Category Archives: Intellectual Property

Patent Joint Ownership Issue

Joint ownership can arise from joint inventorship, such as where two or more individuals directly or indirectly collaborate as inventors. This often times happens unwittingly, as the two inventors may not have worked on the development of the invention together or at the same time. Sometimes, the primary inventor does not realize that the other inventor’s contribution raises that individual to the level of inventor. This is because the inventors do not have to make the same type or amount of contribution and the inventors do not have to contribute to every claim in the patent application.

Ethicon was the exclusive licensee of the “sole” inventor of the patent and Ethicon sued U.S. Surgical for infringement. U.S. Surgical investigated and located a “missing” (ie. unnamed) joint inventor and then proceeded to negotiate a license from him. Ethicon challenged the validity of the license. The courts upheld the validity of the license because the “missing” inventor, as a joint inventor, was a joint owner of the entire patent. Ethicon v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998), cert. denied, 525 U.S. 923 (1998).

The cautionary tale here is that even a one percent contributor to a patent will be a joint owner of the entire patent. An owner of a patent who believes that he has exclusive control of the patent may be sadly mistaken and find himself suddenly competing with another company.

The key for the “sole” inventor is to make sure that all others (ie. employees, etc.) who may work on any aspect of the invention have valid employement agreements or valid joint venture agreements that contain the proper assignment clauses. These agreements must be entered into prior to any work by the employee or contractor.

For the purchaser of a patent, proper due diligence will be key to understanding where the potential risks may arise. Due diligence should include review of agreements with employees or contractors working on the development of the intellectual property. Drafting strong purchase agreements and transaction documents can help protect the purchaser. Effective guarantees, warranties, indemnification and assignment clauses can lessen the financial impact, if something unpleasant occurs following the purchase of the intellectual property.

Expired Patents: Update

On June 10, 2010, the Federal Circuit, in Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. June 10, 2010), affirmed the judgment of the U.S. District Court for the Eastern District of Virginia, which had entered summary judgment in favor of Solo for “false marking” related to Solo’s practice of marking expired patents on its beverage cup lids.

The Federal Circuit held that, under 35 U.S.C. § 292(a), a product embodying an expired patent is indeed an “unpatented article”, but a plaintiff must demonstrate that the defendant intended to deceive the public in order to succeed under § 292. The court stated that a rebuttable presumption is created when a plaintiff shows that the defendant knowingly made false statements.  The defendant may rebut this presumption by showing by a preponderance of the evidence that it did not intend to deceive the public.  The court also noted that the presumption is weaker in cases where the markings are for expired patents that once covered the marked products.  Solo, which had relied on advice of counsel and weighed the high costs of removing the markings, was able to rebut Pequignot’s evidence that it intended to deceive.

In its holding, the court reasoned that Solo acted in good faith by seeking advice of counsel, and that it had been driven by a desire to avoid the high costs and business disruption that retooling would have created.  The court also reasoned that by adding to the “may be covered” language to its products’ packaging, Solo had acted in good faith to provide a truthful representation of the patent coverage for its products.

This decision will put a damper on the false-marking claims.  However, some defendants may not have the same advice-of-counsel excuse.

Do You Have Trade Secrets?

Do you have trade secrets in your business?  If these trade secrets went to a competitor would it hurt your business?

A trade secret gives a business an advantage over its competition.  The secret could be a method, device, business intelligence, or formula that gives a business an advantage over its competition.  By definition a trade secret includes information, including a formula, pattern, compilation, program device, method, technique or process that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable, by other persons who can obtain economic value from its disclosure or use.

Do you really have a trade secret?  Prove it.

Do you actively protect the trade secret?  Do you use non-competition , non-solicitation, and confidentiality agreements?  Do your employees execute such agreements with you?  How about third parties that may have access to the information?

If you don’t, good luck getting a court to see your side of things.  Federal and state laws can help you protect your secrets and help you stop others from using the secrets, but you have to take reasonable efforts to maintain secrecy.  If you don’t treat a “trade secrete” like trade secrets you will not get paid.  Look up MP Medical Inc. v. Wegman.  If you treat “trade secrets” like trade secrets, you will get paid.  Look up H&R Block v. Paramount Tax Services.

Besides the agreements referred to above, a business must have company policies in place that are documented and are actually followed practices.  Practice, practice, practice.  I cannot say it enough.

Expired Patents

Updated:  June 28, 2010. See THIS.  Federal Circuit held that Solo Cup did not have the “intent to deceive the public” required for false marking liability.  The court created a high bar for plaintiffs to overcome and the decision will put a damper on the false-marking claims.  However, some defendants may not have the same advice-of-counsel excuse that Solo Cup was able to rely upon.  The case below is still highly pertinent to businesses with patents.

Recently, hundreds of companies have been sued for false patent marking.  Federal statute creates a cause of action against a manufacturer who, with intent to deceive the public, mark unpatented products as patented. Any person may sue to collect the damages, however, half of the award goes to the Federal Government.  Damage awards may be awarded up to $500 per falsely marked article.

One of the largest of such cases is Pequignot v. Solo Cup Co. where Solo Cup Co. is being sued by a patent attorney claiming the company is misleading consumers by marking its products with expired patent numbers.  To save money on retooling and other costs, Solo Cup had continued to mark its products with patent numbers even though those patents had expired.  Pequignot sought a damage total exceeding $10 trillion based on the $500 per falsely marked article standard.

The judge ruled in Solo Cup’s favor, but the case is on appeal.  What happens on appeal will likely have great ramifications for other manufacturers.  This case is one in a series of recent cases raising false marking claims, and it highlights the potentially high stakes from falsely marking products — the maximum potential damage award against Solo was enormous. However, the court’s decision creates a high bar for plaintiffs seeking to obtain a favorable decision in such cases, at least when the defendant has acted in good faith.

This unusual case raises the question of how businesses can protect themselves from patent-marking bounty hunters.  Since federal law allows individuals to sue for false marking and reap monetary benefits, it is imperative that companies learn how to avoid false-marking liability.

First: Pay attention to the details of your patent.  When does it expire?  Stop marking the product once it does expire.

Second: Take steps to build your market base by developing a strong trademark while you have patent protection.  This will help your market dominance even after your competitors can enter your market and produce “copies” of your product.

Third: Patent your ongoing innovations.  Patent your new and improved changes to your product.  This will give you protections that will extend beyond the length of your original patent protection.

Who is an Inventor? Is it important?

Inventors on a patent should only be ones who provided inventive contribution that will be part of the material later claimed.  It can be very problematic for a company embroiled in a patent contest in court, if an inventor is listed who did not provide inventive input or an  inventor was left out who did provide inventive input.

Someone who helps build a portion of the system, but did not provide inventive input to what is described as inventive material in the patent application, is not an inventor.

Normally, the inventors will assign the patent rights to an invention to the company for which they are working for.  If someone is an inventor that is not an employee of the company then that needs to be handled properly and their assignment should be obtained.  A company should decide whether some incentive should be given to inventors, possibly stock options based on the price of the shares at the time of the invention.

Website Owners have Imunity From Libelous Posters

United States Court of Appeals For the First Circuit, February 23, 2007

In Universal Communication Systems v. Lycos, a company who had allegedly been victimized by defamatory statements on a web site regarding the value of its stock sued Lycos, which operated the web site.  The web site allowed users to post comments with minimal moderation, and no one from Lycos was responsible for the allegedly defamatory statements.

The court stated: “In Section 230 of the Communications Decency Act (CDA), 7 U.S.C. § 230, Congress has granted broad immunity to entities, such as Lycos, that facilitate the speech of others on the internet. Whatever the limits of that immunity, it is clear that Lycos’s activities in this case fall squarely within those that Congress intended to immunize.”  The court observed that allowing website owners to be sued for the statements of commenters on their sites would have an “obvious chilling effect” on speech.  Accordingly, the court dismissed the complaint against Lycos.

A website owner remains liable for its own speech, but the owner will not be held liable for disparaging speech by other posters.