Entrepreneurship Chap 8

04/10/23 Copyright 2001 - Robert A. Myers 1

Intellectual Property for

Entrepreneurs

Professor Robert Myers

[email protected]

[email protected]


DevelopingManaging

ProtectingExploiting

Intellectual Property

IS WHAT BUSINESS IS ABOUT


Intellectual Property - What Is It? Patents Copyrights Trademarks Trade secrets Other results of intellectual activity

–Know-how–Chip (and other) designs–Plant designs–"Ways of doing"


Intellectual Property Is Property

Has value Can be sold or licensed Can be stolen Can be protected Subject to much of property and contract law

as well as to IP law


Commercializing IP

The objective of the game Can demand most of the investment IP covers full gamut, from conception to operating

business Transition is a huge challenge Various critical milestones Need a "scientific" management process Even if you are a start-up Especially if you are a start-up


Article I, Section 8:

Congress shall have the power...to promotethe progress of Science and useful Arts by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and discoveries

The United States Constitution


Statutory Requirements for a US Patent Allowable scope?

–Law of nature? Novelty

–Prior art? Utility

–Good for something?–Must be “operable”

Non-obviousness–To one of ordinary skill in the art

Full disclosure Reduction to practice not necessary


A Patent Only Enables You to Do One Thing

You can prevent someone else -- anyone else -- from practicing what you have claimed in a jurisdiction (country) where you have a valid patent

This is a legal monopolyWhich antitrust law and legal precedents can prevent you from exercising if you have “market power”

Or, you can license others to practice your invention You may nevertheless not be able to practice your own invention without licenses to patents owned by other parties


Key Points

• A patent is an exclusionary monopoly

• The monopoly is defined by the claims

• Patent value is arrived at from a business case

• A patent is virtually worthless if no one else wants to practice the invention

• Lawyers are not optional


Criteria for Filing a Patent Application Size of market affected by invention Novelty of the technical field covered How central is the invention to expected products Scope of broadest claims Portfolio needs in the area of the invention How easily can use of the invention be detected How easy is it to avoid using the invention What percentage of companies in the field may use the

invention Any value to current or anticipated alliance activity Any value to current or anticipated technology transfer

activity Likely enhancement of your (or your organization’s)

prestige


Kinds of Claims Structure Process Method Use Combination Form of matter Software Form of life (gene, plant...) A single patent can have many claims, of different types

May be different in different countries


Software Patents Currently are being (very!) freely granted Critical difference from copyright:

– Copyright protects form of presentation– Patent protects essential idea

Software patent must meet same statutory requirements as any other patent

– Useful– Novel– Non-obvious

Value still being established– Reluctance to pay for license (although some companies are paying)

– No useful court decisions other than “Hub and Spoke”– No proven infringements

It’s a jungle


Patents on "Ways of Doing" Business Can make incredibly powerful patents Need very little "technical" substance Emerging and important trend

Particularly financial instruments E-commerce and Internet

Opportunity for clever "inventors" to stake out huge claim

Need to meet statutory requirements "Obviousness" seems less a problem

Various examples Freeny: Delivery of goods mediated by network

Often, Patent Examiner lets a questionable one through

Only courts can remedy USPTO White Paper: www.uspto.gov/web/menu/busmethp


Some Statistics

• 2500 “Business Method” patents as of 1/1/00• Leader: Pitney Bowes!• Jay Walker (Walker Digital) has “patent factory”,

hundreds of patent applications• 2500 “Business Method S/W” applications per year• In 1999, ~1000 issued patents with “Internet” in

patent


The Internet and e-Commerce Just because it's there, it may not be free Internet creators advertise they are free spirits

–Intellectual property is free as the air Downloading software or content creates big

exposures, such as–Use of the material infringes a patent–The material is copyright–The license terms are restrictive–The protected material will be inadvertently incorporated in a product

–Posting material may limit owner's rights–Posting material may reveal owner's missteps


The “Single Click” Claim A method of placing an order for an item comprising: under control of a client system, displaying information identifying the item; and in response to only a single action being performed, sending a request to

order the item along with an identifier of a purchaser of the item to a serversystem;

under control of a single-action ordering component of the server system, receiving the request; retrieving additional information previously stored for the purchaser

identified by the identifier in the received request; and generating an order to purchase the requested item for the purchaser

identified by the identifier in the received request using the retrievedadditional information; and

fulfilling the generated order to complete purchase of the item

whereby the item is ordered without using a shopping cart ordering model.


Protecting IP on the Internet The “Millennium Copyright Law”

Responds to fundamental Internet technology: Moving information around the Net creates all kinds of copies which were, prior to this law, illegal

Does not provide a whole lot of protection apart from this Bar the door!

Encryption License agreements Secure download technology Contract with your staff

Be brave -- Don’t hesitate to assert your rights The fundamental issues

Unless you are a content owner, the barriers to entry are porous

Even if you’re a content owner, the technical barriers to theft are flimsy


Legal Action• Amazon.com sued Barnesandnoble.com for infringing its "single click"

patent.• Priceline.com (Jay Walker’s flagship company) sued Expedia.com (a.k.a.

Microsoft) for infringing its "on-line auction" patent. • Tom Woolston (a.k.a. MercExchange) filed to have Priceline's patent

declared invalid, claiming he invented it first.

• Sightsound.com sued MP3.com and CDNow.com for infringing its patent,

claiming it holds the patent on the entire concept of downloading music. • Audiohighway.com says their patent covers Internet music. • Ebay has been sued by Network Engineering Software for infringing their

patent covering an “automated on-line information service and directory, particularly for the Web”

• Ebay have sued Bidders Edge for violating their copyrights, among other assertions, for posting listings taken from the ebay site.


Courts Have Ruled...

• Software patents are valid

• Business method patents (“ways of doing”) are valid

• Algorithm Patents (“ways of calculating”) are valid


Copyrights The exclusive privilege of an author or proprietor to

make multiple copies of literary, artistic or intellectual productions and license others to do so

–The right to copy Protects the form, not the underlying idea The work must be original -- but may be a derivative

work It is created -- and therefore subject to copyright --

when it is fixed so it may be perceived, reproduced or otherwise communicated

Notice optional Registration optional -- necessary for statutory

damages–Otherwise, only actual damages


Copyrights Exclusive rights

–Reproduce–Prepare derivative works–Distribute copies–Perform–Display–Each can be assigned separately

Fair use allows some exceptions First sale allows subsequent transfer Proof of infringement not always easy

–Insert bogus elements, lines of code, addresses, etc.


Copyrights First strategy for protecting computer programs Patent Office refused patent protection Copyright easy and inexpensive

–Shrink wrap license Limited protection from infringement

–Modifications–Proof needed

Only in recent years has USPTO made software patents easier to get

–Still difficult to enforce–S/W culture negative–Discovery a challenge

Many (most) programs are not patentable


Key Elements of US Law "Original" works of authorship

–Not necessarily "novel" "fixed in a tangible medium"

–Such as film, tape, disk...–An unrecorded game or performance not protected

"...of expression"–Limits protection to "expression", not "idea"–Separation of "expression" from "idea" no easy matter

How much change is necessary to create a "new" work?

–Not much


Trade Secrets ...A secret formula or process, unpatented, known to a

limited number of individuals who use it, to competitive advantage, in the manufacture of an article of trade having commercial value..."

Relevant factors–How widely known–How protected–How valuable–How hard to develop independently

Can only be disclosed under confidential agreement Do not exist without a contract Can be licensed as IP Lasts forever -- unless no longer secret May be preferable to patent -- may not


How to Protect Your Intellectual Property

Burglary is illegal, but you still lock your doors

Patents provide very strong protection and offer real sanctions

Patent if you canEnforce your patentsFind a good IP lawyer!

Register your copyrights and trademarksKeep it a trade secret if necessaryHave a non-disclosure agreement (NDA) handy and don’t hesitate to use it

Contracts are key


Q and A Cost of a patent: Think “$thousands”, usually less than

ten Cost of suing to protect your patent: Think “$million”, at

least one A decision will take years If you’re lucky, you might get an injunction Expect to settle -- everyone tries to

Time to get a patent: About two years from file date It’s a secret while in the USPTO But you have no other protection until it issues

Life of a patent: Twenty years from date of file (very contentious)

Life of a copyright: Life of creator plus 75 years “Mickey Mouse extension”

Life of a trade secret: As long as it stays secret


Internet SourcesIBM Patent Server: http://www.patents.ibm.com

US Patent and Trademark Office: http://www.uspto.gov

Copyright Resources On-Line:http://www.library.yale.edu/%7Eokerson/copyproj.html

IPWorldwide: http://www.ipworldwide.com

Inventors resource homepage: http://www.gibbsgroup.com

Hoover’s Corporate Information: http://www.hoovers.com

Thomas Register of American Manufacturers:http://www.thomasregister.com

Licensing Executives Society: http://www.les.org

Everything you want to know about SEC filings:http://www.10Kwizard.com

American Intellectual Property Law Association:http://www.aipla.org

Franklin Pierce Law Center: http://www.fplc.edu

Documents

Entrepreneurship Chap 8