WEB PATENT NEWS–July, 2000
by Robert M. Hunter, Registered Patent Agent
News about patents, licensing and seed capital sources for inventors and innovating organizations.
I. HOW TO PRESERVE PATENT RIGHTS–Following a few rules can prevent the inadvertent loss of patent rights. Recipients of U.S. Government research funding awards have to follow a few more.
II. PATENT COST ALLOWABILITY FOR SMALL BUSINESSES–A CPA explains how patent costs incurred by small businesses and universities in performing their responsibilities under research funding agreements can be charged to the Government.
III. DECIDING WHEN AN INVENTION IS READY FOR PATENTING–Having trouble deciding when your invention is ready for patenting? You are not alone. Here is some help.
I. HOW TO PRESERVE PATENT RIGHTS
Small businesses, academic organizations and individuals that perform research and development under contract or grant awards from the U.S. Government are allowed under U.S. law to secure ownership rights to inventions that are "conceived or first actually reduced to practice" in the performance of the project. In these situations, Government regulations add a layer of complexity to the already complicated rules that all inventors and employers of inventors must follow in order to preserve patent rights. A roadmap for navigating this complex terrain is presented below, with initial rules applying to all innovating organizations. While there are some exceptions to the following rules, complying with them will preserve patent rights under almost all circumstances. Actions that are required by standard patent rights clauses in funding agreements (e.g., Small Business Innovation Research awards and university research grants) are marked with an asterisk.
How to preserve patent rights (in general):
1. Ensure that employees know how to recognize inventions.*
2. Require that employees agree to disclose inventions in a timely manner and to assign them to their employer.*
3. Claim each invention broadly as well as more narrowly, in all possible forms, and support the claims in an invention disclosure, by providing adequate written description, enablement and best mode of the invention. Do not rely on a single patent; develop a patent portfolio.
How to preserve non-U.S. patent rights (for inventions invented in the U.S.):
1. Do not publicly disclose (orally or in writing) "how to make" and "how to use" the invention; do not use the invention in public OR offer the invention for sale (publicly or in secret) before filing a patent application in the U.S.
2. Be the first to file a (provisional or regular) U.S. patent application. Make any biological materials deposits before filing.
3. File and prosecute an international patent application and/or national applications within 12 months of priority date. File national applications in countries designated in the international application within 19 or 30 months of priority date.
How to preserve U.S. patent rights only (loss of non-U.S. rights could ensue if this route is followed):
1. Do not publicly disclose (in writing) the invention, use the invention in public in the U.S. OR offer the invention for sale (publicly or in secret) in the U.S. more than 12 months before filing a patent application in the U.S. Offering to deliver a prototype that embodies an invention is an offer to sell if the invention is technically "ready for patenting" when the offer is made.
2. Be the first to invent and keep witnessed records about conception and diligence in (actual or constructive) reduction to practice in the U.S. Document monitoring of "experimental" public uses.
3. File a (provisional or regular) U.S. patent application within 12 months of conception or before another person independently invents the invention. If a provisional was filed first, file and prosecute a regular application within 12 months of priority date.* Make biological materials deposits before or during pendency. Pay issue fee and maintenance fees on time.*
How to preserve patent rights under funding agreements (consult www.iedison.gov and use it if possible):
1. Reserve the inventing role for employees rather than assigning that role to subcontractors, because subcontractors own the rights to their "subject inventions." File and prosecute patent applications on pioneering/background inventions that were conceived and actually reduced to practice before performance of the funded project in order to control the practice of "subject inventions."
2. Report/disclose any "subject invention," i.e., one first conceived or first actually reduced to practice in performance of the funded project, to the awarding agency within two months of disclosure of the invention to the business by the inventor(s).* If needed in order to prepare the invention report/disclosure, perform a search of the related art first.*
3. Elect (usually worldwide) title to the invention within two years of reporting the invention to the awarding agency.*
4. File a regular U.S. patent application in time to preserve rights and within one year of election or, if business wishes to relinquish rights in U.S., notify agency in time for it to file.* Include Government License Rights statement at beginning of application.*
5. File any non-U.S. patent applications in time to preserve rights and (at the latest) within 10 months of filing the regular U.S. application, or, if business wishes to relinquish rights in a country other than the U.S., notify agency in time for it to file.*
6. Take effective steps within a reasonable period to achieve practical application (e.g., manufacture, make available to the public on reasonable terms, etc.) of each subject invention.*
It is an unfortunate fact that many inventors or their employers inadvertently take actions that preclude their ability to obtain patent protection for their inventions. Moreover, small businesses and universities that have received U.S. Government research funding often do not comply with funding agreement patent clauses, which can also threaten patent rights. By following a few rules, patent rights can be preserved, thus leaving the patenting option open if it is determined to be appropriate later. While breaking some of the above rules can merely make your life more complicated, breaking others will result in a loss of patent rights. In order to preserve your patent rights, speak to a patent professional before you break any of them.
II. PATENT COST ALLOWABILITY FOR SMALL BUSINESSES
by Russ Farmer, Certified Public Accountant
There has been a lot of discussion regarding patent cost allowability for small businesses, particularly as it relates to the SBIR (Small Business Innovation Research) program. There is very little (if any) "official" policy in place on the allowability of patent costs within any of the agencies. Some are now taking the position that if patent costs are allowable they will be authorized as direct costs. Most ignore the issue officially and let the auditors argue the issue. Unfortunately, auditors often take a position that is in the best interest of the Government and not necessarily a position based on the regulations (either FAR or CFR).
The FAR (Federal Acquisition Regulations) is very specific as to the allowability of patent costs (FAR 31.205-30). This section of the FAR, which is similar for grants (contracts are covered by the FAR, while grants are covered by CFR – Code of Federal Regulations -- sections for the various agencies) states, in part " . . patent costs are allowable to the extent that they are incurred as requirements of a Government contract ." This is very simple and straightforward until one looks at what the contract says. In all SBIR contracts (similar clauses exist in grants) FAR 52.227-11 [Patent Rights –Retention by the Contractor (short form)]) is a required clause. This FAR section requires the Contractor to follow a specific procedure for any patentable "invention" resulting from a Government contract. This FAR section requires that: a) the contractor disclose the invention to the Government, b) the contractor elects in writing whether or not to retain title to the invention, and c) if the contractor elects to take title, then it must file for a patent. The precise interpretation of this section is that the contractor "must" either elect to take title or "must" elect not to take title. In other words, a positive action is required of the contractor when an invention results from a Government contract (or grant) either to retain title or not to retain title. Once the contractor elects to retain title, then the actions are clear -- the contractor must prosecute a patent (if the invention is patentable). Clearly this is a contract requirement and as such satisfies the requirement for these costs to be allowable.
Many contractors automatically exclude patent costs from incurred-cost claims because they have been "told" that patent costs are unallowable. That is simply not the case. Unless the solicitation and/or contract (or grant) specifically states that patent costs are unallowable, the position the contractor should take is that patent costs for inventions resulting from Government contracts and grants are allowable and includable in incurred-cost claims if the contractor elects to retain title on any inventions.
Russ Farmer is a CPA and president of PBC inc. a Denver--based firm that provides comprehensive management services nationally to emerging businesses, especially companies involved in the SBIR program. Their website is www.pbcinc.com
III. DECIDING WHEN AN INVENTION READY FOR PATENTING.
Inventions are not static realities. They evolve (and most get better) over time. Conception of an invention often starts with recognition of a problem. Then a desire for a solution occurs. Miraculously, a glimmer of a solution to the problem, the skeleton of an "idea," occurs in the mind of the inventor. Next, the idea is "fleshed in" as the inventor figures out how to actually make one of the darn things, usually a simple or narrowly-applicable version. Then, the inventor generalizes the solution, making it more broadly useful.
While this is only one path along which inventions progress, it illustrates that an inventor can find it difficult to decide when his/her invention is "ripe" for patenting. The answer to this question depends on both technical and business factors. From a technical perspective, the U.S. Supreme Court recently determined, in Pfaff v. Wells Electronics Inc., that an invention is "ready for patenting" when inventor can prepare "drawings or other descriptions of the invention that are sufficiently specific to enable a person skilled in the art to practice the invention." From a business perspective, however, an invention is ready for patenting only when the inventor can describe it broadly enough to support claims to a large enough piece of intellectual property to justify the investment in time and money that a patent represents.
If you think of a patent as a "negative right," that is, a right to prevent others from practicing a claimed invention, then an invention is ready for patenting when the invention has evolved to the point that the extent of that right is sufficient to confer a competitive advantage to the patentee or licensee. So, how can you tell how evolved an invention is? That's where the concept of enablement comes in.
An invention can be claimed only as broadly as it is enabled in a patent application. Enablement means being able to describe "how to make" and "how to use" an invention to a person having ordinary skill in the art to which the invention pertains. If one can only enable an invention narrowly within the pages of a patent application, then one can only claim it narrowly, and vise versa. If "undue experimentation" is necessary to practice a claimed invention, the invention has claimed too broadly and the claim(s) will not be allowed by the patent office. If the level of "predictability" of an art is low, as it is in most biotechnologies, more disclosure (e.g., examples) can be required to enable broad claims. If it is high, as in the case of many mechanical and computer-related inventions, less disclosure may be required.
It is difficult for most inventors to be realistic about how broadly they are capable of enabling the practice of their inventions, and, hence, how broadly their inventions can be claimed. Most want to be able to prevent others from even approaching their intellectual property, when in reality a patent can only be used to prevent actual "trespassing" on an enabled and claimed invention.
A patent practitioner with experience in the field of the invention can provide a more objective perspective on this important question. If appropriate, he can also arrange for "persons of ordinary skill" to assist in this critical determination. Thus, only after an invention is sufficiently developed to allow it to be enabled to the extent that it is a valuable business asset, is it ready for patenting. Before that point, it is a wish or an incomplete idea, not a "ripe" invention.
Robert M. (Bob) Hunter, Ph.D.
Licensed Professional Engineer
Registered Patent Agent