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Chemical engineers, whether directly engaged in R&D or not, routinely deal with situations that are new and different, not only to them, but to those in the chemical process industries (CPI) as a whole. Quite often, the way such situations are handled produces one or more patentable inventions. In the event that a patent is sought on the invention(s), the chemical engineer (inventor) will have to navigate the patent system, usually with the help of a patent attorney.
This first article installment of a two-part series provides an explanation of the patent system. The second part of the article (to appear next month) will suggest ways in which an engineer can work most effectively with his or her patent attorney. An inventor who is well educated in how best to work with a patent attorney and in the patenting process and its procedures will have an easier time, and a better patent on his or her invention will result.
Most of the information provided on the patent system will be on the U.S. system specifically, but some important contrasts with that of other countries will be presented. Although the patent systems around the world are fairly similar, the U.S. system has some unique features, and it is helpful to contrast these with what goes on elsewhere.
It is important to note that knowledge of the patent system is also useful to most people working in the CPI, even those in management, marketing, sales or other positions who will not likely invent anything. For example, knowledge of the system brings an understanding that patents are property, albeit intangible, and may be assigned (in effect sold) or licensed (in effect rented, sometimes to multiple parties at once) to provide income for their owners. In addition, patents can be used to protect market share for their owners in countries where patents are issued and in force. Although the U.S. and many other countries provide a huge and very open market for goods made within their borders, as well as those imported from other countries, there are still some barriers to market entry; an important one, though often ignored until it is too late, is that created by the patent systems of the U.S. and other countries. Ignorance is not bliss when it comes to patents.
Readers are cautioned that although the discussion here may be taken as generally applicable, space limitations preclude the discussion of certain exceptions, nuances and even entire topics; that is, the information herein should be taken only as providing general understanding and not as legal advice for any specific situation. For particular situations, readers should seek out the specific advice of a licensed patent attorney.
History of U.S. patent law
To assure that a beneficial, non-abusive patent system developed in the U.S., the Founding Fathers included a specific clause in the federal constitution. The first of several Patent Acts was passed by Congress in 1790, and the current Act (a.k.a. 35 USC or the Patent Statute) was passed in 1952 with later amendments. Other sources of patent law are Title 37 of the Code of Federal Regulations (CFR) and the patent decisions of various federal courts and certain agencies. The Manual of Patenting Examining Procedure (MPEP), written and used by the U.S. Patent and Trademark Office (USPTO), which does not have the force of law, but is still considered authoritative to some degree, is a useful reference.
The first U.S. patent was issued in 1790, while Thomas Jefferson ran the U.S. Patent Office, for the making of potash and pearl ash (a chemical technology) and was signed by George Washington. Since then, over 7 million patents have been issued in the U.S.
U.S. patent law is really a federal enterprise. A federal agency, the USPTO, examines patent applications and issues patents. The federal courts hear patent cases, with the state courts’ involvement being limited to cases where the patent itself is peripheral to the issue in the case. (An example would be a patent license case where the issue is really on the license contract terms, not relating to the patent itself.) Appeals from federal patent trials go to the U.S. Court of Appeals for the Federal Circuit; this procedure was established to promote uniformity in patent case law. In rare instances, the U.S. Supreme Court may decide to take a patent case on further appeal as the court of last resort.
By contrast, U.S. trade secret law is mostly a state affair (varying from state to state), but there are some federal trade secret laws in force.
Types of U.S. patents and patent applications
There are three types of U.S. patents: utility, design and (botanical) plant. Only utility patents (granted on inventions with a utility or use) are considered further, as they are the only kind likely to be encountered in the chemical industry.
In order to get a patent granted, a patent application must be filed and “pass” examination by the USPTO. A patent application may be filed as a “regular” or as a provisional application. A provisional requires fewer formalities and a smaller filing fee; it acts to hold priority of invention, but it must be converted to a regular filing within a year for continued effect. Patents are granted only on “regular” applications.
Patentable subject matter and types of inventions
There once were many restrictions on what constituted proper subject matter for a utility patent in the U.S. Today, even patents on computer programs (that are more than a “naked algorithm”) and business methods are fairly common, although some controversy remains on the latter. In fact, the Supreme Court has indicated that patentable subject matter includes “anything under the sun that is made by man,” while mentioning only a few exceptions such as the laws of nature themselves.
The Patent Statute delineates the types of patentable inventions as: (new and useful) processes, machines, manufactures, compositions of matter and (new and useful) improvements of these. These categories do overlap to some extent.
Requirements for patentability
The basic requirements that must be met for a utility patent (in addition to certain formal requirements) are that the claimed invention must be useful, new and non-obvious. In patent-attorney lingo, the invention must meet the 101, 102, and 103 requirements; these numbers correspond to the sections of the Patent Statute covering utility, novelty and non-obviousness, respectively.
• Utility (101). This requirement is seldom an issue. Even an indirect indication of a use for the invention in the application is usually sufficient
• Novelty (102). This requirement is often an issue and requires some explanation (see Novelty Requirements, p. 65)
• Non-Obviousness (103). This requirement is related to, yet distinct from, the novelty requirement, and is often an issue. They are related in that non-obviousness is based on the prior art events defined for novelty. The distinction is probably best explained by quoting from section 103 of the statute:
A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.
For more on non-obviousness requirements, see box, p. 67.
Once a patent has issued, those who own it are protected against infringement. There are several types of patent infringement: 1) direct; 2) inducement of others; 3) contributory; 4) making or selling certain parts of an invention patented in the U.S. for assembly outside the U.S.; and 5) importing into or selling, offering to sell, or using in the U.S. a product made outside the U.S. using a process patented in the U.S. It is really more accurate to say that a patent claim(s) — rather than a patent — is infringed, since what constitutes a patented invention is judged by what the claims cover; only one claim of a patent (even if it has hundreds of claims of varying scope and type) need be infringed for there to be infringement.
Direct infringement is the making, using, offering to sell (if sale will be during the patent term), or selling in the U.S., or importing into the U.S., without authority or statutory exception, of an invention patented in the U.S. at any time during the patent term. Unawareness of a patent is not a viable defense; in such cases, one can still be liable for infringement. This is different than in trade secrets where one may independently develop or even reverse engineer the product or process of another and not be an infringer; trade secret infringement requires a bad act like theft.
Patent claims must be considered in determining if there is infringement. Infringement can be found not only where at least one claim is literally met (literal infringement), but also where there is equivalency (infringement under the doctrine of equivalents). Equivalency exists when not all elements of a claim are literally met, but for those not literally met, there is an equivalent present; elements are equivalent if they perform substantially the same function in substantially the same way to obtain substantially the same result, or if they are “insubstantially” different.
Infringement by inducement of others involves the active and intentional solicitation or assisting of a third party to directly infringe a patent. This third party must actually directly infringe the patent, and the inducer must be aware of the patent for the inducer to have liability.
Contributory infringement is the selling, offering to sell or importation of a material component of a patented invention where the infringer knows that the component has no other substantial use other than in what happens to be the patented invention, that the component is likely to be used in what would be an infringement of the patent and there is actual direct infringement by another as a result. Knowledge of the existence of the patent itself by the contributory infringer is probably required.
The fourth and fifth types of infringement, involving activities outside the U.S., may come as a surprise to many. There are some exceptions to the fifth involving material change introduced by subsequent processing, as well as where the product becomes a minor component of another product.
Here are some examples on infringement:
1. Your company owns a patent on gasoline additive X. Another company, without permission and with knowledge of your patent, makes the additive and puts it in gasoline and sells it (with ads that say how great the additive is for engines) to consumers, who use it in their cars. Is there infringement? Yes, the other company is a direct infringer and an inducer. The consumers are direct infringers but usually not sued.
2. Same scenario, but your patent is on gasoline with the additive, and the other company makes the additive for addition to gasoline by consumers. The additive is sold to consumers with instructions on how to add it to gasoline, which they follow. It is known that there is no other use for the additive. Is there infringement? Yes, the other company is an inducer and a contributor. The consumer is a direct infringer, but usually not sued.
Patent infringement defenses
There are many defenses to patent infringement; four common ones will be mentioned. First, there is the defense that the patent (really the claim(s) in question) is invalid; the Patent Office is not taken as infallible. A second defense is patent misuse and/or a violation of the antitrust laws involving the patent in question, such as in tying arrangements (for example, where the sale of a patented salt pelletizer is tied to the purchase of salt which is unpatented and has other uses). A third defense is inequitable conduct on the part of the patentee; neglecting to disclose any prior art or prior art events in the application process can render claims in a patent unenforceable (for more see Part 2, next month, duty of candor). A fourth is license and/or exhaustion; if the patent holder grants a license and the licensee adheres to the terms of the agreement, there can be no liability by licensee to licensor while the agreement is in effect.
Exhaustion is a form of the license defense, since it involves the authorized and unrestricted sale of a patented invention. In this case, the sale is said to “exhaust” the patent holder’s rights as to what was actually sold (an implied license). A license/exhaustion defense is not foolproof if, for instance, there are patents on a product and on various methods of using it and these patents are not all held by the licensor/seller.
Patent infringement remedies
There are various remedies possible in patent infringement litigation including: 1) monetary damages, which can be enormous; 2) multiplication of monetary damages up to three times those found if the infringement was willful; 3) attorney fees for the winning party if there is certain bad behavior by the losing party, which can also be huge; and 4) perhaps the most feared, the injunction. In cases involving imports to the U.S., exclusion orders enforceable by U.S. Customs may also be issued.
An injunction operates to bar the performance of certain acts relating to the patent involved, such as making a patented product or using a patented process. An injunction can put a defendant out of business after losing an infringement suit. Injunctions may also be granted while litigation is pending, which could effectively put a defendant out of business before the case is over — even for a case that the defendant might even eventually win!
Licenses are basically contracts or agreements not to sue under specified conditions.
It is common practice for a patent owner to grant a license to a patent, thereby giving the licensee rights to practice the technology covered in the patent and not be sued by the patent’s owner. The owner gets paid a royalty in exchange. However, more than one party may have the right to exclude others (sue) as to a technology (see dominant/subservient patents, box p. 64, and the license defense). Holders of trade secrets may also license their technology, but there isn’t usually this issue of other holders being able to sue the licensee.
The law of licensing is very complex and will not be discussed in detail. A word to the wise, however: if you are operating under a license, it is a good idea to know the terms. For example, it might be important to know which of the three types of license is being used: exclusive (owner promises not to practice the technology and not to grant any other licenses to it), sole (owner promises not to grant a license to any other party), or non-exclusive (owner may grant other licenses). It is important to know exactly what technology is covered and for how long.
A notable difficulty in licensing arises in the determination of a fair royalty; licenses are an intangible property. One rule of thumb is that the royalty should be one-fourth of the profit the technology produces. This profit, however, is often hard to determine.
In this section, the U.S. patent system is contrasted with that of other countries and mostly examined from a non-U.S. perspective.
Differences. While patent laws and procedures around the world are similar, some of the greatest differences exist between laws of the U.S. and those of other countries as a group. Some important distinctions between the U.S. system and of other countries are presented.
Before examining actual differences, it should be stated that patents are only effective in the country where they are granted. A U.S. patent does not give rights in China, for example (but see the fourth and fifth types of infringement above). It is the law of a country that counts within its borders.
It is also worth mentioning that some apparent differences stem merely from use of different terminology for the same thing. For example, in Patent Cooperation Treaty (PCT) practice (described in more detail below), industrial applicability is equivalent to utility in the U.S., and inventive step is equivalent to non-obviousness in the U.S.
The first difference considered is what entity handles patenting. In the U.S., it is the USPTO. Most other major countries have their own national patent offices such as the U.K., Germany and Japan. Some smaller countries have in some ways combined their national offices. All these offices will issue patents, although in a few countries they are really only registrations, as no examination is done.
There are also multinational examining offices, like the European Patent Office (EPO). The EPO does not actually grant patents, but using one set of rules, examines cases for its member countries that an applicant has designated. The U.K., France and Germany are examples of EPO countries. Patents are granted by the individual nations designated if the applicant is successful in EPO examination; there is no European patent. Many EPO countries, such as the U.K. and Germany, still maintain separate examining offices and accept filings of cases for purely national examination.
Another major multinational patent group is made up of the signatories of the PCT. Applications filed via this treaty may be examined under its auspices, managed by the World Intellectual Property Organization (WIPO), but the results may be ignored by the individual member nations. There is no patent issued under the PCT, only by the members designated after further review. As of July 2007, there were 137 signatories of the PCT, including the U.S. and most other major countries. Its main advantage is that for one fee, it allows an applicant generally up to 30 months to decide on how to proceed in the national offices of designated countries. After designation for a relatively small number of countries is paid, there is no further cost to designate all other PCT member states. The flexibility gained gives an applicant time to see how markets develop.
As to more substantive differences, business methods are recognized as patentable subject matter in the U.S., but this is not the case in many, if not all, other countries. Use claims are not proper in the U.S., since there is no corresponding recognized type of invention in the U.S., but they are acceptable in EPO countries. These are claims to the use of something, such as use of product A as a catalyst. In the U.S., they must be converted to a process claim giving a step(s) to be valid.
Probably all countries besides the U.S. have an absolute novelty requirement. That is, there is no grace period between a disclosure and filing comparable to the one year in the U.S. 102(b) prior art events. A secrecy agreement between parties that covers all disclosures before filing is probably sufficient in regards to this requirement. The prior art of the 102(e) type is probably a U.S.-only innovation.
In the U.S., the first inventor (or group) to invent (if there is no abandonment, or unreasonable suppression or concealment, see 102(g) above) gets the patent, unless there is a diligent, first to conceive inventor who wins an interference. This is not the case in probably all other countries, where the patent goes to the first to file.
The requirement to disclose the best mode of practicing the invention is probably limited to the U.S. Patents in the U.S. must be filed in the name of the inventor(s), but in most, if not all other countries, a company that has patent rights may file for the patent in its name. The duty of candor is probably a U.S.-only innovation.
The doctrine of equivalents/equivalency is said by many to be limited to the U.S., but there is some evidence that some form of it had at least once existed in the U.K. and to a lesser extent in other EPO countries. This is important to keep in mind, as the finding of equivalents is somewhat subjective and can lead to a finding of infringement.
There is a procedure at least in the EPO, but not in the USPTO, that allows interested persons to challenge the validity of a patent for a time after it is granted (avoiding a court). This is called an opposition. Some may argue that the U.S. reexamination procedure is similar, but it is very limited in comparison.
In many countries, particularly in the developing world, there is a requirement to “work the patent”; that is, the patent must either be practiced by the owner or licensed. If the patent is not worked, the owner can be forced to license the patent (compulsory licensing). This is not the case in the U.S. with the possible exception for a critical patent in a time of national emergency.
Getting a patent outside the country of invention. The U.S. and most other countries routinely grant patents on new, useful and non-obvious inventions made elsewhere when proper application is made. The application may be filed directly with the USPTO or applicable national office as a national application (or similarly in the EPO), in related fashion with a priority claim under the terms of the Paris Convention (the U.S and most other countries are members) or other treaty as applicable, or as the national stage of a PCT filing if applicable.
Importer/exporter issues. For those involved in import/export with the U.S., it is important to take careful note of the extraterritorial reach of U.S. patent infringement law. Namely, the fourth and fifth types of patent infringement mentioned above should be considered. Of course, these infringement types are in addition to the more common sort, such as the unauthorized importing of a U.S. patented product into the U.S. Remember that innocence (often) makes no difference in the damage that can be caused by patent infringement claims in the U.S. An infringing entity involved can be put out of business in the U.S.; recall the powerful weapon of the injunction discussed above, as well as the exclusion order to U.S. Customs.
Patent portfolio management
Portfolios of patents (and even trade secrets) should be carefully managed to get the most value out of them. This can be difficult to understand, because patents (and trade secrets) are really intangible assets; that is, they are not like land, process equipment and other tangibles.
A recent book by J. L. Davis and S. S. Harrison, Edison in the Boardroom (John Wiley & Sons, New York, 2001), provides an excellent introduction to this topic. The book describes five stages that organizations go through in their approach to handling patents. Of these, the first three are fairly self-explanatory and familiar territory to many in the chemical industry: defensive (get patents to defend turf), cost control (patents are expensive to maintain) and profit center (license patents). Readers are encouraged to take a look at this book, but note that the central problem of valuations is left mostly up in the air.
Working with a patent attorney
Look for the next installment of this series, where the basics on working with a patent attorney are presented, along with some details on patent applications and the procedures of getting these applications issued as patents.
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