[GUESTPOST] To Patent or Not?

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A guide to utility patents for product engineers in technology

Launching a product in a new market? Commercializing a prototype and making it market ready? Getting a patent or a clearance from a patent holder are among a few issues that concern a product engineer in today’s competitive market. Product specialists across the world spend a considerable amount of time drafting patents, performing clearance searches, negotiating licensing agreements and designing workarounds to ensure that a product does not face the threat of infringing someone else’s intellectual property. While this might sound like a fairly simple job, the patent rights necessary to commercialize a product are fragmented and controlled by multiple rights holders including major corporations and the infamous patent holding companies or non-practicing entities. This disorganized fragmentation of the rights increases the cost to market for a product since multiple licenses need to be negotiated leading to an increase in royalties paid. As a technology consultant in patent prosecution, litigation, and licensing, I prepared this guide to help aspiring product engineers and specialists understand utility patents and their implications on product design and commercialization. I also talk about some problems with the existing patent system in the United States and the debates around these matters.

“Patents are basically legally binding dibs.” — John Oliver

A patent, or “legally binding dibs” as John Oliver calls it, is a form of intellectual property conferred to an inventor or assignee by a state. A patent holder has exclusive rights to practice the claimed invention or acquire a benefit from it and the patent holder may permit or deny others these rights. The right is usually conferred for a minimum period of 20 years. Patent laws vary in each country and it is important for a person developing a product to understand the implications of patent laws in the geography where the product is to be launched.

Johnson’s patent introduced the cog wheel in cable cars

While the first known patents were granted in Venice during the 13th century to Venetian inventors in the field of glass making, the importance of patents rose during the Industrial Revolution and the subsequent development of railroads. Patents were regarded as a means for obtaining an exclusive right over a period of time for an invention that required extensive research and development during an age when inventions mostly involved machinery and moving parts. Patents were seen as more of an economic privilege rather than an intellectual property right during these periods since they were granted without examination to inventors who were able to afford the high costs associated with the application. Gradually, judicial systems started getting involved in the process and began to define legal statues for patent laws in each country. One important aspect of obtaining a patent is the disclosure of the invention to the public to enable them to improve upon it.

The front page of a modern US patent

Patents took their present form in the United States when a basic structure for modern Patent Law was laid down in Patent Act of 1952. Patents issued in the US after 1976 are available in full-text form on the United States Patent and Trademark Office (USPTO) website or on other databases and search engines such as Google Patents. Structurally, a patent has a Title, an Abstract, at least one but usually a set of claims, a set of drawings, a detailed specification including a background and a summary along with a description of various embodiments, bibliographic information including important dates, names and legal events, and finally a set of references and citations. Claims are the most important part of a patent since they define the legal scope of the invention and are used by attorneys to draw boundaries around the disclosed idea. A claim from U.S. Patent 6,285,999 which covers an aspect from Google’s PageRanking process invented by Larry Page is cited below. The patent is assigned to Stanford University where PageRank was developed by Larry and Google holds exclusive licensing rights, which was obtained by giving Stanford 1.8 million shares of Google. While the claim provides legal protection for the technique, it needs to be read in light of the specifications to construct and define each claim term.

What is claimed is:

1. A computer implemented method of scoring a plurality of linked documents, comprising:

obtaining a plurality of documents, at least some of the documents being linked documents, at least some of the documents being linking documents, and at least some of the documents being both linked documents and linking documents, each of the linked documents being pointed to by a link in one or more of the linking documents;

assigning a score to each of the linked documents based on scores of the one or more linking documents and

processing the linked documents according to their scores.

Now that we know a bit about the history of utility patents and what they look like, it is important to understand how to obtain one. While the laws vary in each geography, there are certain aspects which are similar everywhere. First and foremost, the question of whether a particular subject matter is eligible for a patent based on the statutory laws governing patentability in the state where the application is made needs to be answered. While most countries have agreed that abstract ideas and laws of science and nature do not fall under patentable subject matter, much of the debate today is based on whether computer algorithms and business methods are patentable. The USPTO defines four broad categories of patentable subject matter: Process, Machine, Manufacture, and Composition of Matter. Once the subject matter is deemed patentable, a patent application is examined by the PTO to evaluate if the subject matter is novel, useful and non-obvious. The term “Prior Art” is used to refer to literature that contains a portion or entirety of the subject matter disclosed by an applicant. A patent is granted when a “notice of allowance” is issued. This is done after an examiner deems that the subject matter is patentable, the conditions for patentability are met and the required fees are paid.

  1. In order to be novel, the patent application must contain a new idea or a significant improvement over a prior art.
  2. The described invention should also have utility i.e. it should provide some identifiable benefit and must be capable of use.
  3. Finally, the invention should be non-obvious to a person having ordinary skill in the art. This implies that the novel and inventive step should be significant and should not be something fairly obvious to a normal person operating in that technology domain.

The following image taken from a deck on Patent Prosecution prepared by Clements Bernard PLLC illustrates the costs associated with filing and maintaining a patent across its lifecycle.

Patent Lifecycle and Costs

All this seem fairly straightforward and logical steps followed by inventors and product engineers seeking to protect and innovate. Then how did we land ourselves in today’s situation where experts argue that the patent system is prone to abuse and has begun to stifle new innovation? A major complication began to rise with the issue of so-called software patents towards the end of the 20th century. Right from when the first software patent was granted for a sorting system in 1968 (U.S. Patent No. 3,380,029), there has been endless debate on the validity of software patents. Many argue that software, based on algorithms that recite a logical series of steps to solve a problem and implemented on a general purpose computer, is not patentable per se. Most countries, except for the United States, were very skeptical about granting patents for software and business processes stating that such innovations need to be tied up with some form of hardware improvement or produce some tangible result or transformation to fall under statutory subject matter. In the United States, a series of Supreme Court rulings in some landmark cases such as Gottschallk v. Benson and Diamond v. Diehr led to the conclusion that significant improvements in data processing using algorithms that run on general purpose computers could be considered as patentable subject matter. It was arguably not evident at the time that such inventions which contained broad claims on software algorithms were far too important to be patented because these data processing techniques had to be used in every computer. The situation was worsened when the Supreme Court issued its ruling for Bikski v. Kappos in 2010, saying that business methods are patent eligible. This, coupled with declining selectivity at the USPTO and increased grant rate for patents led to the generation of numerous ridiculously broad software and business method patents in the US.

Cotropia’s study shows that the grant rate for US patents was around 90% in 2013.

In 2014, Christopher A. Cotropia and his colleagues working in the Intellectual Property Institute at the Richmond School of Law published a paper which calculated a corrected grant rate for patents in the US by devising a model that accounted for abandoned applications, continuations, and backlogs. The corrected rate arrived at by Cotropia approached a staggering 90%.

The securitization of patents by companies that were running low on capital added fuel to the fire by triggering the growth of Non Practicing Entities or “Patent Trolls”. Patent trolls are called so because they are essentially patent holding companies that purchase patents and use them not for making products but to obtain money by licensing them. When a patent troll threatens to sue a company for infringement, most companies are forced to settle for a license since it costs anywhere between $ 1–5 million to defend a patent lawsuit. A counter suit cannot be filed against a patent troll since they do not produce any products. This scenario is described well by John Oliver in his take on the US patent system in Season 2 Episode 10 of Last Week Tonight.

Last Week Tonight with John Oliver: Patents — Season 2 Episode 10

Now that we are in this mess, is there any hope for an escape? In June 2014, the US Supreme Court issued a ruling in Alice Corporation v. CLS Bank, which has changed the perspective of attorneys on patentable subject matter. The issue in the case was whether a computer-implemented electronic escrow technique for facilitating financial transactions was patent eligible. The Supreme Court ruled that the claims were invalid which led to a lot of attorneys declining to accept cases on patents that have claims on general purpose computer software and business methods. The Leahy-Smith America Invents Act (AIA), a federal statute passed by the Congress and signed by Obama in 2011, provides certain provisions that may be used as ammunition for shooting down patent trolls.

The issue of these broad software patents and the fact that patents are held by multiple entities including holding companies have contributed to the fragmentation of the rights required to commercialize a product today. Royalty stacking is a situation in which a single product infringes on many patents thereby bearing multiple royalty burdens and increasing the cost to market. Fragmentation has also resulted in the creation of patent thickets and patent landmines.

A patent thicket is “a dense web of overlapping intellectual property rights that a company must hack its way through in order to commercialize new technology.”

“Software patents are the software project equivalent of landmines: each design decision carries a risk of stepping on a patent, which can destroy your project.” — Fighting Software Patents by GNU

Experts are proposing the use of “portfolio cross licensing deals” and “patent pools” to mitigate this issue.

“A portfolio cross license, under which two firms license large blocks of their respective patents to one another, can provide a partial solution to the problem of patent thickets because it removes the need for patent-by-patent licensing. This bilateral licensing solution, however, is not likely to be much help when a firm requires licenses to a small number of patents held by each of many firms. In such cases, patent-pooling agreements may create substantial transaction efficiencies by enabling multiple patent holders to pool their patented technologies and, through a joint entity, license them as a group to each other and to third parties. As a result, patent pools may reduce the transaction costs of multiple licensing negotiations and may mitigate royalty stacking and hold up problems that can occur when multiple patent holders individually demand royalties from a licensee.” — Antitrust Analysis of Portfolio Cross-licensing agreements and patent pools

Portfolio cross-licensing agreements are suited for larger corporations in the semiconductor, telecom and software industries seeking to avoid infringement litigation by bilaterally agreeing to license broad portfolios of technology related to a particular field of use. Patent pools, if managed properly, allow startups to license only necessary portions of a technology from third party entities. If patent pools are organized around technology, such as an MPEG-2 pool or DVD pools, startups can reduce royalty stacking by seeking a license from the pool rather than from multiple fragmented rights holders. While these techniques provide a solution, they also pose a risk of increasing the probability of collusion and antitrust activities.

As a product specialist or an entrepreneur, it is important to realize that protection of intellectual property needs to be done is a proper manner to ensure healthy innovation and growth of a business. A product can be differentiated by designing a work around or improvement over existing patented technology and licensing only necessary portions from rights holders. Both over protection and under the protection of intellectual property is not ideal. An optimum mix wherein the core business idea is protected and differentiated is the ideal way to go about designing and commercializing a new product.


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If you resonated with this article, please subscribe to my official blog archive. I’m a technology consultant at iRunway, a boutique specializing in technology consulting and diligence for litigation and licensing support in IP. We are based out of Austin and Bangalore. Please check out the company website for a list of our clients and services.

*This article is provided by Gautham S.K., a technical patent consultant located in Bangalore, India.  Some rights are reserved by the author. Copying this text is only permitted when giving credit to the original author and linking to either Medium or this webpage.

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