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A few months back at a medical device investor conference, an Intellectual Property (IP) lawyer basically said:
If a LARGE company steals a SMALL company’s IP
– and SMALL sues –
SMALL will lose most of the time because it doesn’t have deep pockets, bandwidth, and counsel to defend it.
That stuck with me.
So I asked my IP lawyer Doug Limbach (http://medgroup.biz/Doug) for his perspective. And he replied,
“Your scenario, where LARGE usurps SMALL, is rare. Usually LARGE licenses, partners, or acquires SMALL. By and large, the U.S. patent system works the way as intended and LARGEs rely on SMALLs for breakthrough technologies.
That said, SMALLs must take a close look at the ideas that came before them and clearly define what they consider theirs.
If SMALL wants to keeps others out (and avoid being sued for infringing others’ IP), the general options are:
1) File patent, trademark, and/or copyright applications;
2) Keep the technology a trade secret; or
3) Make the company’s technology fully public so no one is able to obtain patent protection covering it.
The second and third options typically cost very little, but often don’t provide viable alternatives for protecting a technology. Conducting a freedom to operate patent search and analysis is also a good idea to ensure the company has actually come up with something new. Just because something didn’t made it to the market doesn’t mean it is novel and unpatented.
A fairly recent shift in the patent ecosystem is the rapid rise of non-practicing entities (NPEs) or patent aggregators, pejoratively known as patent trolls. These often develop no products or technologies, but acquire patents from companies that no longer can use them.
For example, when a company changes direction or dissolves, some or all of its patents may be sold to an NPE. The NPE will then use these patents to extract licensing fees from companies that are developing products in the area of the NPE’s patents.
NPEs play useful roles when purchasing a dissolving company’s patent assets, but often impede progress in a technology area when collecting royalties from companies who utilize and advance the technology.
New legislation is proposed to reign in NPE abuses but these proposals may weaken the patent system and harm many stakeholders.
For example, fee-shifting legislation proposes to have a losing party pay the legal costs for both parties. However, such a change could make it even more risky and cost prohibitive for SMALLs to legitimately assert their patents.
We’ll see if the proposals move forward in their current form.”
>> For the group, what are your greatest IP concerns?
Doug will cover this and related topics during his 10x Medical Device Conference talk on May 5 in San Diego.
If you want to attend our annual meeting, register now.
Only 57 seats remain.
Make it a great week.
P.S. Got a question for Doug? Ask him at http://medgroup.biz/protect-intellectual-property
If I was an emperor an attempt to patent software would be punishable with public whipping… One can dream…
About that cyclone vacuum cleaner … I find the traditional sucker good enough and much cheaper, thank you very much. Does not look very cool but it is hidden for most of the time in the closet. Sometimes this invention stuff is somewhat overblown …
We all know the difficulty in patenting. However not everything is bad and impossible. We have to accept the status quo and concentrate our energies on finding viable strategies. Trying to change the world through the political process is waste of time, very costly and unpredictable. Maybe we should swing the discussion in this blog towards strategies that protect inventors and developers.
Maybe we should register patents in countries such as China and to export to the USA? Or we should register Trade Marks, Design and hid know how into EPROMs. Maybe a smart lawyer can come up with protecting IPR through some other laws to create competition to UPSTO? Maybe we should develop only niche products with small target markets but high margins? How would you solve the status quo problem?
If we talk Patents we also have to talk financing. Serious product development takes years and in most cases product developer runs out of money to pay patent maintenance. (Read CV of Dyson who developed the cyclone vacuum cleaner). Maybe we should talk about where we find equity investors that can be trusted and what to do to build trust? You certainly don’t find suitable investors in a shark tank. You would increase rate of success by approaching successful business people that have a similar background and to make it clear at the start that you don’t accept game playing.
Don’t you think we should move forwards with constructive suggestions?
Sure John Olivier is far from a civil, detailed and professional discourse on the subject we should have. He is a comedian after all.
1. That we as modern and hopefully decent society participate and support such events!
3. That we as serious creators/ developers don’t have the guts to search and find sensible net-wealth people that have money and interest to invest directly in new products/technologies. Having BAs, VCs, Consultants, Mentors present will increase the risk of conflicts exponentially because they are all OPMs that don’t have money. They aim to earn their money by issuing crazy term sheets and by playing investors against entrepreneurs. Entrepreneurs have to be good persuader and should never participate in a game of divide and rule.
Last Week Tonight with John Oliver: Patents (HBO) – YouTube ow.ly/LTeOs
One point to bear in mind is that when you are filing a PCT application you are filing an application not only for the U.S. but also for Europe and elsewhere, so it ought to be written in a way that is sympathetic to the laws and practice in key jurisdictions if it is to give the best results down the line.
Doug Limbach, JD
Burrell (Bo) Clawson
Patents are only of initial value as a deterrent and for gaining interest from investors or companies who would buy out the small company after the patents issue.
One item not mentioned here yet are foreign patent applications which must be filed within a short 18 months after the US patent application is filed.
Getting significant coverage in key industrialized countries becomes a major expense for a startup. This is exactly why a startup can benefit so much by getting investors early so the capital is available to protect what you develop so you can cash out or earn money later at a greater rate by protecting your product’s exclusivity.
As for the software being copied ,,, It is one thing to take a software verbatim and repackage it under different name, that is theft. It is another to take a structure construct and use it to solve another problem. Software has roots in mathematics and it should operate more this way: you cannot patent a theorem and this is the base of progress in math. And still it did not prevent from mathematicians, academics and industry to make respectable profits.
The biggest blow to the federal and academic research is the budget starvation perpetuated by shortsighted and frankly not very sharp Congress and succession of administrations who do not have understanding of the value of basic research.
Doug Limbach, JD
The previous Director of the USPTO actively solicited, listened to, and acted on comments from all stakeholders, including SMALL companies and independent inventors, and I’m hopeful the current Director will too.
Burrell (Bo) Clawson
Negotiating is a specialty and though people “trust” their attorney, a lot of attorneys are not good at negotiating or advising on negotiating.
Patent licensing offers a number of options to negotiate and they should be explored in all the permutations before you go in to negotiate:
* license rates, fixed or declining,
* Time period for patent to expire or possibly competitors to do a workaround,
* Future upgrades with added patents automatically being included in the license and extending the time for payment of fees,
* Trade secret part of implementing the patent (could be more valuable than the patent),
* Join Forces: Cooperative development between companies for the next gen patents to gain seriously extended coverage.
* Pressure tactics: “Look, a NYSE company like yours needs exclusivity. I can license that. If we fight, we may just have to put our next generation inventions into the public domain and you won’t be able to exclude competitors from using those. The alternative is we work together or competitors get an advantage.” NYSECo will say “But you wouldn’t get anything out of public release.” and you can state back, “But NYSECo will then be saddled with more competitors.”
The point is to obviously be able to offer the larger company a deal on a compelling value point or points for them so they can see obvious long term value and sell a deal to their executive suite.
There are dozens of ways to skin a deal. Write them down and plan each scenario out.
See Apple/Samsung patents war, most of the “patents” are issued preemptively, I don’t know how many stoop to the levels of “a rectangle with oval corners”, but many I saw as just plain ridiculous.
But this are two giants pummeling each other and do not own stock of any of them (at least directly…), so I care less.
However patent trolls showing on a door of a successful start-up with bogus broad “patents” when the company went thru sweat and blood to finally reap rewards is a different story. The so called “inventions”, laying and collecting dust for years, with nobody actually bothering to implement them, usually containing such earth shattering “innovations” like “a system for an Internet-assisted backup” without any other substantial supporting technology or claims? (see Carbonite case, this one a jewel, the guy who patented it was apparently no more than a scribe during the meetings, he was allowed to patent the idea without even given due to his colleagues, effectively making USPTO a vehicle for what should be labeled as IP theft!).
The patent system was supposed to foster innovation and protect the ACTUAL innovators.
I can try to claim a patent on “a hand-held apparatus to be used for digging Martian soil” without ANY chance of implementation or even concept validation and I may be lucky to actually get it approved. No just wait until somebody gets there and uses a shovel…
I appreciate you apology but it is hard to me to believe that the patent/legal system works for fairness, justice or progress. From my personal experience with the judicial systems only lawyers can win anything; plaintiffs, defenders .. they almost always loose in the balance.
I understand that we all need to survive in the circumstances we found ourselves in, but I can also call a spade, a spade.
Doug Limbach, JD
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