Business Law for Entrepreneurs & Managers - Intellectual Property - Patents

Intellectual Property Overview

Patents are evidence of rights given to inventors to protect their inventions.  Generally, patents are one type of protection for intellectual property.  Intellectual property generally refers to intangible assets that someone claims ownership in by virtue of creating those assets.  Additionally, intangible assets may be transferred from the original creator to another person or entity.  

Independent Patent Systems

Patent systems are administered by governments and international organizations to allow inventors to receive exclusive protection for their new and useful inventions.  Different countries and international organizations have their own laws, rules, and procedures to apply for a patent or to use or enforce a granted patent.  

In addition to forming their own patent systems, many countries also participate in international treaties or agreements that specify procedures for recognizing patent rights from other countries.  These joint programs are typically administered by a separate international organization, which specifies the procedures for complying with a set of common rules that all participating countries have agreed to recognize.  This type of international cooperation makes it possible for an inventor from one country to apply for patent rights in many other countries, in addition to their own country.

The patent systems established and administered by different governing bodies can change over time.  Patent laws, rules, and procedures can change as new laws are passed, new regulations are adopted, or new interpretations are established through the courts.  This chapter will focus primarily on the patent system currently established in the United States, with some additional discussion of the international patent application system.

An Agreement with the Government

The fundamental premise of the U.S. patent system is to offer inventors an incentive for publicly disclosing their new and useful inventions.  Under constitutional and statutory authority, the U.S. government agrees to give certain rights to inventors in exchange for disclosure of the inventor’s invention.  

The rights granted to the inventor are relatively broad, but are limited to a specific term or time period.  The inventor agrees that the invention will become publicly available at the end of the patent term.  In other words, the inventor agrees to dedicate the invention and the inventor’s knowledge specifically disclosed in the patent to the public when the life of the patent ends.

Basic Terminology

PATENT or PATENT APPLICATION

For accuracy, it is critical to distinguish between a “patent” and a “patent application.”  The term “patent” refers to an issued document that has been granted by the governing body (the U.S. government).  This gives the patent owner rights that can be enforced against unauthorized infringers of the patented invention.  

In contrast, the term “patent application” refers to the documents that are filed with the government body, but have not yet been issued as a granted patent.  Thus, patent applications are in the examination stage, or are waiting to be examined, whereas an issued patent has successfully passed the examination stage.  

A patent application gives the applicant “patent pending” status, but is not enforceable against infringers.  Only an issued patent can be enforced against infringers.  

PROVISIONAL PATENT APPLICATION

A “provisional patent application” is a specific type of patent application that also provides “patent pending” status.  Provisional patent applications are discussed in more detail below.  In brief, provisional patent applications are never examined, so they can never result in a granted patent.  Consequently, there is no such thing as a “provisional patent.”

PRIOR ART

Prior art refers to certain categories of publicly available information that can be used to show that an invention is not new and/or useful.  The most common forms of prior art referenced during examination include other issued patents and public patent applications.  However, there are many other types of prior art such as books, academic papers, company technical documents, website documentation, and so forth.  Prior art is also used often in litigation to try to show that a granted patent should not have been granted because the invention was not new and/or useful over the prior art that was already available to the public.

INFRINGEMENT

Patent infringement refers to the unauthorized activities that make use of patent owner’s rights granted in an issued patent.  The issue of infringement focuses on what rights are held by a patent owner, and whether or not someone else is performing activities that use those rights without permission from the patent owner.  In many ways, patent infringement is independent of whether or not an invention is patentable.  

A Negative Right

Patents grant a “negative right” to the patent owner, making it possible for the patent owner to exclude others from making, using, selling, offering to sell, or importing copies of the invention or discovery.  In this way, a patent owner may stop an infringer from practicing the invention.  In contrast, patents do not grant to the patent owner a right to make or use the patented invention, because other existing patent rights may be infringed by making or using an invention or discovery.  So it is possible for a patent owner to infringe another patent owner’s existing patent rights by making or using his or her own invention.

Patent Laws and Regulations

The U.S. Constitution grants to Congress the power “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”  This is the constitutional basis used to pass federal laws (“patent laws”) that govern how patents are granted and enforced.  The patent laws give the executive branch of the federal government the latitude to adopt additional regulations (“patent rules”) that govern specific procedures for examining patent applications and granting patents.  

These patent laws and rules are used by the U.S. Patent and Trademark Office (USPTO) to manage the patent process for all inventions seeking U.S. patent protection.  Similarly, U.S. courts use the patent laws to settle patent disputes.

Individual states do not have patent systems or authority to grant or govern patents.  All patents are governed by the federal laws and regulations.  However, contractual agreements tangential to patent rights (transferring ownership or licensing rights) are governed by individual state laws.

As noted above, different countries and international organizations have their own laws, rules, and procedures to apply for a patent and to enforce a granted patent.  Attorneys or other patent practitioners in each country can assist inventors and applicants through the specific processes in their respective countries.

Types of Patents

In the U.S. there are three different types of patents: Utility, Design, and Plant.  Each type of patent has its own filing requirements, examination procedures, term of protection, and criteria for enforcement against infringers.

Utility Patents

A utility patent recognizes an invention or discovery for a new and useful process, machine, article of manufacture, or composition of matter.  These categories are often referred to by other names, including methods of use, business methods, methods of manufacture, apparatuses, devices, systems, and other names.  The invention or discovery may be entirely new or may be an improvement on an existing method, device, system, or chemical composition.  

Utility patents are the most common type of U.S. patent.  They are usually valid for 20 years from the time that the patent application was originally filed.  Maintenance fees are required at certain times throughout the 20 years in order to keep the patent in force.  As with other patent rights, utility patents are only enforceable after the patent goes through the examination process and is granted.  

Design Patents

A design patent recognizes a new, original, and ornamental design for an article of manufacture.  This type of patent focuses on the ornamental design, instead of the physical structure or functionality.

A design patent is typically valid for 14 or 15 years from the time the patent application was originally filed.  There are no maintenance fees to maintain a design patent in force once it is issued.  A design patent protects against other ornamental designs that are confusingly similar.

Some products are suitable for protection using both design patents and utility patents.  For example, the ornamental design aspects of a product (the shape, icons, graphical or industrial form, etc.) can be protected by a design patent, while utility patents might protect the structural and functional features of the product, how the product is made, and how the product is used.

Design patent protection can also coordinate with the protection offered by copyrights.  Like design patents, copyrights protect the works of art or authorship, which are often ornamental in nature.  Unlike design patents which can be infringed by confusingly similar designs, copyright protection requires evidence that an infringer copied the work from the original artist or author.  There is no requirement to show copying for design patent infringement.

Similarly, design patent protection can apply to designs that are also used as trademarks or trade dress.  In particular, the use of a particular new design which qualifies for protection under a design patent can be applied as a brand identifier for specific products or services.  Once applied to market or brand the specific products or services, the same design protected by a design patent can also qualify for protection as a trademark or trade dress.  The legal tests for infringement of design patents and trademarks are also similar, as both are based on a determination whether there is a likelihood of confusion between conflicting designs.

Plant Patents

A plant patent recognizes distinct and new asexually reproduced varieties of plants.  Some aspects of such plants, and the methods of making them, can also be protected by utility patents.  Plant patents provide protection for 20 years from the date of filing of the patent application.  Given the special nature of this type of patent, and its relatively limited use, this chapter will not focus on the additional details of obtaining or enforcing plant patents.

The Lifecycle of a Patent

The patent lifecycle can be roughly divided into two stages: 1) obtaining the patent, and 2) enforcing the patent.  The typical costs and legal services required for each of these stages can be quite different from one another.  

OBTAINING A PATENT

The process of obtaining a patent begins when an inventor determines that he or she has invented something new that is worthy of protection against potential copiers or infringers.  The inventor can then submit an application to the governing body (the U.S. Patent and Trademark Office in the United States).  The application must meet very particular requirements for both form and substance.  

The Patent Specification

In addition to many formatting rules, the basic contents of a U.S. patent application must include a description of the invention and at least one claim.  The description must provide enough detail to teach another person skilled in similar technology how to make and use the invention.  And if the invention is conducive to illustrations, then illustrations can be provided and referenced in the description.

Patent Claims

The claims establish the legal boundaries of the invention the applicant seeks to protect.  Claims can be submitted in various forms, as long as they meet the specific formatting requirements.  Also, claims can be directed to different aspects of a single invention.  For example, some claims may be directed to a device, while other claims may be directed to methods for making and/or using the device.  

Each claim defines an invention, which can impact the type of person or organization who might be expected to infringe that claim.  For example, a claim to a device might be infringed by someone who makes the device, someone who sells the device, someone who imports the device, and so forth.  In contract, a claim directed to how the device is made might only be infringed by others who make the device (e.g., manufacturers), but not by people who merely use the device without making it.  Similarly, a claim directed to how a device is used might only be infringed by others who use the device (e.g., consumers and end users), but not be people who make the device solely for sale to the consumers or end users.  In this way, different types of claims can be drafted with different groups of potential infringers in mind.

Patent Examination

Once a patent application is drafted and submitted to the patent office, the patent application will eventually be assigned to an examiner.  The examiner will review the patent application to make sure it complies with all the formal requirements.  The examiner will also search for documentation of “prior art” that might teach some or all of the aspects of the invention claimed in the patent application.

Any reasons why the examiner thinks the claimed invention is not patentable will be issued in an office action.  The applicant has the right to respond to the issues raised by the examiner in a response to the office action.  For each response, there is usually a fixed response period, although in some cases extensions of time can be obtained through the payment of additional fees.  Communications can go back and forth between the examiner and the applicant many times before either the examiner determines the invention is patentable and issues a notice of allowance.  

Alternatively, the examiner ultimately may maintain that the claimed invention is not patentable.  When this happens, the applicant has a couple different options.  First, the applicant may stop pursuing the patent application.  Second, the applicant may pay additional fees to request further consideration by the examiner.  Third, the applicant may pay additional fees and submit documents to initiate an appeal of the examiner’s position.  This appeal is administrative within the patent office, not within a court of law (although further proceedings could be brought in a court of law).

Patent Allowance & Issuance

Once patent claims are determined to be allowable, the applicant will receive a notice of allowance and a statement of the issue fees due.  After payment of the issue fees, the patent typically will issue within the next few months.  Later, at certain times during the life of the patent, the patent owner will be required to make maintenance fee payments if the patent owner wants to continue the term of the patent.  Those fees can be paid at each interval to keep the patent in force through the full term of the patent.  However, if those fees are not paid then the patent expires earlier than the full term of the patent.

ENFORCING A PATENT

Once a patent is issued, the patent owner has the right to enforce the patent against infringers.  Notably, the burden to enforce a patent is one the patent owner.  The U.S. patent office does not monitor for potential infringers of any patents.

Patent Infringement

A typical infringement scenario includes identifying a potential infringer, performing an analysis of the accused product or method relative to the relevant claims of the issued patent, and then taking some action to notify the accused infringer of the issued patent.  This notification can be performed in many ways—the two most common ways are by either sending a cease-and-desist letter or filing a patent infringement suit in federal court.

Patent Cease-and-Desist Letters

Cease-and-desist letters usually inform a potential infringer of the patent owner’s rights in an issued patent.  There are many potential risks that can be raised when a cease-and-desist letter is issued to a potential infringer.  One of the most prevalent risks is the possibility that the potential infringer might use the letter as the basis to file a separate suit to have the federal court declare the issued patent invalid.  The disadvantage to the patent owner in this situation is that the potential infringer can select the location where the suit will be brought, which likely will be chosen to be inconvenient and/or expensive for the patent owner and, if possible, might be a jurisdiction where courts are historically less favorable toward patent rights.  

Patent Infringement Lawsuits

Instead of contacting a potential infringer through a cease-and-desist letter, some patent owners prefer to initiate a patent infringement suit first and let the suit itself serve as notice to the potential infringer.  This allows the patent owner to control more of the choices as to where and when the suit will occur.  It also may indicate a higher level of commitment by the patent owner.

Patent negotiations and lawsuits proceed in many aspects similarly to other negotiations and law suits.  Readers may refer to other sections for more detailed information about specific negotiation and/or litigation techniques.

Patent Validity and Infringement

Ultimately, the patent owner will be advocating for validity of the patent claims and infringement by the accused infringer in order to stop and collect damages for the infringing activities and/or establish a licensing arrangement to collect royalties in exchange for authorization to allow the accused infringer to practice the patented claims.

Patent Invalidity and/or Non-Infringement

On the other hand, the accused infringer will be advocating for non-infringement of the patented claims.  In some situations, the accused infringer will also be advocating for invalidity of some or all of the issued patent claims.  For any claims that are found to be invalid, the accused infringer will not be liable for infringement.

Patent Appeals

Regardless of the initial outcome of the patent infringement litigation, one party or the other (or both) may request that the case be reviewed by an appellate court, which may review parts of the case for proper application of the law and, in some cases, may review whether or not the basic facts of the case were dealt with justly.

Different Fee Schedules

The U.S. Patent and Trademark Office has established a normal fee schedule for most services they provide.  The Office has also set up two other payment schedules, often with lower fees, for applicants who qualify as a “small business entity” or a “micro entity” within the established rules.  

Small Entity Status and Discounted Fees

In general, the criteria to qualify as a small business entity are set by the Small Business Administration and, at the time of this writing, recognize business with less than 500 employees and less than certain annual revenues as small business entities.  Qualifying applicants pay about half of the normal fees for some of the services.  

Micro Entity Certification and Discounted Fees

Other applicants who have a limited number of prior patent or patent applications, and who make less than a specified amount of income (e.g., three times the poverty level for an individual), and who meet other criteria specified by the Office, can qualify for further reductions in fees as a micro entity.  The fees for micro entities are often about half of what a small business entity would pay.  Some higher education institutions and other organization can also qualify for micro entity status with the Office.