If your business is run on original ideas, you probably know something about business method patents.
A business method patent is a patent directed to a new way of doing business. Historically, only tangible things, such as machines, were considered patentable. But as banks, human resources firms, car dealerships and the like sought to obtain patents on their innovative ways of doing business, in 1998, the U.S. patent system was changed so that business methods could be patented.
Despite the enormous possibilities presented by this significant change in U.S. patent law, equally significant difficulties presented themselves with business method patents. Under U.S. patent law, patents may only be awarded to new or novel inventions. A patent examiner in Washington makes this determination by comparing the invention to other, known inventions in the same field.
A patent can be acquired for any sort of document or tangible prototype of an invention. However, due to practical limitations on searching for documents or prototypes, patent examiners have typically searched only for already-issued U.S. patents to evaluate the novelty of an invention.
In other words, if an inventor invented a new mousetrap, the examiner in Washington examining the patent application would compare it to previously patented mousetraps. If a sufficient difference were found, the new mousetrap would be deemed novel and awarded a patent.
Herein lies the problem for business method patents. Prior to 1998, business methods were generally not patentable. Therefore, inventors did not apply for patent applications directed to business method inventions. When the law changed in 1998 and a flood of business method patents was filed in a U.S. Patent and Trademark office, examiners had difficulty finding "prior art" patents of business methods.
Many people believe that patent examiners awarded patents to business methods that were actually not novel and therefore not patentable.
A patent that has been wrongly issued by the U. S. Patent and Trademark Office can be proved invalid. An invalid patent cannot be enforced against an infringer, essentially making it powerless. A party sued for patent infringement can defend itself by proving the patent invalid during litigation.
But patent infringement litigation can be expensive, often costing more than $100,000. Another way to prove a patent invalid is by filing a proceeding the U.S. Patent and Trademark office calls re-examination. In such a case, the person filing for re-examination can set before the patent examiner other nonpatent prior art that he or she believes should have been considered when the patent was approved.
However, even re-examination can cost $10,000 to $20,000, and few people will file unless they have a significant financial interest in doing so.
The financial opportunity afforded by business method patents outweighs the problems associated with them. Most business method patents concern Internet businesses such as Amazon's "one-click" patent on its purchasing system and Priceline.com's patent on a reverse auction.
These companies, as well as others, have concluded that the difficulties of business method patents are justified by the enormous opportunity they represent. Roger Emerson is a shareholder in the intellectual property law firm of Emerson & Associates. He can be reached at email@example.com.
Many companies which have hired nonemployees to develop these vital tools are discovering that their purchase price did not buy the copyrights to the underlying work and they are, therefore, limited in their ability to exploit or even protect the work.
Companies fail to recognize that under the sometimes counterintuitive default principles of copyright law, copyrights in the works for which they paid stayed with the contractor, even though the work itself was paid for and transferred. As a result, these companies may be left scrambling to acquire those rights, sometimes at great cost and potential risk.
So how can you avoid this scenario?
The key is to understand two principles of copyright law. First, copyright ownership flows from authorship. Second, the person who fixes a work into a tangible medium, like paper, film or computer code -- not the person who paid for the work -- is generally deemed the author.
Thus, when you hire an outside contractor to develop your software program or Web site, by default, the contractor is the author, even though you may have paid thousands of dollars for the project and even though it was implicitly understood that the contractor would turn the final product over to you.
By the same token, if your contractor hires a subcontractor, the subcontractor may be the author and owner of the copyrights and you'll be left searching to figure out who has the copyrights.
There are two important exceptions. First, an employer is generally deemed the author over any works created by its employees who are acting within the scope of their employment. Thus, the scenario above relies on the fact that an outside contractor was hired to perform work.
Second, the Copyright Act specifies that copyrights in "works made for hire" belong to the commissioning party (rather than the commissioned contractor) if the parties agree in a signed writing that the work is a "work made for hire."
Unfortunately, the Copyright Act specifies only nine categories of works that constitute works made for hire, and in many cases, the work being developed by your contractor may not fit into one of those.
So what can you do if you must use the services of an outside contractor? The brief answer is to make sure that you have a written agreement signed by you and your contractor and entered into, prior to the commencement of the work, that identifies the work specifically as being a work made for hire.
The agreement should contain a provision requiring the contractor to assign all copyrights in the work to you in the event that the work is found not to fall within one of the statutory categories of works made for hire. Lastly, include a provision obligating the contractor to obtain similar agreements from all subcontractors used on the project.
Where there is doubt on the need to obtain such an agreement from anyone, resolve it in favor of getting an agreement. By taking this preventive measure at the start, you may avoid a larger, more costly pain in the future.
Youve chosen corporate name. You may even have a federal trademark.
But when you apply for a domain name, your companys address on the Internet, you find out that someone already has it. What do you do?
A person who secures a domain name corresponding to a trademark owned by an another may now be guilty of cybersquatting.
On Nov. 29, 1999, the Anticybersquatting Consumer Protection Act was signed into law.
Under this law, a cybersquatter is someone who, with a bad faith intent to profit, uses a domain name that is confusingly similar to anothers trademark.
In determining whether the cybersquatter acted in bad faith, the law suggests nine factors be evaluated:
1. Does the alleged cybersquatter have any trademark rights of his own in the domain name?
2. Does the domain name consist of the legal name of the alleged cybersquatter?
3. Has the person previously used the domain name with the bona fide offering of any goods or services?
4. Is the alleged cybersquatter lawfully parodying the trademark owner or the trademark?
5. Is it the persons intent to divert consumers away from the trademark owners online location to a site accessible under the domain name in a way that is likely to confuse visitors as to the source, sponsorship, affiliation, or endorsement of the site?
6. Has the person offered to sell the domain name to the trademark owner without having an intent to use the domain name in the bona fide offering of any goods or services?
7. Has the alleged cybersquatter provided false contact information when applying for the registration of the domain name?
8. Has the person registered multiple domain names, knowing they are confusingly similar to trademarks of others?
9. Is a trademark used in the domain name registration really functioning as a trademark?
Under the new law, cybersquatters can be made to transfer the infringing domain name to the trademark owner. Cybersquatters are also liable for recovery of profits lost by the trademark owner, damages suffered by the owner and the costs of the lawsuit.
The trademark owner can choose statutory damages in lieu of actual damages. This is often helpful when the alleged cybersquatter hasnt earned significant profits through the misappropriation of the trademark. The amount of the statutory damage is not less than $1,000 and not more than $100,000 per domain name.
The new law also provides several important protections to domain name registrants. A reasonable belief by the alleged cybersquatter that the use of the domain name was lawful is a complete defense to a charge of cybersquatting.
Similarly, a court may impose attorneys fees against the trademark owner if it believes the trademark owner has acted improperly in attempting to obtain the domain name from the alleged cybersquatter.
Roger Emerson is a shareholder in the intellectual property law firm of Emerson & Associates. He can be reached at (330) 535-9999 or by e-mail at firstname.lastname@example.org. He limits his practice to patents, trademarks, copyrights and Internet law.
But that is when a business chooses its trademark. And failing to properly clear and protect the trademark of a fledgling business can be a critical legal mistake.
Consider this scenario: In 1888, Mr. Green starts a dairy business in Akron. He calls the business Green Dairy. Because of limitations on refrigeration and transportation at that time, the business is generally localized, but within that locality, very successful.
By 2001, due to good management and high-quality products and services, Green Dairy has several manufacturing plants and retail outlets dispersed throughout Ohio and Pennsylvania. In the Akron area, the trademark "Green Dairy" had developed considerable goodwill and name recognition. In addition, due to advances in distribution channels and in advertising, Green Dairy now has the opportunity to expand its operation into Indianapolis.
Management decides to apply for a federal trademark, because it now sees the need for nationwide trademark rights. However, when its trademark attorney searched the availability of the trademark "Green Dairy," he discovered another dairy in Phoenix had obtained a federal trademark registration for the mark "Green Dairy" six years earlier. The Akron-based Green Dairy now asks what can be done.
Unfortunately, very little. Because the Akron Green Dairy never sold products in Phoenix, the Phoenix Green Dairy had the right to call its dairy Green Dairy. Further, because the Phoenix Green Dairy owns a federal trademark, it owns trademark rights everywhere the trademark "Green Dairy" had not yet been used at the time the application was filed.
As such, even though Akron Green Dairy had adopted the trademark "Green Dairy" in 1888, because the Phoenix Green Dairy had filed a trademark application in 1995, it owned the trademark everywhere except Akron. If the Akron Green Dairy expanded into Indianapolis, its use of the trademark "Green Dairy" would be an infringement of the trademark rights of the Phoenix Green Dairy.
The Akron Green Dairy was left with a difficult choice. It could either choose not expand its business, or it could choose to adopt a new trademark. In effect, the filing of the federal trademark application by the Phoenix Green Dairy cut off the Akron Green Dairy's ability to expand in new areas under the valuable trademark "Green Dairy."
How can this situation be avoided? By promptly clearing any new trademark through a trademark lawyer. Once the lawyer has rendered an opinion that the mark is available, it should be secured by filing a federal trademark application.
By doing so, the business owner ensures the mark is available for the business as it grows. The process of clearing and protecting a trademark is not expensive, but because trademarks last as long as they continued to be used, federal trademarks grow to become valuable business assets.
Roger Emerson is a shareholder in the intellectual property law firm of Emerson & Skeriotis. He can be reached at email@example.com.
So you want to be the next Bill Gates, but you dont want to be a nerd? You want to make zillions on the Internet, but you dont know the difference between a megabyte and a dog bite?
Now you can. A recent important court decision has helped create a race to the United States Patent and Trademark Office and you dont want to be left behind.
Historically, it was widely believed that under U.S. patent law, an invention required the physical transformation of an object.
Metal was hardened, a tire cornered better, the humidity in a room was controlled, plastic was made more durable, etc. However, in July 1999, a United States court decided State Street Bank & Trust Co. vs. Signature Financial Group, a case involving patent infringement. The important thing to note is that the parties suing over a patent infringement were banks. Since when are bankers inventors?
Since now, or more specifically, since the State Street Bank case, in which the invention was a hub and spoke mutual fund, which permits multiple mutual funds with the same investment objectives to form a legal partnership. Each individual fund is a spoke that invests its individual assets in a common stock portfolio, or hub. This financial and legal structure provides tax benefits, improved efficiencies and reduced and shared expenses.
The Signature Financial Group filed a patent application covering its data processing system used to manage a hub and spoke mutual fund. When a competitor, State Street Bank, heard about Signatures system, it copied it and began using it. Signature sued for patent infringement and won.
The State Street Bank case has become a catalyst; helping to generate a flood of patent applications directed to inventions that historically were not considered patentable subject matter. These patent applications, known as business method patents, seek to protect ways of doing business.
Examples of the type of business methods that are being patented include supplier and customer service methods, procedures for sales, distribution, billing and collections, training, product testing and creation methods, methods of gathering market intelligence, general data management and order processing, and the handling of returned products. Some of the more famous business method patents which have been awarded include the Priceline.com patent and the Amazon.com one click ordering system.
Wherever you work, in whatever field, its important to know about the opportunities presented by business method patents. If you work in a business that has not considered patents, such as one that doesnt manufacture a product, you need to open your mind to business methods patents.
Theyre not just for geeks anymore.
Roger Emerson is a shareholder in the intellectual property law firm of Emerson & Associates. He can be reached at firstname.lastname@example.org.
In these modern days of downsizing and right-sizing, companies are subcontracting many business services. The task of creating Web sites, advertising materials and slogans, photography and brochures are often assigned to nonemployees or subcontractors.
From a business standpoint, hiring subcontractors may be good business. From a copyright law standpoint, it can be disastrous. According to United States copyright law, the thing created (i.e., the Web site, the advertising material, the photograph, etc.) is called "the work" and the person who created the work is "the author." Under the law, the author owns the work. If the person who creates it is an employee who does so in the scope of his or her employment, then the employer is the author"
What about when a company hires a subcontractor to create a Web site? Believe it or not, the company owns that copy of the Web site, but the subcontractor is the author of what it created and the subcontractor owns the copyright in that work.
To own the copyright in a work is actually to own five distinct rights: the right to make copies, the right to distribute the work, the right to perform the work, the right to make derivative works and the right to publicly display the work.
For many business situations, the most important of these is the right to make copies and the right to make derivative works. In the example of Company A hiring a subcontractor to develop a Web site, the company would own one copy of the Web site and the subcontractor would own the copyright in the Web site.
The subcontractor hired by Company A would therefore have the right to make copies. This means the subcontractor could sell the same Web site, or a very similar one, to Company B, Company C, etc. In addition, because the copyright owner has the right to make derivative works (new works related to earlier works), Company A may not be able to update its Web site without the permission of the subcontractor.
In my experience, most companies and most subcontractors aren't aware of this aspect of copyright law. Occasionally, a knowledgeable and opportunistic subcontractor blindsides a less knowledgeable company by enforcing its copyrights against the company.
How can this problem be solved? Proactively, it is easy and inexpensive. Retroactively, it is usually difficult and expensive. Before hiring a subcontractor, prepare a simple written agreement, stating that the copyrights will transfer from the subcontractor to the company. The specific language for the transfer can be provided by an intellectual property attorney familiar with U.S. copyright law. This simple, proactive measure will pay big dividends. Roger Emerson is a shareholder in the intellectual property law firm of Emerson & Associates. He can be reached at email@example.com.
Trade dress law is a first cousin of trademark law. Trade dress refers to features other than the trademark itself which tend to identify the product to consumers.
It can include the appearance and shape of the product, the packaging or the font style or graphical presentation of the trademark, for example, the script used in the Coca-Cola logo. A good definition is the total image of a product, including features such as size, shape, color or color combinations, texture or graphics.
Like a trademark, trade dress is a property right, giving the owner the exclusive right to use it. The purpose of trade dress law is to prevent confusion of the consuming public in the marketplace.
One of the interesting aspects is whether a color or combination of colors used on a product can be protectable via trade dress or trademark law. Many products are identifiable simply by the color of their packaging.
An examples is two popular brands of artificial sweetener. The "pink one" is sold under the trademark Sweet 'N Low, while "the blue one" is sold under the trademark Equal. However, the trademarks for these products are seldom uttered in Starbuck's. Rather, you'll hear, "Pass me one of the blue ones."
The colors pink and blue have become so associated in the minds of coffee drinkers, the trademarks themselves are not as important as the color of the packaging. Another familiar examples is the color red for Coca-Cola cans and the color pink for insulation sold by Owens Corning.
Trade dress can be protected by registering it with the U.S. Patent and Trademark Office. Registration begins with the filing of an application, just as trademarks are registered. The applicant describes its trade dress, usually with reference to colors, and photographs accompany the application.
For example, American Airlines received United States Service Mark Registration No. 2,108,158 in 1997, giving it the exclusive right to use certain color combinations in association with transportation services. The registration reads " ... the colors blue, red and silver ... The word 'American' is ... red. The AA is ... red for the first 'A' and blue for the second 'A.' The scissor eagle design is ... blue. The plane is silver."
By applying for registration of its trade dress, American Airlines has availed itself of the additional legal protection available under the federal trademark laws. Perhaps your company should consider trade dress protection.
No one wants to arrive at the marketplace wearing the same trade dress as someone else. Roger Emerson is a shareholder in the intellectual property law firm of Emerson & Associates. He can be reached at firstname.lastname@example.org.
Entrepreneurs who speak with both invention marketing companies and patent attorneys at legitimate law firms may question why the invention marketing firms appear to be less expensive while offering a broader range of services.
Unfortunately, most invention-marketing firms are a trap for the unwary and the uninformed, making money by playing on the general public’s unfamiliarity with intellectual property law and its terminology. Here are some common misunderstandings used by invention marketing firms to sell their services.
- “We will get you on file with the U.S. Patent and Trademark Office” The inventor hearing this phrase wrongly believes this phrase refers to a US utility patent application, a service for which a patent attorney may charge $5,000 or $6,000. The invention marketing firm may charge only a few hundred dollars to file with the U.S. Patent and Trademark Office.
How? The papers filed by the invention-marketing firm are not a patent application, but rather a disclosure document. A disclosure document is sometimes useful to demonstrate the conception date of the invention, but creates no legal rights for the inventor. The filing fee for filing a disclosure document with the U.S. Patent and Trademark Office is only $10.
- Narrow or few claims Like most things in life, some patents are more valuable than others. Analogizing patents to real property, your patent might be a half-acre undeveloped city lot strewn with broken bottles or it might be a 150-acre horse farm.
Nonetheless, in each case, the inventor receives a patent, just as the land owner receives a deed to the property. The value of the patent depends on the novelty of the invention and the skill of the patent drafter. An invention-marketing firm may actually get a patent for the inventor but the claim will most likely be very narrow and specific to the invention, meaning the patent is easily avoided and not very valuable.
A good patent attorney will write several claims of varying scope and will try to get the broadest claim possible for the client. Of course, such effort requires more time and more effort, and costs more money. But in the end, the client is better served.
- Design patent versus utility patent The word design is commonly used by inventors, such as, “I want to show you my new piston design.” However, in United States patent law, a design patent has a very specific meaning.
A design patent protects ornamental, nonfunctional, nonutilitarian aspects of an invention. A utility patent, on the other hand, protects utilitarian, functional aspects of an invention. It’s hard to imagine how a design patent for a piston in an internal combustion engine would ever be relevant or applicable, since the piston is never visible to the consumer.
Nonetheless, a popular scam used by invention marketing firms is to obtain U.S. design patents on all inventions, instead of a utility patent. Why? Because utility patents are more difficult, time-consuming and costly to obtain. A design patent is very simple to obtain and may take only an hour of legal time.
Some invention marketers charge $3,000 or $4,000 for a design patent and will then compare it favorably to the $5,000 to $6,000 cost of a utility patent requested by a patent attorney.
A search for articles on the subject of invention marketers reveals a near epidemic of fraud and waste promulgated on the American public by invention marketing firms. For further information, please refer to www.ftc.gov/bcp/conline/pubs/services/invent.htm and www.inventorfraud.com and www.uspto.gov/web/offices/com/iip/complaints.htm#licensepromotion. If you need to protect an invention, hire a patent attorney, not an invention marketer.
Roger D. Emerson chairs the Intellectual Property practice group at Brouse McDowell. Reach him at (330) 535-5711 or email@example.com.
You probably chose a name for your business at the start of your venture, but did you confirm that the name is available for your use? Most entrepreneurs don't, but they should.
Few things are more disruptive to a new business than announcing its name and investing in signage, printed materials and advertising, then later having to change that name. This mistake should be avoided at all costs.
But how can this happen if the Ohio secretary of state says your proposed company name is available? Unfortunately, availability does not necessarily mean your adoption of that name won't infringe the trademark rights of another. The same phrase that may be available as a corporate name may not be available as a trademark or service mark under which to conduct your business. Here's why.
* The scope of protection is greater for trademarks than for corporate names. Two corporate names such as "Hamburgers of Akron Inc." and "Akron Hamburgers and More Inc." might be different enough in the mind of the secretary of state to constitute two different corporate names, but if consumers are confused and wrongly assume an affiliation between the two entities, then trademark infringement has occurred.
* A corporate name is often not the company's trademark. A corporate entity may hold itself out to the public under a trademark that is different from its corporate name. The company name is often, but not always, the trademark under which business is done.
Again using the example above, suppose I want to open a business under the corporate name "Emerson Inc." but I want to operate my business as "Emerson Inc. dba Akron Hamburgers and More." The Ohio secretary of state will approve my corporate name, "Emerson Inc.," but the entity "Hamburgers of Akron Inc." will rightly claim that the use of the trademark "Akron Hamburgers and More" will infringe its trademark rights in "Hamburgers of Akron Inc."
* Federal trademarks have effect in Ohio, but generally are not registered with the Ohio secretary of state. Some names are already owned by entities not incorporated in Ohio. Therefore, they won't be found in a search of the Ohio secretary of state's records.
For example, let's say there was a chain of restaurants in Arizona and New Mexico called "A. Hamburger and Moore" and that the phrase "A. Hamburger and Moore" is a registered federal trademark. The federal trademark would have effect in Ohio even if the owner of the mark did not currently have a restaurant in Ohio.
Under this example, it is likely that the use of the name "Akron Hamburgers and More" would constitute an infringement of the federal trademark "A. Hamburger and Moore."
So how can you safely choose a name for your new business? Have an attorney experienced in trademark law conduct a trademark availability search of the proposed corporate name and any other names under which your company might conduct business. The attorney should be able to provide you with a thorough report that indicates whether the proposed names are available.
If they are, adopt and protect them by filing a federal trademark application to ensure that your new entity is free to expand and use the corporate name throughout the United States.
Roger D. Emerson is a partner with the law firm of Brouse McDowell. Reach him at (330) 535-5711 or firstname.lastname@example.org.
Making cars faster, safer and more efficient remains a goal for many.
Breed, who holds numerous patents involving automotive safety, invented his first sensor and electromechanical safety system in 1968 after using his degree in mechanical engineering to develop explosive devices for the U.S. Army. He saw the opportunity to apply the technology of explosives to safety, specifically sensors and air bags to protect automobile occupants during car crashes.
How are air bags and explosives related?
There are several methods for inflating air bags, but in each case, the inflation must take place very, very quickly to protect the occupant from injury. Essentially, a controlled explosion causes the rapid deployment of the air bag.
The process begins with a crash sensor -- an accelerometer -- which detects a potential impact by measuring extreme deceleration. The accelerometer sends a signal, usually electric, to an explosive device, which triggers the nearly instantaneous inflation of the air bag.
While air bags have saved thousands of lives, they have caused injuries and deaths as well. One of the inherent challenges of this technology is avoiding injuries from contact with the air bag or pieces of the air bag compartment. Air bag manufacturers are investigating how to make air bags safer while still retaining their effectiveness.
Breed Technologies Inc. has patented scores of inventive air bags, including an air bag that vents air as it inflates, reducing the risk of secondary injuries by reducing the inflated bag's rigidity. Breed Technologies and other air bag manufacturers continue to develop innovative products for safer travel, exploring such technology as explosive powered seat belts and automatic steering.
As the automotive air bag industry began to grow in importance, Breed Technologies held the patent to the only crash-sensing technology available. Founded by Allen Breed in 1987, Breed Technologies continues to be a leading manufacturer of automotive air bags, and its products are used in more than 400 models of cars. Breed, who died in December 2002, received a number of honors for his work, including National Entrepreneur Of The Year in 1995. He was inducted into the Automotive Hall of Fame in 1999 for his invention of the electromechanical crash sensor.
Thanks to Breed and to the scores of other entrepreneurs whose patented ideas have made the asphalt jungle a little safer for us all. Roger D. Emerson is partner and chair of the Intellectual Property practice group at Brouse McDowell. Reach him at (330) 535-5711 or email@example.com.