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The Big Patent Picture: A Strategic Overview of The Patent Ecosystem, Including Patent Procurement, Licensing, Investment, Enforcement, and Defense

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The Big Patent Picture: A Strategic Overview of The Patent Ecosystem, Including Patent Procurement, Licensing, Investment, Enforcement, and Defense

This course provides an overview of the essentials of Intellectual Property (IP) that all attorneys and entrepreneurs should know, including the types of IP, procurement basics and strategies, enforcement, defense, and how to mitigate IP litigation risk. The course further provides an overarching explanation of the full patent lifecycle as to enable participants to assess whether, why, how, and when obtaining patent protections might be worthwhile for a particular business endeavor.


Larry Sandell
Mei & Mark


Larry Sandell - Good day. My name is Larry Sandell. I'm a patent attorney and litigator with Mei & Mark LLP. Today I will be presenting the big patent picture, a strategic overview of the patent ecosystem, including patent procurement, licensing, investment enforcement and defense.

So in today's presentation, I will start with some intellectual property, 101, speaking about the different kinds of IP that are available in the U.S. and in most other countries as well. I'll move towards talking about the two sides of the patent coin. That includes excluding others from practicing your patents, as well as avoiding infringement of other companies or other people's patents. Talk a bit about patent procurement strategy, how companies and inventors can preserve their IP rights from day one and some tips for building a valuable and effective patent portfolio. From there, I'll move to speaking about what patent enforcement and defense is and what it might look like. Just a little preview and some of it's many forms, as well as talking about freedom to operate analysis and how companies can mitigate their risk of infringing others IP.

So for types of IP protection, one to the forefront of my mind, usually in many others is utility patents. And these are generally the patents that people are referring to where you hear the word patents. And utility patents, protect technological inventions and that can include machines, software algorithms, formulas and various processes and methods. Another form of patents are design patents and those protect ornamental designs, but not actually a functional portions of products. Then there are trade secrets and trade secrets can be used to protect things that are, as it sounds kept secret, but if people figure out trade secrets on their own in fair manners, then it actually is no longer protected. Trademarks protect words or symbols that are used to designate a products origin and copyrights protect writings, illustrations in other works of authorship.

So in protecting your IP, it's supported consider first of all, what are you trying to protect. When you talk about protecting your technology, often we're looking at utility patents or trade secrets and in a little bit, I will get into how you sort of decide which to protect, but also designed patents can be used to protect user experience designs as well as graphic user interfaces and software code can also be protected by copyright. When you're referring to artistic expression, copyright is the main form of IP that protects books, novels as well as music of course, and movies and videos, but design patterns also do protect some artistic expression so long as it's embodied as an ornamental design for an actual product. For branding trademarks are the main IP protection. However logos can additionally or alternatively be protected as copyrights. And finally for business ideas, usually we're looking at NDAs or trade secrets as well as trust is always a very important one because enforcing NDAs can be very difficult in many situations.

So turning to utility patents. I'm gonna start at the beginning with the basics here. The anatomy of a utility patent includes the specification, which is a written description of what is being invented, what has been invented, how it can be used and various versions or embodiments of the invention. Most patents also include figures that illustrate various aspects of the invention. It's not required for all patents, but it's generally a good idea if the technology lends itself to additional illustration with figures. And the legally operative part of the patent is the claims at the end, the claims describe what the patent owner actually has exclusive rights to. The claims can sort of be thought of as the property lines that protects your invention. If somebody else does something, sells a product or uses a method that falls strictly within your property lines, within the scope of your claims, they would be infringing your patent. Unless of course you've given them permission to do so via a license. So broader claims that have a larger scope can be harder to get, and they can be more valuable, but they may be less likely to stand up to legal challenges if you attempt to enforce your patent as I'll discuss a little later. Narrower claims or claims having a narrower scope of protection, tend to be easier to get, but they're also easier for a competitor to design around. A competitor can sell a product that's very similar to your claimed invention, but if they changed certain details to get outside the scope of these narrow claims, they would no longer be infringing your patent. And when you pursue a patent, you get up to 20 claims included in the USPTO filing fee. So it's nice and probably best practice to get some broader claims, giving you good breadth of protection, as well as narrow claims where you can be a little bit more confident that if you end up in litigation, these claims will not get knocked out.

So on this next slide, I provide an example of a utility patent. On the left shown is a figure 3d, from a patent that I prosecuted and was issued for a client of mine. And in the left, you can see it's a light box that it can be used for growing plants. There are a number of numbered elements and those elements are described at further length and the specification in the written description. And then on the right side, we have first claim one, which is called an independent claim and below that is claim two, which is a dependent claim. So in claim one, you can see that the claim is introduced by reciting a light wall for cultivating at least one plant indoors comprising. So this is the basic description of what is actually being claimed. And then below that are the claim elements. And in order to practice this invention or to infringe this claim, a product would have to meet all of the claimed elements below. So the first element is that the light wall has to comprise a first side, a second side, top side, bottom side, front side, and backside. Now those elements say not be so limiting, but they're very useful for reference as the clay moves on. A light wall has to also include a first lighting structure housed within the space, defined by the sides and a first set of mechanical devices that are configured to enable movement of the light wall. And then below those elements of the claim, there is a wherein clause and then further elements are listed. The lighting structure unit is configured to provide light to at least one plant through at least the first side. And it goes on and on, but the important thing to know is that these are the property lines in order for a competitor's device to infringe this patent claim, it has to meet each and every one of these elements. If a competitor can design a light wall that perhaps has many of the similar characteristics, but doesn't meet every single one of these elements, it would not be infringing. And that's what we call a design around.

And then below claim one, the independent claim, because it stands on its own is claim two. This is a dependent claim. It states the light wall of claim one where in the first set of mechanical devices comprises a set of wheels dispose on the bottom side. So essentially what this dependent claim does is it adds one additional element. So it is of narrower scope than the independent claim. It's a little bit more difficult to infringe because you have to hit that element as well. But that dependent claim is important to have because if independent claim one was knocked out, if during a litigation and accused a infringer of the patent, found some prior art, some earlier patents or some earlier publications that made everything in claim one obvious or showed absolutely everything in claim one, claim two might still survive. Cause claim two by itself might not be obvious.

So moving on to other basics of a utility patents, the life of a utility patent is 20 years from the original filing date. And it is to emphasize that the filing dates for patents are quite unforgiving. There are a number of events that can occur that can prevent you from having a patent. It can permanently foreclose your patent rights. So the first limitation for the filing deadlines is that your patent application must be filed before anybody else either files a patent on the same invention or publicly discloses the invention. So if the invention is out in the public, because somebody else perhaps invented it at the very same time and posted it on the internet or began to sell the same invention on the internet or anywhere else, really that is going to prevent you from filing a patent on the design. If it comes to your own use of the device, you have a 12-month grace period. That's in the U.S, Canada as well has a 12-month grace period, but most countries in the world do not give you any grace period at all.

So accordingly best practices to file a patent application before you offer your product for sale, before you use your product publicly, or before you even speak publicly about your product or your invention. Patent prosecution refers to the process of negotiation between your patent attorney and a patent examiner at the U.S Patent and Trademark Office, which is often abbreviated as USPTO. And in essence, the USPTO is examining the patent application to ensure that the claims are written properly, that the claim subject matter is novel. That is it's totally new and that it is not obvious in view of the prior art. The patent examiner conducts searches for prior art that may predate your application and this prior art may include other older patents, other published patent applications, academic publications. The patent office also looks in various databases, looks at foreign patents, can search the internet to see what else is out there and especially before your application was filed. And the process of patent prosecution typically takes between one and three years.

 A lot of this depends on how busy the particular technology unit, where your application ends up is. And while most patent application prosecutions fall within that rough range, I've seen a few that have been completed before that and many that fall after that, especially if it's contentious between the patentee and the patent examiner and there's disagreement. So an application will publish after 18 months of its filing date by default. And this publication is required if you intend to file your patent application abroad in other countries, that's as a result of a number of treaties between the U.S and many other countries to essentially consolidate patent practice. So it sort of works together. If you'd prefer to operate in a stealth mode and you're not filing internationally, you can request that the patent office not actually publish your application while it's an application.

Of course, when you have a patent that's issued at that point, it's going to be published. But if there's a question as to whether or not you think they will issue, and you'd like to protect your secrecy ahead of time, often requesting non publication can be a good idea. So turning to design patents. While utility patents as they name their name sounds, focused on utility design patents are focused on ornamental design. So these patents protect ornamental aspects of your design, but not the functional features, which is essentially the opposite from utility patents. And whereas utility patents expire 20 years from the application date, the life of design patents is 14 years from the date the patent is issued. So this can allow people to essentially continue prosecution of their design patents or file what are called continuations of design patent applications. And it's effectively extend the life of their design protection by protecting different aspects of their designs.

So in a design patent, the patent attorney can select which features are actually part of the design patent claims and which are there merely for context. And I'll refer to figures one and two of the electrical outlet at the bottom of the page, you can see that and a lot of the lines for the electrical outlet including the top and the back portions, those are all dashed lines. Well in this design patent, those aspects are considered contextual. So those aren't actually part of the claim. If somebody copies the claimed aspects, which are the aspects that are shown in solid lines, which is basically the structure, the way that the various USB ports, as well as the AC outlet plugs are positioned, if that part is copied, but the back of the outlet is changed, it would still fall within the claim scope because here, what is claimed is the structure well, is the positioning of those aspects. That's the design because of course there are many other ways in which an outlet face can be designed, but it's this particular ornamental aspect, the way that it looks that is being protected.

So in addition to physical products, design patents can be used to protect designs for applications on computers, on smartphones, graphic user interfaces, and the like, and on the right, I have an example from another patent that essentially protects a way of flipping a page in a computing device. And so you can think of this as almost a flip book, whereas the page starts to turn in figure one, continues to turn in figure two and is almost fully turned in figure three. This is the graphical user interface. This animation is protected by the design patent ad issue. So turning to trademarks, the life of a trademark is a bit longer. It is perpetual provided that the mark, the branding is continued to be used in commerce. And what a trademark essentially does is allow you to exclude others competitors and the like from using your marks, your branding, as well as confusingly similar marks in the space where it's protected. So there are federal trademarks, which protect your branding nationwide in order to get a federal trademark registration, which is designated by an R with the circle around it, they must be used in commerce. Commerce doesn't have to be wildly successful, but it must be legitimate in commerce.

And it is split by classes. So if you are using your particular brand in internet sales context, there are specific international classes, which you can apply into and your brand will be protected in that class and those around internet sales. But if somebody uses a similar brand to protect something entirely different, say plumbing supplies that are not actually sold on the internet, they can be relatively secure that they're probably not infringing your trademark there. So in addition to federal trademark applications that are filed based on a product or service being in actual commerce, you can also file what's called intent to use applications. And essentially these a savior place in line. Typically they're used for businesses that have not yet launched, but are starting to develop goodwill, or they're starting to expand significant resources to put together their launch campaign or advertising campaign. And it would be a shame if somebody else swooped in and began using the mark and filed their federal trademark before they had the chance to. So an ITU application gives them a chance to reserve their spot so long as they have a bonafide intention to use that mark in commerce moving forward. There's also what are called common law trademarks and those are typically designated by having a TM after the brand or after the mark. And common law trademarks are a bit harder to enforce because the owner of the common law trademark has to proved the distinctiveness of their mark before they actually can succeed in proving infringement. However, that distinctiveness is presumed and when you have a federal registered trademark it's essentially earned or presumed by way of going through the federal trademark registration process. So for common law trademarks, you don't actually register them. You might have your registration in progress for a federal trademark as well, but the actual register registration, there's no actual registration process. For the most part, if you believe you have a distinctive name, a distinctive brand that you want to protect, regardless of whether or not you're pursuing federal trademark rights so that you can use that R after, it's generally a good idea to put the TM after every use of your name, because that signals to your competitors and it signals to the world that you believe that you have a valid distinctive mark, and you're using it in commerce and others should not be using that same mark.

There are also state trademark registrations. Most if not all states allow marks to be registered within the states and those state trademarks offer local protection within that state. And if you're a business that does not intend to, or does not do any interstate commerce, which is I suppose fairly few businesses these days, but still there are some state trademark registration might be the way to go. It's typically cheaper, quicker and easier, and of course, protecting your marks with multiple forms of trademark protection can always be a good idea.

 Turning to copyright. The life of a copyright, copyright IP rights are extremely long. They are the creator's life. The person who created the expression being protected. It's 70 years from the date of their death. If it's a work for hire, a company hired somebody to create something it's 95 years from the publication of that work of expression. So copyrights last a quite a long time, they protect you from actual copying as the name sort of suggests, but it doesn't protect you from independent creation and it protects the form of the presentation, but not the general idea of the concept. And copyrights are commonly used in art, music, movies, TV, books, and so on and so forth. Copyright can also be really great to protect websites, to prevent competitors from either, you know, ripping off the artistic expression of your website, which may include graphics or a precise way it looks, but it may also include things like customer reviews. There are plenty of instances where customer reviews have been ripped off directly, and it can be good to protect those. Copyright can also be used to protect software source code, and it's commonly used to do that.

However, it's important to note that the copyright protects the written expression of the code itself. So the way that it is written, it prevents certainly wrote copying as well as slight changes to the code that could be made, but it does not protect the overall algorithm that a certain software might use that might be protectable versus a utility patent. But by that same token, the utility patent would not protect the actual expression being used. And obviously there's a bit of a grey area in between and the strongest protection is to protect it from both sides, but protecting source code with copyright can be helpful because it protects your software if somebody may be able to, for example, look at the HTML on your webpage and then directly copy that. So copyrights are registered with the U.S Copyright Office. They're not substantively examined. And common law protections for copyright are there, you don't actually have to register your copyright to receive protections, but is much, much harder to enforce copyright infringement if you have not registered with a copyright office. Finally, the last major IP form that I'll touch upon here are trade secrets and a trade secret is any business or technical information that has economic value. It's not generally known by or available to the public and it's subject to reasonable efforts to preserve its secrecy.

So if you hit those three elements, you generally have a trade secret and a trade secret is protected from people who obtain access to the trade secret through improper means or misuse the secrets gained through lawful access. So obtaining access through improper means, if you have trade secrets and you keep them on an internet accessible database, so long as they're subject to reasonable efforts to preserve secrecy, keep it under password protection, perhaps also use a proper encryption depending on, I guess, the level of the secret. If somebody is able to hack into that and steal your trade secrets, you can file suit against them for improperly exploiting your trade secrets. Also people who misuse secrets gain through lawful access. If you have an employee who has, you know, signed appropriate forms, saying that they understand the secrecy of certain data, perhaps they have access to your customer lists during the course of their employment, and they keep them on their computer, take 'em home. If at some point they leave your employment and then use your customer lists that they had gained lawfully in the past, but use your customer list to create their own business, they are misusing your trade secrets and you can file suit against them to prevent, to stop that, to potentially obtain damages and potentially receive court orders to force to them to stop. It's important to note your trade secrets must be kept secret. The best practice is to implement formal policies for your companies. Having NDAs religiously signed by your employees by third party vendors you use and then of course have any digital files be adequately protected by passwords and additional stronger protections as well.

So with that'll move to the next potion of the presentation. I'd like to talk about the two sides of the patent coin to large extent, this applies to other forms of IP, but it's really important to think about IP protection. Having both of these aspects, a patent is fundamentally a right to exclude others from practicing a certain technology. And technology that is not patented defaults to the public domain. So the two sides of the patent coin are what your patents allow you to and the tails I have here is what other people's patents or other companies patents may prevent you from doing. So your patents will allow you to exclude or prevent competitors from practicing your claims. You can enforce your patent against them if they do so. It allows you to give permission to others, to practice your claims. This is commonly referred to you as a license. You can sue and collect damages from infringers, which are of course, people who practice your claims without your permission and it's important to emphasize that your patents do not actually allow you to practice your invention. It's quite likely that you can legally practice your invention, but your invention and practicing your invention possibly could infringe somebody other's patent, somebody else's patent.

For example, maybe you have a patent to a certain, very specific toy car, but the way they that you install the battery in that toy car might be subject to another person's patent. So it's possible that using that toy car or selling that toy car could infringe another person's patent, even though your patent is directed exactly to that toy car. It's also important to note that you don't have to actually use your invention to get a patent. You don't even actually have to assemble it in many cases so long as your patent application sufficiently describes how somebody could put it together. So turning to tails, the other side of the IP coin is other people's patents. And so on one hand, the heads allows you to exclude others and the tails is you being excluded. So other people's patents can in a substantial liability if you end up infringing them. And of course other people can prevent you from using your own invention without a license if a component of the invention is patented and you need their permission. So to preserve your patent rights, there's something called provisional patent applications.

Now provisional patent applications are not actually examined by the patent and trademark office and by themselves, they will not turn into actual patents. What they do is they save your place in line. In the beginning of this presentation, I spoke a bit about the unforgiving deadlines for patent prosecution. Provisional applications are a great way to protect yourself from those deadlines. It's good to get a provisional on file before any disclosure or offer for sale is made. And it's also a great idea to include many ways as to how your invention might work within the provisional application. So a provisional application expires after 12 months and within that 12 month period, if you do ultimately intend to get a patent, you'll have to file a non provisional patent application. And what's really great about provisional applications in addition to the fact that their filing fees are quite low, generally 150 to $300, depending on the size of your company is that they remain confidential after they're filed and unless a non-pro provisional patent is filed based on the provisional and that non provisional patent application is either ultimately issued, or if it's published after 18 months. So provisional applications can allow companies and inventors to essentially postpone their decision as to whether or not to protect their IP, their technological IP as a trade secret or as a patent. So it's important for a provisional patent application to have an adequate and a thorough disclosure while the patent office is gonna accept any piece of paper, any writing, and it will be a provisional patent, provisional patent application without an adequate disclosure, it's not worth much more than just saying, "Hey, I have a patent pending." So it's always a very good idea to engage a patent attorney, to be involved in preparing a provisional application. But if you have to do it yourself as a result of lack of resources or extremely compressed time, perhaps 'cause a disclosure is about to be made or was made 11 and a half months ago, it's good to ask yourself if the average engineer in your field could make the invention, could put it together after reading the patent application, that's a good rule of thumb to assess whether it has an inadequate disclosure. But again, engaging patent council is the better way to go.

Turning towards international protections. There's something called a PCT application that stands for Patent Cooperation Treaty application. It essentially allows you to save your place in line in a similar manner as a provisional patent application, but allows you to do so internationally. So as I mentioned earlier, in most countries in the world, any pre-filing public disclosure of your technology or offer for sale will preclude you from obtaining patent rights in those countries. What a PCT application does is it allows you to preserve your rights across the board, even for very large companies that can be extremely expensive to prosecute patent applications around the world at the same time. And what the PCT does is it allows you to kick that can down the road a bit. So it actually gives you 30 to 32 months from the original priority date, which might be when you file the provisional to file in almost every country that you might be interested in. That's the U.S, that's the Canada, that's the European Patent Office, that's the European Union, as well as United Kingdom, Mexico, China, Japan, South Korea, Australia, Russia, Brazil, African countries, Israel, Taiwan is actually not a part of this treaty. It's the main notable one that's not part of it. A PCT application is actually examined. It has to be formally proper, which is a distinction from a U.S. provisional application and at a certain point you file it internationally and then if you'd like to file in one of the PCT countries, you file, what's called the national phase application. And in the patent office of that country, they're able to look at the international examination of the patent application and that can essentially be their starting point for determining, if and what patent rights you should get.

So why get a patent? Patents can create value and of course the type of value and the degree of value will differ by the business and will differ by the industry. But patents can provide corporate value by providing a competitive advantage. Perhaps your employees have developed the most efficient way to conduct a certain process and that can give you an edge, 'cause your competitors may be barred from doing it. If it can give you an indirect offense to your competitor's patents, perhaps your competitor has accused you of infringing one of their patents, having a patent that they may be infringing can be extremely helpful for negotiation. Essentially you can cross license the patents to one another money may or may not also change hands, but rather than having a large drawn out lawsuit with your competitor where you each fight each other, you might be able to declare peace and essentially license your respective patents to each other.

Of course, patents because of these things can increase the company value to investors as well as potential acquirers, acquiring companies may see even more value from patents that you own than your company sees in its actual operations. And then there are also potential revenue streams from licensing your technologies, from selling the patents and then of course also from suing infringers can be used to create a revenue stream. And what makes a patent claim set valuable? I spoke about this a little bit earlier. If you can box out the competition and prevent them from engaging in the same type of commerce, by taking exclusive rights to a technology that's great or perhaps just the most efficient way of doing it. It's good to have broad claims that are very difficult for competitors to design around and it's also good to have narrow claims, which may be hard for a competitor to invalidate during litigation, which I will get into in a minute. And finally, it's good to have claims for which potential infringement might be observable. There are especially method claims that might be infringed by your competitors, but if you have no insight as to how they conduct an actual process and really no clue whether or not they're using your most efficient process or not, that that makes enforcing the patents a risky proposition for you. So it's also good to draft claim sets that for which the elements are satisfaction of all the claim elements are observable from the outside without that secret knowledge of exactly how your competitor is doing it.

So one aspect of patent strategy is to build a portfolio. I'm gonna touch quickly on continuation applications, which are called CONs often and continuation in part applications, which are called CIPS CON applications are patent applications that claim priority to another non provisional patent application. And these can be filed at any time so long as the parent application, the patent application that priority is claimed from is still pending. And essentially that means that parent application has not yet been abandoned and it has not yet fully issued. So the specification, the written description and the figures are going to be the same generally and the priority dates generally the same, but you're able to draft a totally new claim set so long as it's supported by that original specification and figures. And it's even okay to draft claims so that with the eye towards the competitors so that that competitor's product were in fringe. But again, the claims have to have support in that original specification in those original figures.

So continuation and part applications are similar except new subject matter can be added to the specification in the figures as well as the claims and the priority date for each claim is decided independently depending on when its subject matter was initially filed with the U.S Patent and Trademark Office. And the USPTO won't as a general rule, determine what a priority date for a particular claim is, unless it finds some prior art that has come about between the priority dates. And so as a result of this competitors really have to assume that the priority date for each claim is the original priority date, unless they intend on having a patent attorney really, really take a deep dive and a given assessment suggesting that perhaps a later priority date should be used. But again, it's only really a court that would make that determination ultimately. So there's risk for your competitors there and that's one reason why CIPs can be valuable. So it's also can be good to draft what I call omnibus patent applications that includes subject matter, that you don't plan on claiming immediately, but you might wanna claim later in future or continuation or potentially CIP applications as well. And so this preserves your rights and it can delay filing costs for sets of patent claims that may not be as essential, but later on down the line, you might want to obtain, if you have the resources then.

It's also worth noting that utility patent applications can provide priority to design applications. So it can be worthwhile to include extra figures that show ornament designs just in case you'd wanna file design patent applications later on. So let's talk a bit about patent enforcement. This is a very large topic in and of itself, but I'll just talk briefly about what patent litigation looks like in federal district courts. Patents are a federal grant of rights and so when patent infringement is determined, it is in federal courts. This is not something that ends up in a state court. It's a federal question. The main aspects to patent litigation are first claim construction and claim construction is essentially interpreting the words that are in the claim. So what does a patent claim actually mean? And typically the patent owner and the accused infringer will fight over this with the patent owner, trying to ensure that the claims are broad enough to cover the accused infringer's product, but narrow enough to avoid the prior art and the accused infringer will do essentially the opposite. There we will try and get a claim construction that will be either too narrow so it doesn't cover their product or so broad that it includes the prior art rendering, the patent obvious or anticipated or perhaps both. So there's fact discovery in the patent litigation and there's expert discovery where each side has experts who will talk about the technical aspects of the technology, arguing about infringement sometimes about claim construction, as well as whether or not the patent was invalid.

So infringement of course, is a major part of patent litigation and invalidity is another major portion. Patents are presumed valid once they're granted by the U.S. Patent and Trademark Office. So an accused infringer actually has to prove that a patent is invalid by clear and convincing evidence. Then there are patent damages by statute. Damages for patent infringement are at least a reasonable royalty. What is a reasonable royalty? Many pages have been written and much ink has been spilled on that. There's a large body of law on that and that's also another matter for experts to argue over. A patent owner can also obtain lost profits if they can prove that they would have made more profit, but for the accused infringer's infringement. And finally, a lot in a lot of cases, there's an attempt to prove that the infringement was willful, that is the accused infringer knew about the patent and proceeded in their course of conduct anyway, and that can potentially trouble damages. Injunctions are also available for patent infringement. They're a little bit difficult to come by, but they're not extremely rare and then appeals go to the federal circuit in all patent cases.

Sometimes appeals happen right after claim construction. Claim construction is decided by the judge as a matter of law. And in many cases, a certain claim construction might preclude a victory by either the patentee or the accused infringer. And it can be worthwhile to say, well, if this claim construction stands, this is how the case is ending up. So we're appealing the claim construction and in that manner, claim construction might happen then in appeal and then the case goes back to the district court for the rest of the litigation, or maybe settled entirely after the claim construction. So there are also declaratory judgment actions in the patent context, and that those allow it accused of infringer to strike first and clear the air. If the patent owner is threatening suit, at least implicitly or restraining the business of an accused infringer using the patent, then the accused infringer can strike first, essentially this reverses the roles, the plaintiff is the person who's been accused of patent infringement. And the defendant is the patent owner and effectively the plaintiff in these cases will assert non-infringement and in validity and then the defendant comes back with a counterclaim saying, we are now asserting infringement, and we will defend against your invalidity argument as well.

Another major venue that's used for a patent enforcement is the U.S. International Trade Commission. And the U.S. International Trade Commission it's under section 33 and it's essentially a trade remedy that addresses unfair competition in imports into the United States. And so damages are not available from the ITC, but what you get if you win at the ITC is an exclusion order. And essentially us customs and border protection will prevent your competitors' product from entering in the United States, which effectively can act as an injunction and as a result of that sometimes, and quite very often, there can be negotiations during ITC proceedings or after ITC proceedings that enable cash settlements to release these exclusion orders and whole, or in part. The ITC has nationwide jurisdiction and it addresses unfair acts that occur over seeds so long as the goods are imported into the United States. If the goods are manufactured into the United States, the ITC is probably not for you to enforce your patents. Many of these cases focus on patents, but the ITC cases under section 337 are not limited to patents. There's also trademark enforcement, copyright enforcement, as well as other unfair competition that's out there. And there is no jury trial. It's an administrative of law judge that rules in the ITC. So just to compare quickly, the ITC and district court patent litigation in district court, there are damages, usually that's what you're going for. And there's some potential for an injunction, but it can be tough to come by. In the ITC, there are no damage available and there essentially is an automatic injunction against importation if you are successful. In district court, very few cases actually make it all the way to trial. Usually it will go somewhere along the way, patent litigation is very expense between the specialized attorneys and the specialized experts. So only about 3% of cases actually make it all the way to trial. In the ITC it's about 40%. As far as win rates, in the district court the patentees win about a third of the time and in the ITC, the patentees win a little over half the time. Time to trial is a major distinction here. In district court, it's trial happens two to three years from filing of the case. So that can take a while. It's a drawn out battle. The ITC, however, is extremely fast, nine to 10 months from institution is when trial happens. A lot of this is due to statutory requirements.

Another major distinction is what's called domestic industry, and that is whether or not the patent owner practices, the patent or essentially sells products that patent, patent uses the patent in commerce. So in district court, this isn't required. If you're looking for lost profits however, you need to demonstrate how you've lost profits. So it's essentially going to be necessary. In the ITC, the complainant who's the plaintiff of the ITC must demonstrate that they have a domestic industry that exploits the patent. Lot of law on that. I'm not gonna get into the details there, but the short story here is that if you just own a patent and you'd like to get an exclusion order preventing a competitor or a potential competitor from bringing their product into the United States, you are going to have to be able to prove that you use the patented technology in the United States or license it appropriately. So one defense to patents, other than defending within a lawsuit that you've been sued or filing the declaratory judgment action is inter parties review at the USPTO. And this is important to knock out a threatening patent, it's an opportunity, you can knock out a threatening patent at a reduced cost and at an increased speed. Essentially it's a mini litigation at the U.S Patent and Trademark Office.

One advantage for potential infringers in attacking a patent at the USPTO rather than in district court, is that the standard of review is lower in the district court, as well as at the ITC. The standard of review for patent in validity is clear and convincing evidence. It's pretty tough to knock out a patent because it is presumed as a matter of law that the patent office did their job in examining the patent. However, if you're back back at the USPTO, the standard becomes preponderance of the evidence. So just over 50% likelihood that it is invalid. So that can be very helpful. There are a couple reasons to file an inter party's review at the USPTO other than fully knocking out the patent. One way is to obtain leverage, if you want to obtain a license to the patent, this happens with some frequency. A company may be wary of a certain patent if they file an inter party's review. Now, all of a sudden the patent owner is worried that their entire patent might be knocked out and they may grant a license to the company who filed the IPR at unfavorable terms. And this might be actually really, really great even a better result than knocking out the patent for the company that filed the IPR, because other competitors out there would still have to deal with this patent out there, but a license on good terms allows them to get around it. And as well federal judges can also stay just record patent litigations, pending results of IPRs.

So another place where patents are now sometimes enforced is by private companies. I'll refer to here, who's Amazon who appears to be sort of far away in this process. Amazon has a proceeding called Amazon Neutral Patent Evaluations. And the idea here is that Amazon will provide through a neutral evaluator who is not formally part of Amazon will provide an initial assessment of infringement. And Amazon can then rely on that to decide whether or not to take down items from their website. So for $4,000, a patent holder can assert that listings on amazon.com infringe their patent and the listers, the sellers can object to this and say, we do not believe that we assert the patent and they can pay $4,000 themselves to engage in this proceeding. So at the end of the day, the $4,000 from the loser of the proceeding is kept by the neutral patent evaluator to pay them for their time. But the proceeding is very cheap and very quick, there are only three briefs in the entire proceeding, the opening brief by the patent holder or the opposition brief and the reply brief. There's no discovery, there's no trial, there's no oral argument. And usually it's about 10 to 12 weeks for the entire proceeding. And again, you know, the only remedy is removal of the offending listings on amazon.com. The proceeding, which is somewhat of a disadvantage to the accused infringers only looks at infringement. There's no way to argue that the patent is invalid that is unless you are selling the product on Amazon before the patent was actually filed for. There's no appeals, there's no reconsideration, but if you ultimately win in a district court or in the ITC or at the USPTO in knocking out the patent or proving non-infringement, Amazon is going to refer to that ruling. It's also worth noting that Amazon only offers these Amazon Neutral Patent Evaluations for products that are sold by third party sellers. They don't allow products that Amazon itself sells to undergo these proceedings.

So I'm gonna touch a bit upon freedom to operate before ending this presentation. This is how companies can best protect themselves from IP lawsuits. There's no perfect protection here, but there is due diligence that can be done to really reduce the risk. Typically they look to their competitors. What is their competitor actually doing? What are the patents that their competitor has? It's worth doing a freedom to operate, looking at competitor patents out there before a product is launched and maybe even before fully investing in product development, if that's going to be resource intensive, sometimes you see published patent applications of patents that have not yet issued and have not yet been abandoned. And those can be a little bit dangerous 'cause as we discussed your competitor might be able to look at what you're offering and redraft the claims to focus on it. But ultimately the freedom to operate analysis can give some peace of mind because it does reduce the risk of IP lawsuits. So if a freedom to operate analysis finds patents or applications of concern, there are certain things that can be done to mitigate the risk. One is to obtain formal opinions of counsel to reduce risk of willfulness determinations.

So if you don't believe that you'd actually infringe this patent, but perhaps there's some claim constructions or arguments that would support infringement, it can be a very good idea to go to patent counsel and ask them to assess this matter. And often a formal opinion is drafted up. And in many cases, the opinion of counsel will state that it's the opinion of that competent patent attorney, that there is no infringement or perhaps that the patent ad issue is invalid. And so while that opinion may or may not win the day in a litigation many years down the road, it's very valuable to the potential infringer because it gives them a good faith. It can give them a good faith basis that they're not willfully infringing. They don't believe they're infringing. They have a good reason to believe they're not infringing. And as a result, even if they're ultimately found liable of patent infringement, likelihood of getting trouble damages, against them is greatly reduced. Other things that can be done if a freedom to operate finds patents or applications of concerns, you can attempt to license the patent from the owner of the patent. Of course, that has its risks 'cause you're alerting the patent owner to your presence there. You can consider filing post grand challenges at the USPTO and you can also just be ready to litigate or file an IPR if this happens. And finally, it's important to note that even if freedom to operate analysis finds nothing, patent litigation is always a threat. There may be unpublished applications out there that are lurking, that don't get turned up in the FTO and there are also a lot of patent lawsuits for weaker patents that you could get hit with and even if they're not very meritorious, they can be a nuisance and they can be expensive.

So and now I have tried to give you a view of the patent ecosystem as well as an IP introduction. There is a lot on this topic that can be learned and of course it's all changing as well, but I thank you for your time and please don't hesitate to reach out to me if you have any questions or potentially might become embroiled in a patent enforcement matter or have technology you wish to protect, I can be reached at my email, which is [email protected] Thank you.

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