Patent Ownership and Transfer

CHAPTER 19 Patent Ownership and Transfer TRIVIA The first woman to receive a patent, Mary Kies, received it in 1809 for weaving straw with silk or thread. Abraham Lincoln is the only U.S. president to hold a patent (Patent No. 6,469 for A Device Buoying Vessels Over Shoals, granted in 1849). Someone receives a patent in the United States every three minutes. In 2000, Qualcomm reported royalty and licensing fees totaling $705 million for its technology used for cell phones. CHAPTER SUMMARY Because patents have the attributes of personal property, they may be sold, licensed, or bequeathed by will. A person who conceives of an invention and reduces it to practice is a sole inventor. In many cases, however, more than one person will work on an invention. Those parties may be joint inventors even though they do not contribute equal efforts to the invention and do not physically work together. If a dispute over priority of inventorship arises, the general rule is that the first to invent is the one who conceived of the invention and first reduced it to practice, either actually (by building a model or embodiment of the invention) or constructively (by filing a patent application for the invention). Notebooks describing work done by inventors often assist in determining priority disputes. Generally, inventions discovered by employees (who are not subject to agreements granting rights to employers) are owned by employees, subject, however, to a shop right, namely a nonexclusive royalty-free license in favor of the employer to use the invention. In most instances, however, employers require employees to enter into agreements assigning any inventions and rights therein to the employer. Nevertheless, even without a written agreement, if an employee is hired specifically to create a certain work, the employer will own the resulting work. As items of personal property, patents may be assigned or sold to others, as long as the instrument is in writing. Recordation with the PTO is not required for an assignment to be valid but is recommended. Patents may also be licensed by agreements granting another the right to use, make, or sell the invention for a specified period in a specified territory in return for which the licensee will give consideration (usually in the form of periodic royalty payments) to the licensor. Patents 1

CHAPTER 19 may also be used to secure obligations so that in the event of a default by the patent owner, the secured party may seize the patent and exercise all rights of ownership. INTERNET RESOURCES Federal laws relating to patents: U.S. Patent and Trademark Office: General information: http://www.ll.georgetown.edu or http://www.findlaw.com http://www.uspto.gov (access the MPEP for information about joint inventors, assignment, and licensing; forms are provided for assignments and for recording assignments and for Invention Disclosure Documents; general information about invention promotion firms) http://www.ipmall.fplc.edu (Pierce Law s IP MALL with excellent information and articles and links to other IP sources); http://www.findlaw.com; and http://www.megalaw.com

CHAPTER 20 Patent Infringement TRIVIA The costs of the average patent infringement trial are estimated at between $1.5 million and $3.5 million. Inventors from California apply for more patents than residents of any other state, followed by New York and then Illinois. Residents of Alaska apply for the fewest patents. According to some experts, lawyers in patent infringement cases often charge contingency fees as high as 45 percent. Although jury verdicts overall increased substantially in 2000, the most significant increase involved IP cases. CHAPTER SUMMARY A patent can be infringed even if the infringer does not intend to infringe and does not know a patented invention exists. Liability for inducing infringement or contributory infringement, however, requires intent. If parties cannot resolve a patent dispute amicably, litigation will be instituted in federal court. The claims of the patent will be construed and the accused invention will be compared against the claims to determine if infringement has occurred. If the accused invention falls within the language used in a patent claim, literal infringement exists. Under the doctrine of equivalents, infringement can also exist if the accused invention performs substantially the same function as the patented invention in substantially the same way to reach substantially the same result. The patentee is bound by arguments made and amendments entered during the history of prosecution of the patent and cannot later argue a position inconsistent with one reflected by the file wrapper. An accused infringer may assert that there is no infringement, that the patent is invalid, that the patent was procured by fraud, that the patentee is guilty of patent misuse, that the accused device is being used solely for research purposes, or that the patentee is barred by laches or estoppel. Remedies in infringement actions may include injunctive relief, compensatory damages, costs, interest, and, if bad faith is shown, attorneys fees and increased damages of up to three times compensatory damages. 1

CHAPTER 20 INTERNET RESOURCES Federal laws relating to patents: U.S. Patent and Trademark Office: Other information: http://www.ll.georgetown.edu or http://www.findlaw.com http://www.uspto.gov (access the MPEP for information about infringement actions and appeals) http://www.bustpatents.com (web site relating to patent issues and providing table listing patent lawsuit awards and patent buyouts by companies); http://www.findlaw.com and http://www.megalaw.com offer general information about patents and patent litigation

CHAPTER 21 New Developments and International Patent Law TRIVIA The top ten best-selling prescription drugs generated worldwide sales of about $42 billion in 2002. The two best-selling drugs in the world are Lipitor and Zocor. In 2001, only two U.S. companies (IBM Corp. and Micron Technologies) were on the PTO s top ten list of patentees. Seven of the top ten patentees were Japanese companies. Since 1996, when the first genetically modified crops were grown, global genetically modified crop areas have increased thirtyfold. It costs an average of more than $800 million to bring just one new medicine to patients, with a 1 in 5,000 chance of success. During fiscal year 2002, the PTO received approximately 43,000 international or PCT applications. CHAPTER SUMMARY The most significant new development in patent law is likely the Federal Circuit s decision in State Street to largely discard the business method exception to patentability. So long as they produce a useful, concrete, and tangible result, mathematical algorithms, software, and business methods are patentable. In the wake of State Street, patents for Internet business methods, software patents, and e-commerce technologies have been applied for in tremendous numbers. Other new developments in patent law relate to inventions in the areas of medicine, pharmacology, and agbiotech. Because patents granted by the PTO have no effect in a foreign country, inventors desiring patent protection in other countries must apply for patents in each of the countries in which protection is desired. Because applying for and prosecuting patents on a country-by-country basis is expensive and cumbersome, inventors often rely on the protection afforded by the Paris Convention, a treaty adhered to by more than 160 nations. On the basis of an application filed in one of the member countries, the applicant may, within one year, apply for protection in any or all of the other member countries, and claim as its priority date the date the application was first filed. This twelve-month period of time allows inventors to gather funding and engage in marketing analysis to determine in which countries patent protection should be sought. 1

CHAPTER 21 Another treaty, the Patent Cooperation Treaty, facilitates the filing of applications for patents in member countries by providing a centralized filing procedure and standardized application format. The filing of an international application under the PCT affords applicants an international filing date in each country that is designated in the application and provides a later time period (up to thirty months) within which individual national applications must be filed. Other international conventions also exist, principally the European Patent Organization (a centralized patent system affording patent protection in as many of the member countries as the applicant designates in a single patent application), and TRIPs, by the terms of which the United States revised the duration of utility patent protection from seventeen years from date of grant to twenty years from the date of filing of a patent application. The new Patent Law Treaty aims to simplify and streamline the process for international patent filings. Under U.S. law, it is necessary to obtain a license from the Commissioner of Patents before applying for a patent in a foreign country. Filing an application in the United States is equivalent to requesting a license, and when the PTO issues a filing receipt, it will indicate whether the request is granted or denied. The PTO may order an invention to be kept secret if national security concerns are implicated. INTERNET RESOURCES Information about, and text of, treaties: PTO information about PCT: Lists of patent attorneys and patent offices around the world: Information about biotechnology: Information about agricultural biotechnology: http://www.wipo.org (information about and text of the Paris Convention, PCT, and Patent Law Treaty); http://www.wto.org (information about and text of TRIPs); http://www.european-patentoffice.org (information about and text of the European Patent Convention and European Patent Organization) http://www.uspto.gov (see PCT Home Page and Chapter 1800 of MPEP) http://www.piperpat.co.nz http://www.bio.org (web site of Biotechnology Industry Organization) http://www.agbiotech.net

CHAPTER 22 Trade Secrets Law TRIVIA In 2000, a Florida jury ruled that Walt Disney Co. wrongfully appropriated the idea for a sports theme park from a former baseball umpire and ordered the company to pay $240 million in damages. In 2000, a court awarded $25 million in actual damages to an individual whose idea for preparing and serving rotisserie chicken was appropriated by Perdue Farms. The damages were based on the amount of direct costs Perdue Farms saved by using the plaintiff s process. According to a 2000 survey by the American Management Association, nearly 70 percent of large U.S. companies actively monitor and review employee e-mail and Internet usage. Economic theft cost American companies more than $1 trillion in 2000 according to a study commissioned by the American Society of Industrial Security. CHAPTER SUMMARY A trade secret consists of any information that its owner has reasonably protected and that, if known by a competitor, would afford some commercial advantage or benefit. If properly protected, trade secrets may exist forever. Trade secrets are protectable even in the absence of written agreement if the parties enjoy a relationship of trust and confidence (as is the case in employer-employee relationships). Trade secrets are also protected from appropriation by improper means such as theft, bribery, or espionage. Although trade secrets can be protected even without a written agreement, such an agreement is advisable. Agreements with key employees should also include noncompete clauses. While strictly scrutinized by courts as possible restraints against trade, such noncompete provisions are enforceable in most states as long as they are reasonable in time, territory, and scope. A trade secret owner may obtain injunctive relief or monetary damages, or both, if a trade secret has been misappropriated. Criminal penalties may also be assessed against the violator. A trade secret, however, will not be protected by a court if its owner has not exercised reasonable efforts to maintain its secrecy. 1

CHAPTER 22 Companies should implement aggressive trade secret protection programs to ensure the protectability of valuable information. Information can be protected by physical barriers (such as lock and key), contractual provisions prohibiting disclosure, and by taking advantage of protection available under copyright and patent laws. INTERNET RESOURCES Uniform Trade Secrets Act: http://www.nccusl.org (web site of the National Conference of Commissioners on Uniform State Laws) Trade Secrets Home Page: Employment agreements: http://my.execpc.com/~mhallign/index.html (web site of attorney Mark Halligan offering excellent information about trade secrets, articles, and links to other resources) http://www.allaboutforms.com (web site offering sample forms for noncompete agreements, confidentiality agreements, and employee invention agreements, which can be used as models and drafting guides)

CHAPTER 23 Unfair Competition TRIVIA George Foreman has received at least $187 million for lending his name to the marketing of grilling machines, showing the marketability of a celebrity s persona. The estimate of losses each year to U.S. businesses due to the counterfeiting of consumer goods is approximately $200 billion. In March 2003, Rexall Sundown agreed to pay the FTC up to $12 million to resolve charges that it had made unsubstantiated claims about Cellasene, a purported cellulite treatment product. The FTC currently receives more consumer complaints about identity theft than any other type of fraud. CHAPTER SUMMARY The term unfair competition refers to a wide variety of acts and practices that constitute improper commercial conduct. Because the property interests being protected are often intangible, such as reputation, image, and goodwill, the interests are classified as intellectual property. Injured parties can rely on a host of theories to protect their commercial interests: passing off (selling one s goods as those of another); misappropriation (the taking of another s valuable commercial interests); false advertising (making false representations about the nature or quality of one s own goods or services); the right of publicity (protecting one s image or persona from commercial appropriation); product disparagement (making false representations about another s goods or services); dilution (weakening another s trademark or service mark); or infringement of trade dress (causing a likelihood of confusion with the overall appearance or image of another s product or service). Additionally, section 43 of the Lanham Act provides a federal cause of action for a broad range of anticompetitive activities (including passing off, false advertising, product disparagement, trademark dilution, and infringement of trade dress). Finally, the FTC regulates commercial acts and practices. Under the Paris Convention, the United States is required to protect citizens of member nations against unfair competition, and U.S. citizens are treated in other countries equivalently to nationals of those member nations with regard to unfair competition. 3

CHAPTER 23 INTERNET RESOURCES Federal and state laws relating to unfair competition: Federal Trade Commission: General information: http://www.ll.georgetown.edu or http://www.findlaw.com http://www.ftc.gov http://www.findlaw.com, http://www.megalaw.com, and http://www.ipmall.fplc.edu

CHAPTER 24 Intellectual Property Audits and Due Diligence Reviews TRIVIA In 2000, the Brookings Institution estimated that at least 50 percent and possibly as much as 85 percent of the value of American companies is attributable to their intangible assets, such as intellectual property. As of early 2003, Hasbro had paid filmmaker George Lucas approximately $470 million so that it could sell toys based on the Star Wars movies. The COCA-COLA trademark is the most recognized trademark in the world and the company values its brands at nearly $70 billion. CHAPTER SUMMARY Because clients can be unaware of the value of the intellectual property they own, law firms often conduct intellectual property audits for clients. The audit reveals valuable intellectual property assets that can then be exploited for the client s benefit. Audits should be conducted on a periodic basis to reflect the changing nature of intellectual property. Audits or reviews are also conducted when companies are sold, when they borrow money, or when they acquire other companies. In such instances, the review is often called due diligence. Because almost all types of intellectual property can be lost through lack of protection (including nonuse, failure to monitor licensees properly, failure to renew or maintain registrations, and failure to protect against infringing activities), the intellectual property audit is a crucial tool that allows a company to understand and exploit the value of its intellectual property portfolio. 5

CHAPTER 24 INTERNET RESOURCES Statutes relating to intellectual property: General information: http://www.ll.georgetown.edu and http://www.findlaw.com http://www.findlaw.com, http://www.ipmall.fplc.edu, and http://www.megalaw.com