IP Offerings Logo
patent leather

Remedies-at-Law for Infringement – Part Four
Posted: 11/15/2021

The last three columns in this space covered three aspects of patent infringement. We first addressed the remedies available to an NPE (non-practicing entity) whose patent is infringed. An NPE is a patent owner who does not practice his or her or its patent – primarily independent inventors and universities.

The second installment addressed remedies for Practicing Entities (or “Market Participants” as they are also known). These are businesses that own a patent, and manufacture and/or sell a product or service based on that patent.

The third installment in the series addressed what infringement is and, even more importantly, how you document that infringement. If you missed any of these missives, they are all available below.

This fourth article in the series addresses your options once you have identified and documented what companies and what products or services from those companies are infringing your patent. Let’s start with the one and only Don’t on the Do’s and Don’ts List of Patent Assertion: Do NOT contact the infringer yourself! Many patentees think that a letter to the infringer will bring a quick settlement and a license for the patent. Contacting an executive at the company that you believe is infringing your patent can only have negative effects. It could, in fact, result in the infringer filing a Summary Judgement lawsuit against you, so you end up as the defendant and have to hire an attorney to represent you. Just as you would not attempt to fill your own cavity, do NOT attempt to enforce your patent yourself!

You need to know that patent litigation is VERY expensive. It can cost from $200,000 to $500,000 or more to try a patent infringement lawsuit when you add up all the costs – not just direct legal fees, but filing fees, depositions, expert witnesses, exhibits, damages consultants, travel expenses, and other items.

If you represent a business or you are a high net worth individual, and you can afford to invest that kind of money to enforce your patent rights, you do not need to read the rest of this article. If you need a referral to a patent litigation law firm, and there are several that IPOfferings can recommend.

If, however, you are not prepared to invest hundreds of thousands of dollars in the enforcement of your patent rights, you will need a partner, and that comes in the form a Patent Assertion Firm. These are businesses that specialize in asserting patents against infringers on behalf of the patent owner. It is a highly specialized field, so there are less than 50 such businesses in the U.S.

Just as IPOfferings can represent a patentee in the monetization of his or her or its patent by finding a buyer or licensee for the patent, IPOfferings can represent a patentee in the monetization of his or her or its patent by finding a Patent Assertion Firm to partner with the patentee in the assertion of the patent against its infringers.

There is another factor here that has to be considered at this point. Since the damages that can be collected by the infringed party are “reasonable royalties” (we covered this in the first installment of this series), there must be sufficient sales of the infringing product so the reasonable royalties will be enough to cover the litigation costs and still leave a profit. As a rule, there must be tens of millions of dollars of sales of the infringing product for a patent assertion campaign to be a viable undertaking. Sue an infringer that has generated $4 million in sales of infringing products, and if the reasonable royalty is 1%, that’s just $40,000 in damages, not nearly enough to cover the legal fees to sue the infringer in the first place!

A Patent Assertion Firm (or PAF) will need to see the Claim Charts we covered in the last installment in this series. If the PAF believes that you have a valid claim of infringement and there are sufficient sales of infringing products to make the patent assertion campaign a profitable venture, it may decide to partner with you. We use the word “partner” because the patentee contributes the patent and the PAF contributes the legal and litigation fees along with the company’s expertise.

Should the PAF be successful, the revenue generated from the patent assertion campaign will be divvied up per an agreed-to formula among the Patent Assertion Firm, IPOfferings, and the patentee. The PAF needs to recoup its out-of-pocket expenses along with a reasonable profit, so it earns -as it is entitled to - a substantial share of any settlements and awards. And while the patentee receives just a portion of the total settlements and awards, the patentee risked no cash of his or her or its own.

Finally, if the patent assertion campaign is not successful – for any reason – the Patent Assertion Firm writes off all the expenses it incurred on behalf of the patentee, and the patentee owes nothing.

Next Time: What are the risks and potential rewards of a patent assertion campaign?

Remedies-at-Law for Infringement – Part Three
Posted: 10/26/2021

Two columns ago, we addressed the remedies available to patentees whose patents were infringed. Since the available remedies differ by the status of the patent holder, we first addressed the remedies available to an NPE (a Non-Practicing Entity). An NPE is a patent holder that does NOT practice the patent – that is, does not manufacture or sell a product based on the patent. NPEs are most often includes independent inventors and universities.

In our last column, we covered the remedies-at-law that are available to Practicing Entities (or “Market Participants” as they are also known). These are businesses that manufacture – or have manufactured – and sell a product or services based on a patent owned by that business.

In today’s installment, we address what infringement is and, most important, how you prove it. U.S. Patent law (35 U.S. Code § 271) states that “…whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” Ah, were it that simple.

In order for a patent to be infringed, the product or service must “read” on every aspect of at least one independent claim in the patent. That essentially means that if you were to describe the features of a product it would be as if you were reading from an independent claim in the patent. To infringe, a product cannot be close to what is covered in the patent. It has to be exactly what is covered in the patent!

Let’s say you have a patent for a toaster over, and Claim 1 of your patent states that the toaster oven has a timer that is set by the user, it turns the toaster oven off in a specific number of minutes, and it beeps to alert the user that the food is ready. A toaster oven with just a timer does not infringe that patent. Only a toaster oven with BOTH the timer AND the beeper infringes the patent. If the toaster oven has additional features not covered in the patent, that is okay. But to infringe a patent, a product or service must include every aspect of one independent claim.

We were recently approached by a patent holder. A company was making a product that exactly duplicated what was described in the inventor’s patent except that it did not have a port for uploading data. And without that port – that was a key element in Claim 1 – the product was not infringing the patent, despite the fact that it read on every other aspect of Claim 1 from the patent!

Had the patent been written without the data port in Claim 1, and had the data port been included in a dependent claim, that inventor would have had a valid claim of infringement. But that was not how the patent was written and not how the patent was granted, so only a device that includes all the elements in Claim 1 – including the data port – would infringe the patent.

The next step is to document infringement, and that is done with what is called a Claim Chart. It is a document that lists each element in an independent claim from a patent in the left column, and in the right column it documents the infringement of each element in the claim using either pictures of the infringing product or descriptive copy about the infringing product. The infringement evidence must be documented, and that is usually done with a link to the website page from which the images and/or text was taken.

An inventor cannot prepare his or her own Claim Charts. We receive Claim Charts on a regular basis submitted by an inventor, but no one will take them seriously. To be authentic and acceptable, a Claim Chart must be created by a knowledgeable third party. And – unless you are the inventor who believes his patent has been infringed – anyone can understand why.

If you go to the Patent Infringement Services page at our website, you will see the first page of a Claim Chart from the Cellular Communication Equipment v. Apple patent infringement lawsuit from 2016.

Next Time: You have documented infringement of your patent. Now what?

Remedies-at-Law for Infringement – Part Two
Posted: 10/4/2021

Last month this column addressed the remedies available to patentees whose patents were infringed. Since the available remedies differ by the status of the patent holder, we first addressed the remedies available to an NPE (a Non-Practicing Entity). An NPE is a patent holder that does NOT practice the patent – that is, does not manufacture or sell a product based on the patent. This most often includes independent inventors and universities.

The only remedy available to the infringed patent holder is to sue the infringer in U.S. District Court. If the court finds that infringement did occur, the patentee is entitled to “reasonable royalties” – what the infringer would have likely paid in royalties had the infringer simply licensed the patent in the first place. As we pointed out, it does not seem fair that the only consequence of patent infringement is that the infringer ends up paying what it would have paid in the first place had it licensed the patent, but that is the law.

However, if the patentee can prove willful infringement – prove that the infringer knew about the patent, but went ahead and infringed it anyway (a tough case to make, but it can be made) – the infringer is now liable for treble (or triple) damages, considerably more than the infringer would have paid had it simply licensed the patent in the first place.

In this installment, we address the remedies available to a Market Participant or Practicing Entity. A Market Participant or Practicing Entity is most likely a business that owns and practices a patent. The enterprise manufacturers or sells a product based on the patent, and a competitor is infringing that patent. To clarify an issue about which we are often asked, a Market Participant does NOT have to manufacturer a product to be a Market Participant. It only needs to sell a product based on the patent. Many U.S. companies have their products manufactured overseas – so the company does no manufacturing itself – and it sells those products in the U.S. A company that has a patent-protected product contract manufactured, and only sells it, is most definitely a Market Participant and entitled to all of the remedies available to a Market Participant.

For the Market Participant, there are three remedies.

♦ Reasonable Royalties: Just like the Non-Practicing Entity, the Practicing Entity – if it can prove infringement – is entitled to what the infringer would have likely paid in royalties had it licensed the patent in the first place. And if the Market Participant can prove willful infringement, it is also entitled to treble damages. Both the NPE and the Market Participant are entitled to reasonable royalties from the infringer, and treble damages if they can prove the infringement was intentional.

♦ Lost Profits: Since the infringed party is selling a product based on its patent, there are profits generated from the patent via the sales of the products based on that patent. When a competitor sells an infringing product, it is essentially stealing sales from the patent owner since had the infringing products not been available, the buyers of those products would have had to buy product from the patent owner. And so, a second remedy available to the Market Participant is the profits it lost on sales that went to the infringing party. By determining what the sales and profits were for the infringer on the infringed products it sold, what those lost profits are can be determined.

♦ Injunctive Relief: The third remedy is not remunerative, but it can be very potent. The court may issue an injunction ordering the infringer to cease sales of the infringing product in the U.S. For an infringer that has a few warehouses full of product that it cannot now sell, and factories set up to produce a product that it cannot sell, an injunction can be devastating! When a Market Participant can secure an injunction from the court ordering the infringer to cease sales, that infringer comes begging to the patent owner to take a license for its patent!

In the famous Apple vs. Samsung patent infringement lawsuit back in 2012, the jury decided in Apple’s favor that Samsung was infringing several Apple patents and Apple was entitled to damages. Apple petitioned the U.S. District Court for the Northern District of California to issue an injunction prohibiting Samsung from importing infringing Galaxy smart phone into the U.S. The judge denied Apple’s request. Apple appealed the ruling, and three years later – that's how long an appeal can take – the Appellate Court ruled that the judge should have issued the injunction. By then, however, it was too late to benefit Apple since Samsung had substantially changed the design of its phones.

Had the judge properly granted Apple the injunction, and Samsung could NOT sell its smart phones in the U.S., Samsung would have been forced to seek a license from Apple for the infringed patents. Apple could have refused to license its patents – that is most likely what Steve Jobs would have decided – and Samsung would be out tens or million or hundreds of millions in sales revenue. Ouch!

Next Issue: Proving Infringement

Remedies-at-Law for Infringement
Posted: 9/13/2021

We’ve worked with many inventors and businesses over the years who were horrified to discover that their patents had been infringed. Ironically, though, for many of them, it turned out to be a fortuitous and profitable event!

The bad news is that there are no “Patent Police” that you can call when your patent is infringed who will find and arrest the infringers. Patent infringement is a civil matter, so the patent owner (the “assignee” in patent lingo) has to pursue the infringers through civil litigation.

We are often asked by the owner of an infringed patent what he or she or it can expect in compensation for infringement of the patent, and the answer depends on the status of the assignee – NPE (non-practicing entity) or market participant – as the remedies are quite different.

♦ NPE: A non-practicing entity is a patent owner that does not practice the patent – that is, does not make or sell a product based on the infringed patent. This most often includes independent inventors and universities. The NPE who can document and prove infringement is entitled under current U.S. patent law to “reasonable royalties” – what the infringer would have likely paid in royalties had the infringer licensed the patent in the first place instead of infringing it. It seems unfair that Company A blatantly infringes a patent, and the only penalty is that it has to pay the royalty it would have otherwise paid had it simply licensed the patent in the first place, but that’s the law.

The most common chain of events is that the assignee engages a patent litigation law firm or partners with a patent assertion firm, and files a patent infringement lawsuit against the infringer. There are hearings and motions are filed, and there is “discovery” (an exchange of evidence and documents between the plaintiff and the defendant). The patent assignee – the party filing the complaint – is the plaintiff, and the party who is being sued is the defendant.

Both sides are entitled to question the other side’s witnesses in what is known as a “deposition.” At some point – before the actual trial begins – the two sides usually sit down and work out a settlement. Very few patent infringement lawsuits go to trial – the vast majority are settled out-of-court because it is simply too risky to roll the dice and take your chances with a jury. The question every plaintiff asks is “Do I want my fate determined by 12 people, none of whom is smart enough to get out of jury duty?”

In the famous Apple vs. Samsung smartphone patent infringement lawsuit back in 2012, Steve Jobs wanted to go to trial to position Apple as the innovator and Samsung as the intellectual property thief. Jobs’ gamble paid off, and Apple won, but it was a bold move on Apple’s part!

When the assignee and the infringer reach an out-of-court settlement, it often has two parts. First, there is usually a lump sum payment that covers past infringement from when the infringing product first went to market to the present. If the infringer is still selling the infringing product, there is a second part of the settlement in which the infringer takes a license for the patent and pays royalties on sales of the infringing patent going forward for the remaining life of the patent. This is sometimes paid out in quarterly royalty payments, but to close the books on the whole affair, infringers will often agree to a second lump sum settlement that approximates what the royalties would likely be for the life of the patent.

If the two sides cannot reach an agreement, and they do go trail, either side could win or lose. And the whole affair could drag on for years with appeals and other legal maneuvers.

There is often more than one infringer. If Company A’s products are infringing a patent, Company A’s direct competitors' products are also likely infringing the same patent, so there is Company B and Company C that also have to be sued. From that point forward, the process is pretty much the same with each infringer. However, once two or three infringers agree to out-of-court settlements, the remaining infringers will sometimes just settle up with the plaintiff and save a few hundred thousand in legal fees.

There is one other wrinkle to all of this. If the plaintiff can prove that the infringement was “willful” (the infringer knew about the patent and infringed it anyway), the infringed party is entitled to treble (or “triple”) damages. In many cases, a company comes up with a new idea for a product and goes to market with that product unaware that there is a patent that covers the technology behind the new product. That is unintentional infringement, and the infringer only owes reasonable royalties while the willful infringer owes reasonable royalties times three.

And finally, the plaintiff – in the vast majority of cases – is out the legal fees it took to file and pursue the patent infringement litigation. There are limited “special circumstances” under which the judge in the case will require the defendant to reimburse the plaintiff’s legal fees – or require the plaintiff to reimburse the defendant’s legal fees – but that is a rare outcome.

♦ Market Participant: The rules are very different for the company that owns a patent, produces or sells a product based on that patent, and the patent is infringed. And we will cover that in the next Patent Leather.

The Challenge of Selling a Trade Secret
Posted: 8/17/2021

Last month, we covered the difference between a patent and a trade secret. If you missed it, and you want to know the key difference between these two key intellectual property assets, last month’s column appears in the Patent Leather section at our website.

There are some innovations that really should be patented, while there are other inventions that might be better served as a trade secret. Clearly the best-known trade secret is the formula for Coca Cola, and the decision that was made over a century ago to not patent the soft drink formula, but keep it a trade secret, has served Coco Cola corporate well lo these many years.

So… if you have a trade secret – and you have clearly made the decision for one reason or another to NOT file a patent application to cover the technology – you are next presented with the challenge of monetizing your trade secret. Or, if you have very wisely decided to engage professional assistance with your venture, your broker is presented with the challenge of monetizing your trade secret.

One of the advantages of a patent is that while it is a monopoly granted to the inventor by the federal government – thank you, Founding Fathers – it is also a public document. We are often contacted by an inventor with a patent who wants us to sign an NDA (non-disclosure agreement) before showing us his or her patent! And they are surprised when we tell the inventor that is not necessary. One of the advantages of selling a patent is that we can simply send a link to any interested party that provides the prospective buyer or licensee with the entire patent filing. Our preference is Google Patents, but there are other sites that also provide patent data.

The exact opposite is the case with a trade secret. It is absolutely NOT a public document, and we absolutely, positively do NOT want any aspect of the trade secret to be a public document. Ergo, describing to a prospective buyer or licensee what the trade secret actually is is most definitely a considerable challenge.

Some inventors have a prospective buyer sign an NDA, and with the NDA in place, they share their trade secret with the prospective buyer or licensee. Bad idea. Especially if you have multiple parties looking at the trade secret. If one of the NDA-signers lets the trade secret slip out, the challenge is proving who spilled the beans. Even if there is one NDA-signer, and somehow the trade secret goes public, what recourse does the inventor have? He or she will have to prove in court not only that the trade secret was made public, but specifically who revealed the trade secret. And unless the trade secret appears in a by-lined article, that’s almost impossible!

Two Trade Secret Challenges: Two significant challenges are created when one wants to sell or license a trade secret.
1. How do you show the prospective buyer or licensee the trade secret without actually showing them the trade secret and risk letting it slip out into the public domain? Yes, that seems impossible, but it is simply too risky to reveal your trade secret to a prospective buyer or licensee and hope that person does not steal it.
2. Once you’ve sold or licensed the trade secret, how to you prevent the buyer or licensee from letting the cat out of the bag? What good is keeping a trade secret secret, only to have the buyer or licensee fail to take necessary precautions and let your trade secret go public?

Fortunately, for the owner of a trade secret who is seeking to monetize that asset, IPOfferings has developed solutions to both Items 1. and 2. How do we do it? We cannot tell you because it they are trade secrets.

Trade Secret vs. Patent
Posted: 7/15/2021

We are regularly contacted by inventors who have either (a.) made the decision to keep their inventions a trade secret and not file for a patent for their inventions or (b.) ask us our advice about keeping their invention a trade secret as opposed to filing for a patent. So…let’s spend a few paragraphs on this.

There are several famous and successful trade secrets. The most famous and unquestionably most successful trade secret is the formula for Coca Cola. Almost every knows – or should know – the story. An Atlanta pharmacist, one John Pemberton, invented Coca Cola in 1886. As recently as thirty or forty years ago – a good example is the pharmacy run by James Garner in Murphy’s Romance – drug stores had a counter that sold ice cream sodas and cold drinks. Pemberton invented a new and different beverage to sell at Jacobs’ Pharmacy on the corner of Marietta and Peachtree Streets in downtown Atlanta.

Rather than file for a patent – that would have expired over 100 years ago – Pemberton decided to keep his drink – actually the syrup he invented that is mixed with carbonated water to produce the actual beverage – a trade secret. Coca Cola is a good illustration of the two elements that are required for a successful trade secret:

1. It cannot be reverse engineered! While a chemical analysis can identify the actual ingredients that go into the dreadful drink – the IPOfferings crew are NOT Coke drinkers – it cannot determine the sequence in which the ingredients are blended, the exact quantities of each, and how they are mixed together.

2. It Can Be Kept a Secret! The number of people who know about the trade secret need to be small and trustworthy. The formula for Coca Cola is – as legend goes – kept in a safety deposit box at an Atlanta bank. Just a small handful of long-term and highly trusted Coca Cola employees have access to the formula. Is there a formula for New Coke? We do not know.

The bottom line is that a successful trade secret really has to be a process and cannot be a thing. If you have an invention for the next great toaster oven, protecting it with a trade secret is ridiculous because any competitor can simply buy one of your new, super-duper, next-generation toaster ovens and disassemble it, reverse-engineer it, and build a product identical to yours. And you can do nothing about it!

And that is the other major difference. If a company infringes your patent, you have legal recourse. You can sue them for patent infringement and, if you make your case, can collect damages. If you are a market participant – you are making and selling a product based on a patent – you have three remedies: Damages, lost profits, and injunctive relief.

If a company or competitor manages to steal your trade secret, you have NO recourse! You can try to find out who the culprit is that sold you out, but that is almost impossible. And even if you do, all you can do is fire the guy.

A trade secret – if it is a process that cannot be reverse-engineered – and it can be kept secret and still utilized to make a product or provide a service – can be sold or licensed just like a patent. But if it is sold or licensed, and the buyer or licensee does not take the necessary precautions and lets the trade secret cat out of the bag, your trade secret is now worth zero! Ouch.

Then there is the challenge of selling a trade secret. We will address that in August.

The Challenge of Selling a Patent Application
Posted: 6/18/2021

A granted patent – while its value is listed under “Intangible Assets” on most Balance Sheets – is very much a hard asset. It is a document from the U.S. federal government granting exclusivity to the owner (the “assignee”) of the invention covered by the patent for 20 years. It is an American concept the Founding Fathers believed to be so important that – rather than leaving it up to Congress to enact patent legislation – they incorporated patents (and copyrights) into the original U.S. Constitution! The brilliance of the Founding Fathers still amazes us 250 years later.

But what about a patent application? IPOfferings and other patent brokers represent primarily granted patents. The rights created by and protected by the patent are right there in black and white in the patent document. And when a patent is sold, ownership of the patent is “assigned” to a new owner who acquires the patent and all rights associated with the patent.

A patent application, however, is not a guarantee by the United States of America of anything! It is an application. It may – or may not – be approved and become a granted patent. In fact, only 52% of all patent applications ever become granted patents. Almost half of all patent applications are either rejected by the patent examiner or the patent application is abandoned.

When we are contacted by patent applicants who want to monetize their patent applications, we always advise them of the 50/50 approval/rejection rate. Their responses are always the same – they have the single greatest patent ever filed in the history of U.S. patentry, they have the best patent attorney to ever practice before the USPTO, and there is absolutely no doubt that their patent applications will be approved! While we admire their enthusiasm, the fact remains that only half of all patent applications become granted patents, so that factor has to be accounted for when one goes to sell a patent application.

The 50/50 approval/rejection rate of a patent application must be accounted for in the sale of a patent application. It is usually done in one of the following manners.

♦ Cash Sale: Some patent applications are simply purchased for cash, and the acquiring entity takes over the prosecution of the patent application – sometimes retaining the original patent attorney, sometimes engaging a new one – and the new assignee of the patent application assumes the risk that the patent application may not be approved as a granted patent. In such cases, the buyer has usually conducted considerable due diligence and is reasonably satisfied that a patent will be granted.

♦ Buy an Option: Some acquirers will pay for an option on the granted patent – for if and when it is granted. A purchase price for the granted patent is agreed to, and when the patent is granted, it will be transferred to the new owner in exchange for the agreed-to purchase price. Either the original applicant continues with the prosecution of the patent application, or the optioner takes over the prosecution. If the patent application is rejected, the original applicant keeps the money he or she was paid for the option, but there is no patent sale because there is no granted patent.

♦ Purchase with Bonus: The acquirer buys the patent application for X dollars and takes over prosecution of the patent application. Should a patent be granted, an agreed-to bonus of Y dollars is paid to the original applicant.

For both of the second two options there is the sticky question of which claims make it through to the granted patent. It is not uncommon for a patent examiner to accept some claims and reject others, so it is possible – in fact, likely – that the patent that is granted will not have all the claims from the original application, some of which may be of importance to the buyer, so this factor has been included in the agreement to acquire the patent application or take an option on the granted patent.

Published vs. Unpublished Patent Applications: When a patent application is filed, it is held in secrecy by the Patent Office for 18 months, at which point the patent application is published. That is, it is made public. As a result, it is much easier to sell a published patent application since anyone can go the USPTO website or Google Patents or a half-dozen other websites and see the actual patent filing. During those first 18 months – while the patent application is a secret document – giving copies of the patent filing to anyone who asks to see it is – to say the least – messy. You can see why it is much easier to sell a published patent application than an unpublished one.

Why Wait 18 Months? The reason the Patent Office sits on a patent application for 18 months is not arbitrary. When Company A comes up with a new idea for a toaster oven, it files a patent application for its new technology. That 18 months of secrecy gives Company A time to develop its new product – do the design, engineering, testing, prototyping, packaging, sourcing, and other tasks required to bring a new toaster oven to market – and proudly label it “Patent Pending.” And it can do this without fear that one of its competitors will steal the idea behind Company A’s new toaster oven. Once the patent is published, and the patent application is approved, “Patent Pending” will be replaced with the Patent Number. If the patent application is NOT approved, “Patent Pending” has to come off the product, but Company A had a couple of years of de facto patent protection while the patent application was in prosecution. Giving patent applicants that 18 months promotes innovation, and that is the whole idea behind patents in the first place!

However, that 18 months provides NO benefit to the independent inventor who does not have a factory in which he or she can produce a product based on his or her patent. If the plan is to monetize your patent – and not commercialize it – it makes no sense to wait out those 18 months in secrecy.

Free Consultation: Our advice to all independent inventors who do not plan to commercialize their patents but hope to sell or license or otherwise monetize them, is to request that the Patent Office publish their patent applications immediately so they become public documents, making them much easier to promote to prospective buyers and licensees.

Additional Benefit: There is an additional super-secret upside to having your patent application published early. We cannot reveal it here, but if you have a patent application, and you are considering our recommendation, there is an additional benefit that we will share with you. Contact us at [email protected].

Why Fuel Cells Never Took Off
Posted: 6/5/2021

The concept is very appealing. We all know that water is H2O – two hydrogen atoms and one oxygen atom bonded together. Most of us experimented with hydrolysis in High School in which we separated water into oxygen and hydrogen. And therein lies a tale.

It was back in 1959 when a scientist at General Electric, one Leonard Niedrach, filed a patent for a totally new concept in how electrical current was generated. Five years later, in 1964, he received U.S. Patent No. 3,134,697 for a “Fuel cell.” In addition to the impact of this foundational patent is the question on our part of why it took the Patent Office five years to grant that patent? There was no prior art to review. Fortunately for us today, patent pendency is about 30 months.

Getting back to the main story, the concept behind a fuel cell is brilliantly simple. Put oxygen in one chamber and hydrogen in a second chamber with a catalyst and a proton-exchange membrane between the two chambers. The oxygen will attempt to combine with the hydrogen to form water, but the membrane will only permit the protons to pass through, leaving the electrons stuck on the other side. However, a wire from the hydrogen side to oxygen side will permit the electrons from the hydrogen atom to pass over the membrane via the wire to join their proton mates and complete the merger. And what do we call electrons passing through a wire? We call it electricity!

Imagine this. An electrical-current-producing device that consumes no fossil fuel but uses oxygen and hydrogen, that has NO moving parts, that makes no sound, and that produces as its waste product water vapor. No hydrocarbons are consumed by the device, and none are emitted as waste, so a zero-carbon footprint! And since it has no moving parts, it will last forever! No repairs or maintenance! Can you image the possibilities?

NASA jumped on this technology and powered many of its space vehicles with fuel cells. Fuel cells were going to be the future of non-polluting automobiles. In fact, several manufacturers produced hydrogen-fueled autos such as the Jeep Treo and the Chevrolet Colorado ZH2. While battery-powered electric vehicles took off – and made Elon Musk a billionaire – hydrogen-powered vehicles languished. There are a few reasons why.

♦ Infrastructure: First of all, you need a network of hydrogen filling stations so all those hydrogen-powered cars and trucks can fill-up. The vehicle can use air for the oxygen, but it needs a tank of hydrogen. California mandated and funded a network of hydrogen filling stations under what it calls the California Fuel Cell Partnership. So you can buy and drive a fuel cell car in California, but once you leave the state, there are no hydrogen stations, so you are out of fuel – and luck. Until there is a national network of hydrogen filling stations, fuel cell-powered cars will just not take off. It is much easier to build electric car charging stations than hydrogen filling stations. Also, while it is relatively easy and not too costly to deliver electrical current to EV charging stations, it is very expensive and a logistical challenge to truck hydrogen to H2 filling stations.

♦ Cost: Then there is the cost of the hydrogen. It must be refined from a compound that includes hydrogen. The richest form of hydrogen is methane or H4C – four hydrogen atoms bonded to a carbon atom – that is produced by rotting garbage and is captured from landfills. Really! The problem is that when hydrogen is liberated from methane, that carbon atom bonds with an oxygen atom and forms carbon dioxide or CO that is emitted into the air. And the whole idea behind a fuel cells was to eliminate all those hydrocarbons!

♦ EVs Are NOT Pollution-Free! Only about 12% of the electricity consumed in the U.S. is green. The rest is generated from fossil fuels – mostly coal and natural gas. So, while an electric vehicle is in and of itself pollution-free, there is substantial pollution that is created to generate the electricity to charge the EV’s batteries. Electric vehicles do not eliminate spewing hydrocarbons into the air, they simply move pollution from the highway to the local power plant. And fuel cell-powered vehicles move pollution to the hydrogen recovery facility and to all those trucks delivering hydrogen to all those hydrogen filling stations.

U.S. Patent No. 11,000,000 Is Granted!
Posted: 5/24/2021

Congratulations to Jason Diedering and Sarvanna Kumar on the granting of their patent. What earns these inventors special attention is that they were granted U.S. Patent No. 11,000,000 for “Repositioning wires and methods for repositioning prosthetic heart valve devices within a heart chamber and related systems, devices and methods.” The assignee of the patent is 4C Medical Technologies, Inc.

Since the first U.S. Patent was issued in 1790 – it was signed by George Washington and the patent examiner was Thomas Jefferson – we’ve come a long way. For the first 46 years of the operation of the Patent Office, U.S. Patents were simply identified by the date they were granted. The Patent Act of 1836 set up a system of numbering, so the current system of sequentially numbered patents goes back 185 years.

Back in 1970, Alvin Toffler predicted in his book, “Future Shock,” that in a “post-industrialist” world change would occur at an increasing rate, leaving people suffering from "shattering stress and disorientation." Today we call that “innovation” and we got used to it! To put the granting of the eleven millionth U.S. Patent in perspective, here is a hyper-cruise through U.S. Patent history, one million patents at a time.

♦ 1908: It took from 72 years to reach U.S Patent No. 1,000,000 for a “Vehicle-tire.” The automobile had just come onto the American scene and Henry Ford was cranking them out by the thousands, so a new tire design made sense. Why they hyphenated the title we do not know. The inventor was one Francis H. Holton who assigned his patent to the B. F. Goodrich Company, an American icon until it was acquired by Michelin of France.

♦ 1935: It took much less time – just 27 years – for the Patent Office to grant U.S. Patent No. 2,000,000 for a “Vehicle wheel construction.” Ironically, this patent was also auto-related. The inventor was one Ledwinka Joseph and the assignee was the Edward G. Budd Manufacturing Co. that today is owned by ThyssenKrupp of Germany.

♦ 1961: It took another 26 years for U.S. Patent No. 3,000,000 to issue for an “Automatic reading system.” This patent was invented by Kenneth R. Eldredge and assigned to yet another American icon, General Electric Company.

♦ 1976: Just 15 years later, U.S. Patent No. 4,000,000 was granted for a “Process for recycling asphalt-aggregate compositions.” The inventor was one Robert L. Mendenhall, the founder of the Las Vegas Paving Co. Just think of all the casino parking lots that needed paving over the past five decades!

♦ 1991: Another 15 years passed until U.S. Patent No. 5,000,000 for “Ethanol production by Escherichia coli strains co-expressing Zymomonas” was granted to the University of Florida. The inventors were Lonnie O. Ingram, Tyrrell Conway, and Flavio Alterthum.

♦ 1999: The pace of innovation really picked up in the 1990s because it took just eight years for U.S. Patent No. 6,000,000 for an “Extendible method and apparatus for synchronizing multiple files on two different computer systems.” Two computers talking to each other was cutting edge in 1999! The inventors were Jeffrey C. Hawkins and Michael Albanese, and the assignee was another American icon, 3Com Corporation, now a unit of super icon Hewlett-Packard.

♦ 2006: Just seven years later, U.S. Patent No. 7,000,000 for “Polysaccharide fibers” was granted. The inventor was John P. O'Brien and the assignee was yet another American icon, E. I. du Pont de Nemours and Company.

♦ 2011: From eight years to seven years to just five years for U.S. Patent No. 8,000,000 for a “Visual prosthesis” to be granted. The inventors were Robert J. Greenberg, Kelly H. McClure and Arup Roy, and the patent was assigned to Second Sight Medical Products Inc. which is still in business and is traded on the NASDAQ.

♦ 2015: Innovation charged on, and in just four years U.S. Patent No. 9,000,000 was issued for a “Windshield washer conditioner.” The inventor was one Matthew Carroll who assigned the patent to his company, Wiperfill Holdings LLC. The invention captures rain water, deionizes it, and uses it to refill the windshield washer reservoir. There is no record of this invention ever being commercialized.

♦ 2018: In just three years and two months, U.S. Patent No. 10,000,000 for “Coherent LADAR using intra-pixel quadrature detection” was granted to yet another American icon, Raytheon. Part of an international patent family, it addresses the use of laser detection and ranging (or LADAR) for autonomous vehicles.

♦ 2021: It took just slightly less time – two tears and 11 months to be precise – for U.S. Patent No. 11,000,000 to be granted.

Here are the spans of years between each millionth patent:
U.S. Patent No. 1,000,000: 72 years
U.S. Patent No. 2,000,000: 27 years
U.S. Patent No. 3,000,000: 26 years
U.S. Patent No. 4,000,000: 15 years
U.S. Patent No. 5,000,000: 15 years
U.S. Patent No. 6,000,000: 8 years
U.S. Patent No. 7,000,000: 7 years
U.S. Patent No. 8,000,000: 5 years
U.S. Patent No. 9,000,000: 4 years
U.S. Patent No. 10,000,000: 3 years and two months
U.S. Patent No. 11,000,000: 2 years and 11 months

The Smart Home Business Segment Has Arrived
Posted: 5/7/2021

We are trying to locate the source for “You are not a man until you have a daughter.” It is a true statement, proven over and over again from generation to generation. What does that have to do with the Smart Home?

There is another true saying. A business sector is not really a business sector until it has a really nasty, drag-down, all-out, patent infringement lawsuit. Based on Vivint v. ADT (Case No. 2:2021cv00115) that was filed in U.S. District Court for the District of Utah, the Smart Home business segment has arrived. IPOfferings represents several Smart Home portfolios, and we were one of the first businesses to see the potential for this new business segment several years ago, so we have some skin in this game.

The plaintiff is Vivint Smart Home, Inc., a leader in the Smart Home business segment. The company was founded back in 1999, it boasts 1.7 million customers, and company became publicly traded just last year.

The defendant is ADT, Inc., a much, much older company. The bad guy is always the older company. In fact, ADT it was founded back in 1847 – yup, 175 years ago! – as American District Telegraph, the primary competitor of Western Union. Over a century and a half, the company morphed into business and home security services, becoming the leader in that segment. With a presence in six million homes and businesses, expanding into the Smart Home and Smart Office business segment made a lot of sense.

In the lawsuit, Vivint claims that ADT is infringing six of its patents:

  • U.S. Patent No. 7,956,739: Monitoring and entry system presence service
  • U.S. Patent No. 8,392,552: System and method for providing configurable security monitoring utilizing an integrated information system
  • U.S. Patent No. 8,700,769: System and method for providing configurable security monitoring utilizing an integrated information system
  • U.S. Patent No. 9,349,262: Security system providing a localized humanly-perceivable alert for identifying a facility to emergency personnel
  • U.S. Patent No. 10,228,151: Floating thermostat plate
  • U.S. Patent No. 10,325,159: Entity detection

ADT’s response was the standard one: “ADT believes the claims asserted by Vivint are completely without merit and intends to vigorously defend against the lawsuit." Just once – just once – we’d like the response to be “Oops. You got us. We bad!”

This is not the first litigation between these parties. In 2018, Vivant paid ADT $10 million (not much for a company with just over $1 billion in sales) to settle a deceptive sales lawsuit.

We will keep you updated as the case progresses.

The Turing Award – And Therein Lies a Tale
Posted: 4/19/2021

The Turing Award for 2021 has been awarded to Alfred Aho and Jeffrey Ullman for their work in computer languages. The Turing Award is named after Alan Turing, the brilliant British mathematician whose team created one of the first computers and used it to crack the coded messages sent by the Nazis using their Enigma machine.

Known as the “Nobel Prize” of the computer industry, it is given each year by the Association for Computing Machinery to those who are responsible for an innovation "of lasting and major technical importance to the computer field.” Messrs. Aho and Ullman met many years ago when they worked together at Bell Labs, and therein lies a tale that we shall share with you.

The story begins with the founding of Western Electric Manufacturing Company in 1869. It manufactured electrical products such as typewriters, alarms, and lighting products, and was closely aligned with the Western Union Telegraph Company, for which Western Electric supplied relays and other equipment. Western Union was the company that ran the U.S. telegraph system for over 100 years.

A decade later, U.S. Patent No. 174,465 was awarded to 29-year-old Alexander Graham Bell of Boston on March 7, 1876 for what was to become the telephone. Bell’s investor in his start-up business to produce and install telephones and provide telephone service was his father-in-law, Gardner Greene Hubbard, who formed the Bell Telephone Company in July 1877.

Bell and Hubbard set up a subsidiary, American Telephone & Telegraph Company, to handle long distance telephone services, but in 1899 they decided to make Bell Telephone a subsidiary of American Telephone and Telegraph. AT&T became THE U.S. telephone company for another 80 years, and came to be known as “Ma Bell.”

In 1879, Western Union and American Telephone and Telegraph were involved in a nasty patent infringement lawsuit – all great disputes are over a patent or a woman – and the suit was resolved when AT&T acquired Western Electric in 1881. For the next 100 years, Western Electric was the manufacturing subsidiary of AT&T. If you ever see an old black dial telephone at a flea market or in an antique store, turn it over and you will see that it was manufactured by Western Electric.

As the manufacturing business of the telephone industry, Western Electric needed to be on the cutting edge of technology, so on January 1, 1925, Bell Telephone Laboratories, Inc. was formed, and into this new company was combined all the engineering, development, and design departments of AT&T and Western Electric. Bell Labs – as came to be known – hit the ground running with 3,600 employees housed in 4,000 square feet at 463 West Street in Manhattan.

Bell Labs became one of the most prolific invention machines in history, having received 30,000 patents to date. Bell Labs invented everything from talking pictures to the transistor. Bell Labs invented the photovoltaic cell (or solar panel), the laser, radio astronomy, fiber optics, the UNIX operating system, and the picturephone – 50 years before Zoom! It was at Bell Labs that the 2021 Turing Award winners. Alfred Aho and Jeffrey Ullman, met and worked and became colleagues.

When AT&T was broken up in 1984 into regional operating companies and a long-distance telephone provider, Bell Labs became AT&T Bell Laboratories, a subsidiary of the long-distance company. In 1996, AT&T Bell Labs and Western Electric were spun off into a separate company, Lucent Technologies, Inc., but a small number of researchers were kept on staff by AT&T as A&T Labs.

In 2006, Lucent merged with French telecom manufacturer Alcatel to form Lucent-Alcatel, S.A.

In 2016, Nokia Corporation, the Finnish multinational telecommunications giant, acquired Lucent-Alcatel and established Nokia Bell Labs, the current successor to this storied American institution.

Are You Reporting All Your Assets?
Posted: 3/15/2021

We are often asked by our clients who have chosen IPOfferings to represent them in the monetization of their patents what value we should put on their patents. IPOfferings provides not one, but three, separate Patent Valuation Services, but we do not go through the process of performing a formal patent valuation – unless the clients engages us to do so – because it is a buyer’s market, and the buyer sets the price. Not all patent brokers will admit it, but that is the reality today.

There are times, however, when performing a patent valuation makes a lot of sense. In fact, there are times when a patent valuation is a critical event that should not be avoided. When a company has home-grown patents – patents that it did not acquire, but patents it applied for itself – it is critically important that a business know what those patents are worth. To see why, follow along with us on this adventure.

A business comes up with a new technology. It’s CTO (chief technology officer), its VP of Engineering, its Marketing Director, or any other employee at the company from the executive suite to the loading dock, comes up with an invention that the company could develop into a new product or use to improve or enhance a current product. What does a smart company do? It files a patent application for the new technology.

It probably engages a patent attorney to file the application, and two or three years later – current patent pendency at the USPTO is 23 months, but it was recently as high as three years – a patent is granted. Congratulations. But here is what does not occur: There is NO accounting transaction that records the acquisition of that patent.

When a company buys a truck, or a lathe, or shelving for the warehouse, or computers, or any other capital equipment, an accounting transaction occurs that takes funds out of Cash and adds the value of the acquired truck, lathe, shelving, or computers to the Equipment line under Property and Equipment. So as a company builds its assets, they automatically appear on the left side of the Balance Sheet.

If a company buys a patent – we hope it buys the patent through IPOfferings from one of our clients – an accounting transaction occurs that takes the funds out of Cash and records the value of the acquired patent under Intangible Assets.

But – and this is a very common but – when a company does what we covered back in the third paragraph (go back and read it if you need to), there is NO accounting transaction. The filing fees and attorney fees for the patent application are not assets. They are expenses that are properly written off in the year they are expended. So, when that patent is granted, it is most definitely an asset, but not one that appears on the company Balance Sheet automatically as other assets do.

We come across companies all the time in all industries that have from a handful to dozens of active, granted patents that are not accounted for on the company’s Balance Sheet!

Why is it important for a company to record its patents as assets? Because adding the value of its patents – and other intangible assets – to the Balance Sheet increases the company’s value. And a company with greater value has easier access to financing. It is much easier for a start-up business to raise venture capital or other financing if the value of its patents are reflected on its Balance Sheet. Adding the value of its patents to the Balance Sheet of a publicly held company can do wonders for the company’s stock price. And let’s face it, any company’s Balance Sheet should accurately reflect all of a company’s assets as well as its liabilities.

If you represent a company that has home-grown patents, and those patents are not reflected on your Balance Sheet, the time has come to have a professional valuation of those patents performed so their value can be accurately reflected on the company Balance Sheet.

Alec Schibanoff Will Be Speaker at the 2021 World IP Forum
Posted: 2/16/2021

The World IP Forum is a prestigious annual conference that addresses all aspects of intellectual property. It is held at a different location each year. It attracts attendees from the IP community, industry, academia, and government, and features speakers from the IP community, industry, academia, and government. There will be speakers from many of the national patent-granting agencies around the globe, major corporations, universities, national court systems, IP law firms, and professional IP services providers.

Our very own Alec Schibanoff will be one of the speakers, offering a presentation on Patent Triage. The 2021 World IP Forum will be April 26-28, and this year’s conference will be a virtual event.

We Thank Andrei Iancu for His Service
Posted: 2/16/2021

President Trump’s appointee to run the Patent Office was Andrei Iancu. As most of you know, the Director of the U.S. Patent and Trademark Office is also the Under-Secretary of Commerce for Intellectual Property and a presidential appointee. So, Mr. Iancu’s stint at the USPTO ended January 20 as did the service of all other cabinet officers and presidential appointees, except for a small number that were asked to stay on temporarily by the new administration.

Iancu came to the U.S. from Romania, and holds a BS in Aerospace Engineering, an MS in Mechanical Engineering, and a Juris Doctorate – all from UCLA. He worked in industry – four years at Hughes Aircraft – and in legal practice – 13 years at Irell & Manella. In addition to having movie-star good looks and a world-class personality, he did a pretty good job at the Patent Office. Among his accomplishments was reducing total pendency (the time it takes from when a patent application is filed until it is either granted as a patent or it receives a final rejection) down to an average of just 23 months. Bravo!

It is unclear where Iancu will go, but wherever it is, he will be brilliant. He is just that kind of guy. Until a new Under Secretary of Commerce for Intellectual Property is nominated and confirmed by the Senate, the Acting Director of the USPTO is Drew Hirshfield, the Commission of Patents and a career USPTO employee. We take this opportunity to thank Andrei Iancu for his service to the patent community and to his country.

100 Top Patent Recipients for 2020
Posted: 2/16/2021

Each year, Harrity Patent Analytics compiles its PATENT 300 – the 300 largest recipients of U.S. Utility Patents. You can visit the Harrity website for the full list of 300 and all the excellent analysis they provide. Here are the Top 100.

1. IBM 9,435
2. Samsung 8,539
3. LG 5,112
4. Canon 3,689
5. Intel 3,284
6. Raytheon 3,213
7. Huawei 3,178
8. Microsoft 2,972
9. Taiwan Semiconductor 2,892
10. Sony 2,886
11. Apple 2,840
12. Dell 2,826
13. Toyota 2,819
14. GE 2,417
15. Alphabet 2,379
16. Amazon.Com 2,373
17. Qualcomm 2,297
18. BOE 2,157
19. Ford 2,090
20. Panasonic 1,929
21. Hyundai 1,626
22. Micron Technology 1,535
23. Facebook 1,527
24. Johnson & Johnson 1,492
25. Hitachi 1,472
26. Boeing 1,464
27. AT&T 1,459
28. Medtronic 1,440
29. Ericsson 1,401
30. Fujifilm 1,399
31. Siemens 1,341
32. Epson 1,335
33. Mitsubishi 1,319
34. Toshiba 1,314
35. Honda 1,219
36. Denso 1,214
37. Honeywell 1,178
38. Texas Instruments 1,150
39. Cisco 1,141
40. US Federal Government 1,108
41. Robert Bosch 1,100
42. Fujitsu 1,093
43. SK Group 1,091
44. Sharp 1,052
45. NEC 1,007
46. HP 989
47. Kyocera 978
48. Philips 949
49. Ricoh 938
50. Murata 892
51. TCL 880
52. Infineon 834
53. HPE 831
54. GM 802
55. Western Digital 788
56. Oracle 783
57. Halliburton 778
58. Nokia 757
59. Kioxia 756
60. Capital One 747
61. Sumitomo 740
62. Applied Materials 738
63. SAP 737
64. Alibaba 721
65. Softbank 720
66. Brother 713
67. Verizon 712
68. Bayer 706
69. University of California 687
70. Saudi Arabian Oil 683
71. 3M 668
72. Porsche 658
73. NXP Semiconductors 649
74. STSMicroelectronics 646
75. Olympus Corporation 643
76. Safran 641
77. Procter & Gamble 640
78. Fanuc 634
79. Schlumberger 633
80. Lenovo 630
81. Tencent 623
82. Boston Scientific 605
83. Konica Minolta 587
84. Japan Display 580
85. TDK 578
86. Baker Hughes 572
87. Mubadala 571
88. BBK Electronics 564
89. Airbus 560
90. Semiconductor Energy Lab 556
91. Rolls-Royce Group 553
92. Commscope 550
93. Mitsubishi 530
94. Salesforce.Com 525
95. BASF 517
96. ETRI 499
97. Tokyo Electron 498
98. Continental 495
99. Adobe 490
100. Corning 488

A few clarifications and observations:
No.1, IBM, has led this list for as long as anyone can remember.
No. 46 (HP) is Hewlett-Packard, Inc., the PC and printer manufacturer.
No. 63 (HPE) is Hewlett-Packard Enterprises, the server, networking, consulting, and support services business.
No. 26, Boeing, received 1,464 U.S. Patents while its direct competitor, No. 89, Airbus, received only 560.
No. 60, Capital One, is the only bank in the list.

We Need to Get This Off Our Collective Chests
Posted: 1/18/2021

We keep a list of what we call Annoying Errors. These are errors – usually in grammar – that we see people make over and over. What does this have to do with patents, patent brokerage, and patent-related services? We will feel better when we get it off our chests. That’s what. So here goes.

♦ Reflexive Pronouns: These have to be the most-often misused forms of speech in the American language. What is wrong with this sentence? “Jeff, Sally, and myself were responsible for filing the patent application.” It hurts just to read the sentence. “Myself” is a reflexive pronoun, so it should never appear as the subject of a sentence. The correct sentence is “Jeff, Sally, and I were responsible for filing the patent application.” What is wrong with this sentence? “It is better to leave these things to myself.” Again, we cringe as we read this. A reflexive pronoun is never the direct object of a sentence. The correct sentence is “It is better to leave these things to me.”

A reflexive pronoun “reflects” back on the subject of the sentence, so “myself” is never used unless the subject of the sentence is “I”. For example, “I cut myself shaving.” or “They can handle that themselves.” A reflective pronoun (myself, ourselves, yourself, yourselves, himself, herself, itself, and themselves) is never the subject of a sentence and is only used when it reflects back on the subject (I, we, you, he, she, it, or they).

Patent Triage includes the evaluation, patent-by-patent, of the entire collection of assets, and putting each patent into one of five categories.

♦ Farther and Further: Farther is the superior form of “far”. Example: “I used to live in the far house, but then we moved down the road to the farther house. I hope to one day live in that beautiful house that is farthest down the road.” Far. Farther. Farthest. Get it? You use “farther” when you could also use “far” or “farthest”. The Ford Motor Company tagline “Go Further” is grammatically wrong. Great cars and truck. Bad tagline. Should be “Go Farther”. Go far. Gar farther. Go the farthest.

Further is a verb and means to advance or promote. Example: “A good education will further your career.” “I do not want to go any further with this.” Wrong. “You do not want to go any farther.” With that or anything else. Got it?

♦ Irrespective and Irregardless: “Respective” and “irrespective” are wonderful and useful words. “Based on our guidelines, we will take the respective actions.” Or “Irrespective of your request, we will not close early on Friday.”

“Irregardless” is NOT a word. “Regardless” means without any concern as to what others say or do. “We shall act regardless of any actions on your part.” Great word. So what could “irregardless” possibly mean?

♦ Perrogative: This is our biggest pet peeve, and we hear it this non-word all the time and even see it in print, even though the spell checker had to have flagged it when it was first entered into the document. “It is my perrogative, so I shall proceed as I wish.” Really? The word is “prerogative” and it is pronounced “pree rog uh tiv”. Not “per rog uh tiv”. Prerogative. Please….

To those of you who thought you caught an error in the first paragraph, we purposely use the term the “American” language. English is what they speak in England, and it is charming and wonderful to listen to. We are not alone in this belief. In fact, Websters – THE authority on dictionaries – calls its lexicon “Webster's New World Dictionary of the American Language”. Hah!

Now we really feel better! Our best wishes to all for a healthy and prosperous 2021!

Is It Time for a Serious Evaluation of Your Patent Assets?
Posted: 12/12/2020

While we are on the topic of what is or is not a good time for something, here is a subject that every business or university that owns patents – as well as any prolific inventor with an inventory of patents – needs to consider. Year ends are always a good time to look back, reflect, analyze, consider, and strategize.

A question that every owner of multiple patents should consider is: What is the best course of action in 2021 and beyond for each of the patents it owns? The way to start that process is with what is called “Patent Triage.” The term “triage” is most often used in medical scenarios. When there is a disaster with multiple injuries, the injured are brought to a medical facility and they are immediately triaged. They are evaluated using medical community standards to determine who needs critical care, who needs intense care such as surgery, who can wait for treatment, and who really needs to be sent home. The key, of course, is to save lives by making sure the most seriously injured are treated first.

While no one usually dies in the process, Patent Triage is a patent-by-patent evaluation of a company’s or a university’s or an inventor’s patents to classify each one, and from that evaluation have a strategy for that asset. Once classified, the smartest course of action for each patent becomes clear. For those who cannot see the patent forest for the patent trees, the solution is to totally avoid the forest, and look at each individual patent.

Patent Triage includes the evaluation, patent-by-patent, of the entire collection of assets, and putting each patent into one of five categories.

♦ Core Patent: These are patents that a company is practicing in the products or services that it sells, they are essential to the enterprise, and they should be professionally appraised – if they have not been – to determine their value so that value is reflected in the company’s Balance Sheet. Universities and inventors do not have Core Patents, only businesses.

♦ Assertion Asset: These are patents that appear to be infringed – with “appear” being the key element here. There are several indicators that a patent can have that it is being infringed – the number of Forward Citations is just one. These patents need to be further studied in a second process to determine if there is infringement, who the infringers are, and – if appropriate – to document that infringement with Claim Charts. An infringed patent – based on who the infringer is – can be a patent that has considerable under-utilized value, and that value can be realized using a few different strategies. A patent can be both Core and Assertion – and often is, and the infringer is a competitor of the patent owner.

♦ Licensing Candidate: This is a patent that has the potential to generate royalties, but may not be because all the prospective licensees are direct competitors of the assignee, and the patent owner does not want to created competition for its patented product. And while that makes sense, it is not always the case that it will create new competition. There are instances in which a patent can be licensed to companies that are in concentric businesses – enterprises that have related, but not directly competing products – to the patent owner's business. One of the most attractive aspects of a Licensing Candidate is that it can generate income with no Cost of Good Sold! A patent can be Core and/or Assertion and/or Licensing.

♦ Divestiture Patent: This is a non-core patent – a patent that covers a technology that the patent owner is not practicing – that is likely to have little real value for the business. Divestiture Patents should be referred to a patent broker to see if they can be turned into cash. It is not uncommon for a company to file for a patent on a new technology, but for one of several reasons – from lack of marketing to bad timing to too high an investment to distribution or packaging issues – the business never commercialized the patented invention. A Divestiture Patent might also be a Licensing Candidate, but it is definitely not a Core Patent and not an Assertion Asset.

♦ Non-Core Patent: When a business believes it has a new technology within its grasp, it should always file for a patent for that invention. Better to have a patent for an invention you do not practice than not have a patent for a technology that you do practice! The result of this activity – an activity we strongly endorse – is that sometimes a company ends up with a patent that is simply not core to its business, but it is not a patent with licensing or sale potential. For example, the technology covered by the patent was cutting edge when the patent application was filed, but just a few years later – when the patent was granted – the invention is no longer practical, or other technologies have replaced it, or the market has gone elsewhere. A good example of this are the electronic typewriters that hit the market in 1980 and 1981. They were a great idea in their heyday, but the PC made electronic typewriters obsolete by 1983. It is not even worth paying the maintenance fees on the Non-Core Patents, and they should be abandoned. Needless to say, those patents that are triaged as “Non-Core” do not fall into any of the other categories.

Every business, every university, and every inventor needs to know what’s in the warehouse, especially when that warehouse is full of patents.

More Advice for Every Inventor
Posted: 11/12/2020

Last month, in Advice for Every Inventor, we provided valuable – yet free – advice for every inventor with a patent about to be granted. If you missed the article, or you want to read it again, or send it to someone who needs to read it, it is posted down below.

As we promised in last month’s Patent Leather, we share with you this month yet another way to add sales appeal and value to your next patent. It is no surprise to anyone that we compete today in a global economy. That point was illustrated in The World Is Flat by economist Thomas Friedman. The book came out back in 2005, but the lessons in the book are still valid. Friedman illustrated how any business anywhere in the world can effectively compete against all other businesses across the globe. With this in mind, how does an inventor compete in a global marketplace – and make his or her patent more appealing and more valuable in the process?

The acquirer of your U.S. Patent is very likely a multinational enterprise that manufactures and sells products in many countries. The company that is buying your patent for patent protection in the U.S. will very likely also want patent protection in Europe and Asia where many U.S. companies also do considerable business.

That means that in addition to filing for a continuation, also file for a PCT Patent Application. If you are not familiar with it, the PCT (Patent Cooperation Treaty) is an agreement between most of the nations of the world to cooperate in the granting of national patents. Filing a PCT Patent Application based on your soon-to-be granted U.S. patent gives you a global priority date for your patent, and it considerably speeds up the time it takes to secure patents in other countries.

Let us take a minute to clarify something. We get emails from inventors every day – and we mean “every day” – who filed a PCT Patent Application and believe that they now have a “global” patent. A PCT Patent Application is NOT a patent. It is simply an application that can be used to secure patents from the 153 nations that are signatories to the agreement. Each national patent office needs to individually review your patent application and either approve the application and grant a patent, or reject the application based on that country’s patent laws – and they can differ considerably from nation to nation – and what other patents may have already been granted in that country, as well as other legal and regulatory factors.

But filing a PCT Patent Application gives the acquirer of your patent-and-PCT-Patent-Application portfolio a distinct advantage if that company decides to sell a product based on your patent in other countries – a very likely outcome in today’s global economy. Filing for a PCT Patent Application is another of those Low Risk/High Reward propositions we promote.

If the acquirer of your U.S. Patent and PCT Patent Application does not need a patent in another country, the company just lets the PCT Patent Application expire. No harm. No foul.

So – to increase the appeal and value of your soon-to-be-granted patent, there are two very important extra steps to consider:
  1. File for a continuation
  2. File a PCT Patent Application
A portfolio consisting of a granted U.S. Patent, a continuation application from that granted patent, and a PCT Patent Application, is a portfolio with both downstream and international appeal, and it is absolutely more valuable than a solo U.S. Patent! Absolutely!

Advice for Every Inventor
Posted: 10/13/2020

We return to this topic at least once a year because it is critical to the successful commercialization of U.S. Patents, especially recently granted U.S. Patents that are going to be monetized and not practiced by the inventor and assignee.

Among all asset classes, patents are unique because they are the one asset that you cannot buy and then modify to your exact needs. Take real estate, another asset class, as an example. You can buy a building that once housed a factory and turn it into a warehouse – or vice versa. Or…you can apply for a zoning variance and turn that old factory into an office building. Or even an apartment house. Even a nursing home or extended care facility. You could knock out big chucks of the front wall of the building, put in windows, and turn that old factory into a retail location – a store or restaurant. The possibilities are almost endless. In the Northeast where we are located, it is fashionable to buy a barn and turn it into a house. Or buy a warehouse or factory building and turn it into lofts. You get the idea.

Alas, the same is not true of patents. The red meat of a patent is its claims. And what is in the claims in the granted patent is what a business receives when it buys or licenses that patent. Wouldn’t it be great if a business could buy a patent, and then tweak the invention covered by that patent to the exact needs of that company? Alas, to dream, but it is not possible.

But wait a minute. There actually is a way to do that! It is called a continuation. When a patent application is approved – the Patent Office term is “allowed” – that is time for the inventor and his or her patent attorney to file for a continuation. There are continuations, divisionals, and continuations-in-part, and your patent attorney can describe the differences between them and which is most appropriate to your patent.

When you file a continuation, you create a patent application that includes the claims from the first patent along with the Priority Date of the first patent. When you go to market with a granted patent and a continuation patent application based on that patent, you create a portfolio that is a much more attractive and valuable asset than just the initial granted patent.

What the acquirer of the patent-and-continuation can do is use the continuation to tweak the invention in the original patent. For example, a patent covering a medical device for humans can be supplemented by a patent that covers animals. A patent that includes a visual and audio warning device can be supplemented with a second patent that calls a specified phone number or communicates via Bluetooth. A patent covering industrial equipment can be supplemented by a second patent that covers household appliances. The possibilities are quite literally endless!

Here is the other benefit of filing a continuation. One morning you are going to wake up at 3:00 am and ask yourself why you did not include one more feature in your recently granted patent? But wait, you can. Use the continuation to add that feature. Now you have an even more comprehensive patented invention.

But – before that second patent is granted – be sure to do what? File for a continuation!

What if you and the buyer of your patent never need the continuation? You just let it lapse. No harm. No foul. We are believers in High Reward/Low Risk ventures, and filing for a continuation before your next patent issues is clearly High Reward and Low Risk (and low cost). It creates a portfolio that is more appealing and more valuable than just the solo granted patent.

While this advice has been given from the aspect of the independent inventor, it clearly applies to any organization – such as a business or university – that is filing a patent for an invention. Filing a continuation gives the organization the ability to build on the basic invention covered in the initial patent and create a downstream – or several downstream – second or third-generation patents that share the Priority Data – always a critical factor – from the initial patent.

Why Is the Selling Cycle So Long?
Posted: 9/18/2020

Patents are acquired for several reasons. Some are acquired as assertion candidates. Some are acquired to give a company patent protection – or additional patent protection – for its products and services. Some are acquired by a company simply so one of its competitors does not buy it!

But most patents are acquired with the goal of commercializing the invention covered by that patent. The acquirer will use the patented technology to either develop a new product or a new service, or to enhance, improve or expand the performance and capabilities of a current product or service. And making that decision is a complex one. And one that takes time.

When a business acquires a patent with the goal of commercializing the invention covered by that patent (or patent portfolio), the company is not simply looking at the cost of the patent. In fact, the cost of acquiring the patent is often only a fraction of the total cost of developing and bringing to market a new product or a new service based on that patent.

Going from patent to new product is not an inexpensive, simple, quick task. It is, in fact, an expensive, complex, lengthy task. The new product has to be designed, engineered, and manufactured, and where it will be manufactured or assembled has to be determined. Parts for it have to be sourced. Prototypes may have to be made that can be tested, either for performance or for market research. The product will need packaging. It may need branding and the filing of a trademark or service mark application. It may need approvals such as UL or CE certification, or permits or licenses.

Then there is the marketing required to put the product in front of buyers. If it will be sold through retail channels, the manufacturer may need to negotiate for shelf space. A warranty, service and repair program needs to be set up. What additional staffing will be needed in all of these areas to produce, deliver, and support this new product? If it is a software program or a service, there is no traditional manufacturing, but there is still the entire product development continuum, and an infrastructure will need to be created to deliver the software or service – and get paid for it.

As you can see, virtually every department and business unit of the company acquiring a patent is involved in the commercialization of that patent, and in the decision to acquire it. This is why we tell our clients that it typically takes three to nine months to close a deal for the sale of a patent to an operating company. We wish it were shorter, but it is not.

It takes nine months to make a baby. It would be great if we could recruit three women and do it in three months – or nine women and do it in just a month – but that is not reality. And it takes time to put a patent in front of the right people at the right company and let that business make the collective decision to acquire and commercialize that patent.

Of Sheaves and Reapers and Patents and Marketing and Politics and War
Posted: 6/20/2020

“Those who go out weeping, carrying seed to sow, will return with songs of joy, carrying sheaves with them.” -Psalm 126:6

Our story starts with sheaves. Since men began planting crops thousands of years ago, farm workers toiled in the fields to bring in the grain harvest. They had to bend over to cut the stalks of wheat – truly back-breaking work – and then tie the stalks of wheat into sheaves. The sheaves were taken to a threshing floor or threshing barn where the wheat would be separated from the chaff.

Cyrus McCormick is credited with mechanizing the process of bringing in the grain crop by inventing the first mechanized reaper. He was granted a U.S. Patent for “Improvement in Machines for Reaping Small Grain” in 1834. It was a horse-drawn contraption that mechanically cut the grain from the forward motion of the device. When demand for the product exceeded McCormick’s ability to build them in his home state of Virginia, he relocated to Chicago and set up a factory to sell his new “McCormick Reaper” to farmers across the U.S.

McCormick had a competitor, one John Henry Manny of Rockford, Illinois, who showed up at the Paris Exposition in 1855 with his version of the reaper that just about everyone agreed ran circles around McCormick’s product. McCormick returned to the U.S. from Paris with a tarnished reputation and promptly sued Manny for patent infringement, demanding that Manny cease production of his reapers and pay McCormick $400,000 – a considerable sum in 19th Century currency – for his infringement.

The case went to trial in September of 1855 – you could get a trial date fairly promptly back then – and it featured prominent attorneys on both sides. McCormick hired a litigator – former U.S. Attorney General Reverdy Johnson – and an IP expert – New York patent attorney Edward Nicholl Dickerson.

The defendant was represented by attorneys George Harding and Edwin M. Stanton. If that name rings a bell, you probably aced American History back in high school. Because the trial was to take place in Illinois, the defendants needed a member of the Illinois Bar as their attorney-of-record, so they hired a young, lanky fellow from Springfield, one Abraham Lincoln.

McCormick lost the case, but not the war. While he probably did not have a superior reaper, he made continual improvements to the product, and his marketing was far superior to his competitors, so he made millions selling the McCormick Reaper. In 1856, McCormick’s factory cranked out more than 4,000 units! In 1871, the McCormick factory was a victim of the famous Chicago Fire and was burned to the ground, but McCormick rebuilt. Over the following years, the reaper was expanded to become a reaper/baler that also baled the sheaves and eventually became known as the “McCormick Harvester.”

McCormick’s harvester and his company grew to become International Harvester, a multinational manufacturer of farming equipment and trucks that is known today as Navistar International.

So whatever happened to that Lincoln fellow? He was elected the first Republican President in 1860, and he was so impressed with Edwin M. Stanton from the patent infringement trial five years earlier that he asked Stanton to serve as his Secretary of War. As a result of the loss of their patent infringement claim, the McCormicks were lifelong Democrats.

Of Sewing Machines and a Patent Thicket and a Patent Pool and Consumer Finance
Posted: 6/20/2020

It’s JEOPARDY! and the answer is: “He invented the sewing machine.” If you answered “Who is Singer?” you would be wrong. The correct response would be “Who is Howe?” “Who is Elias Howe?” if you want to be a Ken Jennings-type show-off.

Elias Howe received a U.S. Patent for a “Sewing Machine” in 1846. Isaac Singer did not receive his U.S. Patent for a “Sewing Machine” until 1851. Yet Singer is still in business today – 120 years later – while no one (except the fortunate readers of this column) ever heard of Elias Howe. And therein, as they say, lies a tale.

Several manufacturers of sewing machines popped up in the 1850s. Using a sewing machine compared to hand-stitching a garment was a no-brainer. Every housewife in America wanted one, as did all the companies that made ready-to-wear clothing. So Elias Howe began licensing his patent at exorbitant fees to anyone and everyone trying to build and sell anything similar to a sewing machine.

Meanwhile Isaac Singer – an eccentric, an entrepreneur, a sometimes actor, and the father of two dozen children from different women – took Howe’s invention to the next level by adding a thread controller and combining a vertical needle with a horizontal sewing surface. And Singer started licensing his sewing machine patent.

But it wasn’t just Howe and Singer. There were other sewing machine patent holders licensing their patents, creating what has come to be known as a “patent thicket” – a situation in which a number of parties can lay claim to different key elements of the same basic invention. It sparked what is known in patent lore as the “Sewing Machine War.”

Order was formed out of chaos when one Orlando Brunson Potter, a lawyer and the president of the Grover and Baker Sewing Machine Company, proposed an unprecedented concept. The various patent owners should merge their business interests and charge a single patent licensing fee. This created what is known as a “patent pool.” Nine patents were rolled into the “Sewing Machine Combination” with each of the patentees earning a share of the licensing fees collected from every sewing machine manufacturer.

How did Singer rise from all of these companies and become the dominant player for the next century? It really had nothing to do with Isaac Singer who was not a very smart businessman. It was really Edward Clark, an attorney who was a partner of Singer and who took over management of the company and decided to invest in some marketing. Clark also came up with the “hire-purchase plan” for customers who could not afford to pay cash for a sewing machine. They could make a small down payment and then pay off the balance in installments – the first consumer installment payment plan in the United States!

What did Clark do with the profits? He bought up all of his competitors and built a corporate headquarters building in Manhattan that was for a few years the tallest building in the world.

The IP Community Has an Ally in Neil Gorsuch!
Posted: 5/18/2020

U.S. Supreme Court Associate Justice Neil Gorsuch wrote the dissent in the Thryv, Inc. v. Clicl-to-Call, Tech, LP case that was recently decided by the U.S. Supreme Court. In the dissent, Justice Gorsuch provided a refreshingly compelling defense of patent rights, defending a patentee’s right to obtain judicial review of rulings from the Patent Trial and Appeal Board.

Justice Gorsuch was able to secure support for his view from just one other justice on the court, Associate Justice Sonia Sotomayer. What strikes us as most curious here is that a justice appointed by conservative Republican President Donald Trump joined forces with a justice appointed by liberal Democrat President Barack Obama on the issue of inventor rights!

For all the details about the court decision and some excellent analysis, please read “Justice Gorsuch Champions Patent Rights in Recent Dissent” that appeared in the April 22 IPWatchdog.

Why Put a Value on a Patent or Portfolio?
Posted: 5/18/2020

We wrote last month about why patents from smaller countries have little value. So picking up on the value theme, we address this month why one would want to spend money for a professional valuation of a patent, patent family or patent portfolio. There are several reasons.

First of all, most patents that are assigned to businesses do not appear as an asset on the Balance Sheets of the companies that own them! Not surprisingly, many business owners and executives are shocked when they learn this. The reason is that patents do not come into existence as other corporate assets do.

A business buys a truck. The expenditure for the truck is an expense on the Profit-and-Loss Statement that becomes an asset on the company’s Balance Sheet. But when a company applies for a patent, the application and prosecution fees are written off as an expense in the years they are expended. When the patent is granted – two to three years later – no accounting transaction occurs like a check being issued to pay for the afore-referenced truck.

A beautiful patent with a gold crest and red ribbon arrives. It is either framed and hung on the wall or it is put in a file cabinet. What does NOT occur is any kind of accounting transaction that makes the patent appear as an asset on the company Balance Sheet.

In such cases, the company should have a Patent Valuation performed for all of its granted patents and then use those Valuations to document each patent’s value so they can be added to the Balance Sheet under Intangible Assets. This also applies to trademarks and service marks. Adding unrecorded patents to a business’s Balance Sheet can add hundreds of thousands – even millions – of dollars of new assets to a business’s net worth, dramatically improving a business’s debt-to-equity ratio. And that can both improve the ability of the business to secure financing and reduce the cost of borrowing! If it is a publicly traded company, it should have a positive effect on the stock price.

If you are an inventor with a patent or patents, you can have them appraised and list them as assets when, for example, you apply for a mortgage. Finally, if you are looking to sell or license your patent or portfolio, a professional valuation of your IP can give you an understanding of what it might sell for. Additionally, when a couple divorces, both may be required to report on their assets. We provided many valuations over the years for inventors in the midst of a split with their spouses. To learn more about the three Patent Valuation Services we offer, visit the Patent Valuation page at our website.

What Determines the Value of a National Patent?
Posted: 4/15/2020

We have the same conversation – either by telephone or via email – just about every day. We get calls and emails from inventors and business executives around the world who contact us about their non-U.S. patents only to learn that their patents have essentially NO commercial value. And they are aghast!

So let’s back up and look at some hard numbers. The U.S. enjoys the largest economy in the world. In 2019, the United States – according to the IMF (International Monetary Fund) – generated just over $21 trillion in revenue. That’s $21 trillion in sales of goods and services – what the economists call GDP (Gross Domestic Product). The value of everything sold by all the businesses, not-for-profit organizations and government agencies in the U.S. – from automobiles to Alka Seltzer – food and drugs – clothing and toys – you name it. Every product and service including getting your teeth cleaned at the dentist and registering your car at Motor Vehicles.

Here is the list from the IMF of the countries in the world by their 2019 GDP that generated over $1 trillion in national revenue. This chart is in millions, so add six more zeros (“000,000”) at the end.

United States $21,439,453
China $14,140,163
Japan $5,154,475
Germany $3,863,344
India $2,935,570
UK $2,743,586
France $2,707,074
Italy $1,988,636
Brazil $1,847,020
Canada $1,730,914
Russia $1,637,892
South Korea $1,629,532
Spain $1,397,870
Australia $1,376,255
Mexico $1,274,175
Indonesia $1,111,713
As you can see, only the U.S. and China have over $10 trillion in national revenue. There are just five countries with $2 to $5 trillion in GPD, and only nine countries with between $1 and $2 trillion. All the other nations in the world generate less than $1 trillion in national revenue – not much in today’s world.

What does this have to do with patents? Simply this: A U.S. Patent has considerable value simply because the U.S. is the largest economy with the largest potential for sales of a product based on that U.S. Patent. A U.S. Patent enables you to produce and sell a product in the largest economy in the world – and sue any business that infringes your patent for reasonable royalties and lost profits, seek injunctive relief, and generate negative press coverage for the infringer.

Following that thinking, a Greek Patent has relatively little value because it only gives you patent protection in a relatively small country that generated just $214 billion in national revenue and ranked No. 50 out of 186 countries. Any company anywhere in the world – except Greece – can manufacture a product that infringes your Greek Patent and sell that product anywhere in the world – except Greece – in blatant infringement of your Greek Patent. And you can do NOTHING about it!

Now it is possible that a company could infringe a U.S. Patent, but by manufacturing the product outside of the U.S. and purposely selling the product exclusively outside of the U.S. it would avoid being pursued by the U.S. Patent owner. Yes, this is possible, but it is not practical. The U.S. is one fourth of the global economy. Bypassing sales in the U.S. deprives the infringer of one-fourth of the sales it could generate had it purchased or licensed that U.S. Patent. But virtually any company can be very successful manufacturing and selling a product in 185 nations around the world, but not Greece.

That is why we find ourselves telling owners of Portuguese and Peruvian and Phillipine Patents that their patents just simply do not have any commercial value. It makes more sense to infringe the patent and manufacture and sell a product based on that patent outside of the country where the patent was granted than to buy or license the patent in the first place.

This is not because we are a bunch of Ugly Americans. The Ugly American was a novel published in 1958 about America’s diplomatic failures in Southeast Asia. The title of the book came to be the term used to describe Americans who think the sun rises the sets on the U.S. to the exclusion of the rest of the world. Yes, the staff at IPOfferings are all Americans who love and are proud of our country, but the value we place on U.S. Patents versus patents from relatively small countries is not because we are blind to the rest of the world. It is a simple matter of economics and cold, hard numbers.

The lesson for all readers of this column is this: If you are applying for a U.S. Patent, consider also applying for a Chinese, Japanese and European Patent as it will give your patent significantly more economic value. Why do we recommend a Chinese, Japanese and European Patent instead of a Chinese, Japanese and German Patent? Because applying for a German Patent is about the same amount of work as applying for a European Patent, and with your European Patent Application you can specify three nations, so select Germany (the fourth largest economy), the UK (the sixth largest economy) and France (the seventh largest economy).

If you are filing for a non-U.S. Patent, file a PCT Patent Application and use it to secure additional patents in countries with large economies. We have nothing against Turkey or Taiwan or Thailand, but they are just not large economies. A single patent from the UK or Canada or Australia – all companies in the Top 16 – still has limited value without a U.S. Patent to give the invention patent protection in the largest economy.

We live in a flat world. We are referring to the term created by Thomas Friedman in his 2005 best-seller, The World Is Flat. The book did not attempt to prove that Christopher Columbus was wrong and his ships would fall off the end, but that any business anywhere in the world can now compete with any other business anywhere in the world. Friedman’s reference to the world being “flat” was that today’s global economy is a level playing field. That also means that any company anywhere in the world can infringe your patent – and get away with it if you have not locked up patent protection in the larger economies. In securing patent protection for your invention, keep these critical numbers in mind and be smart about it.

Licensing versus Selling – and Licensing versus Buying – a Patent
Posted: 3/19/2020

We are asked all the time by both patent owners looking to monetize their patents and businesses looking to acquire new technology the benefits of licensing versus selling or buying a patent. So here is our 2 cents.

Most companies prefer to own a patent. They prefer to pay cash, own the patent, and carry it on their books as an asset. They can practice the patent, and assert it against any and all infringers. They may have strategic partners to which they might license or cross-license the patent. But all things being equal, if they have the cash, businesses prefer to buy and own the patent.

If a company does not have the cash to buy a patent outright, it will consider licensing it. This applies to start-up businesses, or businesses that have faced a downturn and are looking at new technologies to make a turnaround. The problems with licensing a patent – especially if it is a non-exclusive license – is that the licensor can license the patent to all of the first licensee’s competitors, wiping out any competitive advantage that the first licensee had. When a company licenses a patent, there is also the issue of computing each quarter the sales that are subject to the royalty. For example, if it is a U.S. Patent, no royalty is due on export sales, so they have to be backed out in order to compute the royalties that are due.

For the assignee, the problem with licensing is that the licensee may or may not be successful with a product line based on the licensed patent. If Company A licenses a patent, and then never generates any significant sales from products based on the licensed patent – for whatever reason – the licensor takes a hit. But if the product takes off, the licensor can do very well! Selling the patent is low risk/low return. Licensing the patent is high risk/high return.

There is also the issue of enforcement. If a patent is licensed, and the patent is infringed, the licensee often does not have standing to bring an action against the infringer, and the licensor – often an individual and the inventor – does not have the resources to pursue the infringer. So the licensee ends up with a competitor that is infringing the licensed patent and not paying a royalty.

There is no simple response to the question of whether it is better to sell or license, or buy or license, a patent. There are a number of factors that have to be considered. That is why IPOffering always takes a broad “monetization” approach when we take on a patent as a brokerage project.

There is a very good book that covers patent licensing. “Essentials of Licensing Intellectual Property” is available at Amazon for about $25.00 and it covers most comprehensively what both a licensor and licensee needs to know.

If you are a business executive torn between buying or licensing a patent – or an inventor not sure about selling or licensing your patent – we can help you determine what the key factors are that need to be taken into consideration so you can make the best decision. Because, hey, that’s what we do!

Proposed Legislation Aims to Level the Playing Field
Posted: 2/19/2020

It is incredibly ironic that in the December and January installments of Patent Leather we were covering patent infringement, so we did not have room for this news until now. Last December, Rep. Danny Davis (a Democrat from Illinois) and Rep. Paul Gosar (a Republican from Arizona) introduced the Inventor Rights Act of 2019 (H.R.5748). The bill has five main elements and it only applies to inventors who own their own patents (many IPOfferings clients fall in that category) and not businesses, universities and NPEs (non-practicing entities). For a description of what an NPE is, refer to the January installment of Patent Leather below.

  • IPR Opt-Out: The bill would give inventors the right to opt out of an inter partes review of their patentsby the Patent Trial and Appeal Board (PTAB). Accused infringers (plaintiffs in a patent infringement lawsuit) will still have the right to challenge the validity of a patent in U.S. District Court as part of an infringement lawsuit trial, but they will not have the second-bite-of-the-apple they now have to also force a patent into review by the PTAB. A common strategy of infringers is to get a patent it has been charged with infringing invalidated so it simply goes away, and that second option would no longer exist if the bill were passed.
  • Profits from the Infringer: Under current law, inventors are only entitled to receive reasonable royalties (also refer to the January installment of Patent Leather for more information on this) from an infringer, permitting the infringer to keep most of their profits generating by the infringing products it has sold and continues to sell. This bill pays all profits generated by willful infringers who knew or should have known of their infringement of a patent owned by the original inventor to the original inventor. This remedy is consistent, incidentally, with other forms of intellectual property including design patents, copyrights and trademarks.
  • Injunctive Relief: This bill would also entitle an inventor to an injunction prohibiting sales of infringing products, a remedy-at-law no longer available to inventors since the 2006 eBay Decision (additional information on the eBay Decision is included in the January Patent Leather installment).
  • Venue Preference: The bill gives inventors the right to file patent infringement litigation in their home judicial districts. They are currently required to sue an infringer in a district in which the infringer has a facility, and that could be the other end of the country, adding additional costs and burdens for the inventor.
  • Fee Recovery: Inventors – under this bill – would be entitled to recover from the defendant (infringer) their attorney fees if they exceed more than 10% of the amount of damages awarded to the plaintiff.
We admire Reps. David and Gosar’s gumption, but they have an uphill battle as similar attempts to reform patent infringement litigation has not been successful. Here is a link to the complete proposed law. The fact that this bill applies specifically to inventors and the patents they own – and not businesses and NPEs – improves the bill’s chances of passage.

We suggest you send an email to your U.S. Representative expressing your support for H.R.5748. Let’s see what happens.

What You Probably Did Not Know about Patent Rights
Posted: 2/19/2020

When one of us speaks at a conference or other event, we like to work in whenever appropriate that the right to patent an invention or copyright a document actually predates such other established American concepts as Freedom of the Press, Due Process and Habeas Corpus. And here is why…

The First Constitutional Convention met in Philadelphia in 1787 and hammered out what is the original U.S. Constitution. By “original” we mean the U.S. Constitution without any amendments. In December of 1787, Delaware was the first state to ratify the Constitution. That is why “The First State” appears on Delaware license plates. In 1788 Rhode Island rejected the Constitution, but later that year New Hampshire became the ninth state to ratify the Constitution, the number needed to put it into effect. Eventually all the other states also ratified it.

Article 1, Section 8, Clause 8 of the original U.S. Constitution gives Congress the power “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." It is from this section of the original U.S. Constitution that all Patent and Copyright – and later Trademark and Service Mark – laws were derived. So U.S. citizens had the constitutional right to seek protection for their inventions in the form of a patent beginning in 1788, the year the original U.S. Constitution was ratified.

The next year, 1789, Congress drew up twelve proposed Amendments to the Constitution and circulated them to the states for ratification. It was these Amendments – not the original Constitution – that included Freedom of Speech, Freedom of Assembly, the right to bear arms, protection from unreasonable search and seizure, Due Process, Habeas Corpus and the many other rights we enjoy as Americans. Ten of the twelve proposed Amendments - known today as the "Bill of Rights" - were not ratified until 1791, three years after the original U.S. Constitution was ratified.

And that is why patent rights in the U.S. predate the many rights that Americans enjoy and that are considered essential to the country we are. In fact, many historians and economists believe that the incredible prosperity, wealth formation and technological superiority that America enjoys is due in large part to our patent system – a brainchild of our Founding Fathers.

The first U.S. Patent was granted in 1790 to one Samuel Hopkins of Massachusetts for a process for making potash. The Patent Examiner was Secretary of State Thomas Jefferson and the patent was signed by President George Washington.

Even More Answers to Your Questions about Patent Infringement
Posted: 1/20/2020

Back in October and November, we focused two installments of Patent Leather on the topic of patent infringement and enforcement. We received so many questions from our readers that we printed the most common questions – with answers to those questions – in December. Well, the Turnpike Effect kicked in, and our Q&A article from December spawned net more questions! So here goes a second round of answers to your patent infringement questions.

Q: Can I get the court to order an infringer to stop selling products that infringe my patent?

A: Maybe. It depends on what class of patent holder you fall into. Class? Yes, class. There are, in fact, two distinct classes of patent holders, and the remedies available to you as a patent holder when your patent is infringed depends on what class you are in.

◆ NPE: An NPE (non-practicing entity) is a patent hold that does not “practice” his or her or its patent. Most universities own patents that were developed by their faculties, but we know of no university that has a factory on campus that manufactures products based on one of the university’s patents. Most universities have a Tech Transfer department that licenses the university’s patents to industry. So universities are NPEs.

An inventor who does not make a product based on his or her patent is also an NPE.

There are businesses that own patents they do not practice. The R&D staff comes up with a great idea, so the company applies for a patent. Smart move. But Marketing decides there is no market for a product based on that patent, or such a product is not a good fit with the company’s other products, or the product is not core to the company’s business model, or for some other reason decides to not practice a patent owned by the company. Many such companies come to IPOfferings to represent them in the monetization of their “non-core” patents. A company that owns a patent it does not practice is an NPE.

And then, of course, there are patent assertion firms that acquire infringed patents specifically to assert them against the infringer(s), so patent assertion firms are NPEs.

◆ Market Participant: The opposite of an NPE is a “Market Participant.” A Market Participant is almost always a business, and the business owns a patent or several patents that it “practices” – it makes and/or sells a product or service that uses the invention covered by one or more of the patents owned by that business.

The remedies available to an NPE are much different than those available to a Market Participant. When an NPE sues a company for infringing its patent, it has just one remedy available to it under law – reasonable royalties. It can demand that the infringer pay the patent holder what the infringer would have paid the patent holder had the infringer licensed the patent in the first place. If the patent holder can prove that the infringement was willful – the infringer knew about the patent but when ahead and infringed it anyway – the patent holder can sue for treble damages. But the only remedy-at-law available to an NPE is the royalties that would have been paid by the infringer had the infringer properly licensed the patent in the first place.

A Market Participant, however, has three remedies available to it. It can demand reasonable royalties from the infringer just as the NPE can. And it can sue for treble damages if it can prove the infringement was willful.

The Market Participant can also sue for lost profits. By selling products that infringe the Market Participant’s patent, the infringer essentially stole business from the Market Participant since customers would have purchased the Market Participant’s products had the infringer not been selling infringed products that directly competed with the Market Participant’s products. So the Market Participant can estimate what the sales of its products would have been had the infringer not been selling directly competing products, and the Market Participant can sue the infringer for the profits it would have generated on those sales.

The third remedy-at-law available to a Market Participant – and not an NPE – is “injunctive relief” – a court order that bars the infringer from continuing to sell the infringing product. In what is known as the “eBay Decision” the U.S. Supreme Court ruled that an injunction blocking an infringer from selling infringing products should not automatically be issued to all patent holders. It created a four-factor test that the courts must apply. We will not go into all the details, but the primary result of the eBay Decision is that NPEs routinely do NOT receive injunctive relief, but it is granted to Market Participants.

When Apple sued Samsung back in 2010 in the “patent infringement lawsuit of the century,” Apple asked for an injunction barring Samsung from importing into the U.S. and selling the Galaxy smartphones that infringed the Apple patent. The District Court judge did not grant the injunction. Apple appealed the decision, and the appellate court ruled that the District Court should have issued an injunction an injunction that barred Samsung from importing and selling infringing products. It was a Pyrrhic victory for Apple, however, because by the time the appellate court made its ruling, Samsung had moved on to a new model of smart phone and it was no longer selling the model that infringed the Apple patent.

So the answer to the question about getting the court to order the infringer to cease sales of the infringing product is that if you are an NPE, seeking a court order to bar sales of infringing products is not a practical objective for you to pursue. However, if you are a Market Participant, you can pursue injunctive relief as a remedy for infringement of your patent.

For those of you who are interested, the official title of the eBay Decision is “eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)” and Wikipedia has a well written article on the decision if you want to learn more.

Q: What is the difference between a patent and a trade secret? Can you sue for infringement of a trade secret?

A: A “patent” is a bargain with the U.S. Federal Government under which in exchange for disclosure of your patent the federal government grants you a 20-year monopoly. You have the exclusive right to manufacture and sell a product based on the invention covered by your patent for 20 years from the Application Date of the patent. Or you can license that right to someone else, or you can sell the patent, and the new owner (or “assignee”) of the patent now has the same rights granted to the applicant. And you have the right to sue any person or business that infringes your patent.

A “trade secret” is first and foremost a “secret.” You file no application and you share the invention with no one. It is your little secret. And it is your trade secret for as long as you can keep it a secret. One of the most famous trade secrets is the formula for Coca-Cola. John Pemberton made the critical decision in 1886 to NOT file for a patent on the formula, but to keep it as a trade secret. It remains a trade secret to this day. The formula for Coca-Cola – as legend goes – is safely locked in an Atlanta bank safety deposit box, and only a few long-term and highly trusted (and, we assume, well paid) Coca-Cola employees know the formula. Had Pemberton secured a patent for the Coca-Cola formula, that patent would have expired over 100 years ago.

A trade secret is not a practical strategy for a device or tool or other physical product because it can be reverse-engineered by a competitor who could then make a directly competing product. So a process or formula used to produce a product is a far more reasonable candidate to be treated as a trade secret.

If a trade secret is stolen from you – and you can prove it – you do not sue for infringement (that only applies to patents and trademarks), you actually charge the party that stole your trade secret with theft. Many states have laws that specifically cover theft of trade secrets.

Companies that have trade secrets must go to extraordinary lengths to protect them. Only a small number of trusted employees can know about the technology, and access to facilities that use the trade secret should be very limited.

Want to read more Patent Leather? Visit our Archives.