Patents

• Author: Craig J. Madson - Laura M. Burson - Martin R. Bader
• Pages: 177-212

177

I. WHAT IS A PATENT?

A patent is a legal right granted by the federal government giving the pat-

ent owner the right to exclude others from making, using, offering to sell,

selling, or importing the invention claimed in the patent. Patents can be

obtained for inventions that are new, useful, and non-obvious to persons

knowledgeable in the field of the invention. Processes (including business

methods), machines, products, compositions of matter, and ornamental

designs may be patented.

In the United States, patents are provided for by the U.S. Constitution.

Article I, section 8, clause 8 of the Constitution states:

The Congress shall have power . . . [t]o promote the progress of science

and useful arts, by securing for limited times to authors and inventors the

exclusive right to their respective writings and discoveries.

This provision of the Constitution has been implemented by Congress

in part by the United States Patent Act. 35 U.S.C. §§1-376.

Under the Patent Act inventors are awarded a limited monopoly on

their inventions and discoveries in return for making those inventions and

discoveries public.

A. TERM OF A PATENT

The Constitution and the Patent Act aim to promote science and useful

arts by giving exclusive rights in inventions and writings to the inventors

and authors for a limited period of time. A patent grants to the inventor

the right to exclude others from making, using, offering to sell, selling, or

importing the invention as defined by the claims of the patent. U.S. utility

patents (discussed in more detail later) are effective for a period of 20 years

from the date the application is filed with the U.S. Patent and Trademark

Chapter 5

Patents

Craig J. Madson, Laura M. Burson, and Martin R . Bader

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178 • The Intellectual Property Handbook

Office (USPTO). (For patents based on applications filed before June 8, 1995,

the patent term is the longer of 20 years from the application filing date or

17years from the issue date.) It is important to note that the patent may not

actually issue for two or more years following the application filing date.

B. HOW CAN A PATENT BE IMPORTANT

TO A FRANCHISOR OR OTHER COMPANY?

1. Negative Right—to Exclude but Not Practice

A patent represents a limited monopoly granted by the government to the

inventor of an invention or discovery. A patent is a “negative right” in that

it is a right to exclude others from making, using, offering to sell, selling,

or importing the invention. This means the owner of a patent has the legal

right to exclude others from utilizing the owner’s patented technology in

any market within the United States for the term of the patent. Hence, if a

patent covers commercially significant technology, then the owner enjoys

a commercial advantage until new and better technology is invented or the

patent expires. This right can be of extreme importance in building a viable

and valuable business.

Patents provide the inventor with a time period during which he or she

(or his or her assignee) can develop and manufacture the invention and

market it without lawful interference from competitors manufacturing or

selling the same invention. Thus, an inventor of the better mousetrap is

given the opportunity to profit from that mousetrap without facing com-

petition from similar mousetraps manufactured by the competition. The

patent does not preclude the competition from developing further improve-

ments based on the information provided by the patent, but at least the

inventor has legal recourse in the event of a “knock-off,” or near-copy, of

the patented invention during the life of the patent.

A patent does not, however, give the inventor any affirmative rights.

This means that patent owners are not necessarily granted the right to use

the patented invention. Patent owners only have the right to exclude oth-

ers from making, using, offering for sale, selling, or importing inventions

covered by the patent.

The following hypothetical illustrates how a patent does not grant affir-

mative rights:

Xera, Inc., owns a patent covering a soft-serve ice cream machine. The ele-

ments of Xera’s patent are a machine with a freezing cylinder and a dis-

pensing unit that dispenses ice cream. Yukon Corp. later receives a patent

covering an invention for an improved soft-serve ice cream machine. The

elements of Yukon’s patented machine include two freezing cylinders and

a dispensing unit that can combine two flavors of ice cream with a twist.

Because Yukon’s product has each and every element of the inven-

tion claimed in Xera’s issued patent—that is, a freezing cylinder and a

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I. What Is a Patent? • 179

dispensing unit—Yukon’s machine is covered by Xera’s patent and Xera

may ask a court to bar Yukon from making, using, offering for sale, selling,

or importing Yukon’s patented machine. Thus, Yukon cannot practice its

own patented invention without a license to Xera’s patent.

However, Yukon’s patent is an improvement on Xera’s patented inven-

tion. If Xera wished to make or use a machine with two (or more) freez-

ing cylinders that dispenses ice cream with a twist, Xera must obtain a

license to Yukon’s patent to do so. Otherwise, Yukon could ask a court to

block Xera from making, using, selling, offering for sale, or importing any

machines with two freezing cylinders that can dispense ice cream with a

twist. Thus, Xera and Yukon are able to block each other from utilizing this

improved ice cream machine. This sort of overlap of patent rights often

gives rise to the need for cross licenses between patent holders.

Later, Zebra Co. decides to enter the soft-serve market and independently

comes up with a soft-serve machine that uses two freezing cylinders and

the same twist-style dispensing unit claimed in Yukon’s patent.

Because Zebra’s machine uses freezing cylinders and dispenses ice

cream, Xera may ask a court to bar Zebra from entering the market. Fur-

thermore, because Zebra’s machine uses two cylinders and dispenses ice

cream with a twist, Yukon also may ask a court to bar Zebra from entering

the market.

Thus, even if an inventor owns a patent, the inventor may not have a

right to practice the invention because of other intervening patents. Simi-

larly, state or federal law (such as health or safety regulations) may limit an

inventor’s ability to practice the invention. Drug patents, for example, are

very valuable and give a pharmaceutical company the right to exclude any-

one from making their patented drug; the drug company must, however,

get FDA approval before it can sell the drug on the open market or provide

the drug to patients. There are many drugs that have been patented that

cannot be sold.

2. Protects Idea and Concepts

A patent differs from other forms of intellectual property protection

because it can fully protect the underlying ideas and concepts that make the

invention useful. As discussed later, this is a significant difference between

patents and copyrights. Copyrights do not protect the idea underlying the

copyrighted work but rather only the expression of that idea. On the other

hand, patent claims may be available that excludes one’s competition from

using an underlying idea in separate but competitive products.

3. Independent Development—Not a Defense to Infringement

It does not matter if a competitor independently develops technology that

a company has patented. That competitor could not practice that pat-

ented technology without being subject to liability for patent infringement.

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