There’s a lot of opportunity for investors in Cleveland to fund up-and-coming technology companies.
“There’s a growing sense of entrepreneurship and innovation,” says Steve Haynes, managing partner at Glengary LLC. “It has become the norm for colleges, universities, hospitals and other institutions to think about monetizing the technology developed in their facilities. They’re getting research dollars and they’re trying to convert science into something commercial. In addition to institutional technology transfer, incubators, accelerators, etc., are being formed to drive economic development.”
Patrick R. Roche, a partner at Fay Sharpe LLP, adds that there are many companies in the area looking to assist the right companies with capitalization.
“It’s very competitive — there are a lot of deals to be looked at,” he says.
While the market is fertile with both investors and entrepreneurs, Roche and Haynes say there are many things entrepreneurs fail to account for when seeking funding, including the viability and strength of their intellectual property (IP).
Smart Business spoke with Roche and Haynes about what investors look for in entrepreneurs’ IP before a deal can be done.
What does an investor look for in the IP of an entrepreneur seeking funding?
From an investor’s perspective, when an entrepreneur approaches with an idea the investor has to ask, ‘Will this idea have value in the marketplace?’ If yes, then one of the next questions is whether it can be protected, from an IP perspective. Otherwise, releasing it into the public creates a marketplace for anyone who can reproduce it. Then it becomes a marketing game, and early-stage companies don’t have the money to compete with well-capitalized competitors.
From an IP attorney’s perspective, basic due diligence dictates that a business owner or entrepreneur should present to the attorney what he or she thinks is the IP, so it can be analyzed.
It’s important to know when a patent application was filed and whether foreign rights have been preserved. The IP attorney, working on behalf of the investor, will examine in detail what the U.S. Patent and Trademark Office has done with the application and conduct his or her own research to try and predict what the patent office might do with it, called a patentability study. If it’s determined the patent application has little chance of being granted, that will likely kill the deal.
Patent attorneys also are looking at whether the invention can be designed around. Can noninfringing copycat products be created that could hurt the market?
What commonly turns an investor away from a fund applicant?
At an early stage, many of the potential obstacles for investors relate to whether or not there’s IP protection, both legal and otherwise. The strength of that protection is determined by identifying the difference between the applicant’s invention and prior art — the new invention has to be a nonobvious improvement over the state of the art.
Another part of the due diligence analysis is to determine if there’s an obstruction to the right to practice or use the invention freely in the market. It’s dangerous if it’s necessary to get a license from another party to sell a product in order to avoid infringing.
How can entrepreneurs best prepare before pursuing funders?
Entrepreneurs should check their IP ahead of time. Patent applications need to be filed, research should have been conducted, and their novelty and any likely obstructions identified and clearly understood. Investors need to see a thoughtful canvassing of the principal issues that an investor needs cleared. If the efforts of the entrepreneur are consistent with the IP attorney’s findings, and the entrepreneur is honest and truthful with the potential investor, the momentum carries through to a deal.
There’s not much worse than when an entrepreneur says they have a patent and it’s just a provisional application; the person hasn’t done any research and is just hoping everything works out.
It’s understood that every nickel is precious when a company is in the early stages, but it’s important that a company conducts thorough research on its IP before seeking funding. •
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Some mistakenly believe that U.S. patents travel the world with universal protection, but countries work independent of each other when granting patents. That is why, when conducting business internationally, it is important to understand how intellectual property protections are procured in each country.
According to the Paris Convention, a treaty signed by the U.S. and 174 other countries that protects industrial property, a patent granted in one signatory country does not mean it must be granted in another.
“U.S. patents are independent from those granted by foreign countries, so protection is advisable in each market a patented product will be sold,” says John S. Zanghi, a partner at Fay Sharpe LLP.
Smart Business spoke with Zanghi about acquiring international patent protection.
How does the Paris Convention apply?
National treatment and right of priority are two important clauses of the Paris Convention with which businesses should be familiar. National treatment says member countries must grant the same patent protection rights to foreign citizens of other signatory countries as it grants to its own nationals. Nationals from a non-signatory country also are entitled to national treatment so long as they have a ‘real and effective industrial or commercial establishment in a contracting state.’
‘Rights of priority’ refers to the length of time an applicant can take to file a patent for the same invention in two countries. For patents and utility models, an applicant must file additional applications within 12 months. A patent office handles these as if they were filed on the same day as the original application, allowing time to determine the commercial viability of the patented product in additional countries.
An applicant seeking priority based upon an earlier filing is protected from any subsequent disclosures, such as publications, that occurred since the first patent was filed.
Why can’t one international patent application grant protection in all countries?
People have long discussed the idea of a single international patent application, but it’s not available.
Applicants can file using the Patent Cooperation Treaty (PCT), a multilateral agreement administered by the International Bureau of the World Intellectual Property Organization, which allows applicants to file a single application for patent protection in multiple countries. Applicants select the countries or regions where they would like to receive protection. The application is submitted to each office for review, which manages the granting of patent protection individually. Applicants must adhere to the requirements of a particular country and prosecute each patent separately from other countries.
For patent protection in Europe, filing regionally through the European Patent Office (EPO) is an option. The EPO is a collection of 38 European countries that agreed to establish a single procedure for the grant of patents. A European patent gives its proprietor the same rights as would be conferred by a national patent granted in any participating country. Ultimately, if granted, the European patent will grant in the selected European countries. Any infringement is dealt with by national law.
What needs to be done to file a patent in a foreign country?
Obtain legal counsel in each foreign country because each manages its own patent protection. Local counsel has knowledge of local requirements and can assist in filing and prosecuting an application through to the grant of the patent. They also are able to process applications in a timely manner to ensure you don’t miss a filing deadline.
Which patent and patent laws apply if a U.S. business is sued in another country?
Each issuing country manages and maintains patent protection. If someone sues you for infringement outside of the U.S., the laws of that country govern. However, if the country is a Paris Convention signatory, it must grant the same protection to all non-citizens as its own citizens. It is important to understand how the various international treaties and conventions operate, as well as the filing requirements of each country.
Filing a patent is not an insignificant cost, so it is imperative to understand your obligations and risks wherever you conduct business or in countries where significant competitors conduct business. •
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An infringement on your trademark by another entity through its domain name can affect the strength of your brand. In some instances, a company may benefit from stopping an infringer and seeking damages.
“Ultimately, it all comes down to dollars and cents, and whether a business wants to truly invest and strengthen its brand to prevent others from capitalizing on its goodwill,” says Mark J. Masterson, an associate at Fay Sharpe LLP.
Smart Business spoke with Masterson about the intersection of trademarks and URLs, and what protections are available to help prevent costly trademark infringements.
How might a domain name or URL infringe on a trademark?
A trademark owner can enforce trademark rights against a domain name that is likely to create source confusion with the trademark owner’s brand or if a domain name dilutes that trademark. However, in some instances, a domain name registrant would not be prevented from exercising its First Amendment rights by registering a domain name that is similar to the trademark. As such, third parties have a right of fair use as well as the right to parody and satirize others’ trademarks. Regardless, domain name registration does not provide a right to violate trademark law or to engage in cybersquatting.
The U.S. Patent and Trademark office (USPTO) and domain registrars operate separately from one another. Generally, registering a domain name is done on a first-come, first-served basis, with the idea that the registrant has a good faith and a legitimate interest to use the name. On the other hand, the USPTO must examine a trademark application for conformity with federal law and trademark rules prior to formally granting a registration.
What’s the recourse against cybersquatters?
The Anti-cybersquatting Consumer Protection Act provides a private right of action for trademark owners to bring suit in federal court against the holder of a confusingly similar domain name. Additionally, trademark owners may initiate arbitration procedures under the authority of the Internet Corporation of Assigned Names and Numbers (ICANN) to transfer control of a confusingly similar domain name to the trademark owner without having to go to court.
A trademark owner can avoid federal court by filing a grievance through ICANN, following the Uniform Domain Name Dispute Resolution Policy’s procedure for filing complaints. The arbitration process can take as little as three months and is less costly than litigation. However, filing suit in federal court is usually recommended when market share is affected by the infringing use.
How has Internet commerce affected common-law trademark rights?
A URL or domain name registration does not in itself constitute ‘use’ for purposes of acquiring trademark priority. Common law trademark rights are geographic in nature and have caused a bit of judicial confusion with the broad geographic reach of the Internet.
Although some common law trademark rights may exist due to the creation of a website, the strength of these rights is generally dependent upon market penetration, the nature of the business, and the actual geographic reach of the business’s products and services. However, even in situations that appear to be a strong case for granting broad protections to a common law trademark, the courts have raised various questions and developed fact-based tests that can be expensive to prove and tend to favor a registered trademark holder.
Therefore, it is in the best interest of a common law trademark user to register his or her trademark with the USPTO to take advantage of the strongest commercial protection afforded by law.
How can companies ensure their marks are protected in the market and online?
Fundamentally, companies should select a name or logo for their products and services by keeping such variables as domain name and trademark registration in mind. The key is selecting a mark that can become a federally registered trademark with the USPTO and is marketable to a desired consumer. The trademark prosecution process can take up to a year or more, but it is the best way to ensure that trademark rights are protected, online or otherwise.
When selecting a mark, the company should conduct an informal trademark search online or hire a trademark attorney to conduct an in-depth trademark search. Usually, in-depth trademark searches cover USPTO files, state trademark listings and domain name registries, as well as online and other common law uses.
Selecting a domain name should become a priority only after selecting a trademark that can be validly enforceable. Once granted, it is the responsibility of the trademark owner to actively police his or her mark in commerce to prevent unauthorized uses that would otherwise reduce its strength and value. ●
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Patent trolls can be huge, single-minded licensing companies. These nonpracticing entities purchase patents from small inventors who don’t have the desire or funding to create what they’ve patented and threaten potential infringers to get money through licensing fees or lawsuits. Business owners of small and midsize companies can be caught off guard when they receive the letter claiming their product infringes an existing patent, and often don’t know what to do.
“Fighting the alleged infringement usually costs more than the licensing fee the troll is seeking,” says Christian Drago, a patent attorney at Fay Sharpe LLP.
This can make a business owner feel trapped. However, he says patent trolls often cast a wide net, sending letters to companies that may not be infringing. That’s why it’s important to know how to respond.
Smart Business spoke with Drago about how to deal with patent trolls.
Who is most at risk of being the victim of a patent troll?
Generally, infringement claims are a lot more successful when made against small to midsize businesses because they don’t have the capital to fight an infringement suit, so they often opt to pay the license fee.
A patent troll is not going to pick a company out of the clear, blue sky. It will buy a company’s products and reverse engineer them, or scrutinize its marketing collateral for product descriptions. It’s important for companies with patents to be careful what they post on their website. Market your company, but don’t give too much away because you could be giving ammunition to a troll.
If you receive a letter from a nonpracticing entity, what do you do?
First, don’t panic. The entity is soliciting a licensing fee and its track record in litigation is not great. Contact a patent attorney and have him or her review the claim and your product to find out if you’re actually infringing. Don’t use your in-house or general practice attorney; courts want outside independent review.
If it’s discovered that you’re not infringing, get a non-infringement opinion by outside counsel. That can be used to offset damages and show you acted in good faith by procuring the assistance of an attorney.
The attorney will compose a letter that says your company had outside counsel review the claim and determined you are not infringing. Now the troll has to do its cost/benefit analysis and decide whether it wants to pursue this any further. The troll may just move on.
However, if willful infringement is discovered, meaning you continue to infringe after you’re made aware of the infringement, the penalty can be upped by a judge. That’s why it’s important to show you acted on the well-reasoned opinion of counsel as soon as possible.
How can you protect yourself?
If you’re going to file for a patent, you want to file as soon as is practical. Bring an attorney onboard while the product is in development, not when you join the market. Have a patent attorney conduct a patentability search and get a freedom to operate opinion. This gives you the best idea of what patents are out there.
If the attorney finds similar, existing patents, he or she can show them to your engineers, and the engineers can innovate around current designs. This could give you a competitive edge and allow you to go after competitors when they infringe on you. The process also focuses the company on what it’s doing in the market.
If you have to backpedal because you failed to do your due diligence, your R&D costs could double because of scrapping a project and going back to the drawing board.
However, keep in mind patent searches aren’t exhaustive because, at the time of the search, there may be applications that are being reviewed but have not published. Patents issue from three to five years after they’re filed and they’re published 18 months after filing. That leaves a gap.
That’s why, it’s important to take these letters seriously and get counsel involved right away. You need to quickly determine the best course of action based on the facts, not the claims.
Christian Drago is a patent attorney at Fay Sharpe LLP. Reach him at (216) 363-9000 or firstname.lastname@example.org.
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Many companies train employees to enter phrases such as ‘confidential’ or ‘attorney work product’ and copy counsel when sending sensitive emails so that the information is protected under attorney-client privilege. In the event the company becomes embroiled in litigation, counsel would see such phrases and flag the messages as privileged, preventing them from inadvertently being produced to the other side during discovery.
However, while it’s a good idea to include such phrases in messages, it’s not always enough in the court’s eyes to designate it as privileged. Also, a computer’s auto-save feature may have saved versions of an email that didn’t include such phrases, leaving them unprotected. Both of these issues arose during Oracle America, Inc. v. Google, Inc.
“For each email being composed, Google’s system was saving multiple drafts of it. That’s probably something that you wouldn’t want to do,” says Jude A. Fry, a partner with Fay Sharpe LLP. “Then when the company got sued, there were, for this single email, multiple versions, and the only version put on the privileged log was the final one.”
Smart Business spoke with Fry about how companies can ensure privileged information sent through email is protected.
What happened in the Google case?
Oracle claimed Google’s Android smartphone platform infringed its patents, and the two entered into litigation. An email that included language that could be harmful to Google in the patent case was placed on a privileged log, a document describing items that can be withheld from a case under attorney-client privilege.
That internal email was sent to the vice president in charge of the Android smartphone platform at Google, copying Google’s counsel in the ‘to’ field. The email was captioned ‘attorney work product’ and ‘Google confidential.’
While the final version of the email was placed on a privileged log, auto-saves of the email were inadvertently produced to Oracle’s counsel during discovery. Since the auto-saved drafts did not include the phrases ‘attorney work product’ or ‘Google confidential,’ they were not caught by electronic scanning mechanisms.
Google demanded that Oracle return the emails under the clawback provision of the protective order, claiming the emails were privileged. Oracle returned the emails but filed a motion to compel their production. The district court ordered that the emails be reproduced.
How were the auto-saved drafts of the email not coded as privileged?
When doing the search, counsel was likely using key words to see what was coded as privileged. There were probably thousands of emails produced. Counsel was able to locate the final email because, by that point, the author had put the phrase ‘attorney work product’ in the email’s body and added the attorney as one of the recipients. However, in other auto-save versions those phrases weren’t included, so they didn’t get flagged.
What’s disturbing is that the system saved nine versions during the time it took to type it up. Why is it necessary to save all of those versions?
Consider only saving emails that are sent, and configure your email system to delete all other versions. Also, understand how your email system works — whether auto-drafts are saved, what happens to these drafts, where they’re stored. Figure this out now and not when a case is pending.
How should a corporate employee set up an email to make sure it is privileged?
Train your employees to direct the email to legal counsel in the ‘to’ field and salutation. State in the email that information is being given to or sought from the lawyer so that he or she can give legal advice. Also, include in the message that it is being prepared in anticipation of litigation, at the direction of an attorney, to further the provision of legal advice. Include headings such as ‘attorney work product,’ ‘privileged’ and ‘confidential.’ However, these headings alone will not make an email privileged, so limit the substance of the email to the legal issues.
People write a lot of emails but often don’t think about someone other than the intended recipient reading it. When doing business though email, consider who could possibly read the message and approach it accordingly. It’s a good practice to think carefully before you put something in writing.
Jude A. Fry is a partner at Fay Sharpe LLP. Reach her at (216) 363-9113 or email@example.com.
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Competitive intelligence aims to provide as much insight as possible into the trends of an industry and into the strengths, weaknesses and current activities of direct competitors. Such programs can be as simple as monitoring the intellectual property (IP) filings within the U.S. of a single competitor, or as sophisticated as gathering and analyzing IP information for many competitors in different countries throughout the world. Either way, there is business value in establishing and maintaining a competitive intelligence program to understand how competitors are behaving through their IP habits.
Smart Business spoke with Matthew P. Dugan, a partner at Fay Sharpe LLP, about competitive intelligence programs.
What is competitive intelligence?
The term refers to a program to develop and maintain a body of data and information that can be organized and analyzed to provide a better understanding of one or more aspects of a company's business environment. The analysis can provide a broad, high-level view of an industry by identifying trends in a particular area of technology. It also can give a focused view of the activities of a particular competitor or group of competitors. Often, the strategy includes both.
What types of information are included?
Information described in patents and published patent applications often form the backbone of the program. While records from the U.S. Patent and Trademark Office are easily accessible and can provide valuable data for a competitive intelligence program, in some cases other sources may provide access to information on a shorter time frame. For example, companies with foreign competitors should consider searching for patent applications in the competitor’s home country, since patent filings are often made and published there before a corresponding U.S. application is available for review.
Is just the technical information of the patent documents evaluated?
No. Often, useful information can be ascertained from what patents and patent applications a competitor decides not to aggressively pursue. So, once a potentially relevant patent application is identified, the application’s progress can be monitored to try to determine whether the competitor is moving away from that technology. With such an assessment, it can be helpful to ask:
- Has the competitor continued to pursue its initial patent applications for a new concept? Or, did the initial applications go abandoned without further activity?
- Did the competitor file just a single application for this new concept? Or, did it file a whole family of applications that cover a variety of aspects and variations of the concept?
- Did the competitor pursue patent protection in a very limited number of countries? Or, did it go to the expense of filing the application all over the world?
What other information can be included in a competitive intelligence program?
News and announcements, regulatory filings and even domain name registrations can add to the overall effectiveness of a program.
Useful insight can be gained from the trademark and service mark applications filed by a competitor. They are normally available within days or weeks of being filed, so a company can be alerted to the possibility of activity by a competitor much earlier than by monitoring patents alone.
Also, in cases of new products and product lines, trademark applications are often filed in the U.S. based on an intention to use the trademark or service mark with a particular list of goods or services. Such information can be useful in determining that a competitor is working toward offering an updated product or expanded product line.
Why should a company undertake this?
Insight gathered through a competitive intelligence program can help business leaders make more informed decisions about a company’s strategic direction and where to focus marketing and product development resources. It can help identify trends in the evolution of existing technologies, which can impact existing product lines; find developing technologies near core businesses, which could lead to new products and business opportunities; and identify new or emerging players in the industry, which can help in preparing for new competitive threats and eliminate surprises.
Matthew P. Dugan is a partner at Fay Sharpe LLP. Reach him at (216) 363-9167 or firstname.lastname@example.org.
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Companies have information that gives each of them a competitive advantage over competitors. Patenting this information is sometimes legally impossible or disadvantageous — patents expire, leaving vitally important information publically exposed.
Some companies choose to treat the information as a trade secret because such a designation can offer legal leverage in certain situations. And unlike a patent, a trade secret can last forever.
A patent expires 20 years from its effective date of filing, and that previously protected invention enters the public domain. With a patent, you’re disclosing how to make and practice an invention in exchange for 20 years of exclusive rights to do so,” says Daniel R. Ling, an associate with Fay Sharpe LLP.
He says many companies, especially smaller ones, don’t often consider the role of trade secrets, but in certain instances companies could be well served by recognizing and protecting such valuable information. But there’s one catch: “You have to take reasonable steps to maintain it as a secret.”
Smart Business spoke with Ling about identifying and protecting trade secrets.
What are some examples of information that could be a trade secret?
Customer and supplier lists, the arrangement of equipment in a factory and certain manufacturing processes are examples of valuable proprietary information that may not rise to the level of something that can be patented. Often, it comes down to that which makes your product better than that of your competitors but can’t be patented because it doesn’t meet the basic legal standards, which are that the invention is new, not obvious, useful and eligible to be patented.
How long does trade secret protection last?
Trade secrets last indefinitely, as long as the information is maintained confidential and the holder of the trade secret continues to take reasonable precautions against disclosure.
How are trade secrets best protected?
There are many methods of protecting sensitive information. If it’s a process that involves multiple steps, a company could isolate the responsibility for each of those steps across multiple locations so the entire process isn’t carried out in one place and a single person isn’t privy to the entire production.
It’s also fairly common to include confidentiality agreements and nondisclosure clauses in employment contracts for not only employees who might be aware of a trade secret in its entirety, but also for employees who may have only some knowledge of the process. Companies with such sensitive information should work with a business attorney to put together those agreements.
What can be done if a trade secret is leaked?
If the trade secret was misappropriated — obtained illegally or otherwise improperly disclosed — there are steps that can be taken to prosecute the perpetrator. The Uniform Trade Secrets Act, the general framework of which has been enacted by 46 U.S. states, offers remedies when a trade secret is acquired through improper means or through a breach of confidence. This can provide some relief to a trade secret holder in the form of injunctive relief (e.g., stopping the use of a misappropriated trade secret), monetary damages and/or attorney’s fees.
However, if the information is developed independently or introduced to the public lawfully, nothing can be done. Further, if the secret that was being held is a patentable idea, another company or individual could secure the rights to it and bar others from acting on it. That’s why it’s important to carefully consider what you hold as a trade secret; if it can be easily reverse engineered it’s not right for trade secret protection.
Regardless of whether the secret got out legally or illegally, once it’s widely disclosed the remedies under the law might not be sufficient to make a company whole again — once it’s out, it’s out. The trade secret holder ultimately has an obligation to take reasonable protective measures to guard its secrets.
Daniel R. Ling is an associate at Fay Sharpe LLP. Reach him at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
More content is being published exclusively through the Web, which means those seeking to either obtain a patent or attack the validity of a third-party patent need to exercise greater diligence when conducting a patentability or validity search.
“It’s important that the scope of prior art searches, whether used for preparing patent applications or defending infringement accusations, consider Web-based information,” says Mandy B. Willis, an associate at Fay Sharpe LLP.
“Companies need to be more aware of online postings by searching websites when conducting patentability and freedom-to-operate searches,” she says.
Smart Business spoke with Willis about the Web’s impact on prior art and how to apply diligence in this new publishing environment.
How can a solely Web-based reference qualify as a prior art printed publication under the patent laws?
In the past, many companies looked just at patents, patent publications and printed articles when conducting prior art searches. But the court in a recent case, Voter Verified, Inc. vs. Premier Election Solutions, Inc., provided guidance on how to determine whether a solely Web-based reference qualifies as a prior art ‘printed publication.’ The court created a three-part test to make this determination.
What is the test for determining whether an online article qualifies as a printed public document?
The first prong of the three-part test is public awareness. This prong is used to determine if the relevant public is aware of the website which contains the article. And, ‘relevant public’ means persons interested in the technology in question.
The second prong of the test is, having found the website, whether the article can be found by a person exercising reasonable diligence. In one example, this prong can be met if search tools on the website are sufficient to retrieve the article in response to a query using search terms that relate to the subject matter of the article.
And, the third prong is whether the article was accessible to the public before the effective filing date of the patent and/or application in question. This prong is met if the website was undisputedly open to any Internet user by the critical date. A showing of accessibility can be supported if all submissions on the website are treated by the community as public disclosures or if users can freely and easily copy the website content.
To pass the test, all three prongs must be met.
Is evidence of indexing a prerequisite to establishing that an online reference is a printed publication?
The key inquiry regarding whether a solely Web-based reference can be prior art is if the reference is or was sufficiently accessible to the public exercising reasonable diligence. However, it’s not necessary to provide any evidence of how the public located the website or article; the reference just has to have been discovered.
Indexing allows the interested public to locate an article on a website and can be a relevant factor in proving accessibility, but it’s not an absolute prerequisite. Accessibility is based on a host of facts and circumstances surrounding a reference’s disclosure.
Must the disclosure in the online reference be identical to the claims in a patent application or an issued patent to qualify as prior art?
No. Under section 103 of the patent laws, the disclosure in an online reference must only make the method or system of the claim obvious, either alone or when combined with another reference, to one of ordinary skill in the art. It does not have to be identical to the language in a patent application, just similar.
What can a company do to protect its patents from being invalidated or itself from being accused of infringement?
In the event that a patent holder accuses you of infringement, you can try to invalidate that patent with a prior art, which could be a Web-based article. Therefore, document your search strategy and the search terms you use to find the reference to support a showing that the prongs can be met.
If you are building a patent portfolio and/or applying for a patent, expand your patentability search to online publications. If you’re aware of postings that can be cited against your claims during prosecution, you can craft stronger claims earlier in the patent process, which can save you time and money.
Mandy B. Willis is an associate at Fay Sharpe LLP. Reach her at (216) 363-9000 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
Trademarking a color has become more common — UPS and brown, Target and red, John Deere and green and yellow.
However, Sandra M. Koenig, a partner at Fay Sharpe LLP, says it’s important to remember that trademarking a color isn’t limited to big companies, especially if you have a specific audience and can show the color is distinctive in a smaller segment of the industry.
Smart Business spoke with Koenig about trademarking colors and the law surrounding it.
What can be a trademark other than a word or logo?
Some nontraditional trademarks can be an overall appearance or trade dress, such as color, product shape, scent and sound. When trademarking color, it can be a combination of colors applied to products, packaging or something that represents a service, as well as just one color, called color per se. Consumers should be able to easily associate color with a product or service, or its source. You might be asked to prove the connection, perhaps with surveys.
What does it take to make a color a trademark?
There are certain criteria to get a color registered. It cannot be a color required in an area or acting as an industry standard, such as green’s association with the environment (for an environmental product). The color needs to be used consistently, but your use shouldn’t limit competitors. If it’s the cheapest color to use when manufacturing a product, you can’t keep it for yourself. The color should be unexpected and not related to its function.
Some companies get color or product configuration trademarks as a way to extend protection to something no longer covered by a patent, or never covered. Trademarks last forever, as long as you keep using and renewing them, while patents are good for 20 years from the day of filing and design patents last 14 years. Therefore, when a patent runs out, trademarking the color or shape is a way to keep a unique look under protection.
The registration process can take years, especially if it’s a single color or there are appeals. Last year, in one noteworthy case, Louboutin v. Yves Saint Laurent, a federal appeals court limited Christian Louboutin’s color trademark to shoes with a lacquered red sole and contrasting upper. However, once you have a registration for your color, you’ve got national prima facie exclusive rights.
Is it easy to prove you have a trademark in a color?
It depends on your field and with what the color is associated. Areas where products are supposed to have color, such as fashion or paint, are difficult. It’s also sometimes harder to trademark a product going to general consumers. A logo with a color like the yellow Shell gas station logo is fairly straightforward, a combination of colors absent shape or configuration is more difficult, and one color without limitation to shape or configuration is hardest to prove.
Another consideration is whether you’re registering a particular shade by the pantone number, a range of pantone numbers or a color without limitation to shade. Like with traditional trademark infringement, it comes down to the likelihood of confusion. If you registered the color orange per se and somebody has peach, is that confusingly similar? If you did a pantone range of a yellow, how far outside of that range is confusing?
If you want to protect the color of your product, how can you establish rights in order to register it?
Be proactive and consistent. Don’t dilute the color by offering the same product in an array of colors. If you want to be the supplier of a magenta-colored product, don’t sell the same product in purple, green, yellow and gray.
Promote it in advertising, including saying the color word. Use ‘look for’ advertising, like ‘look for the color red on your grocer’s shelves’ or ‘we’re the green people.’ It helps if your company colors are the same as the product you’re trying to protect. You also can tie the color with something relevant like Owens Corning did with the Pink Panther and its pink insulation. Anything to drive home the association with the color and you and your product.
Sandra M. Koenig is a partner at Fay Sharpe LLP. Reach her at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP.
Challenging a patent is a strategic decision made by a individual or business and can be done for a number of reasons and at various stages of the patent process — such as during the patent “pending” phase or after the patent has been granted and issued. However, challenging a patent before or after granting is expensive and could have some pitfalls, such as potentially making the challenged patent more resilient to validity assertions if a challenge fails.
Smart Business spoke with James Scarbrough, a partner with Fay Sharpe, LLP, as well as law clerks Matt Burkett and Erik Keister, about strategies for challenging patents and when it’s appropriate to do so.
Why would someone challenge a patent?
There are several reasons to challenge a patent. For example, someone can challenge a patent if they think that the person(s) that obtained the patent stole or copied the invention from them. Another reason to challenge a patent is if there is a concern that a product or process may infringe one or more claims of the patent. Also, if a person has been accused of infringing a patent, and the person wishes to prevent or end a lawsuit or encourage a patent license agreement, the person may then challenge the patent. A patent or pending patent application can be challenged through the U.S. Patent and Trademark Office (PTO) as an alternative to court litigation.
How does a patent challenge work?
One type of challenge can be made after a patent application is filed but before a patent is granted or issued. This particular challenge is called a pre-issuance submission. Documents that can be considered prior art, such as another patent, a published patent application, or any other printed publication of potential relevance can be submitted to the Patent Office. The person submitting the prior art must also provide a concise description of relevance of each document. The submission must occur before a notice of allowance is mailed or the later of two events: (a) six months after the application is published, and (b) a mailing of a first Patent Office Action in which one or more claims are rejected.
The entity whose patent application is being challenged can submit a response to the challenge, but is not required to unless requested by the Patent Office.
Another type of challenge proceeding is called a derivation proceeding. In a derivation proceeding a person may challenge a patent or pending patent application if they think that an inventor in an earlier filed patent application derived the claimed invention from an inventor of their patent application. Any such petition may be filed only within the one-year period beginning on the date of the first publication of a claim to an invention that is the same or substantially the same as the earlier application's claim to the invention.
A third type of challenge is called a Patent Post-Grant Review. A Post-Grant Review is performed once a patent is issued and must be done within the first nine months of the grant date of the patent. A patent owner is given three months to respond after the review request before the Patent Office decides to proceed forward with the review. The patent owner has one opportunity to file a response or amend claims. The challenge can be based on several factors within patent law, such as patentability, anticipation, obviousness, or indefiniteness.
What happens if you win a challenge? And, if you lose?
Winning a challenge could result in the patent being invalidated and any products or processes thought to infringe the patent claims can then be freely produced without threat of a lawsuit or legal action with regard to the challenged patent. A successful outcome might also result in the patent claim scope being limited such that a competitive product can be manufactured or sold without concern of infringement. Winning the challenge could also stop a lawsuit from being filed or a pending lawsuit that has been filed against the challenger. If a challenge is lost, i.e., the patent or patent application survives the challenge, the challenger could potentially be found liable for infringement in a pending or subsequently filed lawsuit. Additionally, a patent that survives a challenge may become stronger in that it has survived a review against additional prior art.
What’s the difference between challenging a patent before or after it has been granted?
When challenging a patent application before a patent is issued via pre-issuance submission, the challenger submits prior art and then is not involved in the process after that point. A pre-issuance submission can be made by anyone before a patent is granted.
When challenging a patent after grant, it depends on the timing whether it is before or after nine months since the patent had been granted. A Post-Grant Review can be performed if it is less than nine months after grant of a patent. A Post-Grant Review is advantageous in that the patent can be invalidated on more grounds and there is a lower burden of proof. Which challenge is appropriate depends on the timing of the challenge, the basis for the challenge and the person or entities making the challenge.
What costs might a company incur by challenging a patent?
Fees for the different types of challenges vary, and can range from $180 for every 10 documents submitted in a pre-issue prior art submission, to $60,000, which is the estimated cost of preparing a petition for derivation. And those figures may not take into all costs incurred, such as attorney fees. Ultimately, a company has to do a cost/benefit analysis to determine whether it’s worth spending the money to file a challenge, weighing the risks of not filing and possibly being exposed to liability.
James E. Scarbrough is a partner with Fay Sharpe, LLP. Reach him at (216) 363-9141 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Fay Sharpe, LLP.