Showing posts with label patents. Show all posts
Showing posts with label patents. Show all posts
Patent "Reform": A Done Deal
Modifications to the patent law were finally passed by Congress this week -- the Leahy-Smith America Invents Act. Although referred to as “patent reform,” commentators have noted that the Act does little to “reform” the problems associated with the patent system—notably, an underfunded PTO, inadequate examination procedures, and burdensome litigation. In the end, the Act contained quite a bit of special interest policy-making that favors large companies over independent inventors. The major change of the Act is that the U.S. switches to a first-to-file system in March 2013, 18 months after enactment. You'll find a summary of the Act's provisions here and here is a timeline detailing when the changes in the Act go into effect.
Labels:
america invents act,
patent reform,
patents
Can an Inventor Ditch Her Investors?
Dear Rich: I entered into a corporate agreement with someone who had a patent pending idea. After a year of back and forth, we finally started a corporation in February 2010. In total we spent 1 year talking about creating a corporation together and 1.5 years involved in the corporation; she always kept meeting the next big investor at the club where she worked and would drop me until the investor lost interest. As per our agreement, she was to bring the patent into the corporation and I was to bring the business management and necessary prototyping funding. In the agreement, I was getting 38% of the company, she was getting the remainder. At the this point, the patent is close to being finalized, the trademark and slogan are now done, and the prototyping is virtually done. Unfortunately, she now wants to terminate the agreement and is going around me and telling the patent attorney and others not to speak with me. Her certified termination letter to me states nothing in regard to the amount of time, money, and work I have put into our company. We have a corporation formed with an operating agreement clearly indicating our roles and percentages. She now has amnesia and says she never agreed to give me part of the patent even though she has the original contract and corporate operating agreement. Ideally, I feel she has defaulted from the agreement and loses any rights whatsoever on the patent. This would have been the case had done something similar; I would lose my investment, work, time, and ownership if I defaulted and acted unethically behind her back. How should I best handle this situation? What would happen to one of the entrepreneurs on Shark Tank if they tried to do this to one of the Sharks? Please don't ask the Dear Rich Staff hypothetical questions about reality TV shows. We're not equipped to answer. It's not so much that we're old and out of touch (which is true), it's just that after the first season of Survivor -- the one where Susan and Richard got on each other's nerves ("Your inability to admit your failures without going into a whiney speech makes you a bit of a loser in life ...") -- we decided that the human race had created a fork in the road and we would take the path without reality TV.
Right, you had a question. The resolution of your problem depends on two things: your paperwork and the amount of money each party is willing to spend on a legal battle. Your lawyer needs to review the initial agreement, the corporate formation documents, and hopefully, if there is one, the assignment of patent rights. Even if there is no assignment to the corporation, your lawyer may still be able to force the transfer of rights (or at least a financial judgment tied to the value of the patent) if the remaining paperwork conclusively proves that the inventor was going to hand over the invention. In any case, based on the facts in your letter, it appears as if this matter is headed for some legal martial arts so we urge you to see an attorney ASAP.
Alternative courses of action. If you have an arbitration clause in your agreement, that may enable you to resolve the matter quicker, or you could always ask for arbitration if the inventor is willing to agree. More importantly, have you evaluated the patent's commercial potential? We know that you believe in the patent so much so that you're willing to fight about it, but the objectivity of a third-party evaluation my save you a lot of time and effort. As you may be aware, it's estimated that 50% of patent applications never become patents and of those that do get issued, less than 2% are commercialized (offered for sale). (We're not sure how reliable these statistics are but they give you an idea.) In other words if the idea is uncommercial, its possible that your inventor friend is offering you a chance to walk away from your obligations without any more risk or investment. That may be a better choice than being trapped in a reality TV show with your so-called "partner."
Right, you had a question. The resolution of your problem depends on two things: your paperwork and the amount of money each party is willing to spend on a legal battle. Your lawyer needs to review the initial agreement, the corporate formation documents, and hopefully, if there is one, the assignment of patent rights. Even if there is no assignment to the corporation, your lawyer may still be able to force the transfer of rights (or at least a financial judgment tied to the value of the patent) if the remaining paperwork conclusively proves that the inventor was going to hand over the invention. In any case, based on the facts in your letter, it appears as if this matter is headed for some legal martial arts so we urge you to see an attorney ASAP.
Alternative courses of action. If you have an arbitration clause in your agreement, that may enable you to resolve the matter quicker, or you could always ask for arbitration if the inventor is willing to agree. More importantly, have you evaluated the patent's commercial potential? We know that you believe in the patent so much so that you're willing to fight about it, but the objectivity of a third-party evaluation my save you a lot of time and effort. As you may be aware, it's estimated that 50% of patent applications never become patents and of those that do get issued, less than 2% are commercialized (offered for sale). (We're not sure how reliable these statistics are but they give you an idea.) In other words if the idea is uncommercial, its possible that your inventor friend is offering you a chance to walk away from your obligations without any more risk or investment. That may be a better choice than being trapped in a reality TV show with your so-called "partner."
Labels:
corporation,
invention,
patents
When Does New Patent Law Go Effect?
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A.G. Bell takes a call (c) Sasha Stim-Fogel |
Labels:
america invents act,
patents,
reform
Can We License Individual Patent Claims?
Dear Rich: We recently received a CIP patent (continuation in part patent) with numerous claims pertaining to different industries. For example, one claim covers the invention as it relates to government. Another claim covers the invention as it relates to the medical industry, etc. Can the owner of a patent assign or license the rights to specific claims within the patent? For example, can we license or assign only the rights of the claims pertaining to the medical industry to a biochemical company? According to Patent it Yourself author, David Pressman, the answer is "Generally yes, unless the licensing of less than all of the patent claims is in furtherance of a scheme to monopolize a certain industry beyond the monopoly conferred by the patent -- for example, in one case when a company was willing to license a critical patent only if the licensee took licenses under some additional undesirable patents, that was held to be an illegal antitrust practice since it extended the patent monopoly beyond its ordinary scope." Occasionally, a party sued for patent infringement will raise this issue as a defense (known as "patent misuse"). Pressman reminds readers that when it comes to questions of antitrust law, things can get complicated (as the law is often vague on the subject). It's one of those areas where an attorney's consultation is probably necessary.
Should We Wait for Patent to License?
Dear Rich: Our company has a product idea which has been professionally prototyped/tested and we have acquired a trademark. It is patent pending for the past 2.5 years and should be up for finalization within 6 months. It relates to a fashion technology and our intent is to try to license the technology to existing brands. I am concerned that potential customers (brand) could lose a sense of urgency if they have to wait for the patent to be finalized? As you know, there is always a chance a patent can be denied, delayed, or disputed. They could also look for workaround’s on the patent or possibly seek deals with like technologies already available. Due to the risks and costs involved, I have opted to license the technology instead of producing a line ourselves. Had we been in a manufacturing position, we would have produced our product under Patent Pending status. As we don’t have production facilities or know-how, serious cash flow, nor distribution channels we have opted for a licensing model. Should we wait for patent finalization before trying to license the technology out? We can't advise you what to do but we do know that many people in your position do not wait for a patent to issue before pursuing a license. Often that decision depends on the industry. For example, in the toy, entertainment and fashion industries, speed to market may be the most important variable, with proprietary rights being a second perhaps less important concern. You probably are aware that there is no legal protection for your technology until the patent issues. Because 18 months have passed, your patent may have been published by the USPTO (depending on whether you permitted publication) so you can take advantage of one protective aspect of patent law. Anyone who copies your invention now, before the patent issues, can be subject to infringement for past transgressions once the patent is granted, provided you place them on notice regarding your patent pending status. We talk about that more here.
Evaluation agreements. Most people in your position use evaluation or option agreements with potential licensees. These agreements allow someone to evaluate the potential, and if they like your stuff, to make a deal. If your application has not been published you will need a nondisclosure agrement (or some variation) as well.
License agreements. Because there is always a possibility that a patent will not issue many people in your position enter into licenses with a two-tiered royalty. (Here is some basic invention licensing information). If the patent issues, you receive one royalty; if the patent does not issue, you would be entitled to a lower royalty. There are numerous ways these agreements can play out and we've outlined a few of the scenarios in one of our books.
Evaluation agreements. Most people in your position use evaluation or option agreements with potential licensees. These agreements allow someone to evaluate the potential, and if they like your stuff, to make a deal. If your application has not been published you will need a nondisclosure agrement (or some variation) as well.
License agreements. Because there is always a possibility that a patent will not issue many people in your position enter into licenses with a two-tiered royalty. (Here is some basic invention licensing information). If the patent issues, you receive one royalty; if the patent does not issue, you would be entitled to a lower royalty. There are numerous ways these agreements can play out and we've outlined a few of the scenarios in one of our books.
Labels:
18 month publication,
license,
patents
Can A Ship Builder Use Patented U.S. Technology?
Dear Rich: I am the builder of a ship. Can I sell the ship with a patented technology to someone else although I am not the owner of the patent? We're assuming you're asking about U.S. patents (and that's all we can speak about, anyway), so here goes: A U.S. patent owner can bring a patent infringement action (lawsuit) against you if you make, use, or sell the ship (incorporating the invention) in the U.S. without permission. Your email indicates you are from Malaysia. A U.S. patent owner cannot stop the manufacture, use, or sale of the technology or device (used in the ship) in Malaysia unless the owner has patented the invention in Malaysia. However it would be an infringement of a U.S. patent to import the ship into the United States, or for you to create all of the parts of the patented invention in the United States and send those parts to Malaysia with instructions for assembly. (Here is some basic information on foreign patent treaty rules.)
What if the boat docks in the U.S.? What if the boat isn't sold or imported into the U.S. but docks occasionally at a U.S. port? Patent law has an exception (the temporary presence exception) that permits ship and aircraft owners (with otherwise infringing technology) to dock here without being sued provided: (1) the ship or aircraft enters the U.S. on a temporary or accidental basis, and (2) the patented technology or device is used exclusively for the needs of the ship or aircraft.
What if the boat docks in the U.S.? What if the boat isn't sold or imported into the U.S. but docks occasionally at a U.S. port? Patent law has an exception (the temporary presence exception) that permits ship and aircraft owners (with otherwise infringing technology) to dock here without being sued provided: (1) the ship or aircraft enters the U.S. on a temporary or accidental basis, and (2) the patented technology or device is used exclusively for the needs of the ship or aircraft.
Labels:
patents,
temporary presence exception
Can I File Provisional in Foreign Language?
Can I File Provisional in Foreign Language? (click to enlarge)
Labels:
foreign,
patents,
provisional patent application
Should Spouse Sign Invention Assignment?
Dear Rich: I am working with a co-inventor and we're getting ready to assign our patent rights to a company that we created (incorporated in California). The co-inventor is married and so am I. Do we need to have our spouses to sign the assignment as well? Congratulations on doing the right thing -- that is creating an entity and transferring your patent rights to it. Many people proceed informally and fail to properly assign their rights. Don't forget to record your assignments with the USPTO.
Right you had a question. Legal title to an invention is a matter of state law, not federal law. In California, if you filed your patent at the time you were married, a court will presume that your spouse shares an undivided half of your interest (that is, your spouse is co-owner of legal title to the patent). That rule was confirmed in a recent case. To avoid confusion and to be assured that your assignment is complete (and your spouse will not later dispute the assignment), you should include a provision in your assignment similar to the one below. This provision protects the assignee (person acquiring the rights to the invention) from later being sued by the spouse of the inventor. When used in assignments, it usually appears below the signature line for the inventor. (BTW, this provision is not required in license agreements.)
Sample Provision for Spousal Assignment
Right you had a question. Legal title to an invention is a matter of state law, not federal law. In California, if you filed your patent at the time you were married, a court will presume that your spouse shares an undivided half of your interest (that is, your spouse is co-owner of legal title to the patent). That rule was confirmed in a recent case. To avoid confusion and to be assured that your assignment is complete (and your spouse will not later dispute the assignment), you should include a provision in your assignment similar to the one below. This provision protects the assignee (person acquiring the rights to the invention) from later being sued by the spouse of the inventor. When used in assignments, it usually appears below the signature line for the inventor. (BTW, this provision is not required in license agreements.)
Sample Provision for Spousal Assignment
I am the spouse of Assignor and I acknowledge that I have read and understand this Assignment agreement. I am aware that my spouse agrees to assign his/her interest in the Invention, including any community property interest or other equitable property interest that I may have in it. I consent to the assignment and agree that my interest, if any, in the Invention is subject to the provisions of this Agreement. I will take no action to hinder the Agreement or the underlying assignment of rights.Spouse’s signature
Labels:
assignment,
patents,
spouse
Is It Harder (or Easier) to Invalidate a Patent?
[We're providing some Supreme Court summaries this week.] Yesterday, the Supreme Court upheld a $290 million decision against Microsoft. Ouch! (Microsoft v. i4i Ltd. Partnership). The Justices chose not to go troll hunting and in what is considered a victory for non practicing entities, the Court maintained the standard of proof required to invalidate a patent. (The standard of proof is a scale of how convincing the evidence is. On the low end is a 'preponderance of the evidence'; on the high end is "beyond a reasonable doubt." 'Clear and convincing' is in between.)
The Backstory. Microsoft was sued for patent infringement by i4i, a Canadian company. i4i's pursuit eventually forced Microsoft to disable an XML feature of Word (which ended up making it more confusing and time-consuming for the Dear Rich Staff to convert text into eBooks). Microsoft had been offered a chance to license the patent before the case blew up but passed perhaps believing that the patent would be proven invalid. At trial, Microsoft argued that i4i failed to disclose a prior invention that might have invalidated the application (a principle known as the 'one-year rule'). The jury was instructed that the patent could only be invalidated if there was "clear and convincing" evidence of invalidity. Microsoft and many other tech companies wanted the court to use the lower standard of "preponderance of the evidence" which would make it easier to invalidate many of the iffy patents used by non practicing entities.
But it didn't happen. The justices refused to change the standard, proving that the Court isn't slavishly pro-business or anti-Canadian. The Court threw one small bone to troll victims: they could tell juries about any evidence that hadn't been considered by the patent office -- like the facts Microsoft had advanced about i4i's patent.
Bottom line: Tech companies will need to petition Congress for a change (unlikely) and big Pharma is happy with the decision.
The Backstory. Microsoft was sued for patent infringement by i4i, a Canadian company. i4i's pursuit eventually forced Microsoft to disable an XML feature of Word (which ended up making it more confusing and time-consuming for the Dear Rich Staff to convert text into eBooks). Microsoft had been offered a chance to license the patent before the case blew up but passed perhaps believing that the patent would be proven invalid. At trial, Microsoft argued that i4i failed to disclose a prior invention that might have invalidated the application (a principle known as the 'one-year rule'). The jury was instructed that the patent could only be invalidated if there was "clear and convincing" evidence of invalidity. Microsoft and many other tech companies wanted the court to use the lower standard of "preponderance of the evidence" which would make it easier to invalidate many of the iffy patents used by non practicing entities.
But it didn't happen. The justices refused to change the standard, proving that the Court isn't slavishly pro-business or anti-Canadian. The Court threw one small bone to troll victims: they could tell juries about any evidence that hadn't been considered by the patent office -- like the facts Microsoft had advanced about i4i's patent.
Bottom line: Tech companies will need to petition Congress for a change (unlikely) and big Pharma is happy with the decision.
Labels:
invalidity,
patents,
Supreme Court
What Does It Mean to 'Induce' Patent Infringement?
Dear Rich: Thanks for explaining the Supreme Court's decision in the Roche v. Stanford patent case. Could you make that a regular feature? Wow, we're really torn. On the one hand we love to come up with new regular features, and on the other hand so many bloggers already discuss these big cases (in the case of patent law, check out Patent Baristas and Patently-O). On the other, other hand (wait, is that three hands?) we have to write about something!
Right, you wanted to hear about a Supreme Court case. Last week, the Supreme Court decided Global-Tech Appliances v. SEB. SEB patented a deep-fryer whose exterior was cool to the touch. Global-Tech Appliances, operating outside the U.S. copied everything but the cosmetic aspects of the SEB deep fryer. Global-Tech then branded these deep fryers for sale by Sunbeam, Montgomery Ward, and others. SEB sued Global-Tech for inducing others to infringe its cool-touch patent. Global-Tech defended itself by arguing that it couldn't induce others to infringe because it had no actual knowledge it was infringing SEB's patent. (Global-Tech had vetted its device with a patent attorney but had failed to disclose to the attorney that their device was copied directly from the SEB deep-fryer.)
Justice is (Willfully) Blind. The Supreme Court ruled for SEB. Yes, said the court, inducing infringement required knowledge of the existing patent, but that knowledge could be inferred using a legal standard referred to as "willful blindness." As the Court stated:
Right, you wanted to hear about a Supreme Court case. Last week, the Supreme Court decided Global-Tech Appliances v. SEB. SEB patented a deep-fryer whose exterior was cool to the touch. Global-Tech Appliances, operating outside the U.S. copied everything but the cosmetic aspects of the SEB deep fryer. Global-Tech then branded these deep fryers for sale by Sunbeam, Montgomery Ward, and others. SEB sued Global-Tech for inducing others to infringe its cool-touch patent. Global-Tech defended itself by arguing that it couldn't induce others to infringe because it had no actual knowledge it was infringing SEB's patent. (Global-Tech had vetted its device with a patent attorney but had failed to disclose to the attorney that their device was copied directly from the SEB deep-fryer.)
Justice is (Willfully) Blind. The Supreme Court ruled for SEB. Yes, said the court, inducing infringement required knowledge of the existing patent, but that knowledge could be inferred using a legal standard referred to as "willful blindness." As the Court stated:
Many criminal statutes require proof that a defendant acted knowingly or willfully, and courts applying the doctrine of willful blindness hold that defendants cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances.The Court went on to distinguish willful blindness from a lower court's standard known as "deliberate indifference." As for the differences, we won't go into all the details, but practically, the bottom line is that when asking an attorney to render a legal opinion (Does my deep-fryer infringe?), don't hide information (like, 'I copied this from another deep-fryer').
Labels:
inducement,
infringement,
patents
Does Ruling Mean University Doesn't Own Rights?
Dear Rich: I read that the Supreme Court ruled that universities can't claim ownership of inventions? Is this ruling retroactive or does it only affect inventions that occur after the ruling? We think you may have misinterpreted things. If you're one of the thousands of scientists, professors, or instructors who have assigned rights to a university, we're sorry to have to break it to you but the Supreme Court's recent ruling doesn't change the landscape quite as much as the headlines seem to promise (BTW, the latter link is one of the better explanations of the case).
What Happened? In a case involving Stanford University and the Roche pharmaceutical company, the Court was faced with two agreements signed by a university scientist: one in which he promised to assign rights to the university; and another in which he actually assigned rights to a company that was later purchased by Roche. The Supreme Court ruled that the agreement in which rights were actually assigned took precedence over the agreement in which rights were promised.
The Bayh-Dole Act. Stanford's position was that the inventor's rights automatically vested in the university under the Bayh-Dole Act. The Bayh-Dole Act, enacted in 1980, permits universities to claim patent rights in inventions created with federal funding at a university. The university may then license these discoveries to private industry—a practice some critics have likened to corporate welfare. Curiously, one of the prerequisites for the university to claim these rights is that the university must have written agreements with its faculty and technical staff requiring disclosure and assignment of inventions. The ruling won't invalidate past assignments. But problems may occur in cases like this one, where two assignments appear to conflict. In addition, you can expect that universities will stop using language in which inventors promise to assign and instead automatically assign inventions. That seems like a silly distinction to the rest of the world but there has to be some justification for patent lawyer fees.
What Happened? In a case involving Stanford University and the Roche pharmaceutical company, the Court was faced with two agreements signed by a university scientist: one in which he promised to assign rights to the university; and another in which he actually assigned rights to a company that was later purchased by Roche. The Supreme Court ruled that the agreement in which rights were actually assigned took precedence over the agreement in which rights were promised.
The Bayh-Dole Act. Stanford's position was that the inventor's rights automatically vested in the university under the Bayh-Dole Act. The Bayh-Dole Act, enacted in 1980, permits universities to claim patent rights in inventions created with federal funding at a university. The university may then license these discoveries to private industry—a practice some critics have likened to corporate welfare. Curiously, one of the prerequisites for the university to claim these rights is that the university must have written agreements with its faculty and technical staff requiring disclosure and assignment of inventions. The ruling won't invalidate past assignments. But problems may occur in cases like this one, where two assignments appear to conflict. In addition, you can expect that universities will stop using language in which inventors promise to assign and instead automatically assign inventions. That seems like a silly distinction to the rest of the world but there has to be some justification for patent lawyer fees.
Labels:
Bayh Dole,
ownership,
patents,
university
Can I Get a Business Method Patent?
Dear Rich: I have an idea for an online service for promoting sports events. It can be done by existing companies, needs a big database, and requires no new technology. Is it possible to file a Provisional Patent Application for such a business idea with no new technology involved? Can it qualify for a Business Method Patent? We think what you're asking is "Can my idea qualify for a utility patent?" And the short answer is, that depends. We do know that it's possible to get a patent for a business idea that combines existing technology. Here's an explanation of the standard.
What's a business method patent? A business method patent is a type of utility patent popularized after a 1998 case. These patents are granted for a method of performing specific business tasks and they typically combine software with a business methodology -- for example, a method of calculating gold futures. But not all business method patents are high-tech. They can be as simple as a method for teaching janitors how to dust. Business method patents were thought to be dead after an appellate court ruled that a business method could only be patented if it (1) was tied to a particular machine or apparatus or (2) it transformed a particular article into a different state or thing. (In other words it had to get physical.) But after a nail-biting year for business method patent owners, the Supreme Court saved them when it held that the standard used by the appellate court was too narrow.Summing Up Dept. It is still possible to obtain a patent for a method of doing business. You may encounter problems if an examiner suspects that your idea is not patentable subject matter -- for example, it is an abstract idea. And of course, you cannot get the patent if the idea has been sold or published more than a year before your filing.
Wait, we forgot something. You asked about filing a provisional patent application (PPA). Yes, you can file that. Here's something that explains the basics. Assuming the PPA was prepared properly, its value only lasts for a year unless you file a regular patent application for the same subject matter.
More on my grandfather. Your invention for promoting sports event online would not have worked on him (shown here with my grandmother). He didn't live long enough to go online and even if he did, there is no way you could convince him to go a sports event.
The Lawyer Who Invented Copying
Wow are we annoyed! We missed celebrating Chester Carlson's 100th birthday last month. Oh well. Here's an article we recently wrote about one of the coolest inventors ever.
Snazzy inventions aren’t just for science geeks and movies about time travel—they also changed the way that law offices did business in the twentieth century. The ballpoint pen made it easier to sign contracts, by eliminating attorney’s fountain pens and inkwells. Post-Its made it possible to flag legal errors and provide handy “sign here” notes. Liquid Paper enabled secretaries to make corrections (instead of retyping whole briefs), the Rolodex simplified keeping client information, and, of course, Scotch tape enabled lawyers to tape together legal bills after clients ripped them to shreds.
But one invention—the Xerox 914—turned out to be the most profitable device to drop into the law office. And surprise, surprise, it was invented by an attorney.
Like many people who worked with legal documents, Chester Carlson was frustrated by inefficiency. Back in the early 1930s before he became a lawyer, Carlson worked in the patent department of Bell Laboratories. He quickly tired of copying patents using carbon paper. The reproductions were time-consuming and prone to errors. (For those too young to remember, copies used to be made by jamming sheets of carbon paper between sheets of paper, stuffing them into a typewriter, and typing firmly enough so that the carbon made imprints—then swearing up a storm if there was a typo.)
At about the same time, Carlson’s hypercritical mother-in-law moved into his apartment. To avoid her unpleasant nightly tirades, Carlson enrolled in law school. While hand-copying passages from law books one night, Carlson again ran into the same frustration. Why wasn’t there a simple method of reproducing copies on paper? Carlson began to pursue an obscure idea—a process that would fuse fine black powder to paper using electrostatic charges. Carlson originally called his process “electron photography,” and then nicknamed it xerography (from the Greek words xeros (dry) and graphein (writing).
In 1937, by which time he was a patent attorney, Carlson perfected his theory and used his legal drafting skills to patent his revolutionary process. But he still had no actual proof that it worked. He offered his patent to IBM for a $10,000 advance and 5% royalty—in hindsight, one of the best offers of the twentieth century—but IBM passed. (Twenty years later, IBM still failed to see the potential when it reviewed the first Xerox copier and concluded that the device “has no future in the office copying market.” Ouch!)
It wasn’t until 1945 that Carlson partnered up with a nonprofit R&D firm in Ohio, which improved on the invention and licensed manufacturing rights to the Haloid Company, a tiny photographic paper manufacturer in Rochester, New York. Things dragged on until the mid-1950s when—just as Carlson’s initial patents were expiring—the Haloid Company (now renamed Xerox) perfected
Carlson’s process and tested it in nearby offices. Xerox knew it had a hit when the testing companies asked to keep their demo machines.
The debut of the Xerox 914 was one of those rare moments in inventing history when a device transforms the environment in which it is placed. Xerox believed that businesses would use the 914 primarily to make duplicates of outgoing correspondence. They never imagined that employees—no longer encumbered by messy and time-consuming copies—would use it for internal document reproduction, such as memos, reports, newsletters, and even personal documents or their faces and other body parts. The result was an explosion of office and personal copying. Within seven years of its introduction, Xerox was the 15th largest publicly owned company in the United States.
It’s said that the business of law is really about selling paper to clients; and the Xerox machine put that principle into overdrive. The law firms devised a clever system of markups. Initially, they leased copiers and paid per copy, allowing them to mark up and pass along those charges to clients. But even after law firms began to own their photocopiers, they retained the per-copy charges for clients. A few cents per copy may not seem like much at first, but hey, what if everyone is suddenly buried in paper?
And buried they are. Consider, for example, when one business sues another. As a normal part of the pretrial discovery process, in which each side asks to see evidence held by the other, attorneys review the other side’s relevant memos, phone records, financial records, and other documents. With piles more photocopied documents at each business, however, it creates an exponential increase in the size of discovery requests—literally boxes, and sometimes trucks of documents being sent back and forth. To deal with this paper explosion, law firms added more staff, thereby increasing the billing. In short, Xerox had created a cash machine for law firms.
The copier also triggered illegal activity (always a boon for lawyers). For example, there was office espionage, loss of trade secrets, and even fraud (for those who understood how to create fake photocopied documentation). The Xerox machine launched many copyright lawsuits: for example, a series of cases where authors and publishers protested the fact that people—students and teachers, in particular— were no longer buying their books and scholarly journals, but simply slapping a borrowed original onto a copy machine. Legislators took the device into consideration when creating the 1976 Copyright Act, by including provisions on academic photocopying. Although we now take the photocopier for granted, it was essentially the original VCR or Napster—a device that, for the first time, put infringement into the hands of ordinary Americans.
Carlson earned millions from Xerox, but never measured success by money. He had spent his childhood in poverty—during his last year in high school he lived in a converted chicken coop—and had a goal to rid himself of his wealth before he died. He spent his final years getting rid of his royalties via charitable contributions and pursuing spiritual goals. His process—which remains virtually unmodified from his 1937 patent—continues to supply copies to his legal brethren via photocopiers, laser printers, and fax machines.
Snazzy inventions aren’t just for science geeks and movies about time travel—they also changed the way that law offices did business in the twentieth century. The ballpoint pen made it easier to sign contracts, by eliminating attorney’s fountain pens and inkwells. Post-Its made it possible to flag legal errors and provide handy “sign here” notes. Liquid Paper enabled secretaries to make corrections (instead of retyping whole briefs), the Rolodex simplified keeping client information, and, of course, Scotch tape enabled lawyers to tape together legal bills after clients ripped them to shreds.
But one invention—the Xerox 914—turned out to be the most profitable device to drop into the law office. And surprise, surprise, it was invented by an attorney.
Like many people who worked with legal documents, Chester Carlson was frustrated by inefficiency. Back in the early 1930s before he became a lawyer, Carlson worked in the patent department of Bell Laboratories. He quickly tired of copying patents using carbon paper. The reproductions were time-consuming and prone to errors. (For those too young to remember, copies used to be made by jamming sheets of carbon paper between sheets of paper, stuffing them into a typewriter, and typing firmly enough so that the carbon made imprints—then swearing up a storm if there was a typo.)
At about the same time, Carlson’s hypercritical mother-in-law moved into his apartment. To avoid her unpleasant nightly tirades, Carlson enrolled in law school. While hand-copying passages from law books one night, Carlson again ran into the same frustration. Why wasn’t there a simple method of reproducing copies on paper? Carlson began to pursue an obscure idea—a process that would fuse fine black powder to paper using electrostatic charges. Carlson originally called his process “electron photography,” and then nicknamed it xerography (from the Greek words xeros (dry) and graphein (writing).
In 1937, by which time he was a patent attorney, Carlson perfected his theory and used his legal drafting skills to patent his revolutionary process. But he still had no actual proof that it worked. He offered his patent to IBM for a $10,000 advance and 5% royalty—in hindsight, one of the best offers of the twentieth century—but IBM passed. (Twenty years later, IBM still failed to see the potential when it reviewed the first Xerox copier and concluded that the device “has no future in the office copying market.” Ouch!)
It wasn’t until 1945 that Carlson partnered up with a nonprofit R&D firm in Ohio, which improved on the invention and licensed manufacturing rights to the Haloid Company, a tiny photographic paper manufacturer in Rochester, New York. Things dragged on until the mid-1950s when—just as Carlson’s initial patents were expiring—the Haloid Company (now renamed Xerox) perfected
Carlson’s process and tested it in nearby offices. Xerox knew it had a hit when the testing companies asked to keep their demo machines.
The debut of the Xerox 914 was one of those rare moments in inventing history when a device transforms the environment in which it is placed. Xerox believed that businesses would use the 914 primarily to make duplicates of outgoing correspondence. They never imagined that employees—no longer encumbered by messy and time-consuming copies—would use it for internal document reproduction, such as memos, reports, newsletters, and even personal documents or their faces and other body parts. The result was an explosion of office and personal copying. Within seven years of its introduction, Xerox was the 15th largest publicly owned company in the United States.
It’s said that the business of law is really about selling paper to clients; and the Xerox machine put that principle into overdrive. The law firms devised a clever system of markups. Initially, they leased copiers and paid per copy, allowing them to mark up and pass along those charges to clients. But even after law firms began to own their photocopiers, they retained the per-copy charges for clients. A few cents per copy may not seem like much at first, but hey, what if everyone is suddenly buried in paper?
And buried they are. Consider, for example, when one business sues another. As a normal part of the pretrial discovery process, in which each side asks to see evidence held by the other, attorneys review the other side’s relevant memos, phone records, financial records, and other documents. With piles more photocopied documents at each business, however, it creates an exponential increase in the size of discovery requests—literally boxes, and sometimes trucks of documents being sent back and forth. To deal with this paper explosion, law firms added more staff, thereby increasing the billing. In short, Xerox had created a cash machine for law firms.
The copier also triggered illegal activity (always a boon for lawyers). For example, there was office espionage, loss of trade secrets, and even fraud (for those who understood how to create fake photocopied documentation). The Xerox machine launched many copyright lawsuits: for example, a series of cases where authors and publishers protested the fact that people—students and teachers, in particular— were no longer buying their books and scholarly journals, but simply slapping a borrowed original onto a copy machine. Legislators took the device into consideration when creating the 1976 Copyright Act, by including provisions on academic photocopying. Although we now take the photocopier for granted, it was essentially the original VCR or Napster—a device that, for the first time, put infringement into the hands of ordinary Americans.
Carlson earned millions from Xerox, but never measured success by money. He had spent his childhood in poverty—during his last year in high school he lived in a converted chicken coop—and had a goal to rid himself of his wealth before he died. He spent his final years getting rid of his royalties via charitable contributions and pursuing spiritual goals. His process—which remains virtually unmodified from his 1937 patent—continues to supply copies to his legal brethren via photocopiers, laser printers, and fax machines.
Nonobvious Prior Art Claims
Dear Rich: Say there is a known prior art that currently has a patent pending and I file for a provisional stating claims with which I believe are nonobvious to the prior art. [Hi Readers. Before we lose you in a torrent of inventor-speak, allow us to provide a short translation. This inventor has come up with something that he believes to be new and not obvious (nonobvious) to those in the field of invention. (These two standards -- new and nonobvious -- are the basis for getting a patent.) Another inventor has filed a patent application for a related invention (the "patent pending" reference). In summary, the inventor doesn't believe his invention is substantially similar to the existing technology in that patent application (or "prior art"). What follows are his questions and our answers.
1. Can they accuse me of infringement and take me to court? The other inventors cannot sue you for patent infringement until their patent is granted. If 18 months have passed since the other inventors filed a patent application and the application has been published, they can notify you about the application and then sue you for any infringements that occurred after notification. (We've discussed that previously here). In either case, the actual lawsuit cannot be filed until the patent is granted. Whether the inventor succeeds obviously depends on whether you guessed right about the prior art.
2. Can I sell during my provisional status and if or when do I have to stop selling because there is a known prior art with a patent pending status? You can sell any time you want but if you sell your invention and it infringes, you'll be liable once the other patent is granted.
3. If this invention which I believe is nonobvious to the prior art shows that it has commercial value, but there's a known prior art, is it worth filing a non-provisional after 8-12 months? We're kind of going around in circles. If you have commercial potential and you're concerned about infringement (or issues of prior art) you should bring in a patent attorney to provide an opinion before you waste your money or time on the pursuit. Keep in mind that whether you're right or wrong about the prior art, the other inventor can come after you if there's enough of a case to get in court. And then you'll be spending money on a court battle when you could be devoting the time and money to some other great new idea.
4. If my invention is non-obvious to the prior art will a patent be issued and do I still have to license the basic idea of the prior art? If your invention is new, nonobvious and meets all the patent requirements, you're entitled to a patent. Keep in mind, these determinations are tied to the interpretation of the patent claims, explained here.) If the invention doesn't infringe, do you have to license rights from the other inventor? No.
5. I read in your book that changing something small may be considered as a novelty and may be considered patentable (if I am correct). If so, do you have to go to court to prove that, or can the examiner just approve it, and when a patent is issued to the nonobvious then you are protected? In some cases, small changes are enough to get a patent, in other cases, no. If an examiner feels the application is sufficient, you'll get your patent. Alas, that patent can always be challenged and then you may have to deal with two battles, a patent reexamination and a court case.
1. Can they accuse me of infringement and take me to court? The other inventors cannot sue you for patent infringement until their patent is granted. If 18 months have passed since the other inventors filed a patent application and the application has been published, they can notify you about the application and then sue you for any infringements that occurred after notification. (We've discussed that previously here). In either case, the actual lawsuit cannot be filed until the patent is granted. Whether the inventor succeeds obviously depends on whether you guessed right about the prior art.
2. Can I sell during my provisional status and if or when do I have to stop selling because there is a known prior art with a patent pending status? You can sell any time you want but if you sell your invention and it infringes, you'll be liable once the other patent is granted.
3. If this invention which I believe is nonobvious to the prior art shows that it has commercial value, but there's a known prior art, is it worth filing a non-provisional after 8-12 months? We're kind of going around in circles. If you have commercial potential and you're concerned about infringement (or issues of prior art) you should bring in a patent attorney to provide an opinion before you waste your money or time on the pursuit. Keep in mind that whether you're right or wrong about the prior art, the other inventor can come after you if there's enough of a case to get in court. And then you'll be spending money on a court battle when you could be devoting the time and money to some other great new idea.
4. If my invention is non-obvious to the prior art will a patent be issued and do I still have to license the basic idea of the prior art? If your invention is new, nonobvious and meets all the patent requirements, you're entitled to a patent. Keep in mind, these determinations are tied to the interpretation of the patent claims, explained here.) If the invention doesn't infringe, do you have to license rights from the other inventor? No.
5. I read in your book that changing something small may be considered as a novelty and may be considered patentable (if I am correct). If so, do you have to go to court to prove that, or can the examiner just approve it, and when a patent is issued to the nonobvious then you are protected? In some cases, small changes are enough to get a patent, in other cases, no. If an examiner feels the application is sufficient, you'll get your patent. Alas, that patent can always be challenged and then you may have to deal with two battles, a patent reexamination and a court case.
Signed NDA; Lost Patent Rights
Dear Rich: In 1995, Company A signed an NDA with me that enabled a presentation to their executives concerning my ideas and vision in the implementation of bar code reading applications using cordless telephone technologies. Following the presentation, and after leaving the documentation with the company, they wrote to me rejecting participating in the proposals presented. In 2001 Company B, which is wholly owned by Company A entered into a joint venture funded by Company A with Company C. Company C has been awarded patents in this area of technology that I proposed in 1995 to Company A. All the major players in the mobile phone market now licence from Company C to enable cordless phones to read and transact operations over the air. In 2003, I wrote to Company A concerning these facts that Company C may not have good title to these patents due to the history of circumstances inter alia myself. They responded with a letter stating that they (Company A) were a strategic supplier to Company C and that the executive who signed the NDA was employed by the business network division at that time and as there was no longer a business network division that position no longer existed. Are there any statute of limitations that would prevent me taking further action legally? Would it be more productive to start addressing these issues directly with Company C in the USA? The short answer is that you've probably waited too long to pursue your trade secret claims. 10 or 15 years may not seem like a long time when considering human history or geophysical activity, but it's eons within the legal system. (You should consult with an intellectual property lawyer to be positive).
The clock started ticking ... As a general rule, you have a certain number of years (typically 3 to 5) to take legal action after your problem developed. For example, most states have adopted the Uniform Trade Secrets Act which has limit of "3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." In addition, there's a legal theory known as laches that could limit any damages you may have suffered because you waited too long to bring the suit. (Here are some of the other defenses that Companies A, B, and C could make to a claim of trade secret misappropriation.) Although it's not the same as a lawsuit for damages, you may be able to argue that the issued patents are invalid by having the patents reexamined.
The clock started ticking ... As a general rule, you have a certain number of years (typically 3 to 5) to take legal action after your problem developed. For example, most states have adopted the Uniform Trade Secrets Act which has limit of "3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." In addition, there's a legal theory known as laches that could limit any damages you may have suffered because you waited too long to bring the suit. (Here are some of the other defenses that Companies A, B, and C could make to a claim of trade secret misappropriation.) Although it's not the same as a lawsuit for damages, you may be able to argue that the issued patents are invalid by having the patents reexamined.
Labels:
patents,
trade secrets