Intellectual Property Directions

Can you trespass on someone’s property before they own it? More to the point, can you be forced to pay back rent for the time during which you were acting like a squatter on public land that was later sold to a developer? In the world of land development the answer is (probably) no; in the world of IP development the answer is a definite maybe.

Back in the olden days, BP (Before Publication), the invention you disclosed in your patent application was kept secret until your patent issued. You could mark your product “patent pending”, which gave anyone copying your product fair warning that IF your patent issued they might have to stop making, using, selling an infringing product.

With the advent of pre-allowance application publication (~ 18 months after the priority date), the world was given access to your invention even though you had no patent to stop them from copying it. This, it would seem, violated the quid-pro-quo of the applicant’s “contract with society” [if you teach society about your invention you can have ~ 17 years of exclusionary rights]. To correct this imbalance, Congress added a modicum of pre-grant patent protection.

Of course, it’s still the case that no infringement action may be started until the patent is issued. After all, the patent may NEVER issue, in which case there can’t be infringement. However, once the patent issues, a patent owner can  collect “reasonable” royalties for infringement activities that occurred between an application’s publication and the date of issuance. In theory, that is. [for you doubting Thomases, see 35 U.S.C. § 154, section (d)].

To collect these royalties, a patent owner has to:

1. sue to prove infringement (no cheap feat),
2. prove that the claims that survived to form the issued patent are “substantially identical” to the claims in the published application,
3. demonstrate that the infringer had “actual notice” of the published application, and
4. show the infringing activity took place after the date of publication.

Of these 4 conditions, only the last will be easy to satisfy. The other three conditions are likely to cause more headaches and expense than the “reasonable royalties” are worth.

For an example of the headaches, consider the “actual notice” condition. Presumably this means the patent applicant has to observe a competitor building something that will possibly infringe the yet-to-be-examined patent and then send them a copy of the published application. But if they were working on it before publication (i.e., before public disclosure of the application), then their work might be prior art and you are probably required to inform the patent office, under your duty of candor. Failure to notify the patent office may cost you your patent even if the actual information turns out not to affect the examiner’s decision.

And on the other side of the equation, the “what’s in it for me” side, the “reasonable royalty” limit on what you can collect is reasonable, since the “infringement” being addressed is infringement of a non-existent patent. Indeed, infringement of a patent that might never come into existence at all. The patent application process should not become a show stopper for competitors. Competitors are already put on warning that they may have to stop selling their product if/when your patent issues; the reasonable royalty cost allows them to make a rational business decision about the risks of pre-issue activity.

So, my recommendation to a patent applicant is, in most situations, let this sleeping dog lie. And to the potential infringer, I suggest worrying more about what changes you might have to make if and when the patent issues, rather than worrying about the “reasonable” royalty you might have to pay for what you are doing now.

Would you be more likely to buy a package of sports cards - you know, like you used to get with Fleer bubble gum - if there was a chance it included a splinter of Ted “Splendid Splinter” Williams’ baseball bat and a certification that it was authentic? Well, would you?

How about a trading card with a piece of someone’s uniform? More importantly, would you grant a patent to the first person to attached a piece of an article of authenticated memorabilia to a trading card? The USPTO did.

Although I don’t understand the business model, there appears to be a big business in sports cards these days - sans bubble gum. Manufacturers insert a limited number of special items into the card packages as an enticement to sell more cards. These special items include “signature cards” “rookie redemption cards” and now “memorabilia cards”.

At the end of 1994, Adrian Gluck filed for and ultimately was issued a patent for a “memorabilia card” comprising:

a substrate in the form of a card and having an image surface,

the image surface including a background image and a foreground image, and wherein the foregoing image is of a famous figure,

a piece of a memorabilia item being adhered to the card adjacent to where an image of the actual item normally would appear, and

the card including a certificate attesting to the authenticity of the item.

Further, the patent claims defined one example of a memorabilia item as being:

a first member, and

a portion, but not the entirety, of an authentic memorabilia item used by a popular sport or entertainment personality or during a memorable event, said portion attached to said first member wherein the authentic item is a baseball bat, and said portion comprises a tiny piece of wood taken from that bat.

A typical memorabilia card is shown in this link.

Mr. Gluck sold his rights to Media Technologies Licensing, LLC who, in 2001, sued Upper Deck Co., a major producer of sports cards, for infringement. The District Court granted summary judgment to Upper Deck, but the Court of Appeals for the Federal Circuit (CAFC) reversed on procedural grounds. Upper Deck then asked the PTO to re-examine the patent, which it did, affirming Gluck’s patent’s validity. The District Court then performed claim construction and issued a summary judgment that the patent was not anticipated but was obvious. Media Tech appealed to the CAFC. The CAFC, in a 2-1 split, upheld the obviousness decision.

The whole discussion in the CAFC’s opinion is bothersome to me. The courts, when discussing obviousness, are forced to put a glossy coat of objective argument on the inherently subjective question. They are forced to work from the prior art in evidence rather than their innate knowledge of what an average person knows.

It should be clear to everyone involved that it did not take any “aha” moment, any inspired inventive spark, to “invent” the trading-card-with-bat-splinter. In creating a trading card with a piece of a memorabilia object, Mr. Gluck perhaps realized that P.T. Barnum was right but he sure didn’t come up with anything that “promote[s] the Progress of Science and useful Arts“; at best he came up with a method of promoting the sale of sports trading cards; a business method, perhaps.

And in fact his strongest defense against obviousness was that all the experts in the field didn’t expect it to “work”, meaning they didn’t expect commercial success. But commercial success is, at best, a secondary indication of non-obviousness and cannot overcome the weight of many primary indicators.

So the courts have now, twice, given an obviousness dope slap to the PTO which twice said this was a valid patent. Perhaps Mr. Gluck and Media Technologies will realize that this patent wasn’t ready for the big leagues.

Since Valentine’s day is behind us, is it okay to speak of a relationship gone bad? A “divorce” that has ended up in patent court some 12 years after the patent issued? Can you really enforce a patent 12 years after the supposed infringement started or is this just a “lovers’ quarrel” taken too far?

Hassan Kunbargi started investigating the chemistry of cement at a graduate student in 1984. Edward Rice, owner of CTS Cement Manufacturing, became aware of Kunbargi’s work and sought an adjunct faculty position at UCLA so that he could serve as Kunbargi’s advisor. Rice hired Kunbargi to work at CTS in 1985. After that, both men worked for another company, Fibermesh.

In 1989, after demonstrating the invention disclosed in a patent application to Rice, something in the relationship apparentlyy turned sour and Kunbargi ceased working for Rice. In September 1990 the patent was allowed and Kunbargi received the ’556 patent, entitled “Very Early Setting High Strength Early Cement.”

Fast forward to 2002. Upon the issuance of his third patent, Kunargi sued Rice for, among other things, patent infringement and theft of trade secrets. This case bounced around the courts with motions on both sides being considered at one time or another. [including Kunbargi's motion to disqualify Rice's counsel, who had been listed on a power of attorney as entitled to prosecute a patent application on an invention by Rice and Kunbargi when they had both worked for Fibermesh!].

Among other defenses, Rice turned to the doctrine of laches - that is, the idea that if you fail to act within a reasonable period of time you lose your rights under the law. The concept, like most aspects of patent law, is an attempt to enforce fairness. If you believe someone is infringing your patent, it is considered unfair for you to wait until the other party has invested in the technology and built up a large business before enforcing your patent. The District Court agreed with Rice that 12 years was too long and declared the patent unenforcable against Rice in a summary judgement [viz., without a trial].

According to the court, Kunbargi should have known of his infringement claim because of his history of working on cement mixtures with, and then having a falling out with, Rice, and because of his prior affiliation with CTS. The court found that, because Kunbargi had demonstrated his invention to Rice before the ’556 patent issued, Kunbargi was on “inquiry notice” at the time the patent issued.

The appeals court (the CAFC) disagreed. It said:

CTS does not dispute that [Kunbargi] could not have tested CTS’s product for the presence of soluble anhydrite. Without access to CTS’s internal procedures, Kunbargi could not have investigated CTS’s methods to determine infringement. Even Kunbargi’s hiring of a private investigator led to no conclusive result that CTS’s products infringed the ’556 patent. An infringer does not escape liability merely by infringing in secret. [Kunbargi] could only have asserted infringement of the ’556 patent upon a reasonable belief that CTS infringed all of the limitations of the claims, including the limitation requiring soluble anhydrite.

The CAFC therefore reversed the summary judgement and sent the question of laches back for trial. The CAFC pointed out that, for laches to apply, the only time that counts is the time after the patent holder should have had a reasonable basis to believe infringement is taking place.

Keeping a low profile while you infringe, even if you are successful for many years, will not get you off the hook for infringement. And knowingly allowing someone to infringe in order to build up your settlement (or get revenge in a relationship gone bad) may leave you holding an empty purse.

While admittedly a very special case, funded on both sides by very deep pockets, 1.7 BILLION dollars isn’t chump change to anyone. See http://www.bizjournals.com/boston/stories/2010/02/01/daily1.html.

One thing this settlement reinforces is the advice I always give clients: you only know you have a valuable patent when someone wants to copy your invention - either by licensing or infringing your patent. So the key to getting “the right patents, at the right time, for the right cost” is to ask yourself the question “If so, so what?” In other words, if you do get a patent issued on your invention (3 or 4 years from now), will anyone care?

• Will your competitors simply find another way to build a competing product, having seen your patent application 18 months from now?
• Will the cost of their R&D make your solution look attractive?
• Will they already have a competing, non-infringing product on the market by the time your patent issues?
• Will your approach represent a big cost savings?
• Will the state of the art already passed by this technology?
• Will you have the resources to defend your patent rights (or at least find an attorney to take your case on contingency)

Think carefully about these questions before investing in a patent. Remember that your patent can only stop someone from making, using, selling, etc starting on the day your patent issues. All of the sales the competition has made during your patent’s pendancy are not considered infringement.

Before committing to filing a patent application you should evaluate (with professional help) how broad your patent is likely to be, in light of the prior art and what your competitors are likely to do if they are blocked by your patent.