Small Entity Status — be careful of non-exclusive licenses.

Is a company’s “small entity” status with the PTO put in jeopardy by granting a non-exclusive license to a major corporation — assuming that the non-exclusive license does not convey any right to exclude others from making or using the invention?

According to 37 CFR 1.27, a small entity includes:

an inventor . . . who has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention. . . .

MPEP 509.02 defines “rights in the invention” in this section of the rules as “the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States.”  This therefore appears to indicate that a non-exclusive license to a large entity that does not convey any right to exclude others would not fall within rule. However, if you read further in the MPEP, you notice a discrepancy involving non-exclusive licenses:

A grant of a non-exclusive license to a “non-small” entity will disqualify applicant from claiming small entity status. See Ulead Systems, Inc. v. Lex Computer & Management Corp., 351 F.3d 1139, 1142 (Fed. Cir. 2003).

In yesterday’s decision in Nilssen v. Osram Sylvania (N.D. Ill. 2006), the district court found Nilssen’s patents unenforceable because, inter alia, Nilssen had failed to pay a large entity fee even though the patents-in-suit were nonexclusively licensed to Philips Electronics.

In addition, the patents were unenforceable due to: (a) a patentability declaration submitted by an undisclosed business partner; (b) Nilssen’s admission that he “opposes government fees, taxes, and the present legal system;” (c) Nilssen’s improper priority claims; (d) failure to disclose ongoing litigation to the PTO; (e) failure to disclose material prior art; and (f) unclean hands due a failure of decorum and courtesy in interactions with the PTO.

Regarding Nilssen’s unclean hands, the Court cited a petition to the Commissioner that reads as follows:

a) [The Examiner] cannot be characterized as being skilled in the arts to which subject applications pertain . . .
b) [The Examiner] is severely deficient in his understanding and use of reason and logic . . .
c) [The Examiner] has an inadequate command of the English language . . .
d) [The Examiner] has repeatedly shown himself to be overtly non-cooperative and non-caring.

USPTO On-Line Inventor Chat

The PTO has begun holding on-line chats for inventors.  Here are some interesting responses.  The full transcript is available here.  

Q: If I want to meet with my patent examiner, what is the procedure?

USPTO Expert: If you are represented by a patent agent or attorney, they can contact the examiner, and set up an interview generally limited to 1/2 hour in length. Your attorney or agent must attend and you may be present during the interview. However, if you are not represented by a patent agent/attorney (a pro-se applicant) you may directly contact the examiner via contact information provided to you at the end of each correspondence from the Office. For more information, you can browse MPEP 713 – 713.10. The MPEP is available on-line through our website.

Q: What is the current USPTO position on software / business method patents?

USPTO Expert: Please see the following link for more information on business methods, Software/business methods claims are patentable if they meet the requisite criteria for patenting as set forth in the patent statutes.

Q: What’s the estimated time that will take for a patent on a product to be approved once I file for a patent at the USPTO?

USPTO Expert: The length of time will depend on the specific technology, it generally takes about 18 months to receive a first written opinion. Some technologies are experiencing backlogs and therefore it may take longer. On average, it takes about 27 months for a patent to issue after its filing.

Q: How long is the waiting period for a fairly simple patent pending application for a design patent?

USPTO Expert: With our current back log in designs, the average waiting time is eleven or twelve months to first Office action.

Avoid Festo Presumptions With a Letter to the File?

Professor Douglas Lichtman at the University of Chicago writes with a question about patent prosecution:

Why haven’t patent prosecutors begun to aggressively document the purpose behind their claim language changes, for example by writing letters to the file making clear a precise and narrow construction of the change. The argument to do so is that such documents would rebut the broad Festo presumptions that right now threaten to construe every change broadly. And it would be cheap to do.

I am not advocating anything misleading. But often changes are made for a very specific reason, and claim language changes (like claim language itself) can be imprecise. So why not clearly document the precise change the examiner requested, making clear what you meant to sacrifice and protecting the rest from Festo?

Please e-mail your comments to me or Professor Lichtman.

UPDATE: The real question is why patent attorneys do not precisely define in their office action response what you intend to give up in an amendment. For example, why not say “of course, my purpose here is only to exclude red wheels, leaving fully intact everything else that might have been included in the original claim language.”

What is a Trade Secret?

Historically, trade secrets arose under common law. Today, every state provides some form of trade secret protection – although the level of protection varies from state to state. The Uniform Trade Secrets Act (UTSA) has been ratified by many states and has helped to establish a more uniform body of law across the country.

A trade secret can take many forms, such as a device, method, or formula that provides some competitive advantage or has independent economic value. The holder of the trade secret must make reasonable efforts to ensure that the subject maintains its secrecy.