What do Contingent Fee Patent Lawyers Look for When Considering Patent Title and Term?
In my previous post What Makes a Good Contingent Fee Patent Case?, I noted that title and term two of the most important factors when considering a new matter. A prospective client cannot enforce a patent they do not own, a patent they do not have the right to enforce, or a patent with a term that does not overlap the period of infringement.
When performing due diligence into a patent matter, we need to make sure that there are no issues with the title, standing of the prospective client, and term of the patents. Also, since a contingent fee patent lawyer is entering into a close relationship with a patent owner or inventor, we also consider issues relating to the background of the inventors and patent owners.
Issues with title and standing. First, we confirm that a purported patent owner has full ownership of a patent claim. Even though this sounds simple, numerous pitfalls can arise.
Assignment. Are the patents properly assigned to a single entity? Many issues can arise if this is not the case including a co-inventor or co-assignee licensing the patents to an accused infringer.
Standing and right to enforce. Who has the right to enforce the patents? Even if a single entity owns the patents, it may have exclusively licensed its power to bring suit to a third party. We need to make sure the potential client has the standing to sue for infringement.
We need to establish the prospective client holds clear title to the patents, and confirm their right to enforce the patents.
Issues with term. There are also issues to consider with the patent term.
Term extension and terminal disclaimers. Patents are valid for 20 years from the effective filing date, plus term extensions, except when terminal disclaimer is present. Unless there are provisional damages under 35 USC 154(d), the damage period usually begins on the issue date of the patent. We need to understand the term of each of the patents in the portfolio.
Maintenance fees. U.S. utility patents need to have "maintenance fees" paid at 3.5 years, 7.5 years, and 11.5 years after grant to remain in force. The patent rights expire if the fees are not paid. In some instances, the fees can be paid late for a surcharge; however, this can give rise to an argument of "intervening rights" by an accused infringer which could reduce or eliminate any potential damages for infringement. See MPEP 2501 and 35 USC 41. We need to ensure that the patent owner paid the maintenance fees without any lapse.
Limitation on damages. There is a backward-looking 6-year limitation on damages under 35 USC 286. In other words, there is no recovery for any infringement committed more than six years before the filing of the infringement complaint. Thus, we need to confirm infringement occurred after the issuance of the patent and did not stop more than six years before the current day. Ideally, the violation will extend into the future for many years.
The term (considering extensions and disclaimers) along with the payment of maintenance fees and the limitation on damages should be considered in view of the alleged infringement to understand the scope of possible recovery to the prospective client.
Related issues with inventors and patent owners. In addition to the above issues with rights and term, several problems can arise relating to the inventor's background. Thus, we conduct a detailed inquiry into the origin of the inventors and patent owners.
Inventor's or patent owner's employment history. We make an inquiry into the employment history of the inventors. The inventors may have had an obligation to assign the invention to an employer at the time of the invention. Similarly, even if the inventor was an independent contractor, there may be issues with “shop rights“ flowing to an alleged infringer.
Inventor's or patent owner's membership in a patent licensing group, or other prior licenses. In some instances, patent owners may have joined patent licensing pools or groups. These organizations often require the patent owner to convey a license to all of their patents to the group in exchange for membership or some other benefit. Once this occurs, any member of the group is licensed to use the patents. Should the patent owner ever need to monetize their patents by enforcing them, a large number of infringers may already have a license through the patent licensing network. We need to make sure the patents are not already licensed through these groups or under another arrangement. See, e.g., Why Google Wins by Giving Away Patents to ‘Startups’ Willing to Join the LOT Network.
Each inventor's contribution to the patent filing. In the case there are multiple inventors listed on the face of a patent, it is essential to know the exact contribution of each inventor. Sometimes, during the initial filing of a patent application all of the contributors to the invention are listed as inventors. During the prosecution of the patent claims, features are often added or removed from the claimed invention. This change may necessitate the addition or removal of some inventors from that application. In a subsequent filing, added features may be removed, or removed features may be added back into claims again necessitating a correction to the listed inventors. Thus, it is essential for patent owners to keep a record of each inventor's contribution to the patent application and compare it to the claimed matter. We need to understand each inventors contribution and compare it to the claimed matter.
Inventor's or patent owner's personal background. In many ways, a contingent fee representation is like a business partnership. You should not go into business with an incompatible business partner. Thus, in a contingent fee representation, an investigation into the personal background of potential clients is something to consider.
During the due diligence phase, a lawyer should make an effort to get to know each of the inventors and the patent owner. The failure to uncover relevant employment or contractor agreements, membership in a patent pool, or other issues that may affect the title to the patent rights can turn into a costly mistake for a contingent fee patent lawyer.
The patent rights, standing, and term are issues to investigate early on in the due diligence process. This phase of due diligence may require talking to the patent owner and inventor about their background and the development of the invention. Failing to uncover an issue here can be a costly mistake for a lawyer.
Likewise, patent owners considering contingent fee representation should have this information on hand to resolve any issues relating to the above.