DOING BUSINESS IN CALIFORNIA

INTELLECTUAL PROPERTY
LAWS - Part 1 – US Patent
Law

October 15 and November 19, 2008

Presented by: Noriyuki Shimoda

© 2008 Squire, Sanders & Dempsey L.L.P.

Introduction -
01年から05年までに発行された米国特許数
Year 発行特許数

2005 157,472

2004 181,002

2003 186,571

2002 184,005

2001 183,491
2001年から2005年までの
特許裁判の数
Year 特許裁判数

2005 2,750

2004 3,075

2003 2,814

2002 2,700

2001 2,520
2001年から2005年までの
特許裁判で認められた平均損害賠償額
Year 平均損害賠償額

2005 $5,322,556

2004 $31,781,960

2003 $29,008,614

2002 $16,926,366

2001 $5,722,327
2006年の１年間で特許裁判の
当事者となったテクノロジー会社トップ１０
Rank 会社名 裁判数
1 Microsoft 19
2 Verizon 16
3 Apple 12
4 Hewlett-Packard 11
5 Intel 9
6 Dell 9
7 AT&T 8
8 Broadcom 7
8 CA Inc. 7
8 Motorola 7
8 Oracle 7
2006年の１年間で特許裁判の当事者と
なった健康医療関係会社トップ１０
Rank 会社名 裁判数
1 Abbott Laboratories 13
2 Merrick & Co. 11
3 Eli Lilly 8
4 Barr Pharmaceuticals 6
4 Johnson & Johnson 6
4 Pfizer 6
7 Medtronics 5
7 Stryker 5
7 Wyeth 5
10 Aetna 3
10 Bristol-Meyers 3
10 Celgene Corp. 3
10 Forest Laboratories 3
10 McKesson Corp. 3
2006年解決額トップ１０
Rank 裁判 金額

1 NTP Inc. v. Research in Motion $613 M (S)

2 Masimi Corp. v. Tyco International $330 M (S)
3 InterDigital v. Nokia $253 M (S)
4 Rambus Inc. v. Hynix $134 M (J)
5 David Colvin v. Microsoft/Autodesk $133 M (J)
6 Advanced Med. Optics v. Alcon $121 M (S)
7 Finisar v. DirecTv $116 M (J)
8 ABC/CBS/NBC v. EchoStar $100 M (S)
8 Vreative Technology v. Apple $100 M (S)
8 MGM Studio v. Kazaa $100 M (S)
8 University of California v. Monsanto $100 M (S)
アメリカ史上解決額トップ１０

Rank 裁判 金額
1 Michelson v. Medtronics $1350 M (S)
2 Sun Microsystems v. Microsoft $1250 M (S)
3 Texas Instruments v. Hyundi $1000 M (S)
3 Texas Instruments v. Samsung $1000 M (S)
5 Polaroid v. Eastman Kodak $873 M (J)
6 Medinol v. Boston Scientific $750 M (J)
7 NTP Inc. v. Research In Motion $613 M (S)
8 Novell v. Microsoft $536 M (S)
9 Eolas Technologies v. Microsoft $521 M (J)
10 City of Hope Medical v. Genentech $500 M (J)
特許裁判の費用
損害賠償額＄１M以下の裁判
裁判の場所 平均額

NY 705,556

DC 1,097,059

SF 605,769
特許裁判の費用
損害賠償額＄１M以上＄２５M以下の裁判
裁判の場所 平均額

NY 3,667,308

DC 3,167,742

SF 2,823,529
特許裁判の費用
損害賠償額＄25M以上の裁判
裁判の場所 平均額

NY 6,190,000

DC 6,947,917

SF 7,985,714
Topics to be Covered
• Basics of US Patent Laws
• Several Patent Issues
– Who owns an invention?
– What is provisional application?
– International patent? – PCT application
– License after expiration of patent is valid?
– Invention in US and export control
– Business method patent
– Security interest in patent
– Patent vs. trade secret
• Patent Litigation
• Recent Development and Trend
Basics of US Patent Laws
• Definition of patent
– The right to exclude others from making, using,
selling, offering for sale, or importing the
invention throughout the United States
– A grant of intellectual property rights by the
United States that permits the patent owner to
stop others from exploiting the patented invention

Squire, Sanders & Dempsey L.L.P.

Basics of US Patent Laws
• Limitations of patent
– Geographical
• A patent issued by one country cannot be
enforced in another – the inventor or its
assignee must apply in each country in which
patent protection is desired
– Time
• A patent is enforceable for a limited period;
20 years from filing date for most types, 14
years for any new, original and ornamental
design for an article of manufacture

Squire, Sanders & Dempsey L.L.P.

Basics of US Patent Laws
• What is patentable?
– Processes
– Apparatus
– Manufactured goods
– Compositions of matters (such as chemical
compounds)

Squire, Sanders & Dempsey L.L.P.

Basics of US Patent Laws
• What is not patentable?
– Purely mathematical algorithms
– Business concept, not to level of concrete
process
– Business form
– Intended results of desired goals
– Functions without apparatus
– Nebulous concepts or ideas
– Laws of nature

Squire, Sanders & Dempsey L.L.P.

Basics of US Patent Laws
• What are the requirements?
– An invention must be
• novel
• non-obvious
• useful
– A patent application must disclose
• description of invention (Description Requirement)
• how to make and use without undue
experimentation (Enablement Requirement)
• the best way that the inventor knows of making the
invention (Best Mode Requirement)

Squire, Sanders & Dempsey L.L.P.

Time Limits for Filing in US
• An application must be filed within one year of the earliest
of any of the following:
– the date that the invention is offered for sale or sold in
the United States. An offer for sale can occur, for
example, via trade shows, web sites, sales literature,
or meetings
– the date that the invention is used in public in the
United States; use needs to be more than
experimental use
– the date that the invention is published anywhere in
the world; this can include, for example, journal articles,
trade shows, Web sites, sales literature, public
meetings. Publication means public disclosure to
uncontrolled groups of people

Squire, Sanders & Dempsey L.L.P.

Time Limits for Filing
in Foreign Countries
• Most foreign countries do not provide the one-year
grace period
• Any publication of an invention that happens before
the filing of an application in the United States may
block the inventor from obtaining a valid patent in
some foreign countries
• An inventor can avoid the problem by filing an
application in the United States before disclosure
and filing foreign applications within one year of US
filing

Squire, Sanders & Dempsey L.L.P.

Steps for Obtaining
a Patent in US
• Consulting with a patent attorney
• Conducting a patentability search on the invention
• Preparing a disclosure of the invention
• Preparing and filing patent application in the US
Patent and Trademark Office (PTO)
• Examination by PTO and PTO’s office action
• Publication in 18 months after filing date
• Submitting responses
• Notice of Allowance by PTO and payment of an
issue fee
• Issuance of patent

Squire, Sanders & Dempsey L.L.P.

Several Issues of Patent Laws
• Who owns an invention?
• What is provisional application?
• International patent? – PCT application
• License after expiration of patent is valid?
• Invention in US and export control
• Business method patent
• Security interest in patent
• Patent vs. trade secret

Squire, Sanders & Dempsey L.L.P.

Who Owns an Invention?
• Between employer and employee
– Without written assignment or implied-in-fact
assignment (in the case that an employee was
hired for the specific purpose of the invention),
an employee owns the invention
– Employer obtains only a shop right
• Shop right means a non-exclusive,
royalty-free license to use the invention
– Importance of a written assignment agreement

Squire, Sanders & Dempsey L.L.P.

Who Owns an Invention?
• Between co-inventors or co-developers
– Without an agreement, each joint inventor or
each joint developer has a full right to the
invention
– Two companies end up as joint owners of the
invention and any resulting patent
– Each company may use it freely
– Importance of a written agreement regarding
which party owns it, how they can use the
invention, how they can exploit the invention, and
how they will share profit

Squire, Sanders & Dempsey L.L.P.

Who Owns an Invention?
• Between company and outside contractor
– Without a clear written agreement, it is a difficult
problem – there is no default rule
– It is determined by all the available evidence as
to what their agreement was regarding ownership
of the invention
– Importance of a written agreement regarding
which party owns it

Squire, Sanders & Dempsey L.L.P.

Who Owns an Invention?
• Between separate unrelated inventors
– USA adopts the first to invent wins system while
the rest of the world adopt the first to file wins
system
– The first inventor is determined through a
procedure called Interference at PTO
– Interference may be instituted between a patent
application and an issued patent within one year
of issuance of the patent
– Interference may be instituted between a patent
application and a published patent application
within one year of the publication

Squire, Sanders & Dempsey L.L.P.

Who Owns an Invention?
• Between separate unrelated inventors
– There is still a significant advantage to being the
first inventor to file because the later filing
inventor has the burden to prove that he/she is
the first inventor
– It is always quite important to keep all the written
record of conception and development of the
invention

Squire, Sanders & Dempsey L.L.P.

Provisional Application
• A provisional patent application filed in PTO that will
be granted a filing date for a future regular patent
application
• Allows use of pending patent notice
• Will not be examined
• Will never become a patent
• Does not start a 20-year patent term
• Automatically abandoned in one year
• Not available for a design patent

Squire, Sanders & Dempsey L.L.P.

Provisional Application
• Must provide
– Description of the invention sufficiently to enable
one of ordinary skill in the art to build and use the
invention
– Best mode for carrying out the invention
– Drawing if necessary
– Names the inventors
– Indication as provisional
• A provisional patent application does not need
– Claims
– Oath

Squire, Sanders & Dempsey L.L.P.

Provisional Application
• Useful when
– You do not have time to prepare a formal application
– You need more time to study the market to see
whether the invention will be profitable
– You do not have enough money to prepare and file a
formal application
• Disadvantages
– Added cost
– Added delay
– Incomplete provisional application cannot be relied on
to provide an early filing date
– Foreign priority deadlines are calculated from the
provisional filing date

Squire, Sanders & Dempsey L.L.P.

International Patent –
PCT Application
• No international patent
• Instead PCT (Patent Cooperation Treaty) filing is
available
• PCT
– Is an arrangement that covers most of the major
industrial countries – including all of Europe,
North America, Japan, China, South Korea and
Australia
– Allows an applicant to postpone filing national
applications in all countries at once

Squire, Sanders & Dempsey L.L.P.

International Patent –
PCT Application
• An applicant in one of the signatory countries may
file a patent application and claim the benefit of the
filing date in the first country if the second
application in other countries is filed within one year
of the original filing date
• Single PCT application reserves an original filing
date for a patent application in many other countries
• Delays expensive step of filing separate applications
in many countries

Squire, Sanders & Dempsey L.L.P.

Typical procedures
for PCT Application in US
• Filing a regular patent application with US PTO
• Filing a PCT application with US PTO or WIPO
within one year of the original filing with US PTO with
designation of the countries that will be included in
PCT filing
• At 18 months after the priority date (the filing date of
the original patent application), PCT publishes the
application
• At end of the 30-month period (or 31 months for
some countries), the PCT’s role in the patent
application process is terminated

Squire, Sanders & Dempsey L.L.P.

Procedures for
PCT Application in US
• If the applicant decides that it is not worthwhile to
prosecute the application in foreign countries, the
applicant may allow the application to be abandoned
by simply taking no action
• If the applicant decides to continue foreign
prosecution, the applicant enters the application into
whichever countries patent protection is desired
• It is only then that the very expensive foreign
national stage of patent prosecution starts

Squire, Sanders & Dempsey L.L.P.

License After Expiration of Patent
• Can parties agree in a license agreement that a
licensee of a patent is obligated to continue paying
royalties even after expiration of patent?
– Answer is no.
– Recently, a court denied a patent owner’s right
for royalty payment beyond the expiration of the
patent. In this case, the licensee offered to pay
patent royalties beyond the expiration date in
exchange for a lower royalty rate, and once the
patent expired, the licensee refused to pay.

Squire, Sanders & Dempsey L.L.P.

License After Expiration of Patent
• To avoid this result, patent owners should consider
including a license to use know-how, trade secret or
other intellectual property rights that have
independent value beyond the patent expiration date
with the patent license. While the royalty payments
must be less after the patent expires, the obligation
to pay royalties for continued use of the other
intellectual property can continue.

Squire, Sanders & Dempsey L.L.P.

Invention in US and
Export Control
• What is an Issue?
– Under US export control regulation, there is a
requirement that you need to obtain an export
license from an appropriate government agency
when you export certain goods or technology
– An export means any actual shipment or
transmission (including via email or fax) of items
out of United States, which includes any release
of technology information within the United
States to foreign citizens, who are not United
States permanent residents

Squire, Sanders & Dempsey L.L.P.

What is an Issue?
• A US R&D subsidiary corporation of a Japanese
corporation may not transfer the technology to the
parent corporation if the technology is covered by
the US export control regulation (e.g., encryption
technology, munitions)
• Email communication to a Japanese corporation
could be a violation of the US export control
regulation
• Simply a release of information by verbal
communication to visitors from Japan could be a
violation
• If a violation occurs, you are subject to penalty

Squire, Sanders & Dempsey L.L.P.

What to Do?
• You need to determine whether the information and/or
goods you export is subject to the US export control
regulation
– If so, you need to obtain an export license to avoid a
violation
• The starting point in the analysis for goods and technology
information is to review the US Commerce Control List to
determine the appropriate export control classification
number (ECCN) for the subject technology or goods
• The specific ECCN must be identified, because it
determines whether a specific export license is required. If
so, the supporting documentation and information that
must be submitted with the application for such export
license

Squire, Sanders & Dempsey L.L.P.

What to Do?
• Products or technology specifically designed,
developed, manufactured, or modified for a military
purpose are listed on the US Munitions List, and
require an export license in almost all circumstances
• In addition to proper product classification, exporters
also should implement procedures to ensure that no
products or technology of any kind are exported to
embargoed countries or sanctioned persons or
entities (which are identified on several export denial
lists) without a license

Squire, Sanders & Dempsey L.L.P.

Business Method Patent
• Business Model Patent? Business Method Patent?
• No definition nor special rules of business method patent
under the current patent laws. One kind of process
patents

Squire, Sanders & Dempsey L.L.P.

Significance of
Business Method Patent
• Regular benefits of patent rights
• Great or possibly indispensable tool for a start-up
company in obtaining financing
• Great weapon to obtain the first mover’s advantage
• It was one of key factors to Silicon Valley success
stories

Squire, Sanders & Dempsey L.L.P.

Business Method Patents
Issued in US
• Amazon.com’s One Click Patent (9/1999)
• Amazon.com’s Affiliate Program Patent
(Internet-based customers referral system, 2/2000)
• Priceline.com’s Reverse Auction Patent (8/11/1998)
• Doubleclick’s DART Patent (Method of delivery,
targeting, and measuring advertising over network,
9/7/1999)
• Harrington’s Shopping Cart Patent (Integrated
interface for vendor/product oriented Internet Web
sites, 4/20/1999)

Squire, Sanders & Dempsey L.L.P.

Amazon.com vs.
BarnesandNoble
• September 28, 1999, the patent was issued
• October 21, 1999, Amazon.com filed a motion for a
preliminary injunction with a complaint against
BarnesandNoble
• December 1, 1999, the court granted Amazon.com’s
motion
• February 14, 2001, the federal appeals court
reversed the district court decision and remanded
• Parties settled case in early 2002

Squire, Sanders & Dempsey L.L.P.

Criticisms About
Business Method Patents
• PTO should not issue business method patents
because PTO issues patents for ideas that are
obvious or were well known before the patent
application was filed
• PTO is not equipped to determine the patentability of
business method patents, primarily because prior
patents are the primary tool that a patent examiner
uses to decide if something is patentable, and until
now, there have not been many business patents
that have been issued
• PTA improved a process of examination of business
method patent.

Squire, Sanders & Dempsey L.L.P.

First Inventors Defense Act
of 1999
• This defense is available to an accused infringer
who reduced the claimed business method to
practice at least a year before the filing date of the
patent application and used the method in a
continuous commercial manner before the filing date
• The defense must be shown by clear and convincing
evidence
• Currently there is no definition of business method
patent
• The defense is not a general license to all claims nor
does it extend to improvement

Squire, Sanders & Dempsey L.L.P.

Security Interests in Patent
• Establishment of General Security
– Requirements
• Creation via a security agreement
• Perfection through filing UCC-1 Financing
Statement with debtor’s state of incorporation
– Scope of obligation
• Principal, interest, and cost of enforcement

Squire, Sanders & Dempsey L.L.P.

General Security Interests
• Security interests in general
• Collateral
– Goods
– Blanket (all assets)
– Proceeds
• Priority
– Generally first to file

Squire, Sanders & Dempsey L.L.P.

Security Interests in Patent
• Procedures for perfecting a security interest in
patents
– Filing UCC-1 financing statement with debtor’s
state of incorporation
– Recording security interests in the PTO (federal)
• Recording of transfer: Patent Act
– A party who records a transfer with the PTO first
takes priority if it records within three months of
the transfer

Squire, Sanders & Dempsey L.L.P.

Priority Between
Secured Creditors and Licensees
• License that precedes the perfection of the security
interest
– Secured creditors take the patent subject to the
interests of the licensee
• License granted after the perfection of the security
interest
– Secured creditors take priority over a license
even though the license is recorded (majority’s
view)

Squire, Sanders & Dempsey L.L.P.

Patent vs. Trade Secret
• Patent advantages
– Perfect exclusivity – you can stop others from
using the invention even if others independently
developed the invention
• Patent disadvantages
– Limited period of protection
– Discloses technology

Squire, Sanders & Dempsey L.L.P.

Patent vs. Trade Secret
• Trade secret advantages
– Unlimited period of protection
– Inventions maintained in secrecy
• Trade secret disadvantages
– Cannot stop others form using the invention if it
was independently developed by the others
– Easily lost if it is disclosed to public
– A third-party patentee could stop a trade secret
owner from performing a trade secret, even if the
trade secret owner invented (but never
disclosed) first

Squire, Sanders & Dempsey L.L.P.

Patent Litigation
• One scenario of patent dispute
– Invitation to license letter
• Not a demand letter or a cease and desist letter in
order to avoid a counter lawsuit for a declaratory
judgment
– Investigation
• Investigation is required once on notice to avoid a
willful infringement claim (treble damage and
attorney’s fee)
• Try to find non-infringement and/or invalidity of
patent
• Non-infringement opinion and/or invalidity of
patent opinion by an independent attorney is
recommended.

Squire, Sanders & Dempsey L.L.P.

Patent Litigation
– Counter argument letter
• Claim for non-infringement and/or invalidity of
patent
– Settlement discussion or negotiation
– Seek for damage and injunction
– Lawsuit for a declaratory judgment in a home state
• Defendant
• Litigation savings
– ADR
• Early neutral evaluation
• Mediation
• Arbitration
• Others

Squire, Sanders & Dempsey L.L.P.

Civil Procedures
• Civil procedures
– Service of complaint
– Selection of jury trial or non-jury trial
– Answer or motion to dismiss (within 20 days)
– Counter claim together with answer
– Answer to counter claim or motion to dismiss
– Discovery
• Document requests
• Interrogatories
• Requests for admission
• Depositions (expert witness)

Squire, Sanders & Dempsey L.L.P.

Civil Procedures (cont.)
• Civil Procedures
– Initial Disclosure
– Case management conference
– Motion for summary judgment
– Pre-trial conference
– ADR before trial
– Argument in writing
– Trial
– Judgment
– Motion to set aside jury verdict
– Appeal to federal circuit court in DC (only appeal
court for patent litigation)

Squire, Sanders & Dempsey L.L.P.

Recent Development and Trend
• Patent reform (first to file, no interference, limitation
to divided applications, Information Disclosure
Statement needs to provide reasons for relevance
etc.) is still pending.
• Obviousness standard has been changed by the US
Supreme Court in KSR v. Teleflex (“teaching-
suggestion-motivation” (TSM) test is not the only
obviousness test )
• eBay v. MercExchange; no more “automatic”
injunctions in Patent cases

Squire, Sanders & Dempsey L.L.P.

Recent Development and Trend
• In re Seagate; standard for finding against willful
infringement is now lower. Advice of counsel is not
required any more? It requires showing of “objective
recklessness” to prove willful infringement.
• In denying Bernard Bilski and Rand Warsaw's effort
to patent a method for hedging risk in commodities
trading, The Federal Circuit U.S. Court of Appeals
ruled that pure business methods cannot be
patented. The court concluded that an invention is
patentable only if "it is tied to a particular machine"
or it "transforms a particular article into a different
state or thing."
• The number of allowance has been significantly
down

Squire, Sanders & Dempsey L.L.P.

www.ssd.com