This is a common question. Just because your company owns a patent doesn’t necessarily mean that you can practice what is covered by the patent. Sound crazy? It’s true. A patent is a negative right. Generally speaking, a patent gives the owner the right to preclude others from making, using, selling, offering for sale and/or importing what is protected by the patent during the term of the patent. However, a patent does not guarantee that the patent owner can make what is covered by the patent without infringing someone else’s rights. A simple example illustrates this point. Company A invents the first inflatable bicycle tire. Company B comes up with the idea of adding a valve stem to the tire so that the tire is more easily inflated and Company B is awarded a patent on a bicycle tire with a valve stem as it is a new, useful and non-obvious improvement to Company A’s patented tire. Then, Company B makes its first tire with a valve stem and receives a cease and desist letter from Company A alleging infringement of Company A’s broader (or more dominant) patent for just the tire. Company B has a problem as it has manufactured Company A’s patented tire. It doesn’t matter that it added anything to it (i.e., the valve stem) as Company A’s patent broadly covers any inflatable bicycle tire. Company B is not left without some leverage however. Should Company A desire to make a tire with a valve stem (because it is a much more compelling product for consumers), it could not do so without Company B’s permission. In the end, the companies would probably cross-license the use of their respective patents. How could this scenario possibly have been avoided? While many of the more dominant patents would have been uncovered during the patent application process for Company B’s patent, it is advisable to have a “prior art” search of existing patents conducted, especially if your company is thinking about actually manufacturing the product. The breadth of any existing patents can be assessed so that you can ensure that your company is not walking into a landmine. Another option is to commission a “freedom to operate” opinion by a patent attorney. In this context, the patent attorney will scour a sea of patents that are possibly relevant to your idea and will give you an assessment of how crowded the space is before you move forward with manufacturing your invention. This type of a search differs from a “prior art” search in that it is much broader in scope and will entail looking for any patents that might address any aspect of your invention vs. just looking for patents that are essentially for the same invention (e.g., looking for any patents that are for just a valve stem used in any context vs. conducting a prior art search to find patents on a tire with a valve stem). In the end, you just need to remember that a patent does not grant you the right to practice the patented invention. It allows you to prevent others from doing so. If you plan on practicing your invention, you should strongly consider hiring someone to conduct a review of the existing prior art (e.g., patents) so that you don’t run into later problems.
Clients often inquire about whether they need to purchase every variation (e.g., misspellings) of their domain names used for their websites in order to prevent others from infringing their trademarks. The short answer is no. Indeed, there is no requirement to purchase any domain names at all. Generally speaking, in the U.S., trademark rights are acquired through use. As long as you have superior trademark rights, you can approach owners of confusingly similar domain names about trademark infringement. However, this is not the most cost effective approach. It will surely cost a company much more to hire outside counsel to pursue any infringers than paying the annual fees for the most obvious variations of the domain name used for its primary website. Read a discussion on the issue. While it may not be feasible for a company to register a multitude of variations for all of the domain names that it owns, it should consider adopting this approach with regard to the primary domain names (e.g., the domain name used for its primary website) used in connection with its business. An ounce of prevention in this regard goes a long way toward minimizing future business distractions and keeping a company’s legal bills down.
As previously discussed, Apple developers allegedly received cease and desist letters from Lodsys based on the use of in-app applications. Now, Lodsys appears to have taken it to the next level by allegedly suing several developers for patent infringement in the ever popular Eastern District of Texas. Read what appears to be a copy of the Complaint. It will be interesting to see Apple’s reaction and/or next steps.
It has been reported that Lodsys has also pursued Android app developers over in app purchase technology. Such technology allows for a wide range of content (e.g., virtual content, such as additional levels, etc.) to be sold within the application.
Yesterday, the Federal Circuit clarified the standard for proving inequitable conduct in patent infringement cases in its Therasense, Inc. decision. Similar to how it addressed the burden of proof for fraud on the USPTO in the trademark context, the Court adopted a heightened standard for proving inequitable conduct. Here are several points to consider:
- it was a split decision so the Supreme Court may ultimately decide the issue;
- the Court noted that inequitable conduct allegations are a “common litigation tactic” and as such, adopted a more stringent approach in an apparent attempt to discourage this practice;
- the Court clarified the two requisite elements for proving inequitable conduct: materiality and intent;
- with regard to materiality, the Court rejected the USPTO’s broader view of materiality under its Rules as well as the previously used sliding scale approach in favor of a “but for” test– the USPTO would not have allowed a claim of the patent-at-issue had it been aware of the undisclosed prior art;
- the Court provided a carve out to the “but for” rule for “affirmative egregious misconduct” (which should be a ripe area for future litigation);
- with regard to intent, it must be shown that “the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it[;]”
- it is not enough to show that the applicant “should have known” about the materiality of the reference;
- inferring intent will become difficult as “the evidence ‘must be sufficient to require a finding of deceitful intent in light of all the circumstances'” and when there are multiple reasonable inferences, intent cannot be found; and
- absence of a good faith explanation for withholding a material reference will not, in and of itself, be sufficient to prove an intent to deceive.
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.
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.