Monday, June 20, 2016

Cuozzo v. Lee: IP Protection Gets More Complicated

The Supreme Court handed down a decision this morning in Cuozzo v. Lee.

Two questions were before the court:
(1) Is the decision to institute "inter-parties review" ("IPR") appealable?
(2) Is the Patent Office allowed to continue to use the Broadest Reasonable Interpretation as the standard of review?

They answered both questions "yes" (with some nuances).  This has some implications for IP strategy.

First, the newly passed federal trade secrets statute continues to be an attractive alternative to patents.  As the courts and Congress continue to chip away at patents (sometimes with a rock hammer, other times with a jackhammer), patents become less attractive and simply keeping your discoveries and inventions secret becomes more attractive.

Second, while the Court leaves open the possibility that some extraordinary circumstances, such as a constitutional question, may merit review of the decision to institute IPR, it holds that ordinary questions about the propriety of an institution decision may never be appealed.  The only possible upside for inventors is that it is very likely that a similar conclusion will be drawn with regard to the denial of a request to institute review.  The upshot is that patent holders with valid and infringed technology can expect infringers to continue the practice of filing a request for IPR and asking the Court to stay any infringement lawsuit pending the patent office's administrative (IPR) proceeding.

Third, the standard for IPR is substantially tougher on the patentee than the District Court standard is.  In District Court, the patent claims are interpreted according to their ordinary meaning, and are presumed valid in the absence of "clear and convincing" evidence to the contrary.  By contrast, in an IPR, the patent claims are interpreted as broadly as reasonably possible (meaning that much larger amounts of "prior art" are available to invalidate the claims).  Making this uphill climb even steeper is the standard of review in IPR:  A claim is invalid if the challenger shows it to be invalid by a preponderance of the evidence.

What the Court does not recognize (although it constituted an inordinate amount of the oral argument in the case) is that the USPTO rarely, almost never, allows a patentee to amend or narrow the claims during inter-parties review.  This is contrary to the original process of getting a patent, where the patentee can amend dozens of times (if they want to spend that kind of money on requests for continued examination) in response to a negative decision by the examiner.

Best practice for a patent portfolio now includes keeping a live continuation (a continuation is a second patent filing, usually made right before the issuance of the first patent filing).  This significantly raises the cost of inventing.  To explain why, an example is useful:

Imagine that I file a patent disclosure describing a method of doing A, B, and C, and I also disclose doing those things in conjunction with any combination of steps D-Z.  I get a patent for a method of doing A, B and C, with dependent claims covering D, E and F.  I then let the patent issue without a continuation.  It turns out that somebody else reads my patent and begins to infringe by doing steps A, B, C and Z in combination.  Since my claim on A, B and C is infringed by A, B, C and Z (since infringement constitutes doing all of the steps in the issued claim), I sue.  The infringer files for IPR and the patent office determines that that it is barely more likely than not that A, B and C are disclosed in the prior art and invalid.  I apply to the patent office to narrow my claim to also require Z (which is not disclosed in any of the prior art that the patent office used to find the A, B and C claim invalid), and they refuse (they do refuse amendments in almost all cases).  My patent is now invalid (where a District Court would have found it valid) and I have no right to narrow it even though I invented the combination of A, B, C and Z.

This unfair outcome can be easily avoided by a wealthy inventor who can afford to keep a live continuation on file, preserving the right to obtain a narrowed claim (such as A, B, C and Z) in the continuation, even after the IPR killed the parent.  However, without an open continuation, the patent is simply gone and the infringer gets to use my invention for free.

Here are the take-aways:

(1) If you can choose between trade secret and patent, choose trade secret.  Congress has substantially strengthened protections for trade secrets even as it substantially weakened protections for patents.  This means that some great innovations will become unavailable as building blocks for a next generation of innovations (because those building blocks will not be available to the public), but regardless of whether it is good public policy, it is good strategy.

(2) If you do file for a patent (for example, because the technology can be reverse engineered), make sure to file dependent claims that are narrow enough to survive even the most stringent review and keep an open continuation on file.

(3) This impacts only the United States.  For inventions where there is a foreign market, it continues to be good strategy to file foreign.  At minimum, Germany makes sense as the biggest economy in the EU.  The cost of a full blown international filing can easily exceed $100,000, so it becomes a bit of a game of kings.

(4) Hire a patent lawyer and an IP strategist.  Patent law is moving so quickly that only those able to leverage expertise and experience have a reasonable shot at good IP protection.

About the author:  Gary Shuster is an inventor and IP strategist and an attorney at Coleman and Horowitt, where his patent lawyer, Sherrie Flynn, also works.

Monday, October 19, 2015

The Rate of Invention is Staggering

I just received my 150th issued US patent.

That kind of landmark tends to trigger a look back.

My first patent was number 6,756,879 and my 150th was patent number 9,166,974 -- meaning 2.41 million patents issued between my first and my 150th. To get a sense of the accelerated rate of innovation in recent years, it is worth pointing out that more than 25% of all US patents ever issued have issued in the mere 11 years that passed since my first one issued in 2004.

Friday, October 9, 2015

TPP Intellectual Property Chapter Leaked

Wikileaks has released the intellectual property chapter of the current draft of the Trans-Pacific Partnership agreement.

This agreement addresses how member nations deal with trademarks, copyrights, utility patents, plant patents, drug and medical patents and drug approval, and trade secrets.  I'm sure in the coming days we'll see a lot of analysis as to how these changes will impact IP law.

Monday, September 28, 2015

Can you patent an invention just to prevent the world from using it?

Eric Goldman blogged about a case where a person purchased a copyright to an unflattering photograph of himself with the intention of using copyright law to make the photograph disappear from the internet.  Eric writes "Due to the decisive appellate ruling and the district court’s stinging rebuke and fee-shift, the results of this lawsuit should deter other people from buying up copyrights to manufacture a right to forget."

Copyright law is different from patent law in one critical respect:  There is no (normally) no First Amendment right to practice an invention, whereas there is a First Amendment right to publish specific expressions of ideas, even verbatim, for certain purposes.   As a result, the Copyright Act provides a four factor test (nature of use, nature of work, amount of work copied, marketplace impact) that functionally creates an exception large enough that copyright law and First Amendment law can co-exist.

The other part of the case that Eric blogged about is the implied public policy issue.  Eric writes that "copyright law principally serves as an economic policy by protecting creators' ability to recoup the investments they make in generating new works that have value to society."  I agree with Eric's implication that what made this an easy case to decide was that the copyright holder was using copyright law to censor, rather than enhance, the body of work available to the world.

Put another way, the basis of all copyright and patent law is found in Article 1, Section 8, Clause 8 of the Constitution and grants legislative power to Congress as as follows:  "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries".

So there it is.  I suspect that a constitutional argument, rather than a statutory one, would also have prevailed against an effort to bury content using copyright law -- burying content does not "promote the Progress of Science and useful Arts".  This is an even more powerful constitutional argument when the First Amendment is considered.

The argument is significantly weaker when it comes to patent law, because preventing use of a technology under patent law can be used to promote technological progress.  For example, if I held a patent that covered varying internet connection speed based on the sender, I could insist on net neutrality simply by seeking injunctions against anybody who favored some senders over others.  Of course, this is made all the more complex by the Supreme Court's decision to make injunctive relief harder to obtain in patent cases.  Nonetheless, I suspect that at some point, courts will face the question of whether it is unconstitutional (or patent misuse) to use a patent, with no economic benefit to the patent holder, to simply prevent a disliked technology from being used at all.

Tuesday, September 22, 2015

"Poor man's patent" and "Poor man's copyright": The Tooth Fairies of the IP World

There is a common misconception that an inventor or author can protect their intellectual property by mailing a copy of it to themselves.  These are sometimes called a "Poor Man's Patent" or "Poor Man's Copyright".  I will address each in turn (note:  IP law varies greatly from country to country; I am writing only about the United States).

Poor Man's Patent:

What is a "Poor Man's Patent"?  As an article describes it, "a poor man's patent is simply, just a postcard you send through the United [States] Postal Service.  Just print a copy of the product you designed on it.  Address the postcard to your self [sic].  Once it comes back stamped by the postal service it is a 'Poor Man's Patent.'"  The article takes it one step further, suggesting that a "better way to get a patent is to go to  Download a picture of your product.  Then make a calendar, T-shirt, coffee mug whatever they offer.  You design what [it] is you want and printed on it copyrighted by your name and date. You pay for it. Then sends your design on the product you chose, this is a legitimate patent plus it is copyrighted and no one else can steal it."  Do not under any circumstances attempt to "patent" something this way.  It doesn't work.  The Chicago Tribune nailed it in a 1985 article:  a "poor man's patent [is a] term most appropriate in the sense that the inventor who relies on such protection is virtually assured of remaining a poor man."

To understand why this approach is totally ineffective, we must first understand what a patent is.  A patent is not the right to do anything.  If I had a patent on a better way to break into bank safes, I would not then have the right to break into bank safes.  Instead, a patent is the right to exclude others from practicing a patented invention, and to obtain damages in court if somebody does practice a patented invention without permission.  

These rights only arise in the US once specific claims are issued by the US patent and trademark office.  Before the 2011 America Invents Act, the United States awarded patents to the first person to invent, even if somebody else beat them to the patent office.  Under this old regime, there was a tiny benefit to mailing an invention disclosure to yourself -- it helped established an invention date.  Even this benefit is now gone, as the America Invents Act changed US patent law so that the patent is awarded to the first inventor to file for a patent, regardless of who invented first (with lots of caveats, see a lawyer for details). 

In fact, even hiring a patent lawyer and filing a patent application is not a patent (a "rich man's" patent?).  The only way an invention is protected under the patent system is by making it through the patent process successfully (and thanks to the America Invents Act, surviving the likely post-grant administrative challenges).

Somebody using the (ineffective) "poor man's patent" approach may also be attempting to allow themselves to continue to practice an invention even if somebody else later invents and patents it (old rules) or later files for and gets a patent (new rules).  If somebody doesn't mind making their invention public and possibly preventing themselves from ever getting a patent on it, the most effective way to do this is to publish a thorough description of what they are doing in a public forum.  This would then constitute "prior art" and prevent issuance of a valid patent covering that technology (patent office error could result in issuance of  a patent, but it wouldn't be valid over prior art if done right).  This also triggers real threats to the inventor's later attempts to get a patent ("on sale" bar for example), and should not be done lightly.

The bottom line is that there are really three patent issues the "Poor Man's Patent" raises, two of them highly related:

(1) Can I legally prevent somebody from doing what I invented?

Answer:  Only by getting an issued patent.  There is no shortcut -- although if you keep it as a trade secret there may be some benefit, but that's really something that a lawyer needs to advise on.

(2) Can I keep doing what I'm doing?

Answer:  This is a freedom to operate question, and even the best patent lawyers in the world can only get to "pretty sure" on this one in most cases.  There are millions of valid patents globally, and attempting to answer the question without a strong legal team is just asking for patent litigation.

(3) Can I stop somebody else from getting a patent on what I'm doing?

Answer:  If you publish your invention in a public forum, it is usually going to serve as prior art and prevent issuance of a valid patent -- with some wrinkles that a patent lawyer should expand on if you're really contemplating this.

An inventor who is cash poor does have an option:  There is a "poor man's patent application" -- the provisional patent application.  It can be filed with or without a lawyer, and costs $65, $130, OR $260 (depending on entity status - microentity, small entity, or large entity, excluding attorneys fees).  This application will never mature into an issued patent without filing a proper utility patent application within a certain time frame (a year usually, although it can be shorter in some circumstances, such as when claiming priority to multiple provisionals).  Note that the rules for patents other than "utility patents" differ.

There is some dispute in the patent community as to whether simply filing source code as a provisional patent application is beneficial -- my opinion is that there are some cases where it may be appropriate.  Let's be clear, though:  Saving money on a patent application up front strongly reduces the chance of getting a valid and valuable patent at the end.  This is particularly so given the changes happening in patent law.  A provisional patent application protects only the content of the application, and if you leave something out, that can be a problem later.

While some materials, like the ehow article referenced above, are clearly and obviously wrong in some material ways, even well researched materials -- even recent court cases -- can become wrong or misleading very quickly.  Any reference materials more than a few months old should be assumed invalid as to at least some points.  The law is changing that rapidly (a big case came down last week from the Federal Circuit on a 6/5 vote about whether delay in enforcing rights waives patent damages).  The speed of change is such that relying on anything other than a lawyer (or, if you can't afford one, at least careful reading of current USPTO materials) is likely to lead to mistakes.

One advantage of Fresno I've found as an inventor is that there is at least one excellent patent lawyer (the one I use), and I suspect there are others.  Moving my patent work from two large LA law firms to her in Fresno has resulted in large cost savings (Fresno is simply a better priced legal market) and there has been no compromise on the quality of the work.

Given the pitfalls of going it alone on patents and the more than competitive rates we can get in Fresno, it is my strong opinion that using a licensed patent lawyer (or patent agent -- though I don't know if we have any in Fresno) is critical to any invention-driven startup.

Side note:  Ironically, what would have provided at least some benefit, compared to the "why would people think this is effective at all" self-mailing method, would have been to sign an NDA with a witness or notary public, have them sign and witness the actual document, then seal it or not, who cares.  This would have established an invention date with proof of invention, which under the old "first to invent" regime would have given the inventor priority over an earlier-filed but later-invented invention assuming the inventor timely files for a patent.  Under the new first to file regime, this wouldn't work.

The bottom line is that patents are expensive.  Using a lawyer local to Fresno makes them far less expensive, but patents are still not cheap to acquire.  There is simply no way to get patent protection in the US without going through the patent office.  Anybody who tells you otherwise is wrong.  The real alternative to a patent is treating the invention as a trade secret, but that comes with its own set of risks and benefits and should not be done without the advice of counsel.

The Poor Man's Copyright:

A related myth to watch out for is people "copyrighting" things by putting them in an envelope and mailing it to themselves.  It may provide proof of date, but that is easier to do by just getting a notary public, and far more likely to be legally accepted as proof.  Moreover, things are copyrighted as soon as they are created in fixed and tangible form.  You don't need to do anything to get a copyright in your work.  The doodle you drew while talking with your friend yesterday was copyrighted as soon as you drew it.

There are three levels of copyright protection in the U.S. (the first two levels differ only in terms of how the creator documents the creation date, so they differ in functional but not legal terms):
(1) You create a work, and it is automatically copyrighted with nothing further required on your part;
(2) A work you created and which you documented in a way that allows you to prove date of creation (thereby helping you to win a case if somebody copies your work and later claims that it was you who copied their work); and
(3) A registered copyright.

People don't understand the difference between copyright and a registered copyright.  A registered copyright comes with the right to statutory damages and attorneys fees.  Registration is cheap and easy, but is done with the US Copyright Office.  

Just like with patents, writing something down and putting it in an envelope to "copyright" it is effective as a way of wasting a stamp and little more.  Proof of creation date is far better established in other ways, and in any event is a poor second to actually registering the work.  Unlike patents, most copyright registrations can be done equally well by a non-lawyer as by a lawyer, although for mission critical things like a novel, at least running it past a lawyer isn't a bad idea.

Thursday, August 27, 2015

What about money?

There is a complex relationship between intellectual property protection and money.

Many venture capital sources and angel investors will not invest without some kind of assurance or plan to reduce the risk that a big company will see what you are doing, swoop into your space, and use their money and market dominance to take your business.

Copyright is free and automatic (and registration costs a de minimis amount), but in most cases it would be a trivial task for one of the tech giants to write software from scratch providing the same functionality as yours does.  By contrast, a patent protects functionality.

Let's take a look at a startup from 1998 -- Google.  In 1998 when Google landed an initial $100,000 angel investment, it was patent pending on application 09/004,827, "Method for node ranking in a linked database" -- their basic search algorithm.  On June 7, 1999, Google landed $25 million in equity investment -- two months before their patent application's August 26, 1999 first office action, a non-final rejection by the patent office.  In a very typical history for patent applications, the rejection was eventually overcome and the patent was allowed on April 23, 2001 and issued on August 16, 2001.

The bottom line for Google is that they paid for a provisional patent application (filed Jan. 10, 1997) and a utility patent application (filed January 9, 1998) before they landed any substantial investment.  Google was able to say they were "patent pending", and investors were able to evaluate the patent application and gain a measure of confidence that the then-competing search giants (e.g. Yahoo, DEC's Alta Vista) would not eat Google's lunch by stealing their algorithm.  While the actual role of the patent application in Google's funding is something we can speculate about, the fact is that they followed a solid path to getting funding:  Take steps to protect your intellectual property first, then seeking funding.

At this point, many potential start-ups may be thinking the obvious:  "If I need money to pay for a patent application and I need a patent application to get money, what do I do?"  There are several pathways that can be followed.  A provisional patent application protects the filing date and can be created for $5,000 or less (around $100 if you do it yourself without a lawyer -- something I don't recommend).  A bare bones utility application would cost around the same.  It is definitely worth talking with a patent lawyer to get options and estimates (as well as advice as to how to approach family and friends for the initial $10,000 to protect the IP without putting the IP at risk in discussing it before filing).

There are a few additional options.  One is to find investors who are willing to invest before IP protection has been obtained.  Matt Nutting has identified several classes of angel investors who are willing to invest for reasons other than pure financial motives.  Those investors are excellent candidates for investment in a company pre-patent filing.

You can also utilize local resources to get fundraising advice.  In the Central Valley and Fresno, you can get free help finding financing by going through the Fresno State Small Business Development Center (SBDC).

Thursday, July 9, 2015

Multi Time Machine, Inc. v.

In the recent case of Multi Time Machine, Inc. v., the 9th Circuit Court of Appeal reversed the District Court’s summary judgment in favor of online retailer (“Amazon”) in a trademark infringement action brought by Multi Time Machine, Inc. (“MTM”) under the Lanham Act.  The Court held that a jury could find that Amazon had created a likelihood of confusion under an “initial interest confusion” theory by responding to search requests for MTM Special Ops watches by showing MTM’s trademark three times above the search results, and displaying similar watches manufactured by MTM’s competitors beneath. 


MTM manufactures, among other things, high-end, military-style “MTM Special Ops” watches, and owns a registered trademark for “MTM SPECIAL OPS.”, who claims to offer the “Earth’s Biggest Selection of products,” does not carry MTM watches.  

In its complaint, MTM alleged that Amazon infringed its trademark by responding to search requests on its website with a results page displaying the “MTM SPECIAL OPS” trademark three times, above a display of aesthetically and functionally similar watches manufactured by MTM competitors.  Customers could not purchase watches from the search results page, but had to click through to an Amazon “product detail” page.  On the top of the product detail page, the customer’s initial query “MTM Special Ops” still appeared in the search field.  Nothing on either of the pages indicated that Amazon does not carry MTM products.  However, the search results of the Amazon website produces a list, with photographs, of several other brands of military-style watches that Amazon does carry, specifically identified by their brand names. 

On Amazon’s motion, the District Court granted summary judgement in favor of Amazon finding that the competitor’s itemized products were clearly labeled and there was no evidence that Amazon users were likely to be confused as to the sources of the competing goods. 

9th Circuit Analysis:

Trademark infringement occurs when a defendant uses a mark in commerce in a manner likely to cause confusion as to the source of goods or services.  A defendant can create a likelihood of confusion, and thereby cause infringement, through a type of confusion referred to as “initial interest confusion.”  Initial interest confusion occurs where a consumer is confused, not at the time of purchase, but earlier in the shopping process, if the customer confusion creates initial interest in a competitor’s product. 

The 9th Circuit held that a jury could find that Amazon had created a likelihood of confusion under the initial interest confusion theory because users may be confused as to why they only received search results showing the competitor’s products, and may wonder whether a competitor has acquired MTM or is otherwise affiliated with or approved by MTM.  The issue is not whether a buyer may purchase some brand other than MTM (mere diversion is not enough) but, instead, whether Amazon’s use of the MTM mark would cause initial interest confusion by attracting potential customers’ attention to buy infringing goods because of MTM’s hard-won reputation.  “Even though his confusion may be dispelled before an actual sale occurs, initial interest confusion impermissibly capitalizes on the goodwill associated with a mark and is therefore actionable trademark infringement.’” 


While the 9th Circuit clearly states that it is “by no means certain that MTM will be able to prove likelihood of confusion under and initial interest theory,” there are genuine issues of material fact.  Consequently, the Court reversed the judgment of the District Court, and remanded the action to the District Court for further proceedings.

This Blogger’s Reflections
In some respects, the 9th Circuit appears to be stretching the bounds of what constitutes actionable infringement by finding a genuine issue of fact regarding the likelihood of confusion when none appears to exist because MTM’s competitor’s products were clearly labeled.  It seems highly unlikely to this trademark attorney that sophisticated consumers, making relatively expensive purchases, would be confused as to the source of the competitor’s watches.  If the consumer had doubts as to the source, the sophisticated consumer would investigate further as to MTM’s status and affiliations, or at minimum, search other sites for MTM watches. 

On the other hand, and in contrast to Amazon’s competitor’s and who both clearly state that no search results match “MTM Special Ops,” Amazon makes no clear representation, which caused the 9th Circuit to  focus on Amazon’s intent.  Because it appears that Amazon is attempting to capitalize on the goodwill associated with MTM’s trademark, to the detriment of MTM and, perhaps, Amazon’s competitors,  the end result reached by the 9th Circuit (that the action against Amazo proceeds) may be the fair result.  In any case, MTM will no doubt have a difficult road ahead in attempting to prove consumer confusion with their competitor's products clearly labeled as such.