August 2006

Patenting an Invention

A patent gives an inventor a right to exclude others from making, using, or selling the patented invention for a certain period of time. Patents are a form of property right that is granted by federal patent law, which is administered by the United States Patent and Trademark Office USPTO. The main objective of patent law is not to reward inventors but rather to promote the advancement of science and technology through the disclosure of new ideas. Accordingly, there are several requirements for an invention to be eligible for a patent, and one of the most difficult determinations that is required to be made in assessing a patent application is whether an invention is non-obvious.

The nonobviousness requirement provides that an invention is not patentable if it would have been obvious to a person having ordinary skill in the pertinent prior art as it existed when the invention was made. The “prior art” is simply all of the information available that might reveal that a claimed invention has either already been patented or described in a publication, either of which will render the claimed invention unpatentable. The “pertinent prior art” is the art that pertains to the particular field in which the claimed invention would be classified. For example, if the claimed invention was a tool or a machine or improvement to either, prior art pertaining to chemical compounds would not be pertinent and would not be considered in the non-obviousness determination. In considering what constitutes the hypothetical “person having ordinary skill in the art,” the patent examiner considers the educational background of the inventor; the problems encountered in the art and the solutions the claimed invention is intended to provide; prior solutions to those problems present in the art; the level of sophistication of the particular technology involved; and the educational background of workers in the particular field.

Patent Examining Procedure

Determining whether an invention is nonobvious can be exceedingly difficult. As described in the U.S. Patent and Trademark Office’s Manual of Patent Examining Procedure, the examiner must step backward in time to just prior to the existence of the invention to determine whether a person of ordinary skill in the art would find the invention obvious. An invention is presumed to be obvious or nonobvious depending on whether certain factors are found. The two factors necessary to a finding of a presumption of obviousness are: (1) something in the prior art or general knowledge in the field that suggests the invention to a person of ordinary skill and (2) indications that the invention had a reasonable chance of succeeding as an invention. Both the suggestion of the invention and the assessment of the chance of success must be based on the prior art or general knowledge in the field and not on the information in the patent application, and the assessments must be made as of the time of the invention and not with the benefit of hindsight. If these factors are present, the applicant may provide information in order to rebut the presumption.

As part of the analysis, the patent examiner is allowed to analyze several secondary considerations, including the commercial success of the invention, the long-felt need that the invention would fill, and whether there is commercial acquiescence in the invention. Commercial success provides evidence in favor of nonobviousness because if the invention had been obvious, it would have been invented previously, particularly where the success is due to the invention’s utility and not because of intense promotion and publicity. Moreover, commercial success is an indicator that the invention is considered to represent useful progress in solving the problem toward which it is directed.

The rationale is similar with long-felt need. If the invention filled a need that survived for a long time, the invention must not have been obvious or someone else would have filled that need long before the claimed invention was invented. Commercial acquiescence means that competitors have recognized the validity of an invention’s patent and are willing to pay the necessary license to use or sell the invention. Competitors that felt that the invention was not entitled to a patent might use or sell the invention without paying claimed inventor. None of the secondary factors are determinative and simply represent factors that the patent examiner might consider in the difficult process of deciding whether a claimed invention is obvious or not.

Patenting a Business Method

Business Method Patents

The federal patent statute allows an inventor to obtain a patent for a “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” There is no provision in the patent statute for business methods, and the United States Patent and Trademark Office for decades explicitly rejected business-method patent applications based on a turn-of-the century judicial rejection of a patent for a method of cash-register accounting to prevent fraud by waiters. Much of the rejection of business-method patents was based on the conclusion that the methods and systems sought to be patented were abstract ideas without tangible manifestation; however, that analysis evolved into a doctrine that business methods were inherently unpatentable.

In the latter part of the 20th century, there was a judicial movement towards the conclusion that the “business-methods exception” to the list of statutory patentable subject matter had no basis in law and that business-method patent applications should be assessed upon the statutory requirements for patents, namely that they be new, useful, nonobvious, and have some tangible manifestation rather than be merely abstract ideas. Then, the explosive growth of computers and the development of business methods that involved the application of computer technologies forced a reexamination of the validity of business-method patents.

In 1998, the United States Court of Appeals for the Federal Circuit, which hears all appeals of patent decisions from the federal district courts, concluded that the validity of a patent did not depend so much on whether the method “does ‘business’ instead of something else” as much as whether the method to be patented met the listed requirements of the patent statute. In that case, the patent applicant sought to patent a method of calculating with the use of a computer a final mutual fund share price from various criteria for a fund whose complicated structure posed significant administrative challenges. The court of appeals construed the invention to be a machine that produced a “useful, concrete, and tangible result”; therefore, the invention for which a patent was sought was not merely a mathematical algorithm, a type of abstract idea for which a patent could legitimately be denied.

Based on the U.S. Patent and Trademark Office’s pre-1998 posture towards business-method patents, companies did not seek to patent their business methods. Since the 1998 court of appeals decision, there has been a rush to patent business methods, many of them computer-related, and many of those Internet-related. Two well-known examples are the reverse auction method in which the customer names a price subject to acceptance by a vendor and the one-click purchasing method that bypasses the ubiquitous “shopping cart” model that entails several individual steps to order a product.’s patent temporarily forced competitor Barnes & Noble to change its own one-click ordering method in order to avoid infringing’s patent. There has been widespread criticism that the USPTO has devoted insufficient examination to so-called e-commerce patent applications and has issued overly broad patents, resulting in an Internet business environment in which companies must pay royalties to use methods they had already established years earlier.

Deceptive and False Trademark Advertising

Deceptive Advertising of 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.

Using Experts in Trademark Infringement Suits

There are standards that must be met for admissibility of expert testimony in trademark infringement actions. Experts may have their methods challenged before they take the stand. Expert testimony may be excluded as speculative and unreliable if an expert’s methods are not based on sufficient facts or data, are not reliable, or are not applied reliably to the facts of the case.

The trial court judge acts as a “gatekeeper” to ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable. Every expert is subject to a reliability test. Courts analyze expert testimony using the following five, non-exclusive factors in order to determine whether an expert’s reasoning and methodology are reliable:

  1. whether the theory or technique on which the expert relies has been tested;
  2. whether the theory or technique has been subject to peer review and publication;
  3. the known or potential rate of error of the technique or theory when applied;
  4. the existence and maintenance of standards controlling the technique’s operation; and
  5. whether the theory or method has been generally accepted by the expert community.

Appellate courts review how the trial court judge tests an expert’s reliability under the abuse of discretion standard, which is the same standard used to review the admission or exclusion of expert testimony. When seeking expert testimony, it is critical that the expert’s credentials and methodology be sufficient to withstand court scrutiny.

Preforming a Copyright Work

Performance Rights under the Copyright Laws

Under the Copyright Act, to perform a copyrighted work means “to recite, render, play, dance, or act it, either directly or by means of any device or process.” “Performing” a motion picture or other audiovisual work means “to show its images in any sequence or to make the sounds accompanying it audible.” The Copyright Act defines the term “publicly perform” to mean “to perform or display [a copyrighted work] at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” “To perform or display” includes to broadcast at a place open to the public. Therefore, performances in concert halls, theaters, restaurants, bars, nightclubs, and other common public facilities are covered by the exclusive right of performance, whether the performance is live or broadcast to the public place, while the viewing of a movie in a private home is not a public performance and thus is not covered by the right of performance.

The Copyright Act provides certain exceptions to the exclusive right to publicly perform a copyrighted work. A copyrighted work may be performed in an nonprofit educational setting in which the teacher and students are all in the same place, the performance is done by the teacher or students, and the performance is done for educational purposes and not merely for entertainment. If the performance is of a movie or other audiovisual work, the copy of the copyrighted work that is shown must have been lawfully made in order to be exempt from copyright. In addition, the performance of a copyrighted work may be broadcast if it is transmitted to other educational settings such as remote classrooms primarily for the purposes of making the performance available to persons who are not able to access the main classroom because of disability or other circumstances. Also excepted from the exclusive public performance right are nonprofit performances, whether live or broadcast, as long as the promoters, organizers, and performers are not paid specifically for the performance at issue, any admission charge is used exclusively for nonprofit purposes, and there is no direct or indirect commercial advantage that is gained from the performance.