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Tracy Jong

Patent Law 101: Part 3 | Useful Patent Tips

This is the final part of my 3 part guide on patent law for entrepreneurs. For the last part I have included some useful tips and information that can help you get the most of your patent.

Some key points
about Patent Licenses and Assignments

It is the document’s substance, not the document label, that defines the difference
between an assignment and a license. A transfer of the entire ownership interest
is an assignment while transfer of less than the entire bundle of rights is a
license. Issues frequently arise with respect to reservations of rights,
take-back provisions, field of use restrictions and the like.

Patent applications may be assigned. An assignment of a patent application
carries with it the rights to common subject matter in future divisional or
continuation “child” applications as well. Continuations and divisionals are
patent applications filed on the same disclosure and contain no new subject
matter, but contain new claims. However, the Patent Office records may not
reveal such assignment if no one files a request for recordation of the
assignment in the “parent” application in the file of the “child” application
until issuance or post-issuance. Thus, it is prudent to assess the procedural
history of a patent or pending application as well as its subject matter in
determining the scope of assignment rights.

Contrarily, substitute or continuation-in-part applications are “child”
applications that do not benefit from the assignment of the “parent”
applications and require a new assignment to be executed and filed. Continuation
in part (“CIP”) applications are patent applications that contain some or all of
the disclosure of the “parent” application as well as new subject matter. (These
CIP applications often draw claims to improvements or refinements of an
invention during the pendency of the “parent” application.)

Provisional applications follow the same legal theory – the assignment of a
provisional application carries with it ownership rights to common subject
matter, but a new assignment is required for utility applications that contain
subject matter that is not common to both.

Some key
points about Employee Inventions and Shop Rights

There is no duty for general employees to assign inventions made in the course
of employment arising from the employment relationship absent express
employment agreement requiring assignment.
Great Lakes Press v. Froom,
695 F Supp 1440, 1445 (W.D.N.Y. 1987) (“New York State Law and ‘Federal Common
Law’ are in agreement on the general principle”) It is prudent to use clear,
unambiguous written contracts of employment with obligation to assign inventions
to the employer. In such cases, the inventor employee holds bare legal title in
constructive trust for his employer.

In some cases, an employer may include an obligation to assign even after
employment is terminated in so-called “holdover clauses” for inventions made
during a reasonable period following employment. The test for
reasonableness of holdover clauses includes factors such as:

  • Extends beyond apparent protection that employer reasonably requires
  • Prevents inventor from seeking other employment
  • Against public interest

The good news if you represent the employee with no employment agreement with an
obligation to assign inventions, is that the employee has full unencumbered
title to his invention if the employee was not hired to invent.

The good news if you represent the employer who has failed to use employment
agreements with obligations to assign inventions, is that shop rights may be
available for inventions by employees. Shop rights are implied in fact transfers
of ownership rights where an employee was “hired to invent” or assigned the duty
of devoting his efforts to a particular problem. However, shop rights will not
be available for inventions made of the employee’s own initiative. With shop
rights, the employee’s title is subject to employer’s personal, non–exclusive,
non-transferable, irrevocable, royalty – free license.

Corporate managers may be held to be corporate fiduciaries with judicially
enforced equitable transfer of intellectual property (“IP”) rights, even in the
absence of a written employment agreement with an obligation to assign for
inventions made during course of employment or related to employer’s business.

Making Money from Patents

Patents can yield financial benefits in a number of ways. Owners might receive royalty
checks from licensing agreements. A patent owner may prevail in a patent infringement suit
against a would-be competitor. A patent owner may sell the patent rights for a lump sum. They
may sell a business that holds the patent (or exclusive licensing rights) for a handsome profit
because of its limited monopoly position in the marketplace. A patent owner may be able to raise
prices on his own product because his limited monopoly and the ability to exclude competitors in
the marketplace for that product. A patent owner may be able to reduce prices on his own product
and increase his market share because his limited monopoly on a manufacturing process gives him
a significant economic advantage and cost reduction.

Why We Aren’t a “One Stop Shop” for Inventors

Invention company scams are everywhere. State Attorney Generals, the Federal Trade Commission, and the
United States Patent and Trademark Office give public warnings about invention company scams on their websites.
Inventors should be wary of compaies that promise to be a “one stop shop” to provide marketing, patent, product
development, prototype creation, and other services.

We are not an invention company. We are a law firm. We provide legal advice and assistance to our inventor
clients. As legal professionals, our expertise is in advocating for our clients in protecting their inventions
and market share by procuring patents and trademarks. We do not promise that we can do things that are beyond
our legal expertise. We do not market inventions. There are many reputable professionals that have expertise
in developing marketing campaigns, developing packaging and other such activities. We encourage our clients to
use the right experts at each step in their process.

Patents are like insurance

The reality is that decisions about patent protection have to be made while market potential is unknown or uncertain.
They offer some measure of protection against the time and financial investment in marketing an invention. In many ways,
protection you receive is often related to what you can afford in legal expenses.

A competitor may hold a
dominant claim and there may be no way to practice your invention without
infringing the claims of the competitor. Your competitor’s patent may preclude
you from practicing your invention (i.e., no "right to use"). At the same time,
your patent may be used to prevent your competitor from practicing your
improvement (i.e., "right to exclude"). All is not lost, there may be
cross-licensing opportunities for both parties.

Most commonly, inventors benefit from patent rights by selling the patent
rights, licensing the patent rights (exclusively or non-exclusively) or acting
as the exclusive manufacturer of the product.

Patents are valuable business assets that may be used as collateral for
financing or may be liened by a mortgagor securing a debt. In some cases,
patents act as a deterrent to potential competitors and as a marketing edge to
provide customers and investors with a sense of “cutting edge” technology or
limited monopoly on a market segment.

Benefits of Understanding Your Patent Families

Because of the limitations of two-dimensional paper, a patent family table shows only the patent and applications that are in the direct line of
“priority” from the first filing. A review of the table will show whether a “tree” is highly branched, with many patents and applications sharing common
roots of multiple applications.

This is important to understand for several reasons. One is that any legal or technical position taken in the prosecution of one patent application
in the family affects the scope of the other patent within the family.

Another important reason is that the advantage of filing continuing applications (within the same patent family) is to limit (but not remove) the
ability of the USPTO to apply an earlier application against the USPTO requires a “terminal disclaimer” to be filed in the later application, it
considered by the USPTO to be an obvious extension of the earlier application.

A terminal disclaimer provides that 1) the terminal part of the statutory term of any patent granted on the later application, which would extend
beyond the expiration date of the full statutory term of the patent or application forming the basis of the rejection is disclaimed, so that the patent
terminate simultaneously; and 2) any patent granted on the alter application shall be enforceable only for, and during, such period that the legal title
to said patent shall be the same as the legal title to the patent application forming the basis of the rejection.

This agreement runs with any patent granted on the later application and is binding upon the grantee, its successors or assigns. The separation or
bifurcation of legal title to the patent disclaimed, and the patent in view of which it is disclaimed, results in the automatic unenforceability of the
disclaimed patent.

37 CFR 1.321(c)(3) requires that a terminal disclaimer filed to obviate a nonstatutory double patenting rejection based on commonly owned conflicting
claims include a provision that any patent granted on that application be enforceable only for and during the period that the patent is commonly owned
with the application or patent which formed the basis for the rejection…. These requirements serve to avoid the patentable invention. In re
Van Ornum, 686 F.2d 937, 944-48 (CCPA 1982).

This completes my 3 part guide on patent law. Please consult with a professional patent attorney before making serious decisions about an existing patent or if you need help with the patent application.