TEN THINGS: CREATING AN IN-HOUSE PATENT PROGRAM

I was looking back on my past blogs recently and I realized that it has been a while since I discussed issues related to intellectual property (“IP”).  This week, I’ll try to remedy that oversight.  For just about any company, IP is an important part of its assets be it trademarks, trade secrets, copyrights, or this week’s topic, patents.  Most of my in-house career has been spent with technology companies (or working with divisions of those companies focusing on technology).  Everything I know about the topic I picked up along the way.  I am not a computer science graduate, nor did I study IP issues during law school.  And I handled a few minor IP-related issues at my first law firm.  It really wasn’t until I became the General Counsel at Travelocity that I had my initial experiences with patents.  First, as the victim of the initial wave of “patent troll” cases.  Second, when by default I became the leader of our patent harvesting committee.  It wasn’t much of a program to start with but I decided to dig in and learn as much I could about patents and why it was important that we, as a company, tried to develop them.  It actually turned out to be a lot of fun, especially getting to interact with our software engineers and other super smart people who were developing the next wave of company technology.  Our patent program got better and more refined over time and the USPTO issued a number of patents to Travelocity.   I was never one of the inventors on any of our patents but I like to think the legal department played a critical role in developing those patents.  In my new job, I realize that we have a similar opportunity to build our program and enhance how we develop patents.  So, for this edition of “Ten Things,” I am reaching back to my past to lay out the key points in developing an in-house patent program.  I am going to assume you don’t know a whole lot about patents and (to keep things simple) I will focus on the US patent system – but the principles below work in just about any country:

1.  What is a patent?   A patent is a government-granted monopoly to build, sell, and use your invention (and prevent others from doing so).  If you are issued a patent, it’s good for 20 years (but some patents are good for only 14 years) and after which time your patent expires and anyone can copy, build and sell your invention.  In exchange for the “monopoly,” you must disclose the details of your invention to the public so that someone “practiced in the arts” could recreate it.  To receive a patent, your idea must meet four requirements:

• The subject matter must be “patentable” (as defined by Congress and the courts)
• Your idea must be “new”
• The idea must be “useful”
• Your idea must be “non-obvious”

There are three types of patents you can file for:

• Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof (good for 20 years)
• Design patents may be granted to anyone who invents a new, original, and ornamental design (good for 14 years)
• Plant patents may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant (good for 20 years)

There is a ton of stuff that goes into all the above, far more than we have space to discuss here.  Let’s just say that you will need experienced counsel (inside or outside) to help you determine whether an idea is patentable.  If you are going to get into the details of a patent program, you’ll need to spend some time understanding the basics of what is patentable.

2.  Getting a patent.  Getting a patent is not easy (unless you buy them, which is always an option).  The overall process takes a lot of work and time.  It can also be expensive — roughly $15,000-$25,000 to get a patent issued and buying an already issued patent is likely far more expensive.  You need to file a patent application that sets out in detail a description of your idea.  These applications must be filed by a patent attorney (in-house or outside) skilled in the art of drafting a patent application.  You’ll also want to review publications and other sources to make sure there is nothing already out there that overlaps with your idea or would allow someone skilled in the arts build your invention just from reading what’s already out there (this is called “prior art”).  Then an examiner from the USPTO reviews your application.  They might reject it in total or they might reject part of it (for any of the reasons noted above).  You have a chance to “appeal” (called an “office action”) and the examination process (with the exception of design patents) generally goes back and forth for several years before either your patent is issued or finally denied.  At each stage, you must determine whether it is worth the cost and the effort to continue or, depending on the objections from the examiner, whether the changes you must make to your patent leave you with anything “good” after its all said and done.

You also need to decide in which jurisdictions you will seek patent protection.  Patents are only valid in the country where they are issued.  You cannot enforce a patent issued in the USA against a business operating within the EU or in China (instead you would need patents issued in those countries).  Additionally, in the US, you must seek patent protection within one year of when you first sold or disclosed the patented material.  If you wait too long (more than 12 months), you cannot get a patent.  Finally, one neat trick in the US system is filing for what is called a provisional patent.  This is a relatively inexpensive process that allows you to get an application on file quickly (with far less detail and expense than a regular patent application).  The provisional patent application is good for one year and buys you time to decide if you truly want to pursue a full patent while preserving your position as “first to file.”

3.  Why get a patent?   A key question many on the business side will ask you when you are looking to start up or enhance a patent program is “why get a patent?”  It’s a fair question, especially if you are going to be spending time and treasure trying to get inventions patented.  While ultimately the answer to the question depends on what the company’s strategy is with respect to IP generally and patents specifically, I think you can break the reasons down as follows:

• Protect innovations.  The most straightforward reason to get a patent is to protect a valuable invention, in particular, one you believe competitors or others may reverse engineer or invent on their own.
• Offensive use.  This means getting patents to use for licensing purposes (i.e., money) or to preclude others (competitors) from practicing your invention which, if done correctly, could mean they are no longer competitors.
• Defensive use.  This contemplates getting patents to use to defend the company in the event a competitor or other patent owner tries to assert their patent against you.  If the party asserting the patent operates a real business (vs. being a patent troll) then you may own a patent that you could enforce against them.  When this happens, the parties often agree to a cross-licensing program which allows each party to use the other’s patents.
• Increase shareholder value.  Patents have value.  A portfolio of patents can increase the value of your company for its shareholders, particularly in cases of a potential sale of the business.  You will always see questions around patents (and other IP) in a due diligence request.  Additionally, if your company is publicly traded, a fulsome patent portfolio (or simply obtaining a single new – but important – patent) can mean an increase in share price.
• Taxes.  Being able to demonstrate that you apply for and have patents can be used as a justification for research and developments (R&D) costs which typically qualify as deductions for purposes of corporate income taxes.
• Prestige.  Companies with large patent portfolios (or even just a handful of important patents) are often viewed as innovators in their field.  Employees, especially for technology companies, take pride in the innovations developed by their companies, including patents.  Believe it or not, this can lead to an improvement of morale generally.

4.  Patent or trade secret?  Another important consideration regarding any particular piece of intellectual property is whether you should protect it with a patent or treat it as a trade secret.  Not all IP is worth the cost of trying to obtain a patent.  Additionally, once the patent issues, the particulars of the invention are disclosed to the world and your protection only lasts for 20 years (and it also depends on how willing you are to enforce your patents).  Accordingly, there are times when a patent simply doesn’t make sense.  For example, the good folks at Coke Cola could have patented the formula for Coke.  But, for the reasons noted above, it was a far better decision to treat the formula as a trade secret and keep in out of the public realm.  Before deciding to patent something, you need to think hard about whether that is, in fact, the right course or if you are better off keeping it as a trade secret.

5.  Invention disclosure form.   There are two key documents you must have in place as you deal with and develop your company’s IP.  The first is an invention disclosure form.  This is a form that you require inventors to fill out so their invention can be properly evaluated.   The form should only be a few pages long to encourage inventors to complete it.  The inventor should provide information such as a description of the technology, how it operates, the identity of competitors in the field and their products/technology; how the invention will make a difference in the marketplace for the company and allow the company’s products to surpass others (i.e., why is it worth seeking a patent), are there easy ways to design around the technology, the date the invention was created, whether the invention has been offered for sale and, if so, when, and so forth.  For a good example of an invention disclosure form, click here.

6.  Invention assignment form.  The second key document you must have in place is a form whereby all employees – when joining the company – agree to assign ownership of any inventions created by the employees on company time or using company resources to the company.  This form is often combined with other agreements such as confidentiality, non-solicitation, and non-compete agreements.  Whether you combine the IAF with other restrictive covenants or not is just a matter of preference, the important thing is to make sure you have such a form and that there is a process to ensure that all employees sign it.  You do not want to be in a position where the company is defending challenges to its attempt to obtain a patent from an employee claiming he or she is the real owner.  For a sample of an invention assignment form, click here.

7.  What’s the company’s patent strategy?   Before embarking on a program to generate patents, you need to be sure that you understand and have alignment among the senior management as to the company’s goals and strategy around obtaining patents.  For some companies, they will only want to do the minimum needed to obtain a handful of patents.  Some companies may not want to get any patents at all.  While others will be willing to create an entire group whose sole responsibility is to generate patents and seek licensing revenue.  Some companies may want patents solely for defensive purposes and will do anything to avoid a “patent war” among its competitors.  The company’s strategy around patents will determine how much funding there is for the program and how much cooperation you will get from different groups, especially the software engineers or R&D teams.  The easiest way to figure out where your company sits on the spectrum of patent creation is to ask.  This will be a high-level meeting with the senior management.  This means you will need to be prepared to set out the pros and cons of a patent program, including the costs, the specific reasons why the patent program you are proposing makes sense for your company, and the process you recommend following to generate patents.  If you have outside patent counsel, they will likely be very willing to help you prepare materials for the meeting and may, if helpful, even attend (especially if they believe they will get any patent prosecution work coming out of the program).

8.  Patent harvesting meeting.    This is the crown jewel in your patent program.  A patent harvesting meeting is a meeting where the right people gather to discuss all of the different types of innovation going on at the company and for which ideas, if any, should the legal department seek patent protection.  I used to think of my patent harvesting meetings as “Geeks of the Round Table.”  One particularly bright inventor I called “Q” from the James Bond movies, as he was always coming up with the coolest gadgets and ideas.  Silliness aside, this is the meeting where you make determinations about what to patent, using the company’s patent strategy as your guide.  Here are the key items of a successful patent harvesting meeting:

• The right people must attend.  Our meetings were a mix of Legal, Marketing, R&D, Finance, CTO, CIO, and outside counsel.  Outside counsel attended in person or on the phone for no cost (but knew they would get the patent work that came out of the meeting).  They were very helpful in analyzing ideas.  I think the ideal size for your patent committee is 10 or less, but you should have the actual inventors attend to present their ideas and answer questions.
• Meeting frequency/length.  We met every quarter and our meetings were about 90 minutes long.  You can meet more frequently if your program is really active.  Any longer than 90 minutes though and people drift off and lose interest.  Of course, serving food always helps!
• Understand how patents work/what is patentable.  During our meetings, we would spend time at the beginning going over the ground rules about the patent process and, most importantly, what constituted patentable ideas, i.e., what did we think the USPTO would actually approve.  This became particularly important after the SCOTUS decision in Alice Corp vs. CLS Bank.  This meeting was also a place where we would discuss whether an idea should be treated as a trade secret vs. a patent.  And don’t forget about design patents.  These can be as valuable as utility patents in terms of protecting unique company designs, such as website design.
• Encourage creativity.  While not every idea merited a patent filing, even the goofiest ideas could often spark other ideas.  And things that no one at first thought had merit would be fleshed out by the group into something valuable and a potential patent.  In other words, it’s important to have fun and to encourage people to think freely, no matter how wild the idea.  At a minimum, you’ll have a few laughs.
• Prior art database.  One potentially overlooked benefit of the patent harvesting meeting is the collection of all of the ideas, including inventor notebooks, patent disclosure forms, and even drawings on the back of a napkin (which was how Travelocity started).  All of this material, even if not something you can patent, should be saved in some type of database (paper, scanned, etc.) so that if your company is ever the victim of a patent suit you can comb this database to see if there is any “prior art” that can be used to defeat the patent asserted against your company.
• Follow up.  Finally, as you conclude your meeting be sure to write out all of the follow up steps with respect to any particular invention (for example, you want to get a provisional patent application on file quickly).  As the in-house lawyer, you will likely be the person making sure that all the necessary next steps are taken.

9.  Incentives for inventors.  If you really want your patent program to succeed you will need to come up with some incentives for inventors.  First, make sure that you let the entire company know that every employee is encouraged to submit ideas on the patent disclosure form.  Don’t limit your search to just software engineers or R&D folks.  You never know where the next brilliant idea will come from.  Next, offer a cash award to all of the inventors when a patent application is filed and, most importantly, when a patent is issued.  It does not have to be a large amount, but everyone likes to get a little something for the effort as Bill Murray said in Caddyshack.  We hosted an inventors luncheon every year where we recognized all of the inventors who had a patent application filed and had a patent issued.  Our CEO was the presenter and we made a pretty big deal out of it.  And if a patent issued, we announced it to all our employees and named the inventors.  All of this recognition and rewards (however small) created a virtuous cycle where employees got excited about submitted their ideas.

10.  The role of in-house counsel.  As you can see, in-house counsel has a very important part to play in a patent generation program.  Besides hosting the patent harvesting meeting, in-house counsel:

• Manages deadlines.
• Reviews the patent portfolio regularly to ensure valuable patents are kept alive and those that may no longer be useful are abandoned (why pay expensive maintenance fees for patents that are no longer useful?).
• Helps prepare patent applications (directly or by assisting outside counsel as a liaison with the inventors).
• Is a cheerleader for the patent program and ensures that the legal department makes it easy for inventors to get their ideas in front of the right people.
• Educates senior management and employees on the patent process and the value of patents, including ongoing training to encourage patentable ideas and the protection of IP generally whether by patent or as a trade secret
• “Walks the halls” and talks with employees and inventors about ideas they have or are working on.  There is no need to wait until a patent harvesting meeting to bring forward potentially patentable ideas.  And occasionally, in-house lawyers spot potential ideas that might be patentable and brings the right people together within the company to flesh out ideas and, if the idea is good enough, encourages employees to file an invention disclosure form.

*****

You don’t need a degree in computer science or have spent your career working in patent law to be a valuable part of your company’s patent strategy.  All you need is a willingness to get involved and recognize that your company may be missing an opportunity regarding patents (or not fully taking advantage of the program it does have in place).  This can be especially valuable if you’re looking for a niche to call your own or just the opportunity to “run” something.  It’s also a way to get more visibility with senior management, especially if you have a few successes in obtaining patents.  If you’re looking for an opportunity to be proactive, a patent program may be your chance.  Now excuse me, I have some inventors to talk to.

Sterling Miller

November 16, 2017

CONTACT US

Lawyers in Da Nang:

99 Nguyen Huu Tho, Quan Hai Chau, Da Nang city

Lawyers in Hue:

336 Phan Chu Trinh, Hue City, Thua Thien Hue

Lawyers in Phu Quoc:

65 Hung Vuong, Duong Dong town, Phu Quoc island district

Lawyers in Quang Ngai:

359 Nguyen Du, Quang Ngai City, Quang Ngai Province.

Lawyers in Ha Noi

Room 501, 5th Floor, No. 11, Lane No. 183, Dang Tien Dong Street, Dong Da District, Ha Noi

Website: www.fdvn.vn    www.fdvnlawfirm.vn  www.diendanngheluat.vn  www.tuvanphapluatdanang.com

Email: fdvnlawfirm@gmail.com    luatsulecao@gmail.com

Phone: 0935 643 666    –  0906 499 446

Fanpage LUẬT SƯ FDVN: https://www.facebook.com/fdvnlawfirm/

Legal Service For Expat:  https://www.facebook.com/fdvnlawfirmvietnam/

TỦ SÁCH NGHỀ LUẬT: https://www.facebook.com/SayMeNgheLuat/

DIỄN ĐÀN NGHỀ LUẬT: https://www.facebook.com/groups/saymengheluat/