Intellectual property strategy

Intellectual property categories

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 nonobvious ideas for gadgets, physical objects, compositions of matter (e.g., drugs), and the like. The USPTO carefully reviews these and requires that issued patents must be published. They can last for up to 20 years if you pay the maintenance fees.

Provisional patents are mostly 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., the 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 are 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 try to formulate an intellectual property strategy.

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.

Patent & trademark annuity fees

patent and trademark annuity fees
Time passes. You should set up maintenance fee reminders

It is easy to lose patents and trademarks by forgetting to pay their annuity (maintenance) fees. Set up your automatic reminder systems today.

You have just received your US utility patent or trademark, congratulations!  But remember that unless you pay annuity fees (maintenance fees), your patent or trademark will expire early.  No, you can’t pay these fees all at once. You must pay the fees during various future time windows. You must wait until the time window opens to pay.

Why did the government set it up this way?

Why do we have this strange system?  IP (Intellectual Property) laws are a compromise between public and private rights.  The underlying idea is that if the IP is important to you, then you will keep track of the payment windows.  If it is not important to you (and you forget to pay), then the public rights part of the policy kicks in. So if you forget, the laws automatically transfer the IP rights back to the public! Every certain number of years, the system forces you to assert that you still want the IP. 

Utility patents often have about a 17-20 year term (your mileage may vary), with maintenance fees due during specific time windows at 3-4, 7-8, and 11-12 years after issue. There is no requirement that patents have to be used to keep them in effect.  So during these time windows, the USPTO will just ask you to affirm that you are authorized to pay and take your money.

Trademarks have to be renewed during specific time windows at 5-6 and then every 9-10 years (forever) after issue.  Unlike patents, trademarks are a “use it or lose it” type of IP.  The USPTO, in addition to charging fees, also requires you to provide proof of actual use in commerce. The USPTO will deny renewal if your evidence is absent or unconvincing.

The responsibility for paying these annuity fees ultimately rests with you, the IP owner.  Although some law firms may occasionally send out courtesy reminder notices, you should not rely on these.

Set up an automatic reminder system

Instead, consider setting up your automatic reminder system.  At a minimum, enter the dates into at least one (preferably two) long-term electronic calendars.  Alternatively, you can use other types of automatic reminders (docketing) systems. Remember to keep these systems going.

Alternatively, or additionally, you should consider engaging a professional annuity service. Several such annuity services exist. Without making any particular recommendations, some of these annuity services include Computer Patent Annuities Global, Computer Packages Inc., Dennemeyer & Company, and Maxval.

Non-disclosure agreements (NDA)

Non-disclosure agreements (NDA)
Confidential information

Non-disclosure agreements (NDA) can help preserve business trade secrets and other confidential information, but don’t expect your attorney to sign one.

Businesses often use non-disclosure agreements with their contractors, employees, product evaluators, and site visitors, as well as with other businesses such as suppliers, customers, potential partners, and the like.  These agreements are often required to establish diligence in preserving trade secrets.  If breached, such agreements may also be used, along with other suitable evidence, in subsequent legal action in state or federal court.

Although in some states, non-disclosure agreements are sometimes used as a backdoor form of a non-compete agreement (e.g. attempting to restrict an ex-employee’s employment elsewhere), this is not a universal practice. California, for example, disallows this sort of thing.

NDA typically include various clauses establishing:

  • Who is disclosing the information, and who is the recipient
  • The boundaries of the confidential information – what is and is not covered
  • Confidentiality obligations
  • When and/or how the agreement ends
  • Other legal provisions (beyond the scope of this blog)

Generally, NDA have carve-outs for publically available information and terminate either when information subsequently becomes available to others through no-fault of the recipient, or after a pre-negotiated number of years. Some examples can be seen here.

NDA can be particularly useful when you are working on an invention, but either have not filed a patent application yet, or else are continuing to work on improvements to the invention.  Here, if you want to work with vendors or contractors to produce components of the invention, NDA (and other IP rights agreements) can be important.

Attorneys, including myself, usually refuse to sign NDA.  Why is this?  The reason is that attorneys are already subject to strict state (and federal) attorney-client rules and regulations that require them to keep client (and potential client) secrets. In essence, by agreeing to talk to you, the attorney has already agreed to a standardized, legally enforced, type of attorney-client “NDA”.

Consider what would happen if this were not the case.  Clients would be afraid to even ask an attorney about their particular problems. Attorneys would be signing hundreds of NDA each year, each with different terms. The legal system would grind to a halt.

Professional investors (VC, Angels) usually also refuse to sign NDA.  Here, there is no duty of confidentiality.  However, the finance people control the money, see a lot of ideas they don’t fund, and usually don’t want any constraints on their future investments. This is where it is good to have your patent applications filed in advance.

Medical procedure patents

35 USC 287(C) medical procedure patents
Patents on surgical methods?

Under Federal law 35 USC 287(C), US physicians and other medical practitioners have limited immunity to certain types of medical procedure patents.

US patent law allows patents for inventive methods (such as procedures). The rules also enable devices (such as gadgets), and compositions of matter (such as drugs). But US law carves out a medical practitioner exception for medical procedure patents.

What is a medical procedure patent? Some historical examples include 1) a new and improved method of making surgical incisions on patient corneas. 2) the first medical use of ether (first anesthetic). 3) the first use of ultrasound for fetal gender evaluation.

Public policy here is a bit uncertain.  We don’t want our physicians to be afraid to try new procedures.  We want them to use the best methods possible. But if we don’t financially reward innovation (through patents), then this could stifle further medical progress.  So the critical question is:  should medical procedure patents be allowed, or not?

US law 35 USC 287(C) is a medical procedure “carve-out.”

Over about the last 100 years in the US, the pendulum has swung back and forth between “no” and “yes.” Our present 1997 era law, as described by 35 USC 287(C), is somewhere in the middle.  We have ended up with a strange compromise. The US generally allows these patents but doesn’t always let you enforce them!  So be aware of this unusual rule. You don’t want to accidentally end up getting a medical patent of little value because the law won’t let you enforce it.

The trick to avoiding this unfortunate situation – having a patent that lacks value due to restrictions on enforcement, is to consider 35 USC 287(C). You need to write claims that limit the impact of this strange exception.

The carve-out is narrow.

The good news, from the standpoint of inventors and startups, is that the enforceability carve-out aspects of this law are quite narrow. Patents for medical devices and compositions of matter are allowed and are enforceable. Further, under the legal rule of “contributory infringement,” you may also still be able to enforce against manufacturers who are teaching the use of their products for your patented medical procedure.

So in practice, US rules regarding medical procedure patents are not all that restrictive. The trick is that if you are trying to patent a new medical procedure, think a lot about what devices or medical supplies might be needed to implement your invention.  Claim them, and when you get to writing the medical procedure claims, think about contributory infringement as well.

Patent demand letters

Patent demand letter
Frustrated patent troll

Patent demand letters are stressful.  Before responding or ignoring, evaluate infringement, patent prosecution history, ownership, and litigation history.

Has your startup received a “demand” letter asserting that you are infringing on a patent?  Although real infringement of valid patents does occur, and some of these patent demand letters are legitimate, many patent demand letters are sent in less than 100% good faith. The sender of the letter may be betting that the startup will settle quickly to avoid litigation costs, regardless of the actual merits of the situation.

Don’t immediately contact the sender, and don’t ignore the letter either.  Instead, calm down and evaluate the facts, preferably with the help of a patent attorney.  Is there a plausible infringement problem or not?  How to tell the difference?  A few common methods are discussed below.

To start, get: 1) a copy of the issued patents discussed in the demand letter, 2) the USPTO prosecution history of these patents, and 3) information about the allegedly infringing product.  If the letter doesn’t provide actual issued patent numbers, or if the letter only cites patent application numbers, the probability that the letter is bogus becomes higher.

Look at the independent claims for each patent (claim 1 is not always the broadest claim), and see if your allegedly infringing product infringes the entire wording of any independent claim. If so, look at the relevant dependent claims for more detail. If the letter argues contributory infringement, combine your product with the other accused product for this analysis, and check if your marketing literature is promoting this combination. Claim chart analysis can help here.

The patent prosecution history for the patents in question, usually downloadable from the USPTO, can be very relevant. This history will often reference if the patent has been used in litigation before; if the patent has been reevaluated by either reexamination or the Patent Trial and Appeal Board (PTAB); and if the patent applicant had to make significant concessions during the patent prosecution history.

The patent’s USPTO assignment records can be used to better understand the relationship between the sender and the actual patent owner of record. This is often obfuscated. What is this relationship, and is the purported patent owner the real patent owner?

If there is a history of litigation, check it out. Patent litigation usually takes place in Federal Courts.  This is usually available through PACER (Public Access to Court Electronic Records) and a number of other sources. Has the patent owner been filing a lot of lawsuits and then settling before the court reaches a decision, or does the patent owner usually win?

There are many other issues that can be explored as well, but this type of information can help you and your attorney better evaluate what your next steps should be.