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Approaches to Cost Containment in the Time of Coronavirus
April 29, 2020

By John Bollinger

Reprinted with permission from the April 29, 2020 issue of The Legal Intelligencer ©2020 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

In the current business environment, companies are justifiably concerned about the uncertain future and controlling the cost associated with managing their IP portfolios and engaging outside counsel. In-house counsel also knows that IP is part of the long game and sacrificing company IP now to save costs may cast a long cloud over the future. So, how can the company’s IP interests be effectively managed under current conditions and the required service be provided by outside counsel?

In more conventional time, automatically turning to outside counsel based on past engagements may have been the quick answer. However, these unconventional times require a more agile approach to evaluating and utilizing outside counsel. We all learned during the earlier financial crisis that hard times call for the reevaluation of almost everything we do. The first step in evaluating the company’s need is to determine the central purpose for retaining outside counsel. Does that need call for special or specific technical expertise? Is the need in a focused area of the law where a boutique firm may better service the need than one of the top 100 firms? Or, does the matter call for fire power and international range of a top 100 firm?

All of the above questions can reasonable apply to any company matter, so let’s focus on IP issues and, more specifically, selecting outside counsel for dealing with patent matters. Like the other matters, a central purpose for engaging outside counsel is to acquire needed expertise while controlling the spend and maintaining transparency and timely reporting on how the matter is being handled. As in the past, but now more than ever, choosing outside IP counsel should look to establishing an effective partnership that serves the company’s needs. In some ways, this is a search for a three legged stool. You need quality service at a reasonable rate and in a timely fashion.

Well thought out management of the process for securing and protecting the company’s IP assets is a key factor in determining an IP strategy that aligns the business strategy and holds the potential to generate revenue and drive profitability. The right fit between the company and outside counsel will synchronize the IP services with the company’s mission to build a common understanding of the mission, and the IP can be continually managed.

Patent matters can be of particular importance in an IP portfolio because of statutory requirements on public disclosure and time for filing a patent application that could result in the loss of important rights. Oversight of an existing or developing patent portfolio involves a number of responsibilities, such as keeping records, securing and processing invention disclosures, selecting the inventions to pursue, and managing the patent prosecution, which can seem mundane and not worth the effort in these stressful times. However, such tasks do not need to become a time sink hole if approached methodically.

A well-organized invention disclosure process is a first step in the development of a robust patent portfolio. Critical elements include a company standard invention disclosure form that captures all aspects of the new invention, inventor information and any known prior art patents or competitive products. Current inventor contact information is important in this age of mobility because of the need to execute the patent application declaration and assignment, so the company owns the invention. If an inventor leaves the company, there should be a formal exit interview process to assure the company has all invention disclosures and any changes in the contact information.

Collecting multiple invention disclosures also requires a process for selecting ideas that match up with the company’s business strategy and projected outlook. For example, in a typical invention disclosure process, the inventors within a corporation present their new concepts to a patent harvest team, such as product managers and an attorney, to evaluate ideas and their potential to be produced, to fit the company’s product line and distribution and to add significant value to the corporation. The company may have the necessary expertise in house, and outside counsel can discern between and among potentially patentable ideas that may be valuable to the company, those that may not be fully developed, and those that may run afoul of a competitor’s portfolio. A patent harvest is seminal to outside counsel’s initial evaluation as to the potential of bringing the desired rewards of added value and protection against competitors. It is the juncture where a seasoned IP attorney can create a rapport with the company’s inventors to foster innovation for idea capture.

In view of the cost of filing, prosecuting, issuing, and paying maintenance fees associated with utility patents, an early decision on the economic value of having a utility patent versus a design patent can be a meaningful cost saver. Design patents are quite different from utility patents in that they are less expensive to file, generally have more limited prosecution cost, and there is no requirement to pay maintenance fees at set intervals, so an issued design patent has a cost-free term of fifteen (15) from the issue date.
The decision to choose a design patent over a utility patent does not come without some compromise in the protection. By its very nature, a design patent protects the appearance of a product rather that the utility patent’s protection of the product’s function. Accordingly, this decision should be made in consultation with the various production, marketing, and sales departments.

Design patents have an additional advantage in that the design patent’s term does not relate back to the application filing date like the utility patent, which has a term of twenty (20) years from the original filing date. A design patent application may include multiple embodiments of the design in various degrees of specificity. Very often, the USPTO examiner will determine that the application has multiple impressions of the product, and multiple different impressions cannot be included in a design patent. This will result in the USPTO examiner issuing a restriction requirement to choose one embodiment for prosecution in the application. But, all is not lost because the applicant can file divisional applications for the other embodiments and still preserve the filing date of the initial application for prior art purposes. Each of the design patents that issues from the original application will have its own independent term of 15 years from its issue date.

The key point in choosing to file a design application with multiple embodiments is the potential to provoke restriction requirements from the USPTO examiner and postpone the issue date without losing the initial filing date. The company can evaluate the marketplace and decide seriatim what is to the next design. The company can also decide that the product is at the end of the shelf life and decide against filing any continuation applications. Thus, the initial strategy of filing multiple embodiments can protect the commercially most desirable embodiment while preserving the option for the other embodiments.

The relative simplicity and ease of design applications should not lead anyone to think of them as simple knee jerk reactions. One recent example of not appreciating the intricacies of securing and defending design patents is the case of Hafco Foundry and Machine Co. v. GMS Mine Repair and Maintenance, Inc. (Fed. Cir. 2020), where the jury awarded damages of $123,650 for GMS’ willful infringement of Hafco’s Design Patent No. D681,684. Whether counsel for GMS could argue non-infringement centered upon established law that bars design patents that are primarily functional and that lack ornamentality. A design patent protects the ornamental features of a design, in other words, how an article looks, while the functional aspects of the design are excluded from protection. To present a counterargument of non-infringement, GMS would need to identify the functional elements of Hafco’s design that should be excluded from the scope of protection afforded by the ‘684 patent. In particular, GMS neglected to ensure that the instructions to the jury required that only the non-functional, ornamental aspects of Hafco’s design were to be compared to those of GMS’ design when considering infringement. The Federal Circuit determined that GMS did not preserve this position for appeal, and in effect, counsel for GMS missed out on a key non-infringement argument. Hafco illustrates the complexities of design patent law, particularly in litigation, where the independent, second opinion of outside counsel can an invaluable asset to a company.

Regardless of the approach for utility and design patents, cost-effective patent portfolio management requires attention to in-house practices and, where needed, encouragement for close coordination with retained counsel. A detailed listing, such as a spreadsheet, should be prepared and maintained with all IP rights, patents, trademarks, copyrights and trade secrets and any associated products or process, so the company can see at a glance what it owns and how it applies to the business.

In this time of uncertainty, the company’s IP rights should not be ignored for the short-term benefit of cost saving. A thoughtful approach to cataloging the company IP can provide clarity and uncover value assets that will be useful in the rebound.