United States Patent laws are currently being reformed, in part, to make the U.S. patent system more akin to patenting in other countries, including Asia. However, regardless of the reform, there remain larger questions concerning patents: why to patent, how to enforce patents and what to do when faced with accusations of patent infringement in the United States.
Building a patent portfolio can be expensive, and enforcing your patents against infringers can be even more costly. Why should a start-up company expend resources to cultivate its patent portfolio rather than pump available assets into making products and providing services? Simply put: patents are investments and insurance.
There are many reasons to patent. Many strive to protect core technologies and products, or to corner a competitive advantage by having the ability to prevent others from making, using, offering for sale, selling and importing into the United States patented subject matter. Patents may protect the nuances and features that make your product or service better than that of your competition, and keep your competition from the ability to practice the technology that sets you apart.
Others seek patent protection for non-core business endeavors, creating a climate ripe for new and spin-off businesses. Start-ups among other organizations often conceive great ideas today that they do not have the resources to pursue as a secondary business. But, if patented, these side ideas may result in patent assets to sell to others, and thus become a revenue generation tool. Or they may become a lucrative new business down the road when the company is able to pursue a new business. This side patenting is particularly valuable in a climate where changing economies and global competition force many to become nimble by developing new types of business to adapt to change or by developing new applications for foundation technologies to create new cutting edge endeavors.
Some seek patents for defensive purposes – to be able to level a playing field by defensively asserting patent assets, if faced with infringement accusations from others. Similarly, some patent for “blocking” purposes, to block others from the ability to practice a technology, even if the organization does not necessarily intend to commercialize it. Blocking patents may be used defensively as leverage in a patent dispute, or become a source of revenue if monetized through licensing or sales.
Others seek patent protection to better position a company for attracting investors or for an asset purchase sale – to make sure that your IP ducks are in a row protecting your innovations to boost their value and the overall value of your company. Because patents may be viewed as standalone assets above and beyond a product line, patenting may boost a company’s value in the eyes of investors.
Finally, particularly in tougher economic times, many patent with licensing and IP asset purchase business plans motivating a portfolio build, or decide to turn a new eye toward an existing portfolio to view it as an asset to monetize, rather than merely an insurance policy to protect core technologies. In this manner, a patent portfolio may become a revenue generator, in addition to product and service sales.
The motivation behind why to patent should drive developing a patenting strategy, as business goals should lead strategy decisions as to what types of U.S. patents to pursue, where in the world to seek patent protection internationally, and decisions regarding for which technologies to pursue patent protection.
Patent acquisition and enforcement traditionally included a Cold War like stand-off with competitors stock piling patents with which to be able to threaten each other for competitive advantage in the market place, and which if litigated, often resulted in large cross-licenses after years of patent war. While patent litigation among direct competitors continues, recent years have revealed an increase in other types of patent enforcement.
Enforcement trends, particularly for those having had the foresight to patent in non-core technologies, or in technologies with broad applications, include enforcement against those in completely unrelated industries. For example, businesses that obtain patents in non-core technologies and/or side technologies, may seek to license or assert their patents against others conducting business in those areas. Further, for patents having claims broad enough to cover uses beyond a company’s use of its own technology, there may exist opportunities to enforce patent rights against industries apart from the organization’s competitors. This type of assertion may reduce or eliminate the likelihood that a target infringer would have defensive patents available to level that playing field with cross accusations of infringement used as counterclaims or to attempt to lower license fees.
Other enforcement strategies include asserting patents against industries providing complimentary goods and services, but who are not direct competitors of a patent holder. Depending upon how patent claims are drafted, claims may cover corollary uses. For example, a patent involving computer systems and internet based technologies may be well advised to contain claims directed to different parts of the ecological system, so as to have the ability to pursue infringement claims against various actors in the chain.
Conversely, what do you do when you receive a demand letter accusing your organization of infringement?
In the patent area, many demand letters are couched as “licensing opportunities” pointing out “patent which may be of interest” to your organization. Patent case law has driven this trend away from traditional “cease and desist” communications in patent infringement issues due to court rulings establishing jurisdiction for an accused infringer to seek a declaration of non-infringement in federal court upon receiving a cease and desist letter. Effectively these rulings gave control over choosing whether to litigate a patent infringement case to accused infringers, who became enabled to start litigation. This foreclosed a patentees ability to assert patent rights and maintain sole control over where, when and if he wanted to move from a licensing campaign to litigation. Accordingly, most modern attempts to license are artfully worded in an attempt to avoid establishing this declaratory judgment jurisdiction.
Generally, upon receipt of a “licensing opportunity” letter, your organization is on actual notice of the patent. In patent law, by being on actual notice of a patent, you could be subject to allegations of willful infringement. Willful infringement means that you knew about a patent, but continued to infringe despite this knowledge. A defense to allegations of willful infringement is that an accused infringer obtained a well reasoned opinion of counsel for a good faith basis of non-infringement. An infringer’s justified reliance upon an opinion of counsel may preclude a finding of willfulness. Willful infringement may entitle a patentee to three times to amount of damages for infringement and recovery of attorneys’ fees in asserting the patent against the willful infringer.
Accordingly, upon receipt of a “licensing opportunity” communication, it is advisable to consult patent counsel to assess infringement. Patent infringement assessments involve analysis of the technology and the law. A patent infringement inquiry is a two step process. First, the claims of the patent are construed as a matter of law. Basically, the court decides what the patent claims mean. U.S. Federal courts have established framework for how the meaning of the patent claims is determined. The primary resource for determining this meaning is a review of the patent itself, beginning with the claims, followed by its prosecution history consisting of the paper trail documenting the interactions between the patent applicant and the USPTO during patent prosecution in trying to obtain patent issuance. Arguments and amendments made by an applicant to overcome prior art and other rejections to patentability may impact patent claim scope, such as to narrow the scope of patent claims. Similarly, review of the prior art patents and publications considered by the examiner during prosecution helps to understand what the patent claims cover, as distinguished from what already existed in the prior art and is thus not a part of the patent claim scope. Patent claim meaning is determined from the vantage point of one of ordinary skill in the particular industry. For example, the term “windows” may have a different meaning in the construction technology field than the meaning given in a computer software field of technology. Some words when used in patent claims have legally operative meaning, based upon rules of patent procedure used by the USPTO and court rulings.
The second step in a patent infringement inquiry is a comparison of the accused product to the construed patent claims. If each and every claim limitation in a patent claim is found in literally or by equivalents in an accused device, infringement occurs. Failure to practice a claim element leads to a finding of non-infringement. However, practicing all elements of a patent claim and having additional features (extra elements) generally does not negate infringement. Similarly, having your own patent or practicing your own patent does not negate infringement as it is possible for a particular good or service to fall within the claims of more than one patent.
Based upon patent practitioner analysis of infringement, hopefully a viable basis for an opinion of non-infringement may be found. Sometimes in order to avoid infringement, designing a product to get around a patent claim is recommended. Other times, it may be advisable to take license to a patent or purchase it to cure infringement problems. Even in instances where a company believes it does not infringe a patent, it may sometimes advisable to consider licensing it for business reasons so as to avoid the hassle and expense of patent litigation. However, a patentee may not offer licensing terms that are acceptable to an accused infringer during licensing negotiations, and resolution short of litigation may not always be possible.
Defenses to patent infringement (apart from “I don’t infringe”) may enter into licensing negotiations and/or responses to demand letters, and may impact a company’s willingness to fight charges of infringement.
Common defenses to accusations of patent infringement include claims that the patent is not valid. Patent invalidity defenses are most often based upon prior art, and may generally be more effective when including prior art that had not been before the patent examiner during prosecution of the patent. Invalidity claims pertain to whether the invention was patentable over the prior art and pertain to the tests for patentability. Recent U.S. Supreme Court law has upheld the heightened requirement of proof for invalidity of a “clear and convincing” standard for accusations based upon prior art not considered by the examiner during patent prosecution, as well as that which had been before the patent office. Patent invalidity accusations may be based upon allegations that the patent does not comply with inventorship laws – that the patent was not filed in the name or names of the true inventors.
Defenses to patent infringement may also include allegations that the patent is not enforceable. Patent unenforceability claims are equitable in nature (a la even if the patent is infringed and valid, the patentee should not be able to enforce it against an infringer due to reasons of fairness), and may often include accusations of inequitable conduct or fraud upon the patent office during patent procurement, laches ,estoppel, unclean hands or patent misuse.
Finally, a comparison of the damages attributed to alleged infringement to the overall cost of defending against infringement accusation may impact willingness to license.
Overall, given today’s quickly changing global economies, developing an international patent strategy requires new scrutiny and use of new decision-making criteria. It is time to rethink old practices, to better position resources to protect technologies with IP, not just for the sake of having the protection, but in line with business goals. Patent strategy should be dictated by business goals.