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04.08

Patents — 10 Common Mistakes and How to Avoid Making Them

By Michael S. Neustel

This article deals with broad patent issues and is not intended as a substitute for legal counsel. Questions regarding specific patent law issues should always be directed to a qualified patent attorney.

Introduction

Intellectual property is usually a company’s most valuable asset. While trademarks and copyrights are generally understood, patents are generally misunderstood, resulting in the loss of millions of dollars to companies every year. This article is intended to instruct engineers — and their companies — how to avoid the 10 most common mistakes made regarding patents.

Mistake #1: No Employee Education

One of the biggest mistakes made by companies is not educating their employees about patents. While the management and engineers of a company are the most important groups to keep educated on patents, other groups of people associated with the intellectual property of the company (e.g. technicians, sales staff) need to be educated also.

In addition to educating employees about what patents are, they should also be familiar with how to identify situations that are specifically related to patents, such as the creation of a new product, the suggestion of an improvement to a product by a customer or a potential infringement situation. If employees are not fully-educated on patents, numerous patent rights are lost and expensive mistakes can be made. For example, failure of employees to understand that a new improvement to a product would be patentable can result in the loss of foreign and domestic patent rights by the time the mistake is realized.

A seminar by an articulate patent attorney with your employees can prevent the loss of valuable patent rights — and avoid expensive mistakes.

Mistake #2: “Can’t Be Patented” Attitude

Another common mistake made by engineers and companies is believing that a new technology or an improvement to a product cannot be patented.

Engineers tend to believe that many improvements they make to products are “obvious” and, therefore, are not patentable. The reality is that many improvements made to products are patentable — even improvements that may seem obvious. “Obviousness” in the patent world is oftentimes a different standard from what many engineers may believe.

If an improvement is important enough to be incorporated into a final product, then that improvement typically warrants an investigation into its patentability. A patent attorney can provide valuable advice to help you determine your chances for meaningful patent protection.

Mistake #3: No Intellectual Property Management Program

Many companies — including mid-sized to large companies — do not have an intellectual property (IP) management program. Without an IP management program, employees do not know what to do when they have an invention.

A good IP management program will encourage employees to disclose their inventions. Not only will a good IP management program inform the employees of how and where to submit ideas, it will also provide rewards to inventors that participate — such as special recognition in the company or monetary rewards. You can learn more about IP management programs at www.neustel.com/ipmanagement.htm.

An IP management program for your company is similar to a gold mining operation digging for valuable nuggets of information. Not only do you need to have an IP management program, but you need to operate it effectively to encourage internal disclosure of your company’s intellectual property.

Mistake #4: Performing Patent Research Too Late

Many companies believe that patent research is the final stage of the product development process, when it should be one of the first stages. Performing a patentability search late in the product development process fails to take advantage of some of the ancillary benefits associated with patentability searches.

For example, an early patentability search can identify technology developed by third-parties that could expedite the product development process for a particular product. In addition, an early patentability search can detect potential patent infringement issues up-front, so the product can be designed to avoid infringing upon a third-party’s patent rights. Keep in mind that a patentability search is not intended to be an “infringement search,” since it is focusing solely upon patentability, but sometimes potential infringement issues can be identified.

A company should perform a patentability search early in the product development process. Companies can search the U.S. Patent & Trademark Office patent database at www.uspto.gov or by using software such as PatentHunter [www.patenthunter.com]. It is advisable to hire a patent attorney to perform a final patentability search prior to proceeding with a patent application.

Patent searches can reduce valuable product development time and identify potential infringement issues early on so you can steer product development in a positive direction.

Mistake #5: Failure to Perform IP Audits

While most companies routinely do financial audits, few companies routinely perform IP audits of their intellectual property. While a good IP program will help prevent the need for IP audits, it is still good for a company to go through a complete IP audit once or twice a year to ensure that all intellectual property is being protected properly.

An IP audit is basically a review of all existing products and potential products being developed by the company. Potentially patentable subject matter and trade secrets should be identified for review by a committee to determine if any further action should be taken to protect the intellectual property. In addition to identifying the potential intellectual property, potential public disclosure dates need to be identified, which determine deadlines for filing patent applications.

Performing routine IP audits will flush out the hidden intellectual property of your company and ensure important rights are not lost.

Mistake #6: Not Taking Advantage of “Provisional” Applications

It is easy to identify the inventions that you usually need to patent or should not patent, but what about inventions that are difficult to classify? Filing a “provisional” patent application oftentimes can preserve your foreign and domestic patent rights when done properly.

A “provisional” patent application is a patent application that provides “patent pending” for a period of one year. The filing fee for a provisional patent application is only $105 (as of 1 October 2007). In addition, a provisional application does not require the complex claims section, which makes provisional applications easier to self-draft. However, provisional patent applications do require the same amount of subject matter included in them as you would see in a formal application. Provisional applications are also automatically abandoned after one year and require the filing of a formal application during this one-year pendency period if you want to retain your provisional application’s earlier filing date.

If you are in a situation where you are not able to justify the expense of a patent attorney, but do not want to forfeit your patent rights for a new invention, then a provisional patent application provides an economical and sound means to protect your rights. A free version of PatentWizard® is available at www.patentwizard.com if you want to self-draft your own provisional patent applications.

Provisional patent applications are a valuable tool for inventors and businesses to preserve their intellectual property rights.

Mistake #7: Filing Applications at the Wrong Time

Many companies file a patent application too early or too late. Knowing when to file a patent application is crucial to taking full advantage of your intellectual property.

For example, some companies will file a patent application on every invention immediately after it is developed. However, what these companies fail to realize is that they have only one year from a patent application’s filing date to file a foreign patent application. Hence, by filing too early in the process, companies expedite when they have to decide if they want to file in foreign countries. Oftentimes, this decision takes months of product marketing and sales to determine if foreign patent protection is worth the expense.

Conversely, filing a patent application after you have made a public disclosure (e.g. offer for sale, seminar, published on a Web site) will result in the loss of most foreign patent rights. Furthermore, you will have lost all of your United States patent rights if you wait more than one year after your first public disclosure of the invention to file a patent application.

The best time to file a patent application is usually after the invention has been approved for commercial production and prior to any public disclosure of the invention.

Mistake #8: Patenting the Wrong Inventions

Many companies simply do not focus their patent strategy on the right inventions to protect, and instead waste thousands of dollars attempting to patent the wrong inventions.

An example of a good invention to patent is a new potential “core” product or a significant improvement to an already existing core product. An example of a bad invention to patent is a new product that has little potential of providing significant financial profits to the company.

While it is not a good business practice to not patent anything, it is also not a good business practice to patent everything. Every invention should be closely evaluated on its merits prior to instructing your patent attorney to prepare the patent application to ensure that your company is wisely spending its money.

Mistake #9: Failing to Evaluate Competitors’ Patent Rights

It is not uncommon for a company to underestimate — or overestimate — the patent rights of their competitors. Knowing your competitors’ patent rights is crucial to avoiding a costly patent infringement lawsuit and to ensure that you are not unnecessarily avoiding the development of new technologies.

For example, underestimating the patent rights of a competitor may occur if you fail to investigate your competitor’s product simply because their product has a significantly different structure and operation when compared to your product. Patents can, and typically do, protect multiple variations of a technology. Hence, you could be infringing upon a competitor’s patent and not even know it. Considering a typical patent infringement lawsuit today costs $750,000 or more, you have a valuable reason to ensure you are not infringing on a competitor’s patent.

Alternatively, overestimating the patent rights of a competitor can be even more costly to your company. Without understanding the scope of patent protection offered by a competitor’s patent, companies oftentimes will avoid product development that might be close to the competitor’s product. However, if the competitor’s patent is “narrow” in scope, or if the competitor has improperly marked their products with the patent number, your company would lose out on valuable opportunities to develop products in potentially lucrative areas.

Patent attorneys are best used to keep you out of costly patent infringement litigation, so take advantage of their advice when you encounter a competitor’s patent. A side benefit of this advice is the establishment of the exact scope of your competitor’s patent rights, thereby enabling you to design your products in a more competitive manner without fearing infringement.

Mistake #10: Filing Unnecessary Foreign Patent Applications

A good IP program should assist you in identifying which inventions deserve foreign patent protection and which inventions do not. Contrary to popular belief, filing in foreign countries oftentimes has little value for small to mid-sized companies. There are always exceptions (e.g. companies about to enter an initial public offering, companies looking to be purchased by a large company), but usually when comparing the cost to the benefit received, the best patent value still resides in the United States.

The obvious reason for the value of patents in the United States is that it usually is the company’s largest market. In addition, filing in the United States is relatively cheap compared to the fees associated with filing in foreign countries, which typically ranges from $3,000 to $10,000 per country. In addition, many countries do not provide the same types of protection as the United States.

If you are interested in foreign patent protection, you should consult with a patent attorney and consider filing a Patent Cooperation Treaty (PCT) application. A PCT application can provide you up to 30 months from your earliest effective filing date to file in foreign countries as compared to the normal 12 months if you did not file a PCT application. Typically, a PCT application also can be filed for around $4,000 (including filing and attorney fees), thereby “buying time” so you can determine which foreign markets justify patent protection for a reasonable price. Most small- to mid-sized companies should closely scrutinize any potential (or existing) benefit for foreign patent applications to ensure that they are receiving significant value in those markets.

Conclusion

While companies make costly patent mistakes every day, these mistakes can be avoided easily by educating employees and implementing a solid IP management program. Because patent mistakes oftentimes have no cure, an ounce of prevention is priceless.

 

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Michael S. Neustel is a U.S. Patent Attorney who owns Neustel Law Offices, LTD (www.neustel.com) and is the founder of the National Inventor Fraud Center. Mr. Neustel has a bachelor of science degree in electrical engineering and is a co-author of The Patent Writer and is also the founder of Neustel Software, Inc., which develops intellectual property related software products including PatentWizard (www.patentwizard.com), PatentHunter (www.patenthunter.com) and ConfidentialityWizard (www.confidentialitywizard.com). Mr. Neustel provides intellectual property seminars to businesses and groups across the United States.

Comments may be submitted to todaysengineer@ieee.org. Opinions expressed are the author's.


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