Michael Sherrill - Sherrill Law Office

A trademark is any word, design, scent, name, sound, or other thing that is capable of distinguishing one person’s or company’s goods from another’s, and indicating that such “branded” goods come from a single source – even if that source is unknown. A service mark is the same as a trademark; the only difference is that a trademark is used upon goods while a service mark is used in connection with services. Examples are Proctor and Gamble’s Crest® mark for toothpaste and Supervalu Inc.’s Cub Foods® mark for retail food store services.

A trademark or service mark provides a “shortcut” for customers to identify products and services offered by a business – often accompanied by an experiential and/or marketing driven sense of value for products and services bearing that mark. When properly used and protected, a mark can serve as a valuable marketing tool, complete with the ability to prevent competitors from using a confusingly similar brand in the same geographic area of the owner’s use of the mark.

In the United States the proper use of a mark establishes the rights in the trademark. These are called common law trademark rights. Federal registration of the mark is not required. But, federal registration of the mark provides additional useful and important rights. The additional rights of a federal registration include:

• to use the ® registration symbol,
• to prevent competitors from using a confusingly similar brand nationwide even if the owner’s use is not nationwide,
• to file an application to “reserve” the trademark prior to use (intent-to use application), and
• to elevate the trademark rights to limit challenges to the registration by a prior user of the mark (incontestable registration).

Unfortunately, whether the trademark rights come from common law or a federal registration they only extend to use of the mark in the United States. Details on securing trademark rights in other countries will be provided in the next issue.

The Federal Government instituted sweeping changes to United States Patent Law with enactment of the “America Invents Act” a few years back.  One of the most significant changes is a change from a First to Invent system to a First to File system.

The old First to Invent system awarded inventors who were first to invent (i.e., conceive of an operable embodiment and diligently work towards a reduction to practice) with the right to seek patent protection for an invention over any and all subsequent inventors who independently invented the same invention.  It was the First to Invent system that made maintenance of a dated laboratory notebook so important as such dated notes were often the cornerstone for establishing an early date of conception.

The new First to File system ignores date of conception – eliminating much of the need to maintain a dated laboratory notebook, and awards inventors who are first to file a patent application with the right to seek patent protection for the claimed invention over any and all other inventors who independently invented the same invention.

The new First to File system is much easier to implement – no more expensive interference proceedings to determine who conceived first and whether such conception was followed by a diligent reduction to practice, but at the expense of pushing inventors and their patent attorneys to prepare and file patent applications at a much earlier stage of development – often resulting in the preparation and filing of patent applications that subsequent research and experimentation proves to be technologically flawed or misdirected and of little or no value.

A trademark is any word, design, scent, name, sound, or other thing that is capable of distinguishing one person’s or company’s goods from another’s, and indicating that such “branded” goods come from a single source – even if that source is unknown.  A service mark is the same as a trademark; the only difference is that a trademark is used upon goods while a service mark is used in connection with services.  Examples are Proctor and Gamble’s Crest® mark for toothpaste and Supervalu Inc.’s Cub Foods® mark for retail food store services.

A trademark or service mark provides a “shortcut” for customers to identify products and services offered by a business – often accompanied by an experiential and/or marketing driven sense of value for products and services bearing that mark.  When properly used and protected, a mark can serve as a valuable marketing tool, complete with the ability to prevent competitors from using a confusingly similar brand in the same geographic area of the owner’s use of the mark.

In the United States the proper use of a mark establishes the rights in the trademark. These are called common law trademark rights.  Federal registration of the mark is not required.  But, federal registration of the mark provides additional useful and important rights.  The additional rights of a federal registration include:

• to use the ® registration symbol,
• to prevent competitors from using a confusingly similar brand nationwide even if the owner’s use is not nationwide,
• to file an application to “reserve” the trademark prior to use (intent-to use application), and
• to elevate the trademark rights to limit challenges to the registration by a prior user of the mark (incontestable registration).

Unfortunately, whether the trademark rights come from common law or a federal registration they only extend to use of the mark in the United States.  Details on securing trademark rights in other countries will be provided in the next issue.

The Federal Government instituted sweeping changes to United States Patent Law this past fall with enactment of the “America Invents Act” (“The Act”).  The ten aspects of The Act which will likely have the biggest impact upon small and startup businesses were listed in the January issue of Corporate Cranium.  The first of these aspects is Fees.

The United States Patent and Trademark Office (USPTO) is a self-funded governmental entity, meaning it operates on the fees charged for its services without use of taxpayer dollars.  Since 1992, the Federal Government has actually used the USPTO as a revenue source for the general fund by establishing an annual budget for the USPTO and transferring any fee revenue generated by the USPTO beyond that budget into the general fund.  Since 1992, this has resulted in the transfer of nearly a billion dollars from the USPTO to the general fund.  One of the consequences of this practice has been the USPTO’s inability to hire and train sufficient patent examiners to keep up with the ever growing number of patent applications being filed with the USPTO resulting in a dramatic increase in the average pendency period of a patent application from filing to issuance from about 2 years to about 3 years.

The Act begins the process of weaning the Federal Government off use of USPTO fees as a tax base by allowing the USPTO to keep more of the fees it generates to fund its operations.  In addition, the Act allows the USPTO to adjust its own fees.  A sampling of the USPTO’s proposed fee changes are provided below.

Small Entity, a group that has long enjoyed a 50% discount in certain USPTO fees, is (i) an individual, (ii) a business concern with fewer than 500 employees, (iii) a university, or (iv) a 501(c)(3) non-profit organization.  Micro Entity, a new group created under The Act, is (i) a Small Entity which has filed less than four patent applications and has a gross income of less than about $148,000, (ii) an individual employed by an institution of higher learning, or (iii) an institution of higher learning.

As anticipated, fees will generally be increased across the board, with some fees increased dramatically.  BOTTOM LINE FOR SMALL BUSINESSES, the cost to seek and obtain patent protection and the cost to maintain that patent protection through the payment of maintenance fees will suffer a noticeable increase unless the business can qualify as a Micro Entity, while the cost to challenge another’s issued patent by asking the USPTO to reconsider patentability of the issued patent will skyrocket.

The Federal Government instituted sweeping changes to United States Patent Law this past fall with enactment of the “America Invents Act”.  While many of the substantive changes do not take effect until fall of 2012, it is important to understand the likely consequences, both intended and unintended, of these changes in order to avoid costly and potentially disastrous surprises in the future.

The ten aspects of the America Invents Act which will likely have the biggest impact upon small and startup businesses are listed below.  These enumerated topics will be covered in more detail in subsequent issues of Corporate Cranium.  Should you desire an immediate detailed explanation of any of these topics, please feel free to call Sherrill Law Offices at 651.426.2400 and ask for Michael Sherrill.

1. Fees: Fees are increased, with a significant reduction provided for “Micro-Entities”.
2. Virtual Marking: Option to use the internet to inform potential infringers that a product is covered by a patent.
3. Uncooperative Inventors: Filing of a patent application that includes an uncooperative inventor is simplified.
4. Tollway: Patent applicants may pay a fee ($4,800) in order to have their application moved through the system on an expedited basis.
5. Expressway: Patent applications directed to “Important Technologies” entitled to have their application moved through the system on an expedited basis without paying a toll.
6. Commercial Use Defense: Expands Prior Commercial Use as a defense to patent infringement.
7. Administrative Validity Challenges: Administrative procedures for contesting validity of an issued patent in the United States Patent and Trademark Office (Ex Parte Reexamination and Inter-Partes Reexamination) are replaced with expedited procedures (“Post Grant Review” and “Inter Partes Review”).
8. Mulligans: Administrative procedure for “fixing” an issued patent in the United States Patent and Trademark Office (“Reissuance”) is replaced with an expedited procedure (Supplemental Examination).
9. Business Method Patent Review Program: Persons charged with infringing a business method patent are entitled to request that the USPTO reevaluate validity of the asserted business method patent.
10. First to File: The United States transitions from a “First to Invent” system to a “First to File” system.

Changes in the Fee Structure and creation of the new “miro-entity” discount will be covered in the next issue of Corporate Cranium.

You’ve just come up with an idea for a new product or process or an improvement on an existing product or process.  You’re convinced that if this invention works the way you think it will, you’ll be rich beyond your wildest dreams.  You know that you need to patent this invention to prevent competitors from simply copying the idea as soon as it hits the market, but you’ve heard that patenting is expensive – very expensive – and you’ve got a limited R&D budget.  What do you do now?

First, you must avoid making any disclosure of your invention outside your company, and must avoid selling any products or services that embody or employ your invention until a patent application is filed in at least one country.  If, however, you need to discuss the invention with persons outside your company in order to complete conception and/or development of the invention, you’ll need to contact a patent professional before making such a disclosure.  Such an unrestricted public disclosure or sale may prevent you from being able to secure patent protection on the invention.  However, before spending any dollars on the patenting process you should first (i) develop the idea to the point that it is enabled, (ii) establish with reasonable certainty that the invention is likely to function as expected, and (iii) evaluate the market potential for the invention.

Enablement:  The invention needs to be developed to the point that you can enable someone else having routine skill in the art to make and use the invention.  For example, an idea to improve the traction of a skid steer on snow and ice by increasing the area of the tire in contact with the ground is not an enabled invention until you are able to describe how to increase the area of the tire in contact with the ground (e.g., siping of the tires).

Functionality:  You should be reasonably certain that the invention functions as desired.  You do not necessarily need to make and test an operable prototype, but you should be reasonably certain that it can and will function as expected.  A patent application disclosing and claiming an invention that doesn’t work is worthless.  There’s not much need to prevent competitors from making a product or using a process that does not work and the application cannot be “corrected” or “adjusted” after it is filed to fill in the missing details.

Market Potential:  Many patent professionals overlook this important step.  They are trained to evaluate patentability of an invention and navigate the intricacies of the patenting process to secure patent protection for inventions when such protection is available.  They are not trained to evaluate market potential.  A strong, robust patent covering an invention which has limited market potential makes a wonderful plaque, but is otherwise of little or no value (e.g., a new method for filtering and chemically treating used vegetable oil to produce biodiesel maybe patentable, but if the cost of production is $12.50 per gallon, the patent is of little value as the process has no market potential until the world’s petroleum reserves are exhausted).

Once your invention is enabled, believed with reasonable certainty to be functional, and appears to have reasonable market potential, now it’s time to contact a patent professional and spend the funds necessary to evaluate patentability and, if warranted, seeking patent protection on the invention.

To establish trademark rights in a descriptive term the user must be able to prove that in addition to its normal meaning, consumers have come to also recognize the term as a designation of source (i.e., the term has acquired secondary meaning or distinctiveness).  Specifically, it must be shown that the consuming public primarily thinks of the term in association with a single source of the product.

The amount and type of evidence necessary to prove secondary meaning varies.  The less descriptive the term, the less evidence needed.  There are three basic types of evidence that can be used individually or in combination to prove secondary meaning.

• A claim of ownership of one or more prior federal registrations for substantially the same mark for similar goods and services
• 5 years of substantially exclusive and continuous use
• Actual evidence

The evidence of ownership of one or more prior federal registration may be sufficient where the prior registration is for a design mark with words and the new application is for the words only.  For example the registration for the design mark ® was one prior registration used as the basis for acquired distinctiveness for the word mark SEARS ®.

The evidence of five years of substantially exclusive and continuous use works best for marks that are not considered highly descriptive or misdescriptive of the goods or services in the application.  This type of evidence works well for marks found to be descriptive because the mark is mainly known as a surname. An example is ® for the goods of door hardware.

For a mark considered highly descriptive actual evidence of secondary meaning will be required.  An example is 7-KETO® for an ingredient in the manufacture of dietary supplements.  The type of actual evidence that may be submitted includes consumer testimony, consumer surveys, proof of exclusive use, length and manner of use, amount and manner of advertising, amount of sales and number of customers, established place in the market, and proof of intentional copying.

Trademarks can take many forms, including words, designs, slogans, scents, names, sounds, colors, etc. However, not every such designation is entitled to the status of a trademark and the rights appurtenant to such status.  Such designations, to be entitled to the status of a trademark, must be used in connection with goods or services, must be capable of distinguishing one person’s or company’s goods from another’s, and must be used in such a manner that they indicate that such “branded” goods come from a single source – even if that source is unknown.

Certain types of designations are assumed by law to be trademarks when used properly.  These types of designations are called inherently distinctive marks.  Inherently distinctive marks are assumed to be valid trademarks and owned by the user.  There are three types of inherently distinctive marks:  Arbitrary, Fanciful, and Suggestive.  A fanciful mark is a word made up to serve as the mark or a word no longer in common usage.  An arbitrary mark is a word or symbol commonly used and known but used in an unusual way.  A suggestive mark is a word, slogan, or symbol that hints at some quality, feature, or ingredient of the goods or services associated with it.  Examples of the three types of inherently distinctive marks are:

• Fanciful mark:
  • Kodak for photographic supplies
• Arbitrary mark:
  • Mountain for computer data storage
• Suggestive mark:
  • Friendly for shoes

If a term does not meet the criteria for an inherently distinctive mark then it is either a descriptive term or a generic term.  Generic terms, the common name of a product or service, can never become a trademark or service mark (e.g., Water for bottled water).  A descriptive term is one that immediately conveys some quality, function, feature, characteristic or ingredient of the goods or services.  Two examples of descriptive marks are Oatnut for bread containing oats and nuts and Bed & Bath for retail stores featuring items for bedrooms and bathrooms.

To establish trademark rights in a descriptive term the user must be able to prove that in addition to its normal meaning, consumers have come to also recognize the term as a designation of source (i.e., the term has acquired secondary meaning).  Details on how secondary meaning is developed and established will be provided in the next issue.

Most business owners are well aware that a United States utility patent is an expensive proposition, costing anywhere from $10,000 to $20,000 per invention with no promise or guarantee that a patent will issue on the invention.  However, in many fields, it is virtually impossible to start and maintain a competitive business without them.

The United States economy is built upon the principles of a free market system, in which the attainment of high quality, low cost goods and services is driven by competition.  Under such a system, legal monopolies are limited as they eliminate competition and undermine the basic principles of a free market economy.

One of the few legally authorized monopolies in the United States is granted by way of a utility patent.  A United States utility patent gives the owner an exclusive right to make, have made, use, sell, offer for sale and import the patented invention within the United States during the term of the patent.  United States utility patents filed after June 8, 1995 have an enforceable term of twenty years from their ‘earliest effective’ filing date subject to certain adjustments.

Absent a patent, the free market system permits – and indeed even encourages – competitors to copy new product offerings and sell the ‘copied’ product in competition with the innovator.  Patent protect can be an invaluable tool to start-up companies who typically need the exclusivity granted by a patent to get off the ground – free from the stifling competition of larger established players.  Established businesses enjoy increased profit margins for products protected by a patent – thereby justifying further research and development efforts.  Indeed, many experts contend that in the absence of a patent system, only academic institutions funded by taxpayer dollars would undertake research and development as the cost of innovation could seldom be recovered in the marketplace.

The United States allows inventors to patent “anything under the sun made by man that is useful, novel, and non-obvious.”

Made by Man

Patent protection can be secured only for subject matter that involves the hand of man.  Discovery of something that exists in nature – while perhaps an important and valuable discovery – cannot be patented.  For example – a chemical compound found in nature is not patentable by the persons who discovered the compound as man was not involved in creating the compound.  However, a concentrated extract of that compound may be patented as man was involved in extracting the compound.  Similarly, discovery that the thermal expansion of concrete is highly dependent upon the concentration of magnesium ions present in the concrete slurry during initial curing cannot be patented as this relationship existed in nature long prior to its discovery by man.  However, a method of making concrete using water that has been treated to remove magnesium ions in order to form concrete resistant to thermal buckling may be patented as man was involved in treating the water.

Useful

The “usefulness” requirement may be satisfied by substantially any level of utility beyond mere experimental use of the invention in the development of another invention.  Usefulness tends to be an issue only in those situations where a patent application seeks to patent a new chemical compound they’ve synthesized in the lab, but they have yet to ascertain any use for the compound beyond fill for a sandbag.

Novel

The “novelty” requirement means that the exact invention must not be described in a single prior art reference.  The usefulness and novelty requirements are straight forward, and may generally be readily evaluated with a fair degree of certainty.

Nonobvious

The “non-obvious” requirement requires the invention to be sufficiently different from what was known before (prior art in “patentese”) that conception of the invention would not have been obvious, at the time the invention was made, to a person having routine skill in the art to which the invention pertains.  As can be readily appreciated, the “obviousness” standard introduces substantial uncertainty into an assessment of patentability due to the subjective nature of the analysis.

In assessing the chances of obtaining patent protection, it is necessary to compare the invention with the prior art, identify features which distinguish the invention from the prior art, and specify the advantages which the distinguishing features contribute to the invention.

Chapter 3 will provide additional details for assessing obviousness and set forth some practical examples.

A trademark is any word, design, scent, name, sound, or other thing that is capable of distinguishing one person’s or company’s goods from another’s, and indicating that such “branded” goods come from a single source – even if that source is unknown.  An example is the word Crest® for toothpaste.  Any toothpaste bearing the word Crest® comes from a single source – Proctor and Gamble.

A service mark is the same as a trademark, the only difference is that a trademark is used upon goods while a service mark is used in connection with services.  An example of a service mark is Cub Foods® as the mark is used in connection with retail food store services – not the food itself.

Trademarks and service marks may take many forms, such as:

• Words and Slogans
• Symbols
• Designs
• Devices
• Sounds
• Color
• Smell

Certain things cannot be trademarks or service marks.  These include (i) the common name of a product or service (e.g., Water for bottled water); (ii) pictures, designs, symbols, etc. that are merely ornamental such that a consumer would not recognize the feature as an indication of source (e.g., picture of a sumo wrestler and a map of Japan on a t-shirt); and (iii) a name used only to identify a business or vocation and that is not used to identify the goods or services it produces or provides (e.g., Doctor’s Associates Inc [owner of the Subway® sandwiches franchise]).

A trademark or service mark provides a “shortcut” for customers to identify products and services offered by a business – often accompanied by an experiential and/or marketing driven sense of value for products and services bearing that mark.  When properly used and protected, a mark can serve as a valuable marketing tool, complete with the ability to prevent competitors from using a confusingly similar brand.

Most Americans are well aware of the existence of a patent system in the United States that “protects” inventions.  It is the nature of that “protection” that is widely misunderstood.  My intent, over the course of these articles, is to provide you with the information necessary to allow you to make an informed decision on whether you should seek a competitive advantage by investing in the patenting of your inventions, or forgo the cost and expense of patenting and compete on price, quality and/or service.

Chapter 1:  What is a PATENT?

A patent is essentially a territorially restricted, limited term monopoly.  Once issued, a United States patent provides the owner with an exclusive right to manufacture, use, sell, offer for sale, or import the claimed invention in the United States for seventeen years from issuance or twenty years from the earliest effective filing date of the patent (details on patent terms will be provided in a future article).  For example, a United States patent is not infringed by a competitor who manufactures the invention in China and imports the invention into Canada where it is sold and used.  However, that competitor would infringe if the invention were imported from China into the United States instead of Canada, or if any of the inventions imported into Canada were to eventually find their way into the United States where they are used.

There are several widespread misconceptions regarding the rights imparted by an issued United States patent that need to be dispelled.

The Government Does Not Enforce Patents:  The United States government does not enforce patents.  The task of locating and suing infringers – and paying the costs associated therewith – is left to the patent owner.

Patented Inventions Do Not Necessarily Work:  An issued patent does not indicate that the claimed invention actually operates or functions as described in the patent.  The United States Patent Office does not require a patent owner to establish functionality of a claimed invention unless the claimed invention clearly contradicts a well established law of nature (e.g., claims to a perpetual motion machine) or is so incredulous as to contradict well-established scientific principles (e.g., claims to a bracelet that cures all types of cancer).

Patenting Does Not Guarantee Commercial Success:  An issued patent does not indicate that the claimed invention will be a commercial success.  Even when operable as described, market forces (i.e., cost of production, undesired side-effects, public perception, etc.) may prevent the invention from becoming a commercial success.  The United States Patent and Trademark Office does not assess marketability.

An issued United States patent means only that the United States Patent Office has been convinced by the patent owner that the claimed invention provides some benefit, and is sufficiently different from things previously known (details on the standards for patentability will be provided in a future article).