PLS 780Week 8

Agenda

• Patents• Trade secrets

Discuss

• I now believe it is possible that the current rules governing business method and software patents could end up hurting all of us… (Jeff Bezos)

• The only country earth…to give a exclusive legal right to use of an idea…generally speaking other countries have thought these monopolies of ideas produce more embarrassment than advantage to society… (Thomas Jefferson)

Patent

• Government granted right to exclude• Based upon disclosure to government (USPTO)• Nonrenewable 20 year term• Term begins from application; Applications take 2-3

years from filing to acceptance so its really a 18 year exclusive right

Exclusivity

• Making• Using• Selling (or offering to sell)• Importing to the US• Different from copyrights in terms of defenses to

infringement—there is nothing like fair use

Patents confer a negative right

• They don’t give the holder any specific rights and instead only prevent others from using their patent

• Blocking patents demonstrate the complexity of this idea (Patent 1 mug; patent 2 handle that attaches to mug) since they prevent original patent holders from creating and selling the improved version of a product

Licensing and Cross-licensing

• Patents constantly build upon ‘prior art’ or existing ideas

• Therefore a health and robust system of licensing patents exists

• Why? What do you think this looks like in the real world? The online one?

Patent Prosecution

• The term of art for the patent application process is patent prosecution

• Cannot enforce exclusivity during the patent application process—risky! Sometimes opt for trade secret protection instead (balance risk with rewards—can’t license a trade secret)

• 80% of all patents are owned by corporations• 50% of all patents are owned by foreign companies• Why?

Limits to Exclusivity

• Duration• First Sale Doctrine• Experimental use• Territorial reach• Export

Duration

• Around 20 years• Expensive to maintain! If not paid the patent lapses (

The iPod was a lapsed patent made by a guy in England; Couldn’t afford the $12K to maintain the patent so it lapsed and Apple swooped in—Steve Jobs admitted this!)

• Push to make internet related patents shorter; Why?• Unfortunately, won’t happen due to treaty

obligations…

Other limits

• First Sale Doctrine: allows for reselling a patent based upon legal acquisition of rights under the patent

• Experimental use: Sort of similar to ‘fair use’ but very limited—doesn’t impact the internet; normally reserved for medical trials and scientific study

• Territorial reach-Patents are enforceable only within US; Must apply in each country where you want to enforce

• Cannot export patented material

What is patentable?

• Within the scope—subject matter of patents• Useful• Novel• Nonobvious• Enabled• Drafting a patent application to comply with these

requirements is difficult and requires enormous technical knowledge about the subject of the patent

Scope

• Processes• Machines• Manufactures (articles of manufacturing--stuff)• Compositions of matter• Pretty broad! Includes basically any invention…• Limits: Can’t patent laws of nature, phenomena,

abstract ideas

Utility

• Pretty low bar here• The patent has to have a use of some kind• It as to do something as described• Not required to do anything better; just has to do

something

Novelty

• It has to be new• Prior art can be built upon/augmented but it cannot be

duplicated• Oftentimes prior art renders applications unpatentable• Prior art searching (like trademark knockout searching)

is a useful skill (usually done by a patent paralegal!)• First to invent first to file: Complex set of rules that

must be followed with regards to timing; If a patentable idea has been used more than the 1 year grace period without filing it is no longer patentable)

Nonobviousness

• Must be different from prior art—the more significant the differences the more likely the idea will be patentable

• Secondary considerations are also viewed including the commercial viability of the invention, the perceived need, failure of others to invent something similar, a lot of people copied it (counterintuitive…evidence of it being a good idea!)

Amazon v Barnes and Noble

• Facts• Issue• Holding• Reasoning• Rule

Enablement

• Final requirement• Requires that the patent be filed with specific

instructions that would enable anyone to reproduce the art/invention

• Tough part of the application; You want to meet the requirement but not disclose more than you have to

Type of patents

• Utility (most important to internet—hardware software, business processes)

• Design (the way something looks—overlaps with copyright and trademark but protects the usability of a design—ipod click wheel)

• Plant (literally plants)

Business Methods Patents

• Patent for processing information or conducting operations

• Huge implications for internet companies and ecommerce

• State St. v Signature: 1998 case that says business methods must satisfy the same requirements for patentability (you can’t toss an patent application that involves a business process merely bc it is a business process…)

In Re Bilski

• Facts• Issue• Holding• Analysis• Rule: Complicated case! Limits business methods

patents to those that actually product something and have some utility; can’t be just an abstract idea bc those are not patentable

Patent Enforcement

• Expensive but ultimately through litigation in the federal circuit (subject matter jurisdiction over patents) and can be reviewed by SCOTUS

• Cease and desist letters

Infringement

• Literal: includes everything from an original patent that was infringed upon

• Doctrine of equivalents: May not be exact copy but functions in substantially the same way; Lesser standard than literal but still the same outcome: Infringement. Is this good policy? Why or why not?

Defenses

• Not infringed: There are differences in the two patents

• The original patent is invalid or unenforceable due to obviousness or issues with the patent prosecution itself

Remedies

• Damages and attorney’s fees• Treble damages (up to three times in order to

punish)• Injunctions to stop the infringement• No criminal prosecution or fines like copyright; Why?

Trade Secrets

• Critical intellectual property protection in the 21st century involves protecting information. Why?

Knowledge as asset

• Information and knowledge form the bedrock/foundation of our economy

• How things are made, what the ingredients are, what information is used to make decisions etc. all have immense value and implications

• Patents, trademark and copyright cannot cover and protect all valuable information

Trade secrets

• Virtually any and all information that provides economic value to business can be classified as a trade secret

• Broader and less defined than patents or other IP• Why?

Governing law

• The Uniform Trade Secrets Act—State law that has been adopted by virtually all states protects business information that is not generally known, would be difficult to lawfully acquire and the owner of which has made reasonable attempts to keep it secure

• Economic Espionage Act of 1996—Gives federal law enforcement powers to investigate and judiciary the right to punish those who steal secrets

Why do we have trade secrets law?

• Innovation• Efficiency• Ethics• Even to prevent things like nepotism and cronyism

Obtaining and Maintaining Trade Secrets

• No real process• If it meets the requirements of the statutes (hard to

find information that you tried to protect) and someone steals it, you sue and/or FBI investigates

• Cheap• No limit on duration• Good as a backup protection (especially software

since only first 25 lines need to be placed in copyright applications)

Limits

• Doesn’t protect you from someone who simultaneously or subsequently invents the same thing on their own

• A third party could independently develop the process and then patent; leaving you as the original holder of the secret as a patent infringer!

Trade secrets litigation

• Asserting trade secrets rights in court:• Information qualifies• Reasonable measures were made to keep secret• Information was misappropriated/acquired improperly

• Acquisition by improper means:• Theft• Bribery• Breach or inducement to breach contract or

agreement• Espionage (including electronic)

Defenses

• Reverse engineering (not a defense to patent infringement obviously but a defense to trade secret since it is acquisition by a ‘proper’ means

• Information was never secret• First amendment right to post information (matter of

public or private concern is the litmus test for this defense) Why? What policy is being served here?

Remedies

• Damages and attorney’s fees including treble damages

• Injunctions• TRO’s• Criminal enforcement (in the case of espionage)