Software Developers Beware

It has been interesting to follow Lodsys’ (a patent holding company) pursuit of Apple app developers for patent infringement.  It has been reported that Apple took a license to the patent-at-issue from Lodsys and now, Lodsys is sending cease and desist letters to various Apple app developers.   According to various sources, Apple allegedly required use of the allegedly infringing technology by the developers so certain groups are calling on Apple to indemnify the developers.  Read the Electronic Frontier Foundation’s take on the issue. What is the take away from this scenario? If you are developer and are required to incorporate some sort of technology into your software app, it would be smart to try to negotiate some sort of indemnity provisions to avoid the situation described above.  While this may be difficult as the developers are not often in a position of power to negotiate such terms, they need to be aware of what may transpire without such protections in place.

FTC Tip For The Day….

Besides telling the truth, what’s the one thing that a company can do to minimize its chances of getting an inquiry from the FTC?  Provide a no questions asked, 100% money back guarantee and honor it.  Here’s why.  Generally speaking, the FTC brings most of its cases with the goal of getting restitution for consumers. If there are no damages (i.e., everyone has been refunded), then it reduces the incentive for the FTC to bring a case.  Further, if everyone is happy, there won’t be any complaints to the FTC. Thus, unless you are making outrageous health claims to children, for example, it is less likely that you will wind up on the FTC’s radar screen.  Responding to a FTC investigation will surely cost more than the $39.95 refunded to a consumer. So to sum it up, always tell the truth and provide full refunds. You should have less worries.

But You Didn’t Know About It So You Shouldn’t Disclose It….

An issue that we have dealt with over the years is whether information disclosed in a published patent application can be claimed as a trade secret. The argument is that although the information is in the public domain, the receiving party would never have found it. The Fifth Circuit recently addressed this issue. Read a good discussion of the case.  It is not surprising that the Court concluded that information contained in a published patent application was not protectable as a trade secret under Texas law. However, there is a lesson here. Companies should make sure that their NDAs contain carve outs for any information that is ultimately disclosed to the public by the disclosing party. This way, it will make it harder for the disclosing party to claim that something that it disclosed to the world in its patent application is somehow a trade secret.  Further, they should conduct their own investigation by searching the USPTO’s website for any relevant, published patent applications/patents owned by the disclosing party and should get representations from the disclosing party that the information, which is being disclosed, has not already been publicly disseminated and is not the subject of a patent application.  

Your Competitors Are Making Outrageous Claims So Why Can’t You?

As I tell my kids, it doesn’t matter what everyone else on the playground is doing, if you get caught, there may be serious consequences for you. The FTC takes the same approach when reviewing substantiation for companies’ claims. It doesn’t matter what anyone else is advertising in the industry. The FTC will want to see what substantiation you have for your claims.  Here are six issues that I commonly saw with studies relied upon by companies:
  • The study is on animals and not humans. It is difficult to convince regulators that results shown for mice necessarily translate to humans. 
  • The study is on humans, but does not involve the audience that the advertising targets. For example, the claims in the advertising pertain to ordinary people gaining muscle and the study shows an increase of muscle mass for burn victims, who inherently recover faster and achieve quicker results than ordinary individuals due to their pre-existing condition.
  • The study is on the correct audience. However, the product-at-issue does not have anywhere close to the amount of the active ingredient in it as was used in the study.  Sometimes the differences can be orders of magnitude.
  • The study is not on your product, but just on an ingredient in your product. As many products also have other ingredients, it will not be uncommon for regulators to inquire about whether any beneficial results may be offset by any potentially negative effects of the other ingredients.
  • The advertising promises instant results and the study involved weeks of use before any results were achieved.  For example, the study is based on six weeks of use and the advertising promises “immediate” or “instant” results.
  • The study does not follow generally accepted scientific protocols. For example, no control group or placebo was used in the study, thereby making the results inherently suspect.
What is the upshot? As it’s often costly and time consuming to perform a study on your actual product, it is important that you understand the strength of any studies that you rely upon to support your advertising claims. Just because others may be citing the same studies shouldn’t be the end of the discussion for you as it will unlikely make a difference to any inquiring local, state or federal regulator.

Five Common IP Misconceptions

In my practice over the last decade, I have seen companies fall victim time and time again to the same IP pitfalls.  Here are a five things to keep in mind when trying to build and protect your brand or technology: 1)  Just because a domain name is available with a registrar does not mean that you can use it without consequence.  2) Owning a patent does not guarantee that you can practice the invention covered by the patent. 3) Just because you paid an independent artist to create your logo doesn’t mean you necessarily own it. 4) Sending a simple cease and desist letter is not without risk. 5) Patents may not always cover what they appear to state as they sometimes contain significant printing errors. I will explore each of these topics in more detail in upcoming posts. Stay tuned.

The USPTO Giveth And Taketh Away

The USPTO announced earlier this year that it would be implementing a “Track One” expedited patent examination in early May in which applicants could pay a fee and receive accelerated examination of their patent applications. This was particularly appealing for tech-driven applications as the normal process can take years due to the backlog of applications and there was no requirement of discussing any relevant prior art (as is required in other types of accelerated review).  It has been reported that the USPTO announced today that its Track One program has been put on hold due to budget cuts.  Read a good discussion.  Many companies will be disappointed.

Take Your IP To The Next Level….

Companies often do not seek a coordinated strategy when approaching their IP and regulatory needs. Can this come back to haunt a company? Perhaps. We’ve all seen the following scenario. Many companies choose scientific-sounding names for their products to create an air of credibility with consumers. These products allegedly have been developed after or are based on “years of scientific research.” Understanding the value of a registered trademark, these companies instruct their counsel to file a trademark application with the U.S. Patent and Trademark Office for the product’s name.  After receiving an office action indicating that the mark is rejected because the mark is viewed as being descriptive, the company counters that the mark is fanciful and really doesn’t have any meaning in order to get the registration. Then, there is an FTC investigation over substantiation for some of the efficacy claims about the product. The company could be in a predicament. It needs to show the FTC that it has “competent and reliable scientific evidence” for its product’s claims.  However, it has now admitted to another government agency that it made up the name.  While this is certainly not damning evidence of deception, this may not help the company’s chances of convincing the FTC that it has complied with the law. You can see how this innocent act may be viewed by the FTC.  Not only did the company make up the suspect claims, it even made up the scientific sounding name to further deceive consumers. Certainly, companies should not forego making valid arguments to get trademark registrations. However, they should make sure that nothing is being said that could later detract from any arguments that they need to make should an FTC investigation arise.  Companies should harmonize their IP and regulatory strategies in order to minimize any later issues.