If you are a small business owner, you probably have a lot to worry about, from developing your concepts, to marketing your products, to managing your employees, to growing your company. Thinking about protecting your intellectual property might not be a high priority for you, especially early on, but your intangible and innovative ideas are valuable, and protecting them is an important step in building your business that should not be overlooked.
While small businesses most commonly acquire trademarks and copyrights, there are many other ways to protect your IP, even if you did not invent the products yourself. For example, if you have come up with a clever and unique way of displaying, packaging, or selling your products, a patent could help secure rights to your design or process. Although obtaining a patent can be considerably more expensive than acquiring other forms of IP protection, as with everything else in your business, strategic up-front investments can provide significant long-term benefits, and a diverse approach to IP is often better than one that focuses only on a few types of protection.
For a quick introduction to intellectual property, take a look at this short video by MSNBC's Your Business. You may also visit the small business section of the U.S. Patent and Trademark Office's website.
Wednesday, August 17, 2011
Tuesday, August 2, 2011
Interesting Designs
Pet Feeder
This pen makes me smile.
Greeting card.
Alternate Volt design.
Fancy.
This pen makes me smile.
Greeting card.
Alternate Volt design.
Fancy.
Sunday, July 24, 2011
Design Patents Contribute to IP Portfolio’s Value
If you anticipate selling or licensing your intellectual property – or even selling products produced using that IP – it is good to know how much the IP is worth. This is particularly true in a world where IP is often a company’s most important asset. Think Google, eBay, Facebook. For these companies, the value of the server farms, the corporate campuses, and other physical assets are not all that important. So how is the IP embodied in their products valuated? There are some valuation techniques that should be considered.
As a type of intangible asset, IP is more difficult to valuate than tangible assets. One simple technique for valuating intangible assets is to take the market value of all assets and subtract from that the value of the tangible ones. This may provide a ballpark figure, but intangible assets are more than just IP; for example, goodwill and know how can have tremendous value, but they are not necessarily forms of protectable intellectual property. For example, it may be difficult to pin down a value for a patent.
Design patents are even trickier, because they only protect certain (and not necessarily all) ornamental features of a product. What percentage of that product’s value is attributable to the patent? Compounding the problem is that design patents have a limited life of 14 years, so the patent has no value after it expires and the property enters the public domain. Furthermore, most IP, outside of perhaps pharmaceuticals, loses value over time. One reason is because the protectable knowledge becomes stale or obsolete. Another is that as the patent term nears its end, others may decide that they can wait out the patent’s expiration rather than seek rights to it.
Nevertheless, in some circumstances, design patents can be quite valuable. For instance, 2Tone Apparel of Tempe, Arizona. 2Tone Apparel, founded in 2006, makes “fan wear and sports apparel” for various customers including colleges and universities. In a recent press release, 2Tone Apparel announced a newly acquired design patent (D638,607) for a t-shirt. According to the release, the design includes “a seam that runs continuously from the neck to the end of the sleeve on both the left and right sides of the garment bringing together two different colors of the same material:”
There is no doubt that 2Tone’s design patent is a significant asset (anyone can make ordinary t-shirts), and 2Tone is distinguishing itself on this basis. Founded in 2007, 2Tone is a recent startup that is particularly motivated to grow its business, and it appears to be placing all bets on this shirt design.
In addition to the subtractive approach mentioned above, there are three traditional approaches to valuating IP: the cost approach, the market approach, and the income approach. The cost approach attempts to determine how much it would cost to recreate the IP. This is an unusual concept in that typically IP only needs to be created once (unless the inventor dies with his secrets), and accordingly the cost approach is generally of little use except where the IP has a very low value. Also, subsequent recreations of the IP are likely to be less expensive because many costs have already been sunk, or the IP has become obsolete.
The market approach is typically used for valuating real estate, where sales of comparable homes are used to valuate the house up for sale. In real estate it is said that the most useful comparisons are between houses of similar size, number of bedrooms, bathrooms, etc., and that the ornamental features of the house (flooring, fixtures, and so forth) are only used to make adjustments from the sale prices of the comparable home(s). The trouble with IP is how do you find a comp? And even if you do, how do you identify how much that IP is selling for (especially with non-public companies)? There may not be enough information for the market approach to work.
The income approach is generally considered by far the most useful of the three approaches, especially when the IP is already producing a stream of income. The value of the IP is based on the cash flow that the IP generates or is expected to generate in the future. This can be predicted based on past sales, current orders, and other trends. If the product incorporating the IP has proven market success, it is likely to produce more income than if it is still fledging. Furthermore, the value of the IP can be supplemented by other factors, such as marketing, quality control, and even, presumably, celebrity endorsements or good old fashioned word-of-mouth.
For 2Tone, getting the word out about its new design patent can help drive sales if the design proves to be popular among consumers. Yet fashion is a fleeting thing, and whether or not 2Tone can capitalize on its design may depend more on current trends than anything else. The income approach can help determine if 2Tone should license its IP, sell it outright (while the market is hot), or hold on to it until the time is right.
As a type of intangible asset, IP is more difficult to valuate than tangible assets. One simple technique for valuating intangible assets is to take the market value of all assets and subtract from that the value of the tangible ones. This may provide a ballpark figure, but intangible assets are more than just IP; for example, goodwill and know how can have tremendous value, but they are not necessarily forms of protectable intellectual property. For example, it may be difficult to pin down a value for a patent.
Design patents are even trickier, because they only protect certain (and not necessarily all) ornamental features of a product. What percentage of that product’s value is attributable to the patent? Compounding the problem is that design patents have a limited life of 14 years, so the patent has no value after it expires and the property enters the public domain. Furthermore, most IP, outside of perhaps pharmaceuticals, loses value over time. One reason is because the protectable knowledge becomes stale or obsolete. Another is that as the patent term nears its end, others may decide that they can wait out the patent’s expiration rather than seek rights to it.
Nevertheless, in some circumstances, design patents can be quite valuable. For instance, 2Tone Apparel of Tempe, Arizona. 2Tone Apparel, founded in 2006, makes “fan wear and sports apparel” for various customers including colleges and universities. In a recent press release, 2Tone Apparel announced a newly acquired design patent (D638,607) for a t-shirt. According to the release, the design includes “a seam that runs continuously from the neck to the end of the sleeve on both the left and right sides of the garment bringing together two different colors of the same material:”
There is no doubt that 2Tone’s design patent is a significant asset (anyone can make ordinary t-shirts), and 2Tone is distinguishing itself on this basis. Founded in 2007, 2Tone is a recent startup that is particularly motivated to grow its business, and it appears to be placing all bets on this shirt design.
In addition to the subtractive approach mentioned above, there are three traditional approaches to valuating IP: the cost approach, the market approach, and the income approach. The cost approach attempts to determine how much it would cost to recreate the IP. This is an unusual concept in that typically IP only needs to be created once (unless the inventor dies with his secrets), and accordingly the cost approach is generally of little use except where the IP has a very low value. Also, subsequent recreations of the IP are likely to be less expensive because many costs have already been sunk, or the IP has become obsolete.
The market approach is typically used for valuating real estate, where sales of comparable homes are used to valuate the house up for sale. In real estate it is said that the most useful comparisons are between houses of similar size, number of bedrooms, bathrooms, etc., and that the ornamental features of the house (flooring, fixtures, and so forth) are only used to make adjustments from the sale prices of the comparable home(s). The trouble with IP is how do you find a comp? And even if you do, how do you identify how much that IP is selling for (especially with non-public companies)? There may not be enough information for the market approach to work.
The income approach is generally considered by far the most useful of the three approaches, especially when the IP is already producing a stream of income. The value of the IP is based on the cash flow that the IP generates or is expected to generate in the future. This can be predicted based on past sales, current orders, and other trends. If the product incorporating the IP has proven market success, it is likely to produce more income than if it is still fledging. Furthermore, the value of the IP can be supplemented by other factors, such as marketing, quality control, and even, presumably, celebrity endorsements or good old fashioned word-of-mouth.
For 2Tone, getting the word out about its new design patent can help drive sales if the design proves to be popular among consumers. Yet fashion is a fleeting thing, and whether or not 2Tone can capitalize on its design may depend more on current trends than anything else. The income approach can help determine if 2Tone should license its IP, sell it outright (while the market is hot), or hold on to it until the time is right.
Thursday, May 26, 2011
Road Trip!!! An International Survey of Design Protection of Computer Screen Displays
Previous posts of the Ordinary Observer (such as this) describe how design patents can be utilized to protect computer icons and screen displays under U.S. law. During a recent conversation with a client, I was asked to compare and contrast how U.S. law differs from the law of other jurisdictions in this regard. After a bit of research, I pulled together the following sampling of international design patent law.
Canada
We start our world tour just north of the border in Canada, where industrial designs are registered, not examined. Perhaps unsurprisingly given Canada’s close ties to the U.S., computer-generated icons are eligible for industrial design protection in Canada, provided that they are embodied in a finished article and meet the following requirements:
The icon must be visible when the article is used for its intended purpose;
The features of the icon must not be dictated solely by a utilitarian function of the article;
The title must identify the finished article in which the icon is embodied (e.g., computer monitor, washing machine); and
The drawings or photographs must show the entirety of the finished article in which the icon is embodied.
Successfully registered computer-generated icons are protected for a 5 year term, with an additional 5 year extension available in exchange for payment of a maintenance fee.
Europe
Our next stop is Europe, where registered community designs (RCDs) can be used to protect screen displays and other “graphic symbols.” This broad definition of design embraces the screen displays without reference to the display hardware. Successfully registered graphic symbols are protected for a 5 year term, with 4 additional 5 year extensions available for a total of 25 years of potential protection. Given the Ordinary Observer’s coverage of RCDs to date (including this post from my colleague Keith Noe and this post from my colleague Mathew Grady), our stop here will be a brief one. One point worth noting, however, before we continue is that some large players in this space are actively acquiring the rights provided by RCDs.
China
Next up is China, where (according to this presentation authored by the Industrial Design Examination Department, SIPO of P.R.C) industrial design protection does not embrace screen displays or any pattern that is displayed when the product is electrified. However, as discussed by Yuying Guan here, Chinese industrial designs are not substantively examined. Thus, as a practical matter, including screen display elements in Chinese industrial design applications may not result in refusal and may provide additional, easy-identifiable characteristics of the registered product vis-à-vis potential infringers. Apple, Inc. appears to agree, as evidenced by this post. In China, successfully registered industrial designs are protected for a 10 year term.
Japan
The final stop on our whirlwind tour is Japan. Japanese design law appears to be quite particular in regards to screen displays. According to Design Examination Standards published by the Japanese Patent Office, “a graphic image itself is not to be regarded as a protectable subject matter but to be protected as a part of an article under the Japanese Design Act.” Japanese law further restricts protection to graphic images to those displayed when the article rendering the display is in “a state in which the article is enabled to perform its functions.” This has lead at least one commentator to the conclusion that the only screen displays covered by Japanese design law are those displayed after initial boot of the device. Designs successfully registered under Japanese law have a 15 year term.
As described above, the scope of protection afforded to computer screen displays under design patent law varies remarkably between jurisdictions. These variations underscore the need for careful consideration and planning when fashioning a strategy to protect products with innovative and commercially valuable screen designs.
Canada
We start our world tour just north of the border in Canada, where industrial designs are registered, not examined. Perhaps unsurprisingly given Canada’s close ties to the U.S., computer-generated icons are eligible for industrial design protection in Canada, provided that they are embodied in a finished article and meet the following requirements:
The icon must be visible when the article is used for its intended purpose;
The features of the icon must not be dictated solely by a utilitarian function of the article;
The title must identify the finished article in which the icon is embodied (e.g., computer monitor, washing machine); and
The drawings or photographs must show the entirety of the finished article in which the icon is embodied.
Successfully registered computer-generated icons are protected for a 5 year term, with an additional 5 year extension available in exchange for payment of a maintenance fee.
Europe
Our next stop is Europe, where registered community designs (RCDs) can be used to protect screen displays and other “graphic symbols.” This broad definition of design embraces the screen displays without reference to the display hardware. Successfully registered graphic symbols are protected for a 5 year term, with 4 additional 5 year extensions available for a total of 25 years of potential protection. Given the Ordinary Observer’s coverage of RCDs to date (including this post from my colleague Keith Noe and this post from my colleague Mathew Grady), our stop here will be a brief one. One point worth noting, however, before we continue is that some large players in this space are actively acquiring the rights provided by RCDs.
China
Next up is China, where (according to this presentation authored by the Industrial Design Examination Department, SIPO of P.R.C) industrial design protection does not embrace screen displays or any pattern that is displayed when the product is electrified. However, as discussed by Yuying Guan here, Chinese industrial designs are not substantively examined. Thus, as a practical matter, including screen display elements in Chinese industrial design applications may not result in refusal and may provide additional, easy-identifiable characteristics of the registered product vis-à-vis potential infringers. Apple, Inc. appears to agree, as evidenced by this post. In China, successfully registered industrial designs are protected for a 10 year term.
Japan
The final stop on our whirlwind tour is Japan. Japanese design law appears to be quite particular in regards to screen displays. According to Design Examination Standards published by the Japanese Patent Office, “a graphic image itself is not to be regarded as a protectable subject matter but to be protected as a part of an article under the Japanese Design Act.” Japanese law further restricts protection to graphic images to those displayed when the article rendering the display is in “a state in which the article is enabled to perform its functions.” This has lead at least one commentator to the conclusion that the only screen displays covered by Japanese design law are those displayed after initial boot of the device. Designs successfully registered under Japanese law have a 15 year term.
As described above, the scope of protection afforded to computer screen displays under design patent law varies remarkably between jurisdictions. These variations underscore the need for careful consideration and planning when fashioning a strategy to protect products with innovative and commercially valuable screen designs.
Wednesday, May 18, 2011
Monday, April 25, 2011
DESIGN PATENT REEXAMINATION
The recent decision in Vanguard v. Bank of America (reviewed by The Ordinary Observer – here) has highlighted the increased interest in reexamination of design patents, which has logically followed a perceived increase in the enforcement of design patents.
In a recent article, Tracy-Gene Durkin analyzed the cumulative statistics released by the USPTO, and identified reexamination trends specific to design patents. The statistics were covered a ten year period from January 1999 to December 2009.
During that period the USPTO Official Gazette noticed 5,594 requests for reexamination. Of these, 97 or 1.7% were requests for reexamination of design patents. Of the 97 reexaminations, 85 were conducted ex parte and 12 were inter partes.
The most notable statistic to come out of the review is a better than 50% cancellation rate of design patents under reexamination. Clearly, this high cancellation rate suggests a significant role for reexamination of designs, and Durkin predicts it will lead to the increased use of reexamination for design patents. The threat of reexamination given such a high cancellation rate provides significant leverage to a defendant charged with infringing a patented design. Furthermore, statements made during reexamination may provide the basis for a finding of non-infringement should the patent survive the reexamination process.
Recent decisions have arguably relaxed the necessary showing for infringement of design patents (Egyptian Goddess Inc. v. Swissa Inc. (analyzed - here), Crocs, Inc. v. International Trade Commission (analyzed - here), and International Seaway Trading Corp. v. Walgreens Corp. (analyzed - here)) suggesting that an increase in the enforcement of patented designs will follow. In such a landscape, the expectation follows that reexamination will be used more frequently as enforcement efforts increase.
Interestingly, the actual numbers fail to establish any trend showing an increase in reexamination of design patents (slide show - page 6). Further analysis of more recent numbers continues to defy expectation. Comparing the total change in the number of filings from December 31, 2009 to September 30, 2010 (ex parte 2009, 2010 & inter partes 2009, 2010)) shows only 8 ex parte and no inter partes requests for reexamination for 2010 through September 30, 2010.
In spite of the numbers failing to establish any definitive trend in the number of reexamination requests, there is no escaping the significant role that reexamination can play when considering patented designs.
In a recent article, Tracy-Gene Durkin analyzed the cumulative statistics released by the USPTO, and identified reexamination trends specific to design patents. The statistics were covered a ten year period from January 1999 to December 2009.
During that period the USPTO Official Gazette noticed 5,594 requests for reexamination. Of these, 97 or 1.7% were requests for reexamination of design patents. Of the 97 reexaminations, 85 were conducted ex parte and 12 were inter partes.
The most notable statistic to come out of the review is a better than 50% cancellation rate of design patents under reexamination. Clearly, this high cancellation rate suggests a significant role for reexamination of designs, and Durkin predicts it will lead to the increased use of reexamination for design patents. The threat of reexamination given such a high cancellation rate provides significant leverage to a defendant charged with infringing a patented design. Furthermore, statements made during reexamination may provide the basis for a finding of non-infringement should the patent survive the reexamination process.
Recent decisions have arguably relaxed the necessary showing for infringement of design patents (Egyptian Goddess Inc. v. Swissa Inc. (analyzed - here), Crocs, Inc. v. International Trade Commission (analyzed - here), and International Seaway Trading Corp. v. Walgreens Corp. (analyzed - here)) suggesting that an increase in the enforcement of patented designs will follow. In such a landscape, the expectation follows that reexamination will be used more frequently as enforcement efforts increase.
Interestingly, the actual numbers fail to establish any trend showing an increase in reexamination of design patents (slide show - page 6). Further analysis of more recent numbers continues to defy expectation. Comparing the total change in the number of filings from December 31, 2009 to September 30, 2010 (ex parte 2009, 2010 & inter partes 2009, 2010)) shows only 8 ex parte and no inter partes requests for reexamination for 2010 through September 30, 2010.
In spite of the numbers failing to establish any definitive trend in the number of reexamination requests, there is no escaping the significant role that reexamination can play when considering patented designs.
Thursday, April 14, 2011
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