Intellectual property strategy

Intellectual property strategy
Types of Intellectual property

Optimize your intellectual property strategy by using a combination of patents, trademarks, copyrights, and trade secrets.  

In theory, the different categories of IP (utility patents, provisional patents, design patents, copyrights, trademarks, and trade secrets) are distinct. However, in practice, these can somewhat overlap. Each is a type of IP protection tool. Maximize your intellectual property strategy by picking the right set of tools for the right situation.

Patents (utility patents) cover useful, original, and not obvious ideas for gadgets, physical objects, compositions of matter (e.g. drugs), and the like. These must be filed, carefully reviewed, and ultimately disclosed to the public. They can last for up to 20 years if maintenance fees are paid.

Provisional patents are essentially a short-lived (1-year) first draft of a utility patent.

Patents (design patents) cover the ornamental appearance of a functional item. These also must be filed, reviewed, and ultimately disclosed to the public. These last for 15 years, maintenance fees not required.

Copyrights cover original written material, music, images, movies, and the like. These can last over a lifetime (e.g. lifetime of the author plus 70 years) after initial publication. Registration not initially required, but eventually needed to enforce rights.

Trademarks cover the words, symbols, or packaging associated with certain classes of products and services in commerce.  Registration, disclosure to the public, and review required. These have no lifetime limit, so long as the owner periodically sends in proof of continued use in commerce.

Trade Secrets cover undisclosed commercially useful information not generally known to the public or trade. These can include unpatentable items such as recipes, as well as un-copyrightable items such as lists. No lifetime limit, provided that the secret does not get exposed.

Sometimes it is possible to improve your intellectual property strategy by handling the IP under multiple categories. Examples include:

  • Using a non-publication request to keep the IP secret while pursuing a US patent
  • Converting a utility patent drawing to a later design patent
  • Protecting a user interface IP as a utility patent, design patent, and copyright
  • Recording a distinctive design as both a design patent and a trademark
  • Filing a distinctive image (or fragment of literature) as both a copyright and a trademark

There are some tricky aspects to the multiple category approach as well, these include:

  • Cases where international IP rules are different from US rules
  • Trying to use a provisional patent for a later design patent
  • Shifting copyright (non-functional) vs patent (functional) and design patent (ornamental appearance of functional item) distinctions
  • Competitors using your assertions for one IP category against another IP category

So “mind the gap”, but it pays to think broadly and strategically here.

Startup IP due diligence

Maat goddess of due diligence
Maat – Egyptian 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 upfront, 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. Make sure you have listed the right inventors on any patent applications. 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.

Amazon and IP disputes

Amazon IP - Amazon acting like its own court
The court of Amazon

Amazon.com is enough of an 800-pound-gorilla that its IP policies can impact trademark, copyright, and patent strategy. Amazon is not kind to descriptive (supplemental register) trademarks.

Amazon.com markets products from millions of manufacturers and vendors, resulting in a large number of IP (trademark, copyright, and patent) disputes.

Unfortunately, the US court system is designed to administer slow, careful (and thus expensive) justice to a small number of IP litigants. It can’t scale to Amazon volumes. So Amazon decided to make its own IP dispute process.

Trademarks:

The Amazon Band Registry offers a number of methods to help trademark owners protect their rights and promote their products. However, at least for the US, just any trademark won’t work. The Amazon Brand Registry is presently only available for USPTO trademarks on the principal register. USPTO supplemental registry trademarks are out of luck.

The USPTO supplemental register is where otherwise OK, but “descriptive” trademarks are put to “age” for 5 years until the mark is considered to have “acquired distinctiveness”. So, the moral is that if you are planning to sell on Amazon, it is good to avoid the supplemental register. This can be done by registering a less descriptive product name.  There are trade-offs here, however, since descriptive names help customers understand the purpose of new products.

Copyrights:

Be careful about the text and images that you upload. It should either be your own material, or material that you have clear rights to (e.g. license, resale of previously purchased physical items). Amazon operates a Digital Millennium Copyright (DMCA) infringement reporting system that you (and others) can use to report issues. If you hold copyrights that you feel are important, consider registering them with the US copyright office, as this can make enforcement easier. Note, however, that under their terms of service, Amazon acquires a license to use your uploaded material.

Patents:

Amazon has recently announced a pilot patent dispute program.  The process is fast and (for patent law) inexpensive. The plaintiff provides the US patent number and the Amazon listing of the allegedly infringing product. Both parties can argue this (e.g. one submits written arguments for infringement, and the other submits written arguments in defense).  Both can pay $4,000 to submit their arguments to an Amazon selected neutral patent evaluator. The neutral evaluator evaluates the patent and product in question.

The winner gets their $4,000 fee back. The loser loses its fee. If the allegedly infringing product loses, Amazon will take down the listing. The neutral evaluator’s decisions are apparently final, but you can still go to the court system if you want.

Disclaimer: I have no affiliation with Amazon. Amazon IP policy can change at any time. However, Amazon is enough of an 800-pound-gorilla that their IP policies are having an impact on the IP ecosystem.

Inventorship and co-inventors

Inventorship - how to deal with multiple inventors?
Participants: RRZE (CC BY-SA 3.0) license

US patent inventorship criteria are tricky, but “conception” of the invention and “intellectual domination” are more important than reduction to practice.

If multiple people are involved with your invention, one issue that commonly arises is: “who gets listed as inventor or co-inventor, and in what order?”

For academic and scientific papers, there is a common order – the junior person who did most of the work often goes in front, the senior professor or principal investigator who may or may not have done much work goes at the end, and other persons go in the middle as co-authors according to usually unwritten criteria. So long as no one is seriously offended, the co-author list otherwise doesn’t matter too much.

Many inventors begin their careers by writing academic papers, and often make the mistake of thinking that the same rules apply to patents.

However, patents are different.  You probably wouldn’t let a friend put his name on the deed to your house unless you want to give him co-ownership.  Patents are more like property deeds.  In the US, just who is and who isn’t a patent inventor can make a big difference in terms of who ultimately owns the patent.  As a result, patents have their own set of rules as to who is and who isn’t considered an inventor.

So what are the rules for inventorship? The USPTO rules are covered by MPEP 2137.01 INVENTORSHIP.  These rules were worked out through a number of court cases, and are occasionally a bit fuzzy and open to interpretation.  At the risk of oversimplification, the main idea is that the inventor is the person who conceived of the invention, and not necessarily the person (such as a supervisor) who suggested working on the problem, or the person (such as a technician or programmer) who did the hands-on work to reduce the invention to practice (e.g. make a working prototype). In fact, reduction to practice is usually not necessary.

Other considerations, such as the issue of “intellectual domination”, are also important.  An inventor who is “intellectually dominating” an invention may still be able to use suggestions from others without making them co-inventors.

Things can get tricky. Sometimes the supervisor’s suggestion is really the key insight behind an invention,  making the supervisor an inventor. Similarly, sometimes the person reducing the invention to practice ends up solving unexpected problems, and these solutions form a key part of the invention, making the “technician” an inventor.  Here looking at the invention’s claims can help sort things out.  Who was responsible for what?  Note, however, that claims can change during the examination, and sometimes an inventor can end up being added to an invention, or left on the “cutting room floor” as a result.

In any event, the best time to consider these issues is in advance of filing.  It is also important to discuss assignment in advance of filing as well since the usual goal (to satisfy due diligence) is to have 100% of the invention assigned to the same persons or organizations.

 

Contractor Copyrights

Contractor
Contractor

Want to pay a contractor to produce creative material for you, and then actually own the copyrights? Getting ownership of contractor copyrights is tricky.

Copyrighted material – be it text, images, music, or code, is important for many creative and commercial efforts. None of us have the time or talent to do all of this ourselves, and so it is natural to turn to experts to help provide this material.

We could hire employees for this purpose.  However, many projects are of limited duration, and alas, unlike “the good old days” where employees had no rights and could be hired and fired at whim, these days employees actually have rights and benefits. These include unemployment insurance, social security, tax withholding, and the like. No one wants to go back to the Victorian era, but at the same time, it can be a hassle to employ someone.

Contractors are often used to avoid this hassle.  Contractors are expected to deliver results, but to do so in their own way. We pay money, expect to obtain the benefit of the deal, and then no more hassles or obligations. This simple expectation breaks down when it comes to IP, however, and contractor copyrights are particularly tricky.

To somewhat oversimplify, if you want to pay someone and obtain ownership of copyrighted material in return, the following legal considerations can apply:

  • Under Federal law, full copyright ownership requires a “work for hire” agreement
  • “Work for hire” agreements may imply (and in California, can define) that the worker is an employee
  • Employees are legally entitled to various employee benefits
  • Contractors are not legally entitled to employee benefits
  • Absent an assignment, copyright ownership remains with the contractor
  • Copyright ownership assignments must be in writing
  • Copyright assignments that are not “work for hire” can be terminated by the author or heirs after 35 years

This creates interesting legal problems.  It is common to put “work for hire” terms in contract agreements. The idea is to automatically acquire full copyright ownership this way.  However, such “work for hire” terms can be inconsistent or even incompatible with the definition of “contractor”.  This can open the door to potential legal headaches.

In an alternative approach, there is no “work for hire” clause, but as part of the deal, the author-contractor agrees to assign all contractor copyrights to the work that you have paid for. This is not perfect either. Additional assignment paperwork is often needed, and Federal copyright law allows an author-contractor to petition to terminate this assignment 35 years later.

35 years is fine for most purposes, but what if you are thinking on longer terms? Here, efforts to work around the 35-year copyright assignment termination issue should be considered. One option is to contract with a corporation that in turn “work for hire” employs the author.

Contractor ownership of IP

Agree on IP ownership in advance
Agree on IP ownership in advance

The ownership rules for copyrights, patents, and other IP vary depending on if the IP creator is an employee or an independent contractor.

In today’s world, the distinction between employee and independent contractor is often blurred, but legally, these two forms of working are very different.  As a result, whether you are working as an employee or independent contractor, or hiring employees or independent contractors, it is good to be aware of how these different types of work engagements impact IP ownership rights.

These laws can vary from state to state.  Consider California. Generally, work done by an employee for an employer, at the employer’ request, does belong to the employer. However the IP assignment process is not always automatic (patents, for example, generally need to be assigned to the employer in writing).

One of the reasons why California has a booming high-tech economy is that California labor code sections 2870-2872 mandate (with certain exceptions) that work that does not relate to an employer’s business (and is done with the California employee’s own time and materials) generally belongs to the employee. However, this section of California law may not protect independent contractors.  So if you are an independent contractor, you may want to negotiate this.

US copyright law (writing, art, software, etc.) also distinguishes between employees and contractors. For employees, copyright ownership for works made for the employer typically goes to the employer. However for independent contractors, absent a signed written agreement (such as a work made for hire agreement) that copyright ownership is being transferred, often ownership remains with the independent contractor.  So if you are hiring an independent contractor, absent a written agreement, just because you paid for something doesn’t automatically mean that you own it!

How to distinguish an employee from an independent contractor?  Generally, the difference is the amount of control.  For an independent contractor, whoever is paying can control the work result, but generally not how the work is done.  By contrast, even an employer who gives his employees freedom still has the legal right to specify how the work is done.

Regardless of work arrangement, it is always a good idea to work out the issues of who is going to own what in writing and in advance.  For employees, spell this out with a proprietary information and inventions agreement. For independent contractors, negotiate and sign an agreement on these issues before starting work. This topic often comes up in due diligence.

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 by your examiner?  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.

Open source software licenses for startups

BSD open source software suitable for startups
BSD open source license

Not all open-source software licenses are alike. Some are intentionally hostile for commercial use.  Choose wisely.  

Open-source software is a wonderful thing.  This 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 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 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 1980s, 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 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 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 licenses and software are not quite as famous as GPL 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).

Patent non-publication requests

Patent non-publication request
Keeping patent applications confidential

Non-publication requests: Patent non-publication requests can be an important part of your IP strategy. Under US law, patent applications can be filed with patent non-publication requests. When this request is made, the USPTO will hold a patent application secret (i.e. will not publish it) until when and if the patent finally issues. Otherwise, absent this request, the patent office will automatically publish the patent application 18 months after the initial filing date.

When to consider filing a non-publication request: Non-publication requests are particularly appropriate for certain types of software patent applications, such as “business methods” and related software patents. This is because the US patent law for this type of software is presently in an unsettled state, and the international acceptance of this type of patent is also more limited. By filing with a non-publication request, your disclosure remains a trade secret. If the USPTO grants you a patent that is broad enough to be worth disclosing your work; great. If not, then you can continue to elect to keep your work hidden from the public.

When filing a non-publication request may not be appropriate: If you have plans to file outside the US, then by international treaty, you must file for international patents within 12 months of your initial filing date, and also allow your initial application to be published within 18 months. Here you can either not include a non-publication request on initial filing, or alternatively send in another form rescinding your non-publication request.

Other considerations: Unless a specific reason for non-publication can be identified, I generally recommend filing using the default, “publication” mode. This is because published patent applications can be useful. They help provide published prior art to help establish priority over patent filings from competitors. Additionally, published patent applications look impressive to investors, and can help give you more credibility.

About Silicon Valley and the San Francisco Bay Area

Silicon Valley and the San Francisco bay area
Golden Gate Bridge, San Francisco

Silicon Valley and the San Francisco Bay Area have a worldwide reputation for innovation. But is there any subjective evidence for this? What do the patent statistics say?

According to the USPTO statistics, at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cls_cbsa/allcbsa_gd.htm, as of 2013, Silicon Valley “classic”, characterized as San Jose, Sunnyvale, and Santa Clara (Metropolitan Statistical Area 141940), led the field in patents with 12,899 patents granted. By contrast, the remainder of the San Francisco Bay Area minus Silicon Valley, characterized as San Francisco, Oakland, and Fremont (Metropolitan Statistical Area 141860) came in a respectable second at 8,721 patents.

Here the San Jose, Sunnyvale, and Santa Clara area includes other cities such as Campbell, Cupertino, Los Altos, Los Gatos, Milpitas, Monte Sereno, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara, Saratoga, and Sunnyvale.

By contrast, the San Francisco, Oakland, and Fremont area includes other cities such as Belmont, Burlingame, Emeryville, Foster City, Fremont, Menlo Park, Millbrae, Newark, Oakland, Redwood City, San Bruno, San Carlos, San Francisco, San Mateo, South San Francisco, and Union City.

Combining the two, the San Francisco Bay Area as a whole dominates the rest of the country, at an impressive 21,620 patents granted in 2013. By contrast, the next runner-up, the New York-New Jersey area, comes in at 7,886 patents. The Los Angeles area is close behind at 6,271 patents, followed by the Boston area at 5,610 patents. So from a patent perspective, yes the San Francisco Bay area is, in fact, pretty unique.

Why is this area such a hotbed of innovation? One reason is California’s permissive employment laws. California labor code 2870 states that: “Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time…”  Unlike other states, that often “lock-in” or constrain an employee’s ability to leave and start new companies under vague “trade secret” theories, California’s policy encourages startup formation, and thus a vibrant economy.