A strategically conceived Patent Portfolio in most cases constitutes the most valuable part of the intangible property assets owned by a business.  Careful structuring of post-registration patent arrangements (licensing and in some cases assignment of full/part rights in a patent) further enhances the economic value attributable to the portfolio.   This article provides a brief overview of the Patent Registration process and sets out certain key post-registration patent strategies that optimize the value of the investment/time/energy spent in creating a worthy patent portfolio.

Registration Process

What is a patent?

A U.S. Patent Grant for an invention is a property right issued by the U.S. Patent and Trademark Office to the inventor. It is a contract between an inventor and the U.S. government under which the government grants the inventor a limited monopoly. The limited monopoly gives the inventor the right to exclude others from making, using, or selling a claimed invention in the United States for a period of 17 to 20 years. In return for these patent rights, the inventor discloses the complete invention to the public in order to promote the progress of science.

Are all inventions patentable?

No, not all inventions are patentable. The Patent and Trademark Office stipulates certain requisites that a claimed invention must satisfy before a patent is granted. The three prongs of the patentability analysis are whether the inventor’s claimed subject matter is 1) new, 2) useful and 3) unobvious over prior art. Prior art generally includes any U.S. or foreign patents or inventions which pre-date the inventor’s date of invention or the filing date of the patent application.

Patent Application Process

Unlike trademarks and copyrights, patent rights are not automatically created upon creation of the underlying invention. Patent rights only come into being if a patent application is filed with the Patent Office, and the registration is ultimately granted. Also, failure to timely file a patent application can result in an automatic transfer of any available patent rights to the public domain. It is therefore imperative to clearly comprehend the patent application process. This section of the article provides a brief overview of the application process.  However, please note that as complexity of the application prosecution process is specific to each invention we limit our overview to only the more salient steps involved in the process.

Search for Prior Art

Typically, a search for "prior art" needs to be performed to make a decision on the feasibility of making a patent application. Since an invention to be patentable must not only be useful, but also new and non-obvious, the U.S. Patent Office will compare the patent application to the "prior art" to determine whether the latter two tests are satisfied. Prior art as stated is simply those prior published documents and activities that serve as evidence of the state of the art. If such a prior art search does not cull out any conflicts, then the inventor may move forward with a patent application.

A regular patent application contains two parts: (1) a detailed description of the invention, called the specification and (2) one or more patent claims.

Specification

The Patent Office does not require the inventor to actually build a prototype of the invention. It suffices if the written specification is sufficiently detailed such that an ordinary designer in the field of the invention would be able to review the specification and actually make and use the invention, without further guidance from the inventor. The Patent Office, however, stipulates that the specification must set out the best-known way for implementing the invention without ignoring any substantive details concerning the invention.

Claim(s)

The patent claims are sentences that define the scope of the invention.

The Patent Office reviews the duly completed application and performs a prior art search relating to the claimed invention. The patent claims are then compared to the prior art and an initial determination is made as to whether the claimed invention satisfies the tests for patentability -- useful, new and non-obvious. If the invention is deemed useful, and it is new and non-obvious over the prior art, then the patent application is allowed to issue as a patent.

In most cases, the Patent Office initially rejects the claims as being too broad and issues a written "office action", outlining the rejections and advising the Applicant to respond. The Applicants respond by filing an appropriate response by either amending the patent claims and/or presenting an argument that the patent claims are in fact patentable. This process can sometimes go on until the patent examiner allows the patent application to issue.

Once the patent issues, and only upon its issuance, it is enforceable against infringers.   

Thus as evident, the most crucial part of the patent application process is the patentability analysis. The patentability of an invention can be evaluated at any time -- before and even after a patent is granted.   An inventor typically determines the patentability before filing a patent application to ascertain whether the subject matter of the invention has been previously known to others. Patentability is also evaluated by the Patent Office and the inventor, after filing the patent application, if the Patent Office rejects any claims in the application as being unpatentable over the prior art. Further, after a patent has issued, the patentability (validity) of a patent can be challenged in litigation when an adverse party submits evidence to demonstrate that the claimed invention is found in the prior art.  It is therefore imperative that a comprehensive professional patentability analysis is obtained prior to the initiation of the patent application process.

What does a patent grant?

The patent does not grant the right to make, use, offer for sale or sell or import the invention but only grants the exclusive nature of the right.  Any person is ordinarily free to make, use, offer for sale or sell or import anything he/she pleases, and a grant from the government is not necessary. The patent only grants the right to exclude others from making, using, offering for sale or selling or importing the invention. Since the patent does not grant the right to make, use, offer for sale, or sell, or import the invention, the patentee’s own right to do so is dependent upon the rights of others and whatever general laws might be applicable. A patentee, merely because he/she has received a patent for an invention, is not thereby authorized to make, use, offer for sale, or sell, or import the invention if doing so would violate any law. Neither may a patentee make, use, offer for sale, or sell, or import his/her own invention if doing so would infringe the prior rights of others. The term of the patent shall be 20 years from the date on which the application for the patent was filed in the United States or, if the application contains a specific reference to an earlier filed application under 35 U.S.C. 120, 121 or 365(c), from the date of the earliest such application filed, and subject to the payment of maintenance fees as provided by law. A maintenance fee is due 3 ½, 7 ½ and 11 ½ years after the original grant for all patents issuing from the applications filed on and after December 12, 1980. The maintenance fee must be paid at the stipulated times to maintain the patent in force. After the patent has expired anyone may make, use, offer for sale or sell or import the invention without permission of the patentee, provided that matter covered by other unexpired patents is not used.

Provisional Patent Application(s)?

A regular patent application involves a considerable effort.  The application must sufficiently describe the invention and ensure that the best set of patent claims is drafted.  Alternatively, an inventor may consider filing a provisional patent application(s). A provisional patent application is just like a regular application, except that a provisional application need not contain patent claims. As there are no claims, the Patent Office does not actually examine a provisional application.  A provisional patent application, therefore, serves as a placeholder, for up to one year, to file a regular patent application.  Importantly, the provisional application enables the subsequent regular application to claim priority back to the filing date of the provisional application, as long as the invention claimed in the later-filed application is fully supported by the details of the provisional application.  Thus, the provisional application enables the inventor to buy more time to fine tune his invention while reserving the ability to claim priority on the invention. Furthermore, a provisional application enables the inventor to refer to the disclosed invention as "patent pending" on the product or system itself thus notifying the public as to the inventor’s potential patent rights.

Post Registration Strategies

Licensing

A license in a patent situation is a contractual business relationship between a licensor who authorizes a licensee to use the patent for an appropriate compensation. The compensation (royalty) can vary depending upon the granting of an exclusive or non-exclusive license. A typical license arrangement grants only limited rights in a patent to the licensee and for a fixed period of time, and in some cases for a specified use or market for sale.  Thus, a license may provide a licensor with income for a long time, with much less risk and commitment than is involved with raising investment capital, manufacturing, and all the required ingredients in establishing and owning a company that produces and sells a product.  The licensee on the other hand makes the required investment in establishing everything necessary to produce the finished product and get it to the end user.  Further, in most cases the licensor can receive equity in a new business venture, especially if it is being created for the purpose of marketing the finished product that is the result of the license. The percentage often depends upon the level of commitment and the benefits to the venture that the licensor brings to the table, along with the position and responsibility.  Therefore, strategic licensing arrangements with an able partner may provide numerous advantages which may include: an existing ability to manufacture the patented product along with the means of distribution, the customer door may already be open, partner’s advertising experience, ability to immediately penetrate into domestic and foreign markets, and possible name recognition of the partner. This creates an almost risk free position for the licensor, provided the license is properly drafted, with minimum guaranteed royalties, and benchmark performance criteria defined.  Thus, the licensing can be the most opportune and personally profitable way to go with what you have. The licensing activity when appropriately used as a business function has several benefits to the parties involved.

Assignments

Patent grants / Patent applications are treated as personal property and may be sold/mortgaged/bequeathed by a will to others in full or in part. The patent law provides for the transfer or sale of a patent, or of an application for patent, by an instrument in writing. Such a transfer instrument is referred to as an assignment. The beneficiary of such a transfer, referred to as an assignee, typically steps into the shoes of the owner of the patent and retains the  same rights as the original patent owner.

The statute also provides for the assignment of a part interest, that is, a half interest, a fourth interest, etc., in a patent. There may also be a grant which conveys the same character of interest as an assignment but only for a particularly specified part of the United States. A mortgage of patent property passes ownership thereof to the mortgagee or lender until the mortgage has been satisfied.  Once satisfied, a retransfer from the mortgagee back to the mortgagor, the borrower, is made. A conditional assignment also passes ownership of the patent and is regarded as absolute until canceled by the parties or by the decree of a competent court.  An assignment, grant, or conveyance of any patent or application for patent needs to be acknowledged before a notary public. The certificate of such acknowledgment constitutes prima facie evidence of the execution of the assignment, grant, or conveyance.

Joint Ownership

Patents may be jointly owned as in the case of a patent granted to joint inventors, or in the case of the assignment of a part interest in a patent.  Any joint owner of a patent, no matter how small the part interest, may make, use, offer for sale and sell and import the invention for his or her own profit provided they do not infringe another’s patent rights, without regard to the other owners, and may sell the interest or any part of it, or grant licenses to others, without regard to the other joint owner, unless the joint owners have made a contract governing their relation to each other. It is accordingly dangerous to assign a part interest without a definite agreement between the parties as to the extent of their respective rights and their obligations to each other if the above result is to be avoided.

Conclusion

As evident, there are several complex steps involved in prosecution and subsequent strategic use of the patents. Particularly, patentability analysis of an invention is a tricky process, and it is always pragmatic to probe a new invention against the three prongs of the patentability analysis prior to initiating efforts to prosecute a patent application with the Patent and Trademark Office. Once the patent application matures into a registration, careful strategy is key to optimize benefits from the patent grants. We strongly recommend seeking a professional analysis on the question of patentability of an invention and subsequent patent value optimizing business strategies.