U.S. “First to File” Patent System and Strategic Use of Provisional Patent Applications for Small Businesses

October 24, 2012

By: Jeffrey D. Peterson

On March 16, 2013, the United States will transition to a “first to file” system for filing patent applications. Instead of awarding a patent to the first person to invent an item, the U.S. will award patents to the first person to file a patent application on the invention. The shift to a “first to file” system is intended to simplify and streamline the current system which can invite protracted litigation between competing inventors. The switch would also put the U.S. in harmony with patent offices in Europe, Japan and elsewhere, allowing them to share information and potentially ease the strain on overburdened patent examiners worldwide. Critics of the new change in law, however, say that it will give big companies a huge advantage over start-ups and small inventors. Large corporations have deep pockets and numerous lawyers to write up and file patents they say, and the new law will touch off a race to the patent office instead of a race to innovate. Under the old law, an inventor could establish that he was the first to invent by showing proof of such an invention by way of various types of evidence (lab notebooks, emails and early prototypes) to establish the date of invention. With the new change in the law, such evidence will not be allowed to be introduced and the date of invention will solely be based on the filing date of the patent application. Thus, the importance of preparing and filing a patent application as soon as possible is now more critically important than ever. Companies will now need to investigate the possibility of filing a patent application on any possible patented intellectual property they hold as soon as possible in their business endeavors.

One tool to allow for more efficient filing is the use of a provisional patent application. A provisional patent application is a form of patent application that establishes an early filing date, but does not mature into an issued patent unless the applicant files a regular non-provisional patent application within one year of the filing of a provisional patent.

A provisional patent application includes a specification (i.e. a description and drawings of the invention) but does not require formal patent claims, formal drawings, inventors’ oaths or declarations or other formal paperwork that is normally filed during the prosecution of a utility patent application. The government fees to file a provisional patent application are significantly lower than a utility patent application fee required to file a non-provisional patent application ($250 for a provisional vs. $1260 for a typical utility application). The use of a provisional patent application is a useful tool to establish a priority date of invention, especially when there is insufficient time to generate a complete non-provisional patent application.  The applicant will then have additional time (12 months) in which to file a formal U.S. non-provisional as well as any foreign patent applications on the invention.  All such filings will, however, need to be filed by the end of the twelve month period following the filing date of the provisional application.  The provisional patent application will become a more and more useful tool for small entities to file inventive disclosures of their intellectual property quickly and more cost effectively as the new “first to file” system goes into effect.

If you would like to discuss how the changes in the upcoming change in the patent law effect your business, please feel free to contact Jeffrey D. Peterson at jdpeterson@michaelbest.com.

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Social Media: Reap the Rewards While Avoiding the Pitfalls

March 8, 2012

By: Jeffrey D. Peterson

Facebook, Twitter, Linkedin and other social media sites are becoming standard tools for businesses to market their services and communicate with their customers. Social media sites can be powerful tools for companies to promote their brands, provide word-of-mouth marketing, and allowing direct communication between the company and its customers. While social media sites provide many potential benefits, they also come with associated risks that companies should be prepared to identify and manage.

The first thing a company should be aware of is to make sure its specific social media pages are compliant with the terms of use and privacy policies of the social media providers that govern the use of the site. Most social media sites have prohibitions against posting material which infringes the intellectual property of others, defamatory material or material posted by minors. Companies should make sure that its own postings and materials posted on such sites are compliant with these terms. Companies should monitor usage on social media platforms, especially when customers are allowed to post to the company’s social media pages, to insure that the customer is also complying with the terms of usage. Additionally, monitoring of the company’s social media pages should be done to examine if any posts contain defamatory or negative statements about the company on the page.

Another pitfall to be aware of are testimonials and endorsements a company may use or post on their social media site. The Federal Trade Commission has indicated that companies are subject to liability for failing to make material disclosures relating to any endorsement relationship between an endorser or testimonial and the company. Therefore, if the endorsements or testimonials on a social website are in some way controlled or sponsored by the company this relationship needs to be disclosed.

Another area in social media that companies must be vigilant of is the social media activities of the employees of the company. Apart from simple efficiency losses, due to personal use of social media by employees during work hours, companies should be vigilant about possible leaks of confidential or proprietary information by their employees about company practices, policies and plans on these websites.

A helpful tool for companies to manage their usage of social media, is to develop a social media policy for the business. The social media policy should serve a number of functions. First, it should provide guidelines on how and what type of material the company should distribute on the different social media sites. Secondly, it should provide a monitoring protocol for the social media sites of a company to make sure that the sites are in compliance with the terms and conditions of the site providers, and that the third-party material posted to the sites are also in compliance. Thirdly, the policy should have an action protocol in place for dealing with non-compliant posts of third parties on the social media sites, including a simple request from that can be sent to the social media hosts to take down any non-compliant posts, and canned statements to the users of such sites addressing such non-compliant activity (such as defamatory statements or use of infringing intellectual property). Fourthly, a company should have a protocol in place for dealing with harmful statements made about the company or its products on the website. Fifthly, a company should have policies on its employee’s use of social media sites in relation to company information to protect against the inadvertent release of confidential information

By developing a social media policy and how a company handles its own social media, monitors the social media of others with respect to its company and how its employees deal with social media, a company can manage and avoid all the pitfalls associated with social media activities.

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What’s in a Name? Protecting Your Start-Up Trademarks

September 28, 2011

By: Jeffrey D. Peterson

Most new business ventures are started around a new idea. The business focuses on a new product, a new service, something that will set the business world alight with the new idea and creativity that the business will bring to the marketplace. The initial focus of new companies, rightfully so, is on the development of these new products and services and how to best to commercialize them in a competitive marketplace. Unfortunately, businesses often tend to neglect another key aspect of their company’s property, namely, the intellectual property they have in the name of their company or products themselves. Oftentimes, the initial inquiry around a new company’s name in today’s markets is whether the domain name is available for the name. Companies often fail to do more in-depth trademark clearance searches on both the company name and any new product names which will be used in the marketplace. Just because a domain name is available for use does not mean the company is free to use that name as the name of their business and/or their products. Other parties may have trademark rights in that name, even if they do not have the domain name registered. Selecting a trade name for a new company that is both available and strongly protectable can lead to an invaluable asset for the company as it grows in the marketplace. If a new company does not do the appropriate due diligence on the selection of their name it can lead to painful and expensive name changes of either the company and/or products down the road if problems arise.

Choosing a name
Oftentimes, a new company will choose a name which is somewhat descriptive of the new goods and services that they will bring to market. For instance, “Quality Lenses,” or “Optic Technologies” may provide the commercial impression to consumers that the company is related to optical lenses but the marks themselves are so descriptive that any proprietary enforceability around such trademarks would be relatively weak. This is because, in general, descriptive marks are not available for trademark protection. Only when a mark has  been used for a long period of time and acquired so-called “secondary meaning” will courts find that descriptive marks, i.e. marks which describe a characteristic of the product or services, are afforded trademark protection. The term “secondary meaning” stands for the principle that even though the mark is descriptive, the mark has been so widely used for such a long period of time that consumers recognize that the mark has another meaning beside the descriptive one, namely, it is an indicator of a specific source for the good or service associated with the mark. Therefore, some of the best marks for choice of the name are fanciful or arbitrary marks that do not relate to the product or good themselves. “Apple” for instance has nothing to do with computers or electronics. Another good choice for a mark would be a mark that is suggestive of the good or service associated with it. “Greyhound” for bus transportation is suggestive because a consumer may envision that the bus travels as fast as a greyhound dog. Selecting a mark that is either arbitrary, fanciful or suggestive, but is not directly descriptive, can provide a business name or product name in which a company can strongly enforce if any competitors enter the marketplace using the same or similar brand.

Clearing the proposed name
It is important for any new company to make sure that the proposed name they are choosing to do business as is free and clear to use. This clearance must not only be considered for the goods and services the business is planning on offering immediately but for any future expansions either in goods or services and/or geographical areas that the business is planning on expanding to in the future. Certainly, checking domain name and corporate name availability at the corporate name registration level is appropriate. Additionally, a company should make sure no other state trademark registrations or federal trademark registrations have been filed or registered on the same or similar mark. Additionally, a search should be done to determine if any local businesses in the geographic area the company is operating in have been conducting business or offering products using the same or similar mark. If such pre-existing companies have been conducting business under the same or similar mark, they may have common-law protection for the mark, even if they don’t have a trademark registration. Working with legal counsel to perform a legal clearance search of the names is something that should strongly be considered by any new company to make sure that their proposed business and product names are available for use.

Protecting the trademarks
Once a company has selected their business and product names, and have cleared them in a search, the next step is for the company to decide how to protect their new brands. Fortunately, unlike patent protection, some level of trademark protection is available without undertaking any additional legal filings or expenses. Just the mere act of using a business or product name in public, in association with marketing goods or services, is enough to obtain common law trademark protection for the mark. Common law trademark protection is a right under state law and gives a company proprietary rights to prevent others from using the same or similar mark in the same geographical areas that the company uses the mark. Obviously, the weakness of common law protection is that the protection would only encompass the geographical areas that a company has actually done business in. In order to obtain more robust protection, a company can register their trademark with either the state or the federal government. The rights granted with state trademarks vary from state to state, but generally provide the registrant similar protection to common law protection. Federal trademark registration, however, gives presumptive nationwide rights in the use of a company’s trademark once it is registered. Once a trademark has been registered with the United States Patent and Trademark Office the owner of the registration is, with few exceptions, the only one who may use the mark in the United States in conjunction with the goods and services for which it is registered for. Trademark registration may be applied for at any time – even before the mark is in use. This allows the company to reserve rights to the mark before the associated company name or product is introduced. Before a final registration can be secured, however, the mark must pass through the registration process and be used. The registration process can take upwards of eighteen months. If a new company has enough financial resources it is always a good idea to try to establish a federal trademark registration at least in the company’s name to provide ample opportunities for that company to expand on a nationwide basis while preserving their right to use the mark and enforce it against other parties.

Best practices
No matter how small a new business is, they should always take the time to perform a clearance search in some aspect of the business name to make sure that there are no overlapping domain names or trademarks which would place restrictions upon how the company gets to use its name in commerce. By performing a clearance search and picking a strong distinctive name, a new company should not run into any major issues which prevent them from using their brand in the future and will provide adequate protection to prevent others from using any brands developed by the company. No company ever wants to have to change its business name and being forced to change something as important as the company’s name or the name brands of that company can easily spell the end of a new business.

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Does Your Company Really Own Their Own Intellectual Property?

May 11, 2011

By: Jeffrey D. Peterson

Oftentimes, a new company’s most valuable assets are their intangible ones, namely, their intellectual property. It is in leveraging this intellectual property, whether to gain market share, attract investment, etc., that often times can make or break a new venture. An often critical error made as a new business grows and adds new employees and works more with collaborative partners and contractors, is that the intellectual property which the company often believes it still owns can get actual start to “drift” from the company with ownership rights starting to vest with such new employees, partners and contractors.

Common assumptions that new business often have is that “My company paid for the work and so it owns the IP rights” or “I have an NDA with my contractor and so my company owns the rights” or “anything my employee creates for me is owned by the company.” All of these assumptions can be fatally incorrect, and can lead to a loss of ownership interest in intellectual property that is created for the company. What adds to this confusion is that different laws and rules apply for different forms of intellectual property.

For instance, under copyright law, if an employee creates an original work of authorship within their duties and scope of employment, the ownership of the copyright automatically vests in the company. However, if an independent contractor creates an original work of authorship for a company, such as a logo, software application, etc. the copyright would automatically vest in the author of the work, namely, the independent contractor. Thus any independent contractor that does work for a company would own any copyrights that they would created for the company, apart from any physical deliverable they may provide to the company, absent a specific agreement that the work be assigned to the company or be a work “made for hire” (applicable only under limited circumstances).

With respect to patent rights, all patent rights are personal. The rights in a patent rest independently with the inventor of the patent, who must be named on the patent applications by law. Therefore, individual employees and independent contractors which create patentable material will own the patents outright absent a contractual agreement with the company to transfer such patent rights to the company in exchange for the company either employing them or paying them to create a deliverable on which the patent is based.

Any trade secrets a company has, if maintained by their employees as confidential, will be maintained by the company as a trade secret. However, any independent contractors that the company works with which bring trade secrets to the company may potentially still belong to the independent contractor unless specifically transferred to the company. Additionally, potential trade secret protection for the company can be lost if no reasonable means of protection are taken to keep such information secret when working with an independent contractor. Such a reasonable form of protection would be to use a confidential agreement with the independent contractor,

It is critical that a company manage its relationships with its employees and independent contractors such to maintain and control ownership of its intellectual property. For instance, all employees that the company hires should sign an agreement that any intellectual property that they create in the course of their employment with the company, is owned by the company. The employee should also agree sign any subsequent legal documents necessary to perfect such assignments to the company. Likewise, when a company works with an independent contractor, such as a web designer, graphic designer, software vendor, etc., the company should make it explicitly clear by contract that they either own any intellectual property rights embedded in the work being done for them, or at least secure from the independent contract a license to utilize such intellectual property rights without having to pay additional monies to the independent contractor down the road.

The bottom line is, if your company is paying for the work, it should make sure that it owns the IP rights embedded in such work by using a formal written contract, either with the company’s employees or with any third party contactors.

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