Category Archives: Due Diligence

Do your employee IP agreements automatically assign future inventions?

A recent opinion issued by the Federal Circuit serves as a reminder that IP assignment clauses of employment agreements and employer IP policies must be carefully worded.  A vague obligation relating to future inventions may create questions about patent ownership if an inventor-employee leaves the company or otherwise becomes unavailable to sign patent assignment documents. 

In DDB Technologies, L.L.C. v. MLB Advanced Media, L.P., an inventor entered into an employment agreement that stated: Continue reading

Can a Patent be Assigned on a Claim-by-Claim Basis?

I recently ran across an IP due diligence issue that reminded me yet again of the importance of reviewing patent assignment documents and not simply relying on the USPTO’s assignment database.  In this situation, USPTO records indicated that the inventors assigned the patent to a corporate entity.  However, the assignment document actually stated that only certain claims of the patent were assigned to the corporation.

So what is the effect of such a document? Continue reading

Key Questions for Patent Due Diligence

A technology purchaser, licensee or investor can obtain much less than expected if it fails to ask the right questions about patents. Essential questions to ask before entering into an IP transaction include:

Who is the owner?

A patent publication only identifies the owner at the time of first issue. Often, this is not the current owner. When a patent is assigned, the assignment is recorded with the U.S. Patent and Trademark Office.  Security interests, name changes, and other documents affecting title also may be recorded.  The buyer should obtain a complete chain of title from the original owner (which are the inventors, in the case of a patent).  The buyer also should check government records to ensure that the assignments were properly recorded.

Are the IP rights still in effect?

Most US utility patents have a term of 20 years from the effective filing date, so long as the patent owner pays maintenance fees at various time intervals.  If the owner failed to pay the fees, the IP rights may have lapsed.

Does the patent cover the relevant technology?

A patent includes a set of claims that define the patent’s coverage.  To infringe the patent, the infringer must practice all elements of at least one claim.  The patent also will include a background, detailed description and drawings.  The patent scope may not extend to this additional information.  When acquiring or licensing a patent, the buyer should review the claims to ensure that the patent covers the desired technology.

Will I infringe another patent by using this technology?

A patent grants a right to exclude others from making, using and selling an invention. However, a patent does not ensure a right to practice the invention, as the invention also may be covered by other patents.  The buyer may require the seller to warrant that it knows of no other necessary patents.  The buyer should also independently investigate whether other patent rights are required.

Are there relevant pending patent applications, and are they likely to result in patents?

A patent may not issue until several years after the filing date of an application, and patent rights have no effect unless and until a patent issues. When acquiring or licensing technology, the buyer should ask about pending patent applications and investigate the likelihood that the patent will issue.

Was the invention disclosed before a patent application was filed? In the U.S., a patent application must be filed within one year of the first offer for sale or public disclosure of an invention. If a patent application was not filed in that time period, the inventor waived patent rights. Most foreign countries are more stringent and require that an application be filed before any sale or public disclosure

(Adapted from an article originally published in TEQ Magazine.)

Best Practices for Maintaining Brand Security – Part 2

When performing due diligence, it often suprises me how often a company claims to have no intellectual property or other intangible assets.  However, even a company with no patents, registered trademarks or registered copyrights will have a significant amount of its value tied to intangible assets such as customer and supplier relationships, reputation, and other elements generally associated with goodwill.  In my last post, I wrote about preventive actions that a company can take to help manage adverse events that can damage a company’s goodwill.  In this post, I’ll discuss actions that a company can take after an adverse event — and hopefully after it took preventive actions — in order to guard against long-term harm to its brand. Continue reading

Recent Court Decisions Limit Patentability of Business Methods

The Federal Circuit recently issued two opinions addressing the question of “what is a patentable invention” in the context of software and business methods.  Although the opinions are not likely to cause a major change in current USPTO examination practice, they do affirm certain aspects of that practice.  The cases also will guide corporate IP managers and due diligence professionals who need to examine the likelihood that a software/business method invention is patentable — or whether an issued software/business method patent is likely to withstand a challenge in the future. Continue reading

IRS Proposes Reporting Requirement for Transactions Involving Patented Tax Planning Methods

Today the IRS published a proposed rule that will add “patented transactions” to the categories of reportable transactions under the federal income tax regulations.  The proposed rule defines a “patented transaction” as “any transaction for which a taxpayer pays (directly or indirectly) a fee in any amount to a patent holder or the patent holder’s agent for the legal right to use a tax planning method that the taxpayer knows or has a reason to know is the subject of the patent.”  Patented transactions also include any “transaction for which a taxpayer (the patent holder or patent holder’s agent) has a right to payment for another person’s use of a tax planning method that is the subject of the patent.”   When the new rule is final, any person who pays or receives a fee for the right to use a patented tax planning method will be required to report the payment/receipt as a reportable transaction.  The proposed rule defines a “tax planning method” as “any plan, strategy, technique or structure designed to affect Federal income, estate, gift, generation skipping transfer, employment or excise taxes.” Although the number of issued patents covering tax planning methods is relatively small, the rules may be the IRS’ reaction to legislative action that seeks to ban tax patents altogether.  In fact, the patent reform bill passed by the House of Representatives on September 7 includes such a ban.

How to Assess the Risk of a Permanent Injunction for Patent Infringement

IP risk assessment often includes a review of whether a company risks liability — or even worse, a permanent injunction — based on infringement of a third party patent.  In the 2006 eBay, Inc. v. MercExchange LLC case, the U.S. Supreme Court effectively reduced the risk of a permanent injunction in patent cases by stating that a permanent injunction is not an automatic remedy.  Instead, the inquiry is fact-specific, and in the context of IP due diligence it may be difficult to assess the risk unless certain facts about the patent holder are known.

My colleagues Mike Renaud and Matt Kaplan at Pepper Hamilton recently published an analysis of the eBay case after CSIRO v. Buffalo Tech, Inc., a recent ruling from the Eastern District of Texas which highlights the fact that no “bright line” rule exists for determining when a permanent injunction is warranted.  To read the full article at the Pepper Hamilton website, click here.