This is a copy of our general
introduction, not only as a guide for what we do, but as a guide for what we believe is a
good cost structure for intellectual property matters. We believe that the patent,
trademark, and copyright information contained in this handbook will be of value to you.
Please keep this handbook for future reference, and feel free to copy and distribute it to
others if you would like.
Our firm specializes in all levels of patents, trademarks, copyrights, trade secrets, and
their taxation. Our combined backgrounds in electrical engineering, chemical engineering,
and business enable us to be particularly attentive to high tech areas. Our experience
includes patents in a wide variety of areas such as lasers, antennas, chemicals, chemical
processes, control systems, fiber optics, and more.
Please keep in mind that I am not currently engaged by you as an attorney, nor is any
other member of my law firm, and that a pre-requisite to any such engagement is a signed
attorney-client agreement.
Discussed below are some of the basics with respect to copyright, patent and trademark,
including considerations we feel are important with respect to each kind of intellectual
property. Additionally, we have included information that should give you a good idea of
what services we provide with respect to each kind of intellectual property and how those
services are performed. We hope you find this information helpful, and
we encourage you to call us if you have questions after reading this material.
The three kinds of intellectual property, listed in the order in which they are covered in
this handbook, include (1) copyright, (2) patent, and (3) trademark.
COPYRIGHT
A copyright protects the expression of an idea as long as it is original and complete. For
example, literary works, musical works and words, audio-visual works, sculptural works,
and computer programs may be protected using copyright. A computer program that does not
run and has no utility, on the other hand, might not be protected by copyright because it
is not complete.
With regard to copyrights, we charge for actual time spent in preparing the paper work.
Where multiple copyrights are involved, or where there is a series of applications over
time, a significant savings can be had. It will be important for you to provide all
related information, particularly information regarding the derivation of a computer
program from any pre-existing programs, if applicable. In addition to being copyrightable,
computer programs may also be patentable.
Keep in mind that any copyright item that you have authored which can stand alone should
be copyrighted separately. For example, if each chapter in a book you authored could
conceivably be sold as a stand-alone unit, each chapter should be copyrighted separately
from the others; as a final measure of protection, the entire book with all chapters
assembled should also be copyrighted. Remember that copyright only protects an expression
in the exact form in which it is copyrighted.
If the material to be protected is straightforward (a single book, for example), a
copyright application is a fairly simple and relatively inexpensive process that some
authors elect to pursue independently. Copyright protection may be applied for via mail or
on-line, and detailed instructions for both application processes may be found at
http://www.copyright.gov.
PATENT
There are 3 basic kinds of patent: (1) utility patent, (2) design patent, and (3) plant
patent. Put simply, a utility patent protects things and the way they work. For example, a
utility patent protects machines, chemicals, processes (including mechanical, chemical,
and certain computer processes, articles of manufacture, and software to name a few. A
design patent generally protects the look of something which is functional. For example, a
design patent would protect the look of an automobile, a computer, a pair of tennis shoes,
or a vacuum cleaner, but not a figurine because a figurine is not a functional item.
Finally, a plant patent protects flowers and certain agricultural plants, such as
varieties of
orchids, roses, or apple trees.
When you hold a patent, you have the right to prevent others from making, using and/or
selling the patented invention. Having a patent does not give you an affirmative right to
manufacture, make, use or sell the invention yourself since doing so may infringe someone
else(s patent or may be illegal (like manufacturing a weapons silencer in the U.S., for
example).
The main areas of patent for which our firm provides services include (1) patent
procurement and (2) patent licensing. With respect to timing, it is best to apply for a
patent before (1) sale, (2) offer of sale, or (3) public use or disclosure to maximally
protect your rights in the invention. Before you apply for a patent, your item or process
should be in its final form. By final form, we mean that your invention must be so
complete that you will reasonably have no further manufacturing improvements and that the
product can be manufactured in its current design. If you have a version which can be made
by hand and a version which can be made from high-speed manufacture, the high-speed
manufacturable version will provide the best patent protection. The reason we require this
level of completion is as follows: if your invention is still susceptible to manufacturing
improvements when your patent is filed, then the invention you end up manufacturing (or
which has the highest value) may not be the same as the invention for which you received a
patent! If your patent does not protect the version that you are manufacturing, your
patent will not have as great a value to you. Having a BEST and FINAL version of the
invention is an absolute must if you want to avoid applying for a
patent which has no economic value because it covers a non-profitable or less than optimum
configuration. In the alternative, if you are developing a product line which is
undergoing significant development, it is possible to file a patent based upon each
version of the invention as soon as it is available. Each subsequent patent filing which
adds additional matter is termed a continuation-in-part and adds to the patent. Because we
charge by the page and sheet of drawing, each additional continuation-in-part will only
cost a $800 minimum service fee, against the usual rate for additional pages, sheets of
drawing, and the additional filing fees.
With regard to design patents, the cost and quality of a design patent application is
driven by number and quality of drawings describing the applied for design. Excellent
quality design patent drawings can be obtained for about $130 per sheet or more. In a
design case, it is not recommended that you scrimp on the drawings because they are the
heart of the case. The attorney prepared portion of the case includes a written
description of the drawings, and a single standard claim. The design filing, search and
examination fees are $265 for a small entity (again, this is an inventor with less than
500 employees). The only other cost is the attorney's fee for our time in preparing
the patent application, which is typically spent in drafting the specification, contacting
the draftsman to instruct him on how to prepare the drawings, and preparing the papers for
execution of the patent application. Because of the predictability involved in preparing a
design case, we charge a fixed attorney's fee for this type of case; for example, where
only one embodiment is involved, we typically charge about $1,800. The cost may vary if
the views to be shown
are excessive or complex.
With regard to utility patents, our charge for patent procurement is $380 per hour plus
costs. A utility patent of average complexity requires approximately 10 to 15 hours of
attorney time. Costs will include the preparation of drawings at approximately $130
per sheet, the filing fee/mailing and copies (which is approximately $625 for a paper
filing and somewhat less for a computer filing for small companies having less than 500 employees,
i.e., small entities, and approximately $1000 for large companies having 500 or more
employees). Optional costs include the preparation and filing of an assignment ($240,
including the recordation fee) and the preparation of a disclosure statement where known
references are involved ($380 for five or less references).
Total cost for a patent application is based on a per-page rate of $190. Our minimum
retainer initial fee is $6000, against which is charged the attorney's fees, drawings
charges and filing fees. Ideally, a client will supply us with all necessary information,
drawings, and diskettes having detailed text material relating to (1) the closest known
structure or process over which the invention is an improvement, (2) all aspects of the
inventions which are new, and (3) a detailed explanation of how the invention works,
including an illustration of the operation of the invention by example where necessary.
EXAMPLE 1: Given the above fee schedule, and assuming an average preparation time of 8
hours, (such as for a VERY simple mechanical patent having no more than 3 sheets of
drawings), assuming a disclosure statement is necessary (which is not always the case),
and including the cost of 3 sheets of drawings, the charges will be as follows:
25 pages @ $190/pg =
$4750
Drawings, 3 @ $130 =
$ 390
Disclosure statement =
$ 380
Filing cost =
$ 530
______
$6050
Another measure we use to determine fees is an hourly rate of $380. Our hourly rate will
usually apply where special circumstances are present, such as where we are invited to
review or file a case which has already been prepared. Of course, not every case requires
drawings; for example, it is typical for a chemical patent application not to have
drawings. Where drawings are present, the number of sheets will vary depending upon
the complexity or volume of structure that needs to be illustrated. In some cases,
graphical illustrations are necessary in addition to structural illustrations.
Once a patent is filed, a first office action will issue, typically in about 1-2 years
after filing. In the first office action, an examiner may both deny the claims and argue
against the validity of the claims, and may also cite other references in support of his
position. We will report the office action, which involves some analysis of the Examiner(s
position and options available, and we will extract the cited references and provide them
to you, typically at a cost of about $380. Then, if you wish to proceed, office actions
are responded to by us at the above rate of $380/hour, or preferably $190/page, and, on
average, require 4 to 6 hours of preparation. Office action responses range in length from
about 6 to about 12 pages, depending upon the magnitude and severity of the action. If a
patent is granted, the USPTO charges an issue fee of $755 for a small entity in addition
to a $300 mandatory publication fee. We currently charge $450 for handling the issue
papers and issue fee.
EXAMPLE 2: As an continuing example of the total cost to achieve issuance of a patent,
assume that small entity filing fees apply and that an initial office action response is
prepared by us (occurring about 1 year to 2 years after filing) followed by an allowance
to issue. The additional charges (in excess of the amount shown in EXAMPLE 1 above) might
be as follows:
Receiving and Docketing an Office Action from the PTO = $ 190
Collecting & printing references
= $ 190
Office Action Response 10pgs@ $190/pg =
$1900
Issue fee handling =
$ 450
Government Issue fee & 10 Advance Copies =
$ 900
Government Publication Fee (USPTO) =
$ 300
______
Subtotal $3930
($3930 + $6050 from above)
Running Total $9980
The USPTO no longer gathers, prints, or provides copies of U.S. references. As a result,
we are obligated to do this for our clients so that we, along with the client, can
evaluate the Examiner's rejection. Depending on the number of references, this charge may
exceed $190.
The PTO charges post-issuance fees, which are due at 3.5, 7.5, & 11.5 years.
Including our $450 fee for handling, post-issuance fees for a small entity are $1015,
$1875, and $2815, respectively. For non-small entities, these costs, including our
handling fee are $1580, $3300, and $5180, respectively. These
amounts are for payment by the 3.5, 7.5, & 11.5 year levels. Payment after
these time periods but before the 4.0, 8.0 and
12.0 year time periods involves a $75 additional
"surcharge" for small entities and a $150 additional "surcharge" for large
entities. These fees are paid to keep the
patent in force. A decision to keep the patent in force may be made at each of the
aforementioned points in time, but once the patent is allowed to lapse, it generally
cannot be retrieved without loss of intervening rights of others who could have noticed
the lapse and acted to make additional investment in the patent. However, the USPTO may
allow the revival of a patent for which the maintenance fee has lapsed, providing the
lapse was unintentional, and providing the fees are paid within 24 months past the
abandonment date.
Once a patent has issued, an inventor may keep the invention or may license it to others;
licensing agreements may range from a non-exclusive license to an exclusive license
constituting a sale. The patent number should be marked on goods covered by the patent, or
on goods related to patented processes, as soon as the patent issues.
Currently, changes have been made to the utility patent term of enforcement under the
provisions of the GATT agreement recently passed into law. The agreement contained
provisions which significantly affect our patent system. The term of a utility patent is
20 years from the date of filing or (but no less than 17 years from the date of issuance
for cases filed prior to June 8, 1995). There are some provisions for extension,
not to exceed 5 years, for reasons such as delays based upon an appeal. Changes under GATT
do not apply to design patent cases.
The validity of maintained patents is for a term beginning on the date on which
the patent issues and ending 20 years from the date on which the application for
the patent was filed in the United States or, if the application contains a
specific reference to an earlier filed application or applications under
section 120,
121, or
365(c) of this (35 U.S.C.) title, from the date on which the earliest such
application was filed. If applicants know in advance that they will not want to file in a
foreign country, a special form can be used which will suppress publication of their
application until issuance.
Where a continuation application is filed, regardless of whether the case is published,
the 20 year period will be computed from the filing date of the parent case. Thus,
the applicant will be arguing to the USPTO at the applicant's own expense in terms of time
lost from his 20 year potential patent period.
Such a 20 year from filing rule will also mean that the practical benefits of
continuation-in-part applications which are filed late during the 20-year period may also
be diminished. A continuation-in-part application is one which contains new material in
addition to the old material of a parent case. The continuation-in-part application
operates under the same section of the patent code as continuation applications, and thus
operates under the new rules to limit the patent term to 20 years of the filing date of
the earliest parent patent from which the continuation-in-part depends for priority.
With regard to patent enforcement, if someone infringes your patent, you may invite him to
license it, or you may command him to cease his infringing activities. Once the infringer
is placed on notice and has had a chance to investigate the legitimacy of the patentee's
claims, any further infringing acts are considered willful, and such acts create the
potential for infringer liability for up to treble (triple) damages as well as attorney's
fees. Any legitimate dispute concerning coverage of the patent can be addressed in
settlement/licensing proceedings. Most settlements involve a license of some sort. The
phrasing of the cease and desist letter must be carefully drafted to avoid laches (this
principle bars one from asserting damages during the period in which one has unreasonably
delayed pursuing the claim) and estoppel (this principle bars one from asserting any claim
against the infringer upon which the estoppel was based).
For small businesses, even a single infringer can cause loss of profits and income, and
can completely drain advertising expenditures; further, pursuing the infringer may take a
serious toll on the cash position of the business. For these reasons, we strongly
recommend patent enforcement insurance to help defray the costs of stopping infringers.
Another consideration is that insured
intellectual property may be more attractive to investors and licensees, and thus may
increase the value of a patent. Currently, there is only one company that we are aware of
within the U.S. which provides patent enforcement insurance. An abatement policy that
financially insures efforts to stop U.S. infringers is offered through Intellectual
Property Insurance Services Corporation
(IPISC), which is located at 9720 Bunsen Parkway in Louisville, Kentucky. They may be
reached by phone at 800-537-7863 or 502-491-1144. Their web page is located at
www.infringeins.com, and their email address is info@infringeins.com. Like any other
insurance, the cost of enforcement insurance is based on the amount of coverage desired.
Currently, the IPISC website quotes rates from a minimum of about $1475 to over
$10,000, depending on the intellectual property that is the subject of the insurance.
Loss of value policies for infringers outside the U.S. may be procured either through (1)
an endorsement that modifies a standard U.S. policy so that it includes foreign coverage
where such endorsement is available, or (2) a policy obtained for each country where
protection is desired. Currently, loss of value coverage is available outside the U.S.
through a number of underwriters associated with Lloyd's of London. Generally,
these policies are available on a domestic and foreign basis, with premiums that
range from approximately 1.5% to 5% of the policy limits selected; actual premiums will
depend upon a number of factors specific to each applicant. These policies typically do
not insure legal expenses or liability, but are aimed primarily at protecting the revenue
stream of the business by covering loss of IP assets. For example, coverage is available
for successful legal challenges to the IP where an IP holder has infringed a third party's
rights, or for governmental action that prevents or prohibits exploitation of the IP.
In recent recognition of the crippling economic effect that patent infringement can have,
the European Commission has, from time to time, considered a unified patent insurance scheme for
European patents that may include compulsive insurance at a low fixed annual premium
throughout the life of the patent. The insurance could potentially operate in two stages:
a first level of coverage for investigations absent any risk assessment and a second level
of coverage for costs and damages in cases where a risk assessment reveals a reasonable
chance of success. As far as is known, these scheme is not yet available.
A patentability search enables the patent applicant to get some
idea of how crowded the area of art is, and how the invention compares to the level of
knowlege in the world. The cost of a patentability search for a utility patent is about
$2,000 for simple mechanical cases, but you are warned that this level of search
may likely be
statistically meaningless. (Please see our article entitled "Do You Really Need a
Patent Search?" on our website,
http://patentax.com/library/psrch.html ) This search may be performed by
various patent searchers and may or may not include the same files through which the
examiner will search. It is hoped that the results of this search will conform to the
results of the examiner's search (conducted once the patent is on file in the USPTO);
however, the objective should not be to match an Examiner's bad search. Your patent will
be subject to attack from more intense searches, and particularly searches which are
foreign based. ANY publication, regardless of language or country of origin, can be
used to defeat the claims of a U.S. patent.
If a search reveals differences between the found references and the invention, and if
those differences are sufficiently great, a patent can be applied for at a reasonable
cost. They key to this type of search is to compare the disclosures of the found
references with the invention as it will be claimed in a patent application. Further,
search results may allow us to better craft the application to emphasize those aspects of your
invention which are lacking in the found references identified in the search.
A second level of patent search is an infringement search; this type of search generally
requires more time than that required for a patentability search. Unlike a patentability
search, the key to an infringement search is a careful reading of the claims of valid
patents with an eye to the finished product which the client intends to produce.
These searches start at a cost about $5,000, and are more detailed in analysis, since the
idea is to try to determine if the product or process the client intends to make or
perform infringes a valid patent. These searches are usually performed where a client
wants to either minimize the probability that his product/process may be infringing a
valid patent, or do some form of due diligence to a given level of expenditure. These
searches are also open ended, requiring additional information, such as file histories to
be obtained for any suspected close patents.
Such an infringement study has nothing to do with application for a patent, except that
the references discovered are required to be reported on a patent application and would
normally be used to hone the patent application (as would the results of the patentability
search). Remember, you CAN get patent protection for subject matter relating to
a product that would infringe
another patent if that product were produced. Nonetheless, your patent would
have value if your improvement was significant because a manufacturer would still be
liable to you (and perhaps to the other patent holder as well).
The third type of patent search is a validity study. Where a client's manufactured product
is threatened by an issued patent in a country of interest, a search similar to a patentability search is
performed in the country of interest. In a validity study, the search starts by looking for references
before the threatening patent's filing date for most countries (and more than one
year before the threatening patent's filing date if the threatening patent is a U.S.
Patent). the search and then goes backward in time for hundreds of years. Much of the success of such
validity studies comes from patent searches in Japan and Europe. This process typically
involves setting a spending limit, for example $10,000; one must then decide how much to
spend in each country. One must also decide whether to file a petition for re-examination
based upon the number and quality of the prior references uncovered.
If you are considering filing for a patent, you may also want to consider a petition to
make the application special if you are entitled to do so. Prior to June 8, 1995 the
average current delay period in the USPTO was about one year. This means that at least one
year will pass from the date of filing before a Patent Examiner in the USPTO will even
take up your application and begin to examine it. However, under certain circumstances,
you can petition to have the case pushed to the head of the queue and examined
immediately. Historically, the specific circumstances necessary to be able to file such a
petition (available from 1995 through August 25, 2006) were (1) prospective manufacture,
where a manufacturer binds himself to produce the product in the U.S. or increase
production in the U.S. upon the issuance of a valid patent; (2) infringement, where the
invention is currently being infringed by someone else; (3) applicants health, where the
inventor/applicant is so sick that he might not be available to assist in the prosecution
(doctor's certificate required); (4) applicant's age, where applicant is over 65; (5)
environmental quality, where the invention will materially enhance the nature of the
environment; (6) energy, where the invention will materially contribute to the discovery
or development of, or more efficient utilization and conservation of energy resources; (7)
DNA, for inventions relating to recombinant DNA; AND (8) single invention applications,
where the scope of the claims cover one invention alone (this is available where a search
was performed and where a detailed statement is made by the attorney as to how and in what
areas the invention is patentable, in addition to other requirements); and (9)
superconductivity inventions. HOWEVER, starting on August 25, 2006, all of the above-listed justifications for a
petition to make special were funneled into a "super category" in which the
application is made to convert and file the entire case as an electronic filing, perform
his/her own search by class and subclass, and, in essence, restrict his/her claims to a
single invention. There are only 2 exceptions to this new mass grouping: item (3) -
applicants health (where the inventor/applicant is so sick that he might not be
available to assist in the prosecution - doctor's certificate required), and
item (4) - applicant's age, where applicant is over 65. Therefore,
anyone seeking a quick prosecution will have a quick prosecution, but it will
likely result in claims which may be very narrow. The reason that the "make
special" status has been important since the introduction of the
20-year-from-filing rules is that applications which linger in the USPTO under
the 20-year-from-filing rules are not merely delayed; rather, they use up the
patent owner's potential monopoly period. As the time of processing has taken
longer, the PTO has been under pressure to speed things up. This generalized
acceleration method will be aimed at critics of the PTO delays, who can only
argue that it will kill their potential patent breadth. To speed up the process
without harming the patent, the qualifying status of sickness or age are the
only remaining excuses which will permit patent processing to occur normally.
With regard to making and selling the invention, the U.S. allows a 1 year grace period
(beginning at the time the invention is first marketed) before imposing the requirement
that a patent be filed on the invention, but a U.S. inventor should AVOID relying upon
this grace period if humanly possible, because other countries have a ZERO time grace
period. If the product is published on the Internet or becomes known in other
countries BEFORE a U.S. Patent Application is filed, the inventor's rights in all foreign
countries would be lost.
Note that one of the most delicate and dangerous areas in intellectual property law
involves the disclosure to others either (1) through their collaboration with the inventor
or (2) when the inventor puts the item on the market. You should ensure that those you
work with in developing the product (1) have signed a non-disclosure agreement and (2)
agree that whatever contribution they make to the development of the product will be owned
by you. Great care should be taken here, because the standard for "becoming an
inventor" is very light; a contributor deemed to be an inventor can end up owning an
undivided interest in the patent.
In some cases, the market for a product is suppressed and develops after about the same
delay as the year or two that it takes to obtain a patent. In other cases, the market can
sky-rocket and then plummet before patent protection is obtained. So, in some narrow
instances you may want the patent period delayed, and in other cases you may want to
advance it by filing a petition-to-make-special to get the process moving.
In any case, a filed patent can help with disclosure problems. A non-disclosure agreement
which references a patent that has already been filed is quite strong from an evidence
standpoint. Usually, where there is a fight going on between an inventor and a company
that has usurped the inventor's idea, the company will claim that the inventor disclosed
virtually nothing to them (or at least nothing of any value) while the inventor
will assert that he has disclosed great details. Absent a series of photographs or
videotaping of the disclosure session, a patent is the best deterrent against such claims,
because a non-disclosure statement can recite the identity of the application by number,
partial number, (or by other indicia where the application number has not yet been
received). Further, the patent application can prove helpful in bargaining because it
gives
potential buyers/licensees a concrete idea of what they will receive in the transaction.
Moreover, the transaction can be limited to the application rather than future and/or
ancillary inventions by the inventor, any or all of which can be reserved to the inventor.
With regard to filing for a patent in foreign countries, the general rule is that actual
filing must occur before the invention is (1) known or used in that country, or (2)
printed in a publication anywhere in the world. Foreign filing may be accomplished through
any one of four mechanisms:
1. Filing in the U.S. with a regular non-provisional patent application and then filing in
a foreign country within one year's time. If the second application is filed within one
year, priority dating back to the filing in the first country may be obtained. This is
because most countries will allow anyone filing subsequently to be given a "first in
line" priority in the subsequent filing as if it were filed on the same date as the
first filing, so long as the subsequent filing is accomplished within a year.
2. Filing foreign based upon first filing a U.S. Patent Application to take advantage of
the no-cost foreign filing license grant (from U.S. Department of State and U.S.
Department of Defense). About (currently) 1 month after your U.S. filing, you will receive a filing
receipt which may state that the U.S. Department of State and U.S. Department of Defense
have seen your application and have no objection to your filing overseas. If you were to
blindly proceed to file overseas, or if you were to file overseas despite the withholding
of a foreign filing license, the penalties could involve jail time. Further, if your
invention is believed to be HIGHLY valued, such that it should be kept secret from the
international
community, the government may invoke a protective order placing the inventor under threat
of jail if the patent is disclosed. The procedure allows for some examination and
arguments during the secrecy period, but no patent will issue until and unless the secrecy
order is lifted.
3. Filing in a country where priority is NOT claimed, either through inadvertent omission
to file early or because the decision to file foreign was not made until after the one
year deadline. This will be possible only if the patent has not been published and is
still secret.
4. Treaty filing, typically under PCT. It must be remembered that not all countries are
PCT signatories; therefore, PCT is not available in all countries. A partial list of the
PCT countries are as follows: Arab Emirates, Antigua and Barbuda, Albania, Angola,
Austria, Australia, Azerbaijan, Barbados, Belgium, Burkina Faso, Bulgaria, Bahrain, Benin,
Brazil, Botswana, Belarus, Belize, Canada, Central African Republic, Congo, Switzerland
and Liechtenstein, Cote d'Ivoire, Cameroon, People's Republic of China, Colombia, Costa
Rica, Cuba, Cyprus, Czech Republic, Germany, Denmark, Dominica, Dominican Republic,
Algeria, Ecuador, Estonia, Egypt, Spain, Finland, France, Gabon, United Kingdom, Grenada,
Georgia, Ghana, Gambia, Guinea, Equatorial Guinea, Greece, Guatemala, Guinea-Bissau,
Honduras, Croatia, Hungary, Indonesia, Ireland, Israel, India, Iceland, Italy, Japan,
Kenya, Kyrgyzstan, Comoros, Saint Kitts & Nevis, Democratic People's Republic of
Korea, Republic of Korea, Kazakhstan, Lithuania, Luxembourg, Latvia, Libyan Arab
Jamahiriya, Morocco, Monaco, Moldova, Montenegro, Madagascar,
Macedonia, Mali, Mongolia, Mauritania, Malta, Malawi, Mexico, Malaysia, Mozambique,
Namibia, Niger, Nigeria, Nicaragua, Netherlands, Norway, New Zealand, Oman, Papua New
Guinea, Philippines, Poland, Portugal, Romania, Serbia, Russian Federation, Seychelles,
Sudan, Sweden, Singapore, Slovenia, Swaziland, Chad, Togo, Tajikistan, Turkmenistan,
Tunisia, Turkey, Trinidad and Tobago, United Republic of
Tanzania, Ukraine, Uganda, United States of America, Uzbekistan, Saint Vincent and the
Grenadines, Viet Nam, South Africa, Zambia and Zimbabwe.
Previously, an applicant had to designate each state affirmatively in a PCT application.
Recently, however, the procedure has been changed so that states are automatically
designated and the applicant has the option to withdraw designations for states
not wanted. The laws in these
some countries are such that filing an international application causes an
earlier national application to lose effect.
The European Patent Office (EPO) is treated as a single entity which includes Austria,
Belgium, Switzerland and Liechtenstein, Germany, Denmark, Spain, France, United Kingdom,
Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands, Portugal, Sweden, and more. If 3
or more European countries are of interest, an EPO filing may be the preferred route. The
EPO filing in many cases takes at least eight years, involves EPO maintenance
fees, but may at least save the applicant costs during the prosecution phase.
Most properly, the PCT application will be filed within 1 year of the first country filing
and will claim priority of such first country filing date. The filing of a PCT application
will extend the time for filing in each country or member selected for at least 30 months
(or in some cases 31 months) from the priority date. A very few countries require an additional
filing (Chapter 2 filing) by 19 months from the priority date. So, unless the applicant is specifically
interested in these countries, or where the applicant needs to amend his application,
there may not be a need for a second filing. Many people wait until the 10th or 11th month
after their first country filing to file the PCT application. Assuming that the PCT
application is filed during, and before, the termination of the 12th month of their
first county filing, the initial effect of the PCT filing is to extend the necessity to
file in each PCT elected country by an additional 18 months. PCT and other foreign filing
should be considered no later than 10 months from the US filing date for two reasons: (1)
it may take some time to convert an application to the PCT format, and (2) the applicant
may have additional invention which can be filed as a continuation-in-part at the same
time that the PCT application is filed. This will save the applicant from having to file
two PCT applications to capture the additional invention!
An applicant who files a PCT application without an earlier priority date takes the filing
date of the PCT application as his priority date (provided his invention has not been
published and is generally private). This has the advantage of setting the associated time
periods from the date of the PCT filing. However, it is recommended to always start with a
national filing, as the applicant has the ability to use the 1-year Paris Convention to
obtain priority in other non-PCT countries (Argentina, for example). The cost for the PCT
application will depend upon how many pages and sheets of drawings the application
contains.
Our charge for a PCT filing is roughly $1,600 plus government fees and mailing costs. The
average PCT government fee is about $2,500 and is based upon the number of pages in the
application. Subsequent charges can also be imposed by the government for excess
inventions if applicable. Much of the difficulty in PCT practice is in making certain that
you, the client, are ready to file foreign at the end of the PCT 30-month period because a
PCT filing is not an application so much as a time delay device. Where you are sure that
you want foreign protection in certain countries, it is best to file as soon as possible
after the US filing to both avoid the extra expense of a PCT filing and to avoid
loss of that portion of the potential validity period which will be wasted during pendency
of the PCT filing for the countries of interest.
Filing a European Patent Application before the EPO typically involves three initial fees,
(1) the filing fee, (2) the country election fee, and (3) the request for examination fee.
We collect, file, and transmit fees initially based upon all three in order to minimize
the need to bill these large sums over the period for which they are due. Somewhat
dependent upon the currency fluctuation, the initial cost for this is between
$12,000 and $15,000 given the severe devaluation of US currency over the past few years.
Once filed, renewal fees are due for the next several years and average about $1,500 per
year for as many as 8 or 9 years. Once the EPO case issues, (which right now is running at
about 7 to 8 years after the earliest priority date) it is required that the claims at
least be translated into English, German and French. In addition, any countries where the
issued European Patent is to have effect must be formalized in the country selected within
a SHORT period of time after allowance. For countries whose language is English,
formalization can require attorney fees which are less than about $1,500 per country
selected; where a translation is involved, the cost is likely to be about $6,000 per
country due to the additional cost of translation fees. Enforcement of the European patent
is not unified, and the laws of the country where the EPO patent enforcement is sought
will vary significantly from country to country. Very few clients who file and EPO
application see it through the 7 to 8 years of maintenance, examination, office actions,
formalization, and final country translation and activation. Thereafter, the individual
countries charge annual maintenance fees.
U.S. rights Before the U.S. Patent Issues
New provisions include section 1.54(d) provisional rights enacted November 29, 1999. This
gives a "reasonable royalty" to infringing acts occurring after publication, but
does not apply to cases which are inaccessible prior to publication, such as design
applications, provisional applications, and applications under a secrecy order. Section
1.54(d) provides that (subject to a number of conditions) inventors may receive a
reasonable royalty beginning on the publication date (either 18 month rule or PCT) and
ending on the date the patent issued (provisional rights). At this time, we are unsure of
the mechanism for incorporating these rights into a proof of infringement. If the case is
allowed, the PTO adds a charge of $300 (the publication fee shown in the calculations) to
the issue fee papers to cover the cost of publishing both issued applications and
applications which never issue.
To avoid publication, inventors/applicants must file a statement that they will not file
in any country with an 18 month publication requirement. Inventor/applicants must notify
the USPTO within 45 days of any foreign applications or else risk abandonment of the U.S.
application (a severe penalty). There are further provisions for a redacted copy where
foreign filings comprise only a portion of the subject matter contained in the
domestic filing. A separate publication fee is included with the notice of allowance to
cover many of the additional (and we believe unnecessary) costs for this whole system.
Publication provisions were effective on November 29, 2000.
A foreign priority claim must be made within the later of (1) four months from the date of
filing, or (2) sixteen months from the filing date of the prior application. Name, number,
country, day, month and year of filing are required. The same rule applies to domestic
priority claims as well. Further, the first sentence of PCT priority application must cite
the publication date.
Objections to drawings that the Examiner makes in an office action must be corrected with
the office action response or the reply will be considered non-responsive. This could be a
major burden if the applicant is made to correct drawings on a case that he or she may not
take to issue for reasons such as dissatisfaction with the scope of claims allowed or a
decision to keep the information in the application a trade secret.
After publication, an information disclosure statement may be submitted by the public.
Such third party disclosures can be made with a fee and must be served upon the applicant.
Such disclosures must be made within 2 months of publication or prior to the mailing of a
notice of allowance, whichever is earlier. The PTO also provides for deferred examination
of up to 3 years. All of the new rules do little to advance the interests of individual
inventors.
BEWARE PROVISIONAL PATENT APPLICATIONS!!!!
In our experience, applying for a pharmaceutical-based invention where FDA approval can be
sought with guaranteed privacy seems to be the only valid reason for utilizing a
provisional application. In general, provisional applications may be a trap for the unwary
inventor for the following reasons:
1. Foreign countries do not recognize provisional filing dates, nor do they recognize
disclosures made as of the provisional filing date.
2. If the invention becomes known, for example on the Internet, the inventor may have to
specially convert the provisional application to a regular application, provided that he
is not barred from doing so. Consequently, an inventor is likely to be better served by
filing
a regular application initially, rather than a provisional application.
3. Provisional applications which are specially converted may result in problems with
later-added claims, because these claims must match the level of disclosure of the
provisional application and are therefore subject to rejection on that basis. On the other
hand, a regular application with a complete set of claims matching the disclosure is not
likely to have this problem.
4. Generally speaking, provisional applications present additional and unnecessary
expenditures of funds and filing efforts.
5. During the pendency of a provisional application, the invention must be kept as a
closely guarded trade secret; otherwise, the inventor risks loss of foreign rights if the
provisional application is not specially converted to a regular application, assuming such
an option is available.
6. With respect to filing foreign applications, the entire purpose of the one-year treaty
rule is to allow an inventor to improve his knowledge of how a product is going to
perform. Only a regular application gives an inventor the ability to fully exercise free
expression through advertising and publication of the invention (with an eye toward the
one-year priority date, of course). Often, when a provisional application is specially
converted to a regular application, an inventor will be surprised to find that the foreign
filing must be accomplished based on the original date of the provisional application.
This leaves little time to gauge a market reaction, especially where an inventor has kept
an invention secret
(which should be the case) during the pendency of a provisional application.
Further Note on Patent Divisionals:
New rules which go into effect on November 1, 2007 will severely restrict the ability to
file straight patent divisionals (currently temporarily suspended). Maintaining a system
of temporally linear patents may in some cases need to be augmented by new invention over
time.
THREE IMPORTANT POINTS TO REMEMBER ABOUT YOUR PATENT PROJECT:
1. FINISH THE INVENTION COMPLETELY
By finishing the invention, you will know the cost for materials, labor, production, and
packaging. This is important because the process of doing so will help you to refine the
design and production. As a result, you will have an item which you know you can make for
$10 (for example) and sell for $40 rather than the other way around. If you apply for a
patent based upon a first design and then change the design, the first patent
may be of lesser value (or even worthless) and will require you to file a second patent to
cover your final design. However, where your product has an on-going improvement activity,
filing a string of continuations-in-part may be more advantageous. Our fee schedule is
geared for inventors who seek to keep their patents alive and track their product changes.
The following list is illustrative of the information you should know relative to your
finished invention, and is provided to help you survey invention completeness:
a) All technical data, circuit schematics, performance criteria, block diagrams, process
flow diagrams, communications protocol, mechanical specifications, costs for manufacturing
the item, costs for packaging the invention, performance boundaries if any, temperatures,
pressures, voltages and other scalar magnitudes.
b) A description and knowledge of what it is about your invention that is BETTER, CHEAPER,
FASTER, etc., than the products of your competitors. This may be multi-dimensional and may
involve focusing on synergistic interactions between the elements. Emphasize any omitted
components, for example a device that performs two functions by sharing circuitry,
structure, etc.
c) A good knowledge of WHY your competitors' CONSUMERS will choose your product over the
closest available alternative.
2. LET US HELP YOU APPLY FOR A PATENT.
To enable us to accurately and completely describe your invention, it is crucial for us to
have all available information: drawings, discussion, theory, formulas, product
specifications, materials of construction, and everything else you have that is related to
the invention. For utility patents, we require a check for $6,000 to get your application
process started (assuming that the invention is of average complexity and is not based on
computer software or a business method, both of which require $8,000 to start). Against
this amount will be charged our fees and costs, which will include $190 per page of
specification, $130 per sheet of drawings (if any - chemical cases may not usually have
drawings) and $575 for filing mailing and copies (small entity), assuming no excess claims
charges. Assignments and information disclosure statements require additional fees as
described above. For design patents, we require a check for $1,600, which is full payment
for filing a design patent with only a single embodiment. You will also need to provide us
with the following information:
a) A complete description of WHO THE CLIENT IS. If the client is a corporation, we will
need the exact spelling of the company name and the name of the company president who will
sign papers, including the attorney-client fee agreement. This information is also
necessary to execute an assignment. If the client is a sole inventor, we will need the
inventor's name. If the client is a partnership or other entity, we will need you to
describe the entity and tell us who is in charge of the entity. Remember, a patent is
normally not assigned to a corporation, or significant tax losses will occur.
b) Citizenships of the inventors.
c) Complete name & contact information for all inventors, including telephone and fax
numbers and e-mails.
d) Home addresses of the inventors.
e) Printed copies (two each) of prior art references (so that we can prepare an
information disclosure statement if necessary).
f) Electronic copies, if possible, of all the information relating to the case.
g) Initial payment of $6000 ($8000 if the patent is computer or web based,
computer base or is a complex
machine or complex process)
h) Specific explanation on how the product is used, a short note on the closest product
currently available, and a short note on why others have been unable to achieve what you
have achieved (i.e., a technical statement, not merely a statement that no one else
thought of it).
I) All designs, photos, write ups, and explanations on how the product is used.
Once we get a basic amount of information from you to enable us to formulate an
attorney-client fee agreement, we will send an attorney-client fee letter to you
explaining how the charges are computed. After you have signed and returned the
attorney-client fee agreement to us, as well as all of your data and information above, we
can begin work on your case. In approximately 2 to 3 weeks, we will provide you with a
first draft of the patent application. Once you have examined the first draft and have
made us aware of any changes you deem necessary, we will provide you with the final
product, again with price computed at $190/pg for text, $130 per sheet for drawings &
$530 for filing, plus additional charges for any excess (extra) claims. We will then
file your application with the USPTO and will wait for the first office action to be
issued by the
examiner, typically in about 1 to 2 years.
Assuming your invention is a device you will be launching immediately, we strongly urge
you, while awaiting your first office action, to prepare numerous announcements and press
releases for publication AFTER the patent is filed. Note that because many publications
accept articles on new products, this can mean tens of thousands of dollars in free
advertising!
3. SELL, SELL, SELL!
Once you have finished the invention (i.e., you know everything there is to know about it
and you know the cost to make it down to the penny) and your business plan is in place, if
someone makes an offer at a price you find attractive, we will try to help you formulate a
license agreement which both (1) motivates the licensee and (2) gets a flat 15% federal
capital gains rate (this rate may change in 2012) for you, if we are able to help you negotiate a license which
constitutes a sale. We will also try to help you with a comparison between the
self-manufactured after-tax profit at ordinary rates (typically from 40% to 55%) based
upon what is expected to be higher profit associated with ownership of the goods, versus the passive 15% tax
rate on capital gains from pure licensing.
GENERAL TAX INFORMATION
Patents have significant tax advantage (as of the end of 2011). First, the cost for a
patent filing is not high. It is about 1/6 the cost of buying a new SUV, but it gives you
outstanding tax benefits such as instant capital gains on sale, and instant deductibility
on expenditures related to obtaining the patent. However, you should also analyze your
position against alternative minimum tax, which is increasingly coming to the forefront of
our tax system.
To compare personal expenditure against the advantages of patent, and as a first example;
if you bought a new Ford Explorer for $30k, you would not be able to write it off on your
tax return. If you then sold it for $40k, you would pay ordinary income rates ($3,500 at
the 35% top federal rate) on the $10k profit and you would pocket only 65% of the gain, or
$6,500 (taking into account federal tax only).
Turning now to a second example, for a utility patent of medium complexity at a cost of
approximately $5,000 to file, you would be able to write off the entire amount, which
would essentially result in a government subsidy of $1,750 (figured assuming your highest
marginal ordinary income tax rate is 35% rate) and thus a total cost to you of only $3,250
after taxes (again assuming a 35% rate). If you then sold the patent for $15,000
(but note that patents usually sell for much more), even before it issues, you would pay
capital gains tax of only 15% on the $15,000 as profit, without subtracting the previously
deducted $5000. Note that the outlay to acquire the patent only becomes part of the patent
basis if you elect to treat expenditures as a capital item (this may be the case where
there is an excess loss carry-forward). As a result the tax will generally be calculated
from a zero basis, i.e., 15% of $15,000, or $2,250.
So, for a smaller, tax subsidized investment, you would be able to pocket far more money
in the final analysis. In the first example (for the SUV), you would have an outlay of
$30,000, a gross profit of $10,000 and a net profit of $6,500 after taxes. In the second
example (for the patent), the actual outlay would be $3250 (accounting for the $1,750
subsidy), and you would pay tax of $2,250 (again, computed on the entire $15,000),
leaving $9500 after accounting for both the taxes and the initial outlay. Of course,
transactions involving greater sums of money produce significantly larger leveraging. Much
of the above will also depend upon the level of your personal marginal tax rate.
TRADEMARK
In general, the law treats trademarks as if they are unique associational tags for (1)a
SOURCE of goods or services, and (2) a corresponding level of quality. First, using EXXON
as an example, EXXON is a mark that was carefully selected by its owners, and their
selection process was in accordance with the five golden rules listed below.
Consequently, the EXXON mark is so unique that it requires little effort to defend
and
maintain. This is an important point, because money spent establishing and defending a
trademark must be capitalized; in other words, it is not currently allowable as a
deductible expense. Additionally, a crucially important reason for having a trademark in
the first place is to gather goodwill over the life of the trademark (in addition to asset
value) with an eye toward capital gains treatment on later sale. From a tax standpoint, if
a trademark meets the general standard set forth at the beginning of this paragraph, a
near-perfect "goodwill reservoir capacity" will be created.
When a business owner makes the mistake of selecting a mark that is descriptive of the
goods or services he provides, the owner and his business are certain to suffer. As a
basis for understanding why this is so, it is important to know that each time a business
spends one dollar on advertising, two things happen to the business as a result: (1) the
business experiences a return ratio on its products, and (2) the business develops
"phantom goodwill dollars" which can be redeemed in future if the quality of
goods and services is high. When a weak trademark is selected, several harmful results
occur:
1) Each dollar spent on advertising results in an ever-reducing proportion product sales
and an ever-increasing proportion of those product sales going to competitors who sell the
same-named (or similarly-named) product or offer the same-named (or similarly-named)
services.
2) The owner of a weak trademark cannot force others to stop using his trademark (and
properly so, because a trademark that is descriptive is not truly "owned"), and
competitors have a colorable justification for either copying the mark (worst case),
especially if it is descriptive, or coming close enough to copying the mark that they are
able to pull buyers (and profit) toward their own products and services.
3) If a trademark is weak or descriptive, it cannot be successfully defended, and many
imitators are likely to be attracted to the mark. In this case, the trademark will
generate zero goodwill because no one is likely to be interested in buying a lawsuit
regardless of how outstanding the goods and services may be.
4) The strongest competitors will act to secure rights in the mark, even though it may be
a losing proposition for them, and the result may be that the client who adopted the mark
will be forced to stop using the mark altogether! Even if the trademark was weak, being
forced to surrender the mark and start over with a new mark means that the business owner
will become anonymous to his prior clients who have been using the mark as a method of
contact identity.
5) Finally, a poorly chosen mark can pull the net value of the business below zero. No one
is likely to be interested in purchasing a company that is constantly under fire because
of its poorly selected trademarks. Additionally, some buyers may be forced to resort to
the headache and expense of corporate reorganization in order to be able to acquire the
company assets without taking on the company's liabilities.
THE FIVE GOLDEN RULES FOR SELECTING A STRONG TRADEMARK:
1) Name should not be descriptive of the goods or services provided under the mark. (See
A, B, C, E, & F below)
2) Name should not contain any geographical designations, no matter how small or
little-known a place or landmark may be (See C, E & F, below)
3) Name should not be found in any dictionary (See B & F below) û also, no
look-alike, sound-alike, or spell-alike names.
4) Name should be not be a person(s last name (See D, & F below) û also, no flags or
government coats of arms, or Olympic symbols.
5) Name should not be scandalous, lewd, or vulgar (this is against public policy).
Further detailed in points A through E below are at least 5 ways you can lose money
(perhaps even to the extent of bankruptcy) if you disregard the above rules and select a
weak mark.
A. When a mark is descriptive of the goods and services provided under the mark, it is
equivalent to advertising which benefits your competitors! Confused customers will use
your advertising dollars to locate and do business with your competitors. You cannot stop
others from using the descriptive name or variants, therefore your lawsuit money will be
often spent and always wasted.
B. Because a trademark has an infinite life, money spent on litigation cannot be deducted.
Thus, if you earn $1,000,000 in before-tax profit, but must pay your trademark attorneys
$1,000,000 in legal fees to defend your mark, not only will you NOT break even, but you
will have to borrow $350,000 (plus any state taxes due) to pay the tax on the $1,000,000
you earned!
C. All geographical designations within a trademark are rejected or required to be
disclaimed. This will be the case because a product is either (1) associated with the
geographic designation and denied because it is descriptive, or (2) is not associated with
the geographic designation and is rejected as being misdescriptive. All geographic and
disclaimed designations in a mark reduce the trademark's strength and reduce the
company's value.
D. Last names as potential trademarks are
sure to generate rejections at the PTO (we even had an unusual Hispanic name rejected
because the Examiner found 5 people in the U.S. with that name). Where others entering
into the market either change their name or obtain an endorsement from someone with the
same name, there is nothing to be done other than initiating a large lawsuit, which
introduces the possibility of losing such a lawsuit and even having to borrow money to pay
taxes. Furthermore, in the rare case where the PTO may approve the use of a last name, it
customizes a company to the extent that it becomes worthless to others, especially in the
case where the owner after whom the company is named has died.
E. As stated above, a weak mark is economically fatal in terms of future value. No one
wants to buy a trademark and goodwill or a business which is enmeshed in litigation and
controversy, especially where there is no potential for exclusive control of the
customers'
perception of the identity of the source of goods and services. TRADEMARK is an excellent
ONE-WAY street toward capital gains provided that care is taken in choosing a strong mark.
Once the goodwill is held more than one year, the sale of the asset results in CAPITAL
GAINS which are currently at a 15% federal rate level (for pass through entities
and LLC's). The idea is to provide a clean set
of goods and services so that when you leave the business, your stock is high or your
business value is high.
F. Stay out of the dictionary. If you cannot look the mark up in either English or another
language, the Examiner (who is trying to prevent your getting the mark) cannot look it up
either. A mark which is not readily found through any avenue of search (Internet or
otherwise) and which cannot be split into words found in the dictionary has the ability to
capture ALL AVAILABLE GOODWILL and thus become a "coined mark." When a mark
acquires the status of coined mark, it means that the mark has recognized protection
OUTSIDE its normal stream of commerce. EXXON is a great example of this principle.
For instance, because EXXON is a coined mark, it cannot be used on shotguns, even though
Exxon Corporation does not make shotguns. It is simply VERY POWERFUL as an indicator of
the source of goods and therefore it has extreme impact outside the normal channels
of goods and services. Additionally, it is probably a safe bet that Exxon's trademark
litigation files are extremely small because challenging a mark as strong as
EXXON would almost certainly be a waste of time and resources. Finally, consider that,
even if the EXXON mark were sold with no gas stations and no oil reserves, it would likely
still be worth BILLIONS of dollars.
What about SECONDARY MEANING? This rule enables a descriptive mark to be obtained once
enough advertising is done to cement the name in the consciousness of the customers, such
that a SURVEY would cause a high percentage of the customers/public to associate an
otherwise undesirable name (last name or descriptive name, for example) with the SOURCE of
the goods rather than with its descriptive
meaning. So, for example, you might have to spend $1 billion advertising during the super
bowl, and then $50 million per year until you get the desired public level of association.
But, by doing so, you have built your company into an "advertising drug habit"
which requires the expenditure of millions per year to keep the trademark in question out
of the public domain. This is not just value loss, it is value suicide. The
principle here parallels the purchase of stock: it is never a good idea to buy high (e.g.,
all your advertising investment to protect a word which was descriptive) and sell low
(e.g.,your profits and later sale of the business likely will not be able to make up for
all the money you have spent trying to acquire secondary meaning for a descriptive mark).
You will also need a healthy litigation program in place (i.e., plenty of insurance to
cover the costs of having to defend the mark frequently, etc.). This combination of
advertising losses, litigation losses and loss of value in the going concern is likely to
result in the death of your business, and a painful death at that.
TRADEMARKS WITH LOGOS
To demonstrate how the use of a logo affects the strength of a mark, the Coca-Cola mark
provides an excellent example. Coca-cola is actually a combination of three marks:
(1) the word itself (COCA COLA), (2) the specialized font (Coca Cola with differential
capitalization and having the "oca" and "ola" portions in a sweeping
font), and (3) the graphic artwork (coloration and swath against which the mark is set).
The first mark (word only) is the strongest mark. On a scale of 1 to 10, where 10 is the
strongest, the first mark is a 10. The words COCA COLA are protected no matter how they
are written, no matter what font they are written in, no matter what size or color they
are written in, and without regard to capitalization of any kind. This trademark protects
the sequence of letters itself, so that even a purple truck with black letters spelling
out COCA COLA would constitute trademark infringement.
The second mark (sweeping font and differential capitalization) rates a 5 on a scale of 1
to 10, where a 10 is the strongest. This mark protects the sequence of letters, but ONLY
if they appear in this same way (with sweeping font and differential capitalization). A
purple truck bearing COCA COLA in block letters, therefore, would NOT constitute trademark
infringement if this were the only level of trademark protection in place. However, a
purple truck bearing COCA COLA written in sweeping fashion could constitute trademark
infringement because it looks like the sweeping Coca Cola mark at a glance.
The third mark also rates a 5 on a scale of 1 to 10, where 10 is the strongest. Any
graphic of the sort and coloration (background and swath) will constitute trademark
infringement regardless of what words are included.
A fourth mark is available here, which is the combination of all three of the above
described marks: the word, stylization of the word, and the background or graphics against
which the word is set. This possibility yields the weakest mark, a 1 on a scale of 1 to
10, where 10 is the strongest. Registration of this trademark will only protect against
infringers who copy the mark and ALL of its features EXACTLY with no variation. Clearly,
this level of protection is extremely narrow and is not useful, since any variation in the
copied mark may remove the would-be infringer from the ambit of infringement.
Ideally, where a logo is involved, it is advisable to apply for separate trademarks for
the name alone and the logo alone. Additionally, separate the name from the logo on goods
where possible. Name-logo combinations are weak, thus the reason it is better to protect
each separately. Beyond the typed mark, if a client wants a logo (less protection for the
money), we suggest a second set of marks in these countries. However, if the
mark is powerful, it may be fine to apply only for the typed mark. Often, if a mark is
applied for as a logo or stylized letters, the PTO may force the applicant to DISCLAIM the
very word the applicant is trying to protect. This is not the case with regular
typewritten work mark applications, where the PTO has to either reject it or allow it as a
complete whole. With the typewritten work mark applications, the PTO will stand and
fight against you for the meaning of the letters because disclaiming the typewritten words
in a mark is essentially rejection of those words.
Stay away from differential capitalization. Differential capitalization weakens a mark,
and where combinations or parts of words are used, it telegraphs the pronunciation and
meaning. For example: TreeExam (one word with differential capitalization) is the same as
TREE EXAM (two words without differential capitalization) in they eyes of the trademark
office, and would also be descriptive of a tree surgeon's services. It is less
clear whether TREEEXAM (one word, no differential capitalization) would be viewed by the
trademark office as TREE EXAM, TREXEX AM, or TREEEXAM.
Beware of letting marketing and ad companies choose your mark for you. Although they may
provide fine marketing and ad copy for what you pay them, it has been our experience that
they are adept at finding obscure marks owned by others. In one case, on the
recommendation of a marketing company, we did three full searches sequentially
on three different marks. Each search turned up
an obscure record which would have cost the adopter thousands (and
more) to litigate. In other words marketing companies tend to
re-remember old marks and forget that they are not new.
Keep in mind that the primary object in trademark is not to be cute, catchy, or pretty.
The primary goal is to choose a trademark that will be a vessel for goodwill so that, on
later sale of the business, (1) the potential is high for additional gain (over and above
what is received for assets) from the sale of goodwill, and (2) the additional gain
derived from goodwill is taxable at the capital gains rate, which is currently 15%.
Goodwill is virtually always assigned to the trademark, so a weak mark may mean no buyers
for your business, products or services. The end goal is to put more money in your pocket
at the end of your work life (rather than spending it on litigation to protect a weak
mark).
THE TRADEMARK TREATY
A "regular" trademark application is a filing which occurs after the trademark
or service mark has been used in interstate commerce. A regular application generally
claims as its priority date the date of first use in interstate commerce (or a date at
least as early as that date). A trademark or service mark MUST be used in interstate
commerce before it can issue into a registered trademark.
On the other hand, an "intent to use" application (ITU) is an application filed
before use occurs, and for which priority is given based upon the filing date once the
application is converted to a regular application. Typically, the ITU application is used
where the actual product may not come on-line for 6 months or more. If the period is less
than 6 months, it may be more beneficial to wait for actual use and then apply (rather
than
file an ITU application and convert). Where the period is more than 6 months, an applicant
can benefit from the earlier priority date.
Further, and even more importantly, the trademark treaty gives those who have filed an ITU
application in the U.S. (or other home country) the right to file a corresponding
application in another country with a filing priority based upon the filing date in the
home country, so long as the foreign ITU is filed within 6 months of the filing date of
the home-filed ITU. The same does not hold for REGULAR U.S. filings which are based upon
having previously used the trademark in the U.S. The advantage of the ITU
application is also a disadvantage when used by others.
A filing in England, for example, gives the filer a right to file in the US within 6
months of the England filing and he can claim the England filing date. However, a full
search of the US records would not show anyone with rights either through ITU or by actual
use. This would lead a searcher to believe that it might be safe to adopt the mark.
The potential adopter either files an ITU application or begins using the mark, not
knowing
that the individual or company who first used the mark in England is about to file in the
US using treaty priority, thus defeating the potential adopter.
There is the possibility, as mentioned above, of filing an ITU and later amending the form
of the application to a REGULAR status; however, given the increased cost of conversion
(approximately $400 for our charges, not including the government fee), most U.S. filers
who have previously used the mark simply elect to have a regular filing. An ITU is
converted to a regular application by filing a paper which includes the date the mark was
used in interstate commerce and includes 3 specimens of the mark. If conversion takes
place before the ITU application is allowed, it is called an "amendment to allege
use." If conversion takes place after the ITU application is allowed, it is called a
"statement of use." The trademark can pass to registration only after the
specimens and date of use have passed muster.
If an ITU application is allowed, there are (5) six-month periods (a total of 30 months)
in which use must occur and conversion must be completed, or in which an extension must be
made. The first six-month period is free and follows the notice of allowance. Four
additional 6-month extensions may be purchased to extend the time for use to the full 30
months after the notice of allowance. Each extension costs the same as a conversion. We
charge $400 as our fee for either a conversion or an extension but the conversion
governement fee ($100) is less than the government extension fee ($150) which is in
addition to our fee even though each has a different . The maximum would be
purchased extensions, followed by a conversion between the 24th and 30th month.
The extensions must be filed timely. As a result, dilatory actions (i.e., waiting until
the last minute) are stressful for everyone concerned. Unlike patent cases, an extension
of the period for response may not be purchased. Moreover, after the first purchased
extension, additional facts must be shown indicating that the applicant is serious about
eventually using the mark.
Practically speaking, the trademark treaty is rarely used except in cases where a new
product trademark is to be secured months in advance of actual introduction of the
product. One reason the treaty may be so popular in other countries is that many of their
trademark applications must originate as ITU applications, usually with requirements to
use the trademark over a much later time frame. In other words, most countries are not
concerned with whether you have initially used the mark in their country, so long as the
mark is ultimately used within their applicable time period, typically about 5 years. This
type of format eliminates the necessity to use the mark before it is registered, i.e.,
during a time when litigation might follow if the use is impermissible or if the trademark
is owned by someone else.
EUROPEAN UNION TRADEMARK (EU TRADEMARK)
The European Union has adopted a delay-based search system to enable a single community
mark to be obtained. It utilizes a time-limited search, to be carried out by the 25 member
countries, after which the mark is either objected to or the objection is waived by each
country in the European Community Mark system. Countries who delay their own search,
either through lack of funding or because of simple administrative overload, and who fail
to object to a mark will be considered as having accepted the EU by default action.
The advantage of this method is its low expense; however, this method can also be
economically disadvantageous if it becomes necessary to file in each non-objecting
country. A further disadvantage of this method is that the searches conducted by the
member countries are often slow and lack detail.
When you consider the possibility of searching each country in Europe at about $2500 per
search, especially now that the EU has 25 members, it becomes clear that the cost of doing
so would be prohibitively expensive. The cost of filing separately in each country at
about $2000 per country is also quite costly. The EU application has a filing phase which,
combined with our fee for filing (about $800), comes to about $3000. There is also a
registration fee which, combined with our fee for reporting and handling ($400), comes to about $2500,
for a total of about $5500. Currency rates can change quickly and we
should be asked for a quote before filing.
One remaining disadvantage of the EU system is the possibility that ONE of the 25 member
states objects to the mark. If this occurs, then no EU trademark can issue. An applicant
then has the option to USE the EU application as a filing priority basis from which
individual country filings in the non-objecting countries can be accomplished. A further
consideration is that each country also has a filing and registration fee which may
average about $2500. This expense will almost certainly force an applicant to carefully
evaluate the countries in which he genuinely wishes to file. The search which was
generated from the failed EU application can be used to increase the likelihood that
ultimate registration will be allowed in the continuation-filing country of choice.
With regard to trademarks, our charge is typically $950 per trademark per class in which
protection is sought. Included at no charge is our analysis of and warnings relating to
your mark selection. This fee includes preparing and filing the application, and also
includes transmitting various papers to the client such as filing receipt, notice of
publication, and the formal trademark registration document. The fee also includes
docketing your case for the due dates of 8 and 15 affidavits which are due in
the fifth year after registration. Each application requires 3 specimens showing the use
of the mark in conjunction with the goods. Information that we require from you includes
the date of first use, the date of first use in interstate commerce (i.e.., the date that
goods, with labels affixed, are shipped across a state boundary in the United States,
either to another state or overseas), an expansive description of all of the goods on
which the mark is to be applied (so that we can determine whether you need to file
additional marks in other classes), the EXACT identity of the owner of the trademark, and
2 specimens (labels) showing the precise mark for which you are applying (or 2 ad
brochures where the mark is a service mark).
When first adopting a trademark, it is highly advisable to have a full search performed at
a separate charge of about $1600 (depending upon the lead time before the full search is
done) to avoid a charge of negligent adoption by someone else who may have superior
rights. This search can help determine what the possible ramifications of using a mark
will be, and can also help predict what the chances are of getting a particular
mark on application. A search at this level can deter a charge of negligent adoption as
long as the 5 rules above for selecting a strong mark are followed. If the 5 rules listed
above for selecting a strong mark are NOT followed, this level of search will only
generate reasons NOT to select the mark. Sometimes, when a client is trying to select a
name, we will also recommend a short statistical search to help pre-qualify the name so
that the big expenditure will not have as great a chance for a negative result.
It has been our experience that, unless a trademark has been chosen deliberately to
provoke an adversary or as part of an opposition, a mark generally proceeds to
registration with little more than some brief attention to formal matters, questions from
the examiner, and the like. This is true for approximately 80% to 90% of all cases, and
these clients typically do not hear from us again until 5 years after registration when
renewal is due. As a result, it is extremely important that you keep us informed of your
current addresses, fax numbers, telephone numbers and e-mails.
In about 5% of cases, the trademark is flatly rejected. In this case, you may simply
abandon the case or proceed to an appeal. Generally, this occurs because the trademark is
already registered or the examiner will not allow registration of the mark in view of an
already-registered mark. If the examiner rejects the mark but the client believes that
there is a chance to go forward with arguments that can distinguish the mark, the client
may elect to have us prepare a formal response as described below.
This is one of the reasons it is extremely important to choose a mark carefully.
Where the applicant has only recently started in the use of the mark, the applicant
has the fewest rights and generally the least chance to justify his registration in a
contest. This is even more important when you consider that the mark can be taken from the
applicant through a petition for cancellation at any time before the applicant accrues
five years after registration, typically at the time for the 8 and 15 affidavits
necessary to keep the trademark registration in force.
Note also that we highly recommend that your trademark be owned by a corporation rather
than a person. A trademark owner is per se responsible for determination of the nature and
quality of the goods and services. As a result, the owner of the trademark under which
goods or services are sold will be held personally liable for product or service failure,
even if the product or service was sold through a corporation.
Further, since the tax treatment of trademarks is similar to the tax treatment on gains
for sale of appreciated corporate stock providing that a pass-thru structure is
used, (i.e., capital gains are not instant), and since
the built-in value of goodwill occurs over time much like the accumulation in value of
stock, an LLC or other pass through entity ownership of trademarks is predominantly
desirable. However where a complete corporation is sold via sale of stock,
capital gains are also possible, but the buyer inherits the tax attributes of
the entity.
In about 5% to 10% of cases, it is necessary to prepare a formal response arguing the
difference between two marks, including a letter of consent from a prior registrant where
possible. In these cases, we charge approximately $190 per page with respect to the
trademark response and $380 per hour for any time beyond the formal response.
Our method of billing eliminates the necessity for us to bill you for letters,
transmittals, or phone calls to the trademark office to answer examiner questions or to
clarify problems. If a trademark matter can be handled by phone call to the PTO, there will be no
extra charge to you. Because we have eliminated the need to prepare billing invoices, we
save ourselves additional work, thus saving the client money. If we billed for preparing a
letter or mailing, we would spend half as much time billing as we spent preparing or
mailing the letter, which does not make much sense to us. However, when we have to respond
formally to the USPTO, especially when we must argue that marks or lines of marketing and
commerce are separate, or where we must cite prior cases, there is an extra charge as
outlined above.
There is also an extra charge and the requirement of a deposit account balance (with
replenishment) of $5000 if you hire us and we have to prepare and file (or
defend) an opposition. An
opposition is a small federal lawsuit before the trademark trial and appeal board, in
which one person or company either (1) seeks to prevent a mark from being registered, or
(2) tries to cancel a registration. The opposing party's mark is usually not
in jeopardy in these cases. Because this is a lawsuit, there are deadline dates for
discovery, document production, depositions, preparation of briefs, and arguments to the
Trademark Trial and Appeal Board. Therefore, if your mark is opposed during the period for
opposition, or if you have a petition filed to cancel registration of your mark, this is a
separate matter which is NOT included in our stated $950 fee for trademark application.
IMPORTANT POINTS TO REMEMBER ABOUT TRADEMARK:
Remember that a trademark should not be a geographical name, should not be descriptive of
the goods and services it represents, and, similarly, should not be misdescriptive of
those goods and services. The mark selected should be far different from other marks which
are used to describe goods and/or services in the same classification. Also remember that
separate applications may be made for trademarking a name, a logo, and name in combination
with a logo. Often, this combination of coverage is sought to achieve maximum trademark
protection because competitors may try to copy or closely approximate the name without the
logo or the logo without the name. Marks having the name and logo are narrower in scope
than either a logo mark or a name mark, and this narrowness will usually encourage
additional application for the name mark alone and the logo mark alone in an attempt to
acquire the broadest trademark protection possible.
With respect to ITU applications:
1) An ITU filing is used with the 6-month statute to file in other countries.
2) An ITU filing must eventually be converted to a regular filing.
3) Each 6 month deadline extension, or a conversion at any time, requires
action, and the time for response at each six month period cannot be extended.
4) Where use will occur soon, and where the mark is not so popular that it is believed
others may grab it, it is more economical to wait until actual use occurs to apply for the
mark.
5) On average, an ITU filing is examined in less than a year, will be published
(if allowed) at about
12 months and will generate a notice of allowance at about 14 months. Adding 30 months
means that you can keep the ITU going for about 3.5 years before finally having to actually
use it in the U.S.
6) The ITU filing, if use occurs, causes the filing date of the ITU to become its priority
date, meaning that the trademark predominates over other trademarks, even where use occurs
before the ITU use. Example: an ITU filing on January 1, followed by use in December of
the same year, will win out over one who simply started using in June. Even though
the user in June used before the ITU user, the priority date swears back to
the ITU filing date.
7) At a MINIMUM, our charge for an ITU will be the filing fee $950 and at least one
conversion fee (and possibly a series of extension fees for each extension) and may involve
several thousand dollars. Please note, however, that PTO fees rise from year to year.
The procedure for trademark is generally as follows:
1) Call us and tell us what the mark is to let us help you choose a mark which is not
descriptive. If the mark is problematic, you can spend $100,000 and still not get it.
2) If the mark is not descriptive (or otherwise violative of the 5 rules listed above), we
will look on a US database for "popularity measure".
3) You can choose a full search (recommended) or decline a full search. We can then apply for the
trademark.
4) Give us the information enumerated above (i.e., owner, contact information, date the
product /service was first used in interstate commerce, etc., and a complete listing of
products for each trademark).
5) Make sure you have product liability insurance before entering business.
6) We will send you the papers for signing in special and unusual cases.
7) You sign an attorney-client fee agreement and pay the $950 fee, and we will file the
case.
The application process requires approximately one year for the case to be taken up by the
USPTO. The government attorney then performs a search and makes a ruling on the
registrability of the case. Thereafter, the mark is published to give members of the
public an opportunity to consider whether they would be damaged by it. Once the period for
a member of the public to make a written opposition has passed, the mark is
registered. After 5 years beyond registration (which may come out to about 6
years of continuous use given PTO delays), the owner has the option to file a renewal.
At this time, the owner can also file to make the mark incontestable (because up to this
point, the mark is still contestable), which is highly recommended.
Special Note: After January 2000, the PTO has tightened up on its goods and services
descriptions. As a result, more specific descriptions of goods and services are required,
in many cases to the point of absurdity. You should have a complete list of goods and
services in EXTREME DETAIL, as you will not be allowed to add goods and services at a
later time. This is NOT a small change and now dominates much of the application
procedure.
We hope the preceding information was helpful to you. Please let us know if we can assist
you in applying for your copyright, patent, or trademark. If you have any questions, we
welcome your phone calls and hope that you will not hesitate to contact us. Additionally,
we invite you to visit WWW.PATENTAX.COM for updates, newsletters, and informative
articles. We appreciate your interest and we look forward to speaking with you in the
future.
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