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Selling Your Patent or Portfolio - Q&A 2
Posted: 11/28/2022

Three recent installments in this space addressed what a patentee (the patent owner) needs to know about selling his or her or its patent or patent family or patent portfolio.

In the last installment we started answering the many questions we received about selling a patent or portfolio. The last installment address what control the patentee has over the selling price of his or her or its patent, plus why auctions are simply not practical nor effective.

But you had more questions. And we have more answers.

♦ How Do I Know I Will Get Paid? When you send an invoice to a customer for products or services, you will probably get paid, but you might not. That is why when one is selling a major asset like real estate or intellectual property the seller does not simply send out an invoice. Just as the sale of real estate always involves a trusted third party that acts as an escrow agent – it could be an attorney, a real estate agent, or the title company – the sale of a patent or patent family or patent portfolio also uses a trusted third party as the escrow agent.

No seller of a patent is going to sign the patent over to the buyer and just hope that he or she or it gets paid. And no buyer is going to send money to the seller of the patent and then hope that the patentee assigns ownership of the patent to the buyer. Either situation could lead to lengthy litigation. Not good.

A much better system has evolved. Once the Patent Purchase Agreement (PPA) has been executed (signed by all parties), the funds to acquire the patent(s) are wire transferred to an escrow account held by the patent broker. Once the funds are received, the broker notifies the seller, and a Patent Assignment is executed and filed with the Patent Office. This is the document that transfers ownership to the new owner – a sort of deed for a patent. It only takes a few days for the USPTO to update its records and show who the new owner (“assignee” in patentspeak) is. If the sale is for an international patent portfolio, similar filings will need to be made at those patent agencies that record changes of ownership as the U.S. Patent and Trademark Office does.

This filing for change of ownership is done by either the patent broker or the buyer’s attorney. The process is similar to how the recording of the change of ownership of real property is recorded at the County Clerk’s Office in the county where the property is located. Once the change of ownership is recorded by the Patent Office, the broker releases from the escrow account the funds due the seller – usually via wire transfer but it is also sometimes by check – completing the transaction.

This system of using the patent broker as the escrow agent prevents monetary disputes and possible lawsuits, ensuring the seller gets paid.

♦ How Do I Know What to Ask for? We do not recommend setting an asking price for the patents we represent, and we do not put an asking pricing on any of the patents we represent. The reality is that it is a buyer’s market out there, so we let the buyer set the price. Setting an asking price will only work against you and never in your favor.

A few years back we had a client who insisted when he first contacted us that he “would not settle for a penny less than $250,000” for his patent. We reviewed his patent and agreed to represent him. That was fine, but we had to keep in mind that he “would not settle for a penny less than $250,000.” In every email he sent us, he reminded us that he “would not settle for a penny less than $250,000” and he even wanted us to put that in the newsletter, at our website, and in the prospectus. We refused to put a selling price on his patent and he was very upset.

We received an offer from a buyer for $325,000. We suggested he make a counteroffer for $400,000 which he did. We ended up selling the patent for $380,00. Had we actually told the buyer that the patentee “would not settle for a penny less than $250,000” what would we have received for the patent? We’d have left $130,000 on the table.

Going to market with too low an asking price can leave money on the table, while going to market with too high an asking price can chase a away an otherwise serious buyer. The bottom line is that there is no need to put a selling price on your patent. You and your broker can have a price range in mind, but that should be proprietary data.

Next Issue: Yet more answers to your questions about selling your patent…


Selling Your Patent or Portfolio - Q&A 1
Posted: 11/15/2022

Our last three installments addressed what a patentee (patent owner) needs to know about selling his or her or its patent or patent family or patent portfolio.

In this installment we start answering the many questions we received. Here we go…

♦ Do I have control over what my patent sells for? First of all, we are very surprised to receive this question! When you sell a house, do you have control over what it sells for? If you sell a car, or stock, or a dining room set, or your golf clubs, or that ugly painting that your crazy aunt left you, do you have control over the price? Of course you do! The only exceptions we can think of to your NOT having control over what an asset you own sells for is if you file bankruptcy and your assets are sold at auction, or you are declared incompetent and your court-appointed trustee sells off your assets.

If you have not filed bankruptcy, and no court has found you not competent to manage your affairs, you absolutely have control over what your patent(s) – and all your other assets – sells for! When your patent broker finds an interested buyer, that buyer will make an offer, and your broker will bring that offer to you. A quality broker will include its recommendations regarding the offer, but it is 100% your decision as the owner of the patent to either reject the offer, accept the offer, or make a counter-offer. There are NO circumstances we can conceive of under which a patent owner would be forced to sell a patent and have no control over the price – unless you filed bankruptcy or were declared incompetent!

We also need to add that there will be a Patent Purchase Agreement (PPA) that will be drafted, reviewed, edited, and agreed to by both sides, and the PPA will include not just the price the patent(s) sell for, but all other terms and conditions regarding the transaction. There is NO sale of the patent(s) until the PPA is signed by the patentee, giving the patentee 100% control over not just the price at which the patent(s) is sold, but all other terms and conditions of the sale! Again, we are surprised that people asked this question.

♦ Why not just have an auction to sell my patent? Ah, were it that easy. To answer this, we first have to explain the process by which a company decides to acquire a patent. Most businesses have a purchasing agent or purchasing director who makes decisions regarding the acquisition of items the business regularly uses in the course of its business – supplies, parts, components, packaging, equipment, and so on. Retailers have buyers who select what products will be purchased for resale in their stores or online. No such positions exist when it comes to patents. It would be great if we could just call up Denise, email her the patent we represent, and Denise would either decide to buy or not buy it. That is not how things operate in patentland.

Acquiring a patent is a company-wide decision. Before Company A acquires your patent, Engineering will need to determine what will be involved in turning your patented invention into a patented product. Manufacturing will need to either set up a line for this new product or contract with an assembler to produce it. Accounting will look over the cost structure of such a product to determine if it can be sold at a reasonable profit. Sales may need to bring on new staff to handle this new product, and if it is a retail product, Sales will need to negotiate for shelf space with their retailer network. Marketing will need to come up with packaging and an ad campaign for the product. Human Resources may have to recruit specialized personnel to handle the manufacturing or packaging or distribution of the product. Customer Service will need to train its personnel to support the new product. And so on and so forth.

That’s why we’ve written in this space many times that the selling cycle for a patent is typically three to nine months. Here is the problem with an auction. If Company A has not brought Engineering, Manufacturing, Accounting, Sales, Marketing, Human Resources, Customer Service, and other business units into the decision-making process before the date of the auction, Company A will not be ready to make a bid for the patent. The odds that all the companies that might be interested in your patent will all be ready to make a decision on a certain date are pretty long. So an auction with no bidders - or just one bidder - is a colossal waste of time and resources.

The other problem with an auction is that if there are no bidders, or just a few low-ball bids, it damages the value of the patent and makes it more difficult to sell down the road. Why not just have an auction? Auctions are great for selling everyday objects that anyone or any business can use – computers, furniture, supplies, equipment, fixtures, vehicles, art, etc. Auctions just do not work for something as specialized as a patent.

Next Issue: We answer yet more of your questions about selling your patent.


Selling Your Patent or Portfolio - Part III
Posted: 10/25/2022

Our last two installments addressed the nuts and bolts of selling your patent or portfolio. Once, that is, that your patent broker has identified a buyer for your IP assets!

The last two pieces covered a Term Sheet, Patent Purchase Agreement, Encumbrances, Grant Back, Escrow, Patent Assignment, Selling a Patent Application, and a License-to-Own. If you missed either or both of the last two installments, scroll down where both are re-printed along with all previous Patent Leather installments.

This issue we pick up where we left off and address additional intelligence you need to know when you sell your patent or portfolio.

♦ Due Diligence: It is a common practice for the acquirer of a patent or portfolio to conduct due diligence to make sure there will be no problems down the road with the patent or patents it is acquiring. The buyer will review the prosecution of the patent application to see if there were any filings made challenging the patent application. The buyer will also research if any challenges have been made against the granted patents - if there are any Post Grant or Inter Partes reviews filed before the Patent Trial and Appeal Board (PTAB)

A buyer will sometimes search for Prior Art that might have been missed by the applicant and the patent examiner to determine if the patent(s) could be subject to invalidation by the PTAB.

Due diligence can also include verifying ownership of the patent. If it was transferred from the original assignee, were all the filings in order? One issue that some buyers will research is if the inventor has a waiver from his or her employer relinquishing any rights to the patent.

Other due diligence issues include verifying that all maintenance fees were paid and if there are any other possible financial liabilities or obligations associated with the patent(s). Also, when will the next maintenance fees be due?

♦ File Wrapper: Some buyers will request the File Wrapper. This consists of all the documents filed by the applicant and all files produced by the Patent Office (Office Actions, for example) during the prosecution of the patent application. Your patent broker can secure this for you if the buyer requests it.

♦ Deliverables: Some Patent Purchase Agreements will have a Deliverables section that details items that the buyer requires be delivered before the transaction can be completed. For example, some buyers may want the original hard-copy ribbon version of the patent(s). Some buyers will request the inventor’s notes or any prototypes or proof-of-concept the inventor developed. What is provided under Deliverables is negotiated among the parties prior to the execution of the Patent Purchase Agreement.

♦ Enforceability: The reality is that the acquirer of the patent may need to enforce the patent one day. After all, that is the whole idea behind a patent – a monopoly granted by the federal government – but a monopoly that has to be enforced by the patent owner. Accordingly, the buyer will research the enforceability of the patent. Were there issues during the prosecution of the patent(s) that might hinder enforcement of the patent(s)? Did the seller ever have any contacts – telephone calls, letters, emails, or meetings – with prospective infringers? Have patents in similar technologies been successfully enforced? Are there 101 issues that might limit enforceability of the patent(s)?

♦ Services from the Inventor(s): An acquirer will sometimes engage the inventor or the invention team of a patent to assist in the commercialization of the patent into a deliverable product. This is usually done in the form of a consulting engagement by the acquirer of the patent with the inventor(s) or the company that is selling the patent. After all, who understands the nuts and bolts of the patent better than the inventor?

Also, inventors often have ideas for their inventions that go beyond what they were able to include in the patented invention. Remember, there is the invention, and then there is the patent invention. And the original invention may have been a much grander concept! The buyer of the patent may also want that grander concept.

Questions: We did our best to describe what a patent seller needs to know. If we missed something, or you need clarification or anything we covered, contact us at [email protected].


Selling Your Patent or Portfolio - Part II
Posted: 10/11/2022

Our last installment addressed the nuts and bolts of selling your patent or portfolio. Once, that is, that your patent broker has identified a buyer for your IP assets!

Last month we covered a Term Sheet, Patent Purchase Agreement, Encumbrances, Grant Back, and Escrow. If you missed the September 28 IP MarketPlace, you can go to scroll down to where it is re-printed along with all previous Patent Leather installments.

This issue we pick up where we left off and address additional issues you need to know when you sell your patent or portfolio.

♦ Patent Assignment: Just as the sale of real estate is a public record that is recorded by the County Clerk in most U.S. states, the change in assignment of a patent is also a public record that is recorded by the U.S. Patent and Trademark Office. A Patent Assignment is completed and signed by the seller (the “assignor”) stipulating who or what is the new owner (“assignee”) of the patent, and that form is filed with the Patent Office. It just takes a few days for the USPTO to update its records and show who or what is the new assignee of the patent.

Some foreign patent offices have a similar process that has to be followed for any foreign patents in the portfolio. However, some countries to do not record and publish the second or subsequent assignees of a patent – it differs from country to country.

♦ Patent Application: It is not uncommon these days for an inventor or business to sell a patent application – either as a sole asset or as part of a portfolio. We’ve preached to our readers the value of filing for a continuation before a patent is issued, so it is not uncommon for a portfolio to include one or more granted patents plus a continuation application.

If the sole asset is a patent application, there is the issue of what happens if the application is not approved and a patent is not granted. After all, only about 50% of all patent applications are granted as patents, so there is the distinct possibility that the patent application is sold, but NO patent is granted. This is addressed a few different ways.

The buyer can purchase an option on the granted patent. The patent application owner then continues prosecution of the patent application, and when a patent is granted, the buyer exercises the option and buys the granted patent. Or the buyer can make an initial payment to the seller, take ownership of the patent, take over prosecution of the patent application, and make a second payment to the seller when the patent is granted. Should a patent not be granted, no second payment is made. If the buyer has confidence that a patent will be granted – usually based on advice provided by the buyer’s patent attorney – the buyer will simply buy the patent application, take over prosecution of the patent application, and hope for the best.

If the patent application or applications are part of a larger portfolio, then it makes sense for the buyer to acquire the entire portfolio and take over prosecution of any patent applications in the portfolio. By “take over” prosecution of the patent application, we mean that the buyer either engages the patent attorney currently prosecuting the patent application and pays the patent attorney’s fees going forward, or the buyer has its patent attorney replace the seller’s patent attorney in the prosecution of the patent application.

♦ License-to-Own: As we’ve reported previously, most patent transactions these days are cash sales. If a company has the cash-on-hand to buy a patent, that is what it will do. The only advantage to licensing a patent is that it backloads the cost, and that is of benefit to a company that is short on cash – a start-up, for example, or a company with declining sales and profits looking to make a turnaround.

The license-to-own program starts out as a license. The licensor (the company paying for the use of the patent technology) pays the licensee (the owner of the patent) an agreed-to quarterly royalty or a quarterly royalty based on unit or dollar sales. The agreement includes a purchase price for the patent or portfolio, and once the licensee has paid that amount in royalties, it takes ownership of the patent. This is a way for a cash-strapped company to preserve its cash, but also be able to acquire the patent or portfolio outright.


Selling Your Patent or Portfolio - Part I
Posted: 9/26/2022

Our last three installments addressed licensing versus selling your patent or patent portfolio, and we answered reader questions about licensing. A key point from the last three installments is that most patent transactions today are straight-up cash sales. While many patent owners would prefer to license their patents – and sit back and collect royalties for 15 or 18 years – that is not always an option. In fact, it is many times not an option at all.

If the only offer on the table to monetize your patent is a cash purchase of the patent – but you really, really want to license it – you may find yourself with just one option. And you will have to swallow hard, accept a sale of the patent, and give up your dream of years and years of royalty checks rolling in.

So, to prepare you for what is ahead, here are the nuts and bolts of selling your patent once you have engaged a quality patent broker, that broker has identified a buyer, and you and the buyer have agreed on a price for your IP. Whether you are selling a single patent, or a patent family, or a patent portfolio, they are all incorporated into a single agreement and the structure is essentially the same regardless of the number of patents.

♦ Terms Sheet: Many brokers suggest starting with a Terms Sheet. It is a one-page document that enumerates the key elements of the sale. Not just what the agreed-to price for the patent(s) is, but if there are encumbrances, will there be a grant back, and other issues. Once both parties have initialed the Terms Sheet, the broker can draw up a Patent Purchase Agreement (PPA).

♦ Patent Purchase Agreement: The PPA includes all the terms and conditions of the transaction. IPOfferings has a PPA template that we make available to the buyer, but some buyers prefer to draw up their own PPA or they may have a PPA template of their own. The PPA is reviewed and red-lined by both parties, and eventually a final version is agreed to and signed by all parties. You may want to have the PPA reviewed by your attorney, but understand that large corporations know it is a buyer’s market, so they are not too receptive to major edits by the patent seller to the Patent Purchase Agreement. Three key elements that are included in a Patent Purchase Agreement are Encumbrances, Grant Back, and Escrow.

♦ Encumbrances: Just as the buyer of a piece of real estate has a Title Search done on the property he or she or it is purchasing, the buyer will want to know if there are any encumbrances to the patent(s) it is purchasing and what they are. Are there any licensees? If so, the buyer will want to see the license agreement(s) so it knows exactly what its limitations and responsibilities are as the licensor of the patent once it acquires the patent. Are there any leans against the patent? A patent agent will sometimes take a lien (a patent is an asset like real estate or a vehicle against which third parties can file a lien) against a patent to ensure he or she is paid. If the patent owner has borrowed against the patent, the buyer needs to know that as well. If any actions were filed against the patent – challenges during prosecution of the patent application or any post-grant reviews – the buyer needs to know. Have all the USPTO Maintenance Fees been paid? If not, who will pay them?

Most patents are unencumbered. There are no licensees, no liens, no litigation. And if that is the case, the seller must so stipulate in the PPA. If there are encumbrances, they must be detailed in the Patent Purchase Agreement along with how each will be addressed by both parties.

♦ Grant Back: When a patent is sold, it is sometimes a condition of the sale that the buyer will issue a “grant back” to the seller. A grant back “grants back” to the seller the right to practice the patent even though he or she or it no longer owns the patent. The buyer is essentially granting the seller a free lifetime license to the patent. This gives the patent seller the right to commercialize the patent at a point in time and prevents the patent seller from ever being sued for infringement of his or her or its own patent!

Some patent buyers will simply NOT agree to a Grant Back. They want 100% ownership of the patent and all rights associated with the patent. Other buyers will issue a Grant Back, in large part because they do not imagine the patent owner becoming serious competition should he or she or it exercise the Grant Back and start manufacturing and selling products based on the patent.

♦ Escrow: There is the issue of how the seller will be paid by the buyer. The buyer is not going to pay the seller and then hope that the seller signs the patent(s) over to the buyer. Should the seller fail to sign over the patents, the buyer will have to sue and that is messy and time-consuming. Similarly, the seller may not want to sign over his or her or its patent(s) to the seller until he is paid. This stand-off is resolved by using the broker as an Escrow Agent. The funds for the purchase are paid to the broker – usually via wire transfer – and put in an Escrow Account. The broker notifies the seller that it has been paid, so the seller is then secure in signing over ownership of the patent(s) to the buyer. Once the ownership (“assignment” is the Patent Office term) of the patent(s) has been made and it is recorded by the USPTO, the broker then releases from the Escrow Account the funds due the seller, and the transaction is completed.


More About Licensing Your Patent – Part II
Posted: 8/22/2022

Two installments ago we covered why most businesses prefer to buy – rather than license – a patent. We explained that buying a patent – if a company has the cash on hand – is much simpler, easier, cleaner, and cheaper than licensing a patent. So, most companies opt to simply buy a patent, own it, practice it, promote it at the company website, mark their products with it, maybe cross-license it, and assert it against any and all infringers.

However, if a company does not have sufficient cash-on-hand to buy a patent – it is a start-up company with limited resources or it is a company that needs to preserve its cash – it will license a patent since licensing has the advantage of back-loading the cost of the patent. Yes, the company will pay more – very likely much, much more – over the life of the patent in royalties than the company would have spent to buy the patent, but it will preserve its cash and have access to the patented technology.

Our installment on selling vs licensing a patent drew many questions, and we answered several of them in our last installment. But there are yet more questions, and here are the answers.

♦ What if the licensee never actually sells any products covered by the patent? This is entirely possible. Company A could license your patent, build a few prototypes, take them to trade shows, and show them to its best customers, only to discover that no one is interested! Or the price to build a product based on the patent makes it too costly and not competitive. If the licensee fails to generate any significant sales of products based on the patent, there will be little or NO royalties to be paid. This is one of the risks of licensing.

Some patent licenses include a minimum quarterly royalty payment. For the first year of the license, for example, the licensee agrees to pay X dollars a quarter until sales of the patented products reach the level that royalties begin to exceed X dollars. This can be negotiated into the patent license, and it is usually just for a fixed period at the beginning of the term of the license.

♦ What is cross-licensing? Company A has a patented technology that Company B (a direct competitor, perhaps) wants, but Company A is not about it sell its patent to Company B. Meanwhile, Company B has a patented technology that Company A wants, but Company B is not about it sell its patent to Company A. The solution is for Company A and Company B to license (i.e., “cross license”) the two patents to each other. Cross licensing is not for inventors, but for operating companies that own and practice patents.

♦ What if the licensee fails to pay the royalties? Just as a vendor can fail to pay in invoice or a tenant can fail to pay the rent, a licensee can fail to pay the royalties due the licensor. Most license agreements include verbiage to address this issue and what the penalties are should the licensee fail to make the required royalty payments. To collect unpaid royalties, the licensor may have to sue the licensee – usually in state court.

♦ Can a patent license agreement be re-negotiated? Any agreement can be renegotiated. If the licensor or licensee is not satisfied with how the licensing agreement is working out, either can contact the other and enter into negotiations to terminate or modify the agreement. Of course, both parties must agree. It cannot be done unilaterally.

♦ How does the licensor know it is being paid the royalties it is truly owed? The licensor (the owner of the patent to whom royalties are paid) must rely on the licensee (the entity that is paying royalties for the use of the patented technology) to report its sales of products covered by the licensed patent(s). It is normal procedure that a licensing agreement gives the licensor the right to audit the licensee’s books if it believes it is not being paid all the royalties it is due.

♦ Can you sell the patent AND collect royalties? As we wrote previously, everything is negotiable. If a company really, really, really wants your technology, it is possible that a company may BOTH buy your patent for cash on the front end AND pay you a royalty on the back end. It is rare, but is has been done.

♦ What happens to a patent that is licensed and then sold? Should a patent be licensed, and then sold, the licensee will be obliged to pay royalties to the new owner of the patent – just as a tenant would pay rent to the new owner of a house or office or warehouse that it is renting.

♦ What happens if the licensee is acquired by another business? All patent licenses include verbiage that the license is still effective should the licensee be acquired by another business, and that the acquiring business must assume all the responsibilities detailed in the patent licensing agreement.

♦ What happens if the licensee files bankruptcy? This is yet another risk of licensing. When a company files bankruptcy, it is in most cases not legally obliged to pay royalties until the bankruptcy is discharged, at which time royalty payments should resume. The licensee will, of course, attempt to use bankruptcy to renegotiate the terms of the license.

♦ What if the licensee goes out of business? Yet one more risk of licensing. The only good news is that the patent – if it was an exclusive license – can now be licensed to another company – very likely a direct competitor of the first licensee.

We must remind our readers that despite the desire of many patent owners to license their patents – and then sit back and collect royalties for 15 or 18 years – most patent transactions these days are straight cash acquisitions. The patent owner who wishes to license his or her or its patent needs to be prepared for a situation in which he finds just one monetization offer on the table, and it is not a license.


More About Licensing Your Patent – Part I
Posted: 7/11/2022

In our last installment, we covered why most businesses prefer to buy – rather than license – a patent. To recap, buying a patent – if a company has the cash on hand – is much simpler, easier, cleaner, and cheaper than licensing a patent. So, most companies opt to simply buy a patent, own it, practice it, promote it at the company website, mark their products with it, maybe cross-license it, and assert it against any and all infringers.

However, if a company does not have sufficient cash-on-hand to buy a patent – it is a start-up company with limited resources or it is a company that is losing money and needs to preserve its cash – it will license a patent since licensing has the advantage of back-loading the cost of the patent. Yes, the company will pay more – very likely much, much more – over the life of the patent in royalties than had the company bought the patent, but it will preserve its cash and have access to the patented technology.

Our installment on selling vs licensing a patent drew many questions, and we shall answer them all.

♦ How are royalties computed and paid? For those few patents that are licensed, royalties can be computed in three ways. Most patent licenses call for a royalty that is a percent of sales – from as little as 0.25 or 0.50% to as much as 4 or 5% depending on the product, the industry, the competition, and other factors. A second option is a fixed dollar amount – for example, $5.00 for each product sold regardless of the selling price of the product. Whether the royalty is a percent or a dollar amount is the result of negotiations between the licensor (the patent owner) and the licensee (the entity that is paying to use the rights to the patented invention). The licensee may not want the licensor to know what it is selling the patented product for, so a fixed per unit dollar royalty addresses that need.

A third option is a fixed fee. Rather than a percent of sales or dollar fee per unit, the licensee pays X dollars a quarter for the use of the patent. For a company that sells a package of products and services – some elements of which include the technology covered by the patent – it may be difficult to define exactly what part of the company’s sales are patent-protected, so this is a simpler option.

Royalties are almost always paid quarterly via wire transfer. How they are paid is detailed in the Patent Licensing Agreement.

♦ How are royalties paid for a U.S. Patent if there are international sales? If Company A is licensing U.S. Patent No. 12,345,678, the patent only covers products that are made or sold in the U.S. So, the license can be written to include that Company A only has to pay royalties on products manufactured or sold in the U.S. However, if the Company A really wants the technology, the licensor may be able to negotiate to have royalties paid on ALL products – regardless of where they are manufactured or sold. Every element of a licensing agreement is negotiable, and we have done licenses for U.S. Patents in which the licensee agreed to pay royalties on ALL sales, U.S. and export.

♦ What Is an exclusive and non-exclusive license, and what are the benefits and drawback of each? An exclusive license is one granted to just one licensee, so the licensee has exclusive rights to the patented invention, while a non-exclusive license is granted to more than one licensee. The royalties for an exclusive license will generally be greater since there is a sole entity licensed to use the patented technology, giving it a monopoly on the patented invention. No competition is a rare and wonderful thing. A non-exclusive license often comes with a lower royalty, but there will be other licensees that will be direct competitors. Needless to say, most patent licenses are exclusive.

♦ What is the term of a license agreement? Just as a licensing agreement for a U.S. Patent will typically only cover products manufactured and sold in the U.S., a licensing agreement will typically be for the remaining life of the patent. That’s 20 years from the Application Date unless the Patent Office granted a Term Adjustment. However, every aspect of a patent licensing agreement is negotiable, and we have done patent licenses that ran beyond the expiration date of the patent because the licensee wanted the technology and was willing to agree to continue to pay royalties past the expiration of the patent to get the technology.

♦ What if the licensee stops selling products covered by the patent? It is entirely possible that five or eight or ten years into the licensing agreement the licensee will cease selling products based on the patented technology. There are any number of reasons for this. The company shifts its focus to other technologies. The product is no longer profitable or in demand. A new technology has come along that has obsoleted the technology covered by the licensed patent. If sales of patented products stops, payment of royalties then also stops. This is one of the many risks of licensing.

In the next issue we will answer additional questions from our readers about patent licensing.


Buying and Selling – vs Licensing – a Patent
Posted: 6/25/2022

We are approached just about every day by a patent owner – an inventor or business or other entity – that wants to license his or her or its patent or portfolio. Ah, were it that easy…

Let’s step aside from patents for a moment, and consider the options of buying versus leasing other assets. In the long run, it is cheaper to buy a house – make the mortgage payments, build equity, and eventually own it – than to lease or rent a house. The same concept applies to an office building, factory, or warehouse. And it is cheaper to buy a car than lease a car – especially if you can buy the car for cash so you have no payments. But even if you have to make car payments, financing is always cheaper than leasing. The same concept applies to a truck for a business. Or office or factory equipment. Or any other capital expenditure.

To be fair, there may be one exception to this rule. In some cases, it is cheaper and smarter to license rather than buy software especially if support and training are covered by the license, but this is the only exception we know of to the rule that buying is always cheaper than renting, leasing, or licensing.

The same principles apply to buying versus licensing a patent. It will almost always be cheaper for a business to buy a patent for cash, own the patent, practice the patent, maybe license the patent to a competitor, cross license it to a strategic partner, promote the patent at is website, mark its products with the patent, and assert the patent against any and all infringers.

That is why the vast majority of the patents we successfully monetize for our clients are cash sales. The companies that are acquiring patents put one and only one monetization offer on the table – a cash purchase. By “cash purchase” we really mean a wire transfer, but our readers know that. “Cash purchase” is the current vernacular.

The simple reality is that if Company A licenses a patent, and the products based on that patent take off, Company A will be paying royalties for the life of the patent – which could be 10 or 15 or more years depending on the age of the patent. And that could get very expensive. We recently ran an article about the inventor of the flash memory drive. Imagine what the royalties must have been on $8 billion in sales?

There are also some negatives – other than cost – to licensing a patent. The licensee (the entity that is licensing the patent) has to break out sales from its total sales of just those products that are covered by the patent. It then has to subtract from that number those sales not covered by the patent. If we are talking about a U.S. Patent, for example, then foreign sales – unless they were included in the licensing agreement – are not subject to a royalty. The licensing agreement will probably also consider returns, adjustments, and credits to define exactly what sales of patent-covered products are subject to royalties. And then the royalty has to be paid four times a year for the life of the patent. That’s a lot of bookkeeping.

On top of that, when the licensor (the patent owner) receives each quarterly royalty payment, he or she or it knows exactly what the licensee’s sales are of patent-covered products. And that is a number the licensee might not want the general public – and, especially, its competitors – to know.

And there are other negatives to licensing a patent. If an infringer shows up, and the licensee informs the licensor of the infringement, what if the licensor fails to act to protect the licensee’s interests? What good is a patent license if the patent is infringed, and the licensor fails to take action?

Okay. There must be some benefit to licensing a patent. And there is. If Company A does not have the cash on hand to outright buy the patent, it will offer to license it. While it will be more costly to license the patent, at least those costs are backloaded. And as everyone in business knows, whenever possible, frontload the revenue and backload the costs. A start-up company, or a small privately held company, or a company that is losing money and needs to preserve its cash, are all candidates to license a patent.

And since buying a patent is so much cleaner, neater, simpler, easier, and more confidential than licensing a patent, it has become a common practice for start-ups or smaller businesses that have to license a patent to negotiate a licensing agreement that includes the option to acquire the patent at an agreed-to price during the term of the license, so the licensee can buy the patent – with cash generated from sales of the patent-protected products – and stop making royalty payments.

According to the latest figures from the Federal Reserve, U.S. corporations are sitting on $3.82 trillion. That’s cash sitting in bank accounts. That’s why so few companies license patents, but opt to buy them.

So….if you own a patent, and you want to license it, we will take our best shot at it if we believe in the viability of the patented invention. But prepare yourself to not be surprised if the only offers you get are for straight cash acquisition of your patent or patents. And then you have to decide not between selling or licensing, but between selling or walking away.


The Story of the USB Flash Drive
Posted: 6/13/2022

Readers of this space know we love a good story, and this is a good one. Last month we covered the invention of the USB port and the patent that covered it. We included in the story that the coalition of companies led by Intel that collaborated to invent the USB port did NOT enforce the patent because they wanted everyone to benefit from the invention. And we applaud their magnanimous gesture.

Well, one of the people who benefited from the un-enforced USB patent was Dov Moran, a prolific Israeli inventor and entrepreneur who was granted U.S. Patent No. 6,148,354 for an “Architecture for a universal serial bus-based PC flash disk” November 14, 2000. His invention became the USB Flash Drive, and his patent generated billions – yes, “billions” with a “b” – for him and his company, MSystems, Ltd.

Moran’s company started manufacturing and selling flash drives based on Moran’s patent, and sales were brisk and healthy. In 2006, MSystems was sold to ScanDisk Corporation for $1.6 billion. SanDisk was acquired by Western Digital Corporation (NASDAQ WDC) in 2016.

Moran very wisely filed for multiple foreign patents, and he filed four continuations that become patents. Moran and M-Systems vigorously defended their patent, filing numerous patent infringement lawsuits in several countries. The last patent in the series was a reissue, U.S. Patent No. RE44641 that expired in 2019. Western Digital was collecting royalties in 2019 on $60 billion in flash drive sales!

The USB Flash Drive is one of the best examples of how performance increases while the price of the product drops. The original MSystems flash drive held a whopping 8 MB of data! The capacity of the flash drive has steadily grown into the terabytes. While the price has steadily dropped.


Federal Circuit Panel Must Address What Can Be an Inventor
Posted: 6/13/2022

When one thinks of an “inventor” the likes of Thomas Edison and Alexander Graham Bell come to mind. Or John Bardeen, William Schockley, and Walter Houser Brattain. Or Arjay Bhatt who invented the USB port (May 18 IP MarketPlace) or Dov Moran who invented the USB flash drive (previous article). These are all men, but women can and are inventors, and IPOfferings represents several. And you do not have to be an American citizen or even an American resident to apply for a U.S. Patent.

A case now before the courts is addressing the question of if Artificial Intelligence can be an inventor! A Federal Circuit panel must decide how to define what an “inventor” and an “individual” is in a test case for artificial intelligence inventorship.

The term “individual” as used in U.S. patent law should be interpreted broadly, including extending it to artificial intelligence machines such as DABUS (Device for the Autonomous Bootstrapping of Unified Sentience), a form of AI developed by Australian computer scientist Stephen Thaler. This is the argument made by Ryan Abbott, a partner at the Brown, Neri, Smith & Khan law firm, before the U.S. Court of Appeals for the Federal Circuit. Chief Judge Kimberly A. Moore and Circuit Judge Richard G. Taranto centered their questions to Mr. Abbott on how to more simply define “individual.” They questioned the concept of zero human involvement in the creation of AI-generated inventions.

Taranto noted that in some cases it would be “odd” to list an AI as an inventor. Artificial intelligence refers to a capability, he said, citing dictionary definitions. “My general sense has been that the term artificial intelligence is nearly always and in some dictionaries only used to refer to the capability, not the machine that has it,” Taranto said. “That would make extremely odd, just for that reason alone, to indulge the usage that you have to indulge when you say, ‘an AI, the AI as a unit,’ that could be an inventor,” he added.

Abbot responded that the judges can view DABUS as an “inventive entity” because it is a software program operating on a specific physical computer.

The case currently pending in the U.S. is not the beginning of Stephen Thaler’s challenge to have AI accepted by national patent offices as an inventor. Thaler has one win under his belt in South Africa where he received a favorable decision from the Companies and Intellectual Property Commission. However, his request was denied by the European Patent Office, the second largest patent agency.

This case began when the U.S. Patent and Trademark Office ruled that DABUS cannot be an inventor on a U.S. Patent Application, and the U.S. District Court for the Eastern District of Virginia’s backed up the Patent Office. The district court decision was appealed by Thaler, putting it before the U.S. Court of Appeals for the Federal Circuit.

Thaler’s appeal to the federal circuit is Case No. 1:20-cv-09003.


Patent Monetization Conference Coming Up in June
Posted: 5/15/2022

Mark your calendar. Best Practices for Monetizing Patents is a virtual summit that will be held Thursday, June 9, from 10:00 am to 5:30 pm Eastern Time. The conference has valuable content for anyone who comes in touch with intellectual property – from IP assets managers to IP licensing executives, inventors to investors, business development professionals to CEOs.

Each of the conference sessions include input from several panelist who each approach the topic from a slightly different perspective, and each session will include time for Q&A. Here is the conference agenda.
Primer on Patent Monetization
Primer on Spinning Off Technologies
Selling a Royalty Stream
Preparing for Negotiations with Buyers/Licensees
Monetizing Patent Through Exits
Working with Contingency Lawyers and Litigation Finance Companies in Patent Infringement Actions
Monetizing Standard Essential Patents
Patent Pools for Complementary IP
Deal Terms and Negotiating Strategies
Patent Acquisitions from the Buyer’s Perspective

Our very own Alec Schibanoff will be a panelist on two of the conference sessions, and the other panelists come from a cross-section of the IP community so it will be diverse learning experience for the attendees. Best Practices for Monetizing Patents is co-sponsored by Tech Transfer Central and Certified Patent Valuation Analyst.

Registration for the conference is very affordable, and you can also order on-demand videos from the conference for training and reference purposes. You can download the conference program and registration at this link.


The USB Port Changed Everything!
Posted: 5/15/2022

It was 25 years ago that the Universal Serial Bus (or “USB”) port hit the market. There are still some of us around who remember the pre-USB days. Connecting a peripheral to a PC was not a simple matter. There were serial ports and parallel ports. Serial ports included CAN, RS-232, RS-485, RS-422, I2C, I2S, LIN, SPI, and SMBus formats. While RS-232 was the most popular, not every RS-232 serial connector was exactly alike. Some had slightly different pin layouts that could take hours and a full head of hair to sort out.

Many printers worked with a parallel port. The Centronics parallel port was the most popular through the 1980s and into the 1990s. It did work, but it was large and clumsy, and while the female end plugged right into the back of your printer, that did not mean that the male end necessarily just plugged into the PC! The other problem with conventional serial and parallel connectors is that if one of pins got bent, it did not work!

What was needed was a single connector that would interface any peripheral to any PC.

It was Arjay Bhatt, the Chief Systems Technologist at Intel, who came up with a concept for a universal port. Intel partnered with Microsoft, Compaq, Digital Equipment, Northern Telecom, NEC, and IBM to invent what became the USB port and U.S. Patent No. 5,694,555 for a “Method and apparatus for exchanging data, status, and commands over an hierarchical serial bus assembly using communication packets” was granted to Intel Corporation in 1997. To show just how long ago that was, Compaq is now part of HP, Digital Equipment was acquired by Compaq before it was acquired by HP, and Northern Telecom is out of business!

Intel chose to NOT enforce the patent, and USB products currently generate $18 billion in worldwide sales.


Gene Quinn Responds to New York Times OpEd Criticizing the USPTO and Former Director Oancu
Posted: 4/24/2022

The New York Times recently ran an OpEd piece, “Save America’s Patent System,” that was highly critical of the U.S. Patent and Trademark Office and its former Director under the Trump Administration, Andrei Iancu. Gene Quinn, editor and publisher of IPWatchdog, responded to the Times’ critique. We provide a link to Gene’s excellent rebuttal, “New York Times Editorial Board Lobs Unfounded Criticism at Patent System, Iancu” and urge all of subscribers to link to Gene’s excellent article and read it.

AND…if you are not currently do so, you should be subscribing to IPWatchdog. It is the most informative publication covering patents and IP.


And Now for Something Completely Different
Posted: 4/24/2022

This is the title of a famous Monty Python’s Flying Circus skit, but it also what we are doing this month. For the first time ever, for this installment of Patent Leather we will address a totally non-patent topic: The wit and wisdom of Mark Twain and Will Rogers.

Mark Twain was more than a novelist. He traveled the world and in his later years toured the U.S. to packed theaters where he performed a one-man show. He reported on his travels, told stories, gave advice, and thoroughly entertained his audiences. Before Vaudeville, he was the best show in town.

Here are some of his best quips:

  • Human beings are the only animals that blush. Or need to.
  • Never put off till tomorrow what you can do the day after tomorrow.
  • Nothing so needs reforming as other people’s habits.
  • The lack of money is the root of all evil.
  • The secret of getting ahead is getting started.
  • If you tell the truth, you don't have to remember anything.
  • All you need in this life is ignorance and confidence, and then success is sure.
  • Whenever you find yourself on the side of the majority, it is time to pause and reflect.
  • In the first place, God made idiots. That was for practice. Then he made school boards.
  • It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.

The next time you are in Connecticut, check out the Mark Twain House & Museum in Hartford. You can see the whole thing in a couple of hours. Most enlightening and lots of fun for the whole family.

Will Rogers started entertaining at rodeos and in Vaudeville, and then moved on to radio and the movies. At the height of his career, he had a daily radio program, a daily newspaper column, was making movies, and toured the country with his one-man show.

Here are a few of his best quips:

  • Buy land. They ain't making any more of the stuff.
  • Diplomacy is the art of saying 'Nice doggie' until you can find a rock.
  • Everything is changing. People are taking their comedians seriously and the politicians as a joke.
  • Make crime pay. Become a lawyer.
  • There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves.
  • Everything is funny, as long as it's happening to somebody else.
  • Even if you're on the right track, you'll get run over if you just sit there.
  • Good judgment comes from experience, and a lot of that comes from bad judgment.
  • I am not a member of any organized political party. I am a Democrat.
  • The older we get, the fewer things seem worth waiting in line for.

Should your travels ever take you to Oklahoma, the Will Rogers Memorial Museum & Birthplace Ranch is in Claremore which is northwest of Tulsa right off Interstate 44. Plan on spending the day.


Didn’t We Already Know This?
Posted: 4/9/2022

According to a report just released by the U.S. Patent and Trademark Office, industries that intensively use intellectual property protection account for over 41% of U.S. gross domestic product and they employ one-third of the total U.S. workforce. Well, duh! We kinda knew that.

According to the third edition of Intellectual property and the U.S. economy, there were 127 IP-intensive industries in sectors such as manufacturing, wholesaling, retailing, and professional, technical, management, and administrative services that accounted for $7.8 trillion in U.S. gross domestic product (GDP) – 41% of total U.S. GDP for 2019. Direct employment in these industries accounted for 47.2 million jobs in 2019 – 33% of total U.S. employment. In addition, jobs in other industries that rely at least partially on IP-intensive industries for their sales accounted for an additional 11% of U.S. employment. That adds up to 44% of the U.S. workforce.

The report provides data that offers greater insight into the demographics of workers in IP-intensive industries. The report concludes that patents, trademarks, and copyrights are the means for establishing ownership rights to the creations, inventions, and brands that bring tangible economic benefits to their owners. Again, we knew that. The report also found a substantial wage premium for workers in IP-intensive industries, with average weekly earnings 60% higher than wages paid to workers in other industries.

Relative to workers in non-IP-intensive industries, workers in IP-intensive industries were more likely to:

  • Earn higher wages
  • Work in larger companies (500 employees or more)
  • Participate in employer-sponsored health insurance plans
  • Participate in employer-sponsored retirement plans
  • Have a bachelor’s degree or graduate degree

The first Intellectual property and the U.S. economy report was published in 2012 and second report was issued in 2016. The third edition of Intellectual property and the U.S. economy can be downloaded from the USPTO website.


We Did Not Know This, But We Are Not Surprised
Posted: 4/9/2022

In the final scene in The Hunt for Red October, Jack Ryan welcomes defected Russian submarine captain Marko Ramius to the New World. We don’t see the terms “New World” and “Old World” used that much anymore now that the national economies have been globalized as Thomas Friedman revealed to us in The World Is Flat.

A case in point is the European (Old World) Patent Office that just released its annual report for 2021. There were 188,600 European patent applications filed in 2021, an increase of 4.5% over 2020. Once again, the United States was the leading national source of patent applicants, accounting for 46,533 patent applications or 25% of all filings. Germany (the largest economy in Europe) was second, Japan was third, and China was fourth.

Here is what surprised us – but then really did not surprise us. What single company filed the most EPO patent applications? Maybe one of the Europe’s largest car companies, Stellantis or Daimler? Nope. How about Europe’s two Big Tech companies, Philips and Thomson-CSF? Nope. Oh, it must be Alcatel-Lucent, the telecom giant. Nope!

The company that filed the most European Patent Applications in 2021 was – drum roll – Huawei, a Chinese consumer electronics and telecom manufacturer, with 3,544 patent applications. Korean companies Samsung (of the Apple-Samsung Patent Trial of the Century fame) and LG were second and third. The highest-ranking European business for European Patent Applications was Ericsson at fourth place followed by Siemens at fifth. The highest-placing U.S. company for EPO patent applications was Raytheon Technologies (sixth place with 1,623 applications) followed by Qualcomm (seventh place with 1,534 applications). Sony was eighth, Philips was ninth, and Robert Bosch was tenth. So, only four of the top ten applicants for European Patents were European businesses, while two were U.S. companies, and four were Asian enterprises.

Not surprisingly, the most popular technology fields for EPO patent applications were communications (15,400 applications), followed by medical technology (15,321 applications), and computer technology (14,671 applications). The largest increases in European Patent Applications were in micro-structural and nanotechnology (up 27%), audio-visual technology (up 24%), and semiconductors (up 21%).

The Patent Index 2021 is available from the EPO website.


Electric Cars Are NOT Green!
Posted: 3/19/2022

We addressed this issue in a previous item in this space and got some interesting comments and criticisms. So, we shall state again that electric vehicles are NOT green – or, to be more accurate, do NOT use renewable sources of energy. We have nothing against EVs. In fact, we represent several electric vehicle-related patents. We are against misconceptions, and the widely held belief that EVs use renewable energy is simply NOT true!

Here are the facts. The U.S. Energy Information Administration, a unit within the U.S. Department of Energy, reports that 60.8% of the electric power in the U.S. power grid comes from fossil fuels (natural gas, coal, and petroleum products). Nuclear power accounts for 18.9% of the U.S. power supply. Only 20.1% of the U.S. power supply is renewable (wind, hydropower, solar, biomass, and geothermal).

That means that when an electric vehicle is plugged in to be charged, 79.9% of the electric power to charge that vehicle is NOT green – NOT from a renewable energy source. EVs drive around on batteries that have been charged with electricity that is 61% fossil fuel and 19% nuclear. Those are the facts.

Yes, the electric vehicles do not directly emit hydrocarbons themselves, but the natural gas and coal power plants that produce the largest share of the electric power used by EVs most definitely DO emit hydrocarbons.

If – and this is a big IF – you installed solar panels on your home, and only charged you electric vehicle during the day when the sun was shining, your EV would then be a green vehicle. Or if you installed a wind turbine and only charged the vehicle when the blades were turning, you would have a green vehicle. But charge your Tesla with power from the local electric utility, and your car is simply not green. Sorry.


Electric Vehicles Are Not All That New, Either
Posted: 3/19/2022

Tesla has made quite a splash, and the major car companies have jumped on the EV bandwagon. Ford just announced that it is splitting its automobile business into two primary sectors: Ford Blue division (gas and diesel-powered vehicles) and Ford Model e Division (electric vehicles). General Motors will introduce 30 new electric vehicles by 2025. Chrysler just announced that it will offer an all-electric product line by 2028. So how did we get from Ford’s Model T to Tesla’s Model X?

It was a tortuous trip with many fits and starts. One of the first and most powerful proponents for electric vehicles was none other than Thomas Edison. Although he and Henry Ford were fishing and hunting buddies, they were direct competitors in this area.

The first electric vehicles were available in the 1890s, a decade before the introduction of the Model T. Edison heavily promoted an electric car, but the challenge then, as it still is today, was range. The longer you can drive your EV on a charge, the more practical is the vehicle. Realizing the limited capacity of lead-acid batteries, Edison developed a nickel-alkaline battery that was much more durable and far less hazardous than their lead-acid predecessors. Unfortunately, the new battery was also larger and more expensive than the conventional lead-acid battery, so it significantly increased the cost of an electric vehicle over competing gasoline vehicles. Not much has changed in 130 years!

One of the early advantages of electric vehicles was starting them. Like a toaster oven, you just turned it on. If you owned a Ford, Oldsmobile, or Pierce-Arrow (the best-selling cars in 1910), you had to set the choke and the advance, get out the crank, insert it, and turn the crank in the hope the car would start – and you would not throw out your back or break your arm in the process. When the auto industry offered an electric starter in 1912, it was a significant advancement for gasoline-powered cars and just one of many, many set-backs for electric vehicles.




Patented Products Must Be Marked
Posted: 2/18/2022

In Surf City, the Beach Boys sing that they “bought a 30 Ford and we call it a woody.” They are talking about a 1930 Ford station wagon in which the back of the car is actually made of wood! Years later, Ford re-introduced the concept with its Country Squire station wagons with fake wood trim on the exterior, creating a premium station wagon that was both popular and profitable. They also offered a woody version for the Mercury wagon branded the Colony Park.

We recently came across a 1941 Packard “woody” not too far from our office, just over the state line in Connecticut. If you are not familiar with Packard (no relation to Hewlett-Packard), it was a luxury car brand that thrived from its founding in 1899 through to the 1950s.

During World War II, Packard converted to engine production. It manufactured engines for aircraft and World War II PT Boats were powered by three Packard straight-eight engines. One of Packard’s last major achievements was building a presidential limousine in 1953 that was used in both the Eisenhower and Kennedy Administrations.

There were once over a dozen automobile manufacturers in the U.S., but after World War II they had to consolidate to take advantage of economies of scale. Packard merged with Studebaker, but the combined company just could not make it and folded in the early 1960s, leaving the Big Three – General Motors, Ford, and Chrysler.

Well, we fell in love with this totally restored Packard woody. It holds eight adults comfortably in three rows of leather seating. Just gorgeous. So, we decided to buy it to transport visitors to our Suffern corporate headquarters in style to and from the airport and train station.

Just kidding! We did NOT buy this car. Just kidding. But we really wanted to….

What, you may ask, does this have to do with marking a product with a patent? The Packard Motor Car Company fulfilled that obligation by placing a metal plate on the inside of the engine compartment that included the car’s VIN, its point of manufacturer, and a list of the 63 patents that cover the vehicle.

Among the patents covered by this fabulous car are U.S. Patent No. 1,451,040 for a “Steering rod connection,” U.S. Patent No. 1,916,310 for an “Internal combustion engine,” and U.S. Patent No. 2,101,130 for a “Motor vehicle.” All pretty basic stuff!

The point of this pleasant excursion is that when a company sells a product or service that is protected by a patent, it must “mark” the product with the patent or patents that are covered by it. If a business fails to do this, it weakens its ability to assert a patent against an infringer who can claim it did not know the product was infringed, possibly diminishing the damages it can collect from an infringer. If the infringed party can prove willful infringement – and marking a product with the patent number that covers it is one way to do this – it is entitled to treble damages. Properly marking a product with its patent number(s) can be a matter of some dollars.

If the patent number cannot be attached or imprinted on the actual product, or if you selling services, the product’s patent number(s) should be included in the product’s documentation – user’ manual, install or configuration instructions, tech support details, or warranty information and registration materials, for example – will do. In the case of software, it should be included in that 18-paragraph user agreement that no one reads and everyone signs.

And, most important, all of your patents – whether they cover a specific product or not – should be listed on your website.

If you have only applied for a patent, the product should be marked “Patent Pending” to scare away prospective infringers. One of the advantages of “Patent Pending” is that your competitors do not actually know what aspect of your product’s technology is covered by the patent application, So you get fairly broad protection in terms of warding off the competition.

If your patent application is not allowed, you must remove the “Patent Pending” notice – or file for a new patent application and keep the competition guessing. And if your patent application is allowed, you need to change “Patent Pending” to the actual patent number.


US Inventor Takes on the Kathi Vidal Nomination
Posted: 1/24/2022

We’ve covered in this space that there has not been a permanent Director of the U.S. Patent and Trademark Office since Andrei Iancu, President Trump’s appointee, left the post last January. President Biden nominated Kathi Vidal – a Big Tech patent litigator with the Winston & Strawn law firm – to fill the post.

US Inventor – an inventor rights organization – is opposed to Vidal who represented the likes of Apple, Microsoft, Netflix, Samsung, Cisco, Dell, and other large-tech corporations and is an advocate for patent invalidation.

USPTO Director appointments have traditionally been fairly non-political and were rubber-stamped by the U.S. Senate. US Inventor mobilized its members and supporters to contact the members of the Senate Judiciary Committee, and they stirred up a political hornet’s nest! When Vidal’s nomination came before the Judicial Committee, five Senators opposed her nomination on the grounds that she was another “Big Tech lawyer” who would weaken the U.S. Patent system.

Republican Senators John Kennedy (Louisiana), Ted Cruz (Texas), Mike Lee (Utah), and Josh Hawley (Missouri) were joined by Democrat Senator John Ossoff (Georgia) who bucked his own party’s nominee. This is the first time that a USPTO Director nominee every got any NO votes from the Judiciary Committee!

Despite opposition from these five courageous Senators, Ms. Vidal was voted out of committee and her nomination now goes before the full Senate.

We agree with US Inventor and these Senators. We do NOT need another Big Tech lawyer running the Patent Office. Visit the US Inventor website to see how you can join the cause!


Google Faces Ban on Imports of Networked Speaker Devices
Posted: 1/24/2022

If you’re a regular reader of this column, you will recall that we just completed a five-part series on patent assertion. While suing an infringer in U.S. District Court is the most common venue, there is an alternative if the infringing products are imported into the U.S. – as so many products unfortunately are these days.

The alternative is to take your claim of patent infringement before the U.S. International Trade Commission (USITC). The USITC is an independent agency of the U.S. federal government that has the authority to levy tariffs and issue injunctions.

On January 7, the U.S. International Trade Commission issued an order barring Google from importing products that infringe five smart speaker patents owned by home-audio products manufacturer Sonos Inc (SONO NASDAQ).

Google issued the standard Big Tech statement: They are NOT infringing any patents and the decision will NOT have an impact on their sales. But what is Google going to say? “Oops. You got us!”

Sonos and Google have been embroiled in a global patent war over multi-room audio technology going back to 2020 when lawsuits were filed in California, Canada, France, Germany and the Netherlands. While this decision does not generate damages for Sonos, it does block Google from importing several products, and that’s decreased sales for Google, and it gives Sonos some leverage in its patent infringement assertion efforts.

The five Sonos patents that Google is infringing are:
• U.S. Patent No. 8,588,949: Method and apparatus for adjusting volume levels in a multi-zone system
• U.S. Patent No. 9,195,258: System and method for synchronizing operations among a plurality of independently clocked digital data processing devices
• U.S. Patent No. 9,219,959: Multi-channel pairing in a media system
• U.S. Patent No. 10,209,953: Playback device
• U.S. Patent No. 10,439,896: Playback device connection


Ford Enters the Tailgate Wars
Posted: 1/24/2022

In 2021, the best-selling vehicle in the U.S. was not a sedan or SUV. It was the Ford F-150 pickup. The second best-selling vehicle was the Dodge Ram 1500 pickup, and third best-selling vehicle was the Chevrolet Silverado pickup. Yup! The three best-selling vehicles were all pickups. The Toyota RAV4 came in fourth and the Honda CR-V came in fifth – both SUVs. The best-selling sedan was the Toyota Camry at No. 6. The GMC Sierra pickup was No. 9, and the Toyota Tacoma was No. 10, putting five pickups in the Top 10 best-selling vehicles in U.S.

In the intensely competitive pickup market, every aspect of the truck is up for grabs and market share. GMC introduced a fold-down step in the “MultiPro” tailgate on its Sierra pickup, and Dodge offers the “MultiFunction” tailgate, a two-piece open-from-the-center or flip-down tailgate, on the RAM 1500.

In July of 2020, Ford Global Technologies filed U.S. Patent Application 16/918,335 for a “Tailgate assembly having a door and method of providing access to a cargo bed,” and it reveals what Ford aficionados can expect on their next F-150. Ford has created a smaller tailgate within the larger tailgate that opens horizontally to make it easier to load smaller items such as groceries, adding a partition that creates a smaller cargo space. We assume, for mom, when she borrows the truck and heads into town for coffee, beans, bacon, and hardtack.


Remedies-at-Law for Patent Assertion – Part Five
Posted: 12/10/2021

This month we wrap up our series on patent infringement. First, however, here is a recap. We first addressed the remedies available an NPE (non-practicing entity) whose patent was infringed. An NPE is a patent owner who does not practice his or her or its patent – primarily independent inventors and universities. In the second installment we 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, and the fourth segment addressed your options once you decide to enforce your infringed patent.

In this last installment, we address the process of asserting a patent and the possible outcomes of that effort. Once you have engaged a patent litigation law firm to represent you, or you have partnered with a patent assertion firm and the PAF has engaged a litigator, the next step is for the law firm to file a patent infringement lawsuit. Since patents are covered by federal law, patent litigation is filed in U.S. District Court.

Once the lawsuit is filed, there are multiple communications and exchanges of documents between the plaintiff’s (the patent holder) and the defendant’s (the alleged infringer) attorneys. The defendant will immediately make the standard claim that (a.) they are definitely NOT infringing the patent and (b.) it does not make any difference because the patent is not valid.

Under what is known as “Discovery” both sides must show the other side any evidence they have. We find it hilarious when we watch a courtroom drama and an attorney presents a shocking piece of evidence that is a total surprise to the opposing attorney. That does not happen in the real world because both sides must disclose to the other side all the evidence they have before the trial.

It is likely that each side will depose (or question) the other side’s witnesses in what is known as a “Deposition.” Any witnesses that the plaintiff will call during a trial – such as the inventor – must be revealed to the defendant, and the defendant has the right to question the witness – usually in the law firm’s office – pre-trial. The purpose of the Deposition is to see exactly what the witness has to offer, but to also determine how effective a witness he or she will be.

One strategy that infringers often use today is to try to invalidate the patent. This is done by requesting an ex partes review of the patent before the Patent Trial and Appeal Board (PTAB). If the review is granted, the lawsuit goes on hold. The plaintiff's and defendant's attorneys appear before the PTAB and argue the validity of the patent. The defendant will try to locate Prior Art that challenges the novel aspect of the patented invention. If the patent is invalidated by the PTAB, Game Over. There is NO patent to assert. If the patent is not invalidated, the original patent infringement lawsuit resumes.

After motions have been filed, and there are various hearings, a trial date is finally set, and now it’s time for both sides to play chicken. Going to trial is a big risk for both sides. Either side could win big…or lose big. The result is that most patent infringement lawsuits end in an out-of-court settlement in which the infringer usually agrees to no wrongdoing, but also agrees to take a license under the patent and pay for both past and future use of the patent. An out-of-court settlement is the most desirable outcome since it is a final agreement among the parties, and both sides can walk away and go about their lives. Unless there are additional infringers to pursue – which there often are.

IF – and this is something most patent litigators representing the patentee will try to avoid – you have to go to trial, there are two possible outcomes: You can lose, in which case Game Over. Or, you can win, but it is almost a certainty that the losing side will file an appeal, and it can drag things out for months or years. Apple sued Samsung in the “Patent Trial of the Century” in 2012 and won. Samsung filed various appeals and the case was not finally settled until 2017, five years later! That is why an out-of-court settlement is best.

An out-of-court settlement typically has two parts. First, there is an amount that is agreed to that covers past infringement of the patent – theoretically what the royalty payments would have been over that period had the infringer licensed the patent in the first place. This is usually a lump sum payment. If the patent still has years to run, and if the infringer is going to continue to manufacture the infringing product, the infringer must take a license for the patent. This second half of the settlement can be paid in a lump sum or paid out in royalty payments for the life of the patent or for as long as the infringer continues to sell the infringing product.

So, as you can see, patent assertion is a High Risk/High Reward undertaking. You face the double risks of having the patent invalidated by the Patent Trial and Appeal Board, and the risk of being forced to go to trial and losing. But if you and your legal team can prevail, and secure an out-of-court settlement, you could be looking at a considerable windfall. Patent infringement settlements can run into the millions – even tens of millions – of dollars!


Remedies-at-Law for Patent Assertion – 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 Patent Assertion – 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 Patent Assertion – 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 Patent Assertion – Part One
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.



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