Abandonment and Revival of U.S. Patent Application

October 26, 2012

By: Ivan T. Kirchev and J. Ryan Lawlis

The power to protect a company’s inventions with patents comes with the responsibility of seeing its patent applications the whole way through the Patent Office, from the initial filing to issuance and beyond.

The filing of a patent application begins a lengthy and sometimes harrowing dialogue with an examiner at the Patent and Trademark Office (PTO) who is responsible for making sure that the application’s invention is truly deserving of patent protection. If (or in reality when) the examiner does not agree that the claimed invention is patentable, the examiner will send the applicant a series of “office actions” rejecting the application or demanding certain amendments to the application. With each office action comes a turn of the hourglass, giving the applicant a definite window of time (usually up to six months) to submit a response. If the applicant’s reply satisfies the examiner, the examiner issues a “notice of allowance,” indicating that the applicant’s invention will be issued as a patent.

However, if the applicant makes a wrong turn during prosecution, the application may become “abandoned” in the eyes of the PTO. When a patent application is abandoned, the patent application is dead and anyone can practice the invention described in the patent application. Once it becomes abandoned, the application requires special petition procedures and payment of fees to revive, if it can be revived at all. If it cannot be revived, the application will never issue as a patent.

An application can become abandoned in one of two ways. First, the applicant fails to respond to a particular PTO notice within a specified time during the prosecution of the application. For example, if the applicant fails to reply to an office action within the specified time period, or files an incomplete reply, or fails to do whatever it is that the examiner has requested before the hourglass runs out, then the application will become abandoned.

Second, a patent application can become abandoned by a formal, express abandonment, requested by the applicant. Express abandonment is not necessarily a bad thing and sometimes is actually a step in the right direction for a company. Because an abandoned unpublished application will never become available to the public, sometimes abandonment may be a strategic decision on the part of the applicant to keep the invention out of the public eye.

When the application becomes abandoned, the applicant will receive a notice from the PTO. At that point, the applicant can either ask for reconsideration if he or she disagrees with the PTO decision, or petition for revival. In order to petition the PTO for revival, the applicant must file a reply that includes; (1) the reply that was originally required before the missed deadline, (2) a statement or showing that abandonment was respectfully either unavoidable or unintentional, and (3) the necessary fee.

If the applicant claims that the abandonment was unavoidable, it must show the PTO that the entire delay in filing the required reply from the due date for the reply, until the filing of a grantable petition pursuant to this paragraph, was unavoidable. “The entire delay” means every single day from the missed deadline to the submission of the petition for revival; the showing must include documentary evidence to support the claim of unavoidability. What qualifies as “unavoidable delay” is determined on a case-by-case basis by the “reasonably prudent person” standard.

Generally, to justify revival on the grounds of unavoidability, an applicant must either show truly dire and uncontrollable circumstances, or reasonable actions that unexpectedly resulted in abandonment. Examples of justifiable unavoidability include the death of the prosecuting patent attorney, the constant moving and financial burden of an application for the medical treatment of cancer, or any reasonable interpretation of a rule. What will not qualify for unavoidable grounds of revival includes miscalculation of the filing deadline, unawareness or misunderstanding of the rules of patent prosecution, or conflicts with personal life. Therefore, businesses should carefully consider their decision to abandon a patent application intentionally (e.g. by deliberately not responding to an office action). Most likely, this type of action will lead to an abandoned application that can never be revived.

If the applicant claims that the abandonment was unintentional, it similarly must state that the entire delay was unintentional. But because a petition claiming unintentional abandonment must merely contain a statement stating as much, rather than a showing, petitions claiming unintentional abandonment are generally less burdensome than claiming unavoidable abandonment. The Manual of Patent Examining Procedure (MPEP) acknowledges as much, stating that the PTO relies on the applicant’s duty of candor and good faith to accept the statement that “the entire delay in filing the required reply from the due date for the reply until the filing of a grantable petition pursuant to 37 CFR 1.137(b) was unintentional” without requiring further information in the vast majority of petitions. Furthermore, the PTO’s reliance on the face value of this statement is enforced by the applicant’s obligation to inquire into the underlying facts and circumstances before providing the statement to the PTO.

However, if the application is revived based on this statement, but then after the patent issues facts arise showing that the statement was false, the entire patent family can be rendered unenforceable on the grounds on inequitable conduct. This situation may arise, for instance, in the discovery of correspondence from the patent attorney to the inventor or the patent examiner indicating an understanding that the patent application will become abandoned, followed by the patent application actually becoming abandoned.

If the application is revived in either case, the applicant must submit a terminal disclaimer to disclaim the length of time that the application was abandoned, and the term of the patent will be shortened accordingly.

Finally, although the America Invents Act (AIA) will impact a variety of patent prosecution issues as it goes into full effect by April of next year, the rules related to abandonment and revival will remain unaffected.

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The European Patent Office: A Helpful Guide for Inventors

July 10, 2012

By: Ivan T. Kirchev

Before entrepreneurs and startups try to protect their intellectual property rights in Europe, they must have a basic understanding of the European patent system and the ways that they can obtain European patent protection. Although European patent prosecution can be a complex and costly process, companies should certainly consider creating a European patent portfolio.

Geographically, Europe includes 45 countries. The European Patent Office (EPO), is a unified patent office located in Munich, Germany, created by the European Patent Convention (EPC) Treaty. The EPC includes 38 member states plus two extension states. The EPO offers a centralized procedure for filing a European patent application, enabling an inventor to make one patent filing in the EPO {e.g. either directly or by entering a national phase of a Patent Cooperation Treaty (PCT) application} instead of 38 national applications. Upon grant, the patentee can register and file translations of the patent in any of the previously designated individual member countries. By filing through the EPO, the local patent offices in each EPC country will not need to independently review the application. Unless the inventor is a resident of one of the EPO member countries, the inventor must file in the EPO through a European patent agent.

The process before the EPO includes the following main steps: filing, search, publication, examination, grant, opposition (if filed by a third-party), and payment of fees (until grant). If an application contains a plurality of independent claims, which is often the case when the application was originally filed in the U.S., applicants are invited to limit the number of independent claims before the search in the EPO begins. The best approach is to have one independent claim in each category (e.g. method or apparatus/system). If the number of independent claims is not so limited, the search will be carried out on the basis of the first independent claim in each category.

The EPO performs a prior art search and issues a European Search Report and Opinion. The Search Report is published within 18 months of filing of the EP application. Since 2011, search results from other patent offices are used during the search by EPO. For example, the EPO can use search results, search opinions or examination reports (i.e. at least a relevant part of the reports concerning the search) submitted by the Applicant from various origins (e.g. Japan, Korea, U.S., PCT). No translation of the foreign search results is necessary and no copies of cited prior art documents are required. Applicants can submit these search results either upon filing the EP application, at the entry of the national‐phase (PCT), or as soon as they become available. The search results from other patent offices have no binding effect and do not replace EPO search or examination.

Applicants must request examination of the EP application within six months of the filing of the European Search Report. Further, the Applicant is obligated to correct any deficiencies noted in the search opinion when requesting examination. During examination, the EPO can issue actions with various rejections or objections to the application. The Applicant can amend the pending claims of the EP application in order to overcome any such rejections presented by the EPO. After the EPO issues a decision to grant a patent, an opposition by a third-party may be filed against the application. The opposition procedure before the EPOis an administrative, inter parties procedure that allows any European patent granted by the EPO under the EPC to be opposed by any person from the public (no commercial or other interest whatsoever need be shown). An opposition must be filed within nine months from the publication of the mention of grant of the European patent in the European Patent Bulletin.

The European patent confers rights on its proprietor, in each designated country in which it is registered, from the date its grant is published in the European Patent Bulletin. Translation of a granted European patent must be filed in some EPC Contracting States to avoid a loss of that right. Therefore, filing and prosecuting an EP patent application can be expensive and requires payment of various fees. For example, annuity payments to the EPO are required each year the EP application is pending. If the inventor registers the patent in any of the EPC member countries, the inventor must pay annuities to maintain the patent in that country as well.

The European Union has plans to introduce a Unitary Patent in the near future. As discussed above, applications for a European Patent currently need to be filed with the EPO in Munich and then translated and refiled in each applicable EPO member state. Under a Unitary Patent system, applications will only be translated into the three official languages of the EPO – English, German, and French – and they will not need to be filed in each country where the patent is to be recognized. Twenty-five EU member states will participate in the Unitary Patent system, with Spain and Italy currently declining to join.

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Custom Software and Technology Development. Do You Actually Own the Deliverable(s)?

March 14, 2012

By: Ivan T. Kirchev and Derek C. Stettner

I.  Introduction
When a business “hires” a vendor and pays for the development of custom code or another deliverable, a common belief is that the business or customer “owns” the deliverable provided by the vendor. After all, if a business pays for office equipment, furniture, an automobile and a myriad of other items, a transfer of ownership is part of the transaction. However, every-day experience is not an appropriate guide when dealing with intangible property. This article provides an overview of the ownership rights of customers that purchase information technology development services.

II.  Default Ownership Rules
Intangible property (such as patents or copyrights) is not transferred merely because possession of an item changes hands. Software and other deliverables are protectable under intellectual property laws and these laws govern the ownership and right to use such items. While other laws can be important, copyright law is the focus of this discussion.

As a general rule, ownership of a copyright initially vests in the “author” of a work. Copyrightable works include works of art, novels, screen plays, music, marketing materials, technical drawings, specifications and software code. Copyright exists as soon as an author reduces the work to a tangible form (such as creating a file with source code). In other words, when a work is written down or otherwise set in tangible form, the copyright immediately becomes the property of the author of the work. Only the author or those deriving rights from the author can rightfully claim copyright. To transfer ownership, the author must sign a written agreement that expressly transfers or assigns his or her rights to another person or entity.

III.  Works Made For Hire
There is an important exception to the general ownership principles discussed above. Certain works are classified as works “made for hire.” Works made for hire are defined by federal law in the Copyright Act. If a work is properly classified as a work made for hire, then ownership does NOT vest with the author. Depending on the circumstances, the author’s employer or the entity that has contracted with the author, owns the copyright in the work. The statutory definition of the term “work for hire” does not cover “hand shake” or other informal transactions where a vendor is paid money to create a work.

The statutory definition of a “work for hire” is as follows:

1.  a work prepared by an employee within the scope of his or her employment; or

2.  a work specially ordered or commissioned that falls into one of nine classes: (1) a contribution to a collective work, (2) a part of a motion picture or other audiovisual work, (3) a translation, (4) a supplementary work, (5) a compilation, (6) an instructional text, (7) a test, (8) answer material for a test, or (9) an atlas, provided the parties expressly agree in a written agreement that the work will be considered a work made for hire.

In cases where a business hires a vendor to create a deliverable, the vendor is an independent contractor and not an employee. As a consequence, the deliverables of the vendor will not qualify as a work prepared by an employee. In such circumstances, statutory work for hire rule applies only if the work falls into one of the nine classes and the parties enter into a written contract. While “software” is not explicitly listed in the statute, certain software might be classified as audiovisual works. However, other software may not qualify for any of the statutory classes. So, reliance on the work for hire exception is unwise. 

IV.  Suggestions
Because default ownership rules favor authors (not buyers) and work for hire exceptions to ownership may not apply when purchasing technology services, it is critical that buyers enter into a written contract with their vendors. The contract must include a specific provision that addresses ownership of any deliverables that the buyer expects to own. The contract should also include license provisions that specify the rights of the buyer to use any deliverables that are provided by the vendor. In the absence of such an agreement, the buyer will most likely end up with no ownership rights and only an implied license of uncertain scope to use the deliverables. Since the ownership and license provisions can be complex, consulting an experienced lawyer can help ensure that a buyer receives appropriate rights in exchange for the remuneration paid to the vendor.

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International Patent Protection

August 4, 2011

By: Ivan T. Kirchev

Startups, entrepreneurs, and small companies must try to protect their intellectual property rights both in the U.S.and overseas. Although international patent prosecution can be a complex and costly process, companies should consider creating an international patent portfolio. Having such patent portfolio will certainly make the company more attractive for U.S. and foreign investors. If a company already has pending U.S. patent application(s), the company can seek protection of its inventions outside of the U.S. by filing foreign patent application(s). Generally, there are two ways to pursue foreign patent protection.

A company can file an application directly in each desired country or region (i.e. in Europe, Germany, China, etc.). Most foreign patent applications can be filed based on an U.S. application. As a general rule, these foreign applications must be filed within one year of the U.S. filing date in order to obtain the benefit of that U.S. filing date. Cost of foreign filing depends widely on the country and includes filing costs and the corresponding patent prosecution fees of foreign associates handling the prosecution.

Alternatively, a company can file an international Patent Cooperation Treaty (PCT) application within one year of the filing date of the U.S. application. The PCT application provides, in essence, a placeholder and opportunity to file one international application and have the patentability of the claims examined under international standards. Currently, the PCT includes 139 member states including most industrialized nations. The applicant will receive a report regarding the patentability of the claims in about six months after filing. Eventually, the applicant will have to choose specific countries in which it ultimately desires to obtain a patent. The PCT is a patent “filing” system, not a patent “granting” system. There is no “PCT patent.” The applicant can start the application or “national phase” process in any particular country that is a member of the PCT right after filing the PCT. Alternatively, the applicant can wait to receive an international search report and written opinion of patentability. Filing through PCT, instead of directly in the member countries, allows an applicant to delay “national phase” filing in these countries up to 30 months from the U.S. filing date (31 months in some cases). Generally, if company would like to have one or more patents in hand as soon as possible, it should start the national phase immediately after filing the PCT. Alternatively, if a company would like to defer costs and see what the patentability report indicates, waiting is a reasonable course of action.

There are many benefits to filing a PCT application. A PCT filing provides one application, in one language, filed with one Office that defers multiple foreign filings until entry into the national phase. The PCT application permits last-minute foreign filings and provides an international filing date. The applicant can make amendments to an application that will be in effect in all designated elected states. In addition, the applicant can better plan expenses for the national phase filings and thus can control its overall costs.

On the other hand, at the time of filing the PCT application, the applicant may also want to file national applications in countries not included in the PCT, which is a relatively small number of countries. Costs and fees for filing a PCT application are estimated around $3,000-$4,000.  Nationalizing the PCT application in the countries selected by the applicant adds additional costs which vary between the PCT member countries. The highest filing cost is with the European Patent Office (around $9,000), but a European application will give the applicant the opportunity to select many countries in Europe. Filing in other PCT countries may cost around $500-$700 per country (these are just filing costs). Prosecution fees and maintenance fees add extra cost to the application.  Below is a link to a list of the counties participating in the PCT.

http://www.uspto.gov/web/offices/pac/dapp/pctstate.html

Therefore, a company should determine its goals with respect to foreign patent protection and decide which of the above-identifies international filing options works best for its objectives and budget.

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Patent Rights and Attracting Investors

May 25, 2011

By: Ivan T. Kirchev

It is very important for startups, entrepreneurs, and small companies to protect their intellectual property rights. Creating a patent portfolio (or even several pending patent applications) will improve the company’s ability to attract venture capital financing. Typically, investors are faced with different uncertainties when they evaluate a startup and they often rely on patents (or pending patent applications) as indicators for calculating the company’s potential. For that reason, startups, entrepreneurs, and small companies have to understand not only the patent application process, but the patent assignment processes as well.

Correctly assigning the patent rights of an invention to the company should be as important for a startup as is filing patent applications or acquiring patents for its core technology or business model. A patent assignment is a transfer or sale of the entire interest in a patent. In other words, all rights that were originally granted to the patentee will transfer to the assignee. Generally, patent assignments can be made during the application process, or after a patent issues. It is recommended that patent applications be immediately assigned from the inventor(s) to the company so that the company can control the prosecution of the application and can add the patent (when issued) to its portfolio. Although recording an assignment with the USPTO is not required, recordation can protect against confusion as to the true owner of the patent.

A company’s patent portfolio is crucial to its ability to attract investors, and therefore a company should make sure that all patent rights are properly documented and assigned to the company. Before investing in a startup or a small company, investors typically conduct due diligence to investigate ownership, chain of title, product marking practices, maintenance fees, and litigation issues relating to the company’s patents. Startups, entrepreneurs, and small companies should be aware of some ownership issues related to their patent rights. There are several issues that can impact a company’s ownership of patent rights:

  • Incorrectly drafted employment contracts. Generally, employment contract bind an employee to assign all inventions and discoveries within the scope of employment to the company. However, some employment contracts fail to include such provision.
  • Absence of employment contracts, and rights of co-inventors. In the absence of an employment contract or an agreement with each inventor addressing the assignment of an invention, each co-inventor or prior assignee retains the right to practice, and perhaps assign, the invention without compensating or even notifying the other co-inventors or assignees.
  • Rights of former employers. Many startups are founded by former employees of other, typically larger companies. If this is the case, the prior employment contracts of the founders and inventors of patents and applications should be examined for provisions that allow a former employer to assert rights in the company’s IP or provisions that limit the former employee’s ability to compete in its technology and market areas.
  • Rights of universities. Because many startups are based on technology that is first developed by professors or graduate students, agreements between universities and inventors of that technology should be studied to ensure that a university cannot assert rights in the company’s IP.
  • Rights of the government. A company funded by the government should be aware that the government might retain rights in a patented invention resulting from the government support.
  • Rights of spouses. When a company is owned by both spouses, it is very important to decide and understand who owns the majority shares of the company and, therefore, rights to the company’s IP. For example, if the spouses get divorced the person who owns more shares of the company’s stock can ultimately receive ownership rights of the patents and the entire company.

In summary, potential investors not only evaluate the intellectual property assets of a startup (e.g. patents, etc.), but they also examine the assignments of the patent rights of these companies to ensure that the core technologies of these startups are protected with patents correctly assigned to the companies. An entrepreneur or a startup company should accordingly be aware of the importance of intellectual property rights protection and proper assignment of these rights.

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