There are three types of patents available in the United States: utility patents, plant patents, and design patents. Each type of patent addresses different types of inventions. What does a design patent cover?
A design patent covers a new, original ornamental design for an article of manufacture. (35 U.S.C. § 171). Put another way, a design patent protects the overall visual appearance of a useful article. This can involve surface ornamentation applied to or embedded in the article, the shape of the article itself, or combinations of such things.
Front Page of Albert Einstein’s U.S. Design Patent No. D101,756 (left) and Front Page of U.S. Design Patent No. D168,677 assigned to Apple, Inc. (right); see also, e.g., Thomas Rinaldi, Patented: 1,000 Design Patents (2021)
It is important to note what design patents do not cover. They do not protect designs in the abstract that are unconnected to an article of manufacture. An original artistic painting is copyrightable but cannot be the subject of a design patent because there is no article of manufacture present. Also, design patents do not cover useful features as such, only ornamentation. Useful aspects are properly addressed only in utility patents. Anything with an appearance entirely dictated by function lacks ornamentality. However, a design patent must relate to a useful article and aspects of the claimed design can be useful, so long as there is visual ornamentation that—as a whole—goes beyond the purely functional aspects.
In many other countries, designs are not covered by patent law but rather “industrial designs” are registered as a different type of intellectual property (IP). Other countries sometimes administer industrial design registrations in a manner adjacent to or related to trademarks.
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
Businesses usually assign primary responsibility for patents and patenting of the company’s new inventions to a particular person or department. But who should have that responsibility? There is really no right or wrong answer. Different companies handle this differently. Though there are some things to consider that may suggest the best way to assign responsibility for patents.
If a company is active enough with patents, it may have a dedicated intellectual property (IP) department or group with in-house patent attorneys taking primary responsibility. However, the question dealt with here is really how to assign responsibility for patents in the absence of dedicated in-house IP staff.
There is a Range of Possibilities
First off, let us take a brief look at the possibilities. Responsibility for patents could be given to any of the following departments that exist in many companies:
Engineering/Research & Development (R&D)
Legal (including an IP group within legal)
Finance/Accounting
Sales & Marketing
Responsibility can also be assigned to individual people in a company, often an executive, officer, or in-house counsel. These people might be the heads of the departments listed above. In smaller businesses, we could add to that list the CEO, president, general manager, or a member-owner of a limited liability company (LLC).
Assigning primary responsibility does not mean other departments are excluded from patent decision-making. And sometimes budgetary allocations for patents might be split between different departments, such as allocating some or all patent-related fees to engineering/R&D’s budget while a legal department maintains responsibility for overseeing day-to-day patenting activities. Inter-departmental committees can also be formed.
Key Considerations
The ideal way to look at where primary responsibility for patenting should be placed within a company is to look at what will best achieve the company’s overall objectives and goals. Those will not always be the same. For some companies, filing as many patents as possible is the goal. For others, minimizing overhead and cost-cutting is more important than patents. There are endless possibilities. Though in many situations, the company’s goals will not explicitly address how patents fit into the picture. Figuring out how patents might advance larger company goals is usually part of those very responsibilities. But there are a few recurring issues that may influence who should have primary responsibility for patents.
First, consider typical patent expenses as a proportion of a company’s overall budget, and the anticipated volume of patent activity. In small companies, the cost of seeking even a single patent may be substantial compared to other expenses, whereas in a large multinational company any individual patent has an insignificant impact on a company-wide budget. This tends to affect how (and how much) responsibility is delegated. The volume of patenting is also important. This is both a matter of the cumulative budget needed for patent activities but also the likely workload that supervision of a patent portfolio presents to the responsible person or department.
Intra-company rivalries may influence assignment of patent responsibilities. Different departments may compete against each other for resources and budget allocations. Responsibility for patenting might be seen as a way to exert control over certain budgetary issues. This has the potential to produce dysfunctional situations. One department with responsibility may try to under-utilize patenting in order to effectively (if somewhat surreptitiously) re-allocate budget resources elsewhere. Is that in line with company-wide goals? Consider the possibility and likelihood of this occurring when assigning these responsibilities.
Another important consideration is bandwidth. It makes little sense to assign patent responsibilities to a person or department with no time or capacity. This responsibility shouldn’t be like an unfunded mandate. Inaction due to lack of time is also a recipe for loss of patent rights. And yet, bandwidth concerns should, in theory, be temporary ones. In the long term, other considerations should take precedence. A company should eventually address bandwidth limitations through hiring or other organizational changes to allow the best-situated person or department the time and resources to meaningfully execute the company’s goals around patenting.
Individual temperament can be a significant factor. For example, an individual with a strong anti-patent bias may not be the ideal choice to lead a program intended to obtain the maximum number of patents. More generally, some people may not understand patents or legal issues well. This is often an is/ought problem. Some people act based on how they think the legal system—and patent examination in particular—ought to work, rather than based on how it actually operates. For instance, some engineers struggle with the ambiguities inherent to patent law and legal issues in general, and can get frustrated with legal matters that depart from the sort of scientific and engineering precision they expect elsewhere. As another example, some business people have ideas about legal definitions of what constitutes “prior art” or “obviousness” that are simply contrary to existing law. And on top of all that, some people simply lack the objectivity needed to oversee patent matters effectively.
Having a firewall between supervisors of patent matters and named inventors can be worthwhile. Particularly where bonuses are paid to inventors, conflicts of interest can arise when named inventors oversee their own patent applications. The main issue is that persons supervising patent applications sometimes show more interest in their personal bonuses than company goals. For instance, they may pursue futile or worthless patents or questionably name themself as an inventor simply to personally obtain a patent- or invention disclosure-related bonus. Having a policy in place that prohibits self-supervision of patent matters might be helpful, especially in larger organizations. Though, on the other hand, self-dealing is not always a problem, and in the absence of inventor bonuses this may be a minor concern.
What Is Most Common and Why?
Most commonly, responsibility for patents is assigned to (a) a legal department, (b) an engineering/research & development department, or (c) a patent committee specially formed to handle patent issues. Some combination of these possibilities is also common. In small companies where there are no “departments” as such, having the CEO or other high-level executive take responsibility is typical.
Because patents have a legal character, and often require working with an outside patent attorney specially licensed to practice patent law, it is very common to have an in-house legal department have responsibility. This way you have in-house lawyer(s) talking to outside patent lawyer(s). In-house counsel will understand legal concepts and may already be managing relationships with other outside attorneys. Also, having in-house legal departments involved can help funnel patent-related expenses through existing legal billing and expense tracking systems that the legal department may already be using in other contexts.
Because patents involve inventions with a technical or scientific character, it is also very common to place primary responsibility with an engineering or R&D department. Inventions typically arise out of that department anyway. So it often makes sense to have that department’s personnel closely involved. For similar reasons, engineering/R&D personnel might also have the greatest interest in patents and the technology involved. In this sense they are more likely to see this responsibility as an interesting opportunity rather than an unpleasant chore. Inventors also often take pride in their inventions, so they and their immediate co-workers are usually motivated to see them protected by patents.
Lastly, having some kind of specially-created patent committee involved is another common approach. This committee might have only partial responsibility, such as responsibility for reviewing invention disclosures and determining whether or not to proceed with patenting or to manage patent portfolio maintenance and annuity payments. An advantage of these committees is that they can allow for cross-disciplinary teams that encompass personnel from multiple departments. These committees can be a great way for companies to help keep everyone in alignment. These committees can also help alleviate concerns that an engineering/R&D department will be overly eager to patent everything and anything. Though such committees really only make sense when a company is of a certain size.
Less Common Approaches
Various companies have assigned responsibility for patents to nearly every possible department or person. Not all companies are organized the same, and their resources and ongoing business activities might suggest different approaches. Not every company has an in-house legal department, for instance. Though a common reason for assigning responsibility outside of a legal or engineering/R&D department is simply bandwidth and capacity to take on the responsibility.
Sometimes patents are overseen by finance/accounting. The reasoning sometimes goes that patents are an overhead expense, so finance should keep those in check. Another more subtle reason is that finance often understands revenue sources and therefore might represent a relatively neutral arbiter of what sort of patenting expenses make sense for the business. On the other hand, finance personnel may not grasp the technology involved in patents as well as others, or simply may not have much interest in patents.
Other times marketing or sales oversees patents. This might make sense if a company is heavily involved with trademarks and only occasionally has patentable inventions. Another reason is that some companies see patents as protecting their sales activities—rather than their inventions in the abstract—and so they give sales & marketing say. On the other hand, sales & marketing personnel sometimes have a negative or ambivalent attitude toward patents. That is partly because inventions rarely originate with them. It is just as common, if not more common, for sales & marketing to see patents as taking budget allocations away from their own projects, like advertising campaigns. Lastly, sales & marketing personnel frequently have expectations that are not aligned with actually-existing patents laws. This may take the form of unrealistically expecting a broad legal monopoly without regard for the quid pro quodisclosure of an invention.
The main reason that other departments like finance/accounting, sales & marketing, etc. rarely have responsibility for patenting programs is that these departments tend to be further removed from relevant facts and information. To the extent that there are disputes over who should have a say over patent matters, having a committee that includes personnel from these other departments can be a good compromise that allows for input and shared responsibility without creating awkward disconnects or glaring inefficiencies. For instance, having a committee to approve individual invention disclosures and/or to set high-level patenting goals can be worthwhile when coupled with passing responsibility for day-to-day management of patent applications and granted patents to a specific department or individual.
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
Novelty and non-obviousness requirements for patentability are assessed based on the contents of the “prior art”. Older patents and publications generally count as prior art. But public uses and on sale activities can count as prior art too. Prior “on sale” and public use activities of others (competitors) generally constitute prior art. Though an inventor’s own activities can potentially be treated as prior art as well. An inventor placing his or her claimed invention on sale prior to filing a patent application may be treated as prior art against that later application, unless a patent filing grace period applies. To account for the 1-year statutory grace period, it is common to say that an “on-sale bar” arises when an invention is commercially exploited by an inventor before a “critical date” that is one year prior to the effective filing date of the relevant claim(s) of the patent application. If an “on-sale bar” applies, it qualifies as prior art under 35 U.S.C. § 102(a)(1) against a given claim, for both novelty and obviousness analyses. Under current U.S. law, the on-sale bar applies to commercial sales activities that happen anywhere in the world—though older (pre-AIA) laws limited it to on-sale activities involving the U.S.
There are some nuances as to what does or does not qualify as placing an invention “on sale”. A two-part test is applied in the U.S. A patent claim is invalid or unpatentable under the on-sale bar if, before the critical date, the invention was both:
the subject of a commercial sale or offer for sale; and
This analysis hinges on how an invention is claimed. Depending on what specific subject matter is claimed in a patent or patent application, and how broadly or narrowly it is claimed, the on-sale bar analysis may lead to different conclusions. Also, the on-sale bar is subject to an experimentation exception when an inventor’s own activities are involved.
On-sale bars differ by jurisdiction. Many other countries have an absolute novelty requirement without a patent filing grace period. And some other countries have no on-sale bar at all, or one that applies only to sales in that particular country. It is important to consider the specific law in each individual country where patent protection is sought if sales activities have already taken place. Commercial exploitation of an invention might bar patenting in some countries but not others, depending on the specific circumstances involved.
Furthermore, it is important to note that the on-sale bar is just one among many potential bars to patentability. Public use or printed publication bars, for instance, might arise out an inventor’s or competitor’s activities occurring prior to filing a patent application.
Purpose
The on-sale bar serves a number of purposes. Principally, it avoids an extension of patent protection beyond the statutory term. Modern patent laws are premised on granting only a limited monopoly in a claimed invention in exchange for disclosure of the invention. If an inventor could commercially exploit or profit from an invention and then much later still seek a patent, the expiration of that patent would effectively be extended beyond the intended duration limits. Also, the public notice function around the exclusive rights granted in patents would be frustrated if patent rights could spring up long after an invention became commercially available. The on-sale bar also protects the public’s right to retain knowledge already in the public domain.
When dealing with an inventor’s own actions, this means an inventor has to make a choice between patenting his or her invention or keeping it secret:
“it is a condition upon an inventor’s right to a patent that he shall not exploit his discovery competitively after it is ready for patenting; he must content himself with either secrecy, or legal monopoly.”
Inventors are not permitted to have things both ways, or, to have their cake and eat it too. Though, in practical terms, not all inventions lend themselves to secrecy. It may be possible to maintain secrecy over certain manufacturing processes or the identities of certain materials used in a liquid solution—like a proverbial “secret formula”. But it is usually impossible to keep the physical/mechanical configuration of a product secret except by not selling or publicly using it at all. That means patent protection may be the only way to have market exclusivity in certain types of inventions.
U.S. patent laws do, however, provide a one-year grace period for patent filings, unlike many other countries. And an inventor’s own experimental activities are excepted from the on-sale bar. But these are essentially the only exceptions to a general policy requiring that inventors promptly seek patent protection or forfeit rights patent rights by commercializing their inventions.
Another important purpose of the on-sale bar mentioned above is to prevent patents from removing things that are already commercially available from the public domain. While much of the discussion that follows emphasizes inventors’ own activities, which is often the primary question when these issues arise, on-sale bars can apply to commercial activity by anyone. If someone else had already placed something on sale, it usually counts as prior art against a later-filed patent claim (unless the later-filing inventor qualifies for the prior disclosure exception under 35 U.S.C. § 102(b)(1)(B)). It does not matter if the person or entity that previously commercialized something chose not to patent it. The on-sale bar is an independent bar to later patenting that does not depend on someone having previously patented or attempted to patent something.
Sales
Commercial sale of an invention before the critical date gives rise to an on-sale bar. Though a sale for experimental purposes is distinguished from a commercial sale and is excluded from the on-sale bar. A commercial sale normally involves transferring property rights (that is, title to the goods) for consideration that the buyer pays or promises to pay the seller for the thing bought or sold. However, in this context, commercially leasing an inventive product is treated as a commercial sale even though title to the goods is not transferred—this includes standard computer software licenses for software-enabled inventions, for example. Even a single commercial sale can give rise to an on-sale bar. It does not matter whether or not the details of the invention are made available to the public through the sale, or that it was a sale subject to buyer approval (that is, in a “sale on approval” where the buyer could potentially return the goods to the seller). Moreover, using an inventive product while providing commercial services triggers the on-sale bar too.
When an invention is for a method or process, a sale of that inventive method or process before the critical date will give rise to an on-sale bar. For example, if an invention is a method of manufacturing something, selling goods manufactured using that inventive process constitutes a sale. Additionally, selling a product that embodies the essential features of an inventive method of use will constitute an on-sale bar for the claimed method of use. However, whether inventive activity pertains to an invention involving a method, an apparatus, or both, may not be apparent until a patent application is prepared—or possibly not until much later when particular claims are allowed or granted.
Merely licensing or assigning rights to an invention does not constitute a sale. Though a commercial sale of an invention by a licensee before the critical date would give rise to an on-sale bar, because the licensee is considered to stand in the shoes of the patentee, and that would include commercial use of a method of making a product by a licensee.
However, an inventor outsourcing manufacturing to validate the manufacturing process for regulatory approval only and stockpiling the invention only for that inventor do not, without more, constitute a sale where the inventor maintains control of the invention. But commercial agreements between a patentee and its supplier or distributor are not exempt from the on-sale bar, such as where title to the goods passes to the distributor or where the manufacturer/supplier is free to market the product or disclose the process for manufacturing the product to others. Also, method or process inventions cannot be stockpiled, and outsourcing the commercial use of an inventive method/process of making something would generally trigger the on-sale bar.
Commercial Offers for Sale
A commercial offer for sale before the critical date, without a sale actually being completed, also establishes an on-sale bar. The U.S. Supreme Court has described commercial offers for sale as occurring when an invention is first marketed commercially. The offer must be commercial rather than experimental in character, just as with completed sales. Also, as with completed sales, a commercial offer for sale of a method/process invention before the critical date give rise to an on-sale bar, though mere licenses and assignments of rights do not.
However, lower courts have effectively read-in a significant limitation on what constitutes a “commercial offer for sale” based on commercial contract law. “Only an offer which rises to the level of a commercial offer for sale, one which the other party could make into a binding contract by simple acceptance (assuming consideration), constitutes an offer for sale . . . .” Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1048 (Fed. Cir. 2001). Lower courts have pointed to general commercial law for these determinations rather than the law of the particular state where the transaction took place, looking to the Uniform Commercial Code (UCC) for guidance. Though the UCC does not define “offer”. So courts have further looked to the Restatement (Second) of Contracts, which says, “An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” (§ 24). The Restatement also says there must be intent to be bound, because “[a] manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.” (§ 26). Although no particular language is required to constitute an offer for sale, lower courts have said (citing and extending § 33(3) of the Restatement, which says that leaving proposed term(s) open indicates a non-“offer”) that a communication that fails to include material terms (such as quantities, time of delivery, place of delivery, or product specifications) is not an “offer” in the contract sense. Though a “quote” (sent in response to a request for quotation) has been considered equivalent to a commercial offer for sale when it included essential price, delivery, and payment terms (plus alternative product amounts that reflected multiple distinct offers for sale).
These judicially-created limitations on commercial offers for sale mean that the standard is an ambiguous one based on the involved parties’ subjective intents and understandings, rather than a bright-line one. As long as current lower court interpretations prevail, whether a communication naming a price constitutes a commercial offer for sale or mere preparations for future offers for sale (that alone do not give rise to an on-sale bar) depends upon the facts and circumstances of each particular case. So early sales, marketing, and promotional efforts may or may not trigger the on-sale bar, depending on the circumstances (including whether and how a customer responds to them). A salesperson vaguely discussing the possibility of offering a product in the future without the potential customer actually being able to accept a specific offer on specific terms may not qualify as a “offer for sale” under current lower court case law.
Keep in mind that other types of bars to patentability might apply even if there was no sale or commercial offer for sale. For instance, an advertisement of an invention before the critical date might qualify as a “printed publication” bar instead of (or in addition to) an on-sale bar. And a non-experimental public use of an invention before the critical date would give rise to a public use bar. The on-sale bar is only one among many potential bars to patentability that must be considered.
Secret Sales & Offers for Sale
In the U.S., the on-sale bar still applies to a confidential, private, or otherwise secret commercial sale or offer for sale before the critical date. This means that merely having a non-disclosure agreement (NDA) or other contractual confidentiality terms in place will not avoid triggering an on-sale bar. An NDA might still help establish that a sale or offer for sale was primarily experimental rather than commercial, depending on all the other relevant circumstances. And the existence of an NDA may mean that a given use of an invention does not give rise to a public use bar or that the confidential exchange of documents does not constitute a printed publication bar. Moreover, an NDA may make discovery of prior sales by third parties difficult to identify. But any commercial sale or offer for sale of an invention triggers the on-sale bar, regardless of the public versus confidential/secret nature of such commercial exploitation. While having an NDA in place may have certain advantages for the parties involved, it will not avoid an on-sale bar in the U.S. when there has been non-experimental commercial exploitation.
Applicable law in other countries may be different, however. Indeed, countries that lack a distinct on-sale bar might even allow a later inventor to obtain a patent and enforce it against the prior inventor who did not patent or publicly use the invention (because all use was confidential rather than public).
Experimentation Exception
There is an experimental sale exception to the on-sale bar. A sale or offer for sale that is primarily for experimental purposes, as opposed to commercial exploitation, does not raise an on-sale bar. Though the experimental sale exception applies only if the commercial exploitation is merely incidental to the primary purpose of experimentation to perfect the invention.
Only certain activities are considered experimental, depending on the purpose or intent behind them. A use may be “experimental” only if it is designed to: (1) test claimed features of the invention, or (2) determine whether an invention will work for its intended purpose. This judicial definition of what is experimental applies to both the public use bar and the on-sale bar. But experimental use cannot occur after an invention has actually been “reduced to practice”; once an inventor realizes that the invention as later claimed indeed works for its intended purpose, further alleged “experimentation” may constitute a public use and/or on-sale bar. Similarly, a contract characterizing commercial activities as “equipment testing” will be insufficient to establish experimental use if unnecessary, that is, if the testing could have been performed satisfactorily before or without the sale.
Courts have applied the following factors to determine if a sale constitutes experimentation or commercial exploitation, though not all factors will apply in any given situation:
the necessity for public testing,
the amount of control over the experiment retained by the inventor,
the nature of the invention,
the length of the test period,
whether payment was made,
whether there was a secrecy obligation,
whether records of the experiment were kept,
who conducted the experiment,
the degree of commercial exploitation during testing,
whether the invention reasonably requires evaluation under actual conditions of use,
whether testing was systematically performed,
whether the inventor continually monitored the invention during testing, and
the nature of contacts made with potential customers.
While the experimentation exception to the on-sale bar has long been recognized in the U.S., it is rather difficult for an inventor to qualify for it. Successfully invoking it might even be more rare in the on-sale bar context than in the public use context. So think of it almost like a unicorn defense against invalidity. And when a patent is enforced, any reliance on this experimentation exception by the patentee is certain to be challenged by the accused infringer. Therefore, it may be advisable in many situations to avoid relying on it (other than as a backup plan or “plan B” fallback position). A better strategy is to file a patent application before accepting or seeking any payment for an invention, or at least to file within one year of any payment, request for payment, or any other activities that could potentially be seen as exploiting or seeking to profit from an invention.
All this makes sense if we turn back to the basic purposes of the on-sale bar. The experimentation exception arises because the inventor is not really extending the expiration of patent rights when he or she is not yet certain that the invention is viable or complete. A key reason the experimentation exception against the on-sale bar is so rarely established is that inventors normally don’t try to sell inventions that they know are not yet in working order. When they have sold or offered to sell things, that tends to give rise to an inference that the inventor really did believe the invention was sufficiently workable for the buyer’s purposes (despite after-the-fact inventor denials that often come across as self-serving). If anything, the exception is more likely to apply where the only reasonable experimental testing involves using the invention in connection with commercial services under close supervision—as in the famous case City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126 (1878) where the inventor garnered more sympathy than most.
“Ready for Patenting”
An invention is “ready for patenting” when, prior to the critical date, the invention is either: (1) reduced to practice; or (2) depicted in drawings or described in writings of sufficient nature to enable a person of ordinary skill in the art to practice the invention.
Reduction to practice means being embodied in a distinct form, like through construction of a working prototype. Reduction to practice happens when occurs when the inventor/seller had possession of the claimed subject matter and that it was shown or known to work for its intended purpose. For something to qualify as a reduction to practice, it must show that the invention works for its intended purpose beyond a probability of failure but that need not be established beyond a possibility of failure. Importantly, reduction to practice does not require that the invention, when tested, be in a commercially satisfactory stage of development—for utility patents this analysis is from the standpoint of technical feasibility rather than marketability or saleable appearances. It does not, however, require that the seller recognize that his or her on-sale invention possesses specific later-claimed characteristics when there was no question that the invention was useful at the time it was placed on sale.
Whether or not an enabling disclosure has been documented (in the absence of actual reduction to practice) is generally assessed in the same way as for priority claims. In any event, any time there are engineering specifications available that are sufficient for use to manufacture an invention, or to allow a customer to know specifically what is being purchased, the invention will usually be considered ready for patenting.
Difficult questions arise when advance development agreements or pre-availability contracts are involved. In some situations, a contract may be signed for a seller to deliver to a customer at a later date something not yet invented. In other words, the customer understands that goods meeting certain requirements do not yet exist but believes that the seller will be able to devise one or more inventions that will make delivery of suitable goods possible in the future. This is a situation where the customer does not know upfront exactly how those goods will be configured. But certain general requirements, goals, or objectives that the goods be better, faster, lighter, etc. would likely be set forth in such an advance contract. When does the on-sale bar arise in these situations? The answer is it depends when the invention was conceived subsequent to the signing of the contract. For purposes of the on-sale bar, it is initially viewed as an open offer to sell an idea for a product (or service) that is converted into a “commercial offer for sale” at whatever time the relevant invention is later conceived:
“[A]n invention cannot be offered for sale until its conception date. Hence, if an offer for sale is made and retracted prior to conception, there has been no offer for sale of the invention. In contrast, if an offer for sale is extended and remains open, a subsequent conception will cause it to become an offer for sale of the invention as of the conception date. In such a case, the seller is offering to sell the invention once he has conceived of it. Before that time, he was merely offering to sell an idea for a product.”
When, exactly, conception happens may very well be disputed. But once there are drawings that might enable the invention to be made and used, or it is actually reduced to practice (even if the inventive aspect is not yet appreciated or recognized), an on-sale bar can arise.
Joint research & development agreements potentially raise further limits on application of the on-sale bar where they do not bear commercial fruit and are cloaked in confidentiality. That is to say that research & development activities, even where conducted jointly, may pertain only to the process of invention or related experimentation rather than to commercial activities. But, as always, this will depend on the specific circumstances involved, including what the applicable contract(s) say. There is not always a bright line separating research & development and on-sale activities when joint efforts are involved.
Anytime there is already a contract or commercial proposal of an idea for a product (or process), the inventor must diligently pursue a patent filing after something inventive is actually conceived to ensure that filing occurs within the one-year U.S. grace period. Though keep in mind that the ways these issues are treated in other countries may differ.
Best Practices and Words of Caution
Assessments of potential on-sale bars must be approached with caution. The treatment of potential on-sale bar activities is governed by somewhat subjective and imprecise standards in the USA. The consequences of incorrectly relying on an experimental sale exception to the on-sale bar can be severe for both the patentee and the patentee’s legal counsel. For instance, if a court later rejects an inventor’s determination that a pre-critical date sale was experimental, an entire patent might be found unenforceable in addition to specific claims being found invalid—if information about the on-sale bar was withheld from the USPTO with deceptive intent (which can be inferred). Moreover, because on-sale bar activities apply to obviousness analyses too, commercialization of an earlier version of a product or process before the critical date potentially be relevant to the obviousness of a later-developed variation or improvement.
The best strategy to avoid an on-sale bar worldwide is to file a patent application before any activities that could potentially be seen (in the light least favorable to the patentee) as exploiting or attempting to profit from an invention, or, at least in the USA, to file within one year of any such activities. But if there has already potentiallybeen definite commercial sales activity before the critical date, or anything that might potentially be viewed as the commercial exploitation of an invention before the critical date, consider explicitly disclosing it to the USPTO in order to satisfy the duty of disclosure. This is because court rulings about experimental sales will happen only many years later and may be driven by sympathies and impressions given by witnesses at least as much as the “cold” factual record. And there are risks of self-serving biases when inventors make these determinations themselves.
In order to make a legal determination about whether or not an on-sale bar applies, there must first be a sufficient investigation of the relevant facts. It would be nice if the legal standards for on-sale bars allowed for a straightforward and uncomplicated assessment. But the reality is that these are complicated, nuanced legal determinations that depend on a variety of specific facts that will differ from one situation to the next. If important relevant facts are unknown, overlooked, or even concealed, then it may be impossible to reliably determine whether an on-sale bar applies in a given situation. So, beyond the lack of bright-line legal standards as to certain aspects, the dependency of these legal analyses on underlying fact gathering is yet another reason caution is merited.
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
Obtaining rights in an invention require affirmatively filing a patent application. There is a limited one-year grace period in the U.S. to file a patent application after the invention has been disclosed or commercialized before patent rights are lost. In the context of an inventor’s own prior activities, the term “critical date” refers to the beginning of the grace period one year before the “effective filing date” of a claimed invention. Understanding this grace period is important in order to know when patenting becomes barred, or may have already been barred, due to an inventor’s own prior actions.
The U.S. patent laws generally bar patenting if “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention” or if “the claimed invention was described in a patent . . . or in an application for patent published or deemed published . . . [that] names another inventor and was effectively filed before the effective filing date of the claimed invention.” (35 U.S.C. § 102(a)). In other words, disclosures and commercial exploitation of an invention prior to the critical date qualify as “prior art” that can be held against a later-filed patent or patent application. Such prior art is used to evaluate the patentability (or validity) of a claimed invention.
Illustration of Timeline for U.S. Patent Filing Grace Period
However, there is a one-year grace period for filing a patent application following a disclosure or commercialization of the invention by an inventor (or someone who obtained that subject matter from an inventor). This grace period is formally stated as follows:
(b) Exceptions.-
(1) Disclosures made 1 year or less before the effective filing date of the claimed invention.- A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if-
(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor
***
(2) Disclosures appearing in applications and patents.-A disclosure shall not be prior art to a claimed invention under subsection (a)(2) if-
(A) the subject matter disclosed was obtained directly or indirectly from the inventor or a joint inventor;
*** or
(C) the subject matter disclosed and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person. [see also § 102(c) regarding inventions under joint research agreements that may satisfy this provision]
So if an inventor has publicly disclosed an invention or placed it on sale, the clock has begun on the one-year deadline to file a patent application. Under current U.S. law, disclosures and on-sale activities happening anywhere in the world trigger the grace period filing deadline. But disclosure of an invention more than one year earlier represents a complete bar to patentability. The grace period is not extendable.
This 1-year grace period is somewhat unique to U.S. patent law. Most other countries have what is called an absolute novelty requirement. That means a patent application must be filed before there is any disclosure of the invention. Though the specific things that do or do not count as a prior disclosure vary somewhat by country (for instance, sometimes the country in which the disclosure was made matters, and sometimes secret sales are not considered public disclosures). What this means is that even though the U.S. has a patent filing grace period, the applicant needs to consider the most restrictive patenting requirements among all relevant jurisdictions. If it is desired to pursue foreign patent protection, or even just to preserve the possibility of foreign filings, then it is important to file a patent application before any disclosure or sales activity to ensure that patent rights are preserved for all foreign countries.
Another aspect of this grace period is the exception set forth in 35 U.S.C. § 102(b)(1)(B), which says a disclosure falling within the grace period does not qualify as prior art (under § 102(a)(1)) if “the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.” In other words, a disclosure by someone other than the applicant (occurring one year or less before the effective filing date) can potentially be defeated and removed from the realm of “prior art” if the inventor or applicant had previously publicly disclosed the claimed invention (one year or less before the effective filing date). So, in very limited situations, a prior public disclosure within the statutory grace period can also potentially aid a patent applicant against competitors trying to patent or commercialize the invention.
In general, the initial filing of a patent application to preserve U.S. patent rights and stop the clock on the 1-year grace period encompasses both U.S. and foreign applications. The “effective filing date” (as defined in 35 U.S.C. § 100(i)) is the earlier of the filing date of a given U.S. patent application or, if there is a qualifying foreign priority or domestic benefit claim to earlier application(s), the filing date of such an earlier U.S., PCT international, or foreign application that disclosed the claimed invention. Where this can become complicated is that there may be multiple prior applications but the effective filing date is assessed on a claim-by-claim basis. The effective filing date is not necessarily the earliest prior application if the relevant “claimed invention” (as defined in 35 U.S.C. § 100(j)) was not yet disclosed in it.
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
There are many situations where it is desirable to challenge the validity or patentability of a granted patent or pending patent application. For instance, an invalidity search can be useful for an invalidity opinion to mitigate infringement liability, an invalidity defense in litigation, a proactive challenge to patentability at the U.S. Patent & Trademark Office (USPTO), or a pre-issuance submission (observations) to try to restrict or prevent a patent from being issued. But what is the best timing for such an invalidity search?
In one sense, an invalidity search is never strictly legally required. Though, practically speaking, invalidity searches are often crucial to avoiding or reducing liability for patent infringement in many contexts. These searches must be performed in a timely manner to obtain the greatest value from them. That includes performing searches in time to meet deadlines that require having suitable search results available.
Patent invalidity searches are reactive in the sense of being conducted in response to some infringement risk arising. That could be the receipt of a cease & desist letter, the filing of an infringement lawsuit against you, or other knowledge of a potentially problematic patent (e.g., via a freedom-to-operate study). In any event, an invalidity search requires first knowing which patent is the subject of the invalidity search. That is because an invalidity search depends on the scope of the particular claim(s) of concern and their effective filing date(s)—including any priority date(s).
It is a best practice to consider an invalidity search after a tangible risk of patent infringement comes to your attention. Knowledge of a patent coupled with a reasonable belief that infringement might be present can potentially give rise to enhanced damages for infringement. And knowledge of a pending patent application can potentially give rise to so-called “provisional rights” to pre-issuance infringement damages.
There may be deadlines that determine when invalidity search results are needed. For instance, in patent litigation in a district court, the court will issue a scheduling order that often sets a deadline to set for invalidity contentions. In is necessary to have search results available in order to formulate those invalidity contentions and prepare a suitable report. Other times, invalidity contentions might be requested through discovery requests, such as interrogatories. Either way, it is crucial to perform the invalidity search far enough in advance of such deadlines to allow for subsequent legal analysis of the search results.
Moreover, there are situations where a proactive challenge to a granted patent is desired. Proceedings such as inter partes review (IPR), post-grant review (PGR), oppositions, and the like may have various different deadlines by which a challenge must be filed. Such deadlines drive the timeline for completing invalidity searching. Just as in litigation, the search must be completed with time to spare to allow for legal analysis and preparation of any formal filing papers for the patent challenge, which may require considerable effort to prepare. Additionally, a pre-issuance submission (or observation) might be filed against a pending patent application and there likewise are both formal and practical deadlines to do so.
Lastly, if an opinion of counsel setting forth grounds for liability is desired to mitigate potential infringement damages, such an opinion should ideally be obtained before your relevant product (or process) is commercially launched. If patent in question is discovered only later, then such an opinion should be obtained without unreasonable delay. Having invalidity search results is a prerequisite to completing an invalidity opinion.
In all these possible settings, it is common for multiple invalidity searches to be performed. That can include follow-on invalidity searches performed in an iterative manner, in order to exhaustively locate prior art and to try to obtain sufficient prior art for desired (and reasonable) invalidity arguments as those arguments evolve and develop. It may also include searches performed by different searchers in different databases (including in non-patent literature databases), in different native languages, though investigation of prior public use and on-sale activities, and the like.
Have an invention you would like to patent? Have a brand you would like to register as a trademark? Concerned about infringing someone else’s intellectual property? Is someone else infringing your IP? Need representation in an IP dispute? Austen is a patent attorney / trademark attorney who can help. These and other IP issues are his area of expertise. Contact Austen today to discuss.
If you have decided to perform a freedom-to-operate (FTO) or “clearance” study to try to reduce the risk of patent infringement, it will be necessary to determine when a patent search should be performed. This is a question about best practices for the timing of patent FTO/clearance searches.
The following timeline provides an overview of major timing considerations and the best time to conduct a patent FTO study.
In general, the ideal time to conduct at FTO search is before a product (or technical process/service) is commercially launched but after its technical design parameters are sufficiently established to know what the search should encompass. That is a window of time in between an initial business case and the beginning of research & development (R&D) efforts, on the one hand, and the formal product launch on the other. Additionally, the FTO search and accompanying legal analysis should be completed well enough in advance of the product’s commercial launch date to allow time for possible risk mitigation efforts before infringement liability might start to arise. If the FTO search uncovers a potentially problematic patent, you gain the most benefit from that information if you have allowed time to take responsive action before a product launch point-of-no-return.
In this context, a product launch can be anything that is potentially actionable as patent infringement, including making, using, selling, offering for sale, or importing an infringing product in or into the USA. Though product launch infringement risks tend to be greatest when there is a major commercial release that makes the product (or process) widely publicly available, as opposed to mere preparatory efforts (such as prototyping) that might happen only on a private and confidential basis.
Having technical design parameters that are sufficiently established to know what the search is important. This allows the FTO searcher to understand what, specifically, should be searched—and what is excluded from the scope of the search. This process of determining what to search is referred to as “feature identification” (or sometimes “product decomposition”). This involves itemizing individual patent-sized technical features present in the product that are to be searched. But feature identification is only possible if there is sufficient technical information available. If R&D efforts are still in preliminary stages, or if there is really only a (non-technical) business case available, it may not be feasible to conduct an FTO search yet, or at least not for all planned product features. In those situations, a more generalized “landscape” search is perhaps more appropriate. Otherwise, the FTO search(es) for insufficiently-developed feature(s) may need to await further technical R&D.
Updates?
After an FTO search is completed, there are various reasons why a later “update” search may be helpful. First of all, there is generally a delay of roughly eighteen (18) months between the filing and publication of most patent applications—and sometimes longer. This means that there may be relevant pending (but unpublished) patent applications that cannot be found during an initial FTO search. But, additionally, there may be changes to the technical design of planned or released product over time that merit further FTO searching and/or analysis. So, at what time(s) should such FTO search updates be performed? There are actually multiple possible approaches.
Discrete FTO Updates
A first approach is to perform one or more discrete FTO updates that resemble the initial FTO search and analysis. The timing of such discrete updates can be based on product- or technology-based milestones and/or calendar- or timeline-based milestones.
A typical product/technology milestone would be the release of a new or different version of a given product that has new, improved, or simply different features and functionality. An example would be releasing version 1.1 or 2.0 of a product that was previously cleared for its version 1.0 design only. Another typical product/technology milestone would be the occurrence of a particular pre-release design review phase. Technologies that have relatively long development cycles sometimes go through formalized design review processes with multiple distinct phases. In each phase changes to the product design might be introduced. For instance, a given initial product design might work well in prototype form but later be discovered to be too difficult to manufacture efficiently and thus might be replaced with a more easily manufactured design that was not previously searched.
An example of a calendar-based milestone would be to simply conduct a search update on a set periodic cycle, such as every year, or a single time after 18 months have passed since the original FTO search. There is no right or wrong update time period here, or even an particular appropriate number of updates. This is really a trade-off between the burden and expense of each update and the infringement risks likely raised, including the density of ongoing patenting on relevant technologies. Though recall that unpublished pending patent applications might first become available 18 months (or more) after the original FTO search.
Ongoing Monitoring
It is also possible to conduct ongoing monitoringof all patents and published applicationsfor:
particular competitor(s)
particular technology area(s)
Ongoing monitoring can be facilitated through the use of alerts/saved criteria set up with proprietary search platforms or, alternatively, periodic (manual) searches. Such ongoing monitoring can take place in addition to or in place of other milestones or criteria for an FTO search. The main decision points with respect to ongoing monitoring are when to start and when to stop monitoring, and the scope regarding which competitor(s) and/or technology area(s) are included. Those factors are often highly influenced by the time and resource commitments required, as well as the relevance of those efforts to planned or ongoing commercial activities. It is worthwhile to periodically revisit the parameters for ongoing patent monitoring efforts, to ensure that those efforts are still relevant and appropriately focused.
Have an invention you would like to patent? Have a brand you would like to register as a trademark? Concerned about infringing someone else’s intellectual property? Is someone else infringing your IP? Need representation in an IP dispute? Austen is a patent attorney / trademark attorney who can help. These and other IP issues are his area of expertise. Contact Austen today to discuss.
A question that comes up frequently is whether functional language is permitted in patent claims. Sometimes this is called functional claiming. This has long been a fundamental yet unresolved issue in patent law. In general, functional language is permitted in U.S. patents and patent applications. But that does not mean it is always acceptable. The acceptability of functional claim language depends on where and how the functional language is used in a given claim and also on how the functional claim language relates to what was actually invented (and disclosed). These questions are often about whether the applicant/patentee’s intentions behind the particular use of functional claim language are proper or not.
To be clear, functional claiming generally refers to describing something by what it does rather than what it is (structurally). Method claims naturally use functional language. The focus here is on functional language in apparatus claims.
The first question to ask is whether the functional claim language is used to recite the point of novelty—the limitation(s) that purportedly distinguish the claimed invention from the prior art. If not, the use of functional language is much more likely to be acceptable and free from dispute. For instance, using functional language in a claim preamble to highlight intended use (possibly in a non-limiting way) is generally acceptable. Though functional recitations appearing anywhere in a claim could still raise concerns. But the situation is most critical when the functional claim language appears right where the claim purports to recite the point of novelty. Suspicions are often raised when a claim includes many structural recitations related to what was already known in the art but then conveniently switches to functional language when setting forth the point of novelty.
When the functional claim language appears at the point of novelty, further analysis is merited. Some other questions should be asked. Is the functional language an attempt to draft a preemptive claim that covers all possible solutions to a technical problem? Or is the functional language an attempt to claim an entire genus of possible solutions? Those are questions about overbreadth in light of the quid pro quo policy underlying modern patent law. This is a matter of preventing an improper extension of a patent’s scope beyond what was actually invented. Also, does the use of functional render the scope of the claim indefinite? This tends to be a concern about whether the functional language makes the claim’s scope unclear by obfuscating what is or is not encompassed. It also reflects concerns about attempts to circumvent the required “peripheral” claim format and instead utilize “central” claiming; that is, attempting to recite merely a vague central inventive concept without informing those of ordinary skill in the art about the scope (outermost boundaries) of the claimed invention with reasonable certainty.
With regard to questions of claim breadth, functional language must be assessed based upon its meaning within the claim as a whole and in light of the entire disclosure of what was actually invented. This inquiry involves looking at the particular functional claim language in context to see if it is purely functional language or only partially functional language that is limited by associated structural recitations or by the invocation of means-plus-function format (“means for . . . [a recited function]”) specifically authorized by statute (35 U.S.C. § 112(f)).
For example, consider the claim, “An assembly comprising part A, part B, and a connection between part A and part B, wherein the connection is configured to rigidly fix a base portion of part A to an end of part B.” Such a claim seems acceptable even though the “configured to” language is followed by “rigidly fix” language that might be seen as functional if viewed in isolation. In other words, this example uses partly but not wholly functional claim language. The functional recitations are limited by further structural recitations of part A, part B, and a connection.
On the other hand, consider the claim to an improved widget that recites, “A widget configured to achieve good result X.” Such a claim is not structural but instead uses results-based and purely functional language at the point of novelty to try to claim all solutions to a problem. This latter claim is preemptive of all possible solutions that “achieve good result X”, even those that have not yet been invented. Claims directed merely to a desired result have long been considered objectionable primarily because they cover any means which anyone may ever discover of producing the stated result.
Also, it is possible to add structural recitations such that the functional language is only partially functional. We can continue here from the last example. Consider an amended claim that recites “A widget configured to achieve good result X, comprising:” as merely the claim preamble, and then proceeds to recite the structure that achieves the “good result X” in the body of the claim, such as “substrate Y; and a coating Z applied to the substrate Y, wherein the coating Z comprises a thermally insulating material containing at least 5% yttria by weight.” That claim would not be purely function because of the functional language in the preamble—we can just assume here that “good result X” has something to do with high temperature operation. In this case, the additional structural recitations in the body of the claim would explain what the invention is (in structural terms) rather than stopping with merely a statement of the result it achieves.
There may also be situations where functional-looking language really has a structural meaning (to a person of ordinary skill in the art). For instance, the portmanteau term “screwdriver”—derived from the German word schraubenzieher (screwpuller) and/or the French word tournevis (turnscrew) from the middle ages—could be seen as functional. But, today, anyone would recognize the word “screwdriver” as referring to a generic name for a kind of tool, in a structural way. If we imagine that a patent claim using the term “screwdriver” was presented in the early middle ages, before there was an accepted structural meaning for that term, such medieval usage could raise concerns about its breadth in relation to what was really invented—would it have also covered a pair of pliers that might be used to grip a screw in order to “drive” it, or a hammer? This example in medieval times would look like purely functional claiming of merely a desired result—driving a screw. Whereas, today, usage of “screwdriver” would be an unremarkable structural reference to a genus of tools (having a tip that can can engage one of the many different types of screw drives, but excluding pliers and hammers).
A patent claim that uses functional language to refer to an entire genus may (or may not) be acceptable. Genus/species issues are also among the most fundamental in patent law. The philosophical idea behind reference to an entire genus is that it encompasses an unknown or unstated species. For a patentee, this is usually the intent! Patentees often want to get the broadest possible monopoly rights, including blocking rights over later inventions. But a key component of modern patent law is that patents should be limited to what the patentee actually invented. So, very often, questions about the use of functional claim language are about the reasonableness of claim scope that goes beyond what was actually invented—or at least what was actually disclosed in a patent application. These questions often turn on the breadth of the disclosure of an invention and whether that disclosure is robust enough to support a claim covering an entire genus or not. Functional claim language is frequently used to recite something like a genus or class rather than merely one or more particular species. A recitation encompassing multiple species may or may not be improper. It is a matter of degree and context.
With regard to enablement requirements, “If a patent claims an entire class of processes, machines, manufactures, or compositions of matter, the patent’s specification must enable a person skilled in the art to make and use the entire class. In other words, the specification must enable the full scope of the invention as defined by its claims. The more one claims, the more one must enable.” And this is directly tied to the breadth of monopoly the applicant or patentee demands, and whether, commensurate with that demand for a monopoly, the inventor’s disclosure identifies a quality common to every functional embodiment. This means that the acceptability of functional language that effectively claims an entire genus or class rests not only on the claim language but also on the entirety of the disclosure and the level of predictability in the relevant technological field or art.
For instance, these issues often do not turn merely on whether a given claim uses “configured to” vs. “adapted to” vs. “operable to” language (or the like). Though patent attorneys and judges sometimes try to reduce the larger and more fundamental questions to such superficial formalities—sometimes as a matter of “university discourse” (i.e., making highly ideological policy arguments through the guise of seemingly neutral and objective technical rationales).
With regard to definiteness or clarity concerns, partially functional language is frequently acceptable and might sometimes be more clear and definite than certain alternative types of claim limitations (like a negative limitation). For instance, with a mechanical invention, partially functional claim language used to recite the way certain enumerated structures are connected and moveable—or not movable—relative to each other may be perfectly clear and uncontroversial. But when purely functional claim language is substituted for structural language such that the (purely) functional language entirely displaces structural language, as a way to consciously avoid limiting the scope of the claim to particular structures, then it might not be acceptable. This is more like the “good result X” or medieval “screwdriver” examples given above. It is the broadness, ambiguity, and overhanging threat of purely functional claiming that is problematic. The public cannot tell what does or does not fall within the scope of the purely functional language.
Another legal issue around functional claim language under U.S. patent law is the use of means-plus-function format (under 35 U.S.C. § 112(f) or pre-AIA § 112, ¶ 6)—also called step-plus-function format for method/process claims. An applicant can invoke means-plus-function claim format to utilize functional language in the claim, in which case the claim language is construed to cover the corresponding structures, materials, or acts described in the specification and equivalents thereof. A catch is that the specification (including the figures) must provide an adequate disclosure of structure corresponding to the means-plus-function claim language. Means-plus-function format can sometimes be useful to recite known (prior art) elements but with recitations at the point of novelty it is often considered a narrow and less desirable claim format. That is because an equivalent structure for means-plus-function purposes must have been available at the time of the issuance of the claim, but does not extend to after-arising technology developed after the issuance of the patent (except under the the Doctrine of Equivalents, if it applies).
There have been many, many cases that deal with functional claiming. However, U.S. courts have not not definitely and conclusively resolved these issues. That is not really surprising because patent applicants have numerous incentives to try to obtain monopoly rights over more than what they invent.
In the USPTO’s Board of Patent Appeals and Interferences’ (BPAI) precedential case Ex parte Miyazaki (which now seems to stand in conflict with Federal Circuit cases, at least in major part), it was explained that “when [a] limitation encompasses any and all structures or acts for performing a recited function, including those which were not what the applicant had invented, the disclosure fails to provide a scope of enablement commensurate with the scope of the claim . . . .” Such purely functional claim language is unpatentable unless the applicant has given the public notice that the limiting conditions of 35 U.S.C. § 112, sixth paragraph (now § 112(f)) are being invoked. Therefore, according to Miyazaki, purely functional claim language is unpatentable when it is “unlimited either by (1) the application of 35 U.S.C. § 112[(f)], or (2) the additional recitation of structure.” (emphasis in original).
Where this has been complicated is that the Federal Circuit has (controversially) held that purely functional language that does not use “means for” to explicitly invoke § 112(f) might still be interpreted as means-plus-function language. This stands in contrast to the more convincingly-argued BPAI Miyazaki decision regarding the need for notice to the public regarding invocation of § 112(f) limitations. The Federal Circuit is trying to save applicants from themselves (and potentially from the invalidity or unpatentability of the purely functional claims they chose to pursue) at the expense of the general public’s entitlement to clarity and predictability regarding the scope and validity of patent claims. This is also another example of Federal Circuit hostility to Supreme Court precedent regarding breadth- or preemption-related invalidity issues other than for sliding-scale enablement requirements.
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
It may be desired to proactively challenge the validity or patentability of a granted U.S. patent for a variety of reasons. What are the available options to challenge a granted patent either at the U.S. Patent & Trademark Office (USPTO) or in court? The following table compares the different types of proceedings and summarizes the applicable standards.
Anyone with standing (substantial controversy between parties having adverse legal interests of sufficient immediacy and reality; requires affirmative act by patentee)
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
Businesses often hire vendors to develop things for them, perhaps due to a lack of expertise in some particular area or just a lack of capacity. The vendor might be another firm, an individual independent freelancer, a temporary contractor working on-site, or some other type of consultant. This is often referred to as outsourcing. But who owns the intellectual property (IP) for things the vendor creates? This question should be asked at the beginning of a vendor relationship. Ideally, it should be answered before hiring the vendor.
All too often businesses ignore ownership of IP rights until there is infringement or a big business deal long after the vendor was hired. But cutting corners or forgetting to put IP ownership in writing at the beginning of a vendor relationship can potentially have huge (if avoidable) consequences later on. Businesses do come to regret such oversights later on. For instance, when selling a business, a prospective buyer might raise questions about lack of IP ownership due to vendor or outside contractor involvement, which might present barriers to completing the sale or might lower the purchase price. Or, when there is infringement, a business lacking ownership will not have standing to sue the infringer while the vendor (who still owns the IP) may be unconcerned and disinterested.
A common mistake is to wrongly assume that merely paying a vendor automatically transfers IP ownership or that receiving physical copies (even the sole original) transfers IP ownership. In the absence of something in writing, the vendor most likely retains any patent or copyright ownership interests. Vendors, for their part, may also be ignorant or misinformed about IP rights. Anyone hiring a vendor should not assume that the vendor understands potential IP issues or that the vendor’s standard agreement (sometimes called a master services agreement) will adequately or satisfactorily address and allocate IP ownership.
Type of IP
Default Owner (Subject to Exceptions)
Patents
Inventor(s)
Copyrights
Author(s)
Trademarks
User of mark (to designate source)
Trade Secrets
Rightful owner
Table Summarizing Who Typically Owns IP Initially (In the Absence of an Agreement or Local Law to the Contrary)
Seeking to obtain IP rights from a vendor after the end of the relationship can be difficult. You may find yourself without leverage to insist upon vendor cooperation or the vendor may no longer exist (or be deceased). And vendors may opportunistically seek windfalls to assign over IP rights after-the-fact. In worst-case scenarios, the vendor may own the IP and be able to freely commercialize it to your disadvantage, as well as to potentially block further independent development by you.
From the vendor’s perspective, an assignment of IP rights might be undesirable. But this is a question of leverage (bargaining power) and whether the vendor is willing and able to turn down potential new work. Though a suitable compromise may be to provide a license-back to a vendor, allowing certain uses by the vendor while still transferring IP ownership to the vendor’s client. An example is a portfolio license allowing the vendor to show examples of past work to potential clients. What makes sense in any particular situation will vary, of course.
Patents and Copyrights
For patents and copyrights, the general rule in the United States is that whoever creates the IP is the owner. In the absence of a written agreement to the contrary, this means that a vendor will generally own any patent rights or copyrights stemming from the vendor’s own efforts by default, even if the customer paid the vendor for it. But there are exceptions. And it is possible to agree in advance who will own the IP — that generally needs to be in writing.
“For patents and copyrights, the general rule in the United States is that whoever creates the IP is the owner.”
By statute, transfer of ownership of patents (or a patentable invention) and copyrightsmust be in writing — though copyright law allows the copyright owner’s duly authorized agent to sign an assignment. Any written document, including purely electronic materials, could include or constitute an assignment if it shows intent to presently transfer ownership rights. The written document should use words like “assigns”, “hereby assigns”, “hereby conveys, transfers, and assigns”, etc. to create a present transfer of ownership. Oral assurances will not transfer ownership of an invention (patent) or copyright; although limited implied non-exclusive licenses or equitable rights (e.g., shop rights) might still arise without being in writing.
Agreements that constitute merely an obligation to assign — typically phrased in the future tense such as with “will own” or “shall assign” language — do not effectuate an assignment of IP. Rather, obligations to assign require later execution of a separate written assignment. But ambiguous language relating to possible future agreements (such as “shall be owned as agreed upon”) may not even create an obligation to assign.
Some jurisdictions have different default rules about IP ownership. At least one U.S. state, Nevada, may vest initial ownership of patent rights with the inventor’s employer rather than the inventor by statute. Under common law, a “hired to invent” doctrine may affect patent ownership too, in limited scenarios. Some other countries also have laws that place ownership of an invention in the hands of the employer rather than the inventor. Though sometimes these laws establish only an obligation to assign. It is important to consider the location of the vendor, the location(s) of the individuals involved, and the location(s) were relevant activities took place to determine which jurisdiction’s laws will apply.
Joint development may also result in joint ownership. If the vendor and your business collaborate to jointly develop IP, by default they are each the owner of an equal and undivided interest in the entire IP right(s). Under the patent laws, in the absence of an agreement, co-owners can each independently exploit the invention without an accounting to the other (though all co-owners must join a lawsuit to have standing to sue an accused infringer). Under copyright case law, an accounting is due to the other co-owner(s) for profits arising from the jointly-owned work to prevent unjust enrichment. Joint development agreements or the like can set forth various ownership rights in advance and can also govern the handling of relevant pre-existing “background” IP.
All the above concerns also apply to vendors themselves. For patents, an invention by a vendor’s employee is generally not automatically owned by the vendor. And if a vendor retains a subcontractor or non-employee then copyright ownership would likely initially vest in the subcontractor/non-employee creating a given work in the absence of an assignment or valid work made for hire agreement. Therefore, in the absence of a warranty relating to the vendor’s ownership of IP and/or a no-subcontracting contractual provision, or intimate knowledge of the circumstances involved in the creation of the IP, there is no assurance that an assignment from the vendor (alone) will transfer all IP ownership to you.
“Work Made for Hire”
An important potential exception to initial ownership under U.S. copyright law involves oft-misunderstood “work made for hire” statutory provisions. There are two, and only two, ways to qualify something as a work made for hire under current law. First, a copyrightable work prepared by an employee within the scope of his or her employment is deemed authored by and thus automatically owned from the outset by the employer. But vendors and even “internal” independent contractors do not fall within that definition.
Second, parties without an employee/employer relationship can also agree in writing that a work will be a “work made for hire” but only for nine categories of uses of works enumerated in 17 U.S.C. § 101, which may not apply—parties cannot contractually expand those statutory categories.
A “work made for hire” is-
(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use [i] as a contribution to a collective work, [ii] as a part of a motion picture or other audiovisual work, [iii] as a translation, [iv] as a supplementary work [see definition below], [v] as a compilation, [vi] as an instructional text, [vii] as a test, [viii] as answer material for a test, or [ix] as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities.
Definition of copyright “work made for hire” from 17 U.S.C. § 101
The “work made for hire” doctrine is frequently misunderstood. In practice, it might even be single the most misapplied and confusing provision in all IP law. Simply because you pay someone to make or provide something copyrightable is not enough. And even having a contract that purports to establish something a work made for hire may not actually achieve that goal. It is fairly common for contracts to include language about work made for hire that does not apply and has no legal effect. Only things that meet the statutory definition of “work made for hire” are legally effective.
Because the statute defines categories of possible works made for hire by a somewhat arbitrary and limited list, which is based on “use” rather than the inherent characteristics of the work, it may be difficult to know upfront if something will qualify with certainty. For instance, if a vendor is specially commissioned to write some text, that text could qualify as a work made for hire if commissioned for use as an “instructional text” but the identical text would not if instead commissioned for use in a novel or on an advertising billboard. Moreover, whether vendor-created software source code qualifies as “a contribution to a collective work” and/or “a compilation”, and was intended to be used in that manner, may be far from clear, particularly before any work begins. And agreements, on their face, may not clarify these crucial facts.
A work made for hire not only affects who owns the work but also who is considered the author. This can potentially be significant for copyright termination rights. The persons(s) who actually prepare a work made for hire have no termination rights, whereas person(s) who assign rights to a work can potentially invoke terminate prior assignment transfers (or licenses) decades later.
For older works, created before the 1976 Copyright Act, a much different “instance and expense” test was applied to determine who is the copyright owner. Under that older test, which is inapplicable to recently-created works but can still apply to old works, the commissioning or hiring party may be treated as an “employer” and thus the “author” and copyright owner for things a vendor or outside contractor creates—regardless of the type of intended use of the work.
Trade Secrets
The rightful owner of trade secret rights will be the party that develops the trade secret information, by default. This means technical know-how, etc. developed independently by a vendor will normally belong to the vendor. It may be unclear whether relevant trade secrets were part of “background” IP that pre-dated a relationship with the vendor or not, which can potentially become a point of dispute later on. But a written agreement can be used to establish intended trade secret ownership from the outset.
On the other hand, confidential information developed by a vendor might lose trade secret status if shared with a client business (or others) without reasonable measures to maintain secrecy. This might limit or prevent a vendor from attempting to assert trade secret rights against its client and/or its client’s customers, particularly if there was no non-disclosure agreement (NDA) or other enforceable contract term.
Trademarks
U.S. trademark rights accrue to the party actually using a mark in connection with commercial activity to designate the source of goods and/or services. For instance, a marketing firm creating a brand strategy and identifying a proposed mark for a client would not obtain U.S. trademark rights because only the client business would use (or intend to use) the resultant mark in commerce. But many other countries have first-to-register systems, which might allow a vendor to register your mark. Ownership of non-trademark rights, such as copyright, in graphical logos intended to be used as trademarks might be a little more complicated and might raise other issues too, including a potential divergence in who owns the copyright and trademark rights.
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
Official fees for U.S. patent applications depend on the size of the applicant(s), plus that of any licensees, affiliates, or other associated parties. There are different fee rates applied to large, small, and micro entities. What follows is an explanation of how to determine if large, small, or micro entity fees apply.
Large Entity (Undiscounted) Status
By default, all applicants are subject to large entity official fees. Large entity fees are also called undiscounted fees. A for-profit business having more than 500 employees (including employees of affiliates) is a large entity. But, really, the best way to look at undiscounted or large entity status is to say that it applies whenever any applicant does not qualify for reduced fees as a small or micro entity.
If there are multiple applicants, undiscounted (large entity) fees must be paid if any of them fail to qualify for reduced fees as a small or micro entity.
Also, an applicant is required to pay undiscounted (large entity) fees if sufficiently connected with a large entity, such as through an affiliation, assignment, obligation to assign, licensing agreement, joint ownership, or shop rights.
Small Entity Status
Qualifying as a small entity allows for discounted official fees. Small entity fees are generally forty percent (40%) or two-fifths of large entity fees. Though not all fees or surcharges are eligible for a small entity discount.
To qualify for small entity status, the applicant(s) must each be a person, small business concern (having no more than 500 employees, including those of affiliates), or nonprofit organization (including non-profit universities and certain non-profit scientific or educational organizations). But an applicant is required to pay undiscounted (large entity) fees if associated with an entity that does not qualify as a small entity, such as through an affiliation (a potentially confusing circumstance explained further below), assignment, obligation to assign, licensing agreement (subject to certain exceptions discussed below), joint ownership, or shop rights.
In general, entities are affiliates when one has the power to control the other or a third party has power to control both. However, affiliation under that standard is assessed based on the totality of the circumstances. For instance, an affiliation with a single shareholder (or a group of shareholders) holding less than 50% of the voting stock can be present if that minority block of stock is large compared to other outstanding blocks of voting stock and provides “negative control” through veto power over an important aspect of the business concern. Accordingly, an affiliation with a venture capital firm or the like having sufficient control over a portfolio of multiple companies can mean that employees of all affiliate companies in that portfolio are aggregated together when assessing the 500-employee limit. As another example, an affiliation can be established when one firm relies on a second firm (including a customer) for 70% or more of its revenue in a longstanding relationship, due to economic dependence, meaning the employees of the second firm are counted against the total of the first firm. Contractual relationships short of ownership are also considered.
There are certain exceptions to the types of licenses that result in loss of small entity status. Firstly, a license or similar transfer of rights in the invention is only relevant if it involves a U.S. application or patent. A license involving only a related foreign application or patent would not affect U.S. small entity size status, for instance. Moreover, implied licenses to use and resell patented articles purchased from a small entity will not preclude the proper claiming of small entity status. Also, a use license to the U.S. Federal Government does not result in loss of small entity status.
A security interest (such as using a patent or application as collateral for a loan) does not result in loss of small entity status unless there is a default that triggers the security interest. An inventor or applicant retaining a firm to build a prototype of an invention for the applicant’s own use is not considered to constitute a license for purposes of the small entity definition.
Small entity status requires claiming that status, such as on an Application Data Sheet (ADS). However, there is no further certification or supporting evidence required.
If small entity status is lost, the applicant must submit a notification of a loss of entitlement to small entity status. However, once small entity status has been established, fees can continue to be paid at the small entity rate without regard to the change in status until the issue fee is due or any maintenance fee is due. In other words, an established small entity fee status remains in effect during ongoing examination of an application and discounted small entity fee rates are only formally lost at the time of issue fee payment (after allowance) or when the next patent maintenance fee is due.
Any attempt to intentionally establish inaccurate status as a small entity, or pay fees as a small entity, is considered fraud on the USPTO. Such fraud can make a resultant patent unenforceable. Also, the USPTO can assess a fine—even after a patent has issued—of no less than three (3) times the amount that was unpaid due to a false certification of small entity status.
It may be possible to correct errors related to payments at the small entity rate. If small entity status is established and small entity fees are paid in good faith, and it is later discovered that small entity status was established in error or through error the USPTO was not notified of a loss of small entity status, the error will be excused upon compliance with separate submission and itemization requirements plus a fee deficiency payment. The deficiency amount owed is calculated using rates in effect on the date upon which the deficiency is paid, not the fee rates at the time of the original (but deficient) payment. There is no time limit for such corrections.
A refund is possible, for fees timely paid in full (that is, at the undiscounted large entity rate) prior to establishing small entity status. However, such refund requests must be made within three months of the date of the timely payment of the full fee. Yet the costs and burdens associated with requesting such refunds may exceed the value of the refund in many cases.
Micro Entity Status
There are two possible bases for micro entity status: gross income basis and institution of higher education basis. The requirements for each are rather confusing. Micro entity compliance requirements are also more burdensome than for small entity status. Micro entity fees are generally half (50%) of small entity fees and a fifth (20%) of large entity fees. Though not every official fee/surcharge is eligible for a micro entity discount.
Micro Entity—Gross Income Basis Certification Form PTO/SB/15A
To qualify for micro entity status—gross income basis, the applicant(s) must each certify the following:
(ii) no applicant or inventor has been named as an inventor on more than four previously filed U.S. non-provisional patent applications (including PCT applications designating the U.S.)
(iii) no applicant or inventor had a gross income in the previous year of more than the “Maximum Qualifying Gross Income,” which is three times the median household income (as of September 12, 2023 that was $223,740 (USD) but that amount changes yearly), and
(iv) no applicant or inventor has assigned, granted, or conveyed, or is under an obligation to assign, grant, or convey, a license or other ownership interest to another entity that does not meet the “Maximum Qualifying Gross Income” limit.
For the previously filed application limit, applications resulting from prior employment are not counted against the total. So an applicant/inventor is not considered to be named on a previously-filed application for micro entity status purposes if he or she has assigned, or is under an obligation by contract or law to assign, all ownership rights in the application as the result of his or her previous employment—this exception does not apply to prior applications as part of current employment, however. Also excluded from the total are any PCT applications for which the basic national phase entry fee to enter the U.S. was not paid. Lastly, USPTO guidelines say that the filing of a future application will not jeopardize entitlement to micro entity status in any of the (up to five) applications already filed.
To qualify for micro entity status—institution of higher education basis, the applicant(s) must each qualify as a small entity and certify micro-entity status. But there are two possibilities. Each micro entity applicant (that qualifies as a small entity) must either:
(B) have assigned, granted, or conveyed, or be under an obligation by contract or law to assign, grant, or convey an ownership interest in the application to such a United States institution of higher education.
Micro Entity—Institution of Higher Education Basis Certification Form PTO/SB/15B
Importantly, the institution of higher education basis for micro entity status also requires that the inventor(s) be the applicant(s), not the university.
Both possibilities for micro entity status require that all applicant(s) qualify as a small entity. Small entity status might be lost if there is a license granted to a large entity, for example. However, the micro entity requirements do not exclude licenses for U.S. Federal Government use, meaning that an exception allowing certain applicants to qualify for small entity status does not apply for micro entity status. Also, the micro entity regulations do not explicitly refer to security interests, making it unclear if they are treated the same as for small entity status.
All applicants must still be entitled to micro entity status to pay a fee in the micro entity amount at the time of any official payments. Written certification is required to initially establish micro entity status. But more is required after establishing that status. It is further necessary to determine whether the requirements for micro entity status exist at the time each fee payment is made. Also, if the prosecution of an application under the gross income basis status extends across multiple calendar years, each applicant, inventor, and joint inventor must verify that the gross income limit for the requisite calendar year is met to maintain eligibility for the micro entity—gross income basis discount. And under the institution of higher education basis, each applicant, inventor, and joint inventor potentially must verify that a majority of his or her income comes from a U.S. institution of higher education. These requirements make micro entity status compliance more onerous than for small entity status. Unlike with small entity status, micro entity status can be lost during ongoing examination of an application.
Whenever micro entity status is lost, it is necessary to file a formal notification of loss of entitlement to micro entity status. As explained above, loss of micro entity status can potentially occur at any time. So a notification of loss of micro entity status can generally not be deferred and must be filed promptly (and before any official payments) when an applicant or inventor’s status changes. Small entity status may or may not still be available if micro entity status is lost.
Any attempt to intentionally establish incorrect status as a micro entity, or pay fees as a micro entity, is considered fraud. Such fraud can make a resultant patent unenforceable. Also, the USPTO can assess a fine—even after a patent has issued—of no less than three (3) times the amount that was unpaid due to a false certification of micro entity status.
It may be possible to correct errors related to payments at the micro entity rate. If micro entity status is established and micro entity fees are paid in good faith, and it is later discovered that micro entity status was established in error or through error the USPTO was not notified of a loss of micro entity status, the error will be excused upon compliance with separate submission and itemization requirements plus the fee deficiency payment. The deficiency amount owed is calculated using the date on which the deficiency is belatedly paid, not the fee rates at the time of the original (but deficient) payment.
There is no possibility for refunds of previously-paid fees based on later establishment of micro entity status. In this respect, micro entity status does not provide a window for requesting a refund of previously-paid fees as is possible for subsequent establishment of small entity status. Although if the fees were originally paid at a large entity rate a refund of the difference between undiscounted and small entity rates may be possible when micro entity status is establish, because micro entity status requires that the applicant also qualify as a small entity.
Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.
