Category: Intellectual Property

Three Patent Strategy Changes Under the America Invents Act

The final provisions of the America Invents Act (AIA) recently took effect. The AIA represents the most significant overhaul of United States patent law since the mid twentieth century. It enacted provisions over time, with some provisions taking effect in September, 2011, some in September, 2012, and the final phase taking effect in March, 2013. Even though the provisions are effective, there still remain questions about the scope of impact. The United States Patent & Trademark Office (USPTO) has sought comment and issued rules based on the new provisions. The new Patent Trials and Appeal Board (PTAB) has been formed. The courts have made some rulings based on the new provisions. Without a doubt, prudent innovators have been and are continuing to update their patent strategy based on the new laws. Below are three such steps for consideration:

1. File Patent Applications Early and Supplement with Later Applications

After March 16, 2013, the United States became a first to file country. As a result, the filing date, not the actual date of invention, is the key date in determining what can be cited as prior art. Previously, a patent applicant could rely on the earlier actual invention date to removed the cited art. As a result, a company should consider filing a patent application as early as possible. Under prior patent filing strategy, a company might have waited until the technology and all of its features had been completed before filing. Under the new patent laws, the patent strategy might include filing a patent application as soon as the core technology is completed and subsequent patent applications as the improvements are developed.

2. Maintain the Invention Documentation Process

As mentioned above, it is true that the United States is now a first to file country. This has lead some to speculate that documentation such as an inventor’s journal (electronic or otherwise), presentation logs, or access lists are unnecessary. This overlooks the fact that a significant amount of patent disputes arise over ownership. These days, employees change companies often and information is spread rapidly. Patent ownership disputes can arise after an employee changes companies or a presentation attendee files a patent application for the subject matter prior to original company (See first point for consideration above). As of March 16, 2013, the USPTO instituted derivation proceedings, where a later patent application filer can demonstrate that an inventor named in an earlier application derived the claimed invention from the petitioner. In order to prevail, the petition must be made supported by substantial evidence. As a result, invention documentation such as inventor journals and access logs should still be considered within best practices.

3. Monitor Patents and Patent Applications in Your Field of Technology

The AIA introduced “inter partes review” and “post grant review” proceeding. The proceedings allow a third party to challenge a granted patent in a proceeding within the USPTO by the PTAB. Each of these proceedings is generally designed to be on shorter timeline and at a lower cost than traditional litigation. The inter partes review is currently available and the post grant proceeding is available (for patents granted under the new first to file rules) to you … and your competitors. As a result, part of the amended patent strategy could include evaluating recently granted patents and whether these proceedings might be useful.

Be aware that the United States patent landscape has changed and so must your patent strategy.

Ten Common Concerns with Expanding Business to the United States

Ten Common Concerns with Doing Business in the United States

Startup IP, Investors, and Nondisclosures

Frequently, in an intellectual property consultation with a startup team, we inventory and discuss the intellectual property involved in the business plan and the timing, cost, and strategy in protecting it. As some intellectual property rights can be impacted or misappropriated upon disclosure, the consultation turns towards upcoming disclosures of the proprietary elements of the business plan. Frequently, the upcoming disclosures includes presentations in front of angels or venture capitalists for funding. In turn, this leads to a discussion of approaches to protect elements of the business plan in light of the upcoming disclosure. Sometimes there is a discussion of nondisclosure agreements, which leads to the fact that the majority of formal investors don’t sign nondisclosure agreements. This can create a problem with the intellectual property rights associated with the business plan. For example, some elements of the business plan may be patentable subject matter. In certain settings, the pitch may be deemed a public disclosure. This would mean that the startup has one year to file a patent application in the United states and has forfeited patent rights in many countries outside the U.S., thus international patent filing protection is limited.

Below are three approaches for considering preservation of intellectual property rights associated with a business plan before pitching to investors:

Common concerns of a startup in disclosing proprietary without a signed NDA include the investor revealing the idea to others, theft of the business plan, and the risk of losing rights in the protectable elements of the business plan. A risk averse approach is to have the suitable intellectual property filings and procedures completed before making any pitches. Intellectual property submissions with a filing date prior to pitching is one of the better approaches to mitigate or minimize the damages associated with those concerns. One scenario where this approach may be useful is a Slanket style business plan. Where the business concept is centered around a product that has limited technological innovation, a catchie brand name, and a strong marketing campaign. The startup team may believe that pitching this without any intellectual property filings may be letting the cat out of the bag and opt for this approach.

A second approach is tiered disclosure of proprietary information. You are typically wasting paper and your breath in presenting a nondisclosure agreement to an investor on a first presentation. The first meeting is typically introductory and there is usually no need to reveal much proprietary information. You should be able to explain the product/service, the problem solved, the target market, financials, and the team credentials without discussing the secret sauce. The investors should then have sufficient information to determine whether they invest in the field of technology, whether they are already invested in a competitor, whether there is potential for return on investment, and whether there is interest in a further conversation. Then during the subsequent conversations, you may provide additional tiers of information. After the first or second presentation you may have a sufficient relationship for a nondisclosure agreement. Almost universally, by the time you are discussing term sheets (and clearly at due diligence) you will have NDAs and have revealed some or all of the proprietary information.

For example, a business plan may be centered around a system for generating and processing medical records using specially formulated inks, printers, and an imager adapted for rapid scanning and 100% accuracy in recognition and processing of the characters. In a first meeting, you might state that you have a system that enables the processing of a 100 bed hospital’s records in thirty minutes. In a later presentation, you might mention the novel ink, printer, and imager. In later presentations or due diligence, you would mention the composition, structure, and process. Be aware that not all investors are open to this approach – Angies’ Angels may be open to this approach while Victor’s Ventures may not. You should know what you are prepared to disclose before each presentation.

A third approach is to risk disclosure. To be sure, you are taking a risk. Investors openly state that they hear many pitches. They also openly state they converse and network with other investors. They also openly state that they provide mentorship to companies. The volume of information from the pitches and that open environment support a reasonable possibility of public or private disclosure of your proprietary information, even inadvertent disclosure. On the other hand, are you dealing with a reputable investor who wants to remain in the business? Are you dealing with someone who has a portfolio built upon others’ business plans? If so, why would they shoot themselves in the foot? Moreover, is the possible funding worth more than the risk of intellectual property disclosure or misappropriation? Could the first mover advantage from the funding outweigh the risk of disclosure?

The approach you choose should fit the intellectual property at issue, the business plan, the investors, and the risk tolerance of the team, among other factors. The above options should help you pitch while considering the preservation of your intellectual property rights.

Governmental Sources for Inventor Prototyping and Manufacturing Assistance

Many small businesses need help with design and development of inventions at various stages. A startup may want a mockup or virtual prototype in order to pitch for funding. Later, the business may need a working prototype for further proof of concept. Then that prototype may need to be further refined for efficient manufacture. Thus a business may need expertise in moving forward from the concept stage to a tangible product. As I have stated before, be extremely cautious in using inventor assistance companies for these services. That being said, there are some governmental entities that are available for free or at reduced cost.

One great resource for the proof of concept, prototype assistance, and working through some of the early stage engineering issues is the Space Alliance Technology Outreach Program (SATOP). SATOP is an alliance of scientists, engineers, and other technical professionals who provide free technical assistance in machine design, process engineering, material selection, and numerous other technologies. Note: SATOP does not work on software or information technology projects. SATOP offers up to 40 hours of hours of free technical assistance, with a goal a providing a solution within three months. A small business submits a request for technical assistance and the program checks its subject matter expertise and availability before accepting the project. SATOP has centers in Florida, New Mexico, New York, and Texas.

There are other similar programs around the country, although their focus, cost, and scope of assistance may vary.  Some programs provide only with the original prototype and others focus on specific industries.. Frequently, the programs are associated with a university or a Small Business Development Center. The University of Pittsburgh Manufacturing Assistance Center can assist with a wide range of issues from conception to the manufacturing process. It can help in creating 2D or 3D CAD models, machining, fabrication, and pilot production. The University of Maine College of Engineering also offers a program available to businesses, entrepreneurs, and researchers. The University of Utah will soon open the Energy Innovation Commercialization Center offering services in the clean and renewable energy.

Other than a search engine, great starting points for locating these program are your local Small Business Development Center counselors or counselors at the entrepreneurship or engineering department of your local university. The programs do not typically retain ownership of the intellectual property, thus you would maintain control of the patents and proprietary technology.

Enforcing Intellectual Property Rights in the Startup Phase

Mission critical assets of a startup business can include its unique products and its branding. If either is usurped, the emerging business may not survive for long. Because of that, the small business must consider protecting those assets. A frequent discussion in the analysis of securing formal intellectual property rights is, of course, the value in doing so. Frequently that discussion turns to the ability to enforce those intellectual property right(s) if those rights are infringed upon. Here is where a frequent mistake in valuing those rights is made. Sometimes the business thinks that the value is nominal and not worth the money because enforcing those intellectual property rights means going to court. Going to court can be expensive and out of reach, therefore the registered rights are worthless. The assumption that the only option to enforce the intellectual property rights is by going to court is incorrect. There are three primary options used individually or in combination in enforcing intellectual property violations.

1. Civil litigation

2. Criminal Action

3. Negotiation

Which option or options are chosen should not just be a legal decision. It should be a business decision. In other words, what approach(es) will best help your business? Will filing a patent infringement lawsuit increase revenue? Maybe. Will another person in jail for copyright infringement help your business? Maybe. Can you negotiate with a party who infringed your trademark? Maybe. What problem is being caused by the infringement? What unaddressed issues exist in the business?

First, to use an analogy, most would not think of not documenting their living arrangement, whether that be a rental agreement or a mortgage. And when a dispute about the living arrangement occurs, most people don’t just immediately charge off to the courthouse. Occasionally, I do some pro bono work in this area and this is one of the last recommended options. If a deposit is not returned to a renter, some of the effective solutions might be sending a letter pointing out the terms of the lease relating to the deposit and the penalty for not returning the deposit, blogging about the company that improperly took the deposit, or even possibly accepting the losses. Most people will not end up pursuing a small claims action.

With that being said, take a look at the linked article, discussing the pirating of the upcoming Call of Duty Black Ops game. At this point, the upcoming game is likely protected by copyright, trademark, trade secret, and other forms of intellectual property protection. Analyst Doug Creutz at Cowen Group estimates that Call of Duty Black Ops could sell 10.7 million units in its first year, or $642 million at retail. The game is clearly an important asset of the company.

Well, the game has been leaked prior to its release. The company employed investigators to track the unlawful copies. When the investigators located the infringers, the company had the above options to enforce its IP rights. Activision Blizzard did not charge off to the courthouse and file a civil suit, it didn’t turn the infringers over to law enforecment, and it didn’t put the Guido treatment to the alleged infringers. The game maker integrated legal, financial, marketing strategy into it decision as to how to handle the legal situation. One alleged infringer released a video saying in part “I never said I was going to leak this game… Was I going to give a copy to my friends? Yes…. I wanted to play my game…. The best game I ever played….I wouldn’t have sold the f****** for a million dollars.” Legal issues aside, that’s a pretty strong endorsement of a soon to be released product. (Ed. Note: I’d appreciate such a strong endorsement. Please comment below)

The standard civil and criminal solutions may not be effective in a startup situation. Alternative solutions must be considered. For example, where a trademark infringer is using a domain name unlawfully integrating your registered trademark and impacting necessary revenue, it may be prudent to negotiate immediate control of the domain name. This might be necessary where a small business could not survive until a Uniform Domain Name Resolution Policy proceeding (UDRP) decision or Anticybersquatting Consumer Protection Act (ACPA) based lawsuit could be settled.

What are the chances of the RIAA collecting from Jammie Thomas? Was it evident that collection would be a problem at the time of invesitgating or filing a lawsuit? Would a startup be able to pursue that type of legal strategy? For those reasons, registration of intellectual property with consideration of alternative enforcement strategies should be considered for startup phase businesses.

Small Business Innovative Research Funding for Your Patentable Concept

Funding is a concern for many startups and small business creating new products.  The Small Business Innovation Research (SBIR) is a congressionally authorized, federal program that may be an option for funding for some of those businesses operating in select fields of technology. Two of the key driving policies of the program are to help the government agencies solve their problems and to bring innovative solutions to the public. Even though there is no man in a question-mark covered suit marketing the SBIR program, it is real and money has been and is currently being awarded. To be sure, the program is only available in select situations and is a difficult process. That being said, eligibility and successfully completing the process brings two key advantages:

  1. Funding – The recipient can receive from about $100k in early phases to slightly less than $1,000,000 throughout the phases of a project.
  2. Intellectual property – The recipient maintains substantial ownership of the involved intellectual property.

The program primarily operates at the agency level. An agency may have a very specific problem that needs to be solved or may be open to solutions to more broad problems. The range of problems is broad as some of the participating agencies include the Department of Agriculture, Department of Health and Human Services, Department of Defense, Department of Education, Department of Energy, Department of Homeland Security, Department of Transportation, and NASA. Those agencies create a diverse technological demand, which makes the SBIR program worth exploring for a lot of innovators. The titles of some prior awarded projects under the program indicate research across the spectrum and include:

  • Color Sorting of Post-Consumer Glass and Plastic Containers to Improve Their Recyclability
  • Improving Business-Consumer Commerce Via Mobile Social Networking Services
  • Household Hazardous Substances Data System
  • Hearing Aid Connectivity to Consumer Electronics
  • Device For Aiding Memory Dysfunction in Elderly
  • A Pollution Free Aerosol Dispenser

The first major step in seeking SBIR funding involves identifying the timing and  solicitation topics of the various agencies. The agencies themselves do not post all SBIR solicitations in one location. They are typically posted on the individual agencies’ websites. However, there are some sites to aid your cross-agency search. The Zyn website allows robust searching of SBIR solicitation data.

The next major step involves registering and completing a detailed application in response to a solicitation. The instructions vary by agency and are complicated. The instructions must be followed with diligence or the application may be rejected without substantial review. In fact, about half of applications are rejected because of noncompliance with the rules. The application will take significant time to complete, as it involves detailed project planning, staff information, commercialization strategies, cost information, and other data requirements.

The Small Business Innovation Research program is arduous, but can be worth the reward and should be explored as an option for funding your innovations!

Common Factors in the Decision to File a Patent Application

When working with an inventor or  startup, a frequent question is whether it is prudent to proceed with a patent application. More often than not, I am not in a position to concisely answer the question, as the question may hinge more on economics than intellectual property. A patent search may shed some light on the prudence of moving forward from an intellectual property standpoint, but it doesn’t help answer whether the cost and effort involved in a patent application are worth it. For people at some large business entities or educational institutions, the value may be easier to determine. Moving forward with the process may increase that person’s salary or credibility. For an individual inventor, startup, or small business, the choice is not that simple.

For the startup or individual inventor, a patent should be thought of as an asset. The goal for a patent application should not be a certificate to hang from the wall. In other words, what will moving forward do for your business. You purchased a computer to easily enter, store, search, and communicate data (reducing labor and storage expense). You purchased hosting services for your website to inform others of your product or service (increase revenue) and to enhance your other marketing efforts (reduce expense). You worked with a product designer to optimize the experience of your product for your customers (increase revenue). Even though you probably did not formally analyze purchases for the above, you at least made a “gut level” feel as to how the purchases were beneficial.

There are several formal methods of patent valuation, such as the cost approach, the market approach, and the income approach (the dominant approach for intellectual property). Typically, those approaches may require the expense and effort equal to the cost of moving forward in the patent process. Thus they may not be suitable at this stage of the process. Some questions that might give a “gut level” feel as to whether to move forward to not include:

  • How does your idea help increase revenue or decrease expense?
  • Will a patent application help investors better understand and evaluate the concept?
  • Is the idea in a new field of technology?
  • Is your idea operable only as an improvement to another product or can it be sold independently as a complete product?
  • How large is the total market for your idea (or a related market)?
  • What percentage of the market can your idea help you gain?
  • How many related products exist as your competition?
  • How fast is the industry changing?
  • What are the alternatives to your idea?
  • How much does it cost to manufacture your product?
  • Is the idea in a growing, stable, or declining industry?

Those questions may not lead to a definitive answers,  but they should provide guidance on the decision as to whether to proceed towards a patent. When you made the decision to purchase (or not purchase) a computer, hosting services, or other products and services, you analyzed how it would help your business. You should do the same in deciding to move forward in the patenting process.

Keep Your Startup’s Data Secret

Recently I have talked with some scared startups.

Scenario #1: Startup has its data on a flash drive and loses the flash drive.

Scenario #2: Person has startup’s data on a laptop and the laptop is stolen.

The common theme to both scenarios is that they had unencrypted intellectual property on the drives, thus the intellectual property (possibly customer lists, market research, detailed business plans, product details, etc.) was accessible to anyone with access to the drives. Will someone who finds the flash drive discover and use the data? Was the laptop thief looking for source code or a laptop to sell? Who knows but each business’ intellectual property is at risk.

By encrypting the data, the startups could have essentially removed the possibility that a third party could access their data. There are umpteen encryption programs available, but I’ll mention True Crypt (http://www.truecrypt.org) as one of them. True Crypt supports full disk encryption, partial disk encryption, and portable drive use. There are multiple encryption algorithms from which the user may select. After the data is encrypted, passwords are required to access the data. It provides strong encryption and is simple to use.

The bottom line: Don’t let an easily avoidable scenario place your business’ intellectual property at risk. Protect your data!