The 21st century economy presents various challenges to the modern business owner. Whether one is a small local merchant or a multinational corporation providing goods and services around the world, business owners must identify and protect their business assets to maintain a competitive advantage in the marketplace. “Ideation” and “monetization” are watchwords used to spur innovation into profits. Patent, trademark, copyright and trade secret laws exist to provide innovators with legal protections for their inventions, brands, creations, and know-how. However, the failure to identify and protect such rights under available intellectual property laws usually leads to loss of market share from increased competition by third parties.
The following article was written by Scott Harper and is part one of a multi-part series covering intellectual property rights in the United States.
Read part two here: Intellectual Property 101 - Trademarks.
Read part three here: Intellectual Property 101 - Copyrights.
In general, patents protect solutions to recognized problems which has come to be known as “invention.”[vi] Patent law is primarily governed by federal law, which provides that an individual who “invents or discovers a new and useful process, machine, manufacture, or composition of matter” is permitted to obtain limited exclusionary rights to protect the invention by prohibiting others from practicing the invention without the inventor’s permission.[vii] In exchange for this exclusive right, the owner agrees to disclose to the public the invention in enough detail to permit anyone of ordinary skill in the art to which the invention pertains to practice the invention once the limited exclusionary rights expire.[viii]
In order to receive a patent, an inventor must file an application with the United States Patent and Trademark Office (PTO).[ix] The PTO then examines the application and issues a patent if the invention meets all of the requirements of patentability.[x] In order to be patentable, an invention must “fall within one of the express categories of patentable subject matter, and be novel and nonobvious.”[xi] Until 2011, patents in America were granted to the person who was the “first to invent.”[xii] Under this basis, courts resolved conflicting claims of inventorship by determining who was the first to conceive of the invention at issue.[xiii] This meant that a party who filed a patent application first could have their application nullified by a later-filing party who showed an earlier date of invention.[xiv]
In 2011, Congress passed the America Invents Act (AIA) which made several major changes to the U.S. patent system. One of the fundamental changes made by the the AIA was to change the U.S. patent law to grant patents to the “first inventor to file.”[xv] Under this system, a patent is granted to the first inventor to file a patent application for an invention, regardless of who invented first.[xvi] The objective of this shift away from the ‘first to invent” system was to “increase transparency, objectivity, predictability, and simplicity in patentability determinations” and to bring the U.S. patent system into harmony with most foreign patent systems which operate on the “first to file” basis.[xvii]
A. Purpose of Patents
At the core of the patent system is the idea that people will be encouraged to produce new inventions if there is some economic reward as an incentive.[xviii] However, behind the patent law system lays a public use function.[xix] In effect, the purposes of the patent system are: (1) to foster and reward invention; (2) to promote disclosure of inventions to further innovation and permit the public to practice the invention once the patent expires; and (3) assure that ideas in the public domain remain there for the free use of the public.[xx] These goals are achieved through the “patent bargain.” As explained by the Supreme Court, “the federal patent system . . . embodies a carefully crafted bargain for encouraging the creation and disclosure of new, useful, and nonobvious advances in technology and design in return for the exclusive right to practice the invention for a period of years.”[xxi]
B. Advantages of Obtaining a Patent
A U.S. patent gives an inventor the exclusive right to make, sell and use the invention for a limited time in the United States.[xxii] It naturally follows then, that a patent allows an inventor to exclude others from making, using, selling, offering to sell, or importing the patented invention into the United States.[xxiii] This right to exclude permits the patentee to benefit financially by exploiting the patent himself and/or by granting licenses to others to exploit the invention in exchange for royalties or other consideration.[xxiv] Without obtaining a patent, the inventor has no protection from another person copying the invention and reaping the financial benefits therefrom.[xxv]
C. Types of Patents
1. Utility Patent
A utility patent provides protection for an invention of a process, machine, article of manufacture, or composition of matter.[xxvi] To be patentable, an invention must be novel, useful, and nonobvious.[xxvii] There are three different kinds of utility parents: a patent on the device or apparatus; a patent on a process or method of creating something; and a patent on the product that is produced by a patented process.[xxviii] A utility patent can also be granted for an improvement to a previous invention, provided that the improvement meets all the requirements for patentability.[xxix] In fact, most utility patents granted today are directed to an improvement of a previous invention.
2. Design Patent
A design patent protects “any new, original and ornamental design for an article of manufacture.”[xxx] Examples of design patent subject matter include: vehicles,[xxxi] footwear,[xxxii] and fabrics.[xxxiii] Unlike a utility patent, a design patent only protects the visual, nonfunctional features of an invention.[xxxiv] All of the provisions of Title 35 relating to utility patents apply equally to design patents unless otherwise provided by statute,[xxxv] meaning that a holder of a design patent holds the same exclusionary rights as the owner of a utility patent.[xxxvi] A design must still be novel and nonobvious, but instead of the utility requirement required for utility patents, design patents must be ornamental.[xxxvii] To meet the requirement of ornamentality, the design must “appeal to the eye as a thing of beauty.”[xxxviii]
3. Plant Patent
Under the plant patent statute, a plant patent is available for the invention or discovery of a distinct and new variety of plant that is asexually reproduced and not found in an uncultivated state.[xxxix] “Asexually produced” means that a patent will not be given to plants reproduced through fertilization of seeds.[xl] Furthermore, the statute states that plant patents are not available for tubers or for any plants discovered in a wild state.[xli] As with design patents, all of the provisions of Title 35 apply to plant patents unless otherwise specified by statute.[xlii] Like utility patents, the requirements of novelty and nonobviousness apply to plant patents.[xliii] However, instead of utility, plant patents require distinctness.[xliv] Distinctness has been defined as the aggregate of the plant’s distinguishing characteristics.[xlv]
D. Patent Term
The duration of exclusivity of a patent depends on the type of patent. The patent term of utility patents and plant patents is 20 years measured from the date the patent application was filed.[xlvi] The patent term of a design patent is 15 years from the date the patent issues for design patent applications filed on or after May 13, 2015, and the term for design patent applications filed prior to May 13, 2015 is 14 years from the date of issue.[xlvii] In 1999, Congress enacted several provisions that give patentees three “patent term guarantees” that are meant to compensate an applicant for certain delays by the Patent and Trademark Office (PTO) in examining the application.[xlviii] The first guarantee is that the applicant will receive a prompt initial response from the PTO. Second, the patent application will not remain pending for more than three years. Third, “the patent term will be adjusted for delays due to certain extraordinary PTO procedures."[xlix] However, patent terms may also be reduced under certain circumstances. For example, when a patentee claims that the content of a patent application relates to an earlier-filed patent application, the term of the patent granted therefrom is calculated from the filing date of the earliest claimed patent application.[l]
E. Patentable Subject Matter
Utility patents apply to “any new and useful process, machine, manufacture, or composition of matter.”[li] Accordingly, an invention may only be patented if it falls within one of the following classes of subject matter: (1) process; (2) machine; (3) manufacture; and (4) composition of matter. The purpose of these categories is to restrict patent protection to the “useful arts” or applied technologies.[lii] These statutory classes draw a line between ideas, which are not patentable, and products or processes, which are patentable.[liii]
The four classes of patentable subject mater can be broken down into two categories: process and products (machine, manufacture, and composition of matter). A process is a method of treating “certain materials to produce a given result.”[liv] The process may consist of a series of steps that lead to something new and useful, or the process may be a new way of achieving something that is already known.[lv] The other three classes of patentable subject matter—machine, manufacture, and composition of matter—can be grouped together as products. A machine is a mechanical apparatus created to produce a definite result.[lvi] Because machines are commonly used, this is the most comprehensible category of patentable subject matter.[lvii] A composition of matter is an instrument formed from a mixture of substances,[lviii] such as chemical compounds, mechanical or physical mixtures, and alloys.[lix] To be patentable, compositions of matter must possess some property that does not belong to each substance individually.[lx] Lastly, a manufacture is an article produced by human effort from raw or prepared materials.[lxi] This category is essentially the residual class of “product” patents—encompassing all man-made items that don’t fall within the categories of machines or compositions of matter.[lxii]
F. Requirements of Patentability
In order for an invention to be patentable, it must be new and useful.[lxiii] Novelty is the term used to describe the requirement that the invention be “new.” 35 U.S.C. Section 102 describes certain statutory bars, which are conditions that determine whether an invention is “novel” and therefore patentable.[lxiv] The section provides that an invention cannot receive a patent if any of the following events occur more than a year before the patent application is filed: (1) the claimed invention was patented, (2) described in a printed publication, or (3) in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.[lxv] Statutory bars ensure that patent applications are promptly filed and that the public can rely on inventions that have entered the public domain without fear that the inventor will later seek to patent it.[lxvi] The one-year grace period also allows an inventor to test the commercial viability of an invention before incurring the cost of filing for a patent.[lxvii]
35 U.S.C. Section 101 provides that an invention must be useful, or have “utility,” to obtain a patent.[lxviii] This requirement only applies to utility patents, not to plant and design patents.[lxix] Utility requires an invention to have some qualitative benefit.[lxx] This is a low threshold requirement and is met in most cases.[lxxi] The utility requirement simply ensures that the invention is not a “frivolous or insignificant.”[lxxii] Patent utility may not be presumed, it must be disclosed as an integral part of the patent specification.[lxxiii]
To receive a patent, an invention must not be obvious.[lxxiv] An invention is obvious if it is one that could have been invented with comparative ease by someone skilled in the relevant field of technology.[lxxv] Courts often apply a three-part test to determine whether an invention is obvious: (1) review the scope and content of the prior art; (2) determine the difference between the art and the patent claims; and (3) determine the level of ordinary skill in the art.[lxxvi] In addition to this three-part test, courts may assess secondary considerations such as commercial success of the invention and competitors’ adoption of the invention.[lxxvii]
G. Ownership of Patents
The ownership of a patent is initially presumed held by the inventor(s) as patents and patent applications are considered “personal property” under the U.S. patent statute.[lxxviii] Patent applications, issued patents, or any interest therein may be assigned by the inventor(s) by written instrument to another.[lxxix] All or some of the rights granted by a patent may be licensed to others with various potential restrictions (e.g. territorial scope, duration, exclusive/non-exclusive), while ownership remains vested in the owner/licensor.
In the employer-employee context, if an employee is hired to invent for the employer, the employer owns any resulting invention(s) developed by the employee.[lxxx] This is usually reflected in a written employment agreement confirming the employer’s ownership of the employee’s creations during the course and scope of their employment. In the absence of a written agreement, the employer’s ownership rights to an employee’s invention may be implied if the employer and employee had a mutual understanding that the employee would be inventing for the benefit of the employer.[lxxxi] If the employee was not hired to invent, the employer may alternatively be entitled to establish a “shop right” in the employee’s invention (i.e. a royalty-free, nonexclusive license to use the invention) if the employee developed the invention using the employer’s resources or personnel.[lxxxii]
[i] Intellectual Property, Legal Info. Inst., https://www.law.cornell.edu/wex/intellectual_property (last visited Dec. 21, 2015).
[v] U.S. Const. art. I, § 8, cl. 8.
[vi] Kinney & Lange, P.A., Intellectual Property for Business Lawyers §2.1 (2015).
[vii] Robert Matthews, Jr., Annotated Patent Digest §1.1 (2016).
[ix] 35 U.S.C. § 111 (2012); 4 Donald S. Chisum, Chisum on Patents § 11.01 (Matthew Bender 2016) [hereinafter Chisum on Patents].
[x] Microsoft Corp. v. i4i Limited Partnership, 131 S. Ct. 2238, 2242 (2011).
[xii] 3A Chisum on Patents, supra note 25, at § 10.01.
[xvi] See id.
[xvii] 78 Fed. Reg. 11059 (February 14, 2013).
[xviii] Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013).
[xix] Beidler v. U.S., 253 U.S. 447, 453 (1870).
[xx] Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979)
[xxi] Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 150-51 (1989).
[xxii] See Dawson Chemical Co. v. Rohm and Haas Co., 448 U.S. 176, 215 (1980).
[xxiii] See id.
[xxiv] John Gladstone Mills III et al., Patent Law Fundamentals § 1:3 (2nd ed. 2015).
[xxv] Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 441 (2001).
[xxvi] 35 U.S.C. § 101 (2012).
[xxvii] Id. § 101-03.
[xxviii] Matthews, supra note 23, at § 1.18.
[xxx] 35 U.S.C. § 171 (2012).
[xxxi] See Bonito Boats Inc., 489 U.S. at 141.
[xxxii] See Crocs, Inc. v. International Trade Com’n, 598 F.3d 1294 (Fed. Cir. 2010).
[xxxiii] See Gorham Mfg. Co. v. White, 81 U.S. 511 (1871).
[xxxiv] Bonito Boats Inc., 489 U.S. at 148.
[xxxv] 35 U.S.C. § 171 (2012).
[xxxvi] Matthews, supra note 23, at § 1.19.
[xxxvii] 1 Chisum on Patents, supra note 25, at § 23.01.
[xxxviii] Bliss v. Gotham Indus., Inc., 316 F.2d 848, 851 (9th Cir. 1963).
[xxxix] 35 U.S.C. § 161 (2012).
[xl] Imazio Nursery, Inc. v. Dania Greenhouses, 69 F.3d 1560, 1566 (Fed. Cir. 1995).
[xli] 35 U.S.C. § 161.
[xliii] 8 Chisum on Patents, supra note 25, at § 24.02.
[xliv] See 35 U.S.C. § 161.
[xlv] S. Rep. No. 315, 71st Cong., 2d Sess. (1930).
[xlvi] 35 U.S.C. § 154; 161.
[xlvii] 35 U.S.C. § 173.
[xlviii] Merck & Co., Inc. v. Kessler, 80 F.3d 1543 (Fed. Cir. 1996).
[xlix] 35 U.S.C. § 154(b) (2012)
[l] Id. § 154(a)(2).
[li] Id. § 101 (2015).
[lii] 1 Chisum on Patents, supra note 25, at § 1.01.
[liii] Gottschalk v. Benson, 409 US 63 (1972)
[liv] Cochrane v. Deener, 94 U.S. 780, 787-88 (1877).
[lv] 1 Chisum on Patents, supra note 25, at § 1.03(2).
[lvi] Burr v. Duryee, 68 U.S. 531, 570 (1863).
[lvii] See 1 Chisum on Patents, supra note 25, at § 1.02(1).
[lviii] Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980).
[lix] 1 Chisum on Patents, supra note 25, at § 1.02(2) (quoting A. Deller, Walker on Patents 126-27 (2ed. 1964).
[lxi] American Fruit Growers v. Brogdex Co., 283 U.S. 1, 11 (1931)
[lxii] 1 Chisum on Patents, supra note 25, at § 1.02(3).
[lxiii] 35 U.S.C. § 101 (2012).
[lxiv] Kinney & Lange, P.A., Intellectual Property for Business Lawyers § 3.5 (2015).
[lxv] 35 U.S.C. § 102 (2012).
[lxvi] Tone Brothers, Inc. v. Sysco Corp., 28 F.3d 1192, 1198 (Fed. Cir. 1994).
[lxviii] 35 U.S.C. § 101 (2012).
[lxix] Id. § 101; 161; 171.
[lxx] Brenner v. Manson, 383 U.S. 519, 532-33 (1966).
[lxxi] Juicy Whip, Inc. v. Orange Bank, Inc., 185 F.3d 1364, 1366 (Fed. Cir. 1999).
[lxxii] Brenner, 383 U.S. at 532-33 (quoting Note on the Patent Laws, 3 Wheat. App. 13, 24).
[lxxiii] 35 U.S.C. § 112 (2012).
[lxxiv] Id. § 103.
[lxxv] 2 Chisum on Patents, supra note 25, at § 5.01.
[lxxvi] Graham v. John Deere Co., 383 U.S. 1, 17 (1966).
[lxxvii] Id. at 17-18.
[lxxviii] 35 U.S.C. 261 (2012).
[lxxx] Standard Parts Co. v. Peck, 264 U.S. 52, 44 (1924); Atlas Brick Co. v. North, 288 S.W. 146, 147 (Tex. Com. App. 1926, judgm. affirmed).
[lxxxi] Wommack v. Durham Pecan Co., Inc., 715 F.2d 962, 965 (1983).