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An Entrepreneur’s Guide To Patents: The Basics
Comment
Editor’s note: Brad Woodcox is a technical specialist focusing on startup development for Novak Druce + Quigg, an intellectual property super boutique law firm. Follow him on Google+ and Twitter.
Patents. A single word that incites a fervor in the online tech blogging realm, perhaps only after the emotional responses to the iPhone vs. Android battle or TechCrunch using expletives in an article title.
With the publicity of the Apple and Samsung patent litigation, it became evident that some authors and commenters around the web do not fully understand patents and the patent system. In some instances, the scope of a patent was blown way out of proportion and deemed excessively broad. In other instances, conclusory statements were directed toward the entire patent system without an explanation or justification. For example, some people claim that patents are outdated relics that now only serve to stifle innovation. Typically, this argument has been made in regards to so-called “software patents,” but it is interpreted by many as implicating the entire patent system.
Before you accept these articles and statements as fact and write off patents completely, it might be beneficial to understand their history, the process, how they might help your current or future company, and how your company might be impacted by patents in the future. A series of articles will follow that are written in a style and format to provide the savvy entrepreneur/founder enough information to make his or her own decisions regarding patents and their applicability to the business.
A Bit Of History
Patent systems and other monopoly laws have been used throughout Europe for hundreds of years. The issue was so paramount to the U.S. founding leaders that they included its basic description in the Constitution (Article 1, Section 8). The formal U.S. patent system was established shortly after ratification of the Constitution when George Washington signed the Patent Act of 1790.
One of the key principles of the patent system is to serve as an incentive for innovation. Thomas Jefferson (who was the first patent examiner and oversaw the patent program) stated, “Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody.”
This incentive is created by granting the inventor (or owner of the patent) a temporary monopoly on the invention. The monopoly allows the inventor time to profit from the innovation to recoup the development costs. Such development costs can be rationalized for many products such as hardware or pharmaceuticals. For example, it takes millions or even billions of dollars to develop, test, and get regulatory approval for a pharmaceutical drug. If a generic manufacturer could immediately reverse engineer and produce the drug and undercut the price of the brand name developer, the incentive to develop new pharmaceutical drugs is severely limited.
The system has generally worked as intended for decades. However, as technology progressed, new types of inventions were created. In particular, the rise of computers and software allowed novel ideas to be created quickly with little or no capital expense required, and they created a new virtual field, where inventors applied for patents for seemingly abstract ideas and business methods. Many of these types of patents are now being extensively utilized in litigation, in particular by non-practicing entities (NPEs) and so-called patent trolls, due to the large monetary damages that are being applied in these cases. This along with comparative differences with patent systems in other countries has served as key discussion points for supporters of patent reform.
Structure Of Patents
A patent is often structured into five segments:
(一)cover page
(二)background
(三)summary
(四)specification
(五)claims
The cover page contains several different elements, including the title, inventor, dates of application/grant, and an abstract. The background is a high-level overview of the subject area, often highlighting a problem that is solved by the innovative elements described in the patent. The summary is similar to the abstract, except that it often comprises several paragraphs, where the abstract is limited to a single paragraph.
It should be noted that the title, abstract, and summary may not be very descriptive of what the patent legally covers. Many people less familiar with patents will only focus on these areas when quickly reviewing a patent, which often results in misinterpretation of the true coverage of the patent.
The specification and claims are the heart of the patent. The specification is the what and how of the innovation. It describes the product or process in detail, such that one of ordinary skill in the subject area could build, perform, or recreate the innovation. Claims are the unique and often complex language that defines exactly what innovations are covered by a patent. Each word of the claim may be scrutinized by a patent examiner to determine whether a patent can be granted, or by an attorney in litigation to determine infringement. For these reasons, the claims are the most important part of a patent.
Patent Application Procedure
The patent system in the U.S. is quite complex, bridging laws and a defined process established by Congress and the U.S. Patent and Trademark Organization (USPTO). The rules and regulations are methodically defined in the Code of Federal Regulations (CFR) Title 37 and a lengthy manual termed Manual of Patent Examining Procedure (MPEP). However, the basic application procedure can be distilled down to the following process flow.
Step 1 (Optional): Filing a provisional patent application. This essentially serves as an option or placeholder to file a full application within the next year, while preserving the earlier filing date of the provisional. A provisional application is faster and cheaper than a full application, as it doesn’t typically include a full set of claims. Further, the document isn’t reviewed by the USPTO and it is not enforceable. Filing a provisional also allows you to advertise as patent pending. The cost of filing a provisional is $125 in USPTO fees (small entity) and approximately $2,000-6,000 in attorneys’ fees.
Step 2: Filing a non-provisional application. The most common type is a utility application, which covers any innovation that provides “utility.” It contains the same basic information as the provisional application (perhaps a little further refined) but typically adds a full set of claims. See Step 3 for costs.
Step 3: Prosecution of Application. The non-provisional utility application is then reviewed by a patent examiner who is a subject-matter expert in the field related to the topic of the application. The patent examiner will search the prior art (patents and publications) to see if the innovations described in the claims have been previously disclosed. The patent examiner will issue an office action to the inventor (or the inventor’s attorneys). The Office Action document will specify either that the patent will be granted or that the claims are rejected. If rejected, the inventor may then reply to the office action and present new arguments or modify the claims. This back and forth process can repeat several times until the patent is granted or the application is abandoned. The prosecution process can be quite expensive based on many factors: number of claims, amount of back-and-forth responses required, and speed/priority of application. Often, an entrepreneur may be quoted a figure in the single-digit thousands for filing a patent. Note that this is just the cost of filing a basic initial non-provisional application (i.e. Step 2). It does not include all the fees through granting of the patent. The total cost of obtaining a patent from application through granting is typically $10,000-30,000 (highly dependent on complexity, subject matter, and circumstances of prosecution).
Step 4: Post-Grant. Even after a patent has been granted, additional fees must be paid to keep the patent valid. Further, it is up to the inventor or assignee of the patent to enforce the patent should they feel someone is infringing on the claims of the patent. In fact, failure to enforce the patent may result in forfeiture of some or all of the rights afforded to that patent.
Under a standard application priority, it typically takes 3-6 years for an application to become a granted patent. However, there are a few prioritization methods to reduce this time down to as little as a year, but the priority comes at the expense of an increased cost. If you work with a patent attorney or patent agent, the tasks required of the inventor are minimal and consist of disclosing the idea, signing some documents, and reviewing the application prior to submission.
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