So you own the patent, but can you sue to enforce?

The usual rule in a patent infringement/enforcement case is that all owners of the patent being asserted must join in the lawsuit.   However, it is well established by the case law that, if a plaintiff as an exclusive licensee holds all substantial rights in a patent, the title-owner of the patent need not be joined.  See, for example, Morrow v. Microsoft, 499 F.3d 1332 (Fed. Cir. 2007).  In those cases, the exclusive licensee essentially is the de facto owner of the patent and the owner of the patent is holding an empty title with only economic interest (i.e. rights to receive royalty).  Because there is a unity of patent rights, the patent title owner needs not be joined.  But, if he chooses to, the patent title owner can join the suit, until now.

In a recent case, Azure Networks and Tri-County Excelsior v. CSR, et. al (Fed. Cir. 2014), the Federal Circuit holds that the legal owner of the patent has no standing to be a co-plaintiff with the exclusive licensee.  Azure Networks is the exclusive licensee of U.S. Patent No. 7,756,129 and Tri-County Excelsior is the legal title holder of the patent.  The ownership of the patent was transferred by Azure Networks as a gift to Tri-County Excelsior Foundation, a non-profit organization.  Then, Tri-county Excelsior Foundation granted an exclusive license of “all substantial rights” to Azure Networks.  The “all substantial rights” include “the exclusive, worldwide, transferable right to bring enforcement actions, unfettered control over litigation, and exclusive authority to reach settlements and grant sub-licenses.”   Under the licensing agreement, Tri-County “may participate in litigation only at Azure’s sole discretion.” In return for granting the license, Tri-County receives 1/3 of proceeds on the patent. 

Azure Network and Tri-County jointly sued CSR for infringing the patent in the Eastern District of Texas.  The District Court noted that nothing about Azure Network and Tri-County relationship structure indicates that Tri-County has control over any aspect of litigation involving the ’129 patent; rather, it is clear that Azure is holding all the strings.  The District Court concluded that factors such as Azure’s exclusive right to sue, exclusive license, and freedom to sublicense strongly suggest that the license agreement constitutes an effective assignment and therefore Tri-county has no standing in the lawsuit.

Azure and Tri-County appealed.  The question on appeal is whether Tri-County, as the patent owner, has standing as a co-plaintiff.  The Federal Circuit ruled no.  The court agreed with the District Court that, when all substantial rights in the patent are transferred to an exclusive licensee, that entity becomes the effective owner and the license is an effective assignment.  Because Tri-County had transferred substantially all rights to the exclusive licensee Azure, the owner has no standing to join the lawsuit.  The court suggested that the motivation for transferring the patent title and then receiving a license back was largely to ensure that the case venue would remain in the Eastern District of Texas.

So the implication from this case is that, if you would like the title holder of a patent to have standing to join an enforcement suit, a slice of substantive rights other than economic interest should be left to the owner.

Thanks for reading.

Connie

cwan@patentonomy.com

Composition and device inventions are “strict liability” for “public use” bar and infringement

Recently, I had a businessperson telling me that her competitor has a patent on a composition for treating an inflammatory condition.  The claim of the composition is recited as:

“A composition for treating an inflammatory condition X, wherein the composition comprises A, B and C.”

The businessperson’s conclusion is that she can sell the composition as long as she does not tell people to use it for treating the inflammatory condition.  She is wrong.

In a typical composition claim as recited above, the stated “purpose” does not really matter.  The claimed invention is the composition including A, B and C.  Therefore, the above claim basically exclude others from making, using, selling and offering to sell “a composition including A, B and C” regardless of the purpose.  In another word and borrowing a term from the tort law, this is a “strict liability” claim.

The encounter made me think—what about “a public use” of the above composition for treating a different condition? Would such public use trigger the “public use” bar under 35 U.S.C. § 102(b) (2006) (pre-America Invents Act) (current version at 35 U.S.C. § 102(a)(1)(2012))? 

Here is the text of the 35 U.S.C. § 102(a)(1)(2012):

“A person shall be entitled to a patent unless...the claimed invention was … in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention…”

The Federal Circuit’s answer to the above question is yes.  Here is the case on point: Pronova BioPharma Norge AS v. Teva Pharmaceuticals USA, Inc., which is a pending petition before the Supreme Court.  This issue being petitioned is: whether the statutory bar for “public use” of an invention under 35 U.S.C. § 102(b) (2006) (pre-America Invents Act) (current version at 35 U.S.C. § 102(a)(1)(2012)) broadly bars a patent when an innovator company allows any public access to its invention even if the invention is not actually used in public for its intended purpose.

Pronova v. Teva (Fed. Cir. Sept. 12, 2013) is a non-precedential case by the Federal Circuit.  In this non-precedential opinion, the CAFC invalidated claims to Orange Book-listed patents on omega-three fatty acid formulations because Pronova's predecessor in interest had permitted unrestricted use of formulations falling with the scope of the claims.  In this decision, the CAFC confirmed that a public use requires the disclosure of all aspects of the claimed invention in public and without limitations regarding secrecy or use.  The CAFC ruled that the Pronova's predecessor’s submission of samples of the claimed formulation to a research scientist without restriction, along with a disclosure of the compound’s formulation and the scientist’s subsequent confirmatory analytical testing constituted an invalidating public use.  The CAFC rejected Pronova’s argument that the samples had to actually be used for their intended purpose in order to constitute an invalidating public use.  Specifically, the CAFC stated that "[a]n invalidating public use need not be the intended use of the invention disclosed or claimed in the patent as long as the invention is fully disclosed without restriction." 

In another word, for triggering public use bar to patentability, how the claimed invention is used does not matter.  What matters is that the public has the unrestricted access to the claimed invention—it’s a strict liability.

Thanks for reading.

Connie

connie@patentonomy.com

What is a “public use” bar to patentability?

 “Public use” and “on sale” are often the first bars applied to the patentability of a claimed invention.  According to the America Invents Act (AIA) 35 U.S.C. § 102(a)(1),“A person shall be entitled to a patent unless...the claimed invention was … in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention…”  Therefore, if you sell in public or allow the public access to your invention before you filing for the patent protection, the invention is no longer patentable.

The standard for “public use” is well established by the case law.  The "seminal case" regarding “public use” is Egbert v. Lippmann, 104 U.S. 333, 336 (1881) (the corset case, which has been studied by every patent law student), where the Court posed the essential question:  "[w]as the invention's use public in the sense that it was made available to others with no limitation or restriction?"  In Dey, L.P. v. Sunovion Pharm., Inc., 715 F.3d 1351, 1355 (Fed. Cir. 2013), the CAFC reiterated that the standard for public use is where "a completed invention is used in public, without restriction." 

Public use can be negated where there exists disclosure under a confidentiality agreement or "similar expectations of secrecy," Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1379 (Fed. Cir. 2005).  One measure of the extent to which the disclosure is confidential (as opposed to "public") is "the amount of control which the discloser retains over the invention during the uses in question." See, Lough v. Brunswick Corp., 86 F.3d 1113, 1121 (Fed. Cir. 1996) (insufficient control); Eolas Technologies Inc. v. Microsoft Corp., 399 F.3d 1325 (Fed. Cir. 2005) (unrestricted disclosure to employees); Beachcombers, International, Inc. v. Wildewood Creative Products, Inc., 31 F.3d 1154 (Fed. Cir. 1994) (unrestricted disclosure to party-goers); and Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1265–67 (Fed. Cir. 1986) (inventor retained control of puzzle and information).   The "sophistication of those to whom disclosure was made" is also a factor in the extent to which a use is a public use.

Public use can also be negated where some but not all aspects of an invention are disclosed. See, W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540, 1549 (Fed. Cir. 1983) and Janssen Pharmaceutica, N.V. v. Eon Labs Mfg., Inc., 134 F. App'x 425, 431 (Fed. Cir. 2005) (all aspects of the invention must be disclosed). 

Therefore, to protect your invention against “public use” and “on sale” bar, you should only disclose your complete invention to a third party under a confidentiality agreement and don’t start selling or offering to sell or license your invention before filing for the patent protection.

Thanks for reading.

Connie

connie@patentonomy.com

Understanding Bayh-Dole Act: the ownership of an invention funded by government grants

If you’ve ever licensed a technology out of a university, you would know “Bayh-Dole Act.”  The Bayh–Dole Act, 35 U.S.C. §§200-212, titled “Patent Rights in Inventions Made Under Federal Funding Agreements, codified the rules in dealing with intellectual property rights on inventions funded by federal government grants.  The act is implemented by 37 C.F.R. 401 titled “Standard Patent Rights Clauses.”   In essence, Bayh-Dole permits a university, small business, or non-profit institution to elect to pursue ownership of an invention in preference to the government.  The Bayh-Dole Act authorizes the Department of Commerce to create standard patent rights clauses to be included in federal funding agreements with nonprofits, including universities, and small businesses.  The standard patent rights clause is set forth at 37 CFR 401.14(a).  The clause is incorporated into federal funding agreements through a number of contracting instruments, including grants made to universities and contracts (such as SBIR grants) made with for-profit companies.

Under the standard patent rights clause, small businesses and non-profit organizations can retain that title of a subject invention, which is defined as "any invention of the contractor that is conceived or first actually reduced to practice in the performance of work under a funding agreement," by complying with certain formalities if they obtain title by assignment to "subject inventions."  In order to retain the title, the organization must to do the following:

• Include the patent rights clause in any subcontracts;
• Report subject inventions to the sponsoring agency;
• Elect in writing whether or not to retain title;
• Conduct a program of education for employees regarding the importance of timely disclosure; and
• Require certain employees to make a written agreement to protect the government's interest in subject inventions.

In addition, if an organization elects to retain title to a subject invention for which it has obtained assignment, the organization is obligated to do the following:

• Grant to the government a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world;
• File its initial patent application within one year after its election to retain title;
• Notify the government if it will not continue prosecution of an application or will let a patent lapse;
• Convey to the Federal agency, upon written request, title to any subject invention if the organization fails to file, does not continue a prosecution, or will allow a patent to lapse;
• In each patent, include a statement that identifies the contract under which the invention was made and notice of the government's rights in the invention;
• Report on the utilization of subject inventions;
• Require in exclusive licenses to use or sell in the United States that products will be manufactured substantially in the United States; and
• Agree to allow the government to "march in" and require licenses to be granted, or to grant licenses, in certain circumstances, such as if the organization has not taken effective steps to achieve practical application of the invention.

For nonprofit organizations such as universities, these additional requirements apply:

• Assign rights to a subject invention only to an organization having as a primary function the management of inventions, unless approved by the Federal agency
• Share royalties with the inventor
• Use the balance of royalties after expenses for scientific research or education
• Make efforts to attract, and give preference to, small business licensees

However, it’s worth noting that Bayh-Dole Act does not require the small business or nonprofit organizations to obtain ownership of such inventions.  If an organization does not elect to retain title, control of the invention passes to the Federal agency.   The agency may waive its right to take title to the invention, and allow the inventors to retain title to their inventions.

The Bayh-Dole Act has a growing body of case law interpreting the statue.  The most well-known is the case of Stanford v. Roche, decided by the Supreme Court on June 6, 2011.  The case addresses the question whether the Bayh-Dole Act automatically assigns the title of an invention by a researcher at a federally funded lab to the university.  The answer is no. 

Here is the fact of the case: a Stanford employee, who was under obligation to assign inventions to Stanford, spent time at a biotech company to learn a technique, and signed an agreement with that company agreeing to assign inventions to it.  The company was later purchased by Roche.  Stanford filed patents on work the employee did after returning to Stanford, and the company (and later Roche) introduced products based on the work the Stanford employee did at the company.  When Stanford sued Roche for infringing its patents, Roche countered that it had an ownership interest in the patents due to the agreement that the Stanford employee had signed.  Among the arguments Stanford was one that stated that the Bayh–Dole Act gave grant recipients a "right of second refusal" subject to the Government's right of first refusal, based on the following language of the statue: "If a contractor does not elect to retain title to a subject invention in cases subject to this section, the Federal agency may consider and after consultation with the contractor grant requests for retention of rights by the inventor subject to the provisions of this Act and regulations promulgated hereunder."  The Court disagreed holding that title in a patented invention vests first in the inventor, even if the inventor is a researcher at a federally funded lab subject to the Bayh–Dole Act.  The justices affirmed the common understanding of US Constitutional law that inventors automatically own their inventions, and contractual obligations to assign those rights to third parties are secondary.

Needless to say, after Stanford v. Roche, universities across the nation changed their employment contract language from requiring a university employee to “agree to assign” to “hereby assign” any invention done in the university context to the university tech transfer office.

Thanks for reading.
Connie

cwan@patentonomy.com

Software patentability: USPTO preliminary examination instruction in view of Alice v. CLS Bank

The Supreme Court’s June 19^th opinion on Alice v. CLS Bank may be arguably one of the most anticipated patent cases in recent years.  Many have anticipated this case to be a stake for the Supreme Court to put a final say on the software patentability once for all.   Well, it did not happen.  Categorically, software is still patent eligible subject matter.  The impact of the decision will only be felt patent by patent.

Skipping the case history from the district court through the Federal Circuit and ending up in the Supreme Court, the fundamental dispute between the parties in this case is whether Alice’s computerized platform for managing the settlement risk is a patent eligible subject matter under 35 USC 101.  The patent claims are styled as a method for exchanging financial obligations, a computer system configured to carry out the method, and a computer-readable storage medium containing program code for causing a computer to perform the method. The Court determined that Alice’s claims to methods were ineligible because “the claims at issue amount to ‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.”  The claims to computer systems and computer-readable storage media were held ineligible for similar reasons, i.e., that the generically recited computers in the claims add nothing of substance to the underlying abstract idea.

On June 25, 2014, in view of Alice v. CLS Bank, USPTO issued a preliminary examination instruction to the examination Corp. to help guiding the examination of software patent applications.  According to the instruction, an Examiner must carry out a two-part analysis for abstract ideas.  Part 1 involves the determination on whether the claim is directed to an abstract idea including, for example, fundamental economic practices, certain methods of organizing human activities, an idea of itself and mathematical relationships/formulas.  If the Examiner decides that the claim is directed to an abstract idea, the Examiner must then carry out the Part 2 analysis. 

In Part 2 analyses, the Examiner must determine whether any element or combination of elements, in the claim is sufficient to ensure that the clam amounts to significantly more than the abstract idea itself.  The Examiner must consider the claim as a whole by considering all claim elements, both individually and in combination.   The examples of elements qualifying as “significantly more” when recited in a claim with an abstract idea may include, for example, improvement to another technology or technical field, improvement to the functioning of the computer itself and meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment. 

The instruction further states that limitations that are no enough to qualify as “significantly more” include, for example, adding the words “apply it” with an abstract idea, or mere instructions to implement an abstract idea on a computer and requiring no more than a generic computer to perform generic computer functions that were well-understood, routine and conventional activities previously known to the industry.

Under Part 2, if there are no meaningful limitations in the claim that transform the abstract idea into a patent eligible application, the claim should be rejected under 35 USC 101 as being directed to non-statutory subject matter.  If after Part 2 analysis, the Examiner determines that the claim is patent eligible, the Examiner should then proceed to determine the patentability of the claim under 35 USC 101 (utility and double patenting), non-statutory double patenting, 35 USC 112 (indefiniteness, written description and enablement), 35 USC 102 (anticipation) and 35 USC 103 (obviousness).

Happy July 4^th!

Connie

cwan@patentonomy.com

Dolly is not patentable without its mitochondria DNA—the unpatentability of Myriad’s gene and beyond

Last year June 13, the Supreme Court issued a decision in Association of Molecular Pathology v. Myriad Genetics holding that naturally occurring DNA sequences are not patentable. To recap, at the center of the controversy in the Myriad case was Myriad’s so-called gene patents--Myriad’s BRCA1 and BRCA2 genes. The Court ruled that the isolation and identification of naturally occurring DNA sequences was unpatentable and therefore the BRCA1 and BRCA2 genes were ineligible for patent protection because they were products of nature.

A year late, Dolly, the famous cloned sheep, became a casualty of Myriad’s holding.  The case of In re Roslin Institute (Fed. Cir. No. 2013-1407, May 8, 2014) involved an appeal from a Patent Trial and Appeal Board decision rejecting claims to “cloned mammals.”  The Roslin Institute created Dolly the cloned sheep.  The invention using somatic cell nuclear transfer to create clones was described and claimed in U.S. Application No. 09/225,233.  Claims 155-159 and 164 are directed to cloned mammals. Representative claims 155 and 164 recite:

155.  A live-born clone of a pre-existing, nonembryonic, donor mammal, wherein the mammal is selected from cattle, sheep, pigs, and goats.
164.  The clone of any of claims 155-159, wherein the donor mammal is non-foetal.

Citing the Supreme Court's decision in Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013) and the Federal Circuit’s opinion in Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948), the Federal Circuit reiterates that naturally occurring organisms are not patentable."  Responding to Roslin’s argument that, unlike the donor sheep used to create Dolly, clones like Dolly are eligible for protection because they are "the product of human ingenuity" and "not nature's handiwork," the Court states that "Dolly herself is an exact genetic replica of another sheep and does not possess 'markedly different characteristics from any [farm animals] found in nature,'" and thus, "Dolly's genetic identity to her donor parent renders her unpatentable." 

Well, technically, Dolly is not really an exact copy of her donor parent.  In somatic cell nuclear transfer process, the nucleus of a somatic cell is implanted into an enucleated oocyte.  Therefore, the clone has its original donor’s chromosomal genetic materials and the oocyte donor’s mitochondrial DNA.  Also, recent epigenetics research has indicated that environmental factors lead to phenotypic differences, which further distinguish the clones from their donor mammals.  Unfortunately for Roslin, the Court noted that neither the phenotypic differences nor the differences in mitochondrial DNA were claimed.  

The Court made an interesting point on phenotypic differences.  The Court opines that "Roslin acknowledges that any phenotypic differences came about or were produced 'quite independently of any effort of the patentee.'"  Thus, "[such] phenotypic differences do not confer eligibility on their claimed subject matter [because a]ny phenotypic differences between Roslin's donor mammals and its claimed clones are the result of 'environmental factors,' uninfluenced by Roslin's efforts."  In a nutshell, phenotypic difference is a natural phenomenon and therefore will not render a clone patentable.

However, the Court did indicate that “having the same nuclear DNA as the donor mammal may not necessarily result in patent ineligibility in every case.”  It seems that Dolly will have to be claimed as a combination of its chromosomal donor and mitochondria donor in order to be eligible for patenting.

Thanks for reading.

Connie
cwan@patentonomy.com

Make a clean break on patent ownership in a divorce

Here is a story and let me know if it sounds familiar: once upon a time, a man invented a fabulous gadget and obtained a patent on the gadget.  He subsequently started a company making and selling the gadget.  Starting a company was hard—the man worked night and day and traveled extensively to sell his gadgets while his wife stayed at home taking care of the kids and keeping the household running.  They were a hardworking but happy couple.  The company grew into a commercial success while the husband and wife grew apart.  Wife filed for divorce.  It was a bitter fight—the couple bickered about kids’ custody, visitation rights, who gets the house, who gets the cars, who gets how much of the company ownership, who gets the control or lost control of the company and how to split the licensing income from the patent.  The ever-wise divorce court ordered “equitable distribution of marital property,” including the wife receiving 60% of proceeds from the patent and husband receiving 40%.  The husband and wife went their separate ways. 

Now ask yourself—who now owns the patent?  That is the question answered by the Fed. Cir. in its recent ruling in the case of James Taylor v Taylor Made Plastics (Fed. Cir. 2014).

In James Taylor case, the husband is James T., the wife is Mary T., the patent in dispute is U.S. Patent No. 5,806,566 and the company is Taylor Made Plastics, Inc.  The patent, directed to a “storm drainage conduit plug and sealing band,” is essentially an elastic plug that fits into the open end of a storm drainage conduit or sewer pipe. 

Apparently, a few years after the divorce, James T. lost control of the company and the relationship between James T. and the company went sour.  The company continues to sell the devices James T invented and has stopped paying royalty on the patent.  So, James T. filed his infringement lawsuit against the Company.  Mary T., who remained on the good terms with the company that continues to be family run, refused to join and sided with the company. The district court dismissed the case – finding that title to the patent was divided between the two former spouses, James T. and Mary T., and, as a consequence, any infringement lawsuit must be filed by both co-owners acting in concert.  Federal Circuit agreed.

As in most states, assets acquired during a Florida marriage are presumed to be community assets, which are subject to equitable distribution on divorce.  Because James T. obtained his patent during his marriage with Mary T., Mary T. became a co-owner of the patent through Florida community property law.  According to the Federal Circuit, the equitable distribution of the marital property by the divorce court only addressed the equity interest in the patent but did not address the legal title of the patent.  Therefore, the patent remained co-owned by both ex-spouses.

The lesson here is: in a divorce proceeding, both the economic interest and the legal title of a co-owned patent(s) need to be addressed.  An assignment from one spouse to the other would provide a clean break on patent ownership between the parties.  In this case, a simple assignment from Mary T. to James T. would have avoided the dismissal of the case from the get-go. 

Thanks for reading.

Connie

cwan@patentonomy.com

 

Use in Commerce Requirement for a Trademark Registration

Trademark right is a common law right that is obtained by use of a mark in commerce.  The U.S. Patent and Trademark Office ("USPTO") generally requires evidence of such use before a mark can be federally registered.  This blog post aims to help you to understand what constitutes a “use in commerce” of a mark for obtaining and protecting trademark rights.

The Trademark Act now defines "use in commerce" as "the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark."   There are two basic elements in this requirement, “use” and “in commerce”:

1.       Use of a mark

a.       Ordinary course of trade

b.      Not a use made merely to reserve a right in a mark

2.       In commerce

Use of a Mark

“Use of a mark” plainly means using a mark in association with a product/goods or service.  For example, if you are selling cosmetics, use of a mark means the mark is showing on a jar of cream you are selling.  A photo of the jar of cream bearing your mark would be the proof of use that you can send to USPTO with your trademark application. 

What if you just started your business or a new product line and there is no regular sales yet?  "Bona fide use" may include sales made in a good faith effort to develop a business.  For example, you just started your cosmetic business and have made sample jars of creams with your newly designed mark printed on the jar.  You took or shipped these samples to distributors or retailers in order to promote the sale.  Or, you shipped goods to a sales representation who then distribute them as free samples to potential customer.  You are essentially carrying out "bona fide use of a mark in the ordinary course of a good faith effort to establish a trade." Your samples are recognized as “use of the mark” for trademark registration purpose.  For record keeping purpose, you should always record the first date that you used the mark with your product because that would be the “first use” date you put in for your trademark application.  In addition, you should always document your efforts in developing the business including emails for scheduling the meetings with your potential clients, the dates of meetings and photos of sample products bearing your mark.   These evidences could come in handy when the "bona fides" of the early use of the mark is questioned. 

Use in commerce cannot be a use made merely to reserve a right in a mark.  Such uses may include token use or sham use made solely to reserve a right in a mark, or sporadic, casual, or de minimis uses made to keep a trademark registration alive (from being canceled).  Case law is littered with interesting examples of such “clever uses” created to support trademark applications.  Here are a few examples of such use:

·       shipment of six boxes of various paper goods expressly to establish a basis for filing a trademark application and there were no further shipments for some 18 months;

·       a single shipment of one jar of salt from one corporate officer to another for no charge;

·       sale for $2.50 of 12 bank book holders, followed by instructions not to offer them to prospective customers;

·       sale of a few dollars' worth of women's sportswear to a cooperating company which immediately returned the goods to the seller;

·       "sweetheart" shipment of six cans of grapefruit juice to a one-third shareholder of the shipper at no apparent charge;

·       shipment of adhesive fingerprint seals to a personal friend (who was not engaged in any relevant business) to use "as he saw fit"; and

·       Proctor & Gamble's strategy to keep alive scores of "minor brands" by annually shipping fifty cases of each product to normal customers for $2 per case (regardless of the product shipped), but did not monitor what became of the goods at the retail level nor promote awareness of the minor brands either inside or outside of the company. Furthermore, the trademarked products were simply other P&G products that had been relabelled, and if P&G did not produce the product in question, it simply relabelled those of a competitor.

You can file a trademark application based on “actual use” or “a bona fide intent to use” a mark.  However, even if your file with an intent to use, you must use the mark by demonstrating actual use before a registration will be issued.   After obtaining federal registration of your mark and between the fifth and sixth anniversaries of such registration, you must file with the PTO an affidavit that the mark is in use in U.S. commerce (or explain the circumstances justifying non-use).  Otherwise, the registration will be cancelled automatically. Evidence of use must also be filed at every ten year renewal of the registration.

Use in Commerce

“In commerce” includes all commerce that can be regulated by Congress.   This includes interstate commerce, foreign commerce, commerce within the District of Columbia and commerce with Indian tribes.  “Use in commerce” also includes the sale or transportation of goods or services that affect commerce.  For example, services are usually deemed "in commerce" if they are offered to customers who travel across state lines.  Goods are usually deemed to be "in commerce" if they are shipped over state lines by the mark owner's effort to further a sale. Use in commerce may also occur when goods are shipped interstate in furtherance of a potential sale, such as for display at a trade show. However, if a purchaser takes a purchased goods over a state line, it is not regarded as "in commerce."  

Intrastate use of a mark does not count as a “use in commerce.”  This means that, in the above “shipping the sample” scenario, the samples must be shipped across state line.  In addition, purely intra-corporate transactions have been characterized as "secret" or otherwise non-public uses, and cannot support a trademark registration.  For example, if your company has multiple sites in various states, shipping a product from one site to another does not count as “interstate commerce” even if the product technically crossed state line.

In summary, use is the root of a trademark.  Trademark rights and federal registration start and grow from the use. Without use, marks wither and die. Understanding what it means to use a mark is therefore important to ensuring that trademark rights are properly acquired and maintained. 

Thanks for reading.

Connie

cwan@patentonomy.com

Distinguishing trademark strategy from patent strategy

In my experience of advising businessmen on companies’ intellectual property strategy, I noticed an odd phenomenon: business guys often confuse trademark rights with patent rights and hence trademark strategy with patent strategy.  This blog post aims to clarify some basic features of trademark rights and patent rights and the distinction between the two forms of intellectual property.

Trademark rights arise in the United States from use of a mark.  It is a common law right that can only be obtained through the actual use of the mark in commerce.   This common law right relates to the goodwill that the mark has been associated with, meaning that the mark becomes an abstract or psychological symbol representing the quality of a goods or service.

Close your eye and think about that swoosh symbol of Nike—what images come into your mind? My bet is that the swoosh symbol conjures up various images of famous athletics in motion with their muscle toned bodies gleaming with sweats.  How do these images make you feel?  You feel like putting on a pair of Nike shoes and go out running now!  And all these are happening within a split second of you thinking about the swoosh symbol.  That is the power and the value of a famous trademark!  Therefore, in a marketplace, the goodwill of a mark translates to consumer loyalty to a brand, which a famous mark is often able to achieve.

Because a trademark’s value is associated with its use in commerce, the common law right attaches to the mark from the day the mark is used.  You don’t have to file a trademark application with the USPTO to obtain this common law right.  Therefore, you should always take note of the first use of your mark in association with your goods or service in commerce, which is your “priority” date of the ownership of the mark.

In comparison, patent right is a statutory right—it is a monopoly right for a period of time backed by a government’s enforcement power.  In exchange to this monopoly right, you must provide the public with the knowledge of a novel, nonobvious and useful invention in the form of a patent document having enabling description and the best of way of making or practicing the invention at the time of you filing the patent.  Think of it this way—the only reason a property right is attached to a patent is because the government provides you the access to the court system and its enforcement power to exclude others from practicing your patent without your permission.  Otherwise, a patent is just a piece of paper with technical descriptions and a bunch of oddly worded phrases titled “Claims.”

Savvy business guys are often familiar with the term “priority date” and “prior art” in the context of patents.  They often understand that they should file a patent application before public disclosure of an invention (as a public sale or publication).  However, these concepts are not necessarily applicable to the trademark system.  For example, one CEO once told me that he need to file a trademark application as soon as possible because the company was going to release the product soon.  Well, he was confusing the patent system with the trademark system.  Public use of a trademark will never bar your trademark application; however, public use/disclosure of an invention will bar the filing of a patent application 12 months from the first public use/disclosure date.

Another CEO once provided me a list of suggested countries that he wanted the company’s trademark to be filed in.  Several of the suggested countries were raw material supply countries—however, I know that the particular form of the consumer goods will not be sold in these countries.  I asked him why the selection of these countries and was told that he wanted to stop any potential infringer from manufacturing these goods.  When I asked him whether the consumer goods, which would be sold under the trademark, would ever sold in these countries.  The answer was no. 

This CEO is confusing trademark rights with patent rights.  You can prevent a manufacturer from making a patented goods without a patent license.  However, you cannot prevent the same manufacturer from making the goods as long as the manufacturer does not sell the goods under your trademark.  If the goods will never be sold or used in a country, there is really no value in filing a trademark application in the country.

In summary, for trademark strategy, you should always file in countries that the goods would be sold to your target consumers but not more; and for patent strategy, you should file in any country that your goods will be made, transported, distributed, sold, or used.

Thanks for reading.

Connie

cwan@patentonomy.com

Transfer of “All Substantial Rights” in a Patent Licensing Agreement

Transfer of “all substantial rights” in a patent from a patentee/licensor to a licensee is essential for the licensee’s standing to sue an infringer (i.e., right to enforce the patent) in courts.  Despite parties’ intent to transfer “all substantial rights” in a patent license agreement, the actual terms in a licensing agreement are more dispositive on whether the licensee has the “substantial rights” and therefore the standing to enforce/sue.

An analysis of case laws suggests that a court tends to inquire into two fundamental questions in determining whether a licensing agreement has transferred all substantial rights in a patent from a patentee/licensor to a licensee.  Therefore, to ensure the transfer of all substantial rights transferred by a licensing agreement, a licensor should check the effect of each term in the agreement against the two fundamental questions to understand whether any term prevents the transfer of all substantial rights.

Fundamental property rights inquiry

Similar to rights in a personal property, ownership (i.e., substantial rights) to a property (such as a patent) includes the rights to use, exclude others from using, and dispose such property freely.  Therefore, any substantive encumbrance to these rights prevents a transfer of all substantial rights.

Based on this inquiry, in order to transfer all substantial rights, a license agreement must assure that the licensee:

-          -- has the right to make, use, sell, and offer for sale the patented invention.

-         --  has the right to license to others and/or grant sublicenses to others

o   without being subject to the patentee/licensor’s veto rights to the proposed assignments of the exclusive license, especially a veto right in the patentee/licensor’s sole discretion.

-        --  has the exclusive right to assert the patent

o   without joining the patentee/licensor

o   without being subject to or junior to any other party’s right to assert

o   without having to seek consent from the patentee/licensor; veto rights by the patentee/licensor will defeat a transfer of all substantial rights.

o   it is ok that the patentee/licensor share in an insubstantial part of the exclusive licensee’s monetary recovery received from patent infringers.

o   It is ok that the licensee has the duty to keep the patentee/licensor informed and consult with the patentee as to any litigation and settlements.

Public policy inquiry

The policy reason behind the requirement that an exclusive licensee/assignee must have “all substantial rights” in order to have the standing to sue is to avoiding the multiplicity of lawsuits against the same infringer arising from the same act. 

Based on this inquiry, in order to transfer all substantial rights, a license agreement must assure that:

-         --  the patentee/licensor does not divide up the exclusive license by the patent’s claims or the fields of use and that the licensee has the exclusive right to concurrently assert the patent in all domains, whether commercial or non-commercial or otherwise; any division of enforcement rights by fields of use will defeat a transfer of all substantial rights.

-         --  there is preferably no prior licenses to the patent.

-       --  the agreement does not grant the patentee/licensor a reversionary interest in the patent except for bankruptcy or objectively egregious breaches of the agreement; at will termination of the license agreement by the patentee/licensor will prevents a transfer of all substantial rights.

-         -- the license to the underlying patent lasts the remaining term of the patent; an exclusive license with a termination date before the expiration of the patent will prevent a transfer of all substantial rights in the patent.

-         -- it is ok that the patentee/licensor grants to an exclusive licensee all substantial rights in a specific geographic area of the United States; a division by geographic areas is ok.

Thanks for reading.

Connie

cwan@patentonomy.com