What Every Startup Needs To Know: IP Pitfalls- Poorly Written Or No Agreements- Part Nine

By Debby Winters

Using poorly written agreements or no agreements at all can be a disaster for the startup. Not only is the valuation of a startup based on the IP that it owns, but also on the agreements with IP clauses. Examples are not just limited to things you typically think of as IP agreements but can include employment, consulting, funding, collaboration, settlement, licensing, research, and material transfer agreements. Thus, poorly drafted or non-existent IP-related agreements can be problematic for a startup.

Because of a lack of sufficient funding, many startups attempt to save legal expenses by using template IP-related agreements from a variety of non-professional sources, including the internet. However, such agreements can fail to include clauses that adequately protect the startup’s interest and in many cases, can include clauses that jeopardize a startup’s IP. Thus, when using IP-related agreement templates, the startups should have such agreements at the very least vetted by IP professionals. Startups can also do themselves a disservice by using an attorney who is not familiar with the nuances of IP law.

Many IP-related agreements, particularly research agreements, generally include confidentiality, publication, and IP clauses. The startup should review confidentiality and publication clauses to ensure that confidential information, including trade secret information, is protected from disclosure and that the startup has the right to review manuscripts and other materials containing confidential information before publication. With respect to the IP clauses, the startup should make sure the language allows for retaining its own IP and for protecting jointly developed IP.

Furthermore, with respect to patent license agreements involving a third-party licensor, startups need to make sure that the license agreement provides all the rights needed to commercialize the licensed technology, includes future improvements to the technology, and retains the right to sublicense the technology. The agreement should also have a sufficient termination clause in the event the startup needs to opt-out of the agreement.  The agreement should also specify the relevant field of use and possibly other fields for future expansion. Importantly, the startup should review patents to ensure that the commercialized product materials, methods, and tools are properly claimed with patent life remaining. This should be drafted and reviewed by an experienced IP attorney.

In conclusion to the series of blog posts dealing with common IP pitfalls for a startup, the process of bringing a new startup business to life and in launching new products to the marketplace can be an exciting time. However, many startups are so focused on bringing a new product or service to market that they fail to take the necessary steps to protect the associated IP. Failure to put an IP plan in place can cripple valuation and expose the startup to potential third-party infringement risk. In contrast, startups can protect and exploit their IP assets to build value and revenue by developing an IP plan as part of their conception, creating an action plan to protect IP assets including protection of confidential information, securing ownership rights to the IP, conducting freedom-to-operate searches, and ensuring properly drafted IP-related agreements are in place.

If you need help with your IP or with protecting it, let me know.

How do you know if your idea is truly new and can be patented?

By Debby Winters

Clients frequently come to me with the question “how do I know if my idea is truly new and can be patented?” The standard and easy response that you will get from most patent attorneys will probably be “hire our firm to do a patentability or prior art search and we can tell you” but in my opinion this is not the proper answer. I tell my clients that the answer is more complicated than that as there are many factors to consider, and all on a case by case basis.

While conducting a patentability search and a prior art search is extremely valuable, it is not the be all and end all that many patent attorneys portray it to be as many times there are key articles or other patents that are missed. This means that despite best efforts, and some very smart people using very expensive searching tools, it is nearly impossible to figure out if your idea is truly new or novel. Chances are that there is someone somewhere around the world who has invented the same thing or something very close to it. It’s very hard to find that out, even with advanced searching technology. However, the benefits you receive from the search can be valuable in many other ways.

But how do you truly know if your idea is new? The response I gave to this question is that you can’t ever know for certain but if you do a good patent search and combine that with an internet search using Google and other search engines that have large information databases, you can get a good feel for how new your invention is, BUT there are never guarantees. Hopefully this search will give you enough information to justify your patent filing but I would never bet any money that your idea is truly new or novel on the fact that a patent search did not find any identical inventions. My basic premise is always that the lack of finding something does not prove that it does not exist.

The patent search before you file your patent is your first indication of how new your idea may be. The second test will come as you go through the patent prosecution process and the US Patent Office will do its own search. Usually that search will pick up a few things that your professional search missed. Most of the time you can convince the patent examiner that your idea is different from the similar inventions that their search found.

The last and final test will be a “cease and desist” letter or a lawsuit saying that you are infringing on the patent someone else already has. This is often scary for people to hear but the good news is that if you are successful enough to get these types of letters then this usually means your invention is doing well in the marketplace and you should have enough money to defend your patent.

The bottom line is there is so much information out there and so many people doing so many things around the world that it is nearly impossible to know if any idea is truly new and novel. The best we can hope for is a good enough patent search upfront to help us draft our patent in a way that will get it allowed by the patent office. Nobody truly knows if their invention is new and novel until either the patent office certifies that it is with an issued patent, and even then the patent office may have missed something.

A Prior Art Search…to do or not to do?

By Debby Winters

Many individual inventors and small start-up company entrepreneurs ask if they should do a prior art search, or if they can forego that and save the money for the patent application itself. This is a tricky question to answer as many start-ups don’t have a lot of money BUT, the risk of filing the patent application when the invention might not be patentable could be costly too. Therefore, I usually recommend conducting the prior art search, but the timing of doing so might be important.

Many new inventors are surprised that they are not the only ones working on the same or a similar invention. The internet research they do, although limited, may convince them that they are the only ones working to solve this problem. A thorough prior art search is the only way to know for sure.

Think about the risks of not doing the prior art search prior to filing the application.

1-     The possibility of getting hit with an infringement lawsuit might be the mostly costly risk. These suits can be extremely expensive, even if you don’t get hit with a large damage award. There is a risk that you will not be able to afford to defend such a suit and that all of your hard work in developing the invention, getting it through the prototype stage, and getting it to market would be wasted. There is usually a significant monetary and time investment involved with these steps. There is also a risk that a court could issue an injunction that would prohibit you from making, using, selling, or offering the invention for sale.

2-     The prior art search can help in preparation of the patent application and potentially keep down costs during the prosecution stage. By knowing the closest prior art, the patent application and the claims may be prepared more strategically to take advantage of areas of patentability. Claims may be prepared that get close to the prior art without encroaching on it. It may be possible to develop arguments and strategies for convincing the patent examiner that the invention is non-obvious based on the prior art you uncovered. If you don’t do the prior art search prior to filing you won’t have this information under your belt when the examiner brings it up. Besides, if you find a patent that prevents you from obtaining yours, you can always consider licensing the technology you need to still market your invention. Better to find out now rather than later.

Many times inventors complain that anything you uncover that is material to the invention must be disclosed to the Patent Office. While this seems like a disadvantage, the patent examiner will find this anyway. The patent examiners are very good at finding relevant, as well as irrelevant prior art. A route I typically recommend is to file a provisional patent application, which costs much less than a full utility application, to claim your priority date. You then have time to do the prior art search and ensure that you want to move forward. This also gives you the opportunity to raise more capital to pay for the regular application and the opportunity to draft the application to “work around” any pesky prior art.

If you have questions, please feel free to contact me. As a licensed patent attorney, I will see how I can help.

Voting Machine Patent Timely Decided

Remember the 2000 election between Bush and Gore and how the controversy about the “hanging chad” and the Supreme Court decision “gave” the victory to Bush? Well, the voting machines are much improved now partly due to a patent for a better electronic voting machine that was a filed application in 2000, when the Bush v. Gore decision was being made, and on the day before the 2012 election, a major patent case decision came down.

The IP rights over this patent won’t stop the election as yesterday the Federal Circuit affirmed a Florida federal court’s ruling that two voting machine manufacturers involved in the case of Voter Verified v. Premier Election Solutions and Diebold didn’t infringe a Voter Verified Inc. patent covering a method of verifying ballot accuracy. A three-judge panel agreed with the lower court that voting machines sold by Premier Election Solutions Inc. and Election Systems & Software Inc. don’t infringe the patent. The decision, in effect, ends the four-year old litigation, as it means that ninety three of the asserted patent claims are invalid and the remaining claim is not infringed by the automated voting systems sold by Premier Election Solutions and Diebold. Voter Verified alleged infringement of all claims, 1–94.

The Voter Verified patent, which issued in 2008, discloses and claims automated systems and methods for voting in an election, featuring a self-verification procedure by which “machine and human error may be detected and corrected before the ballot is submitted by the voter for tabulation.” Briefly, the voter enters a vote into an electronic voting station, which temporarily records the voter’s input in digital storage and generates a corresponding printed ballot. That printed ballot is then checked for accuracy, either by presentation to the voter for visual inspection or by a computerized scanning mechanism capable of comparing the face of the printed ballot with the vote data represented in the station’s temporary storage. In either case, only ballots deemed consistent with the voter’s intended or recorded input are accepted for final tabulation.

Vote as you please, but PLEASE VOTE!

Was The Jury Confused When They Decided The Apple/Samsung Verdict?

By: Debby Winters

It is now coming to light that the jury in the Apple/Samsung patent case may have not only been confused in making their decision, but Samsung is hoping there was misconduct/bias, which they have used to request a new trial. Samsung is claiming that the jury foreman may have used extraneous material when making his points to the jury. Extraneous material is not allowed in the jury room. Whether the huge verdict will be overturned remains to be seen.

Samsung Claims that Apple’s IPhone 5 Infringes Its Patents

By Debby Winters

Not surprisingly, now that the iPhone 5 is out, Samsung has added the iPhone 5 to the list of patents Samsung claims Apple has infringed. As you recall, Apple won a $1.05 billion jury verdict against Samsung on Aug. 24 in a separate patent case in August.

“As soon as the iPhone 5 was available for purchase, Samsung began its investigation of the product,” the company said in its court filing yesterday. The iPhone 5 infringes two standards patents and six features patents, Samsung said.

The U.S. District Judge who is presiding over the litigation in California rescinded a ban on U.S. sales of the Galaxy Tab 10.1 that she imposed in June saying there were no grounds for keeping the preliminary injunction in place after jurors concluded in their Aug. verdict that Samsung didn’t infringe the Apple design patent, which was the basis for the injunction.  But Apple contended the ban should remain in place because the jury found the Galaxy Tab infringed other patents at issue in the case. Apple has won a preliminary order blocking U.S. sales of Samsung’s Nexus smartphone. In Aug., Apple added the Galaxy S III smartphone to its list of products that it says infringe its patents. Apple is expected to add infringement claims about other Samsung products, including the Android 4.1 Jelly Bean operating system and the Galaxy Note 10.1 device.

The case in which Samsung added the iPhone 5 claims is scheduled for trial in 2014. Samsung’s original complaint identifies the same eight patents as the basis for alleging infringement by earlier iPhone models, as well as the iPad and iPod Touch.

Apple v. Samsung- Apple won the recent battle but who will win the WAR?

By Debby Winters

A California Court recently found Samsung, the Korean electronics giant, guilty of infringing Apple’s patents and ordered it to pay $1.05 billion in damages. If this huge damage award holds up on appeal, it will stand as the largest patent verdict of all time. But, more important than the amount of money awarded, it gives Apple a huge leg-up in the corporate patent wars, and it immeasurably strengthens the company’s negotiating position with regard to the Android phones it is struggling against.

Although, according to the jury verdict, Apple is the inventor of most of the technology in these smartphones, Samsung has been the number one seller of them in the U.S. in the past few years. This verdict will surely alter the balance of power.

Another twist in the story is that Samsung claims that Apple stole the technology from it and others, such as Motorola, and HTC, in the first place. Samsung claims that technology similar to Apple’s pinch-to-zoom function already existed when Apple was granted its patent, the company is arguing that Prior Art should render Apple’s patent invalid. Samsung has won verdicts against Apple in lawsuits it file against the mobile device giant in Japan. This verdict also follows closely after a South Korean court decided that both companies infringed each others’ patents, a ruling seen to favor Samsung. However, the US battle is the centerpiece of the worldwide legal battle between the two smartphone companies, and is by far the most significant.

It is a fact that Apple is known for suing other companies voraciously over “stolen” property, and currently has lawsuits going with just about every company that has entered the mobile device market. Want to make it even more complicated? Currently, the Android platform is under attack from a number of other companies in addition to Apple. These companies have been forced into licensing agreements due to alleged patent infringements. So, who really invented this technology? And what’s the big deal, anyway?

For starters, Apple’s ultimate target is not Samsung, but Google, because Google created the Android operating system (OS) that runs on Samsung smartphones. Steve Jobs thought Android was a rip-off of Apple products, and vowed to declare “thermonuclear war” on the competing OS. It will be interesting to see what the results of Jobs’ promised nuclear attack will be.

There’s a danger that Samsung products could be kicked off the market following this huge verdict. Apple has portrayed Samsung as an enthusiastic copycat that took a shortcut to profits, engaging in a three-month copying spree that piggybacked on the years of hard work it took Apple to create the iPhone. Samsung, meanwhile, denied those copying allegations, and accused Apple of being a courtroom bully that refused to compete in the marketplace. Negotiating a license agreement between th
e two companies from the beginning could have resolved all of these problems, and may be what it will take in the end, if the infringement verdict is upheld.

How the jury made its decision is another interesting facet in the complicated twist. Each member of the jury was given access to one of each of the accused phones, which could be turned on and used, but did not have Internet access. Based on their own usage, they found infringement of Apple’s patents that cover features like double-tapping to zoom, the “bounce back” technology that snaps images back into place, as well as the contours and shape of the iPhone. Traditionally, jurors are not allowed to bring “model’s” into the deliberation room but as we all know, times are changing!