Tuesday, November 6, 2012

Answers to Some Basic Questions

A reader posed some basic questions in response to our "Commercialization Conundrum" post. The questions and our replies follow.
What is a US Patent?
A patent is a property right that grants an inventor exclusive rights to use/sell/manufacture their invention for a specified period of time in exchange for “teaching” others about his invention and how it works.
A patent is obtained by filing a patent application with the United States Patent and Trademark Office which outlines the specific guidelines determining what is patentable in the US.  (See Way Better Patents' Glossary for more info.)
A patent obtained in another country?
A patent obtained in a foreign country protects the inventor’s intellectual property (the invention) in that country).  It protects against an American inventor importing products that infringe the patent into that country.
But, there's more...
A US patent prevents a foreign manufacturer from importing products into the US that infringe a US patent.  But, the inventor/patent holder needs to enforce the patent without the help of the USPTO.  The USPTO gives you the patent, you have to enforce it yourself (or with the support of top notch IP attorneys.)
What rights do patents provide for the patent holder?
The patent holder is entitled to exclusive use of their invention.  The right conferred by the patent grant is, in the language of the statute (patent laws - this is what it means when patent lawyers say stuff like, "It's statutory.") and the language of the patent itself, "the right to exclude others from making, using, offering for sale, or selling" the invention in the United States or "importing" the invention into the United States.
What does a patent applicant give up to obtains these rights?
A patent holder gives up the rights to keep details of the invention secret.  The inventor receives a patent in exchange for disclosing how the invention works or what it does. Basically the inventor publicly discloses how an invention works (aka - teaches) and gets exclusive rights to use/sell/manufacture your invention for 20 years after the filing date of your patent application (the current term).
Is it really worth getting and defending a patent? Coca Cola, arguably one of the most successful businesses in the world, appears to value trade secrets more that certain patents. But they also vigorously protect their trademark.
Patents and trademarks - the intellectual property equivalent of apples and oranges - event though Apple has lots of both, but we digress.
Patents are good for some things, trade secrets are good for others, trademarks are totally different but are intellectual property too.
  • See the work of Thomas Edison, original patent troll, and Nikola Tesla inventor of Alternating Current.  Both guys had patents but had different strategies.
  • Ask Mr. Bezos how much money Amazon is making from Barnes and Noble and others for licensing fees related to the single action ordering system patent US Patent 5,960,411  (We'll discuss the reexamination where on-demand purchases using your cable TV remote control resulted in big changes to the claims in one-click land.)
  • And for Elias Howe the sewing machine business was pretty good.  It took a five year patent battle but eventually his invention was declared "basic"  (essential or seminal in today's patent lingo) and Mr. Howe was awarded a royalty for every machine that infringed his patent. Patent wars are not new they are just more public thanks to the internet.  The sewing machine war is pretty interesting though.
  • The late An Wang sold his patent for core memory to IBM to raise money forhis firm and then WANG Laboratories changed the way we create documents and worked in an office forever.  WANG Laboratories invented the technology for Object Linking and Embedding (OLE) which it sold to Microsoft in exchange for a $90M investment.  All this internet stuff with pictures with links is OLE on steroids.
  • If Coca-Cola had a patent strategy instead of a trade secret strategy the company wouldn’t have its $167 billion market capitalization and we’d all be drinking “coke” with labels that say Walmart, Stop & Shop, or Mom's Kitchen. Much of Coke's value is in it's branding which protects with its trademarks.  By the way, one part of the formula is out there.  Since high fructose corn syrup, one of the ingredients in Coke, is a grain product by Kosher standards, regular Coke isn't kosher for Passover.  But, Coke replaces the high fructose corn syrup with cane sugar during Passover.  Lots of folks buy Coke by the case at that time of year because a lot of health nuts (in addition to Passover celebrants) prefer cane sugar in their soda.
  • It’s just like the recipe for Oreos. Nabisco, a division of Kraft Food is celebrating the 100th anniversary of their product this year. If they had patented the recipe rather than keeping it as a trade secret, they wouldn’t be making billions selling them since every Tom, Dick and Harry could copy the recipe.  
But just because it's in the patent doesn't mean it works.  Negative know-how (trade secrets that define what doesn’t work) also enters ino this equation. See our earlier post on Tabasco and the Extra Ingredient. Sometimes the patent isn’t always a complete view of the invention, but we may not know it at the time.
Keep the questions coming.