Law 2011 journal.

Get the most for your patent buck by focusing on what you really need

No matter what a business is engaged in, it must operate within a complex legal framework. That's why Business North Carolina publishes its annual Law Journal, in which some of the state's top lawyers highlight issues that could arise and, if not handled properly, entangle even the best-run enterprise. For example, with financial markets still recovering, lenders treat distressed borrowers differently. The Dodd-Frank Act has changed the rules for investment managers, particularly as to who must register with the U.S. Securities and Exchange Commission or state regulators. Even patent protection--and the need for it--has changed because of the rapid pace of technology innovation. These are just a few of the topics our writers have tackled in the pages that follow. We think you'll find them interesting and useful. And, as always, we thank the authors for their efforts and their firms for the financial support that makes this project possible.

--Ben Kinney Publisher

It may seem counterintuitive to take advice from a lawyer about how to save money on legal fees, but most lawyers I know prefer to see their clients get the most out of their legal budgets, especially when it comes to the area of intellectual property. Below are guidelines companies can follow to do just that.

Separate the wheat from the chaff

Just because you can patent an idea doesn't mean that you should. Inventions by employees should be evaluated using consistent criteria to decide whether to apply for patent protection. One factor to consider is whether the potential idea or feature, if implemented by a competitor, will be detectable. Even if an idea is parentable, if it is difficult to determine whether competitors are implementing it, the idea may be better kept as a trade secret. Internal features of machinery or computers that cannot be obtained or observed without great expense are examples of ideas that should be kept as trade secrets. On the other hand, a feature that a competitor is likely to publicize on a website or in marketing materials should be considered for patent protection.

Another factor is the likely scope of patent protection that is attainable. If prior material known to the company before filing is very close to the idea proposed for patenting, then applying for patent protection for an incremental improvement may not be justifiable. Similarly, if a patent search is conducted, the results may eliminate some ideas from consideration. The cost of a patent search is typically less than 10% of the cost of filing a patent application. A pre-filing patent search is not required since patent offices conduct their own search. However, conducting one yourself is a good practice. Otherwise, you are filing blind.

Avoid unnecessary patent application filing costs

Once your company has decided to apply for a patent, excess official fees associated with patent application filings should be avoided. For example, in the U.S. and Europe, additional fees are required if the number of claims in an application exceeds a certain amount. The claims are the numbered paragraphs at the end of the application that define the scope of the invention. While the claims are important, excess claims can cost as much as $220 apiece in the U.S. and 500 Euros (about $709) apiece in Europe. While applicants can cancel claims later, the excess claim fees aren't refunded.

Don't put your patent portfolio on autopilot

After filing, costs incurred include those for responding to office actions--a report issued by a patent office that provides results of a search and usually a rejection of the claims, which requires a response. In a typical patent application, multiple office actions will be issued. Most patent offices will allow an applicant to continue trying to obtain a patent as long as the applicant continues responding and paying fees. In the words of the great boxer Roberto Duran after being pummeled by Sugar Ray Leonard, sometimes "No mas!" is the best strategy. If the scope of patent protection you are seeking has become unduly narrow or no longer relevant to your company's business, it is advisable to stop--even when you are right.

Prune your portfolio

Don't be afraid to let go of patents or patent applications that are no longer relevant to your company's business. In most countries, the term of a patent is 20 years from the earliest priority date. In electrical engineering and computer software, there are few inventions that have a useful life for the full 20-year patent term. Because it is expensive to maintain patents and patent applications, a patent portfolio should be periodically pruned.

For example, in the U.S., patent-maintenance fees are due at 3.5, 7.5 and 11.5 years from the issue date. The current fees are, respectively, $980, $2,480 and $4,110. While the first two are relatively inexpensive, companies should carefully consider whether to pay the final maintenance fee in light of its amount and the length of time that has passed since the patent's introduction.

In Europe and many other jurisdictions outside of the U.S., official fees, called annuities, are due each year while the patent application is pending. It can take several years from the filing date for a patent office to issue an office action. A client once asked, "You mean we have to pay while we are waiting for them to examine our application?" The answer to this question is, unfortunately, "yes" That means it may be desirable to abandon patents and patent applications that no longer have commercial importance.

Patent litigation is not for the faint of heart

Before filing a patent-infringement lawsuit, the internal and external costs of litigation should be carefully considered. Survey data from the American Intellectual Property Law Association indicates that the average cost for such litigation where the potential damages at stake are between $1 million and $25 million is $3.1 million through trial. It probably makes sense to spend $3 million to make $25 million, but you might lose. Accordingly, your company should carefully evaluate, with the assistance of unbiased outside counsel, the possible outcomes before filing a patent-infringement lawsuit.

The internal costs of patent litigation should also be considered. During the case, key employees who spend their time innovating and/or managing your company's business will be required to collect and provide documents, provide testimony and--worst of all--meet with company lawyers. Thus, patent litigation, like marriage, should not be entered into lightly.

Hire patent counsel with expertise and battle scars

When selecting patent counsel to manage your company's patent portfolio, the individual lawyers that will be doing your company's patent work should be interviewed and their legal and technical backgrounds should be considered. An attorney who has a technical degree and industry experience in your company's technology area will be more efficient in preparing patent applications than an attorney who lacks such background or experience. Selecting an attorney with a relevant background will result in less time required of your employees in explaining inventions and reviewing drafts.

Your company should also consider hiring attorneys who have some battle scars. Attorneys who have patent-litigation experience will write better patent applications. A defendant in a patent-infringement lawsuit almost always raises defenses of non-infringement, patent invalidity and unenforceability. An attorney who has had his or her patent preparation and prosecution work scrutinized by defense counsel in light of these defenses will be more conscientious in preparing and prosecuting your company's patent applications.

Conclusion

These guidelines will help your company get the most out of its patent budget. It is OK, and even advisable, not to apply for patent protection for some technologies. It is also OK to abandon patents or patent applications that are no longer commercially relevant. When deciding whether to initiate patent litigation, monetary and internal-resource costs should be considered. Finally, hiring the right patent counsel for your company will lead to a more efficient and healthier patent program.

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GREGORY A. HUNT

Gregory A. Hunt is a shareholder in the patent law firm of Jen kins, Wilson, Taylor & Hunt PA, where his practice involves preparing and prosecuting patent applications before U.S. and foreign patent offices, patent litigation and intellectual property due diligence in merger and acquisition transactions. He received his bachelor's in electrical engineering and master's in computer-network engineering from N.C. State University and his law degree from UNC Chapel Hill.

High-tech surveillance of employees can be full of expensive surprises

"You have zero privacy anyway. Get over it."

--Sun MicroSystems CEO Scott McNealy, during a January 1999 press conference.

Technology is rapidly eroding privacy. Surveillance that was impossible, impractical or difficult a generation ago is cheap and easy today. Even the technically challenged can read another's emails, hide a microphone or video camera, track another's car precisely and continuously, and record phone calls. It is so cheap and easy that many do it impulsively, without thinking.

But be careful about launching surveillance, impulsively or otherwise. There are risks that will be addressed in this article. But this entry can't answer all questions or give legal advice. You should consult with your attorney before doing any surveillance that you would not want someone to do to you or to someone with a thin skin.

We live in interesting, risky times. What one does impulsively because it's so easy may cause horrific problems, including prison, large damages, loss of reputation, employee turnover and hostility toward management. Legislators, judges and juries have a hard time...