I just came back from a one-week business trip in China (Shenzhen and Shanghai) and would like to share my impressions on China's economy and IP market with our readers.
(1) Recession. What recession?
I would never have guessed that China is in recession. The stores were packed with customers and the restaurants were full of patrons, as if China's fast pace has never slowed. For the companies I visited, large or small, their oversea sales might have slowed, but China's domestic consumption keeps these companies going. I can sense that the energy is still there and these companies are still innovating (thanks to supportive Chinese government policies).
(2) Chinese IP Market
Chinese companies have stepped up their efforts to protect IP rights. It appears, however, that large Chinese companies are still not comfortable about spending reasonable (according to the US standard) attorney fees for IP matters. Because of their size and potential, these large companies still attempt to pressure US law firms to offer deep discounts in IP services. I believe that it will take at least another 5 years for the Chinese IP market to mature with respect to these large Chinese companies.
Interestingly, however, the medium or small Chinese companies are more active in defending their products against infringement allegations. Because these smaller companies rely on single or limited product lines, they are more willing to pay standard attorney fees to protect their market shares. Currently, the demand for IP services mainly comes from these smaller companies.
(3) Shanghai: A Futuristic City
I have never seen a more dynamic city than Shanghai, not NYC, not London, and certainly not Paris. Entrepreneurs from all over the world come to Shanghai to look for and seize seemly unlimited opportunities. Not only is Shanghai a financial center of Asia now, it is also becoming a center for technological innovations. Personally, after talking to several clients about their ventures, I was deeply impressed with their innovations and their energy.
Wednesday, April 15, 2009
Wednesday, April 1, 2009
How Unambiguous An Assignment Must Be?
In Euclid Chemical Co. v. Vector Corrosion Techs. Inc., No. 2008-1170 (Fed. Cir. Apr. 1, 2009), the Federal Circuit found that an assignment of a disputed patent to Vector was ambiguous, vacated the judgment of the district court based on an erroneous finding that the assignment was unambiguous, and remanded for further proceedings. On a second issue, the Federal Circuit found that the district court abused its discretion by dismissing Euclid’s bona fide purchaser claim.
Key Issue:
• Whether an assignment that lists an issued patent and all continuations to the issued patent, but leaves out a second issued patent that is a continuation to the first issued patent, cover the second issued patent?
Holding:
• If an assignment merely lists an issued patent and all continuations to the issued patent, but leaves out a second issued patent this is a continuation to the first issued patent, without other clarifying language, does not cover the second issued patent.
The Disputed Assignment (emphasis added)
I, JACK BENNETT, whose full post office address is 10039 Hawthorne Drive, Chardon, Ohio 44024, in consideration for $25,000.00 and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged do hereby sell and assign to VECTOR CORROSION TECHNOLOGIES LTD. whose full post office address is 474 Dovercourt Drive, Winnipeg, Manitoba Canada R3Y 1G4, all my interest in the United States, Canada and in all other countries in and to my US, Canadian, and European applications for patents and issued US patent, namely:
1. Issued US Patent 6,033,553. This patent claims the specific use of LiNO3 and LiBr to enhance the performance of metallized zinc anodes;
2. US Application No. 08/839,292 filed on April 17, 1997,
3. US Application No. 08/731,248, filed on October 11, 1996 (now abandoned),
4. EPO Application No. 99122342.1, filed November 9, 1999, and
5. Canadian Application No. 2288630, filed November 8, 1999,
any and all divisional applications, continuations, and continuations in part together with the entire right, title and interest in and to said applications, any and to all divisional applications, continuations, and continuations in part thereof, the right to claim priority therefrom under the International Convention, and any and all Letters Patent which may issue or be reissued for said invention to the full end of the term for which each said Letters Patent may by granted; and hereby authorize the issuance to said assignee of any and all said Letters Patent not already issued as the assignee of entire right, title and interest in and to the same, for the sole use and benefit of said assignee, its successors, assigns or legal representatives; and hereby covenant and agree to do all such lawful acts and things and to execute without further consideration such further lawful assignments, documents, assurances, applications, and other instruments as may reasonably be required by said assignee, its successors, assigns or legal representatives, to obtain any and all Letters Patent for said invention and vest the same in said assignee, its successors, assignees or legal representatives.
SIGNED AT: Chardon, Ohio, U.S.A.
This 20th day of December, 2001
Federal Circuit’s Analysis
The patent in dispute, U.S. Patent No. U.S. Patent No. 6,217,742 (“the ‘742 patent”), had already issued by the signing date.
The district court granted Vector’s motion for partial summary judgment for ownership, finding that the assignment was unambiguous, that the ‘742 patent was a continuation-in-part of U.S. Patent 6,033,553 (“the ‘553 patent”), and that “the plain and unambiguous language of the [Assignment] assigns all rights in the 553 patent and any and all continuations-in-part thereof.” Slip op. at 4.
The Federal Circuit disagreed with the district court that the assignment unambiguously transferred ownership of the ‘742 patent to Vector. It noted that the language “refers to ‘applications’—plural—but ‘issued US patent’—singular.” Slip op. at 7.
Judge Newman, in her opinion concurring in part and dissenting in part, went one step further and argued that the assignment unambiguously does not convey the ‘742 patent because the ‘742 patent is a different invention from the ‘553 patent and thus was not for “said invention.”
Commentary:
It appears that Vector’s intent must have been for the assignment to cover all existing and future patents in the same patent family. Although the assignment contains broad language, it does leave slight ambiguity, as the Federal Circuit pointed out. Judge Newman’s position seems to be a little extreme, but yet still reasonable and sound, which further illustrates the danger of any ambiguity in the assignment.
From a policy (and law and economics) point of view, the Federal Circuit’s decision makes perfect sense. The burden should be on Vector to draft an unambiguous agreement, which would alleviate the needs for future disputes and the burden on other parties and the court system.
For the licensing professionals, the lesson is simple. Relying on the “any and all divisional applications, continuations, and continuations” may not be enough. Err on the side of caution, and be over-inclusive when drafting the assignment/licensing language. In this case, Vector could have included a sentence to state that the listing of specific patent(s) and patent application(s) is not intended to be exhaustive and the assignment covers any other patent(s) and patent application(s) that may exist.
Key Issue:
• Whether an assignment that lists an issued patent and all continuations to the issued patent, but leaves out a second issued patent that is a continuation to the first issued patent, cover the second issued patent?
Holding:
• If an assignment merely lists an issued patent and all continuations to the issued patent, but leaves out a second issued patent this is a continuation to the first issued patent, without other clarifying language, does not cover the second issued patent.
The Disputed Assignment (emphasis added)
I, JACK BENNETT, whose full post office address is 10039 Hawthorne Drive, Chardon, Ohio 44024, in consideration for $25,000.00 and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged do hereby sell and assign to VECTOR CORROSION TECHNOLOGIES LTD. whose full post office address is 474 Dovercourt Drive, Winnipeg, Manitoba Canada R3Y 1G4, all my interest in the United States, Canada and in all other countries in and to my US, Canadian, and European applications for patents and issued US patent, namely:
1. Issued US Patent 6,033,553. This patent claims the specific use of LiNO3 and LiBr to enhance the performance of metallized zinc anodes;
2. US Application No. 08/839,292 filed on April 17, 1997,
3. US Application No. 08/731,248, filed on October 11, 1996 (now abandoned),
4. EPO Application No. 99122342.1, filed November 9, 1999, and
5. Canadian Application No. 2288630, filed November 8, 1999,
any and all divisional applications, continuations, and continuations in part together with the entire right, title and interest in and to said applications, any and to all divisional applications, continuations, and continuations in part thereof, the right to claim priority therefrom under the International Convention, and any and all Letters Patent which may issue or be reissued for said invention to the full end of the term for which each said Letters Patent may by granted; and hereby authorize the issuance to said assignee of any and all said Letters Patent not already issued as the assignee of entire right, title and interest in and to the same, for the sole use and benefit of said assignee, its successors, assigns or legal representatives; and hereby covenant and agree to do all such lawful acts and things and to execute without further consideration such further lawful assignments, documents, assurances, applications, and other instruments as may reasonably be required by said assignee, its successors, assigns or legal representatives, to obtain any and all Letters Patent for said invention and vest the same in said assignee, its successors, assignees or legal representatives.
SIGNED AT: Chardon, Ohio, U.S.A.
This 20th day of December, 2001
Federal Circuit’s Analysis
The patent in dispute, U.S. Patent No. U.S. Patent No. 6,217,742 (“the ‘742 patent”), had already issued by the signing date.
The district court granted Vector’s motion for partial summary judgment for ownership, finding that the assignment was unambiguous, that the ‘742 patent was a continuation-in-part of U.S. Patent 6,033,553 (“the ‘553 patent”), and that “the plain and unambiguous language of the [Assignment] assigns all rights in the 553 patent and any and all continuations-in-part thereof.” Slip op. at 4.
The Federal Circuit disagreed with the district court that the assignment unambiguously transferred ownership of the ‘742 patent to Vector. It noted that the language “refers to ‘applications’—plural—but ‘issued US patent’—singular.” Slip op. at 7.
Judge Newman, in her opinion concurring in part and dissenting in part, went one step further and argued that the assignment unambiguously does not convey the ‘742 patent because the ‘742 patent is a different invention from the ‘553 patent and thus was not for “said invention.”
Commentary:
It appears that Vector’s intent must have been for the assignment to cover all existing and future patents in the same patent family. Although the assignment contains broad language, it does leave slight ambiguity, as the Federal Circuit pointed out. Judge Newman’s position seems to be a little extreme, but yet still reasonable and sound, which further illustrates the danger of any ambiguity in the assignment.
From a policy (and law and economics) point of view, the Federal Circuit’s decision makes perfect sense. The burden should be on Vector to draft an unambiguous agreement, which would alleviate the needs for future disputes and the burden on other parties and the court system.
For the licensing professionals, the lesson is simple. Relying on the “any and all divisional applications, continuations, and continuations” may not be enough. Err on the side of caution, and be over-inclusive when drafting the assignment/licensing language. In this case, Vector could have included a sentence to state that the listing of specific patent(s) and patent application(s) is not intended to be exhaustive and the assignment covers any other patent(s) and patent application(s) that may exist.
Friday, March 20, 2009
Tafas v. Doll: Round 2 of Battle on the USPTO’s New Rules
Case:
Tafas v. Doll, No. 2008-1352 (Fed. Cir. Mar. 20, 2009).
Ruling:
The USPTO’s Final Rules 75, 78, 114, and 265 are procedural rules that are within the scope of the USPTO’s rulemaking authority. Final Rule 78 conflicts with 35 U.S.C. § 120 and is thus invalid.
Affirm the district court’s grant of summary judgment that Final Rule 78 is invalid, vacate its grant of summary judgment with respect to Final Rules 75, 114, and 265, and remand for further proceedings consistent with this opinion.
Short Explanation of New Rules (note: quotation from the decision):
Final Rule 78 governs the availability of continuation and continuation-in-part applications. Under the rule, an applicant is entitled to file two continuation applications as a matter of right. 37 C.F.R. § 1.78(d)(1)(i). If an applicant wishes to pursue more than two continuation applications, he must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted during the prosecution of the prior-filed application.” Id. § 1.78(d)(1)(vi).
Final Rule 114 provides for similar treatment of RCEs. Under the rule, an applicant is allowed one RCE as a matter of right. Id. § 1.114(f). For each additional RCE, the applicant must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted prior to the close of prosecution in the application.” Id. § 1.114(g).
Final Rule 75 requires an applicant who submits either more than five independent claims or twenty-five total claims to provide the examiner with information in an examination support document (“ESD”). 37 C.F.R. § 1.75(b)(1).
The requirements for ESDs are set forth in Final Rule 265. To comply with Final Rule 265, an applicant must conduct a preexamination prior art search, provide a list of the most relevant references, identify which limitations are disclosed by each reference, explain how each independent claim is patentable over the references, and show where in the specification each limitation is disclosed in accordance with 35 U.S.C. § 112, 1.
Tafas v. Doll, No. 2008-1352 (Fed. Cir. Mar. 20, 2009).
Ruling:
The USPTO’s Final Rules 75, 78, 114, and 265 are procedural rules that are within the scope of the USPTO’s rulemaking authority. Final Rule 78 conflicts with 35 U.S.C. § 120 and is thus invalid.
Affirm the district court’s grant of summary judgment that Final Rule 78 is invalid, vacate its grant of summary judgment with respect to Final Rules 75, 114, and 265, and remand for further proceedings consistent with this opinion.
Short Explanation of New Rules (note: quotation from the decision):
Final Rule 78 governs the availability of continuation and continuation-in-part applications. Under the rule, an applicant is entitled to file two continuation applications as a matter of right. 37 C.F.R. § 1.78(d)(1)(i). If an applicant wishes to pursue more than two continuation applications, he must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted during the prosecution of the prior-filed application.” Id. § 1.78(d)(1)(vi).
Final Rule 114 provides for similar treatment of RCEs. Under the rule, an applicant is allowed one RCE as a matter of right. Id. § 1.114(f). For each additional RCE, the applicant must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted prior to the close of prosecution in the application.” Id. § 1.114(g).
Final Rule 75 requires an applicant who submits either more than five independent claims or twenty-five total claims to provide the examiner with information in an examination support document (“ESD”). 37 C.F.R. § 1.75(b)(1).
The requirements for ESDs are set forth in Final Rule 265. To comply with Final Rule 265, an applicant must conduct a preexamination prior art search, provide a list of the most relevant references, identify which limitations are disclosed by each reference, explain how each independent claim is patentable over the references, and show where in the specification each limitation is disclosed in accordance with 35 U.S.C. § 112, 1.
Tuesday, March 17, 2009
Marking Not Required When the Patentee Only Asserted the Method Claims
Holding: The Marking Statute, 35 U.S.C. § 287(a), Does Not Apply Where the Patentee Only Asserted the Method Claims of a Patent Which Included both Method and Apparatus Claims.
In Crown Packaging Tech., Inc. v. Rexam Beverage Can Co., No. 2008-1284 (Fed. Cir. Mar. 17, 2009), the Federal Circuit reversed the district court’s grant of summary judgment dismissing Rexam’s counterclaim based on a failure to mark, because it is “bound by our holding in Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075 (Fed. Cir. 1983)—that the marking requirement of 35 U.S.C. § 287(a) does not apply when only method claims are asserted.” Slip op. at 2.
The Federal Circuit observed:
“The marking statute, 35 U.S.C. § 287(a), requires that:
Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word “patent” or the abbreviation “pat.”, together with the number of the patent, or when, from the character of the article, this can not be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice. In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.
Accordingly, a party that does not mark a patented article is not entitled to damages for infringement prior to actual notice.”
Id. at 12.
However, in Hanson, 718 F.2d at 1082–83, the Federal Circuit held that “35 U.S.C. § 287(a) did not apply where the patentee only asserted the method claims of a patent which included both method and apparatus claims.” Id. Here, “because Rexam asserted only the method claims of the ’839 patent, the marking requirement of 35 U.S.C. § 287(a) does not apply.” Id. at 13.
In Crown Packaging Tech., Inc. v. Rexam Beverage Can Co., No. 2008-1284 (Fed. Cir. Mar. 17, 2009), the Federal Circuit reversed the district court’s grant of summary judgment dismissing Rexam’s counterclaim based on a failure to mark, because it is “bound by our holding in Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075 (Fed. Cir. 1983)—that the marking requirement of 35 U.S.C. § 287(a) does not apply when only method claims are asserted.” Slip op. at 2.
The Federal Circuit observed:
“The marking statute, 35 U.S.C. § 287(a), requires that:
Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word “patent” or the abbreviation “pat.”, together with the number of the patent, or when, from the character of the article, this can not be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice. In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.
Accordingly, a party that does not mark a patented article is not entitled to damages for infringement prior to actual notice.”
Id. at 12.
However, in Hanson, 718 F.2d at 1082–83, the Federal Circuit held that “35 U.S.C. § 287(a) did not apply where the patentee only asserted the method claims of a patent which included both method and apparatus claims.” Id. Here, “because Rexam asserted only the method claims of the ’839 patent, the marking requirement of 35 U.S.C. § 287(a) does not apply.” Id. at 13.
Wednesday, March 11, 2009
Notable Revisions on Chinese Patent Law: Compulsory License and Its Impact on U.S. Patent Holding Companies and Pharmaceutical Companies
As some of you may know, Chinese Patent Law has gone through revision recently. On December 27, 2009, the Chinese government has approved the revision and the new law will take effect on October 1, 2009. We provide our preliminary analysis below.
One significant change occurs in Chapter 6 – “Compulsory License of Patent Enforcement.” Previously, the law was not clear as to under what circumstances the Chinese government may impose a compulsory license. Pursuant to the old Section 48, if a potential licensee requested a patent license “under a reasonable condition,” but has not got the license after “a reasonable time,” the Chinese government may impose a compulsory license. No explanation was given as to what is a “reasonable” condition or time.
The new Section 48 is more detailed. It states now that a compulsory license may be imposed “if (1) after 3 years since the patent issued and 4 years since the application was filed, the patentee does not have a reasonable justification as to why it has not practiced or sufficiently practiced such patent, or (2) the patentee’s enforcement acts are deemed as a monopoly, and [the Chinese government may impose a compulsory license] to negate or reduce its monopoly effects.”
Note that the Chinese government also passed its first ever comprehensive anti-monopoly legislation in 2008. It remains to be seen, however, how this new anti-monopoly law will shape the IP policies in China.
Nonetheless, the new compulsory chapter appears to be the Chinese government’s response to limit foreign patentees’ ability to seek “unreasonable” royalties from Chinese companies. In particular, the new law will have serious consequences for licensing companies that do not practice the patents themselves, although it is not clear at this point whether a licensing company (i.e., a patent holding company) can rely on related corporate entities that do practice the patents to avoid compulsory licenses.
In addition, the new law beefs up the provisions for compulsory licenses in connection with national emergency and interest (presumably consistent with TRIPS). It adds a new Section 50, which provides that pharmaceutical patents may be subject to compulsory licenses.
Please stay tuned for additional analysis as we comb through the revision in the next several days.
p.s. Mei & Mark LLP has obtained a copy of a redline version of the new Chinese Patent law in Chinese. If you have any question regarding the revision, please feel free to contact Lei Mei, Esq. of Mei & Mark LLP at mei@meimark.com.
One significant change occurs in Chapter 6 – “Compulsory License of Patent Enforcement.” Previously, the law was not clear as to under what circumstances the Chinese government may impose a compulsory license. Pursuant to the old Section 48, if a potential licensee requested a patent license “under a reasonable condition,” but has not got the license after “a reasonable time,” the Chinese government may impose a compulsory license. No explanation was given as to what is a “reasonable” condition or time.
The new Section 48 is more detailed. It states now that a compulsory license may be imposed “if (1) after 3 years since the patent issued and 4 years since the application was filed, the patentee does not have a reasonable justification as to why it has not practiced or sufficiently practiced such patent, or (2) the patentee’s enforcement acts are deemed as a monopoly, and [the Chinese government may impose a compulsory license] to negate or reduce its monopoly effects.”
Note that the Chinese government also passed its first ever comprehensive anti-monopoly legislation in 2008. It remains to be seen, however, how this new anti-monopoly law will shape the IP policies in China.
Nonetheless, the new compulsory chapter appears to be the Chinese government’s response to limit foreign patentees’ ability to seek “unreasonable” royalties from Chinese companies. In particular, the new law will have serious consequences for licensing companies that do not practice the patents themselves, although it is not clear at this point whether a licensing company (i.e., a patent holding company) can rely on related corporate entities that do practice the patents to avoid compulsory licenses.
In addition, the new law beefs up the provisions for compulsory licenses in connection with national emergency and interest (presumably consistent with TRIPS). It adds a new Section 50, which provides that pharmaceutical patents may be subject to compulsory licenses.
Please stay tuned for additional analysis as we comb through the revision in the next several days.
p.s. Mei & Mark LLP has obtained a copy of a redline version of the new Chinese Patent law in Chinese. If you have any question regarding the revision, please feel free to contact Lei Mei, Esq. of Mei & Mark LLP at mei@meimark.com.
Thursday, March 5, 2009
New Test of Inventorship?
In Nartron Corp. v. Schukra U.S.A., Inc., No. 2008-1363 (Fed. Cir. Mar. 5, 2009), the Federal Circuit found that an alleged co-inventor “provided only an insignificant contribution” (i.e., contributing an “extender” ) to the invention of a dependent claim. Therefore, it reversed the district court’s grant of summary judgment of dismissal of the patent infringement complaint due to Plaintiff’s failure to join an alleged co-inventor and remanded the case to the district court for further action.
Key Issue:
• Whether an alleged co-inventor can claim co-inventorship when he contributed a sole, but insignificant, feature of a dependent claim?
Holding:
• An alleged co-inventor cannot claim co-inventorship when he contributed only an insignificant feature of a dependent claim.
Commentary:
In this case, the contributed feature was already in prior art and its combination with key inventive features was obvious. Therefore, the Court reasonably concluded that the contribution was too “insignificant” to justify the co-inventorship.
The Court appears to shift away from the traditional understanding that no matter how small one’s contribution to the invention is, as long as a person contributed to the invention, he is a co-inventor. Sure, it is reasonable to evaluate the “significance” of the contribution when determining the inventorship.
The problem, however, is that this rule moves away from a bright-line test and makes it very difficult to determine the exact inventorship when drafting an application.
For example, in this case, the Court seems to bring the obviouness analysis into the inventorship inquiry. This complicates the drafting process. On the other hand, if the feature in question is really obvious, what is the value of this dependent claim? And why did the applicant add that dependent claim?
A better rule would be to impose a small burden on each applicant to list all persons who contributed to the claims as inventors. In other words, simplify the inventorship inquiry by using the contribution test, and not the “significance” test. Leave the “significance” test to the invalidity analysis. This way, the Court would maintain a bright-line test for inventorship, which, in my humble opinion, is more cost-effective in terms of litigation costs and judicial efficiency.
Key Issue:
• Whether an alleged co-inventor can claim co-inventorship when he contributed a sole, but insignificant, feature of a dependent claim?
Holding:
• An alleged co-inventor cannot claim co-inventorship when he contributed only an insignificant feature of a dependent claim.
Commentary:
In this case, the contributed feature was already in prior art and its combination with key inventive features was obvious. Therefore, the Court reasonably concluded that the contribution was too “insignificant” to justify the co-inventorship.
The Court appears to shift away from the traditional understanding that no matter how small one’s contribution to the invention is, as long as a person contributed to the invention, he is a co-inventor. Sure, it is reasonable to evaluate the “significance” of the contribution when determining the inventorship.
The problem, however, is that this rule moves away from a bright-line test and makes it very difficult to determine the exact inventorship when drafting an application.
For example, in this case, the Court seems to bring the obviouness analysis into the inventorship inquiry. This complicates the drafting process. On the other hand, if the feature in question is really obvious, what is the value of this dependent claim? And why did the applicant add that dependent claim?
A better rule would be to impose a small burden on each applicant to list all persons who contributed to the claims as inventors. In other words, simplify the inventorship inquiry by using the contribution test, and not the “significance” test. Leave the “significance” test to the invalidity analysis. This way, the Court would maintain a bright-line test for inventorship, which, in my humble opinion, is more cost-effective in terms of litigation costs and judicial efficiency.
Monday, March 2, 2009
IP Stimulus Plan for Detroit’s Big Three
[[NOTE: This article has been published by IP Law360]]
More than ever, Detroit’s Big Three need an IP (Intellectual Property) stimulus plan. Forget the debate about the actual cost of labor for General Motors compared to Toyota. Leave that to economists! Like any average American, all I know is that American automakers need to come out with better cars. To do so, American automakers need to invest more in technology and innovation in order to make better cars. To stay competitive in the long term, however, they must also have an IP stimulus plan.
I am a patent attorney and, not surprisingly, I fully support President Obama’s call during his campaign for connecting and empowering all Americans through technology and innovation. Investing in technology and innovation alone, without a long term IP strategy, however, may not be sufficient to stay competitive in the marketplace, specifically when your competitor may copy the technology and make cheaper cars.
Even before this unprecedented economic crisis, American automakers were already in trouble for losing market share to their Asian competitors. Put aside this economic condition, American automakers’ dire situation is eerily similar to that of American semiconductor chip makers in the 1980s. If history provides us any lesson, that lesson is that American automakers need a sound IP strategy.
In the 1980s, Texas Instruments survived the market invasion by Asian semiconductor manufacturers. At the time, cheap Japanese and Korean memory chips flooded the U.S. market, driving prices down and putting U.S. firms out of business. In response, Intel exited the memory chip market. So did Motorola and National Semiconductor.
Texas Instruments’ survival, however, was primarily attributable to the effective utilization of patents against Asian companies. Before Texas Instruments, many companies used patents in much the same fashion as kids trading baseball cards. Texas Instruments, led by a patent attorney named Melvin Sharp, decided to sue its Asian competitors with patent litigation. For months, Texas Instruments’ team of patent attorneys and engineers painstakingly analyzed all its patents on memory chips and its competitors’ products. In the end, Texas Instruments sued many of its Asian competitors in a federal district court and before the International Trade Commission. The rest was history: Texas Instruments received about $1 billion in royalties over the next five years and, more importantly, Texas Instruments re-created a level playing field for competition in the memory chip market.
Indeed, Texas Instruments was arguably the first major American company that extracted any meaningful value out of its patents. And it gained competitive business advantages as a result.
Today, many challenges that American automakers face are the same. Yes, they need to make better cars. Yes, they need to invest in technology and innovation in order to make better cars. But American automakers also need to develop an IP strategy to stay ahead of the competition (assuming the auto bailout plan works). How about patenting the most valuable innovations and being prepared to assert intellectual property rights if that’s what it takes to regain competitive business advantages?
Unfortunately, American automakers are also losing the IP competition. The recent data from the United States Patent and Trademark Office indicates that Toyota files almost 40 times more patent applications than Daimler Chrysler, 10 times more than General Motors, and about 3 times more than Ford.
If American automakers do not step up their efforts in protecting their most valuable assets – intellectual property (i.e., technology and innovation), no matter how many auto bailouts or economic stimulus plans Congress passes, American automakers could be yesterday’s news. Therefore, they need an IP stimulus plan now!
More than ever, Detroit’s Big Three need an IP (Intellectual Property) stimulus plan. Forget the debate about the actual cost of labor for General Motors compared to Toyota. Leave that to economists! Like any average American, all I know is that American automakers need to come out with better cars. To do so, American automakers need to invest more in technology and innovation in order to make better cars. To stay competitive in the long term, however, they must also have an IP stimulus plan.
I am a patent attorney and, not surprisingly, I fully support President Obama’s call during his campaign for connecting and empowering all Americans through technology and innovation. Investing in technology and innovation alone, without a long term IP strategy, however, may not be sufficient to stay competitive in the marketplace, specifically when your competitor may copy the technology and make cheaper cars.
Even before this unprecedented economic crisis, American automakers were already in trouble for losing market share to their Asian competitors. Put aside this economic condition, American automakers’ dire situation is eerily similar to that of American semiconductor chip makers in the 1980s. If history provides us any lesson, that lesson is that American automakers need a sound IP strategy.
In the 1980s, Texas Instruments survived the market invasion by Asian semiconductor manufacturers. At the time, cheap Japanese and Korean memory chips flooded the U.S. market, driving prices down and putting U.S. firms out of business. In response, Intel exited the memory chip market. So did Motorola and National Semiconductor.
Texas Instruments’ survival, however, was primarily attributable to the effective utilization of patents against Asian companies. Before Texas Instruments, many companies used patents in much the same fashion as kids trading baseball cards. Texas Instruments, led by a patent attorney named Melvin Sharp, decided to sue its Asian competitors with patent litigation. For months, Texas Instruments’ team of patent attorneys and engineers painstakingly analyzed all its patents on memory chips and its competitors’ products. In the end, Texas Instruments sued many of its Asian competitors in a federal district court and before the International Trade Commission. The rest was history: Texas Instruments received about $1 billion in royalties over the next five years and, more importantly, Texas Instruments re-created a level playing field for competition in the memory chip market.
Indeed, Texas Instruments was arguably the first major American company that extracted any meaningful value out of its patents. And it gained competitive business advantages as a result.
Today, many challenges that American automakers face are the same. Yes, they need to make better cars. Yes, they need to invest in technology and innovation in order to make better cars. But American automakers also need to develop an IP strategy to stay ahead of the competition (assuming the auto bailout plan works). How about patenting the most valuable innovations and being prepared to assert intellectual property rights if that’s what it takes to regain competitive business advantages?
Unfortunately, American automakers are also losing the IP competition. The recent data from the United States Patent and Trademark Office indicates that Toyota files almost 40 times more patent applications than Daimler Chrysler, 10 times more than General Motors, and about 3 times more than Ford.
If American automakers do not step up their efforts in protecting their most valuable assets – intellectual property (i.e., technology and innovation), no matter how many auto bailouts or economic stimulus plans Congress passes, American automakers could be yesterday’s news. Therefore, they need an IP stimulus plan now!
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