Patent Tsunami Watch: The America Invents Act

Passage of the America Invents Act could trigger a tsunami of provisional patent applications.  Unfortunately, it will be Fortune 500® leviathans unleashing the flood rather than emerging tech-companies. 

Put bluntly, the first-to-file provision of the Act creates an opportunity for the leviathans to blanket the waterfront with provisional applications.  These applications will likely cover any idea that they currently have under development or that happens to be merely on their employees’ minds.  The alternative for these giants would be to run the risk that some upstart might obtain a patent adversely affecting their interests.  Since the last thing that these companies want is to flounder in the wake of an innovator, they are likely to blockade large areas of technology with provisional applications.  Then, while entrepreneurs are busy developing the technology, the leviathans will be monitoring developments and pursing regular applications with which to torpedo the entrepreneurs when the market matures.

How will such developments effect innovation?  Not well we fear.  The entrepreneurial community will have to find some way to navigate through these provisional applications and their progeny.  One way to fight back will be for entrepreneurs to file their own provisional applications as soon as doing so becomes commercially possible.  Then, as the idea matures, they can file more thorough non-provisional applications.  While good for the patent bar, the otherwise premature filings will draw resources from the entrepreneurs during the time when they need them for other activities.  Nonetheless, under the pending Act, filing provisional applications early might be the only way to avoid being sued for infringing an idea that you conceived first. 

The Villhard Patent Group has voiced our displeasure to Congress regarding the first-to-file provision.  We encourage emerging companies to do the same. 

For more information about patents and the patenting process please contact the Villhard Patent Group at (512) 897-0399 or see www.villhardpatents.com.

Planning For Success: IP Now!

The millions of dollars and man-years of effort required to pursue a patent infringement lawsuit usually makes taking such a course of action impracticable for entrepreneurs, start-ups, and even many mid-sized, flourishing companies.  But, some day, we all hope to succeed.  In some cases that means growing a company to a size where such tasks can be managed.  In other cases it means becoming an acquisition target for a corporate giant such as Microsoft (e.g., Skype). 

Should you succeed in growing your company in the future, the time is now to take steps to protect your intellectual property (IP).  For instance, you should review the measures you take to keep your trade secrets secret.  For trademarks and service marks that means applying for registration(s) as is appropriate and policing your competitors' use of marks that might be confused with yours.  For patentable ideas that means keeping the ideas secret for as long as is commercially feasible while, in parallel, filing appropriate patent applications.  You should also avoid making any offers for sale of products/service incorporating your idea(s) until you have at least a provisional applicaiton on file.  For copyrights as with other forms of IP, proper “marking” of related products, services, content, etc. with appropriate symbols (©, TM, SM, ®, “patent pending,” etc.) should be performed and periodically reviewed.  In this manner, when/if you reach the size where infringement suits become possible, today’s actions will enable appropriate legal actions – against your competitors.

Plus, part of the value in an acquisition for the acquiring company is usually the IP of the target.  Indeed, in many cases, big technology companies only want the target’s IP.  In any scenario, if the IP has not been properly protected, the company’s value can be greatly weakened.  Meaning, your buy out will trend lower than would otherwise be the case.

Because a blog article is too short to discuss all of the implications of this topic, we encourage you to seek a review of you IP related activities.  We at the Villhard Patent Group would be happy to discuss doing so at your convenience.  For more information see www.villhardpatents.com or call us at (512) 897-0399.

Hot on the Trail: Business Methods and Intellectual Property

THIS POSTING TO BE UPDATED IN LIGHT OF RECENT PATENT OFFICE AND LOWER COURT RULINGS REGARDING BUSINESS METHODS PATENT ELIGIBILITY

It breaks your heart watching friends forsake opportunities assuming that their brainchildren cannot be patented.  This happens more often than you might think even in tech-savvy Austin.  As one Internet-based entrepreneur said, “All we do is simply find information on the Web, put it together, and make a profit.  If that’s all it takes, everyone ought to be getting patents.”  Another Internet-based entrepreneur stated, “It’s hard to see how moving money around the Internet can be patentable.” 

The news has not yet apparently reached everyone that one year ago (in Bilski v. Kappos) the Supreme Court extended patent eligibility to business methods.

In response, many financial service companies charged to the Patent Office.  They actually began stampeding in 1998 following the State Street Bank decision.  In State Street, the Federal Circuit Court of Appeals decided that a hub-and-spoke network used for managing mutual funds was patentable.  As a result, Visa now has at least 170 published patent applications.  Bank of America has 381.  eBay has 399.  Clearly, many financial players think that business methods are patentable and worth patenting.

So it’s ironic that an entrepreneur can be hot on their business and technology development trails while letting their IP trail go cold.  Admittedly, simply finding information on the Web or just moving money around electronically alone probably won’t suffice for a patent.  But that misstates the patentability tests.  Briefly, patent eligible business methods which are also useful, new, and non-obvious can receive patent protection.  These questions usually distill down to how closely the method (simple or not) resembles pre-existing methods.  Moreover, if an entrepreneur invested their blood, sweat, and tears to build a system up from an idea, it seems that they might have created something more than simply surfing the Web or moving money around.  And, that “something” just might be patentable. 

For more information about patents and the patent process please see www.villhard patents.com.

Pro-Patent Ruling Strengthens Patent Owners’ Hands

The Federal Circuit Court of Appeals issued a ruling last week strengthening the hand of patentees.  The Therasense ruling largely removes the “inequitable conduct” Joker from a patent infringer’s hand. 

Up until last Wednesday, a defendant could play that Joker whenever the patentee failed to disclose to the Patent Office information that might have been material to the patentability of their claims (as viewed with 20-20 hindsight).  Now, the defendant can only play that card if the patentee knew of material information, knew that it was material, made a deliberate decision to withhold it, and that the Patent Office would have withheld the patent “but for” the withheld information.  If so, the court can hold the entire patent (and possibly even related patents) unenforceable.

That rule poses a high burden for infringers trying to squirm out of ponying up damages - with one significant exception.  If the patentee acted egregiously (e.g., fabricated evidence), the court remains free to find inequitable conduct. 

The Therasense ruling seems likely to stop the avalanche of irrelevant disclosures that many patentees previously felt compelled to cause because of the now obsolete standard for inequitable conduct.  The ruling will also likely ease the burden placed on the courts by the routine play of this card.  On the downside, with the Patent Office arguably being deprived of seeing all of the applicant’s cards (information that might have otherwise been disclosed previously), invalidity arguments might shift toward the expensive setting of the trial courts rather than the relatively inexpensive setting before the Patent Office. 

This is not to say that information should be withheld.  Cautious applicants should still disclose information that they feel is material.  Moreover, the Patent Office has the power to re-write their regulations in response to this ruling.  Indeed, they have notified the community they they plan to respond. 

Nonetheless, at the Patent Office, the game of disclosure-based Indian Poker has come to a long needed end.  And the Federal Circuit handed infringers their hats.

For more information about patents and the patenting process readers are invited to visit http://www.villhardpatents.com/ or call us at (512) 897-0399.

Shooting From the IP Hip

Tech-savvy entrepreneurs sometimes find themselves on the horns of an IP (intellectual property) dilemma.  They conduct their own “patent search,” misinterpret the results, and state in writing that they might be infringing one or more patents - thereby admitting (correctly or not) that they are infringing.  Plus, the resulting perceived fear of patent infringement then paralyzes them. 

Entrepreneurs can avoid these situations by not shooting from the “IP hip.”  First, keep in mind that the claims of a patent represent the starting point for determining infringement.  That some portion of a patent, other than the claims, describes technology similar to yours might be beside the point depending on circumstances.  Of course, depending on those circumstances, that information could instead be quite germane to an infringement determination.  Furthermore, determining what a claim covers often presents notoriously complex legal issues.  Therefore, a likelihood of infringement can usually be determined only by someone with proper training. 

Yet, some entrepreneurs readily proclaim that they might be or, worse yet, “are” infringing a patent.  Once these words appear in a potentially discoverable document there’s no telling where the ricochet ends up.  Should a patent owner get wind of that statement, the patent owner will likely try to hold the entrepreneur to those words.  The patent owner will also likely brush off subsequent exculpatory (and, from their perspective, self-serving) statements.  What a court might do with such statements is yet another matter.

Misunderstanding a patent cuts the other way too.  A premature decision that a patent does not affect you can also cause pain in the form of an otherwise potentially avoidable infringement lawsuit.

Solution: the Villhard Patent Group recommends consulting a patent attorney prior to attempting a prior art search on your own and before drawing any conclusions regarding infringement.  For more information about patents and the patenting process please see www.villhardpatents.com or call us at 512-897-0399.

Funding Intellectual Property (IP) Protection in Early Stage Companies

Early stage companies face a number of dilemmas over which activities to fund.  Often, the drive to bring that new product (or service) to market consumes the lion’s share of the available funds.  However, often during early stage activities, much of the IP fundamental to the long-term well being of a company comes into being.  Then, a year later (if not earlier) when that fundamental IP faces potential statutory bars to patenting (see The First Three Things That Entrepreneurs Need To Know About Patents) the company finds itself without money to file their patent application(s).

This article suggests one way to avoid this dilemma: include IP protection activities in funding requests.  Few would hesitate to include line items for technology development, marketing efforts, raw materials, etc. in a funding pitch for angel investors or venture capitalists (VCs).  Yet, having sat through many angel pitches, VC competitions, and the like, this author has noted that few early stage companies include IP protection in their list of activities which they would like to fund. 

This seems odd because, if IP serves as a fundamental piece of a business (as it does in many tech-based companies), it seems that it ought to receive funding commensurate with its importance.  Indeed, after having interviewed a number of angels and VCs, the author is left with the impression that they expect early stage companies to protect their IP and to spend sufficient money to do so.  Therefore it makes sense to ask for funding to protect what might turn out to be the crown jewel of an eventual acquisition target: i.e. the technology developed over time by today’s start-up company. 

Moreover, most angels or VCs acting in their enlightened best interest will probably want the technology they fund protected.  We suggest asking for the funds to do so along with your other requests.

For more information about patents or the patenting process see http://www.villhardpatents.com/ or call us at (512) 897-0399.  We at the Villhard Patent Group would be happy to discuss this issue further with you.

Why Should Small Business Owners Spend the Money to Try to Get a Patent?

Since typical patent trials cost millions of dollars and take years to pursue, many business owners forego the expense of filing patent applications.  However, having the option to sue your competitors for patent infringement happens to be only one reason for obtaining a patent.

First, many investors (e.g. angel investors or venture capital firms.) want to see that you not only have an idea for a good product (or service) but that you also have a good management team, a market that you are developing, and entry barriers to protect your market.  Entry barriers come in many forms including your goodwill, your talents and technical expertise, and your intellectual property (IP) among others.  Because patents allow you to exclude others from using your patented ideas in the market, patents help you hold the attention of these investors. 

Secondly, if your exit plan includes selling your business or offering equity in it, many potential buyers also want to see entry barriers.  These players might also be big enough that they can enforce your patents with law suits.  Your patents can therefore represent significant assets in the deal for these big players.  As a result, patents help hold the attention of your potential buyers too. 

Additionally, patents give you an advantage when a potential customer/competitor makes a make-buy decision.  If you have a patented product in the market your patents will influence their decision if they are at all savvy (assuming that you have made them aware of your patents).  As a result they will be more likely to buy the product from you than if you had no patents. 

That is not to say that patents can guarantee these results.  However, owning patents (at least when compared with doing nothing) increases your chances of obtaining these results.

For more information regarding patents and patent applications contact The Villhard Patent Group at http://www.villhardpatents.com/ or call (512) 897-0399.