International Trademarks: Madrid Protocol

Madrid Protocol countries
Madrid Protocol countries (US color or darker is “in”)

For US companies, the Madrid Protocol can be a low-cost and time efficient way of getting international trademark protection.

The internet makes it almost trivial to sell products and services internationally.  But how do you manage the IP for these products and services? The legal system has been lagging here. Although the 1970’s (pre-internet) PCT system simplifies the process of filing international patents, the underlying international patent system still remains cumbersome and expensive.  In the end, you still have to hire local law firms in each country and work with the local patent offices.

What is the situation in trademarks?  Almost reasonable!  This is because, in the early post-internet era, the international trademark system got a major upgrade, called the Madrid Protocol. So if you are a startup wanting to protect your trademark rights internationally, the Madrid Protocol is a reasonable and cost-effective way to do so.

The Madrid Protocol is a 1996-era refinement of an earlier 1891 Madrid trademark agreement.  The US and over 90 other countries (EU included) are presently members (see the darker countries on the world map), with Canada expected to join in the 2017 to 2018 timeframe.

The main advantage of the Madrid Protocol is that the applicant needs to only file once in the WIPO Madrid system in order to apply for trademark applications in a variety of different countries (such as the entire European Union at a single time).  The application fees, at least by patent standards, are reasonable (e.g. about $1600 to apply for full EU coverage).  This system minimizes the hassles and expense of hiring local law firms and dealing with local trademark offices in each country.

There are a few catches – the applicant must be associated with a Madrid subscribing country, so US based companies can do this; but Canadian companies — not quite yet.  You can’t start from scratch – rather you should have at least one national trademark application pending (and preferably issued), to form the basis of your Madrid application.  US applicants, for example, can use their pre-existing US trademark to file for Madrid coverage through the USPTO. The USPTO will check this Madrid application, and then forward it to the WIPO office in Geneva, Switzerland.

Some other cautions — in the event that your original national trademark application fails within the first five years after filing, your other Madrid filings will likely also fail. Additionally, the various local countries that you designate do have the right to refuse your trademark on an individual basis within the first 12-18 months after filing.

So additional research before filing is recommended.  At a minimum, check the Madrid ROMARIN database for conflicts. Check if your US trademarks might be “generic” or otherwise inappropriate in your Madrid target countries.  Madrid Protocol filings must be renewed every 10 years, so remember to put this on your long-term calendar as well.

Enfish for Alice: a software win

Einfish is good news for software patents
Enfish is good news for software patents

The recent Enfish court decision improves the outlook for US software patents.

Good news for software patents.  The negative impact of the 2014 SCOTUS (Supreme Court of the US) “Alice” decision (invalidating some business method and financial software patents) has been somewhat mitigated by the recent “Enfish” court decision.

What is “abstract?”  “You keep using that word, I do not think it means what you think it means.” Inigo Montoya, “The Princess Bride”.

In “Alice”, SCOTUS did not make business-method and financial software patents patent ineligible.  Instead, they determined that “abstract” subject matter is patent ineligible.  Unfortunately, SCOTUS refused to define the meaning of “abstract”, and then further confused things by using circular logic.  The present two-step, circular-logic, SCOTUS mandated test for patent eligibility is:

Step 1) Determine if the patent is directed to “abstract” subject material.  If not then congratulations, the patent passes this test.   

Step 2) But if the patent is found to be “abstract” in step 1, then determine if the patent contains “something extra” beyond just “abstract” subject material.  If there is nothing extra, then reject the patent as being “abstract”.    

No one knows what “abstract” means.  Unfortunately since late 2014, the USPTO has been generally assuming that patents for software running on standard computers must be abstract under step 1.  Many USPTO examiners (and judges) have been totally skipping step 1 of the two-step Alice test.  They just assume that a given software patent is abstract, and start their Alice test at step 2 “something more”.  This makes it much easier to reject the patent.

What is “something more?”  It is also undefined, but financial and business software generally seems to be lacking.  We could substitute “evil spirits” for “abstract”, and “charisma” for “something more”.  We could almost as validly say that lately, many USPTO examiners and judges have been rejecting most business and financial method patents because 1) assumption of evil spirits and 2) a further lack of charisma.  It is easier to understand if you don’t expect logic.

In 1982, Congress established the Federal Circuit Court to bring more logic and consistency to patent law.  In the recent (May 12, 2016) “Enfish v Microsoft” (Enfish) decision, the Federal Circuit has finally started to do its job.  The Enfish court has ruled that examiners and judges can’t just arbitrarily skip step 1 of the two-step Alice test.  Specifically, the Enfish court ruled that it is improper to assume that software running on standard computers is “step 1” abstract.

The Enfish court pointed out that in Alice, SCOTUS didn’t rule that software is automatically abstract.  Further in Alice, SCOTUS also warned against running amok since every patent is somewhat abstract.  So don’t make software automatically fail the two-step Alice test at step 1.  The Federal Circuit further determined that software running on standard computers that improves an existing technology (such as a database) is not abstract at step 1.

This is another important point:  “abstract” is an undefined legal term, and you and I lack the authority to officially define it.  But the Federal Circuit does have the legal authority to define “abstract”.  The USPTO and other judges have to follow this updated definition.  So Enfish is good news for US software patent law.

Patent restrictions and elections

Why is my examiner holding a chainsaw?

USPTO examiners can require patent restrictions.  These narrow the scope of your originally submitted patent claims.  Choose carefully here.

A while back, you filed a patent application.  Now you have received a phone call or letter from your examiner.  You are informed that there are “Election/Restrictions” and that you must choose between various patent claims on various “Species group” lists.  What is this?

Your initial USPTO patent filing fee buys your patent application about 25 to 30 hours of total examination time.  This is not a lot of time, and frequently examiners think that an application will take longer than this. When this happens, the examiner can reduce his workload by asserting that your application contains “multiple inventions”.  Each of these “multiple inventions” is called a “species”.  These “species” are pieces or fragments of your original claim set.  Examiners divide your claim set among these species, and then send you a notice asking you to “elect” a “species” and claims for examination.  The claims that you don’t elect are called “withdrawn”.

Be careful here.  Examiners have orders to initially reject most patent applications.  The examiner is chopping your invention into smaller pieces to make it quicker and easier to reject. This chopping is uneven. Some pieces may be commercially useful, others not.  Some pieces may be easy to reject, others hard. Sometimes there are only a few pieces, but other times the examiner may split your invention into 15 or even 50+ pieces!

USPTO rules allow restrictions and elections to be done either orally or in writing.  Sometimes your examiner may call you on the phone, explain the restriction and election options, and ask what you want.  A bad decision can be costly, and these oral elections are often legally binding.  I recommend not deciding on the spot.  To be sure you understand all the details and have time to think, request the restriction in writing.

There are restriction rules.  The species need to be distinct, and the restriction should not destroy the invention.  If your examiner has violated these rules, you can and should argue back (this is called a “traverse”) in writing.  Unfortunately, you still have to choose, no matter how unreasonable your examiner’s scheme may look.

Even if your examiner rejects your arguments, there will be other chances.  Later in the examination process, after your elected claims are found to be allowable, you can request “rejoinder” and try to get more claims examined.  You can also have the unelected claims examined later (for extra filing fees) as one or more divisional applications.

USPTO office actions

USPTO office actions
USPTO office actions

USPTO office actions are used to reject most patent applications by using “done before”, “obvious”, “vague”, or “not patent eligible” type arguments.

Although we all hope that a patent application will sail through the USPTO patent examination process and be allowed “as is”, this usually doesn’t occur.  As a practical matter, examiners work on a quota system. The net effect of this quota or “count” system is that the average successful patent is usually rejected several times before it is allowed.

Typically an examiner will first read the patent claims, and search for various citations (often earlier filed patent applications) that match certain claim key-words.  The examiner will then write a 20-40+ page “office action” document that rejects your various claims for various reasons, and send it to the correspondence contact of record.  The examiner expects you to respond within three months by submitting a written “office action response” that rebuts these various rejections.

The most “popular” USPTO rejections are:

Done before – 35 USC 102: The examiner thinks he has found another single citation that teaches everything in your particular claim. However absent actual copying, no two patents are usually totally alike. This type of rejection can often be rebutted by explaining where the citation is different, or amending the claims to add additional detail that differs from the citation.

Obvious – 35 USC 103:  The examiner (sometimes impermissibly guided by your disclosure) is attempting to reject your claim by combining features from multiple citations. The examiner may often create a Frankenstein concept that may or may not be plausible. Fortunately, there are examination rules here. Often this type of rejection can be rebutted by any of 1) showing that the examiner is misquoting the citations, 2) amending your claims, 3) showing which “103” examination rules were broken.

Vague – 35 USC 112:  This “vagueness” or “indefinite” type rejection is used for different things. Sometimes it is harmless and easily corrected, such as when the claim’s grammar is off. Sometimes it is deadly, such as when your underlying patent application doesn’t teach how your invention works in adequate detail.  This is more likely to happen if the original application lacks specific examples.  Although this can often be rebutted or fixed by changing the claims, sometimes the only way to attempt to fix this is to file a “continuation in part” application that adds the missing detail.

Not eligible – 35 USC 101:  In the old days (i.e. before 2015), this was a rarely used rejection because the 35 USC 101 law was written to be very expansive. However, recent court decisions have made this area quite a swamp, and this is still being sorted out. In the meantime, realize that business methods and financial methods have a higher than average rejection risk.

Trade Secrets

“Sshh” by Deborah Azzopradi

Consider trade secrets, especially when your commercially important secrets are unsuitable for patent or copyright protection.

Consider the formula for Coca-Cola and its “natural flavorings”, which dates back over 100 years.  Even if the formula could have been patented (unlikely), the patent would be long expired.  The formula might not be even eligible for copyright since it is a list.  In any event, a copyright by now would be both expired and useless since a copyright is only for the printed words.  However as a closely guarded trade secret, the formula remains valuable (the trademark, of course, is almost priceless).

In addition to recipes, trade secrets can include production methods, marketing methods, computer software, and the like. Pretty much any information that gives a business competitive advantage, and is not generally known, is a potential trade secret.

Trade secret protection is very narrow – unless you can prove to a court that you carefully guarded the secret, and someone with access to the secret then misappropriated the secret, you are out of luck. If someone figures out the secret by other means (e.g. reverse engineering), there is no protection, even for Coca-Cola.

However if you can convince the court that trade secret theft occurred, you can request injunctions (e.g. block disclosure), damages (your economic harm caused by the theft), and possibly even seizure of materials and/or attorney fees.

Until recently, trade secrets were only handled at the state level.  However in May 2016, the federal Defend Trade Secrets Act of 2016 (DTSA) was signed into law.  Trade secret theft can now be handled in either state or federal court. Trade secret theft can now be charged under both civil and even criminal law.

So if you are doing a startup, think about which of your non-commonly known information gives you a competitive edge. Where appropriate, apply for patents and trademarks, and register copyrights to prove copyright ownership.  For the rest, although some disclosure may be required for marketing and fund-raising, try to limit this disclosure, and take positive steps (e.g. restriction of access, nondisclosure agreements) to preserve not-generally-known information that is competitively important.

Design patents

For stronger design patents – less detail can give you broader coverage, so consider turning some solid lines into dotted lines.

design patent
Design patents can be like the disappearing Cheshire Cat

On the surface, design patents – a patent that covers the ornamental appearance of an article of manufacture, seem simple. File multiple drawings showing your design from multiple angles – often all six sides of an imaginary cube, as well as in perspective. If (under a famous court case called the Egyptian Goddess test), an ordinary observer (familiar with the prior art designs of similar products) will confuse someone else’s product with the patented design, then there is infringement.

This raises interesting questions of pattern recognition. The problem is often explained by analogy to the Cheshire Cat from Alice in Wonderland.  How much of the cat do you need to see in order to identify it as a Cheshire Cat?

In a design patent, the parts that are required are shown in solid lines, and the optional parts are shown in dotted lines.  As more and more solid lines are turned into dotted lines, the design becomes more general, but of course at some point, the design then becomes too general to be unique or even recognizable.

When broad coverage of a design is desired, consider filing multiple versions (or alternatively continuations) of a design patent.  Narrower but safer versions can have more solid lines; in riskier but broader versions, replace the less essential solid lines with dotted lines.  Perhaps a subset or outline of your product is distinct enough to warrant design patent protection?  If you think that your design may have multiple distinct sections, consider putting in dotted lines to show these sections in the initial filing, since the USPTO won’t let you do it later.

Compared to utility patents, design patents are relatively inexpensive to file, and relatively easy to get.  However again, the design patent is only for the artistic and non-functional aspects of the design. Design patents now have a 15 year lifetime, and no maintenance fees are required.

A few more tips — design patent examiners have a well-developed ability to detect inconsistencies between drawings and/or ambiguity in drawings.  Problems can often be avoided by first making good quality 3D CAD files, and then making these 3D CAD files available to the patent attorney.

Continuation applications

Don’t like having your own inventions used against you?  Before your patent issues, consider filing a continuation application.

Continuation applications
Continuation applications

Just got your US patent application allowed?  Congratulations!  Now before it issues (usually about 2-4 months after you pay the issue fee), you need to decide if you ever will want to file any improvements or variations of that invention in the future.

If you do have some improvements or variations in mind, now is the time to start working on filing a “continuation-in-part” (or CIP).  In a CIP, you are basically telling the USPTO that you have added some new concepts to your original patent application.  This is OK – worst case the examiner may determine that the new concepts have a later filing date, but in any event, the examiner won’t hold your original patent application against you.

In contrast to a CIP, patent continuation applications are essentially a repeat of the original application. Any differences to the claims had better be fully disclosed in the original application.

Why file a continuation?  One common reason is that you think that you may be able to get stronger claims the second time around, perhaps by making the claims shorter and hence stronger.  Or perhaps there was something in the original application that you forgot to put into your original claims. Both types of claim changes are fine so long as you can show that the newer claims were fully disclosed in the original application.

A second common reason is a nagging fear that although you might not have thought of any improvements or variations yet, you can’t rule out the possibility that you might do so in the near future.  Here, if you don’t file a continuation, after your patent issues, your own patent will be used against your later patent applications as if someone else had invented it.

However if you do file a continuation, it essentially keeps your original patent “alive” a while longer (usually at least another year or so).  Then, if you do come up with an improvement, you can then file a CIP to your continuation application.  When you use this strategy, the USPTO will allow you to claim your later improvement without using your original application against you.

Foreign patent traps

It’s a trap!

Outside of the US, foreign patent offices will often use your own prior patent filings against you.  Avoid this trap by planning carefully.

Both US and foreign patent laws are based on various legal fictions.  One legal fiction is that an invention is instantly created in a fully formed state.  Another legal fiction is that even if a particular improvement to the invention was not actually obvious to the real inventor, still an examiner or judge may reject this improvement as being obvious to an imaginary “person of ordinary skill in the art”.  Patent law just doesn’t cope with hindsight well.

In practice, we all know that real inventions often come into life slowly, usually after much trial and error.  Complex inventions may take years to fully develop. The inventor is thus faced with a dilemma – file fast so as to be the first person to file, or keep working on the invention, file a better patent application, but possibly lose to someone who filed sooner?

US patent laws recognize this problem, and allow an inventor file as many patent applications as needed, even over a period of years, and gradually accumulate a “stack” of patent applications.  This stack of patent applications captures both the time of earliest invention, as well as a later time-optimized form of the invention. Intuitively this system seems fair.  Wouldn’t it be unfair to use an inventor’s own earlier work against the inventor?

Doesn’t this basic rule of fairness apply everywhere?  Unfortunately it does not.  The harsh reality is that outside of the US, other countries typically use an inventor’s own earlier patent applications against them.

This assumption of basic fairness often traps inventors and startups.  Here the only way to avoid the trap is to recognize that this problem exists, and take steps to mitigate problems.

As a good rule of thumb for international patents, assume that there is at most a 12 month window after a first (US) patent application has been filed in which to make further improvements. Plan accordingly. If you have thought up improvements to your invention, it is far better to submit these improvements as an updated PCT patent application before the 12 month anniversary of the first patent application.

After 12 months, you can’t claim the priority date of your first US filing. Someone else can jump ahead of you and claim credit.  Even worse, 18 months after filing (when usually your first US patent application will be published) your first US patent application can then be used against your later filed improvement.

It is very irritating to have an international examiner claim that your improved invention is obvious against your own earlier filed application.  Even more irritating when you know that in reality the improvement was totally not obvious.  Perhaps the improvement may have taken you a year or more of hard work!  Too bad — to the foreign examiner, your improvement is obvious.

The lesson here is: if you have made improvements, file them as an updated international patent within 12 months of the filing date of your first invention (or in an emergency, at least before your first patent application is published — usually 18 months after first filing).

Startup IP due diligence

Maat – goddess of truth

Startup investors know that they are mostly investing in just your IP.  So get your IP ownership situation under control before due diligence starts.

What does a startup investor get for his money? Startup companies are really just a bundle of information (usually ideas), people (founders, contractors, consultants), and things (tangible property, cash). A startup’s “things” will usually have minimal value. The people can walk out the door at any minute. So all that an investor may actually get for his money is some sort of ownership option in the information – the startup’s intellectual property (IP).  Prudent startup investors thus often conduct a fair amount of due diligence on this “IP”.

A startup’s IP can be viewed as being a mixture of alleged inventions (e.g. actual or potential patents), alleged copyrights, alleged trademarks, and alleged trade secrets.  At least some of this information may still only exist in the minds of the founders, contractors, and consultants. What is potentially real here, and what is not?

Sophisticated investors also know that according to our IP laws, unless actions are taken to protect the IP, the IP may either still belong to the individual that created it; or it may have become public domain.  Investors also know that startups often don’t fully understand IP law.  Has that intriguing startup already accidentally lost its key IP?  Was it missing essential IP to begin with?  This is why investors want IP due diligence studies.

Some ways that IP can be missing or lost include failure to obtain written IP assignment contracts, inadvertently placing IP into the public domain, and reliance on IP owned by someone else.

Failure to obtain written IP assignment contracts: IP assignment agreements should be obtained from anyone who has materially contributed to the company’s IP. Don’t assume that just because you paid for something, your company owns that IP — you often don’t. Try to do these IP assignments up front, because the longer you wait, the more leverage the other party has. For example, they could make unreasonable demands, or deny assignment altogether.

Inadvertently placing IP in the public domain: For patents, assume that anything you publish before a patent application is filed can be used against you, and be careful to update your patent filings as your technology advances. For trade secrets (i.e. important, not-generally known information which is often not patentable), take active steps to restrict access, require confidentiality agreements, and of course never publish this at all.

Reliance on IP owned by someone else: For patents, consider prior art searches to reduce the chances that you are infringing on other patents. For copyrights, check the status of your software licenses, and that you and your contractors are not copying other work. Avoid using names that might confuse customers from related companies, since this may cause trademark problems. For trade secrets, stay away from inside knowledge (not generally known in your field) that you or your contractors may have obtained from other companies.

Remember that from an IP due diligence perspective, if you can’t prove you did things right, the assumption will probably be that you didn’t.  So keep your documentation on file.

Open source software licenses for startups

BSD open source license
BSD open source license

Open source software is a wonderful thing.  The open source community has given us a gift pack animal that everyone from individual hackers to the largest companies in the world can ride.  However not all open source software licenses are alike. In particular, some of the most famous open source software comes with legal obligations that can be hazardous for startups.  So if you are doing a startup, resist the temptation to immediately grab your favorite open source software and start hacking.  Instead first take a bit of time to look that gift pack animal in the mouth.

What’s Gnu? Back in the 1980’s, Richard Stallman, who wrote the original and very influential Gnu OS open software license, had a deeply held opinion that in order to create an open software sharing community, it was necessary to “poison the well” for many commercial uses. This underlying hostility towards commercial applications is very evident in “The GNU manifesto”.

These “poison the well for commercial use” Gnu concepts in turn influenced the open source GPL (General Public License), which Linux and MySQL use; along with a number of other popular open source licenses.  Some of these open source license terms can negatively impact your ability to patent your software, as well as your other attempts to make your business profitable.

This problem scares investors.  Sophisticated investors now frequently include open source software questions as part of their routine, pre-funding, due diligence process. So yes, to avoid starving, this stuff matters.

Enter BSD: Not all open source software licenses have these problems. In the 1990’s other software experts decided that an open software sharing community could develop without also poisoning the well for commercial uses.  They developed the Berkeley Software Distribution (BSD) license (initially for their Unix-like operating system). The BSD license encourages sharing, but does not usually limit commercial use or patents.

Although BSD type open source licenses and software are not quite as famous as GPL open source software, a large number of well-respected and highly reliable BSD distributions are available.  Like Linux, there are different flavors of BSD for different applications. Look into FreeBSD for large scale servers, OpenBSD for secure applications, and NetBSD for smaller scale devices.  There are also BSD web servers (e.g. Nginx, httpd, Lighttpd), BSD databases, and many other BSD licensed open source applications.

Use your business model to pick your open source software (license), and not the other way around.  Google’s main revenue is from advertising.  They could afford to base Android on GPL licensed Linux. They have to make Android available for a free download, but given their business model, this isn’t a problem for them.  By contrast Apple has a business model based on selling closed devices.  Apple can’t survive with non-proprietary software. As a result, Apple chose to build iOS and OS X on a BSD foundation.  So pick the license that is best for your business (hint, think permissive or public domain).