November 2005

Assistance with Invention Promotion Companies

Beware of Invention Promotion Companies

The American Inventors Protection Act which was enacted November 29, 1999, and amended by the Intellectual Property and High Technology Technical Amendments Act of 2002; helps protect inventors against deceptive practices of certain invention promotion companies. It requires invention promoters to disclose in writing the number of positive and negative evaluations of inventions they have given over a five-year period and their customers’ success in receiving net financial profit and license agreements as a direct result of the invention promotion services.

Invention promoters do not include government agencies, qualified nonprofit, charitable, scientific or educational organizations, or persons or entities involved in evaluating the commercial potential of or offering to license or sell, a utility patent or a previously filed nonprovisional utility patent application. It excludes any party participating in a transaction involving the sale of stock or assets of a business as well as any party who directly engages in the business of retail sales of products or the distribution of products.


Customers injured by failure to disclose the required information or by any material false or fraudulent representation by the invention promoter can bring a civil action to recover statutory damages or actual damages. Damages of up to three times the amount awarded are available for intentional or willful violations.


The Patent and Trademark Fee Fairness Act of 1999


This subtitle reduces certain patent fees. The original filing fee, the reissue fee, and the international application fees were each reduced. The initial maintenance fee was also reduced. The Director is authorized to adjust trademark fees and language is included that emphasizes that trademark fees can only be used for trademark-related activities.


The First Inventor Defense Act of 1999


This subtitle provides a defense against charges of patent infringement for a party who had, in good faith, actually reduced the subject matter to practice at least one year before the effective filing date of the patent and commercially used the subject matter before the effective filing date. The defense is limited to methods of “doing or conducting business.” Establishment of the defense does not invalidate the subject patent.


The defense is personal and cannot be assigned except as a transfer of the line of business to which the defense relates, and even then, is only assertable for sites using the method before the later of the date of assignment or the effective filing date of the patent. The defense can only be asserted as a defense against infringement of a commercially used method.


The Patent Term Guarantee Act of 1999


This subtitle extends the term of patents, in accordance with regulations prescribed by the Director, to compensate for certain United States Patent and Trademark Office (USPTO) processing delays and for delays in the prosecution of applications pending more than three years. Extensions are available for delays in issuance of a patent due to interference proceedings, secrecy orders, and appellate review. Diligent applicants are guaranteed a minimum 17-year patent term. This subtitle also requires the Director to prescribe regulations to provide for the continued examination of an application, at the request of the applicant.


The Domestic Publication of Foreign Filed Patent Applications Act of 1999


This subtitle provides for publication of patent applications 18 months after filing unless the applicant requests otherwise upon filing and certifies that the invention has not and will not be the subject of an application filed in a foreign country. Provisional rights are available to patentees to obtain reasonable royalties if others make, use, sell, or import the invention during the period between publication and grant. If the foreign-filed application is less extensive than that filed with the USPTO, the applicant may submit and request publication of a redacted version by the USPTO. There is a six year statute of limitations on the “provisional” right to collect the reasonable royalty.


The Optional Inter Partes Reexamination Procedure Act of 1999


This subtitle establishes a reexamination alternative that expands the participation of third-party requesters by permitting those parties to submit a written response each time the patent owner files a response to the USPTO. Those third-party requesters who choose to use the optional procedure, however, will not be able to appeal adverse decisions beyond the Board of Patent Appeals and Interferences. Also, they will not be able to challenge, in any later civil action, any fact determined during the process of the optional reexamination procedure.


The Patent and Trademark Office Efficiency Act


This subtitle establishes the USPTO as an agency within the Department of Commerce, subject to the policy direction of the Secretary of Commerce. The USPTO retains responsibility for decisions regarding the management and administration of its operations and exercises independent control of its budget allocations and expenditures, personnel decisions and processes, procurements, and other administrative and management functions. It also allows the USPTO to establish satellite offices in places in the United States as necessary and appropriate to conduct business and authorizes the entering into and performance of contracts.


Miscellaneous Patent Provisions


This subtitle makes a number of technical and clarifying changes to patent law and provides authority for the electronic filing, maintenance, and publication of documents.

A discharged employee who remains in a similar, if not identical, field of business after termination may face potential liability under trade secret law.  For example, a former employee might benefit from soliciting the customers from former employment. Whether or not such solicitation constitutes a trade secret violation, when the customer list of a former employer was stored in a confidential file, depends on the accessibility of customer names elsewhere.


The solicitation of customers will probably not constitute a violation of trade secret law if:

  • A former employee did not copy or memorize the confidential customer files
  • Employers’ customers were known users of employers’ merchandise
  • Customers engaged in business at advertised locations
  • Customer names were readily ascertainable in the trade as likely users of employers’ services

Criminal Penalty for Government Employees
A federal statute imposes a criminal penalty for any United States government employee who discloses trade secret information that is revealed to him during the course of his employment. This means that government employees are obligated to keep the trade secret information confidential. Imposing a penalty for the violation of a trade secret fosters business and, subsequently, the economy, by:

  • Discouraging government employees from capitalizing on confidential information they become privy to during the course of employment
  • Arming owners of a trade secret with a sufficient remedy in the case of disloyalty

What is Patentable?

Patentable Subject Matter

Patent law specifies the general field of subject matter that may be patented as well as the conditions under which a patent may be obtained. In the language of the applicable statute, any person who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent.” Under law, patents are granted on new inventions of — or useful improvements on — things in the following categories:

Process – A process is an act or method, which primarily includes industrial or technical processes. This is a mode of treatment of materials to produce a result. It is an act or series of acts performed on the subject to be transformed and modified to a different or improved state.

Machine – A machine is a mechanically, electrically, or electronically operated device for performing a task. In patent law, the term is synonymous with mechanism, device, engine, or apparatus.

Manufacture – Manufacture refers to an article that is human-made from raw materials. This covers products other than machines and compositions of matter, including all manufactured articles.

Composition of Matter – Composition of matter refers to chemical and metallurgical compositions and may include certain mixtures of ingredients as well as new chemical compounds.

The above classes of subject matter taken together include nearly everything that is made by man and the processes for making the products.


  • The Atomic Energy Act of 1954 excludes the patenting of inventions used solely in the utilization of special nuclear material or atomic energy for atomic weapons.
  • The laws of nature, physical phenomena and abstract ideas are not patentable subject matter.
  • A patent may not be obtained upon a mere idea or suggestion. A patent is granted upon the new machine, manufacture, etc., not upon the idea or suggestion of a new machine. A complete description of the actual machine or other subject matter for which a patent is sought is required.

Trademark Rights without Federal Registration?

Protection of Trademarks under Common Law

Unlike other forms of intellectual property, protection of trademark rights is based upon actual use of the mark rather than by registration. Generally, the first party who uses a mark in commerce has the right to use the mark in that geographic area as well as in the natural zone of expansion for that geographic area. Any shipment of goods bearing the trademark across a state line in the normal course of business satisfies the “use in commerce” requirement. Token sales made solely to establish trademark use, however, do not constitute legally sufficient “use.”

If a mark is not actually being used but someone has the “bona fide intent” to use it in the future, the use of that mark may be secured by filing what is known as an “Intent to Use” Application with the United States Patent and Trademark Office (USPTO). The filing of an Intent to Use Application essentially reserves the mark in incremental periods of six months. Thereafter, the USPTO must be satisfied that the mark is being used or the right is lost.

Sometimes a state registration is filed by someone who is using a mark locally. This really doesn’t give any additional benefits other than what is gained by actually using the mark in commerce, but it does serve to put the world on notice of use of the mark.

Federal registration is not required to establish rights in a trademark. Common law rights arise from actual use of a mark. Generally, the first to either use a mark in commerce or file an intent to use application with the USPTO has the ultimate right to use and register the trademark.

False Advertising, Unfair Competition related to Trademarks

Any advertising which is misleading in any material respect is considered false advertising. An advertisement is considered misleading if it fails to disclose facts that are important in light of what is stated in the advertisement or facts that are relevant in the light of the customary use of the product. The Federal Trade Commission (FTC) has the statutory power to cancel trademarks it finds constitute false advertising.

Deceptive in Nature

Advertisements that contain representations that are false, misleading, or deceptive are illegal under state and federal laws. To be found liable for false advertising, it must be shown that the advertisement was deceptive in nature. Proof that the ad actually harmed anyone is not important. Moreover, the intentions of the advertiser are irrelevant, including if the false or deceptive advertisement was a mistake.

Federal Law Protections Against False Advertising

The FTC is the main federal agency that monitors false advertising practices. The FTC relies on consumers and competitors to report unlawful advertising. If FTC investigators find that an ad violates the law, there are several ways in which the agency can act:

  • The FTC may try to bring the violator into voluntary compliance through informal means.
  • The FTC can issue a cease-and-desist order and bring a civil lawsuit on behalf of people who have been harmed.
  • The FTC may seek a court injunction to stop a false ad.
  • The FTC may require an advertiser to run corrective ads that state the correct facts and admit that an earlier ad was deceptive.

State Law Protections Against False Advertising

The majority of states have consumer fraud or deceptive practices statutes that regulate advertising. Under these laws, state or local officials can seek injunctions against unlawful advertisers to stop the ads and collect damages for injured consumers or businesses. Additionally, state consumer protection laws usually allow consumers or businesses to directly sue advertisers for any monetary damages stemming from the false advertisements. Some laws even provide for criminal penalties if fraud is involved.

Federal Unfair Competition Laws

Under federal law, a business practice is unfair “when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” The Lanham Act gives parties a private remedy for false advertising claims. To prevail on a false advertising claim under the Lanham Act, the injured party must prove that the advertisement is literally false or is likely to mislead and confuse customers. Evidence of consumer confusion in the marketplace is a prerequisite for recovery under the Act. Parties with successful Lanham Act claims are usually awarded monetary damages and an injunction to stop the advertiser.

Keeping Advertisements Lawful

The following are some of the generally accepted rules for legal advertising:

  • Keep representations accurate.
  • Obtain permission from outside sources used in advertisements.
  • Treat competitors fairly.
  • Keep sufficient quantities of advertised products on hand.
  • Be careful when using the word “free.”
  • Be truthful in all claims about pricing.
  • Do not overextend offers of credit.

Protecting Yourself from Cybersquatters

In order to navigate the Internet, users enter the alphanumeric names of the Web sites they wish to visit, known as domain names. Behind the scenes, root servers match the domain name entered into a browser to the actual numeric address that is used to route the user’s browser to the proper site. In order to avoid duplication of domain names that would render the system inoperable, domain names must be registered and managed. With the explosion of Internet use in the early 1990s, people realized that domain names associated with the names or trademarks of well-known business–for example,–would be extremely valuable to those businesses. In the absence of any rules or restrictions on registration of domain names, thousands of domain names were registered by people with no connection to the businesses and trademarks associated with those names except the desire to offer the domain names for sale to the businesses with which the domain names were connected. This practice was given the name “cybersquatting.”

Businesses and other trademark owners seeking ownership of domain names already registered by others initially had a choice of pursuing a trademark infringement action or paying the price sought by the registrant. However, courts hearing trademark infringement cases had difficulty sorting out incidents of actual infringement and legitimate uses of a trademark within a domain name, such as for the purposes of criticizing the trademark owner. The first legislative attempt to establish clear ground rules for the registration of trademark-associated domain names was the Anticybersquatting Consumer Protection Act (ACPA), passed in 1999.

The ACPA provides for civil liability for one who registers, traffics in or uses a domain name that is identical or confusingly similar to an existing trademark with a bad faith intent to profit from that trademark. The statute provides several considerations for determining the existence of bad faith, including:

  • the registrant’s valid intellectual property rights or other interest in the domain name;
  • whether the domain name is the name of or otherwise identifies the registrant;
  • the registrant’s prior valid use of the domain name in offering goods or services;
  • the registrant’s intent to divert customers from the trademark owner’s own site for the registrant’s commercial gain or for the purpose of tarnishing or disparaging the trademark by creating a likelihood of confusion as to the actual source of the site;
  • the registrant’s intent to sell the domain name to the trademark owner without having previously used the site for legitimate purposes;
  • the providing of false or misleading information during the registration process.

A slight variant of cybersquatting is a practice called typosquatting, in which registrants anticipate common misspellings of existing trademarks or domain names with the intent of tricking an intended visitor of the properly spelled domain to visit the typosquatter’s domain. Commonly, the typosquatter’s domain will prevent a user from exiting without clicking through advertisements, for which the typosquatter collects fees. In other cases, users are unwittingly directed to pornographic or other undesirable Web sites. Courts have treated typosquatting cases in the same manner as cybersquatting cases, based on the legislative history of the ACPA as well as the specific language applying to domain names that are “confusingly similar” to famous or distinctive trademarks.


Another form of cybersquatting is the registration of names of celebrities as domain names. Because the ACPA is designed to protect trademarks from cybersquatting, this type of cybersquatting is not prohibited. Except in cases where a celebrity has registered his or her name as a trademark, which requires that the name be well enough known to have acquired a secondary meaning to the public, cybersquatters are free to traffic in domain names based on person’s names. The ACPA also does not prohibit the registration or use of generic terms as domain names, such as or

The responsibility of managing many of the common top-level domain names, among them .com, .org, and .net, was transferred to the Internet Corporation for Assigned Names and Numbers (ICANN) in 1998. ICANN established a compulsory resolution process to resolve disputes over domain names typified by cybersquatting and typosquatting called the Uniform Dispute Resolution Procedure (UDRP). Under the UDRP, a trademark owner files a complaint with an approved dispute resolution provider. The process is extremely streamlined and unlike the judicial and arbitration processes does not provide for the hearing of evidence or argument, although the domain registrant does have an opportunity to respond to the complaint. A hearing panel then decides whether or not the domain should be transferred to the complaining trademark owner. The loser may then bring a lawsuit to challenge the result. The UDRP results in favorable decisions for trademark owners in four out of five cases, resulting in widespread criticism that the procedure is fundamentally flawed and unfair.

The most troublesome cases have proven to be those in which domain names have been registered with the intent of expressing discontent with the trademark holder, such as the ubiquitous [trademark] domain names. While some registrants have been frank about their intent to exact some price from the trademark holder for turning over the offending domain name, constituting the bad faith necessary to find a violation of ACPA, some courts have interpreted the mere intent to criticize a trademark holder as creating a presumption of bad faith. Others have considered criticism in the absence of financial motive a legitimate use of a trademark. This has sparked a debate as to the role of the First Amendment in the domain name registration arena and induced the somewhat ironic practice of trademark owners registering every imaginable denigrating domain name that includes their trademark to protect it from criticism. Critics argue that such practice improperly allows trademark holders to insulate themselves from criticism on the Internet.