Technology + Law®

When may an inventor place the words patent pending on a product? The answer is that the product may be marked patent pending as soon as the patent application is filed. However, care must be taken to remove this marking if the patent application is later abandoned — or the patent is issued but no longer is in force (e.g., expired).

Under 35 U.S.C. 292, whoever falsly marks a product can be fined up to $500 per offense. And the Federal Circuit has ruled that an “offense” means each false marking. Thus, if a company makes a million products marked falsely with an expired patent number, it can (at least theoretically) incur a fine of $500 million. Furthermore, the law allows private individuals to sue the manufacturer.  If the plaintiff prevails, the proceeds are split with the government.

In the last year, a cottage industry has been formed to sue manufacturers for false marking.  According to one source which closely tracks such lawsuits, the law firm of Mcdonnell Boehnen Hulbert Berghoff, [s]ince January 1, 2010, hundreds of qui tam lawsuits have been filed for false patent marking.” However, not all manufacturers accused of false marking are forking over money. Case in point is Wham-O, the makers of the Frisbee, sued for allegedly including expired patent numbers on their product . Now Wham-O is appealing the constitutionality of the false marketing statute itself.  The Federal Circuit heard arguments this week … but most likely, the U.S. Supreme Court will have the final say.

On June 20th the U.S. Supreme Court granted certiori in the case of Mayo Collaborative Services v. Promethius Laboratories, Inc. This patents at issue are: US Patent No. 6,355,623 and US Patent No. 6,680,302 which involve methods for treating certain gastrointestinal disorders such as inflammatory bowel disease (IBD), Crohn’s disease, and ulceritive colitus.  The patents involve methods for testing the patient’s blood for the presence of 6-thioguanie and administering a particular dosage of 6-meercaptopurine. The method also ensures that the administered drug is not toxic to the subject at the level administered.

Appellant Mayo (defendant in the case below) argues that these patents are invalid because they involve non-statutory subject matter. The question presented is:

Whether 35 U.S.C. § 101 is satisfied by a patent claim that covers observed correlations between blood test results and patient health, so that the claim effectively preempts all uses of the naturally occurring correlations, simply because well-known methods used to administer prescription drugs and test blood may involve “transformations” of body chemistry.

The World Intellectual Property Organization (WIPO) announced that it recently received the 2 millionth filing under the Patent Cooperation Treaty (PCT). The filing was made by US-based Qualcomm. The PCT system was established in 1978 and provides a way for applicants to obtain the benefit of one international filing date which is recognized in the 142 member countries.

The top 20 PCT filers are:

1. Panasonic Corporation (Japan)

2. Philips Electronics N.V. (Netherlands)

3. Huawei Technologies Co. (China)

4. Robert Bosch GmbH (Germany)

5. Siemens Aktiengesellschaft (Germany)

6. Qualcomm Incorporated (USA)

7. Toyota (Japan)

8. LG Electronics Inc. (Republic of Korea)

9. Ericsson (Sweden)

10.Sharp (Japan)

11. Nokia (Finland)

12. NEC Corporation (Japan)

13. BASF Aktiengesellschaft (Germany)

14. Fujitsu Limited (Japan)

15. 3M Innovative Properties Company (USA)

16. ZTE Corporation (China), Motorola Inc. (USA)

17. Motorola Inc. (USA)

18. Microsoft Corporation (USA)

19. Mitsubishi Electric Corporation (Japan)

20. Samsung Electronics Co., Ltd. (Republic of Korea).

As I have written previously, I strongly support the current first-to-invent patent system, and oppose the ill-named “America Invents Act” (S. 23 & H.R. 1249), which would switch us over to a first-to-file patent system.

This video by Randy Landreneau, an inventor and the former President of the Tampa Bay Inventors Council, offers a cogent explanation as to why the America Invents Act should be defeated in Congress.

Mr. Landreneau is now with a company that makes plastic prototypes.  For more information see his website: PlasticPrototypes.net.

This is a frequent question but not one with an easy answer. Before we deal with it, though, let’s try to answer another, related question: Can a pending patent application have value?

Although a pending patent application provides no enforceable legal rights, it may still have value as an asset.  The value of a pending application relates to the expectation as to whether the patent will issue and how broad the issued claims will be, if it does. Also, there may be some value in marking a product with the term “patent pending” .

So, how does one value an intangible asset such as a patent or a pending patent application?

There are three main approaches:

Market Approach

This is similar to how one values real estate. The real estate appraiser looks at sales of similar houses in the neighborhood, and then comes up with an estimate. In the case of intellectual property, the appraiser looks at licensing agreements / sales for similar intellectual properties. For instance, in the toy industry, it may be very common for toys to be licensed for 5% royalty of gross sales.  If that’s the case, the “value” for a license for a baby doll will be deemed “5% of gross sales”.

Cost Approach

In the cost approach, the value of the asset is determined by the amount it would cost to replace the item. This is an approach that is used in high tech industries, where the value of the asset is (at least in part) determined on the basis of R&D cost.

Income Approach

This approach looks at the income-producing capability of the asset. The value of the asset is determined based on the future income stream over its lifetime, discounted to the net present value.  Of course, the income amount used will be an estimate.

In practice, if the item has a clearly defined income-stream, then the income approach will most likely be used. However, many times, it will be difficult to estimate future income from a product.  On the other hand, if the industry has a well defined set of royalty rates, then these will probably be used to determine the asset’s value.  Often a “hybrid” approach will be used.

It is also worth noting that there may be fundamental differences of opinion as to how much an asset is worth.  An inventor may believe that his or her invention is worth far more than the appraised value, based on a different set of assumptions as to future sales, for example.

Ultimately, the actual value of a patent (or other asset) (sale or license) will be whatever the parties agree on.

For more information, see:

From Assets to Profits: Competing for IP Value and Return (Intellectual Property-General, Law, Accounting & Finance, Management, Licensing, Special Topics) by Bruce Berman (John Wiley and Sons, Inc. 2008).

Fundamentals of Intellectual Property Valuation: A Primer for Identifying and Determining Value by Wes Anson and Donna Suchy (American Bar Association 2005).

Recently, the Patent Office provided an online forum to discuss the Manual of Patent Examining Procedure (MPEP). The MPEP is the key reference manual issued by the Patent Office that provides examining guidelines, practices, and procedures. So far, most of the comments are thoughtful. Here is a sampling of comments relaing to disclosure of prior art:

Submission of videos

“As new forms of prior art proliferate, we have to develop some way to submit them to the PTO. For example – web video clips. It seems reasonable that EFS should be enhanced to accept this kind of submission for an IDS. Do people have ideas on this concept? What other types of media have people come across as prior art? This comment is intended as a discussion starter.”

“Dateless” prior art references

“What can an examiner do with a publication with no date?”

Web Site Printouts

“Please offer some examples on proper ways to [cite non-patent literature] printed from websites.”

To read or add your own comments about the MPEP, go to this web site.

According to statistics released by the European Patent Office (EPO), patent filings in the EPO have markedly increased since 2009. Last year, the EPO received about 235,000 patent applicaions, up 11% from 2009, making it the the highest number in the EPO’s history. About 40% of the filings came from member states, with Germany leading with 14% of the applications filed.

Of the top 50 applicants, 21 were from Europe. In terms of applications filed, the top 10 companies were:

1.  Siemens (2,135)

2.  Philips (1,765)

3.  BASF (1,707)

4.  Samsung (1,691)

5.  Qualcomm (1,682)

6.  Panasonic (1,400)

7.  Robert Bosch (1,400)

8.  SONY (1,286)

9.  LG (1,263)

10.  Bayer (1,123)

Among non-European countries, the US (26%) and Japan (18%) led in number of filings. South Korea accounted for 5%. The fastest growth in applications came from South Korea (+21%) and China (+54%).

What does the National Cherry Blossom Festival and the U.S. Patent and Trademark Office have in common?

Answer: They both would be affected by the federal government shutting down.

However, both would be partly operational. As reported here, the Cherry Blossom Festival parade would go ahead as scheduled but would avoid federal property (not easy to do in Washington DC). Meanwhile, the Patent Office has issued the following press release, noting that it would be open as usual for six business days, then non-essential employees would be sent home. According to the press release, the Electronic Filing System (EFS) would be operation during a shut down.