Do I Qualify for Small Entity Fees at the USPTO?

The USPTO has three fee categories: large entity, small entity, and micro entity. Previously I wrote about micro entities that usually get a 75 percent reduction from the large entity fees. If you don’t qualify as a micro entity, you might qualify as an entity, which usually gets you a 50 percent fee reduction.

USPTO rule 37 C.F.R. 1.27 defines which persons, small businesses, and nonprofit organizations qualify as a small entity. An owner of a patent application or a patent is entitled to small entity status only if, the owner is:

  • A person … meaning any inventor or other individual ( e.g., an individual to whom an inventor has transferred some rights in the invention) who has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention. An inventor or other individual who has transferred some rights in the invention to one or more parties, or is under an obligation to transfer some rights in the invention to one or more parties, can also qualify for small entity status if all the parties who have had rights in the invention transferred to them also qualify for small entity status either as a person, small business concern, or nonprofit organization under this section.
  • A small business concern . . . meaning any business concern that:
    • (i) Has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to any person, concern, or organization which would not qualify for small entity status as a person, small business concern, or nonprofit organization; and
    • (ii) Meets the size standards set forth in 13 CFR 121.801 through 121.805 to be eligible for reduced patent fees.
      • Section 13 CFR 121.802 provides that a small entity small business concern is an entity that has 500 or less employees, including affiliates and,
      • has not assigned, granted, conveyed, or licensed (and is under no obligation to do so) any rights in the invention to any person who made it and could not be classified as an independent inventor, or to any concern which would not qualify as a non-profit organization or a small business concern under this section.
      • The definition of who counts as an employee and an affiliate for the purpose of determining the 500 employee limit is defined by several Small Business Association regulations. See, e.g. 13 C.F.R. 121.103, 121.106. If your business, including employees of any affiliate, subsidiary, or parent company, has near 500 employees, it is best to pay the large entity fee.
  • A nonprofit organization … meaning any nonprofit organization that:
    • (i) Has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to any person, concern, or organization which would not qualify as a person, small business concern, or a nonprofit organization; and
    • (ii) Is either:
      • (A) A university or other institution of higher education located in any country;
      • (B) An organization of the type described in section 501(c)(3) of the Internal Revenue Code of 19 86 (26 U.S.C. 501(c)(3)) and exempt from taxation under section 501(a) of the Internal Revenue Code (26 U.S.C. 501(a));
      • (C) Any nonprofit scientific or educational organization qualified under a nonprofit organization statute of a state of this country ( 35 U.S.C. 201(i)); or
      • (D) Any nonprofit organization located in a foreign country which would qualify as a nonprofit organization under paragraphs (a)(3)(ii)(B) of this section or (a)(3)(ii)(C) of this section if it were located in this country.

Federal Government
If a person or small business concern licenses rights in an invention to the federal government/agency, then depending on the circumstances that person or small business concern may or may not qualify as a small entity. Generally the federal government or agencies of the federal government are not considered small entities. MPEP 509.02. Therefore, licensing to the federal government might prohibit you from claiming small entity status.

However, there are some exceptions for certain licenses. For example, a “person” under the above definition that licenses rights to a federal agency under Executive Order 10096 may still qualify as a small entity. Further a small business concern or non-profit may still qualify as a small entity if they license to a Federal agency resulting from a funding agreement with that agency pursuant to 35 U.S.C. 202 (c)(4).

Loss of status
Once small entity status is claimed it will continue in an application until an issue fee is due or maintenance fee is due. 37 C.F.R. 1.27(g)(1). Therefore, a new determination of small entity status needs to be made at the time issue fee is due or maintenance fee is due. A notice of loss of small entity status must be filed, if such status is lost, when paying an issue fee or maintenance fee. The paying of the large entity fee alone is not sufficient. Id. at 1.27(g)(2). A new assertion of small entity status is required in any continuation or divisional application. MPEP 201.06(c)(VIII).

Erroneous Claims
Claiming small entity status when an applicant or patent owner is not entitled to it could be considered fraud on the patent office and could negatively impact the owner’s patent rights. 37 C.F.R. 1.27(h). Therefore it is important to ensure that a claim for small entity status is made only when the owner qualifies.

File Patent Applications Early and Do Not Rely On AIA Grace Period

Before the America Invents Act (AIA), an inventor had a one year grace period between the time of first public disclosure by the inventor of the invention and the time a patent application was required to be filed.  A grace period is provided under the AIA, but for the reasons explained above, the best practice is to avoid relying on the grace period and to file an application early before public disclosures or uses.

Explaining The Grace Period
The grace period provided in 35 USC 102(b)(1)(A) provides that the inventors own disclosure made less than one year before the filing of a patent application will not be prior art against the inventors patent application. Sections (b)(1)(B) and (b)(2)(B) provide that if the inventor (or a third party who obtained the subject matter from the inventor) first discloses the subject matter, then later disclosures (or later filed third party application) of the same subject matter within a year will not be prior art against an inventor’s later filed application on that subject matter. Section (b)(1)(B) and (b)(2)(B) therefore purportedly provides a later filing inventor the ability to overcome a prior disclosure (or patent application) by a third party.

For example, if an inventor Joe publicly disclosed an invention having A, B, and C. Then a subsequently filed US patent or published application by another inventor Bob discloses A, B, C, and D. Under the 102(b) grace period exception, only element D of Bob’s intervening application would be prior art against Joe’s later filed patent application. Bob’s application could not be relied to reject A, B, and C of Joe’s patent application.

But there’s a catch.

Narrow Grace: Only Identical Subject Matter According to USPTO
The USPTO interpreted the law to require the third party’s disclosure be the “identical subject matter” of the inventor’s invention. 78 CFR 11061. This is a narrow view of what prior disclosures can be overcome. Under the prior law, any disclosure including both identical disclosures and disclosures that were not identical, but were an obvious variant, could be excluded as prior art by proving an invention date (with diligence) before the date of the third party disclosure.

Now, under the AIA, the USPTO concluded that the grace period does not cover obvious variants only identical subject matter disclosure. There is debate whether the USPTO is correct. However, it will likely take years before a court rules on whether the grace period should cover obvious variants.

In response to comments made during rule making, the USPTO clarified that there is “no requirement that the mode of disclosure by an inventor or joint inventor be the same as the mode of disclosure of an intervening disclosure (e.g., inventor discloses his invention at a trade show and the intervening disclosure is in a peer-reviewed journal).” 78 FR 11035, 11079. The USPTO further stated that there is “no requirement that the disclosure by the inventor or a joint inventor be a verbatim or ipsissimis verbis disclosure of an intervening disclosure in order for the exception based on a previous public disclosure of subject matter by the inventor or a joint inventor to apply. id. The USPTO further stated, “the exception [grace period] applies to subject matter of the intervening disclosure that is simply a more general description of the subject matter previously publicly disclosed by the inventor or a joint inventor.” 78 FR 11035.

So the disclosure does not have to be verbatim, but how far from verbatim can we go? In other words, how “close” does the disclosure need to be to the inventor’s invention for the grace period exceptions to apply? No one knows at this point.

The Problem Illustrated
How would a problem arise? Consider this example. Matt publishes the details of his invention on the Internet. Jake reads Matt’s disclosure and thinks of a way to improve Matt’s invention in an obvious way. Jake publishes the obvious improvement to Matt’s invention within one year of Matt’s first publication. Matt then files a patent application on his invention within one year of his first publication of his invention on the Internet.

The USPTO might reject Matt’s patent based on Jake’s publication, given that Jake’s publication (of the obvious improvement) was not identical to Matt’s invention. This is true even though Jake’s improvement is based on Matt’s first publication of his invention on the Internet.

Conclusion: File Early
Given the USPTO’s interpretation of the grace period exception, it is important to file a patent application early. Further, if there is ongoing development for an invention, the ongoing developments should be covered by subsequent patent filings as they are invented or refined so that the new subject matter will have the benefit of an early filing date. The problems is that you don’t know what others might independently be doing independently or after seeing your disclosures.

If you have disclosed your invention, you’re not necessarily out of luck given the grace period. But you are in a riskier position. The safest approach is to file early and do not rely on the grace period.

Invention Evaluation Factor: Dancing on the Edge of Failure

SONY DSCHow do you know whether your project / invention is worth continuing to pursue or whether to start in the first place? There are many factors that you might consider when determining whether to pursue a project / invention. One question you might want to include in the mix is whether your invention / project makes or has ever made you feel like you are dancing on the edge of failure.

I consume a lot of content on the topic of innovation and entrepreneurship. Recently I was listening to a podcast series called Seth Godin’s Startup School. There Seth provided that great characterization “dancing on the edge of failure,” which is applicable to the important engaging work carried on by innovators.

Dancing on The Edge of Failure. In episode 10 of the podcast, titled Tactics, Seth talks about finding one’s purpose. Seth asserts that you really feel alive and engaged–not because you were born to do a certain thing or endeavour, such as playing the guitar, paving the street, or running a kids shelter–but because you are dancing on the edge of failure in a particular endeavor.

I think “dancing on the edge of failure” is a great descriptor for challenging and engaging pursuits of life. The image created by the phrase “dancing on the edge of failure” is a mix of excitement combined by the seriousness and focus it takes to be on an edge, especially an of edge of failure. You might succeed or you might not, but the opportunity for success is energizing and focusing at the edge. Endeavouring on a project that is not safe and known brings a level of excitement and interest. Dancing on the edge of failure is not meant to imply recklessness or a lack of planning and due diligence, but rather effort on a challenging endeavour that is not a sure bet.

I see the effects of dancing on the edge of failure in my innovator and entrepreneurial clients. The mix of energy, excitement, and hard work brings an invention from conception to market. Clearly, new inventions generally have a higher risk of failure than the tried and true.

Innovation at the Edge. Innovation often occurs at the edge. This is because if you’re too far outside of the box, the components necessary for your innovation to be adopted might not be available or your innovation might not be accepted by your customer base because its too far out there. On the other hand, if your innovation is in the box, it may not be sufficiently new to generate interest or success. Therefore success is often found at the edge.

I transcribed the following excerpt of the podcast where Seth talks about dancing on the edge of failure:

[14:14] I think there’s a reason its hard to scale. ….  [14:40]  I don’t think there are many answers here, I think largely there’s one. And this is what the Icarus Deception is about. I think that the purpose for just about everybody, when they feel like they have achieved their purpose, has nothing to do with to play the guitar, to pave the street, to run a kids shelter. I mean none of that is in our DNA, right? I think it is to dance on the edge of failure. I think that when people are dancing on the edge of failure and their growing and there is a void over there but they keep moving forward—that’s when we feel alive as people. There’s a few people that don’t have that. Its been boiled out of them or raised out of them or whatever. But generally it’s that getting close to the precipice that I think is ingrained in who we are as people.

So when you talk in the persuasive way you have, lots of people sign up for the Linkedin group. But then, they are safe to quit. It is easier to quit than it is to stare down the abyss. Its easier to quit then to do that dance. . . . . That in fact our purpose is in finding the thing that we did that we didn’t think would work an hour ago and now its working well enough to wonder what the next thing is and keep that cycle going. And the magical ironic punchline is the internet is making that easier than ever for 1.5 billion people. The explosion we are about to see, I think, is not the explosion of industrial job creation it’s the explosion of people who figure out, whether there is money involved or not money involved, how to do that scary thing, whatever that scary thing is.

[Seth Godin’s Startup School, Episode 10, Tactics (emphasis added)]

Innovation often happens through those who are willing to dance on the edge of failure. What projects allow you to dance on the edge of failure?

Photo by flickr user thebarrowboy licensed under this creative commons license.

Micro Entity Status at USPTO

The American Invents Act (AIA) authorized a new fee category, micro entity, directed to reduce fees for individual inventors and small companies. Previously, there were only two fee categories: Large entities that pay full fees, and small entities that usually pay half the fees of the large entity. Micro entities are provided a 75 percent reduction from the large entity fee rate.

To qualify as a micro entity, the applicant must meet all the items under one of the two sets rules.

Rule Set 1 (Income Limit):

  1. Each applicant qualifies as a USPTO-defined small entity under 37 C.F.R. 1.27.
  1. Each applicant is not named on more than four previously filed applications. However, the following application do not count: (a) applications that the applicant has assigned, or is obligated to assign, ownership rights as a result of previous employment (not current employment), and (b) the application was filed in another country, was a provisional application, or was an international application for which the basic national fee was not paid.
  1. Each applicant and joint inventor does not have a gross income more than three times the median household income in the previous year from when the fee(s) is paid. The limit as of August 2013 is $150,162, but this will change each year based upon United States household income. According to the USPTO FAQ page, if there are multiple inventors, the inventors income is not added together, but instead each inventor/applicant must not exceed the income limit.
  1. Each applicant has not (a) assigned, granted, or conveyed a license or other ownership to another entity that is not a micro entity, and is not (b) under an obligation to assign, grant, or convey a license or other ownership to another entity that is not a micro entity.

Rule Set 2 (Higher Ed.):

  1. Each applicant qualifies as a USPTO-defined small entity under 37 C.F.R. 1.27.
  1. The applicant has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the application to an institution of higher education as defined in 20 U.S.C. 1001(a).

Under rule set 1 many will not qualify because of the income limits and rights transfer limitations. Rule set 2 applies to universities and their employees.

Under the current fee schedule, it will cost a small entity $730 (Basic fee $70 + utility search fee $300 + utility examination fee $360) to file a utility patent application without excess claims. In contrast, it will cost a micro entity $400 (basic fee $70 + utility search fee $150 + utility examination fee $150). A large entity will pay $1600 ($280 + $600 + $720) for the same filing.

Patent Rejection: Why did the USPTO reject my Patent Application?

After a patent application is filed, the application will be placed in a queue to be examined by a patent examiner at the patent office. The patent examiner’s job is to ensure that only patent applications that meet the legal requirements for patentability are allowed to become patents.

According to some estimates between about 77% to 95% of all patent applications receive at a least one type of rejection or objection during the first examination by a patent examiner. Therefore it is quite common to receive such a rejection or objection in a patent application. Many such objections or rejections can be overcome by a proper response as explained below.

I. Formalities

Before turning to substantive rejections, which consider whether the invention is new as compared to the prior art or whether the subject matter of your invention is patentable, first we will consider objections based on formality requirements.

Parts of A Utility Patent Application

Section 600 of the Manual of Patent Examining Procedure (MPEP) sets out the component requirements for a utility patent application. For the purpose of this article, we will focus on the specification, the drawings, and the claims. The MPEP provides that the specification should include the following sections in order:

  1. Title of the Invention.
  2. Cross-References to Related Applications.
  3. Statement Regarding Federally Sponsored Research or Development.
  4. The names of the parties to a joint research agreement.
  5. Reference to a “Sequence Listing,” a table, or a computer program listing appendix submitted on a compact disc and an incorporation-by-reference of the material on the compact disc (See 37 CFR 1.52(e)(5)). The total number of compact discs including duplicates and the files on each compact disc must be specified.
  6. Background of the Invention.
    1. Field of the Invention.
    2. Description of the related art.
  7. Brief Summary of the Invention.
  8. Brief Description of the Several Views of the Drawings.
  9. Detailed Description of the Invention.
  10. Claim or Claims.
  11. Abstract of the Disclosure.
  12. “Sequence Listing,” if on paper.

Some of the above sections only apply to certain types of applications, but every application generally includes at least a title of the invention, a background of the invention, a brief description of the invention, a brief description of the drawings, a detailed description of the invention, a claim or claims, and an abstract. Therefore if any required section of the specification is not provided the examiner may raise an objection and require that the section be added or that a heading inserted so that all of the sections that are required are in the specification.

However no new subject matter can be added to the application after it is filed. Therefore, if, for example, the abstract is left out of the application at the time it was filed an abstract can probably be written an added based on subject matter disclosed in the rest of the description of the application. Therefore the subject matter of the abstract would not be new as compared to what was originally disclosed.

Features claimed but not shown in the drawings

In many cases in order for a feature to be claimed in a patent application it must be shown in the drawings. This is not always true for her example with respect to inventions that don’t require any drawings, such as certain chemical inventions. However, many if not most patent applications include one or more drawings that accompanied the description to help the reader understand the invention. See MPEP 608.02. If the invention is of the type that is capable of being shown in drawings then any claimed feature should also shown in the drawings.


A detailed discussion of how drawings should be drafted in order to comply with patent offices requirements is outside the scope of this article. However the rules at 37 CFR 1.84 set forth the standards for patent drawings. Further the USPTO created a Guide for Preparation of Patent Drawings dated June 2002 which is a good resource for resolving questions regarding patent drawings.


Every non-provisional application must include at least one claim. If the patent application does not have a claim the USPTO will not provide the applicant with a filing date. Claims are the most difficult and important portions of a patent application to draft properly. One of the most common objections raised with respect to claims is that a feature or element described in the claim lacks an antecedent basis, which is explained in MPEP section 2173.05(e).

A claim lacks an antecedent basis, for example, when a claim refers to ‘the lever’ or “said lever, where the claim contains no earlier recitation or limitation of a lever. Every element in a claim must be introduced starting with an “a”, such as “a lever”  and every reference to that lever thereafter is either in the form of “the lever”  or “said that lever.” Therefore you can’t recite “the lever” before you provide “a lever” earlier in the claim. if the claim does recite “the lever” before any reference in the claim is made to “a lever” the examiner may reject the claim on the basis that “the lever” lacks an antecedent basis of the claim. This is just one of the formalities that are required when drafting claims. Antecedent basis issues can almost always be remedied by an amendment to the claims that introduces the element in question with an “a” or “an”.

Above are just some of the formality issues that might cause the examiner to issue an objection of your application.

II. Substantive Rejections

Many of the above mentioned formality objections can be easily overcome as long as the application was drafted properly in the first case.  However dealing with substantive rejections can often be more challenging. A substantive rejection often includes an assertion by the examiner that the invention as described in the claims is not new as compared to the prior art.

There are a number of ways to overcome a rejection based on the prior art. These include amending the claims to include further limitations so that the claim language doesn’t overlap the prior art, making arguments that the examiner’s interpretation or understanding of the prior art is not correct, making arguments that the examiner has improperly combined two or more prior art references that cannot be combined under the circumstances. Other methods to overcome the office action which are less common can include proving, if the application was filed before the America Invents Act deadline, that you invented your invention before the reference date of the prior art and diligently pursued a prototype for filing a patent application.

Rejections based on novelty, i.e. that the claimed invention is not new in relation to the prior art, usually take one of two forms: a 35 USC 102 anticipation rejection, a 35 USC 103 obviousness rejection, or a 35 USC 101 ineligible subjectmatter rejection.

Section 102 Anticipation Rejection

In a section 102 anticipation rejection the examiner has to show that each and every element of the subjects claimed is found in one reference either explicitly or implicitly. So to overcome a 102 rejection the task is either to add additional limitations to your claim or to argue that the reference does not contain each and every element of your claim.

Section 103 Obviousness Rejection

In a section 103 obvious this rejection, the examiner could not find every element of your claim and one single reference instead the examiner uses two or more references combined to find every element of your invention. The examiner must put forth a basis as to why it would have been obvious to one skilled in the art related to your invention to have combined the references to meet all of the elements of claim. To overcome a 103 rejection limitations several approaches can be taken, including elements can be added to the claim which are not found in any of the references cited, arguments can be made that the references cannot be combined, an argument can be made that the references do not show all the elements as the examiner claims.

Section 101 Ineligible Subject Matter Rejection

in a section 101 rejection the examiner is asserting that one or more claims of the application are not directed to subject matter that can be patented. This often arises in cases involving computer based, biotech, and business method inventions. The scope of the types of inventions that can be protected is very broad under the U.S. Patent law. But there are some exceptions such as mathematical formulas, abstract ideas, and laws of nature. However it is possible to patent the application of a mathematical formula or abstract idea but not the mathematical formula or idea itself. If the patent application was drafted properly at the beginning it is often possible to overcome this rejection by incorporating appropriate elements into the claims or working with the wording of the claims to avoid claiming directly abstract ideas, mathematical formulas, or laws of nature.


While the above objections are not an exhaustive list, but comprise some of the common issues that arise during substantive examination of patent applications. Many of them can be overcome by the appropriate argument or amendment in a response depending in some cases one how the patent application was originally. A properly drafted application seeks to anticipate and provide support for any changes that might need to be made later during examination by the Patent Office.

Employer and Employee Invention Rights: Does My Employer Have Rights in My Invention?

Whether an employer has rights in an employee’s invention depends on the circumstances of the invention, the terms of any agreements between the employee and employer, and the state’s laws that cover the situation.

The first step is to review the terms of any agreements that the employee signed with the employer. This is because it is possible for an employee to transfer his or her rights in an invention to the employer through a written agreement. Titles to agreements that might contain relevant terms regarding invention ownership include “employment agreement”, “non-compete agreement” “non-disclosure agreement” “intellectual property agreement” “invention agreement” “employee invention agreement” etc. Not all documents with such titles necessarily contain provisions regarding invention ownership, however such documents, if they exist, should be reviewed in case they contain such provisions.

Regardless of the title of the agreement, we are looking for terms that transfer rights in invention to the employer in consideration for the employee employment compensation. Terms regarding invention ownership may explain the scope and extent to which the employer claims ownership over the employee’s inventions.

The terms of an agreement might provide that the employer owns inventions developed by the employee, even if the employee does it on his or her own time and with his or her own resources. However, typically ownership claims are limited to inventions that are related to the employer’s business or reasonably anticipated future business.

Some states have statutes that limit the types of inventions an employer can claim ownership in. For example, Illinois has an Employee Patent Act that prohibits an employer from claiming rights in an invention in which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Therefore Illinois prohibits employers from claiming rights in inventions not developed with employer resources and unrelated to the employers business. However, not all states have such a statute. So if Illinois law does not apply to the employment agreement at issue, statutes of the applicable state law will need to be reviewed.

No Agreement
If there is no written agreement providing the employer owns certain inventions of the employee, then the result will depend on the circumstances of the employment and invention. If any employee was hired or directed to solve a particular problem or to exercise his or her inventive faculties, then it is likely the employer will own the resulting invention under an implied-in-fact assignment. However if the hiring or direction is not sufficiently specific and the employee was not hired or directed to make improvements in a designated area, the employer may not own the resulting invention. There is a fine line between hire-to-invent and general employment, which is very circumstance dependent.

Shop rights
In the instance where the employer does not own the invention, but where the employee uses the employer’s resources to conceive, develop, or to reduce an invention to practice, the employee may have “shop rights” in the invention. Shop rights provide the employer with a nonexclusive, royalty-free, nontransferable license to make use of the invention.

It is important for employers to have written agreement that define which employee inventions that the employer will own. To determine whether an employer will own a particular invention, the applicable employment agreements, the circumstances of invention, and the applicable law should be reviewed.

Options When Your Invention Is Stolen

If you disclosed your invention to someone and that person subsequently copied your invention and or filed a patent application on the invention, you may have options to take action depending on the circumstances. Several scenarios are explained below.

By an non-inventor employee
If your employee, who is not an inventor, is commercializing or has sought patent protection, you will want to review the documents that were executed when the employee was hired. Such documents could include non-disclosure or non-compete provisions.

The misappropriation of the invention could constitute a breach of the non-disclosure provisions and or could constitute trade secret misappropriation if the product/service at issue was not publicly available, or if publically available, if the employee had access and utilized non-public information about the products/services. The misappropriation could also violate a non-compete provision depending on its terms. Further, the misappropriation could violate the employee’s duty of loyalty to his/her employer.

By an inventor employee
Many of the claims explained above regarding the non-inventor employee may exist against a inventor employee depending on whether the employer has any rights in the invention.

To determine whether the employer has any rights in an invention, first any signed agreements between the employee and employer should be reviewed. Language pertaining to employee ownership of employee’s inventions should be reviewed if such language exists.

If no signed agreements exist a number of factors may be considered to determine whether the employer has any rights in the invention such as: (1) was the employee employed to invent, (2) did the employee work on the invention at the direction of the employer, (3) did the employee work on the invention during work hours, (4) did the employee work on the invention using employer equipment, and (5) was the invention related to the employee’s business or reasonably anticipated business or research?

Further state statutes might exist that impact what rights an employer can claim in an invention. For example, Illinois has a statute that limits an employer’s ability to own inventions made by the employee on his or her own time without any of the employer’s equipment, supplies, or facilities when the invention is not related to the employer’s business or the employer’s actual or demonstrably anticipated research or development.

By a non-employee co-inventor
If there are two or more non-employee inventors, under patent law, each inventor will own the patent jointly with the other inventors. This allows each inventor to make, market, sell, license, or otherwise grant rights in the patent and receive moneys therefrom without splitting the funds with the other inventors. Further, each inventor does not need to get permission from the other inventors to undertake such activities with respect to the patent.

Therefore it is important to account for the possibility that co-inventors might fall into a dispute about the patent, a patent application, or the commercialization of a patent pending product/service. Whenever there is more than one inventor it is best to form a legal entity in which the inventors own an interest (e.g. own shares). The ownership of the invention can be transferred to the legal entity by all inventors. The internal operating documents of the entity can describe (1) the ownership interest of each inventor (and other non-inventors, if desired), (2) how the invention will be commercially exploited, (3) how disputes are resolved between inventors, (4) what happens if one or more inventors wants to proceed but other inventors do not, and (5) many other business considerations. The legal entity formed can be a written partnership, a corporation, an LLC, or other entity.

If the rights in the invention were assigned to an entity, then action may be taken based on the rights held by the entity.

By a someone under an NDA
Prior to marketing or publicizing an invention, it is often necessary for an inventor or company to work with others to develop the product or to take other necessary marketing and business actions for launching the product. Often a nondisclosure agreement (NDA) is used between the inventor/company and the third parties prior to product/service launch.

If the invention was misappropriated by a person or entity to which the invention was disclosed under a NDA, then the NDA should be consulted for determination of rights you may have.

Some possible basis for taking action are explain above depending on the circumstances. If your invention has been misappropriated, you likely have options for taking action and recovering rights in the invention. If there is a basis for taking action, the first set may be to send a letter to the misappropriator. However, in some circumstances the first step will be be to file a lawsuit or take action at the USPTO. Seek advice of an attorney regarding the options you may have under your particular circumstances.

Ensuring Strong Patent Enforcement Position Through Virtual Patent Marking

U.S. patent law encourages patent owners to mark products or services that are covered by at least one claim of a patent. Therefore patent marking is an important step in ensuring a strong patent enforcement position if infringement occurs. The America Invents Act now allows “virtual patent marking” as explained below.

Reason for Marking
Section 287 of Chapter 25 of the U.S. Code provides that if a patent owner fails to mark its patented invention, then the damages will be limited to those arising after the infringer was notified of the infringement. However, if the invention is marked, then the patent owner will be able to get damages back to the start of the infringement (subject to any applicable statute of limitations).

Therefore, lets see what happens if the invention is not marked. Assume that an infringer starts infringing your patent five years ago, but you only discovered the infringement today and thereafter quickly sent the infringer a demand letter notifying the infringer of the infringement. Lets assume that the sales over the last 5 years resulted in 3 million dollars in recoverable patent infringement damages. Since the invention was not marked, the patent owner would only be able to recover damages arising after the infringer received the infringement demand letter, and not the 3 million dollars accruing over the last 5 years.

Therefore, marking has an impact on the damages that are recoverable for infringement. Also, whether the invention was marked impacts how a infringer might react to a claim of infringement. If the infringer has a liability of 3 million dollars in damages the infringer is obviously in an inferior bargaining position in terms of settlement as compared to if the infringer as no monetary liability because the invention was not marked.

Who Should Mark
Those that are making, offering for sale, or selling within the United States any patented article or importing any patented article into the United States should mark. Therefore if you are not commercializing your invention by the above activities, you are not subject to the damages limitations of section 287.

How to Mark
Marking notice may be given either by (1) fixing on the product the word “patent” or the abbreviation “pat.”, together with the number of the patent, or (2) by fixing thereon the word “patent” or the abbreviation “pat.” together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent.

If from the character of the patent article, the product itself cannot be marked, then it is permissible to fix the above notice on a label attached to the product or to the package of the product.

Virtual Marking
As provided above, you can provide notice by listing a internet address together with the word patent or pat. where the resulting internet webpage provides an association between each patented article and the corresponding number of the patent. In this way you can quickly and easily update the marking of products with newly issued patents by updating the patent marking webpage to show the patents that apply to the corresponding product. This alleviates the need to change molds or packaging as new patents are issued.

Routinely Updated. The webpage should be updated whenever a patent status changes, including when a patent issues and if a court or the USPTO invalidates or narrows the patent in a way that would change whether the corresponding product is covered by the patent.

Availability. The webpage should be continuously available so that anyone trying to determine the patents covering a product/service will be able to have ready access to the webpage. Records of continuous webpage availability should be kept.

Change log. Further it would be best to keep a change log of the changes to the patent marking webpages so that the log shows the details of each change made to the webpage and the date that change was made. This change log is important to show when marking related to a given product/service or patent began on the webpage.

Published Applications. Published patent application and corresponding products may also be listed on the same or a different web page. When listing published patent application on the same page as issues patent, it should be clear that the published application are not issued patents. The benefit of listing published patent applications is that the webpage might provide actual notice that could allow for the recovery of royalties under provisional patent rights statute.

Inventorship: When was the Invention Conceived?

Dawson v. Dawson, Dkt. No. 2012-1214, 1215, 1216, 1217 (Fed. Cir. March 23, 3013).

This case deals with the issue of when an invention is conceived and involves an invention ownership dispute between a university and a pharmaceutical manufacturer. The issue was whether an inventor, Dr. Dawson, conceived of the invention while employed at the University of California, San Francisco (“UCSF”) or instead later when he joined Insite, a pharmaceutical manufacturer. This case deals with medical preparations, but is interesting on the conception point.

While employed at UCSF, Dr. Dawson made a presentation at a meeting of the World Health Organization (“WHO”) Alliance for Elimination of Trachoma. Trachoma is a bacterial infection of the eye that can lead to blindness. Dr. Dawson’s presentation covered the topical use of an antibiotic called azithromycin to control trachoma, which later became the subject of two patents at issue in the appeal. Documents from the WHO regarding the meeting, discussed Dr. Dawson’s presentation but also included a number objections to Dr. Dawson’s approach, such as the concern that that “[n]o product is available” and that the “[e]fficacy and dosing schedule” would need to be determined, and that “problems with ointments for trachoma treatment are well known . . . . Ointments are difficult to apply and poorly tolerated.”

Dr. Dawson left UCSF and began working at Insite with Dr. Bowman on a formulation. Dr. Dawson needed the help of Dr. Bowman because Dr. Dawson did not have experience in preparing ophthalmic medication formations. Dr. Dawson and Dr. Bowman later filed two patent applications as joint inventors. These applications resulted in Patent No. 6,239,113 and U.S. Patent No. 6,569,443. UCSF filed an application to provoke an interference.

Principles of Invention Conception
The court recited several principals of invention conception:

  • Conception is the “‘formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.’” Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986)
  • After conception “all that remains to be accomplished, in order to perfect the art or instrument, belongs to the department of construction, not creation.” 1 Robinson on Patents 532.
  • “[c]onception is complete only when the idea is so clearly defined in the inventor’s mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation,” and that “[a]n idea is definite and permanent when the inventor has a specific, settled idea, a particular solution to the problem at hand, not just a general goal or research plan he hopes to pursue.” Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1228 (Fed. Cir. 1994).
  • “[b]ecause it is a mental act, courts require corroborating evidence of a contemporaneous disclosure that would enable one skilled in the art to make the invention.” Id.

No Testimony of the Inventors
The court noted that UCSF did not seek testimony from inventor Dr. Dawson or Dr. Bowman on the issue of conception. This is likely because the inventors were not likely to provide favorable testimony to UCSF. However, in this case the reliance on what normally surfaces as corroborating evidence, i.e. contemporaneous disclosure of the alleged conception, was not successful.

General Idea Not Enough in This Case
The court found that the announcement of the general idea in the WHO documents was not sufficient. The court found that the documents provided a preliminary statement about a possibility or potential use and an need for continued work and a report back, fell short of the “definite and permanent idea of the complete and operative invention.”

The Court further found the specific concentrations provided in the patent claims were not disclosed initially in the WHO documents and at the time Dr. Dawson did not know of what concentrations to use.

The dissent found the evidence showed that Dr. Dawson did conceive of the invention while at UCSF. The majority responded that it was reviewing the decision of the Board and not evaluating the evidence in the first instance. Therefore the majority only concluded “that substantial evidence supports the Board’s relevant factual findings and that the Board did not err in holding that UCSF failed to meet its burden of proof as to the legal issue of conception.”

Sufficient Computer Structure Disclosure for Means-Plus-Function Elements

HTC Corp v. IPCom GMBH, Dkt. No. 2011-1004 (Fed. Cir. Jan 30, 2012) [PDF].

HTC sue IPcom for declaratory judgement of non-infringement of IPCom’s Patents, including U.S. Pat. No. 6,879,830 and IPCom countersued for infringement. The ‘830 patent is directed to the handover of a cellular phone from one base (tower) to another, as for example, when a person uses a cell phone in a car traveling between coverage areas.  The invention is intended to reduce the chance of service interruption during the handover.

Claim 1 provides:

A mobile station for use with a network including a first base station and a second base station that achieves a handover from the first base station to the second base station by:

storing link data for a link in a first base station,

holding in reserve for the link resources of the first base station, and

when the link is to be handed over to the sec-ond base station:

initially maintaining a storage of the link data in the first base station,

initially causing the resources of the first base station to remain held in reserve, and

at a later timepoint determined by a fixed pe-riod of time predefined at a beginning of the handover, deleting the link data from the first base station and freeing up the resources of the first base station, the mobile station comprising:

an arrangement for reactivating the link with the first base station if the handover is unsuc-cessful.

At summary judgement, HTC claimed that claims 1 and 18 (similar to claim 1), were invalid as indefinite because (1) they claimed both an apparatus and method steps and (2) the patent failed to disclose structure corresponding to the claimed means-plus-function element “arrangement for reactivating.”

Over Emphasis on Prosecution History. While the district court found the claims invalid because they claimed both apparatus and method steps, the Federal Circuit disagreed.  The Federal Circuit found the claim was an apparatus claim directed to a moble station (cellular phone) to be used within a network. In interpreting the claim language the Federal Circuit considered factors set out in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc): (1) the words of the claim, (2) the specification, (3) the prosecution history, and (4) extrinsic evidence. The Federal Circuit found that the district court put too much emphasis on the prosecution history. The patentee in response to an office action stated, “the cited section of [the prior art reference] clearly describes a process that is completely different from the claimed process. . .” (emphasis added). The Federal Circuit  noted that “claim language and the specification generally carry greater weight than the prosecution history.” The court found that the attorney’s signle reference to a “process” in response to an office action was insufficient when viewed in relation to the plain language of the claims and specification.

Sufficient Computer Structure. The Federal Circuit found that the district court erred in finding that the disclosure of a processor and transceiver was sufficient structure. The Federal Circuit noted that when considering whether their is sufficient support in the specification for a means-plus-function limitation, the disclosure of a general purpose computer or micro processor is not enough. Instead an algorithm must also be disclosed which the computer/processor executes. A patent must disclose “a means for achieving a particular outcome, not merely the outcome itself.” Yet, the appellate court found HTC waived any argument regarding whether the ‘830 patent disclosed a sufficient algorithm.

Further, the Federal Circuit rejected HTC’s argument that the specification needed to disclose the precise circuitry, components, or schematics or controllers would be employed. The court provided that level of hardware disclosure is not necessary, stating “as long as a sufficient algorithm describing how a general-purpose computer will perform the function is disclosed, reference to such general-purpose processors will suffice to overcome an indefiniteness challenge.”