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 which 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-arrounds 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 wilful 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 wilful 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 wilfulness 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 priorietary 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 a managing partner of Fernandez & Associates
LLP in Menlo Park, CA (www.iploft.com).
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