“Protect Your Assets!” – What Today’s Manufacturers Should Know About Patent Law

Taylor Porter patent law attorney John Runnels is featured in the 10/12 Industry Report, First Quarter Edition, in a Patent Law Q&A feature, “Protect Your Assets – What Today’s Manufacturers Should Know About Patent Law.” Runnels discusses the questions manufacturers should be concerned about as their activity involves innovation, research and development, new products or processes, or the use of products, processes or technologies created by other entities.

The full article is below.

Does your company have an adequate intellectual property strategy? Are its policies up to date with rapidly changing patent laws? Does it include the role of employees in creating or using intellectual property? Does the company have a process for determining whether to seek patent protection on inventions by employees?

These are just a few of the questions worth asking for any manufacturer whose activity involves innovation, research and development, new products or processes, or the use of products, processes or technologies created by other entities. We asked the intellectual property experts at four Louisiana law offices to give us a primer on today’s IP environment for manufacturers. In this series, you’ll find information on some threats you may not have considered and some best practices you may want to implement. Look for Part 2 of the series in our second quarter issue.

Note: The information provided in this article is for informational purposes only. Before you make any decision that may have legal implications, you should consult with a qualified legal professional for specific legal advice tailored to your situation.

What should manufacturers consider when implementing or updating their intellectual property strategies in 2016?

JOHN RUNNELS: Intellectual property can be one of a company’s most valuable assets. A patent gives its owner the right to exclude others from making, using, selling, offering to sell or importing the patented invention. Not all discoveries are patentable. Even where an invention is otherwise patentable, patent rights can be lost with the passage of time.

In the first instance, a manufacturer should make sure that its employment contracts and policies expressly require employees to assign all inventions to the employer, or at least to assign all inventions related to the manufacturer’s line of business. Those who go through the patenting process for the first time are often surprised to learn that an employer does not necessarily own inventions made by its employees. Patent policies are sometimes put into place only after the first horse is already out of the barn. The recommended practice is for employment contracts to expressly require assignment of employees’ inventions.

A manufacturer should also have procedures to encourage the prompt disclosure of new inventions to a single office. That office should promptly evaluate all new disclosures and, where warranted, should confer with a patent attorney or patent agent. Sometimes a quick Google search is all that is needed to determine that a promising idea is not new after all. Google can save you time and money before you confer with an attorney. If nothing relevant turns up on Google, and if an invention might be commercially valuable, then it is time to confer with a patent professional.

Until a patent application has been filed, information about any new invention should be kept confidential. In general, no sales or other commercial uses should be made involving a new invention before a patent application has been filed. In narrow circumstances, there can sometimes be exceptions. A patent attorney or patent agent should be consulted to discuss whether an exception might apply in a particular case.

If the decision is made not to file a patent application, then the company should consider whether instead to maintain a new discovery as a trade secret. Trade secret information should only be disclosed to those having a need to know and only where there is a written agreement in place requiring the recipient to keep the information confidential.

What is new or most important in today’s patent law that manufacturers should be aware of?

RUNNELS: Patent law is a complex and rapidly changing field. Two topics will be discussed here, but these topics just scratch the surface.

Foreign patents can sometimes be important. Foreign patents can also be expensive. A United States patent only has effect in the United States. Where there are international markets for a particular product, a company will need to weigh the costs and benefits of seeking patent coverage in other countries. Some jurisdictions are especially strict about timeliness of patent filings. Premature public disclosures can jeopardize potential patent rights. Especially in cases where foreign patents might be considered, take precautions that nothing is publicly announced concerning new discoveries before a patent application has been filed, or until a decision is made not to file a patent application.

Under the America Invents Act (AIA), premature disclosures also have the potential to create problems even in the United States. The AIA is often known primarily for its “first-to-file” provisions. Where two people claim the same invention, it was formerly the case in the United States that the “first to invent” would be awarded priority, at least in principle. Priority instead is now awarded to the “first to file.” Although “first to file” represents the most widely known change in the law, it is not the most significant aspect. Only a very small fraction of patent applications actually end up in priority disputes; certainly, for those few patent applications, “first to file” versus “first to invent” can make a huge difference. However, for the vast majority of patent applications, the more significant aspects of the AIA are those that changed the scope of what is considered “prior art,” i.e., the body of knowledge against which the patentability of a new invention is judged. In general, the scope of “prior art” has been broadened, although in some circumstances it has been narrowed.

Broadly speaking, “prior art” encompasses information that was publicly available before a patent application was filed. In some circumstances, a disclosure made by the inventor less than one year before the filing date will not count as “prior art.” However, even public disclosures made by the inventor are considered “prior art” if made more than 12 months before a patent application is filed. Further, the United States Patent and Trademark Office has taken the position that, even for public disclosures within 12 months of the filing date, where someone else learns of an invention through the inventor’s own disclosure and where that person then makes a new public disclosure with even slight modifications, then that new disclosure can be considered “prior art” that could ultimately bar the original inventor’s patent application. Whether the courts will agree with the USPTO remains to be seen. In the interim, the prudent course is to confer with your patent professional earlier rather than later, and to defer all public disclosures related to an invention until a patent application is filed or until the decision is made not to file.

Practicing law since 1985, Taylor Porter Partner John Runnels is engaged primarily in the practice of patent law, including chemical patent prosecution, biotech patent prosecution, patent licensing, university technology transfer and related matters. Runnels is admitted to the bar in Louisiana, New York and the United States Patent and Trademark Office. He is a member of the American Intellectual Property Law Association, American Bar Association Section of Intellectual Property, Louisiana State Bar Association, Baton Rouge Bar Association and Association of University Technology Managers. Runnels has a B.S. in chemistry from Louisiana State University and an M.S. in chemistry from California Institute of Technology.

What is new or most important in today’s patent law that manufacturers should be aware of?

RUSSEL PRIMEAUX (KEAN MILLER LLP): There are two recent developments in patent law of which manufacturers should be aware. The first is the overall rise in patent infringement assertions by so-called patent trolls, also known as Non-Practicing Entities (NPEs). An NPE is an entity that owns patents but does not manufacture any products or provide any services covered by the patents. While we may initially think of NPEs as nefarious evil-doers, some NPEs may not fit that stereotype. For example, universities often develop patented technology, but they do not manufacture products. Companies should not ignore letters from NPEs; the consequences of doing so can be costly. Companies who receive letters from NPEs should consult with a patent attorney and evaluate how to respond.

The second development is the change to U.S. Patent Law implemented by the America Invents Act (AIA). These changes took place in 2012 and 2013. The main change is that the U.S. has shifted from a “first to invent” system to a “first to file” system. Under this new regime, it is important that companies file for patent protection as soon as possible. Otherwise, a third party may file first and preclude the company from obtaining patent protection. Also, companies should still be aware of the statutory time deadlines that remain in place, even after implementation of the AIA. Under these statutory time deadlines, an inventor will be barred from obtaining a patent if they file more than one year after certain triggering events. These triggering events include the sale, offer for sale, public use or publication of the invention. Finally, many foreign countries do not recognize the one-year grace period. Therefore, to preserve the option of seeking foreign patents, a company should file a patent application before any of the triggering events take place.

What advice do you have for manufacturers for implementing or updating their intellectual property strategies in 2016?

PRIMEAUX: I think the best thing companies can do for their intellectual property strategy is to conduct an IP audit. For the IP audit, we act as if we were conducting due diligence prior to the purchase of the company. It is analogous to putting your house for sale—you try to imagine that you are a potential buyer coming to see the house. Here are some of the things that may be included in an IP diligence inquiry:

  1. Are there any new or anticipated acquisitions of IP or technology, including new filings, new issuances or registrations, new branding or rebranding initiatives, or acquisitions of IP from third parties?
  2. Are there any challenges to the company’s trademarks or any failure to register a trademark (due to third party blocking marks or otherwise)?
  3. Are there any challenges to the company’s ability to operate due to blocking patents owned by third parties?
  4. Is there any loss of rights (recent or anticipated), including loss of rights by way of expiration, abandonment, lapse, cancellation, being held invalid or unenforceable, etc., that has had or may have an impact on the company’s business?
  5. Are there any disputes concerning licenses or other IP/technology related agreements?
  6. Are there any expirations or terminations (or any anticipated expiration or termination) of material or significant licenses or other IP/technology-related agreements that have had (or may have) a material or significant impact on the company’s business?
  7. Are there any existing or anticipated IP related lawsuits, proceedings (including proceedings before the U.S. Patent & Trademark Office or other IP registries), arbitrations, threats, demands (including cease and desist demands and unsolicited offers of license), or claims?
  8. Are there any unresolved security or cybersecurity breaches or loss of sensitive data, trade secrets or other confidential information?
  9. Does the company have key employees execute nondisclosure or noncompete agreements?
  10. Does the company have key employees execute agreements in which the employee agrees to assign any IP created by the employee to the company?
  11. Does the company have nondisclosure agreements or agreements in which IP was disclosed to or received from third parties?
  12. What are the company’s trademarks and are they registered?
  13. What are the company’s patents? Are there pending patent applications? Do the patents and pending patent applications match with the company’s key products or services or are there gaps in coverage?
  14. Are patented products and services properly marked?
  15. Does the company rely on copyright protection? If so, are there copyright registrations? Does the company place a proper copyright notice on materials protected by copyright?
  16. Does the company possess and claim any items of information as trade secrets? What is the company’s proprietary program for maintaining trade secret protection?
  17. Does the company have a clearance process to determine if products or services will infringe third party IP rights? Are there documents describing a formal clearance process?
  18. Does the company have a process for determining whether to seek patent or copyright protection on inventions or works of authorship by employees? Are there documents describing that process?
  19. Determine if the company has a listing of software in which the company has rights, whether as owner, licensee or otherwise.
  20. Does the company have a policy making it clear to employees that they are not allowed to download third party software onto the company’s computers without proper license rights?
  21. Determine if there are communications to or from third parties relating to the validity or infringement of the company’s patents, trade secrets, trademarks, service marks, copyrights and other IP rights.
  22. Determine if there are studies or reports relating to the validity or value of the company’s patents, trade secrets, trademarks, service marks, copyrights and other IP rights, and the licensing thereof.
  23. Determine if there are agreements pursuant to which any patent, trademark, service mark or copyright has been sold or transferred by or to the company. Are those agreements recorded with the proper government offices?
  24. Does the company have a list of all domain names?
  25. Does the company have a calendar or docket system to ensure that all IP items are timely maintained and kept in force?

Are there patent issues particular to Louisiana or to core Louisiana industries such as chemicals, shipbuilding and energy?

PRIMEAUX: A recurring patent theme with traditional Louisiana industry is the concern about IP representations and warranties in Design & Build contracts. In a typical Design & Build scenario, Contractor A will design and build a plant for Company B, and the design will often include technology licensed from third parties. In the Design & Build contract, Company B should ensure that it will have full rights to use the technology embodied in the plant design provided by Contractor A. Company B does not want to face an infringement suit at the outset and be unable to operate the plant, especially after making such a significant investment. Conversely, Contractor A should conduct the necessary IP clearance work, or obtain the necessary licenses, to ensure that it can meet its obligations under the Design & Build contract.

Also, Louisiana, as a Civil Code state, does not have Article 2 of the Uniform Commercial Code (UCC). Consequently, Louisiana does not have a specific statutory provision stating that goods are sold with a warranty of non-infringement. Companies buying from Louisiana manufacturers may want to ensure that their purchase agreements contain a warranty that the goods being sold do not infringe the IP rights of third parties.

This is part one in a two-part series from 10/12 Industry Report.