Robert Platt Bell Articles

SINGING IN CHURCH - is it against the Law?

2008-04-15T14:03:00.000-07:00

SINGING IN CHURCH

Does your Congregation need a License from CCLI?

A friend of mine has asked me to investigate CCLI for her church. They received a pamphlet from CCLI, which seemed to imply that they would need a Copyright License in order to use music in their church. The CCLI materials and website are somewhat vague, and hence misleading, in my opinion, and tend to panic honest God-fearing Christians. The pamphlet I received says "if you can answer YES to any of these questions, you need a CCLI license!" But as we shall see, this is NOT QUITE THE CASE.

One of the questions was "do you photocopy sheet music or print music in your programs?" My church answered "yes" and assumed they needed a CCLI license. The pamphlet did not go into more detail as to why they would need a license or whether they were exempt. However, the pamphlet did list all the dire consequences that could occur (suits for tens of thousands of dollars!) if they did not.

One of the ladies in the church was convinced they are all going to go to jail or be sued out of existence because they are violating Copyright laws by singing from the hymnals and because the bell choir director made a photocopy of a music sheet. I don't think that is quite the case.

The following is an analysis of some of the issues surrounding these license agreements. Every church's situation is fact-specific, so consult with a Copyright Attorney for information regarding your Church. This information is for educational purposes only.

WORSHIP PERFORMANCE EXCEPTION

To begin with, there are many forms of Copyright, and many forms of infringement. For music, there are at least three forms of Copyright. There is the sheet music itself, which can be divided into the subset of the score and lyrics, both of which are Copyrightable. Note also, that with regard to sheet music, there are also "arrangements" that are Copyrightable, so that a particular arrangement of an old tune may still be Copyright, even if the underlying tune fell out of Copyright. There are also recorded performances, which are Copyrighted. If you are a recording artist, you have rights to the recording, even if you did not write the song or lyrics. Finally, there are performance rights. Even if you do not copy the sheet music, if you perform a song in public, it is a public performance of a work and could be an act of infringement.

A classic example is the "Happy Birthday to You" song, which was still in Copyright, at least as of very recently. Many chain restaurants do not sing this Copyrighted song, as they would have to pay royalties on this "public performance." Hence, when you go to a chain restaurant, they often sing a "Hey, it's your birthday" type of song that they created. With thousands of restaurants and at least 2or 3 birthdays every night in a restaurant of any size, they would have to pay royalties for tens or hundreds of thousands of performances a year.

However, there is no law against singing in Church, however. Copyright law explicitly EXEMPTS worship services from the "performance" clause. So sing whatever you want - old hymns or modern tunes. SINGING is not an infringement of anyone's copyright, provided it is in church and part of a worship service.

A coffee shop or restaurant attached to the church - that's a different story. A commercial enterprise is not covered under the performance exception for worship services. So, if you operate such an establishment, or use your sanctuary for concerts or other performances, you might not be covered under the worship exception – particularly (but not exclusively) if such performances are for-profit.

Making photocopies of the sheet music, on the other hand, is not covered by the worship performance exception.

WHAT IS CCLI? HOW DO THEY WORK?

CCLI offers a "church license" for music in their portfolio. Do you need it? That depends on your specific fact situation. Buying a license you don't need makes no sense at all. But some churches might need it. It depends on what kind of music you are copying.

CCLI does not own the Copyrights. They merely are a clearinghouse for licensing rights, offering a flat-fee yearly package that allows you to copy sheet music from their library (they offer other licenses in other divisions, but the sheet music license is the focus of this article). The idea was to provide "one stop shopping" for churches to comply with Copyright requirments - or at least that is their stated goal.

Before you buy a license, make sure you need one. Music in their sheet music portfolio usually has a notice on it with a CCLI license number, or the "worshiptogether.com" notation. If your congregation is making copies of music with these notations on it, a license might not be a bad idea (or buy additional copies in stead of photocopying them).

The license also allows you to download sheet music from their site. If you use a lot of "new music" (as opposed to the old hymnals) this may be a cost-effective and more timely way that buying individual copies of sheet music.

Note that the license agreement does not include instrumental music, apparently - at least from what I can glean from their "user manual" page. It explicitly excludes bell choir music, so it is of no help to my friend, as we shall see below.

Their library includes 160,000 songs (at the present time), including hymns as well as more modern (Contemporary Christian) music. Traditional hymns and the like (over 75 years old) may be in the public domain. You may not need a license to copy traditional hymns like that.

As noted above, the performance of works in copyright (for example, playing music) as part of an act of worship is specifically exempted from copyright laws. You are not going to get sued because the congregation sang "Kumbaya, My Lord" on Sunday morning. And certainly "Nearer My God, To Thee" and other old-time songs are mostly in the public domain by now, anyway.

The only issue is PHOTOCOPYING sheet music, or projecting copies on an overhead projector or the like.

SO, DO I NEED A LICENSE?

As noted above, this material is for educational purposes only. You should consult with an Attorney regarding your Church's specific needs. But let's take the example of my friend's Church. They are a small congregation, with only about 25 members. They have a part-time bell choir, and no singing choir since the death of the choir director. They sing mostly songs out of the Church Hymnal (which they have many copies of) and also pass around two hymns that are photocopied each week.

The CCLI materials and website are somewhat misleading, in my opinion, and tend to panic honest God-fearing Christians. The pamphlet I received says "if you can answer YES to any of these questions, you need a CCLI license!" NOT QUITE THE CASE!

One of the questions was "do you photocopy sheet music or print music in your programs?" My church answered "yes" and assumed they needed a CCLI license.

However, there are some CAVEATS that the CCLI pamphlet glosses over:

(a) You do not need a CCLI license to copy public domain pieces (generally anything over 75 years).

(b) You do not need a CCLI license if you have permission to copy the work.

(c) You do not need a CCLI license to copy materials not in their library (but you may need someone else's license).

(d) CCLI is not the only licensing agency out there, they are just the most convenient and the most aggressively marketed.

(e) CCLI covers only limited categories of music - for example, bell choir sheet music is not covered.

They want about $100 a year for a license for my friend's church, which for their tiny congregation is a lot of money. $100 also buys a LOT of sheet music. If you just buy legal copies of the sheet music (as opposed to photocopying it) you are not infringing any copyright on the sheet music, at least from a copying perspective. $100 buys a lot of sheet music, as I said.

The main issue is making copies of sheet music and passing them around or printing songs in the church bulletin. If it is PUBLIC DOMAIN this is not an issue. If it is used with PERMISSION (surprisingly easy to get, with a phone call) this is not an issue. If it is NOT IN THE CCLI catalog, a CCLI license is not a protection.

In my friend's church's case (25 members) there is a song reprinted on each Sunday's program. I called the copyright owner directly and they were thrilled we were using it and granted permission, asking us only to attribute the song and add a copyright notice and "used with permission". So that is clearly not an issue for my friend's church.

The only other item they copy is an old (1880) hymn out of an old (1900) hymnal, so that is public domain. You can copy that until the cows come home. Thus, the only items they were copying did not require a CCLI license, as they were used with permission, or were public domain.

The rest of the music they use is out of the hymnals and they have more than one copy for each parishioner. The Hymnal copyright page authorizes the church to make copies for use in services (e.g., for sheet music for the piano). So that is covered, too.

They have part-time bell choir, but two bell choir organizations that the director belongs to handle licensing for their sheet music, and much of it is sold with the caveat "Choir director may make up to 4 copies". So we are covered there as well. CCLI does not license Bell Choir music, anyway.

I did find some dusty copies of sheet music that the late choir director had copied for the choir. However, these had the explicit notation that they were NOT COVERED BY CCLI and as a result, a CCLI license would not be any use in bringing the church into compliance for such music.

So, for my friend's church, no, we do not need a license from CCLI at the present time. If things change, then maybe they should look into it.

BUT ISN'T THIS FAIR USE ANYWAY?

I am not sure if photocopying sheet music for church would be considered "fair use". The fair use doctrine is a defense, not really written law. So it is a gray area. If you are performing for profit, making copies of contemporary Christian music (where the copyright is still valid) then you are probably infringing by copying the sheet music and it may be also be an infringing performance as well.

On the other hand, if you are singing an 18th century hymn than you photocopied out of a 1902 Hymnal, it is highly unlikely you are infringing anyone's copyright.

As for photocopying from the hymnals, check with the publisher. The hymnal my church uses allows the pastor to make a reasonable number copies of the hymns for use in services. So that clearly is not an issue for my friend's church.

But the "fair use" doctrine is only a defense. It is a shield, not a sword, and there is no guarantee that it will protect someone from an infringement suit.

THIS FEELS LIKE A SHAKEDOWN OR RIP OFF TO ME. IS IT?

CCLI is doing nothing illegal, as far as I can tell. The service they offer is legitimate, and similar to services offered by other licensing agencies (BMI, ASCAP). They are perhaps a bit over-aggressive in stating the need for the licenses, though. If I sell you a product you have no use for, but lead you to believe you desperately need it, have I done anything illegal? Perhaps not. But that does not make it right in a Christian sense.

The CCLI website sort of puts the "fear of God" (or at least Copyright law) into you, with all sorts of predictions of dire consequences, such as $150,000 lawsuits and jail time. I am not sure this is appropriate for a Christian organization to use such scare tactics. They are scaring these little old ladies to death! They also imply (in my opinion) that their license is a panacea for church music copyright issues, when the license is clearly limited, at least according to the "handbook" on the site. (I asked them to send me a copy of the license agreement, as it is not available on the website, only the "handbook").

Christians, being honest people, are easy to take advantage of.

I searched on the Internet and found some information critical of CCLI. Some folks wonder where all the money goes as they do not appear to publish annual statements, etc. Who is profiting from these licenses? It is a question worth asking. I do not have these answers.

Also, as a Christian organization, I am more than a little disappointed that their literature suggests that people get licenses without explaining the need fully (but listing lots of scary, but unlikely consequences if they don't). Is this truly a Christian way to act?

HAS ANY CHURCH BEEN SUED FOR COPYRIGHT INFRINGEMENT? WILL I BE SUED BY CCLI IF I DO NOT TAKE A LICENSE?

I have not been able to find any example of any SMALL church being sued for copying music scores. There was one BIG case, as explained to me by the people at CCLI:

"CCLI has never sued anyone over copyright infringements [sic]. The authors and publishers would be the only ones with the right to do that. We actually were started by a local church's music director (Howard Rachinski) when the Catholic publishers sued their churches for copyright infringements [sic]. . . . . . The case that started this was in the 1980's, when the Arch-Diocese of Chicago was sued by a Catholic publishing house for copying words into their programs. I don't have the case name. They ended up settling out of court for $190,000.00, but by then, the story had made it into the national spotlight." (e-mail from CCLI, April 2008, emphasis added).

The Catholic church is a "deep pocket" which makes such a suit worthwhile. But then again, $190,000 is chump change in a Copyright lawsuit, which can cost anywhere from $10,000 to $100,000 a MONTH in legal expenses. These folks did not "win" much in their lawsuit, after expenses. Do you think an individual copyright owner is going to spend $50,000 to $100,000 suing your church? Do you really think a jury will return a verdict in their favor? Those are interesting questions to ask. I am not supplying the answers, only asking the questions.

Why is this "suddenly" an issue today? Well, more and more people have photocopiers and it is much easier to make copies. Also, we are much more aware of IP issues in the last two decades, with the boom in the IP business. Perhaps we are TOO aware of IP these days. Some would say things have gone too far...

But, it is true that nearly every time you photocopy a page from a book or magazine, you are illegally copying something (unless it is 75 years old or you have permission). Yes, you might allege "fair use" as a defense, but that is only a defense to a charge of infringement. We all commit de minimis acts of infringement every day without thinking about it.

But let's face it, hardly anyone gets caught for sending Aunt Hattie a magazine article photocopied (please don't say "Xeroxed", OK?) out of Retirement Living magazine. That does not mean it is legal, only that it is nearly impossible to get caught.

I drove by a cop yesterday, doing 50 mph in a 45 zone. He did not pull me over. That does NOT mean the speed limit has been raised to 50 now. Same thing for Copyrights. Don't confuse not getting caught with something being legal.

But, on the other hand, no one is going to bother going after a small congregation for making a few copies here and there. Illegal? Yes. So is speeding in the church bus. But I've been passed by a few church busses in my day.

If you are a pastor of a MegaChurch and are making 3,000 photocopies every Sunday for services, well, that is another thing entirely. That is not some small act of infringement. Moreover, you are a big target, and all it takes is one disgruntled member to call the copyright owner and turn you in.

CONCLUSION

So, do what you think is best. Obeying the law is a good idea. CCLI is one approach, but not the only approach. Make sure what they offer is what you need, or you are just buying a false sense of security. On the other hand, if you are singing an 18th century hymn than you photocopied out of a 1902 Hymnal, it is highly unlikely you are infringing anyone's copyright.

But let me commend you-all for being honest and concerned about it. Let's face it, the odds of being "caught" are slim, and I have yet to find an instance of someone suing a small church for copyright infringement. Yet.

But make sure their license really does cover your needs or that you really need it. Otherwise, you are buying false security, or just plain wasting money. It seems to me that they are trying to stampede churches into signing up for these licenses, when in fact many may not need them. Their website could be a lot clearer on this point.

Consult an Attorney for fact-specific advice related to your church or organization. Remember that commercial enterprises (restaurants, coffee shops, etc.) are a whole different ballgame. And just because you sign a CCLI license does not mean you are covered for ALL music - only the music covered in their library. You might still get a nice visit from the folks at ASCAP and BMI, who also have libraries of licensed music.

We have Met the Enemy...And He is US!

2008-04-13T13:59:00.000-07:00

We Have Met The Enemy…

In the old Pogo cartoon strip, the lead character has a line, "We have met the enemy and he is us". No greater sentiment could be applied to the solo inventor.

It is unfortunate, but among many solo inventors there is a great mistrust in dealing with corporations or licensees. Moreover, folklore abounds with stories of "greedy big companies" lying in wait to steal ideas from the poor solo inventor. Actually, most big companies don't want anything to do with solo inventors!

I represent a number of solo inventors and small companies. It is heartbreaking for me to watch these individuals, after years of hard work, destroy wonderful opportunities through mistrust, greed, and plain old orneriness.

My first experience in dealing with a solo inventor occurred when I was an engineer for a large air-conditioning manufacturer. A solo inventor sent us, unsolicited, a design for an electronic thermostat that he wished to license. We tested the thermostat and were enthusiastic.

Our competitor was hitting us over the head with their new design and our model was still on the drawing board, two years from production. Marketing believed that licensing the solo inventor's design would be a quick and easy way to bring a product to market as a stopgap measure until out own design was developed.

Unfortunately, the inventor, sensing interest in his design, quickly changed his terms and pricing for a license. He felt that if we were so interested in his design, his initial asking price must have been way too low.

Despite the fact his invention was protected by patents, he was also very secretive about how the invention worked, refusing to show us schematics of the invention and grinding the chip numbers off the prototypes he shipped to us.

After a few months of this, even the most enthusiastic advocate in the marketing department gave up. We would lose market share and wait until our own design was ready. A great opportunity for both inventor and company was lost.

My initial experience was not an isolated one, unfortunately. I'm sure you've head of Robert Kearns, "the windshield wiper guy". Kearns will tell anyone who will listen how he has been screwed out of his invention by the big car companies. Unfortunately, the reverse is true. According to the Washington Post, Kearns was offered almost $30 million for his investment (some sources say close to $50 million) in the 1970's, only to turn it down, insisting that the car companies buy his invention directly from him. After years of tedious litigation, and losing nearly everything (wife, health, home), Kearns has finally won far less than the original offer, most of which went to lawyer's fees.

It is very unfortunate, as Kearns perpetuates the myth of the big corporation being out to "get" the little guy. Worse yet, inventors such as Kearns convince many corporations to adopt an "NIH" (Not Invented Here) policy with regard to outside inventions.

The tragedy of Kearns is that he has fought so long for what he believed are the rights of the little guy -- while his battle has actually harmed the chances of solo inventors in the future. Please don't do us any more "favors", Mr. Kearns!

A good friend of mine recently took a job as corporate patent counsel for a large sporting goods company. He has tried, mostly in vain, to get outside ideas submitted by solo inventors considered by the company.

His biggest obstacle? Not management... Not the engineers... The inventors themselves! Many inventors who have very good ideas fall into the same trap of mistrust and vacillation. If the company expresses an interest in the invention, the inventor immediately thinks that the company is going to "screw" him. Eventually, management gets frustrated and drops the idea.
A client of mine recently marketed his idea and received a very positive response from a large manufacturing concern. In addition to flying him coast-to-coast for in-person meetings (at their expense), they paid him thousands of dollars for an evaluation prototype.

"Great work!", I told him. "Naw, they are just screwing me. They'll make all the big money!" The same sad story. After the inventor changed his terms several times and attempted to "control" the invention by withholding the one working piece as "proprietary", the company lost interest.

Why do inventors engage in such self-destructive behavior? I believe the answer lies in several areas:

1) The process of negotiating a license is exciting and full of potential possibilities. Wonderful things are on the horizon! Everyone wants to talk to you and hear your opinion. In contrast, receiving royalty checks is rather dull, even if they are large checks. I call this effect "being enarmored of the process", in effect a form of excitement addiction.

2) Genuine mistrust. The stories of inventors being ripped off are so well spread (but not well documented) that a myth of corporate piracy has developed. In most famous cases alleging corporate rip-offs, the solo inventor ends up winning in the end -- sometimes when not even deserved. Patent cases pitting a solo inventor against a big corporation are a nightmare -- for the corporation! A jury will always have sympathy for the little guy, and such lawsuits are not good for public relations. No wonder most companies just opt out of the process altogether by refusing to consider outside ideas.

3) Lack of appreciation. As an inventor, you should appreciate that a company is going to bring its manufacturing, distributing, and retailing experience to bear on your invention. These are not trivial contributions! Manufacturing engineering, in particular, is one of the most difficult and unappreciated sciences -- and certainly is not as interesting as inventing. Hence, I wonder why Kearns yearned to be a manufacturer! Shelf space or catalog space can be all-important in trying to market your invention. Even if you manufacture your invention yourself, without a retail distribution network, you'll go broke. Help your licensee make money for the both of you.
Unfortunately, some inventors believe that a patent is a license to print money -- which of course, is not true. Folklore abounds regarding successful inventors. Such stories usually end with the phrase, "and then he got the patent and made a million dollars!". What is left out of the story is the hard work necessary between getting the patent and getting a product to market.

While it is true that it is difficult to license or sell ideas to a large company, it can be done. I have interviewed a number of successful inventors and they have given me the following hints:

1) Build a working model. It is difficult, if not impossible, to market an idea that exists only on paper. It is much easier to excite the imagination of a potential licensee with a working prototype. In addition, a prototype proves the concept will work.

2) Protect your invention. Many companies I have dealt with will not even consider an outside idea unless it is patented or a patent applied for. As one corporate attorney told me, patenting an idea shows that the inventor is serious enough to invest in his own idea.

3) Be willing to license or sell your idea. This may sound obvious, but some inventors become reluctant to part with their inventions, which they see almost as their children. In addition, some inventors become so enarmored of the process of negotiation that they are reluctant to let go. Play it straight with potential licensees. Don't try to leverage your results by threatening to license your invention to the competition.

4) Be willing to help the licensee make money from your invention. Expecting a lot of cash up front for an idea is generally unrealistic. A licensing agreement based on a percentage royalty is a win-win situation for both inventor and manufacturer. A manufacturer is interested not only in licensing patents, but also the "know-how" and "show-how" of your idea. A good licensing agreement may also include a consulting contract. Be prepared to help your licensee make money from your idea -- that is why they are interested in licensing it.

5) Keep expectations reasonable. Every inventor thinks his or her idea is a "million dollar idea". Unfortunately, the worth of an idea is what the market (e.g., manufacturers) are willing to pay to license it. A common mistake is to assume that the worth of an idea is equal to the amount of money and time you have invested in it. Pick a reasonable price and be willing to negotiate. Don't raise your price or change terms at the last minute. These are deal-killers!

6) Keep on inventing! The most successful inventors rarely made all of their money from one idea, but rather had a panoply of ideas and inventions. Some make money; some do not. Inventors who put all of their efforts into one invention or idea are seldom successful and typically end up in protracted, bitter patent litigation. Take a license, invest the proceeds -- and move on to the next project!

DOUBLE PATENTING REJECTIONS

2008-03-18T13:25:00.000-07:00

DOUBLE PATENTING REJECTIONS

What do they mean?

Many Applicants are confused by the concept of "Double Patenting". Don't feel ashamed. Many Attorneys and even Patent Examiners don't fully understand the implications of it either.

1. The Basic Concept

As the name implies, a Double Patenting Rejection is designed to prevent an inventor from obtaining two Patents on the same invention. In the far distant past, some inventor were able to (or tried to) extend their Patent monopolies by obtaining multiple Patents on the same invention – either by accident or by intention.

If the later Patent had a later expiration date (and in the old days, Patents extended 17 years from the date of issue not 20 years from filing) then an inventor could conceivably "extend" his Patent term by filing multiple applications on the same or similar invention, with the Patents having different expiration dates.

Clearly such a technique would be impermissible, and the law reflects that. You cannot get two Patents on the same invention, period. But what about similar inventions? That's where it gets tricky.

Thus, we have two types of Double Patenting Rejections – "Anticipation" type and "Obviousness" type. As we shall see the two are quite different. One is essentially fatal to Patentability, while the other is a minor annoyance.

2. Anticipation or 102-type (Statutory) Double-Patenting

If two Patent Applications were filed by the same inventor or inventors, and had the same disclosure and claims, this clearly would be an example of Anticipation-type Double Patenting. In other words, Two applications exist for the same invention – word for word. The later-filed application is "anticipated" by the earlier one. This is similar to a 102-type rejection, where every feature of a claimed invention is shown in the Prior Art.

This type of rejection is also referred to as a Statutory Double-Patenting Rejection, as the basis for this rejection is written into the law.

If such is really the case, there is not much that can be done. You can't get two Patents on the same invention, period. But such is rarely the case. Usually, an inventor has filed two applications on similar aspects of an invention, and the disclosures and more importantly the claims are not word-for word.

In such a scenario, it might be possible to argue the rejection with the Examiner by pointing out that the claims are different in scope. Under the doctrine of claim differentiation, every word in a claim counts, and two claims that contain even one word different from another are arguably distinct from one another, at least in terms of anticipation.

Many Examiners fall into the trap of making an Anticipation-type rejection. I say trap, as once the Examiner makes such a rejection, the applicant's back is to the wall, and they have no choice but to fight the rejection. It is far easier for the Examiner to make an Obviousness-type Double-Patenting Rejection, as the Applicant can easily overcome this with a Terminal Disclaimer and the Examiner gets a "counter" toward his production quota.

A Terminal Disclaimer will NOT, however, overcome a Statutory Double Patenting Rejection. So as an Examiner, you should avoid making them, unless truly necessary.

3. Obviousness or 103-type (Non-Statutory) Double-Patenting

As the name implies, this kind of rejection is made when two Patent Applications by the same inventor(s) claim inventions that are similar, but not identical. In other words, the later application is obvious in view of the earlier one. This is similar to a 103-type (obviousness) rejection where a claim is rejected in view of a combination of Prior Art references or is deemed "obvious" in view of the Prior Art.

There is no Statutory Law for this rejection. It is sometimes referred to as the Judicially Created Doctrine of Obviousness-Type Double Patenting, which has a nice sound and rolls off the tongue. The Patent Office as of late, however, has referred to this as Non-Statutory Double-Patenting, just to keep things simple.

Of the two types of rejections, this is by far the kinder of the two. One can easily overcome this rejection by signing a Terminal Disclaimer and the claims (unless rejected on other grounds) would be allowable. In 95% of the cases I have seen, usually the client is best advised to sign the Terminal Disclaimer and allow the application to issue.

So what is a Terminal Disclaimer? And what does it do? I'm glad you asked.

4. Terminal Disclaimer

In order to prevent an applicant from extending his Patent Monopoly forever, the Patent Office allows an applicant to sign a document known as a Terminal Disclaimer. This document basically says that the applicant will disclaim any portion of the Patent term that extends beyond the term of the earlier-filed application.

It seems like a simple concept. The Patent Office doesn't want people trying to extend their Patent Monopolies. So the Applicant disclaims that portion of the term, and everyone is happy. Applicant gets claims to other aspects of his invention, the Patent Office protects the public interest, and everyone knows that the Patent Monopoly will not be extended.

What could be simpler? Well, it can get complicated.

But first, the basic mechanics of it: In order to file the Terminal Disclaimer, both applications must be commonly owned. So check your Assignment documents and/or make sure the inventorship is the same on both cases. Today, an Attorney can sign a Terminal Disclaimer on behalf of a client, so the complexities of getting signatures from Officers of the Company have at least been removed.

4. Common Ownership

This seems like a perfectly simple thing. Either the inventors are the owners, and the inventorship is the same for both applications, or both applications have been assigned to the same company.

But there is one trick. Once the Terminal Disclaimer is signed, ownership of the two Patents has to REMAIN the same for the life of the Patent. If one Patent is sold to Company A and the other sold to Company B, one or both Patents may now be expired.

So, if a Terminal Disclaimer is signed, be sure to keep that in mind if you sell all or part of your portfolio. If the person purchasing your Patent Portfolio does a due diligence process, they should discover whether any such Patents are linked together.

5. Provisional versus Actual Rejections

It gets a little trickier in another way as well. A Double-Patenting Rejection (both kinds) can be made between an Application and an issued Patent, or an Application and another co-pending Application. In this instance, the term "Provisional" has nothing to do with Provisional Patent Applications.

As the name implies, if an Application is rejected in view of another Application, the rejection is considered Provisional, as the other Application has not issued. If the co-pending application does not issue as a Patent, the issue is moot, and any Terminal Disclaimer filed has no effect.

If the rejection is Actual, then the Terminal Disclaimer is effective and the termination of the present application is based on the expiration date of the issued Patent that the rejection was based upon.

6. Maintenance Fees

One area overlooked by some applicants is maintenance fees. If you forget to pay a maintenance fee on a Patent, and it expires or you intentionally let it expire by not paying the maintenance fee, then the second Patent with the Terminal Disclaimer may expire as well.

7. Patent Term

As noted above, in the olden days, a Patent term was 17 years from the date of issue. Thus, if you filed a second application 10 years into the term of the first Patent, you could effectively extend your Patent term, if they allowed Double-Patenting.

However, with the Terminal Disclaimer, the term of the second application would be truncated to the termination of the first Patent, or 17 years from the date of issue of that Patent.

In recent years, however, we now have Patent terms measured from the date of filing: 20 years from the date of filing (of the earliest application in a series) in most instances. (Patent Terms may be adjusted by months, or even years, to compensate for delays caused by the Patent Office, further confusing things).

In some instances, I have been chagrined to be given a Non-Statutory Double Patenting Rejection in view of an earlier Patent or Application from which the rejected case claims Priority (as a Continuation or Continuation-In-Part, for example). Under the new law, the later filed case will have a 20 year term from the date of the earlier case anyway, so it does not seem to make any sense to raise the Double-Patenting rejection in the first place, as a Terminal Disclaimer would be a nullity.

Not quite, as it turns out. As noted above, if the maintenance fees are not paid in the Parent Patent, the "child" Patent would still be in force, if a Terminal Disclaimer is not filed. So, to cover this unusual circumstance, a Terminal Disclaimer is required.

This scenario illustrates how little is being given up, in many instances, by submitting a Terminal Disclaimer. If the Patent term is going to be 20 years from the date of the earlier filed Application anyway, filing a Terminal Disclaimer causes no real harm (arguably).

8. Fighting a Double-Patenting Rejection

For a Statutory (Anticipation) type Double Patenting Rejection, your choice is really only to fight (or abandon the application. Arguing a Double-Patenting rejection can be tricky, as you are basically arguing against your own "Art". The trick is to illustrate how the claims differ from one another, without disparaging the other application.

The most realistic goal, in many cases, is to get the Examiner to change the Statutory type Double Patenting Rejection to a Non-Statutory type, the latter of which can be overcome by Terminal Disclaimer. In that vein, I usually argue the doctrine of claim differentiation to show that the claims do not in fact cover the same subject matter.

However, in doing so, you arguably create file wrapper estoppel. Granted, this may be necessary to allow the case. But in general, we try to avoid saying on the record what we think the claims mean, as this may limit other interpretations later down the road. An Examiner Interview is often helpful in persuading the Examiner to change the rejection type.

Arguing a Non-Statutory Double-Patenting Rejection is not only fruitless, it may be dangerous as well. This type of rejection can be easily overcome with a Terminal Disclaimer, which leaves little if anything on the record with regard to claim interpretation. Arguing that two similar inventions are Patentably Distinct will likely fall on deaf ears with the Examiner, but a Judge will parse your arguments later on in Court for estoppel issues. I can think of few instances where it is truly worthwhile to argue these types of rejections.

9. Restriction or Election Requirements

One additional complexity in Double Patenting is the issue of Restriction or Election of Species Requirements (see my article on this subject). In some instances, an Examiner may force you to "chop up" a Patent Application into a series of smaller Applications known as Divisional Patent Applications.

In this instance, the Examiner is not supposed to make a Double-Patenting Rejection or Obviousness-Type Double Patenting Rejection. Think about it: In the Restriction Requirement, the Examiner is arguing the two inventions are patentably distinct. In the Double-Patenting Rejection, the Examiner is arguing now that the cases are indistinct from one another.

This is one instance where it may be worthwhile to argue the rejection. But again, since the cases will have the same Patent term anyway (based on a common filing date), the point is often moot.

10. Conclusion

In most cases, an Examiner raises an Obviousness-type (Non-Statutory) Double Patenting Rejection, and the best course of action is to sign a Terminal Disclaimer. In a few instances, the Examiner may make an Anticipation –type (Statutory) rejection, in which case the best course of action is usually to persuade the Examiner to change this to the Non-Statutory type.

Just keep in mind that the applications need to be commonly owned, and should remain commonly owned, and that the Maintenance Fees on both cases need to be paid to keep both in force.

* * *

File Early, File Often

2007-10-21T10:38:00.000-07:00

This is an article that I drafted in 1998 with the intent of submitting to IPTODAY, but was never submitted. It is an interesting first-hand look at the impact of the Pfaff case will have on Patent Litigation. The lesson to patentees is clear: File early!

The Real Lessons of Pfaff v. Wells Electronics:

File Early, File Often, File Provisional

It is still winter in Wisconsin well into March and April, and each member of our team is shivering and stamping snow off their feet as we huddle in the crowded cement blockhouse on the outskirts of Madison. I'm supposed to be leading this motley group, and I'm only in my second year of Law School. For a young Patent professional, this is to say the least, an unusual assignment.

Our expert witness, a telecommunications expert, huddles over an equipment rack, aided by his two bemused sons. What has Dad gotten himself into now? The object of our attention is a breadboarded prototype we have put together from schematics provided during the Discovery phase of our Patent Litigation. The schematics are dated from a time which predates our alleged Offer for Sale. If we can prove the device worked as of that date, we might have a good argument for invalidity under 35 U.S.C. §102(b).

I look over the rest of our group - two video technicians from a production shop on the outskirts of Baltimore, wishing they were home. They are surrounded by boxes of commercial Beta equipment to videotape our demonstration. They look bored, but are not complaining about this easy and profitable work.

Our breadboard is hooked up, and we videotape a quick demonstration in the blockhouse - the system works there, at least. We do two more takes using different signals and lighting and then throw all of our equipment into a series of inexpensive rental cars and tear across icy Wisconsin back roads to tape the rest of our demonstration.

At a remote location, we setup and start the whole procedure again. The breadboard circuit works, and we get two more takes "in the can". Time to go home.

Many hours and tens of thousands of dollars later, we have produced a videodisc for trial demonstrating that the circuit designed by the inventor, as of the date of alleged sale, was operative at that time. Fortunately for us, our opponent delayed filing their application by almost a year - enough time to possibly invalidate their patent.

Before Pfaff v. Wells Electronics, __ U.S. _____ (1998), such extreme efforts were the norm if one wanted to overturn a Patent on the grounds of "offer for sale" under 35 U.S.C. §102(b). Defendants who cannot afford expert witnesses, breadboarded prototypes, and camera crews could do little to invalidate a patent, even where it is clearly apparent that applicant had filed too late.

Fortunately for Defendants, the Supreme Court has changed all of that. Simply stated, the test of whether an invention has been reduced to practice is now based upon whether the inventor had produced sufficient materials to file for a Patent Id at 12. The threshold for "offer for sale" has been considerably reduced.

Given the ample schematics we had in the above example, it is readily apparent that such extreme measures as breadboarding and testing would not have been required to invalidate a Patent under "offer for sale" under 35 U.S.C. §102(b) under the Pfaff test. The schematics alone might have been enough to bury our opponent.

Undoubtedly, the Pfaff decision will generate controversy for months to come. Many in the Patent community are vehement opposed to the Pfaff test, including the AIPLA. Unfortunately, as a Supreme Court decision, it is unlikely to be overturned soon. Fortunately for Patentees, there are easy ways to protect your rights in the post-Pfaff era.

The solution is to file early and file often This simple and sound advice is often lost on Patentees, who let immediate concerns (such as budgets, product introductions, and the like) delay patenting of inventions. A delay of even a day or two can be deadly.

And unfortunately, delays in filing Patent applications occur far too often in our business.

Most Patent firms (if that are any good) have a substantial backlog of cases and amendments to file. As a Patent practitioner, I cannot push aside an application for one client in order to meet the needs of another. It is not unusual or unheard of for a typical Patent firm to take several weeks to even months to complete a Patent Application to the point where it is ready for filing.

Unfortunately, in some Corporations, invention disclosures can sit for weeks or even months before an attorney is contacted to draft the application. In some instances, well-meaning in-house counsel intend to draft the application themselves and call outside counsel only as a last resort. In other situations, it may take weeks or months before in-house Patent Committees approve funds for filing.

Such delays can be deadly, as the Pfaff case illustrates. Even a delay of a week or two, or even a single day can compromise an application. In the semiconductor and computer arts, it is not untypical to see co-pending applications directed toward the same or nearly the same invention, filed within days of one another.

Fortunately, we now have a powerful weapon (not available to Mr. Pfaff) in the form of Provisional Patent Applications. Unfortunately, many attorneys are afraid of using Provisional Patent Applications - due mostly to folklore rather than sound reasoning.

Shortly after enactment of the GATT implementation legislation (providing Provisional protection in the U.S.), visiting EP "eurocrats" made some very unfortunate comments regarding provisional applications. Provisionals, they said, would not likely be granted priority in the EP, as without a claim, there is no "subject matter" to grant priority to.

These comments were, of course, unofficial and flat-out wrong. Provisional Application practice, of course, is a European, not U.S. invention. Although the EP and UK have since issued official statements disclaiming these off-the-cuff remarks, the lore that Provisionals are worthless continues.

Similarly, many practitioners take the view that a hastily prepared provisional application is a poor substitute for a properly filed "formal" U.S. Patent Application. A Provisional Application which does not provide sufficient support under 35 U.S.C. §112, first paragraph (for both enablement and best mode) may not be sufficient to support a later formal application.

In that regard, I agree. However, the Provisional Application should not be viewed as a substitute for formal filing - rather, it is an insurance policy which can be used to back up your formal application.

The Pfaff case, in my opinion, gives additional weight to provisionals as priority documents. In Pfaff, Justice Stevens wrote:

"Second, the invention must be ready for patenting. That condition may be satisfied in at least two ways: by proof of reduction to practice before the critical date; or by proof that prior to the critical date the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention." (Id., at 12)

Thus, the court provides a powerful and simple test for enablement, and a Catch-22 for your would-be opponent. Under Pfaff, if a litigation opponent alleges that your Provisional Application is not enabling, such an argument could be construed as an admission that the invention was not "reduced to practice" as of that filing date (and thus any alleged offer for sale would not invalidate the Patent).

If the invention is alleged as being "reduced to practice" by virtue of the inventor providing materials to a Patent Attorney (to prepare the provisional) then it would be difficult for an opponent to argue, in the same breath, that the Provisional springing from those disclosure materials, is non-enabling.

In short, Pfaff provides the unexpected benefit of giving Provisionals a bit of respectability - and a much needed shot in the arm.

There are, of course, law firms which already have embraced Provisional practice. I am aware of at least one firm which, as a policy, immediately files a provisional from invention disclosure materials provided by an inventor. Under the enablement test provided by Pfaff, such a practice makes sense. Perhaps, after Pfaff, to not file such a provisional (and afford your client the earliest possible filing date) could be considered malpractice per se.

Who's Afraid of Software Patents?

2007-10-21T10:36:00.000-07:00

This article was originally published in June 26, 1995 edition of ComputerWorld Magazine as an OpEd piece. I ended up writing and filing one of the earliest Internet Method of Doing Business Patents as a result of that exposure. Recall at the time, many were predicting the ruin of the software business if software was patentable.

WHO'S AFRAID OF SOFTWARE PATENTS?

Now that the U.S. Patent & Trademark Office has given the green light for software-related patents, some software developers have gone ballistic. In Internet postings and other forums, they argue that software patents will retard innovation, squash the small developer and generally bring an end of the American Way of Life as we know it.

Underlying this concern is that, with the apparent demise of "look and feel" copyright protection in the Lotus v. Borland case, it appears that patents may become the best way to protect software inventions.

I can understand why some software developers are upset. Copyright protection does have some certain advantages, such as being fairly inexpensive to obtain. Moreover, a case of copyright infringement, requires proof that a defendant did some copying. Insulating your software design staff from outside code sources may protect you from a copyright suit. Patents, on the other hand, require no such proof. You can be sued for patent infringement on a patent you've never seen or heard of.

But the critics underestimate the advantages of patent protection for software. Consider the following points:

Software Patents Were Issuing Anyway. At least now the PTO doesn't have to pretend that they don't. By facing this issue squarely, the Patent Office now has the opportunity to more consistently issue valid patents in software related fields. By hiring computer science majors (a break from long-standing PTO tradition) and creating a dedicated Examining group equipped with "prior art" files from the software field, the PTO has a better chance of avoiding such embarrassments as the Compton Multimedia Encyclopedia patent.

Patents are Easier to Adjudicate. The Patent field has over 200 years of Law and Rule making and court decisions behind it to aid in determining the scope and validity of claims. Patent claims are printed on a patent for all to see and interpret. In contrast, the "look and feel" copyright doctrine, apparently now defunct, was a new, judicially created doctrine with no precedential history. Patent claims may be distinctly designed around. "Look and feel" is more nebulous. Whose look? Whose feel? Patent claim interpretation is much less dependent on which judge you get.

Other Fields Have Survived and Thrived. Despite reports to the contrary, most technologies, including the computer arts, have survived and even thrived under our patent system. In the technology business, it is taken for granted that any new product carries a risk of infringement of a patent or patents. This risk can be minimized by performing a simple prior art search which may cost only a few hundred dollars.

Monopolizing the Software Field with Patents Won't Work. Proprietary formats and technologies are vigorously fought in the marketplace. In most cases, less sophisticated competing technologies will prevail. Consider BETA vrs. VHS, MacIntosh vrs. the IBM-PC, or Polaroid vrs. 35 mm. In all three cases, less sophisticated non-proprietary technology has prevailed. Any software developer who attempts to "force" the marketplace to buy his products through patent monopolies will eventually be history. (Bill Gates are you listening?)

Patents Don't Always Favor the "Big Guy". Consider Microsoft and Stakker. The patent system may actually favor the small inventor. Large Corporations may spend hundreds of thousands, if not millions litigating a patent suit. A small company, if they can find the right attorney, may litigate such a suit on contingency for a fraction of that amount. Moreover, a sole inventor has a much greater chance of eliciting jury sympathy when going up against the "big" corporation. Consider Mr. Kerns and his intermittent windshield wiper patent. If anything, large companies have more to fear from sole inventors than vice versa.

Regardless of whether you favor or oppose software patents, it appears as though they are here to stay. Unfortunately, it is not possible to 'opt out' of the intellectual property system. The best strategy is to establish your own portfolio and take reasonable precautions to prevent patent infringement. If sued, your patents can be valuable weapons to force settlement of a suit. Moreover, if you are a small, start-up company, you should count on any possible buy-out suitors being keenly interested in the contents of your patent portfolio.

Robert Bell is a Patent Attorney practicing in Alexandria, Virginia.

To NDA or Not to NDA?

2007-10-21T10:35:00.000-07:00

To NDA or Not to NDA?

--That is the Question --

What do to if your potential business partner refuses to sign a Non-Disclosure Agreement

The client is desperate for advice. “What do I do? My prototype maker refuses to sign an NDA, and I can’t find anyone else to make the invention for me! I don’t want my invention to become public domain! Suppose he steals the idea from me?”

This sort of situation occurs more often than you’d expect, and for the most part, I cannot really advise the client to go one way or the other. The reason is simple. These are business decisions, and I can only give legal advice. In other words, I can tell the client what the potential consequences of any action might be, but I can’t make the ultimate decision for them.

Figuring out what to do in a situation like this requires that you understand what a Non-Disclosure Agreement can and cannot do, and moreover, what your options are if someone you want to do business with refuses to sign such an agreement.

1. What is an NDA?

A Non-Disclosure Agreement is a contract, plain and simple, and is governed by applicable contract laws in your State or jurisdiction. By signing an NDA, both parties agree to be bound by the terms of the contract for the duration of the contract. A typical NDA, properly drafted, contains a few key provisions:

A. The parties agree not to disclose each other’s confidential information to others
B. The parties agree to return all documents and information supplied by the other in the event no agreement is reached with regard to the invention.
C. The parties agree not to use each other’s confidential information without compensating the other party.

In addition, there are usually other provisions that may limit the scope of an NDA. For example, information might not be deemed “confidential” if it was already known to the receiving party or is known and used by others.

Some companies spoof the entire concept of the NDA by reversing the primary terms completely (See my article NOT INVENTED HERE). In these NDAs, which I call “disclosure agreements” the receiving party agrees to keep your invention secret…unless they decide not to! Thus, it pays to READ CAREFULLY any proposed NDA before you sign it. Regardless of whether the title says “Non-Disclosure Agreement” the agreement may provide you with little or no rights.

2. Why won’t they sign an NDA?

Simply put, when you sign an NDA, you are signing a CONTRACT, and any contract may obligate you to perform certain acts. More importantly, for each contract you sign, you are exposing yourself to potential litigation liability for breach of contract.

Thus, as a large company, if you sign hundreds or thousands of NDA contracts, you are incrementally exposing yourself to more and more liability. In a country where you can get sued for serving hot coffee, the odds of getting sued for signing all those NDA’s is pretty high.

So there is no point in a large corporation agreeing to sign an NDA with a solo inventor, unless the NDA is one of those bogus “disclosure agreements” referred to above.

If you think about it, it makes sense. And if you were to advise a company, you’d advise them NOT to sign an NDA. For example, suppose you represent a carmaker. Most of the ideas submitted will relate to cars. If your client signs all these NDA’s with potential inventors, chances are, one of them will submit an idea similar or identical to an idea already under development in your client’s lab. You’ll end up getting sued, as the inventor will claim you “stole” the idea. Better off to advise your client NOT to sign any NDA’s.

Venture Capitalists (VC’s) historically have refused to sign an NDA, and in fact, to ask them to do so is considered an insult and a sure way to put an end to your “elevator pitch”. Again, since VC’s listen to hundreds, if not thousands of invention pitches over the years, the chance that they will hear the same idea more than once (or a similar idea) is pretty great. If they sign NDA after NDA, they slowly paint themselves into a corner, to the point where they cannot back any new idea without the chance of some previous inventor claiming a breach of an NDA.

Frankly, the proposition of an NDA is a bit absurd. Someone comes to you and says they want to tell you a secret. BUT, before they will, they want you to sign a contract agreeing to draconian consequences if you tell the secret to anyone else. Suppose the secret is not all that great? Suppose everyone already knows about it, or more to the point, someone in your company does? It really is a risk not worth taking.

So, there are various good reasons why people will refuse to sign an NDA. If you think about it, chances are, you’d refuse to sign one, too!

3. So What Can I Do?

Again, I can’t tell a client what they should or should not do. But I can advise them of their options and the possible consequences.

The first option is to walk away. Try to find another vendor or company that IS willing to sign your NDA. This might not be a workable option, as there might not be a lot of companies willing to sign an NDA. Moreover, if you walk away, there is no chance of getting your invention built, licensed, or promoted. If you want to play, and they have all the marbles, you might not have a choice here.

The second option is to rely upon your Patent rights or other intellectual property rights. This presumes you have a Patent on your invention or a Patent Pending, and that such Patent was competently drafted and will provide claims of sufficient scope to protect your invention. The downside to this is that you might not have any rights until the Patent issues. Moreover, if the Patent is not sufficient in scope, a company might be able to design-around your Patent claims and avoid paying you any royalties at all.

Both paths are fraught with RISK. But risk-taking is what business is all about. You cannot make money (or develop an invention) without taking large risks. The best you can hope to do is MANAGE risk, by trying to use an NDA and by getting your invention Patented. But you cannot avoid risk entirely.

4. Will My Invention Become “Public Domain?”

This is a tricky question, and one that illustrates why most companies refuse to sign a real NDA.

Suppose you come up with an invention and file for Patent protection. The Examiner does a search and discovers that your invention was actually invented by someone else in 1935. Your Patent Application is rejected, and you get no Patent.

Your invention does not “become” public domain, because in fact, it already was. Thus, if you rely upon Patent protection alone (with a pending application) and end up with no Patent, you have no protection for your invention. But on the other hand, if someone else already invented it, you weren’t entitled to any protection to begin with.

However, if a company signed an NDA, they might still be liable. They would have to prove in court what the Patent Office already proved – that you were not entitled to any rights to the invention in the first place. This additional level of proof is an additional burden to any company signing an NDA, which is one reason they prefer to rely upon Patent rights.

To add insult to injury, if you invention is not Patentable, the company who signs your NDA might find themselves unable to use your invention, while other companies (who did not sign NDA’s) are free to copy your unpatented design. That’s the Catch-22 of the NDA. If the company who signs your NDA produces your invention and pays you a royalty, others (who didn’t sign and aren’t paying you royalties) are free to make the product with impunity – unless you can get a Patent.

So, yes, there is a chance your invention could become “public domain” if you do not use NDA’s before disclosing your invention. However, if you are not entitled to invention protection from a Patent, chances are, you won’t get much protection from an NDA – as your invention is “public domain” anyway.

5. A Real-World Example

A client comes to me with an idea for an invention. We submit an Invention Disclosure Document to the Patent Office to “date stamp” his date of conception. We file a Provisional shortly thereafter, and within one year, a formal Patent Application.

In the interim, he wants to market and develop his invention. He approaches a model maker who is in a similar line of business and asks him to sign an NDA. The model-maker refuses. What is he to do?

I advise my client of the potential consequences and he decides to go ahead without an NDA. Once the model maker sees the invention, he is skeptical that it will work, and even asks my client to sign a release, releasing him from any damages to 3rd party equipment should the device fail. Obviously the model-maker doesn’t think much of my client’s invention!

But once the model is complete, it turns out to be a smashing market success. The model-maker starts selling it himself and telling anyone who will listen that he invented it! More than a year after our filing date, he files for his own Design Patent on the invention.

Meanwhile, my client struggles with a recalcitrant Examiner who stubbornly refuses to allow the Patent. After an Examiner Interview and some amendments, he finally allows my client’s Patent – over a year after the model-maker gets his.

A disaster story? Hardly. The model-maker is now over a barrel, so to speak, as he clearly “swiped” my client’s invention and moreover fraudulently Patented the invention. The invention is now widely in use, and my client’s Patent, now issued, can collect a lot of royalties from various infringers.

If my client had kept quiet about his invention and it was never adopted in industry, no one would be using it, and obtaining royalties from the Patent would be difficult to do. Sometimes it is a good thing when people infringe. In fact, you should hope that people do. You can’t sue a non-infringer, and a non-infringer has little reason to take a license.

So you see, even in this “worst case scenario”, where someone not only refused to sign an NDA, but tried to steal and sell the invention, things worked out OK for the inventor. Had the inventor resorted to secrecy to conceal his invention from the world, chances are he never would have made a dollar on it.

6. Some other NDA questions

So why do people use NDAs? I mean, SOMEBODY has to be using them, right?

Well, this is true. Some smaller companies are willing to sign NDAs with solo inventors, as they are eager to obtain new concepts and ideas. Perhaps they are also more willing to take risks (risk being sued) as they need a ‘leg up’ on the competition.

Large corporations also use NDAs, typically with suppliers and the like. Since they have leverage with such suppliers, it is not hard to get them to sign an NDA. Also, such a supplier might not be able to get any business from companies if they are known as being loose-lipped.

But outside these limited areas, NDAs are largely ignored. And the NDA can often be an impediment to business. It was the NDA that caused Microsoft to be what it is today. IBM originally approached Bill Gates to write the “DOS” program for the IBM PC. Gates turned away the work and referred IBM representatives to the inventor of the then-dominant CPM operating system. After days of negotiation over the terms of IBM’s NDA, IBM representatives got fed up and said “Let’s go ask this Gates fellow again!”. And the rest, as they say, is history. People can get so focused on things like NDAs that they lose site of the big picture.

Can an NDA can “toll” the bar date under 35 USC 102(b)? Under 102(b), you have one year from the date of first use, sale, offer for sale, or publication, to get your invention on file – or it becomes public domain.

If you disclose your invention to a 3rd party under an NDA, does this trigger the one year filing “clock” under 35 USC 102(b)? The answer is a qualified “maybe”.

Strictly speaking, the best answer is to file your Patent Application as early as possible, so you don’t have to make such grey-area judgment calls. Whether a disclosure under an NDA qualifies as “public” disclosure could depend upon a number of circumstances and facts. For example, an offer for sale under an NDA is still an offer for sale. I don’t think an NDA can stop the clock for you there. However, sending out a prototype part to be made by a vendor under an NDA might not be considered a “public” disclosure, as this is still part of the inventing and development stage.

To be on the safe side, I would suggest you file early. You never know what a court will say on the matter, and relying on NDAs to delay filing your Patent Application is never a sound idea.

Why do so many “inventor help” books recommend getting someone to sign an NDA? I am not sure of the answer to this one. Some of these books (and websites) suggest that you can forego the Patent process and instead “protect” your invention with Non-Disclosure Agreements. I disagree.

Sure, it would be great if you could get a company to sign an NDA and then sue them under that NDA if they produce your invention. But as I noted above, the odds of this happening are slim. And there is something unwholesome about using a contract to “trick” a company into paying you royalties for an invention, which, once manufactured, will become public domain.
Should my Patent Lawyer sign an NDA? When I started my practice, I told potential clients that if that made them feel more comfortable, I was more than happy to sign an NDA. Lately, however, I have been backing away from this policy, merely because it seems duplicative and time-consuming. If a client doesn't trust their Attorney, it is not the basis for a good Attorney-Client relationship.

I am nor aware of any Attorney, Agent, or even Invention Broker who has made a business of stealing ideas from inventors. The reasons for this are multiple. To begin with, a Patent Attorney is licensed with the Patent Office, and the State Bar where they practice. If an Attorney were to "steal" an idea, he would face disbarment and lose his livelihood in short order.

Second, most inventions never amount to much – maybe 90% or more. So stealing inventions is a pretty poor scheme. This is why crooked invention brokers want to steal just your money – there is little or no profit in stealing inventions. In order to make money from an invention, you generally have to spend a lot of time, effort, and money promoting an invention, and for a crook, this is just too much work.

Finally, stealing inventions would seem to be a pretty dumb crime. If an inventor has properly documented his invention by writing down an invention disclosure, having it signed and dated and witnessed, he has established a paper trail that any invention thief would be hard–pressed to overcome. It would be suspicious, to say the least, for an Attorney to claim to have invented something immediately after talking with an inventor who claims to have invented the same thing!

* * * *

So what should you do if someone refuses to sign your NDA? I can’t tell you for sure – that’s a decision you have to make on your own. However, I can tell you that at some point along the line of invention development, you have to engage in risk-taking. And at some point, your invention will be publicly disclosed (otherwise it will never generate money). Relying upon secrecy and NDAs to “protect” your invention will rarely result in your making money from the invention. While you may be able to get one company to sign an NDA, once the product is public, their competitors are free to copy it. You are better off to get a Patent for your invention, rather than try to trick people into signing contracts.

UNDERSTANDING MAINTENANCE FEES

2007-10-21T10:34:00.001-07:00

UNDERSTANDING MAINTENANCE FEES

To many, the concept of maintenance fees and the time periods for paying them is somewhat vague. In reality, it is a fairly simple process and easy to remember, if you reduce the concept to its simplest form. The following information outlines most of what you need to know about Maintenance Fees.

1. Maintenance Fees versus Annuities

In most other countries of the world, Annuities must be paid for every patent application and patent. As the name implies, these are annual fees, usually paid on the anniversary date of filing. While the fees are somewhat smaller than US Maintenance Fees, since they occur every year, the overall cost can be greater. In addition, many overseas Attorneys charge fairly heft sums just to docket and pay these fees.

In the United States, there are no Annuities, at least as of the time of this writing. Instead, we have a series of three Maintenance Fees which are payable AFTER the Patent issues, in order to keep the Patent in force. If these fees are not paid, the Patent “expires” for failure to pay maintenance fees.

2. When are Maintenance Fees due?

This is the first area of confusion for many. The fees are officially due at 3½, 7½, and 11½ years from the date of ISSUE of the Patent. Counting to half-years gets kind of confusing, so folks have a hard time figuring out exactly when their fees are due. I know I did! However, there is a way to simplify this calculation – simply round-down to the nearest full year (3, 7, and 11 years).

The fees are actually payable during a year-long “window” starting at 3, 7, and 11 years from the date of issue. These even numbers are a lot easier to remember! Each fee can be paid for the first six months of this year-long “window” without any surcharge. In the latter six months, the fee is considered “late” and a small surcharge fee ($65 at the time of this writing) is additionally due.

So for example, at the 3-year mark, you can pay the maintenance fee due any time from 3 years to 3½ years without any surcharge. From 3 ½ to the 4 year mark, the fee can be paid with the $65 “late fee”. After 4 years, the Patent is deemed to have Expired.

So rather than docket at half-years, it is much easier to docket at the 3, 7, and 11 year marks. If you set a reminder at the ½ year marks, you might not realize that the fee is due until you are already into the “late fee” period. Docket at the beginning of the window, not the end!

3. What are the amounts of the Maintenance Fees?

U.S. Maintenance fees are progressive, so each successive fee is much more than the previous one. The idea is to encourage inventors to allow their Patents to expire unless they are actually being used. The Government does not want inventors to “sit on” Patents with the hope that maybe somebody will someday infringe, and then they can sue. With the Maintenance Fees, it is “use it or lose it”.

Maintenance Fees are raised periodically along with all other Patent Fees, so it is hard to say exactly what they will be. At the time of this writing (July, 2005) the fees are as follows:

YEAR Large Entity Small Entity
3 Years: $900 $450
7 Years: $2,300 $1,150
11 Years: $3,800 $1,900

As you can see, the fees increase steeply after the first fee at year 3. Consult http://www.uspto.gov/ for current fee levels. Note that “Small Entity” pricing applies to most small companies, start-ups, and solo inventors. Consult your Attorney if you are unsure if you are a small entity or not.

4. What happens if I don’t pay the Maintenance Fee?

If the Maintenance Fee is not paid in a timely manner, the Patent is deemed to have EXPIRED (note, not “abandoned”, which is a term that applies only to pending applications). Unless it was your intention to allow the Patent to Expire, this is not a good thing.

It is possible to PETITION to REINSTATE your Patent on “Unintentional Grounds” by filing the necessary Petition (Form PTO/SB/66, available on the http://www.uspto.com/ website) and paying the hefty Petition Fee ($1640 at the time of this writing). However, there are some pitfalls to such Petitions.

To begin with, you cannot intentionally allow the Patent to Expire and then Petition to reinstate on “unintentional expiration” grounds. This sounds rather obvious, but I have had clients ask if they can do this. In case I am not being clear, the answer is NO.

The second problem is that if someone starts making your invention in the interim, and relies upon your Patent having expired to start his business, you might find your rights to sue that person have been damaged or destroyed. The would-be infringer can claim “intervening rights” and you might not be able to collect as much in damages, if anything from that infringer.

Note also that you cannot delay in filing such a Petition. Once you become aware that the fee was not paid on time, you must immediately file the petition. If you intentionally delay in filing the Petition, you lose. In addition, you cannot go back and reinstate Patents that expired years ago. Generally speaking, such a Petition should be filed within one year of the expiration date of the Patent.

So it is not a good idea to let your Patent Expire unless you really want it to.

I should note that it is also theoretically possible to reinstate your Patent by filing a Petition to Reinstate on UNAVOIDABLE grounds. The fee for such a petition is less ($700) but such Petitions are hardly EVER granted. You must show with clear evidence that there was no way you could have paid the maintenance fee on time. And by this, I don’t mean that you “forgot” or your attorney didn’t remind you. It has to be some catastrophic event that would prevent you from paying the fee whatsoever. Frankly, I can think of very few instances where such a Petition would be effective. So forget about it!

5. What is the “Official Patent Maintenance Fee Payment Company”?

Many solo inventors and small companies receive postcards from organizations with official-sounding names such as the “Official Patent Maintenance Fee Payment Company”, or something similar to that. The postcard sounds official and warns the recipient that their Patent will expire unless the Patentee sends the company $125.

These companies are not sanctioned or authorized by the United States Patent & Trademark Office, and moreover, will not pay the maintenance fees for you. If you read the fine print on the back of the post card, they are agreeing only to send you the FORM to pay the maintenance fee for the $125 fee you send them. Responsibility for paying the maintenance fees still rests with you.

Paying $125 for a form is kind of pricey, especially considering that the form PTO/SB/45 can be downloaded for free from http://www.uspto.gov/. Moreover, you can even pay these fees on-line at http://www.uspto.gov/, without using any form at all.

However, what these companies are expecting (and what actually happens) is that the inventor, thinking that the postcard is from the Patent Office, pays the $125, thinking it is the actual maintenance fee, not a service fee for mailing a form. While you might think this is too easy a trap to fall into, I have had at least two clients fall for this scam, both of whom were quite well educated and astute people.

In one instance, an inventor called me, after I had sent a reminder about the maintenance fee, saying “I already paid the fee directly to the Patent Office, and it wasn’t $450 like you said, it was only $125!” While I was disappointed that my client had fallen for this scam, I was also a little chagrined that he would think I would overcharge him for a maintenance fee by more than $300.

Like any other scam, these maintenance fee postcard companies rely upon the greed of the “mark” – by enticing people to think they can get “something for nothing” or in this case, a $450 fee paid for only $125.

If you send $125 to these companies, your Maintenance fee will NOT be paid, and your Patent WILL Expire. Note that falling for a con artist is not sufficient for a Petition on Unavoidable grounds, either.

6. Should I pay the Maintenance Fee on my Patent or let it Expire?

This is as tough a question as “should I get a Patent?” I can’t answer it for you, either. Maintenance fees are expensive, and whether a Patent is worth maintaining depends upon whether you are profiting from it, have plans to profit from it, or are making products covered by the Patent.

The whole idea of the Maintenance fee system is to encourage inventors to let Patents expire if they are not being “worked”. So if you have essentially abandoned your invention at this point, maybe paying maintenance fees doesn’t make any sense.

But that is a business decision, not a legal question. Whether or not you should keep your Patent in force is a judgment call that YOU have to make. Balance the costs with the potential returns. If it doesn’t add up, let it go.

7. Will the Patent Office or my Attorney send me reminders of Maintenance Fees?

The answer to this question is: maybe. The Patent Office SOMETIMES sends out maintenance fee reminder letters to the last address of record in the file. However, the Patent Office does not guarantee to do so, and explicitly states in the Manual of Patent Examination and Procedure that failure to send out such reminders is NOT grounds for a Petition to Reinstate on unavoidable grounds.

Since the last address of record might be your Attorney, the chances of you receiving a reminder from the Patent Office are pretty slim. I would not rely upon this as a means of docketing your maintenance fees.

Some Attorneys might agree to remind of you Maintenance Fee due dates. Some do not. I do not. The reason is very simple. For the very low fees I charge, I cannot take on the responsibility for payment of fees over a period of 12 years from the date of issue. It is just too large a liability and too much clerical work over a long period of time.

Since it is so easy to pay the fees yourself on-line, I find that in the instances where I do remind a client of the fees due, they go ahead and pay it themselves on the USPTO website. So it is not worthwhile for me to docket these fees, pull the files, type, print, and mail reminder letters, only to end up not getting paid.

And with the open-ended liability involved, it certainly is not worthwhile. I cannot assume a potential risk of a million-dollar Patent expiring on my watch in exchange for the possibility of making $175 or so paying a maintenance fee. The risk and rewards just don’t balance out.

There are annuity companies such as Computer Patent Annuities, which, for a fee, will docket your maintenance fees and send you a reminder. For a larger fee, they will even agree to pay them for you. Since these commercial companies are available to assume the risks and liabilities for paying maintenance fees, there is no need for me to duplicate their efforts. And there is certainly no need for me to assume these risks for free, either! If you want someone to remind you of the fees due and pay them on your behalf if you forget, you will have to pay for this service, period.

If you decide to pay the fees yourself, it might be a good idea to file a change of address form with the Patent Office, directing all future correspondence to you. At least this way, you might receive the Maintenance fee reminders and payment notifications if they are sent out.

It is also a good idea to notify your Attorney of any changes of address. While I do no guarantee to remind clients of Maintenance fees, I may send out courtesy reminders from time to time. If a client does not provide me with a current address, there is no way I can send out such reminders. 12 years is a long time, and people do tend to move. In more than one instance, I have tried to remind a client of a Maintenance fee, only to have my letter returned, stamped “no forwarding address”.

Note that you can check the status of your Patent’s maintenance fees, when the “windows” open and close, and whether past fees have been paid by going to the USPTO website at http://www.uspto.gov/ and clicking on the electronic business center.

8. Can I copy technology from an Expired Patent when the Maintenance fee has not been paid?

See my comments above regarding Petitions to Reinstate. Since a Patent Owner can pay the maintenance fee anytime during the yearlong window, we have no idea of whether the Patent has expired until at least the end of that period. In addition, since an applicant can Petition to reinstate on unintentional or unavoidable grounds, it is always possible that the Patent could be reinstated months later.

If you do act in reliance on a Patent having expired, you might be able to claim “intervening rights” if the Patent is later reinstated. However, such rights might not eliminate all of your liabilities, and moreover, you have to go to court to assert such rights.

Whether or not a particular Patent has truly “expired” is a fact-specific situation, and I would recommend consulting an Attorney before taking any actions in reliance of an “expired” Patent.

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As you can see, Maintenance fees are not all that complicated to figure out. Just remember the mantra of “3, 7, 11” as the years to pay the fees. Mark down these dates and make sure the fees are actually paid – if you want to keep your Patent in force.

WHAT IS A FILING RECEIPT?

2007-10-21T10:33:00.001-07:00

WHAT IS A FILING RECEIPT?

Once a Patent Application has been filed, it is forwarded to the Office of Initial Patent Examination (OIPE) for initial review for completeness as well as for classification and assignment to an Art Unit for later Examination. The Initial Examination process is important, as it establishes whether the application is “complete” and whether it is entitled to a filing date.

In order to obtain a filing date, an application need contain only the Specification, Drawings (if appropriate) and at least one claim. A signed Declaration and the Filing Fee are not required for initial filing. Thus, the first job of OIPE is to establish whether the application contains sufficient elements to be entitled to a filing date.

If one of these essential elements is missing, or a portion of them is missing (e.g., pages missing from the application), a NOTICE OF INCOMPLETE APPLICATION may be sent to applicant. This is a pretty serious document that should not be treated lightly. In such a case, you may not be entitled to a filing date until all the basic elements of the application are received by the Patent Office. If you are filing close to a “bar date” or foreign priority deadline, such a situation can be disastrous. For this reason, it is always a good idea to count the pages of your application two or three times before submitting it to insure that no pages were lost in the photocopier or otherwise forgotten. In many situations, if you have a date-stamped receipt card showing that all pages were submitted, you may be able to submit the missing pages (likely lost by the Patent Office) to correct the deficiency without losing your filing date.

If you filed the application without a signed Declaration and without the filing fee (which, as noted above, is clearly permitted) you will receive a NOTICE TO FILE MISSING PARTS (NTFMP). The NOTICE will state what fee should be paid and whether or not a signed declaration need be submitted. A time period for response (e.g., two months) is also stated on the NOTICE. Once a RESPONSE TO NOTICE TO FILE MISSING PARTS is submitted, the application is deemed “Complete” and ready for Examination.

In the Good Old Days, this is when the Official Filing Receipt would then be issued. They were always issued on blue colored paper and the issuance of an Official Filing Receipt was an indication that the application was complete, accorded a filing date, and ready for Examination. In recent years, however, the Patent Office has changed this procedure somewhat. The Filing Receipts are no longer blue, and are issued early on in the process – regardless of whether the application is complete and accorded a filing date.

In situations where a NOTICE OF INCOMPLETE APPLICATION or NOTICE TO FILE MISSING PARTS has been issued, you may receive multiple Filing Receipts, each updated as elements of the application are completed. This can get confusing. Just bear in mind that an Official Filing Receipt does not always mean the application is complete – you have to read it carefully to understand whether anything more is needed.
When studying the Filing Receipt, first carefully check the data on the Receipt to insure it is accurate and correct. The data printed on the Filing Receipt is taken directly from the Patent Application Location and Monitoring (PALM) system – the source of basic Patent Application data through the life of the application. If there is a typo here, it is best to fix it now rather than later. A Request for Corrected Filing Receipt can be filed explaining the error and requesting a correction. A Corrected filing Receipt may be subsequently issued, adding to your pile of Filing Receipts.

The top line of the Filing Receipt shows the basic application data – the Serial Number, filing date, attorney docket number, total number of claims, total number of drawing sheets, and total number of independent claims. In addition, this line shows the filing fee received and the initial Art Unit that the case has been assigned to. If you have not yet submitted the filing fee, this will be indicated on the sheet. The initial Art Unit is based upon initial classification of the invention. Classifiers have only brief minutes to review the application and assign it to a class and subclass (and thus an Art Unit and eventually an Examiner). Don’t be surprised if the application is later reassigned to a different unit before Examination commences.

The Filing Receipt also lists the inventor names as well as their City and State of residence. Again, check this data for errors and correct it now, rather than later. If you application claims priority from another U.S. Application (Utility or Provisional) or a Foreign Application, this data is also shown. Check this data carefully to insure there are no typographical errors – otherwise your priority claim may not be “perfected”. Note that an algorithm in the USPTO computer checks domestic priority claims Serial Numbers and Filing Dates for consistency and will note whether an error has occurred. On one occasion, the computer kept spitting out an “error” message when the Priority claim was indeed correct. A simple Request for Corrected Filing Receipt solved the problem.

The Filing Receipt also lists the Title of the Invention, projected publication date (if applicable) and whether a “Foreign Filing License” has been granted. This last item is a holdover from the Cold War, when Washington was concerned that the Russians would steal our defense secrets from U.S. Patents. Security Group reviews any cases which appear to have defense-related applications and grants (or denies) a foreign filing license based upon the sensitivity of the subject matter. It is very rare that a foreign filing license is not granted. Bear in mind, though, that until that license is granted, you should not foreign file your application!

If your Filing Receipt is accurate and complete, and all outstanding requirements of OIPE have been complied with, the application will be forwarded to the assigned Art Unit for assignment to an Examiner and eventual Examination. Senior Examiners in each Art Unit assign the cases based on subject matter and complexity to various Examiners in their Art Units. In many cases, they may transfer a case to another Art Unit more appropriate to the subject matter. Once assigned, the application is “docketed and ready for Examination”.

Now, here’s the bad news. As of the date of this writing (December 2003), the delay from docketing to a First Office Action on the Merits (FAOM) is at least a year or more in the mechanical groups and running 24-36 months (or more) in the Chemical and Electrical Groups.

Thus, once you have your Filing Receipt and the application has been docketed for Examination, there is nothing else to do but wait – and wait for a considerably long time.

Many inventors are discouraged by this delay. They ask me, “Should I wait for my Patent to issue before I market or promote my invention?” My answer is “No.” The success or failure of your invention is not going to depend upon the Patent, but on whether the invention has any marketable merit – in other words, whether people want to buy it. The Patent serves only to protect your idea, should it become successful and others copy it. So, there is no point is “waiting” for the Patent Office before proceeding with your invention.

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YOUR PATENT HASS ISSUED

2007-10-21T10:32:00.001-07:00

Your Patent Has Issued – Now What?

Some things to remember and watch out for

Congratulations on receiving your U.S. Patent! It sure likes nice, all official-like with a ribbon and seal. After admiring it and showing it to your friends, you may wonder, “well, now what?”

As I have noted on my website, I prepare and prosecute Patent Applications before the Patent & Trademark Office. I am not an invention promoter, developer, or whatever – most of those folks are flat-out crooks.

I also am not a litigator. That takes a set of skills much different than Patent Prosecution. It also requires a lot of support staff and infrastructure.

So I can’t help you if you want to sue somebody or find a company to make and sell your invention. If you’ve been reading the materials on my website (See, “Should I Get a Patent?”) you’ll know my feelings on invention promotion – that the inventor is the best developer and promoter of his own invention.

However, there are some tips and suggestions I can offer to the solo inventor or small entity (small company, start-up).

1. Maintenance Fees: The Patent process is not entirely over at this point. If you do not pay your maintenance fees, your Patent will expire. I have an extensive article on this (See, “Understanding Maintenance Fees”) on my website. As I note in all my materials, I do not agree to docket and pay these for you, as this would be an 11+ year commitment on my part – a lot of liability, without a lot of reward. So review my article on Maintenance Fees and take appropriate measures.

2. Con Games: Once the Patent has issued, or even after it has been published, you may be contacted by a number of companies and individuals offering to help you. Most of these are outright crooks, but not necessarily all of them. Every once in a while, you do run across a legitimate licensee or party interested in licensing or buying your Patent. But the vast majority are frauds. Here are some things to watch out for:

A. Maintenance Fee Fraud: An official-sounding company offers to pay your maintenance fee for an absurdly low sum (e.g., $125). Since the lowest maintenance fee is $450, this is of course, impossible. If you read their post card or letter carefully, what they agree to do is send you the FORM to pay the fee, which of course, you can download free off the Internet. In fact, you can pay the fee online yourself with a credit card at www.uspto.GOV. Note I said “.GOV” and not dot com or some other extension. These fraudsters are tricky, so make sure you are on the right website!

B. Licensing Fraud: A caller from a company with an impressive-sounding name and a fancy website offers to license your Patent for you and tells you they have a licensee ready to sign, or implies they do. Or, they may imply they can find you a licensee and claim to have a great track record in doing this. The catch is, of course, they want $5,000 to $10,000 in up-front fees. They take these fees, from thousands and thousands of inventors and simply cash the checks – which makes them tens of millions of dollars per year. They do little in the way of licensing or marketing your invention, if indeed anything at all. You cannot do anything to get your money back, as it would cost more to sue them that it is worth.

C. Patent Plaques: This is not a fraud, but you will get letters offering to make your Patent into an attractive wall plaque. They are not bad looking (I had my first Patent made into a plaque). But they are not cheap, either. Shop around, as you might be able to find one for a lot less than you are quoted. Also, you can simply frame a good copy of the Patent, printed on fancy paper, for a whole lot less. Clean copies of your Patent can be downloaded from www.uspto.gov or in .pdf format at www.freepatentsonline.com.

3. License Agreements: Like I said, every once in a while, you might get a cold call from someone who really, really wants to license your Patent or buy it from you. I’ve had this happen to several clients in the 20-some years I have been in the Patent business. It is not common, but it does occur. So what do you do? I can help you negotiate the legal terms of a license agreement and help you review a proposed agreement, for fairly nominal fees.

But I prefer to let the client determine the basic terms (price, royalties) rather than interject myself into the process. I have found that Attorneys can sometimes destroy a deal by trying to be in the negotiation process.

What I advise clients to do is very simple. Sit down with a piece of paper and figure out what price you’d like to get for your Patent, in terms of sale, licensing royalties, or both, and write that number down. That would be your “dream” number – what you would like to get. Then write down the bare minimum of what you would be willing to begrudgingly accept.

If you can negotiate a deal between these two price numbers, then sign it. You have made your target and you should move on with no regrets. One problem I see with inventors is that they have no idea (or claim to have no idea) what their invention is worth, and after signing a perfectly good deal, have regrets that they sold “too cheaply”.

I have also seen inventors mess up perfectly good deals by insisting on ridiculous terms (i.e., demanding that all profits from the invention be paid to them). Figure out a reasonable price range, negotiate a deal in that range, and make the deal happen.

And have an Attorney look over the agreement. No licensing agreement is ever “perfect”, but you can protect yourself from some problems down the road by putting in some perfectly reasonable clauses into the agreement – and most licensees expect to see such clauses and would not reasonably object to them.

4. Developing your invention: As I noted above, I am not an expert in invention development. Taking an invention from prototype to marketable product takes a lot of expertise. For an inventor who has yet to make a prototype, this can be a daunting task.

As I have noted on my website, getting a Patent is often the easy part. The hard part is making and selling product. Selling product is ultimately what makes money for a patent holder – either by themselves, or through a licensee. No money can be made if the product is merely a paper idea.

Having prototypes made, traveling to China to have tooling and development work done (where most new inventions are built these days) and then purchasing and warehousing inventory are all expensive and capital-intensive tasks. And this does not even begin to address the efforts needed to market an invention – getting it in catalogs, on store shelves, and into the hands of consumers.

You either have these skills and contacts, or you don’t. Inventor’s groups, some books and magazines may be helpful. But since I don’t work in this line of business, I cannot be of much further help.

5. Infringement: You would think that a company making an infringing product would simply take a license and pay a reasonable royalty, rather than risk being sued for Patent Infringement. You’d think that, anyway! The reality is that a lot of companies take the attitude of “Oh yea, well MAKE ME!”

And this attitude keeps litigators busy.

Again, I am not a litigator, so I cannot sue someone for you. But I can offer the following tips if you are confronted with infringement:

A. DO NOT threaten to sue people: Sending out letters with wording like “you infringe” or “cease and desist” can be dangerous. An infringer can bring a Declaratory Judgment action against you in the court of his choosing, and you will have to scramble to find a lawyer to defend your Patent. If you fail to respond to such an action, your Patent could be held invalid and/or not infringed.

B. DO put people on Notice: There is no harm in sending out a letter stating that the Patent is available for license or sale. Such a letter puts the other party on notice of the existence of the Patent. And, in some instances, it may result in an offer to license or buy your Patent. Consult an Attorney for the specific wording of such a letter.

C. DO NOT discuss the validity or scope of your Patent: An infringer calls you or writes to you and says your Patent is invalid or not infringed – trying to get you to make an admission on the record about some aspect of your Patent, what a particular phrase in the claims means, or whatever. Don’t fall for that trap! Refer all questions about the scope and validity of your Patent to an Attorney. I have seen infringers call up an inventor, badger them about the Patent for hours on the phone, and record the phone call, trying to get the inventor to say something incriminating. Keep silent! Similarly, do not say anything in writing about the scope or validity of your Patent. Such matters are irrelevant to a licensing discussion anyway.

D. DO respond, through your Attorney, to written allegations: One other (perfectly legal) trick to do is to write back to a Patent holder and say “we don’t infringe your Patent because of X”. If you don’t respond to these arguments properly, they might be able to argue that you are estopped from raising infringement arguments later on, as they relied up your silence on the issue as an assent to the allegations of non-infringement. Such allegations need to be responded to carefully, to avoid such estoppel issues.

E. DO NOT be in a hurry: A client calls me on the phone in a panic – someone is making a product just like in his Patent! What is he to do? Well, don’t panic right away. You may be able to collect for infringement damages for up to seven years after the fact, so there is no big hurry to sue them when they are just hitting the market. In fact, sometimes going after an infringer prematurely can hurt more than it helps. If they are still in the prototype stage of development, they can redesign their product to try to avoid your Patent. However, if they have already tooled up for production, it is a lot more expensive to try to “design around” your invention. Putting the infringer on Notice and offering them a license might not be a bad idea, but don’t feel that you have to sue them right away. In fact, most law firms won’t be interested in suing someone, unless there are sufficient damages available to make it worthwhile.

6. Suing Someone (or Somebody): Sometimes you just have to sue someone to collect what is owed to you for your Patent. As I noted above, there are some folks out there who just won’t pay up unless you force them to. So what are you to do? The options are not pretty or simple. Here is a summary of what I know to be available:

A. Hire a Lawyer: If you were Bill Gates, this is a simple solution. Just call your lawyer and sue their pants off. Sure, it may cost anywhere from $50,000 to $200,000 per month to sustain a full-blown Patent Infringement action at a big downtown law firm. But hey, it’s only money, right? Chances are, if you are one of my clients, this is not even an option.

B. Contingency Fee Attorneys: This would seem to be a much cheaper alternative, and relatively speaking, it is. But it still isn’t free. Some firms, such as Niro, Scavone, in Chicago, and even small shops like Mereck, Vorhees, in Alexandria, Virginia, have taken on (or may take on) contingency fee cases. There are three caveats, however, when dealing with any contingency fee attorney:
i. There has to be a “there” there. No Attorney will take on a contingency fee case unless there are sufficient damages to make it worthwhile. The actual threshold will vary from firm to firm, but generally a half-million to a million dollars in damages are needed to make the effort worthwhile. If your invention is only going to generate $50,000 in royalties – then forgetaboutit!

iii. There are still “expenses”. Contingency fee attorneys will still charge you for expenses, which under State Bar Rules, they generally are not allowed to advance on your behalf. While this may sound fairly cheap, one Attorney tells me this can run $10,000 a month or more, for airfare, car rental, hotel rooms, court stenographers, expert witness fees ($300 and hour and up!), photocopying, postage, parking and of course, court fees. Preparing a case for trial often involves travel to depose witnesses, and these fees can add up!

iv. The Attorney usually wants the lion’s share of the proceeds. As noted above, a full-fledged lawsuit can run hundreds of thousands of dollars, if not into the millions, to litigate. So most contingency-fee Attorneys want 30 to 60% of the proceeds before they will consider a case. Most lean toward 60%. It is not that they are greedy (well, relatively speaking, anyway) but that they could make that much representing a cash-paying customer. So they can’t simply give their service away for free. Also, they are taking a huge risk that there might not be any money at all at the other end of this, so they are entitled to a “risk factor” bonus for taking the case.

C. Patent Companies: There are companies out there that will buy an interest in your Patent and then sue infringers and collect damages, splitting the proceeds with you. General Patent Corporation is one of the most famous of these, but there are others out there. Most of these companies want a huge cut of the Patent (a 30-60% ownership stake, again leaning toward 60% or more). In return, they will finance the lawsuit, usually through their own “in house” Attorneys, and collect royalties from licensing fees, and split the proceeds with you. I have never used such companies, but have investigated some on behalf of some clients. I have also talked to some customers of such companies. While some customers report receiving six-figure sums, they do report that it does take years to litigate these cases. Also, some Patent companies may try to charge “expenses” against overall profits – which may cut down your payoff considerably. On the other hand, they are taking big risks that the Patent may not pay off at all, and also are investing cash money in litigation expenses, so they entitled to some return on their investment. If you are totally broke and all you have is your Patent, these companies may be your only option, in some instances. My only advice is to read any such agreement very carefully before signing. And shop around for the best deal. Like I said, there are several of these companies out there, and if your Patent is worth anything, they will compete for the business.

D. Venture Capitalists: Sometimes called “Vulture Capitalists”, a “VC” as they are called, will sometimes agree to back a Patent or groups of Patents, to go after infringers. This is not unlike the Patent Companies cited above, except that they are not as well known and organized as these companies are. And generally speaking, a VC is only interested in really worthwhile Patents. VC’s have earned their reputation the hard way – they earned it. Like the contingency litigation Attorney and Patent Company, they will expect to receive a lion’s share of the proceeds in return for risking hundreds of thousands (if not millions) of their capital. How to go about contacting and selling a VC on your Patent is not easy. This is a business made through connections, and oftentimes you need to find someone who is connected to get one of these deals done. The problem here is that many people will claim to be “connected” but will in fact be only con artists. And given the nature of this business, it is oftentimes hard to tell them apart.

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As you can see, the options for exploiting your Patent are neither cheap nor easy. Perhaps now you understand why I try to discourage people from getting Patents, unless they understand the whole picture up-front. Getting the Patent is often the easy part. For some folks, however, an invention can be a ticket to at least some moderate success, but only after years of hard work and expense. While the Rockefellers, Carnegies, Morgans, and Gates have gone down in history as making millions (and billions) of dollars, these folks were not inventors, but marketers and money-men. It is the people with the dough who usually make the lion’s share of the cash to be had from an invention. The inventor usually ends up with a minority share in any enterprise. But even a minority share can still be quire lucrative.

Good Luck!

© 2006 Robert Platt Bell