the Costs and Benefits of Patent Protection
By: Andrew Sherman, Esq.
McDermott, Will and Emery
THE COSTS AND BENEFITS OF PATENT PROTECTION
Andrew J. Sherman, McDermott
Will & Emery
technology companies and netpreneurs in today’s services-driven
economy are focusing on the protection and leveraging of their
intangible assets in order to continue their development and succeed
against their competition. This
means that they are devoting greater amounts of time and attention to
building and protecting brands, customer relationships, goodwill,
proprietary formulae, strategic alliances, cross-licensing and
co-branding alliances, and other intangible assets.
Your ability to develop, recognize, protect and exploit these
intangible assets is critical and business model or other types of
patents may be an effective strategy. To do so, however, you first
need to understand the costs and benefits of patent protection.
term “intellectual property” is typically used to refer to the
following kinds of intangible assets:
and Creative Works
Data Bases and Proprietary Information
Secrets and Confidential Information
Know-How and Show-How
Web Site Addresses and Designs (encompassing Trademark, Copyright
and Trade Dress)
A patent grants the inventor the right to exclude others from making,
using, selling or offering to sell the invention throughout the United
States, or from importing the invention into the United States for a
limited period of time. To obtain a patent, the inventor submits an
application with the United States Patent and Trademark Office (known
as the “USPTO”). The application must be submitted within one year
of public use or publication of the invention. There are three
categories of patents available:
which are the most common, are issued to protect new, useful,
non-obvious and adequately specified articles of manufacture, machine
processes, compositions of matter, or any improvements thereto, for a
period of 20 years from the filing date of the application.
Design patents are
issued to protect new, original, ornamental and non-obvious designs
for articles of manufacture for a period of 14 years from the date the
patent is granted.
Plant patents, the
least used, are issue to protect certain new varieties of plants that
have been asexually reproduced for a term of 20 years from the filing
date of the application.
methods of business were deemed patentable in late 1997 by the United
States Circuit Court for the Ninth Circuit. Ruling in the landmark
case of State Street Bank v. Signature Financial Group, Inc.,
the court found that Signature’s patent for its “hub and spoke”
mutual fund management process was valid. With the increased
popularity of the Internet, many ways of doing business in cyberspace
are being viewed as novel and patentable.
Perhaps the best known Internet-related business
model patents recently issued are for Priceline.com’s reverse
auction method and Amazon.com’s “one-click” purchase feature.
Both of these patent owners are aggressively trying to enforce
their patents -- Priceline.com by challenging a similar service
offered by Microsoft; and Amazon.com by challenging
Barnesandnoble.com’s Express Lane online purchasing feature.
With the onslaught of these business model patents, if your
business model is dependent on e-commerce, you must consider the
viability of a business model patent.
These issues include not only the patentability of your
business model, but the possibility that it may infringe on someone
patent application and registration process can last from two to five
years and can be very costly. Because
of this, before attempting to obtain a patent, you should conduct a
cost-benefit analysis to determine if the benefits of being able to
exclude others from making, using or selling the invention outweigh
the significant costs of prosecuting and protecting the patent.
As part of this analysis, you should consider:
the projected commercial value of the invention;
out-of-pocket expenses to obtain the patent, including legal
fees, advertising, marketing and re-tooling costs;
the invention’s proximity to existing patented and
non-patented technology (from an infringement and a commercial
the ability to exploit the invention during the timeframe of
exclusivity granted by a patent;
the market value of the invention two to five years down the
road, after completion of the patent application process; and
the availability of adequate alternatives for protecting the
invention, such as state trade secret laws.
you decide to pursue a patent, before retaining a patent attorney,
make sure that you compile and
maintain careful records relating to the research and testing of
the invention. The records should contain key dates, including the
date the invention was conceived and the date it was reduced to
practice (meaning, the date the invention is well beyond the
conceptual stage, and has either actually been developed and tested,
or is so clearly described in the application that a third party
skilled in the particular art could understand and actually develop
the technology). The records should also demonstrate your diligence in
developing and testing the invention. Make sure the records contain
the corroboration of independent witnesses who are capable of
understanding the nature and scope of the invention and who will
verify the dates mentioned above.
next step is to conduct a
search at the USPTO Public Search Room, located in northern
Virginia, just outside of Washington, DC. An attorney experienced in
this area usually conducts the search.
The search will reveal those patents in your field that have
already been issued and how these patents may affect your
application. The ramifications of any previously-issued patents
should be thoroughly discussed with your advisor and may factor into
your decision to apply for a patent.
prosecution of a patent application is a complex process.
First, the actual application must be compiled.
The application consists of the following distinct parts:
A clear and concise
declaration that you are the original and sole inventor of the
subject matter of the application;
Drawings of the invention
(where application and necessary);
One or more “claims of
exclusivity” (these claims define the actual boundaries of the
exclusive rights you hope to be granted -- if drafted too
narrowly, imitators and competitors may be able to develop
similar technologies and processes without fear of infringement;
if drafted too broadly, you run the risk of rejection by
the USPTO examiner or subsequent challenge to the patent’s
validity by a competitor); and
The appropriate filing fees.
filed, a patent examiner at the USPTO will review the application to
determine the patentability of the invention.
As part of this review, the examiner will determine whether or
not you have met the following statutory requirements:
The invention consists of patentable
subject matter (i.e.,
a process, machine, composition of matter or article of
manufacture, or a new and useful improvements to one of these);
You are the original inventor or discoverer of the subject matter described in
the patent application;
The subject matter is new
or novel (i.e., it is not already known to or used by others, has not been
previously described in a printed publication and is not merely a
new use of an existing product);
The subject matter is useful
and not merely of scientific or philosophical interest; and
The subject matter is non-obvious
to others in that particular trade or industry, as determined in
the broad discretion of the USPTO examiner (i.e.,
the differences between the subject matter of the application and
the current body of knowledge of those skilled in that area are
more than marginal).
order to preserve your rights, and continue to protect your interests,
it is imperative that you institute an aggressive patent protection
program once you obtain your patent.
While the costs of such a program may be high, especially if
you undertake any patent litigation, the
rewards will be worthwhile. Should you successfully pursue an
infringer, you may be entitled to an award of damages (which may be
tripled by the court in extraordinary cases), as well as equitable
relief, such as an injunction or accounting for profits.
patent protection program should include:
The use of proper notices of
the existence of the patent on all
labeling and marketing of the invention;
Ongoing monitoring of new
Policing (and limiting) the
activities of employees, licensees and others who come into
contact with the subject matter of the patent;
Exploiting and saturating the
market created by the patented product; and
Pursuing known or suspected
infringers of the patent.