Posts Tagged “Patent Reform”

Keeping your invention as a trade secret just got a lot less risky under the new patent laws – assuming, that is, that your invention is a process or apparatus that you use internally to  make a product or perform a service for a customer. On the other hand, if your secret is embedded in what you are selling – enterprise software sold/licensed under non-disclosure, for example – then you are probably still at risk of being sued for infringement should someone later patent your invention.

Let’s be clear about what the trade secret risk was, prior to September. Perhaps you had invented a manufacturing technique that allowed you to produce widgets significantly faster/better/cheaper than any other manufacturer. From the finished product, no one could reverse engineer your internal manufacturing technique. Typically you would try to keep the details of your technique as a trade secret instead of filing a patent application. Why? You kept it as a trade secret because your patent application, by definition, reveals your secret process and yet it is hard to enforce your patent since you would not be able to tell from your competitor’s finished products if they are infringing your patent.

The risk, however, is that a competitor who independently invented the same technique after you did was (and still is) free to patent it. And once his patent issued, you would be an infringer. Of course, it’s true that it’s hard for your competitor to enforce his patent rights against you, since your finished products don’t reveal your infringing activities. But nevertheless, you were put at risk of being sued for infringement even though you had invented the invention first and had been using it for perhaps many years.

But at last the new patent law has removed this Catch-22, at least in most cases. Under the new law, your prior commercial use of your invention will serve as a defense against an infringement suit. To make use of this defense , generally, you must be able to prove that you were using the invention “commercially” at least one year prior to the filing date of the patent application. Essentially you have to be using that great manufacturing technique to actually make and sell products.

Notice that these “prior user rights” only protect you from an infringement suit for using the invention. It does not allow you to sell copies of the invention to other manufacturers. But as of this past September, you can feel a little less paranoid about being on the losing end of an infringement suit for using your own trade secret invention. As always, it is a good idea to discuss your patent strategy with your patent attorney to understand how the details of the law affect your situation.

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Like many pieces of major legislation, the September 16th passage of the “America Invents Act” had some people running around with their hair on fire… whereas the reality is that many of its most ballyhooed provisions don’t come into play for a year or more. In the next couple of posts I’ll review what you need to think about now…and eventually review what you need to think about later.

The provisions of the act can be broken down into three groups; those coming into effect on or before November 15, 2011, those coming into effect on September 16, 2012, and those coming into effect on March 16, 2013. [For the nit-pickers, yes, some of the later provisions will apply to pending or even issued patents, so there is some earlier impact than their effective dates]. Anyway, let’s look at the most significant provisions that are or will be in effect by a month from now.

Provisions that affect everyone (financial):

  1. There is now a 15% surcharge on Patent Office fees.
  2. Starting 11/15 there is a $400 “electronic filing incentive” (actually a paper filing disincentive surcharge)
  3. There is now a “Micro-Entity” filing category that qualifies for a 75% discount off filing fees.

Item 1. is pretty clear and is already incorporated into the fee schedule from the PTO.
Item 2. is also clear – so if you are almost ready to file a (non-provisional) application on paper, do it before 11/15 to save yourself $400 ($200 small entity).
Item 3., when you read who qualifies as a micro-entity, is really directed at the independent inventor. Here are the qualifications:

  • Qualifies as a small entity;
  • Has not been named as an inventor on more than 4 previously filed patent applications;
  • Did not, in the calendar year preceding the calendar year in which the applicable fee is paid, have a gross income exceeding 3 times the median household income [approximately $50,200]; and
  • Has not assigned, granted, or conveyed (and is not under obligation to do so) a license or other ownership interest in the application concerned to an entity that, in the calendar year preceding the calendar year in which the applicable fee is paid, had a gross income exceeding 3 times the median household income.

Note that being named as an inventor on a patent assigned to a prior employer doesn’t count against you.

Prior User Rights (trade secrets):

The only other immediately effective provision of importance to most of my clients is the expansion of “prior user rights”. Prior user rights means that you can be protected from an infringement suit IF you can prove that you were using the invention commercially in secret for at least a year before the patent holder disclosed the invention publicly.

Under prior law you had a Catch-22 situation; you could maintain your trade secret for years and suddenly risk being sued for infringement should someone else patent your invention, or you could file a patent application, which made your secret public, and risk never being able to enforce your patent (since the actual invention in a trade secret is inherently not visible to the outside world).

Under the new law you can maintain your secrets and still have an infringement defense. It would appear that you will be okay if you maintain an evidentiary chain showing that you were using the invention in commerce. For example, keep process control records that show use of the invention to make a product that you sold. Even stronger as evidence – involve a third party who has no financial interest in the invention. For example, a trusted customer to whom, under NDA, you have revealed the processes you used to fill his orders.


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McDermott Will & Emery has been closely monitoring the Patent Reform Act of 2011.  After a cloture vote last evening shut off debate on H.R. 1249 the U.S. House of Representatives’ version, the Senate appears poised to approve the bill in the coming day(s). 

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Here’s a quiz. Raise your hand if you think an object held to a wall of a bottle with a clip is permanently secured to the wall. Nobody? Suppose I make this more clear, don’t you agree that a “member … is considered permanently secured as claimed [since] it can be left permanently in the bottle by the user.” What, still nobody raising a hand in agreement?

This nonsense argument about what “permanently secured” means was, of course, put forth by a patent examiner, not by me. And not only did the examiner take this position in an office action, but also the examiner maintained this position when the applicant appealed the to Board of Patent Appeals. Said the examiner: “the term ‘permanent’ is broad and does not impart any structure over the attachment taught by Goff, i.e, one can choose to keep the attachment between the bottle and the vent permanently.

At least the BPAI gave the examiner a dope slap in this case, but the real issue is that there is something wrong with a patent system where the examiner can push an applicant into the additional expense of an appeal or RCE (Request for Continued Examination) on such irrational grounds. And this is not an isolated case. I had one client receive an office action equating a terminal attached to a computer to a client computer in a client-server relationship. And another client receive an office action equating the key functional element of his invention to an element that was not even part of the cited prior art (think of having a camera with a  flash unit  rejected because some other camera patent described the sun as the source of light)

Examiners get away with this terrible behavior, and other behaviors that cost the applicant time and money to get good patents allowed, because there is little or no quality control system at the patent office. Oddly enough, just a few short years ago, the lack of quality examination was the root cause of too many bad patents being allowed. One really felt that, with just a modest effort, you could get any application through the system.

At that time (2004) Adam Jaffe and Josh Lerner wrote INNOVATION AND ITS DISCONTENTS: HOW OUR BROKEN
PATENT SYSTEM IS ENDANGERING INNOVATION AND PROGRESS, AND WHAT TO DO ABOUT IT. When the book was published, I didn’t much like their suggested “what to do about it”; now I’m beginning to think it wouldn’t be all so bad.

The heart of their proposal is to remove the presumption of validity that issued patents currently enjoy and instead make the patenting process more of a registration process, with validity to be determined later for those patents that someone cares about. That type of a change would be true patent reform.

Although the odds of such reform ever happening are nil, I’ll discuss what such a system could look like in a future post.

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