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1. TOO LATE TO START FILING US AND
INTERNATIONAL PATENT
APPLICATIONS.
Unfortunately for many
good technology
companies, it may be too
late to file for patent
protection. The
current U.S. rule
generally provides
applicants with a 1-year
grace period during
which a patent
application must be
filed after certain
public or private
disclosure of the
invention. Such
disclosure may arise,
for example, from a mere
"offer for
sale" of the
technology, even if the
product has not yet been
built or prototyped.
In comparison, the
foreign rule, which
applies to many
industrialized
jurisdictions, such as
Japan and various
European countries, do
not give applicants the
benefit of any grace
period after a public
disclosure has occurred.
Thus, it is legally
compelling for
applicants to consider
filing for patent
protection sooner than
later. Although in
some situations, there
may be some special
exception that still
allows for late filings;
it is not advisable for
applicants to count on
those exceptions.
2.
TOO NARROW LEGAL
SCOPE OF CLAIMING
PATENTABLE INVENTIONS.
Many issued patents are
not commercially
valuable because the
scope of their submitted
claims are particularly
narrow, and can be
relatively easily
avoided by determined
competitors. Thus
when submitting new
patent claim language,
applicants should
broadly define novel
concepts that include
potential design-around
by other parties. Although
this legal blocking
strategy sounds easy
enough to state as an
objective, in fact, the
serious exercise of
analyzing future
competitive and industry
directions can be an
extremely difficult
task, particularly
because the analysis
often requires
sophisticated market
understanding, as well
as technical and
engineering vision.
3.
INTERNALLY
MISMANAGED PATENT
INFRINGEMENT "WILFULNESS"
EXPOSURE.
Under U.S. patent law,
one's awareness or
willful state-of-mind
about the existence and
infringement of a
competitor's issued
patent may significantly
affect subsequent legal
liability. Thus if
a party is proven to be
a willful infringer of a
known patent, then for
punitive policy reasons,
economic damages may be
awarded to the patent
owner up to three times
normal recovery amount.
This treble-damage
exposure is so
substantial, that
company management
should be careful to
avoid creating evidence
of internal
communications such as
emails that may be
construed later to
indicate such
willfulness
state-of-mind. Additionally
in many cases, it may be
appropriate for
companies as a matter of
policy to discourage
looking at issued
patents owned by other
entities. And when
a suspect patent is
already known,
management must take
careful steps to refer
the matter to competent
patent counsel for
appropriate analysis and
opinion.
4.
RELYING SOLELY ON
COPYRIGHTS FOR SOFTWARE
PROTECTION.
Copyright protection in
the U.S. and many other
countries arises
instantly and at
virtually no cost to
protect software
technologies, such as
computer programs,
electronic databases,
and graphical display
screens and related
media. In fact,
copyright protection is
often quite a suitable
means to secure much
digital media such as
video and audio creative
works, often even
without compliance with
copyright registration
and notice requirements.
Copyright
protection, however, is
legally vulnerable to
reverse-engineering
efforts by competitors,
during which no
copyright infringement
may arise when the
reverse engineering
results does not result
in literal copying
of the original code,
but merely an
understanding of the
underlying ideas and
functions. In this
vulnerable scenario,
perhaps patent
protection may be more
appropriate to secure
any novel algorithm,
methods, and computing
apparatus.
5.
INADVERTANTLY
TAINTING I.P.R. WITH
3RD-PARTY CO-OWNERSHIP
RIGHTS.
During the course
typically of joint-development
engineering projects,
ideas may originate from
many sources, such as
advisors, consultant,
employees, and even
customers. This
collaborative scenario
sets the stage for
creating intellectual
property rights that may
be co-owned by multiple
parties. And
unless the rights of
such joint owners are
specified up-front, for
example by contract
terms, then there is a
problematic possibility
that certain parties
later may assert not
just their partial
ownership interest, but
actually endeavor to
offer licensing rights
to other 3rd parties or
even competitors.
6.
IGNORING THE
IMPACT OF NEW "FESTO"
U.S. SUPREME COURT
RULING RE PATENT
AMENDMENTS.
On May 28, 2002, the
U.S. Supreme Court (Festo
Corp. v. Shoketsu
Kinzoku Kogyo Kabushiki
Co., Ltd)
substantially changed
the legal effect of
amending patent claims,
particularly upon the
effective scope of
amended claims. This
judicial change cannot
be ignored without
possibly impairing
commercial value of many
issued U.S. patents,
especially where
applicants introduce
explicit argument that
distinguish various
prior-art cited by the
Patent Examiner. Without
getting into the subtle
legal and policy
complexities associated
with the so-called
"Doctrine of
Equivalents," the
Festo decision and
related subsequent
federal cases clearly
narrow many patent
claims scope whenever
applicants propose
routine amendments to
distinguish the claimed
invention against cited
prior-art references.
7.
UNDERESTIMATING
THE IMPORTANCE OF TRADE
SECRETS AND
CONFIDENTIALITY.
Since patent protection
may not arise for many
years until after filing
patent applications, and
copyright protection may
not be applicable to
protect functional
aspects of various
technologies, trade
secret protection may
serve realistically as a
solid backstop against
competitive piracy or
other misappropriation
of company know-how.
Thus the
importance of diligent
use of Non-Disclosure
Agreements (NDA) and
in-house policies and
systems to secure
confidential and
proprietary information
rises to a more
significant level of
management priority.
Additionally early
disclosures, for example
through customer
marketing presentations,
may irreparably hurt
company rights to file
domestic or
international patent
applications.
8.
OVERLOOKING
LEGITIMATE OPPORTUNITY
TO SET-UP OFFSHORE
LICENSING TAX SHELTERS.
Often neglected by
early-stage startup
companies and
entrepreneurs are
offshore strategies for
mitigating federal tax
exposure. Such
international tax
strategies are
especially relevant when
foreign licensees of
intellectual property
rights are contemplated
possibly in the company
business plan. In
many cases in fact,
it is particularly
beneficial to deploy one
or more corporate
entities offshore much
sooner, rather than
after licensees are
identified, in order to
minimize certain taxable
valuation exposure
associated with
transferring such
licensed rights.
9.
RESPONDING SLOWLY
TO U.S.P.T.O. OFFICE
ACTIONS.
Because the U.S. patent
rules now provide 20
years of enforcement
patent protection, after
the U.S. filing date, it
is important to expedite
the claim amendment and
application prosecution
process; otherwise
applicant's enforcement
period is effectively
eroded by unnecessary
delays in the process.
Accordingly,
applicants should
endeavor to respond in
timely fashion,
expediting all office
action responses and
facilitating
communications with
patent counsel whenever
possible. Additionally,
the new patent rules
actually apply a time
penalty to deduct
enforcement period
against issued U.S.
patents in certain
situations where
applicants contribute to
delays during patent
prosecution.
10.
OVER/UNDER-SPENDING ON
LEGAL FEES TO PROSECUTE
PATENT APPLICATIONS.
In the realistic context
of the current economic
recession especially in
Silicon Valley, startup
companies and
entrepreneurs who are
strapped for cash may
negotiate for
substantial fee
discounts from patent
counsel to prepare and
file patent
applications. However,
patent applicants should
be careful to ensure
that most qualified
legal counsel in terms
of technical and
business experience are
selected and engaged to
work on critical company
inventions, perhaps with
bottom-line pricing
being just one of a
number of significant
factors to
consider.
Dennis Fernandez is the Managing Partner, Fernandez &
Associates LLP, Menlo
Park, CA. He can be
reached at iploft@iploft.com.
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