Blueprint of a gear train.

 Robert J. Yarbrough
Patent Attorney

 Patents - Inventions - Trademarks 

Newsletter Issue 9 - November 2009

In this issue:

Read your software licenses carefully.
PTO pilot program for small entities.
What's in a name-Choosing a domain name can be tricky.
You don't have to wait until your patent issues.

Read your software licenses carefully.

by Adam Garson

A recent case before the United States District Court of Appeals demonstrates how important it is for companies to understand their software licenses when planning mergers and reorganizations.  Novelis Corporation learned the hard way when it completed an internal corporate restructuring.  Here's what happened in Cincom Systems, Inc. v. Novelis Corp., 581 F.3d 431 (6th Cir. 2009).

In 1989, Cincom Systems, Inc. licensed two software products to Alcan Rolled Products Division ("Alcan Ohio"), an Ohio-based corporation that would later become known as Novelis. The license Cincom issued listed "Alcan Rolled Products Division" as the "Customer" and granted to Alcan Ohio "a non-exclusive and nontransferable license" to use Cincom's software. Under its license, Alcan Ohio could only place the software on designated computers at its facility in Oswego, New York.

In the meantime, Alcan executed an internal restructuring under state statutory merger laws.  Although Cincom's software remained on the same computers located in the same office as when the license was entered, the plant was now owned by "Novelis."  Cincom caught wind of the change and sued Novelis, alleging that Novelis' actions violated the license agreement.  Novelis lost in the lower court, the parties stipulated to damages of $459,530.00 and appealed.

Novelis argued on appeal that under Ohio state merger laws, the change in ownership of the software did not amount to a transfer of the license.  The Court of Appeals disagreed, holding that state law does not control the assignability of patent or copyright licenses and to permit so would "undermine the reward that encourages invention." The court held that the plain language of the agreement was clear, "no transfers are permissible without express written approval."  It was a costly lesson for Novelis but it teaches us all that we have to read those software licenses. 

PTO pilot program for small entities.

by Robert J. Yarbroughimage of the seal of the U.S. PTO

The PTO announced a pilot program to allow small entities with two or more patent applications to move to the front of the review line by dropping an existing patent application.  As a rule of thumb, a small entity is a business with fewer than five hundred employees.   The theory is that a small entity may change its priorities between the time that a patent application is filed and the time that the application is reviewed.  The application may no longer be of value to the small entity. Currently, the small entity has no incentive to abandon a patent application in which it is no longer interested and the PTO is required to expend resources to review the valueless application.  The small entity will not respond to the resulting office action and the application will go abandoned.  

It is not clear why the program does not extend to large entities, which have many more pending patent applications than small entities.  One possibility is that large entities could game the system because they have so many pending applications and might float more applications just so that the additional application could be abandoned. We do not expect that this program will do much to reduce PTO's backlog and we do not expect that it will be frequently used. 

What is in a name-Choosing a domain name can be tricky.

by Deborah A. Logan

Today, a presence on the Internet is a vital part of business marketing and sales.  That presence is typically represented by the existence of a web site hosted on a particular domain name.  A domain name is the portal to your business and is an important part of the overall marketing process. Picking a domain name should not be taken lightly; careful deliberation is in order.  As a business owner you want to be certain that your domain name represents your company, product and image so as to maximize traffic to your web site and boost sales.

One thing in particular that you want to avoid is choosing a domain name which might be confusingly similar to the trademark of others.  In fact, when you register a domain name you certify that you have a legitimate interest in the name you are registering and that it does not infringe upon the trademark rights of any third party.  Infringing on the trademark rights of another business can result in the loss of your domain name under ICANN's Uniform Domain Name Dispute Resolution Policy (UDRP) or even land you in court.  Either way, not only will you have wasted the effort of marketing your web site and web-based business, you may find yourself mixed up in a costly mess.  

To avoid legal conflict when choosing a domain name, ask yourself these questions to avoid future trouble:

1.    Does the domain name I have selected conflict with a third party's trademark? (Remember that all terms that another might consider a trademark, registered or not, are not always protected.  Generic terms can never be trademarks and descriptive terms can only be protected under certain circumstances.)

2.    Does the domain name I have selected offer goods or services that compete with those already being offered by a party with trademark rights and a similar domain name? (Customer confusion is key here. However, again, legal conflict will only arise if the other party has valid trademark rights.)

3.    Will your web site divert business or online traffic from a site with a similar domain name?  (If you are thinking to register, you might want to think again...)

In the end, your domain name can spell your success on the Internet since a good name is the best asset you can ever have to make your business stand out.  And it certainly cannot hurt to run your ideas by an attorney well-versed in trademark and Internet law so as to protect your interests up front.

You don't have to wait until your patent issues.

by Lawrence Husick

A question we hear often is, "Don't I have to wait until my patent issues to_________?"  The blank is usually filled in with such items as "raise capital", "license my invention", or "disclose my invention to others."  In each case, the answer is an emphatic "NO".  And it's a good thing, too, since the time it takes to actually get a patent is now longer than ever.

Since 1991, the time to get a patent after filing, has, on average, increased from 18 months to over 33 months.  If it were true that inventors had to wait for the Patent Office, then most would never start a business or invest in research and development.

The fact is, that once you file a patent application, your rights are protected under both United States law and the treaties that govern international patent rights, provided that you continue to take the right steps to file your patent applications and respond to requests from the Patent Office and foreign agencies.  You may sell your invention, license it to others, disclose it, publicize it, raise funds for your venture, and so on, because you have already taken the correct steps to protect your intellectual property rights.  Simply put, you do not need to wait for the Patent Office to issue your patent.

If you have questions about patent filing, or about what you should not do prior to filing, please do not hesitate to call us.

Robert J. Yarbrough is awarded an 'AV' (highest possible) rating from the Martindale Hubbel attorney rating agency.