inventors and an assignee.

A patent is an exclusionary right. It is the right to exclude others from using the patented invention without permission of the inventor or assignee. Title 35 of the United States Code (or “35 USC”) is the federal law that covers patents. Section 271 of 35 USC defines patent infringement as when a person or other entity “makes, uses, offers to sell, sells or imports” a product or service that uses the patented invention without the patent owner’s permission.

There are three types of patents: The most common is the Utility Patent that covers a product, device, process or composition of matter. There is also a Design Patent that covers the appearance of a product and not how the product operates, and there are Plant Patents that cover asexually reproduced vegetables, fruits, trees and other botanical species. The term of a Utility Patent is 20 years from the date of application.

The US Patent and Trademark Office (or USPTO or simply “Patent Office”) currently issues about 180,000 patents a year, about half to US residents. The USPTO is an agency of the US Department of Commerce and is headquartered in Alexandria, Virginia. The Patent Office is just one of a few self-funded federal agencies. The USPTO uses no tax dollars, but is funded entirely from the money it collects from application and maintenance fees.

What a patent is not. There is a common misconception about patents. Since patent infringement occurs if a patented invention is used without permission from the patent owner, many people assume that you therefore need a patent to “make, use, offer to sell, sell or import” a product that uses your own invention. Not true. A patent is not the right to use your own patented invention; it is only the right to exclude others from using your patented invention!

You only need permission to make, use, offer to sell, sell or import a product that uses someone else’s patented invention. In that case, your options are to buy the patent (patents are assets that can be bought and sold like inventory, real estate and securities), license the patent (have the patent owner agree to let you use the patent in exchange for a fee, usually a royalty based on unit or dollar sales of the product that uses the patent), or infringe the patent and risk a patent infringement lawsuit by the patent owner.

So, if no patent is required to practice your own invention, should you patent your latest technology?

To patent or not to patent. That is, indeed, the question! While a patent gives you the right to exclude others from making, using, offering to sell, selling or importing a product that embodies your patented invention, that exclusionary right comes with a condition: You must publish
your invention.

All patents are public documents. Before the Internet, the Patent Office operated patent libraries – the agency still does – in federal office buildings across the country, where anyone could view a patent. Today, of course, all US patents are available online. So a patent is essentially a bargain with the federal government. In exchange for the right to exclude others from making, using, offering to sell, selling or importing a product that uses your patented invention, you must disclose your invention to the public.

The reasoning behind this is that each invention in turn leads to the next invention. Public disclosure of inventions prevents another inventor from having to reinvent what has already been invented, but instead jump to that point in the technology and work forward from there. Among patent practitioners, patents are generally classified as a “fundamental” patent – one that represents a breakthrough technology like the telephone, airplane or transistor – and an “improvement” patent that takes an existing concept to the next level. And it looks like the system works, since the US continues to be the global leader in innovation, in no small measure a result of the US patent system.

Why not patent an invention? Under what circumstances might an inventor or business decide not to patent its latest new technology? The alternative to patenting an invention is to keep the technology under wraps as what is called a “trade secret.”

Like everything else in business, technology and law, there are benefits and drawbacks to patenting your invention or keeping it as a trade secret. While you lose the protection afforded by a patent, you gain the advantage that you do not have to publish your invention if you decide to keep it as a trade secret. If you do not file for a patent, you can simply keep your invention as your own secret, proprietary technology. However, the process of keeping a trade secret “secret” is by no means simple.

As long as none of your competitors reinvents or reverse-engineers your new technology, you can keep and practice your trade secret for years … maybe forever. The Coca-Cola Co. made the critical decision over 100 years ago not to patent the formula for its soft drink. Had the company patented the formula, once the patent expired, any competitor would have been free to duplicate it and produce an identical beverage.

However, going the trade secret route runs the risk that a competitor either reinvents your invention or reverse-engineers it. At that point, your competitor is free to make, use, offer to sell or sell products or services that use your invention because there is no patent on it, and there is nothing you can do about it.
As a result, if you decide to keep your newest mousetrap a trade secret, you need to put into effect safeguards that will, in fact, keep it secret. The new technology can only be revealed to a small, select group of employees on a strictly need-to-know basis, and all documentation must be kept under lock and key. The Coca-Cola formula is reputedly kept in a vault in an Atlanta bank and is known only to a key group of senior, trusted employees. In fact, Coca Cola legend has it that the company purposely buys ingredients that do not go into the soft drink just to throw off their competitors as to what is actually in the formula!

What should be patented, and what should not? While every new technology has to be considered on a case-by-case basis, a general rule to start with is that most products should be patented, while a process may be a candidate for trade secret. The logic is that a product can be purchased by a competitor who can disassemble, study and examine it, then reverse-engineer it to duplicate what you did to produce a very similar or identical product.

A process, however, that is not seen by the public and that does not leave a fingerprint is a candidate for trade secret. If what you do in your plant, laboratory or other facility to produce a product or service is not seen by the public, and it would be very difficult (or, better yet, impossible) for a competitor to reverse-engineer your secret process, it may be the better option to keep your process as a trade secret. What the ingredients are in the Coca-Cola formula, how they are blended, and under what circumstances must be very difficult to reverse-engineer based on the fact that no one has been able to do it over the last 100 years.

The other factor that cuts across all of this is the life expectancy of the new product. Your patent will only give you protection for 20 years from the date of filing of your patent application. If the life of the product that uses your patented invention is likely to be less than 20 years – as it is today with many high-tech products – that means that by the time your patent expires and competitors are free to copy it, it will be obsolete anyway. We do not know if John Pemberton, the inventor of Coco-Cola, knew that his drink would capture the hearts, minds and taste buds of America and would endure for over 100 years, but he obviously made the right decision to not patent the formula. Had Pemberton filed for a patent when he developed the Coca-Cola formula in 1886, the patent would have expired over 100 years ago!

In short, if it is likely that a competitor could re-invent or reverse-engineer your invention, you are better off patenting it. If it is unlikely that a competitor could re-invent or reverse-engineer it, you might consider keeping it a trade secret. And that is a tough call to make!

Receiving a patent. The requirements for an invention to receive a patent are that it be novel (that is, new, and something that has not been done before), non-obvious (it is not something that another person could have easily figured out or come up with on his or her own) and useful (it must have a practical application).

Most inventors engage a patent attorney to assist with the patent application process. It currently takes about three years to receive a patent, and the entire process will run several thousand dollars in Patent Office and patent attorney fees.

Fighting infringement. Let’s say you file for and receive a patent, and you come across a product or service that appears to infringe your patent. First, it is entirely possible that the product or service does exactly what your patented product or service does, but does so in a different manner, and so does not infringe your patent. For example, a gasoline engine looks like and performs the same function as a diesel engine, but the technologies are totally dissimilar.

In order for a product or service to infringe your patent, it must duplicate all the elements in at least one claim in your patent. The term patent professionals use is that the product or service must “read on” at least one claim in the patent.

Should you believe that a product or service is infringing your patent, the remedy available is to file a patent infringement lawsuit in US District Court. If your case goes to trial and you win, the court will award “reasonable royalties”: what it believes the infringer would have paid in royalties had the infringer licensed your patent in the first place.

However, like most civil litigation, most patent infringement lawsuits do not go to trial but are settled out of court. Should the infringer agree to a settlement, the amount will likely be computed along the same lines – what would the royalty have been had the infringer licensed the patent? Your settlement will likely also include a license with the infringer to cover future use of your patent (if the patent has not expired).

Compensation of reasonable royalties for the infringement of a patent is predicated on the basis that the infringement was unintentional. That is, the infringer accidentally reinvented your patented invention, and did not know it was infringing your patent. However, should you be able to prove willful infringement – the infringer was aware of your patent but went ahead and decided to make, use, offer to sell, sell or import a product that used your patented invention anyway – the court may punish the infringer by awarding additional damages. The court could award as high as triple (or “treble” in legalspeak) damages. However, proving willful infringement is very difficult, and if the defendant settles out-of-court, it is highly unlikely that it will admit to willful infringement.

A select group of patent owners that meets very specific requirements may be able to receive “injunctive relief,” an injunction from the court ordering the infringer to cease making, using, offering to sell, selling or importing the infringing product. There are a few exceptions, but injunctive relief is not available to most patent owners that do not practice their patents. Such a patent owner is known as an NPE (“non-practicing entity”). However, in limited circumstances, a patent owner that practices its patent (a “market participant”) may be granted injunctive relief, if it also meets other critieria.

The question the patent owner facing infringement must ask is: Do I want justice, or do I want compensation? If your patent is being infringed by a direct competitor that is stealing sales and profits that rightfully belong to your company, then it may be justice in the form of a court injunction. However, if the infringer is a much larger company, or it operates in a different industry, and you can prove infringement and reach a settlement with the infringer, compensation for the use of your patent could turn out to be a very nice revenue stream!

Since patent infringement is not a crime, there are no “patent police.” It is the job of the patent owner to enforce their or its patent. Filing a patent infringement lawsuit can be very expensive, running from a few hundred thousand dollars to several million dollars. It only makes sense to pursue an infringer that is generating millions of dollars a year in sales from the product that infringes your patent, or there will not be a large enough return – from an award from a trial or from an out-of-court settlement – to cover litigation expenses.

For the patent owner that does not have the capital to spend on a lawsuit, there are a few law firms that will work on a contingency basis, taking part or most of their fees from any awards or settlements they secure on behalf of the patent owner. There are also patent enforcement firms that specialize in managing and financing patent enforcement campaigns on behalf of patent owners on a 100% contingency basis. Under the patent enforcement firm business model, the patent owner pays nothing, and the patent enforcement firm bears all costs, manages the entire patent enforcement campaign, engages and supervises a law firm to try the lawsuit, and offers several additional services.

Most businesses do a pretty good job of protecting their traditional assets – inventory, equipment, real estate and cash – but these are all assets that can be easily replaced. In today’s intensely competitive flat world, a company’s intellectual assets are far more valuable – and far more difficult to replace – than its balance sheet assets. Every business needs to have a plan to protect its innovations, technologies and know-how, either by patenting it or securing it as a trade secret.

Kathlene Ingham is director of licensing at General Patent Corp. (; This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Last Updated on Tuesday, 19 July 2011 09:54


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