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Beyond IP Law

A look at what's going on in the world of intellectual property.

An Entrepreneur’s Guide to Success

Posted in Uncategorized

My parents and I immigrated to the United States when I was 5 years old.  My mother would tell me that “the United States is the only place left in the world where a pauper, with enough hard work and ingenuity, could turn into a prince.”  Among the many adventures my parents took me on, one was in the world of start-ups.  My father, a Ph.D Geologist, and my mother, a Ph.D Nuclear Engineer, decided that they were going to open a dry cleaning business.  They developed a chemical combination that would remove stains and “browning” from any material.  Even though they had a great idea, the business eventually failed. With that, my lifelong interest in entrepreneurs and start-ups began.

Today, almost on a daily basis, I speak to entrepreneurs, advising them on how to best commercialize their intellectual property.   And I work with many folks here at Lane Powell who are very good at advising start-ups on how, when, and where to look for and invite in investors.   There are times that I send a client away to do more work before moving forward with his case;   the most common reason being that the entrepreneur does not have a clear vision of where he is going and how much money he needs to get there.  I am always looking for checklist and books to hand these entrepreneurs.  The other day, while browsing, I found a book that will be added to my must-read list for entrepreneurs:  “Start on Purpose: Everything You Need to Know and Do Startup” by author Susan Scherter.  Ms. Scherter has an MBA with a background in finance and regularly provides guidance to entrepreneurs providing direction on how to start-up.

Ms. Scherter’s book provides detailed checklists of everything an entrepreneur needs to think of  prior to starting up.   Each checklist is accompanied by detailed reasoning  of why an entrepreneur should be thinking about particular  issues.  These lists are very thoughtfully put together.  The intellectual property section is right on point.    I would have wanted Ms. Schreter to address the difference between do-it-yourself legal services such as LegalZoom™ and retaining a law firm.   Entrepreneur’s often ask about this issue — a neutral perspective would be helpful.  Ms. Schreter’s book is one that an entrepreneur will go back to over and over again.

As always, I read the acknowledgements because I think it reveals interesting insight about the Author.  I was excited to see that Ms. Schreter works closely with SCORE, a group of retired CEO and other business professionals who give their time to help entrepreneurs;  I often refer clients to this program, and am pleased to say that they often refer clients to me.  Also, Ms. Schrether works with the Small Business Administration (“SBA”); another important group we have in common.  I often participate in SBA workshops.   Then I saw that Ms. Shrether acknowledged my good friend and colleague Steve Winters, an extra-cool, intellectual property lawyer here at Lane Powell.   Steve helped Ms. Shreter edit the intellectual property section of the book.  All green lights for Ms. Schreter.

Thank you Ms. Schreter, for crafting the go-to book that all entrepreneurs needed.  And I am sure if my parents had this book and started on purpose, their business would have most likely succeeded.

Oh, and what ever happened to my parents?  They spent the rest of their lives in very successful science careers (the business world was not for them).  My mother, after retiring from her first career, went back to teach science and math at a high school where most kids are considered ‘at risk.’  My father retired and became active in politics.

Call Your Patent Attorney Early and Often

Posted in Uncategorized

This is a true story.

I recently read a book by Carol Cassella called “The Healer”.  The story is about a family: husband (Addison), wife (Claire), and daughter (Jory); together, they are the Boehnings.  Addison is a biochemist who made a fortune from a cancer test he had invented, and then lost the fortune subsidizing research of a new “molecule”, which he invented, that would cure cancer.  Claire, a doctor, held the family together while Addison desperately hunted for an investor.  A potential investor came into the picture, late in the book, promising to save the day and restore the Boehning fortune.  On page 254, the deal basically fell apart.  The investor asked about the patent and patent applications.  That’s when the story started to become real.

Addison had filed a provisional patent application (which you know is merely a place holder for one year).  The provisional application had gone abandoned because Addison never filed a follow-up utility application.  The investor reminded Addison that science very rarely happens in a vacuum.  There are many scientists who may be working on the same “molecule” at one time.  The real question is who reduces that “molecule” to practice first, and who owns it by patenting it.  As it turned out, the investor’s own company was working on a similar “molecule” and wanted to invest in order to obtain the additional knowledge.  Things went very wrong after that discovery.

Addison should have done his Due Diligence before approaching the investor.  Due Diligence is an evaluation into the details of a potential investment or purchase, where the evaluation involves a verification of all the material facts relevant to the investment or purchase.  At a minimum, a Due Diligence checklist should include:

  • Discussion with your attorney regarding what it is that you think you are getting out of the transaction.
  • Understand what is being bought or sold, and your obligations to the buyer or seller.
  • A full, independent search on the ownership of the intellectual property, and intellectual property maintenance fees or renewal fees to ensure that rights are still in force.
  • Determining the details of agreements which affect intellectual property (such as licenses or liens), which may affect or restrict use of the intellectual property in question.
  • For patents, determining any improvement patents that might exist.
  • Ascertain whether the intellectual property is the subject of any litigation or infringement suits.
  • Determine and confirm the details of all significant timelines involved with intellectual property such as the duration of any license.
  • Always, always ensure that the seller is entitled to sell the intellectual property.

This list can grow more complex depending on the nature of the intellectual property (especially patents) at issue.  If Addison had done his Due Diligence, he would have been advised to file a utility patent application, and at a minimum, explore his options to file international applications.  And, if Addison had any kind of a patent (or intellectual property) portfolio, Due Diligence would have given him a realistic view of what his “molecule” was worth. The moral of this story is Intellectual Property Due Diligence, even when you are the seller, is paramount.

As for Ms. Casella’s book, although she merely skimmed over the most important part (intellectual property Due Diligence), the book was very well written.  Ms. Casella’s characters were excellently developed, and I was personally involved with each one.  The story was riveting; I think I read the entire book over one weekend, and would recommend it to anyone.    

 

Gochujang Sauce

Posted in Uncategorized

I love the Korean rice dish bi bim bap, and I wanted to make it at home. To make bi bim bap, I needed gochujang sauce, one of the world’s most amazing condiments. There is an Asian grocery not too far from where I live, but I don’t speak or read Korean, and I have had mixed success with imported packaged Asian condiments. Therefore, when I saw a few bottles of Annie Chun’s gochujang sauce (http://www.anniechun.com/our-food/gochujang-sauce) sitting on the shelf at my regular grocery store, I was delighted. I buy a lot of Annie Chun’s products, and have learned to expect great tasting foods that are easy to prepare and avoid additives such as MSG. I happily bought a bottle.

I do not work with Annie Chun’s, Inc., but I can guess, based on my experience with other clients, how that bottle of sauce came to be on that grocery store shelf. Somebody at Annie Chun’s had the innovative idea that this relatively little-known Korean condiment would have broad appeal among mainstream grocery store customers. Annie Chun’s decided to invest significant resources into developing that product. R&D team members likely had to taste a lot of different gochujang sauces, settle on a flavor profile, develop a formula, source ingredients, perhaps purchase equipment, and design and source packaging. They also had to convince enough distributors and grocery store buyers that even though they’d never sold gochujang sauce in their stores before, consumers would buy this product.

Annie Chun’s gochujang sauce is an easy sell to consumers like me, who know the Annie Chun’s brand, know what gochujang sauce is, and harbor a desire to make bi bim bap at home. But to quote a company press release, Annie Chun’s believes that consumers will learn to buy this “Korean culinary secret” for use “in a variety of cuisines, not only limited to Asian dishes.” Annie Chun’s invested in this product because it believes that it will teach consumers to use gochujang sauce for things like dipping chicken skewers and flavoring meatloaf.

A key element of this consumer education is the product’s label.

The gochujang label displays the Annie Chun’s brand prominently, and it also says “gochujang sauce” and “Korean sweet and spicy goes with everything sauce.” The Korean name of the sauce and the plain language description are almost certainly too generic to be protectable as trademarks. If Annie Chun’s succeeds in creating significant mainstream American demand for gochujang sauce, Annie Chun’s competitors will be free to introduce their own versions. They will also be free to use Annie Chun’s descriptive language on their own labels, and thus use Annie Chun’s consumer education to drive demand for their own products.

Branding an innovative new product or service always involves navigating the tension between the need to create demand for a new product by using descriptive language and the need to tie demand to something proprietary so that competitors can’t easily exploit it. If Annie Chun’s does not use descriptive language on its labels, it may fail to create demand for the product. On the other hand, if Annie Chun’s teaches consumers to look for “Korean sweet and spicy goes with everything sauce,” its education effort will likely eventually pave the way for its competition.
It would be more difficult to develop consumer demand using language that is less descriptive. Annie Chun’s could call the new product, say, ”Vermillion Passion” instead of gochujang “Korean sweet and spicy goes with everything sauce.” However, the descriptive language probably convinces consumers who have no idea what gochujang sauce is to try the product. ”Vermillion Passion” ketchup may sell, but “Vermillion Passion” gochujang sauce may well languish on the shelf.

When naming new products and services, companies need to consider both the need to educate consumers and the need to tie consumer associations to proprietary language. The right balance depends on the company and the strength of its brand, the novelty of the product, and the nature of the target consumers. Education is crucial to short-term success, and proprietary rights are crucial to long-term success. Proprietary language can share a label with descriptive language, but the proprietary language must be emphasized if it is to receive legal protection.

My bi bim bap was delicious, if I do say so myself. The sauce made the dish. Even my three-year-old daughter tried some. It also does wonders for chicken skewers. I have yet to spread it on meatloaf.

YourCustomerServiceSucks.com

Posted in Domain Name, Trademark

This is a true story (well…..kind of…names have been changed to protect the guilty).

I am a technology junkie.  Unfortunately, my addiction to technology led me to buy a first release dishwasher from X.  The dishwasher stopped working the day after the warranty expired.

Sure, I should have purchased a longer warranty.  Sure, I should have bought a proven dishwasher.  Sure, I kicked myself over and over.

I looked for X’s customer service number.  I wanted to make sure that I called a repairman who had the training and know-how to work on the dishwasher.  It took me at least 20 minutes to find a number for X; when I called that number, it took at least 30 minutes to reach the correct department.  When I finally reached the right person, he chastised me for not buying the extended warranty.  Then, I was given the contact information for three repairmen who were trained on my dishwasher.  The first two had gone out of business.  When I finally got a hold of the third one, he had to schedule me a week out.  I was flustered.

When the repairman showed up, he had no idea what was wrong with my dishwasher.  He indicated that he would consult with X and come back the following week.  When he came back, he didn’t have the right parts and, he would have to order them from X.  Of course, for whatever reason, X could not overnight my parts.  It would be another week and a half before the repairman would receive the needed parts from X.  When the repairman showed up again, the parts he ordered did not fix the dishwasher.  This cycle went on for the next six months.  Sure, a smarter person would have just bought a new dishwasher.

At the first month mark, I felt more than just flustered: X could not get parts out to the repairman quickly; and the repairman who was certified by X, but could not fix my dishwasher.  I needed to vent.

I Googled “X customer service” to find an email or snail mail address were I could send my complaints.  To my surprise, GoDaddy® popped up telling me that the domain “xcustomerservice.com” was for sale for a low, low price.  And, so my blogging career started.

I used this venue to catalog my experience with X, and encouraged others to share their experiences.  I even used X’s logo on my website.  Subconsciously, I was daring X to sue me so that I could tell the world about its defective product and its worse customer service.

What could X do to stop me?  X did not register the domain name I used which incorporated X’s name, and I was clearly using X’s name and logo to draw consumers to my site.

X could have litigated the issue.  Courts and judges have the authority to award control and ownership over domain names (just as they have authority to award control and ownership over any other property).  If the action was based on trademark law, X would have to prove that consumers would confuse the product/services I was selling with those products/services that X was selling; that there was a “likelihood of confusion”.

X could have brought action based on Anti-cybersquatting Consumer Protection Act (the “Act”).  Theoretically, the Act made it easier for registered trademark owners to take over domain names that are confusingly similar the registered trademarks.  Under the Act, X would have to establish that I acted in bad faith.  A court would consider the following factors to make a finding of bad faith:

  • Does the domain name holder have trademark rights in the domain name?
  • Is the domain name the legal name of the domain name holder, or some other name that is otherwise commonly used to identify that person?
  • Has the domain name holder made use (prior to the dispute) of the domain name in connection with a bona fide sale of goods or services?
  • Is the domain name holder using the mark in a bona fide noncommercial or fair use way at a web site accessible at the domain name?
  • Is the domain name holder attempting to divert consumers from the trademark owner’s web site in a confusing way, either for commercial gain or in an attempt to tarnish or disparage the trademark mark?
  • Has the domain name holder offered to sell the domain name to the trademark owner (or anyone else) for financial gain without having any intent to use the mark with the sale of goods or services?
  • Has the domain name holder behaved in a pattern of registering and selling domain names without intending to use them in connection with the sale of goods or services?
  • Did the domain name holder provide false information when applying for the registration of the domain name (or do so in connection with other domain names)?
  • Has the domain name holder registered domain names of other parties’ trademarks?
  • How distinctive and famous is the trademark owner’s trademark?

X could sue me under the theory of slander/defamation.  Truth is the defense.

Courts are notoriously slow and expensive.  I’m sure X would want to put a gag on my blog quickly and cheaply – before I could do any more damage to X.

Alternatively, X could bring action under the Uniform Domain Name Dispute Resolution Policy (“UDRP”) created by ICANN and used by all accredited registrars.  Under UDRP, a trademark owner can initiate a relatively inexpensive administrative procedure to challenge the existing domain name.  A trademark holder will win under UDNDR only if ICANN found the following three factors to be true:

  • that the trademark owner owns a trademark (either registered or unregistered) that is the same or confusingly similar to the registered second level domain name;
  • that the party that registered the domain name has no legitimate right or interest in the domain name; and
  • that the domain name was registered and used in bad faith.

X could show that I had no legitimate right or interest in the domain name by showing that I:

  • registered the name primarily for the purpose of selling or transferring the domain name to the trademark owner or a competitor of the trademark owner for a price greater than out of pocket costs;
  • engaged in a pattern of registering trademarks of others to prevent the use of the domain name by the trademark owner;
  • registered the domain name primarily to disrupt the business of a competitor; or
  •  attempted to attract users to a web site for commercial gain by creating a likelihood of confusion with X’s trademark.

The lesson to be learned here?  Have good customer service or, at least, buy domain names that have words that your customer will search for like:  YourNameCustomerService and YourNameSucks.  It is nearly impossible to buy all the domain names that have YourName in it.  However, with a little planning, you can figure out the most important ones.

How did my story end?  Well, X gave me a new dishwasher and that domain name…let’s just say it now belongs to its rightful owner.

Patented Pancakes!

Posted in Patent, Trade Secret

This is a true story.

My husband and I were driving down to Eugene a couple of weeks ago.  Along the way we stopped at a cute truck stop in Brooks, Oregon.

The menu was extensive; there were about a hundred items on the menu.  One item caught my eyes:  the Patented Pancakes.

I proceeded to order the Patented Pancakes.  While waiting for our food, I scoured the menu and the internet in search of a patent number.  Although I did not remember ever seeing a “recipe” patented, I did know that there are methods of making food products that are patented.  For example: EP1839488 A1 (Egg-Free cake and a method for preparation thereof) ; US3622345 (Propylene Glycol Emulsifier-Containing Shortenings and Cake Mixes Containing the Same); US3409442 (No-Bake Cake Mix).

Alas, I could not find any information regarding the patent.  When the waitress returned, I asked the patent.  The waitress informed me that she couldn’t tell me about the patented pancake recipe because it was a secret.  I started explaining to the waitress, who just did not care, what the grant of a patent meant. (Of course, about this time my husband just about fell out of his chair — laughing.  I’m sure he was coughing nerd in between fits of laughter.)

As it turns out, the pancake recipe was a trade secret.  And, that made sense!  The grant of a patent is given to an inventor in exchange for a public disclosure of the invention.   When patents expire, anyone can make the patented product. Trade secrets are just that – secrets.  Think: Coca-Cola®, Kentucky Fried Chicken®, and Tabasco®.

In this context, trade secrets are more powerful because trade secrets are held by the inventor forever (or as long as the trade secret is kept a secret).  Consequently, I can only purchase the product from the owner of the trade secret.  I must go back to that same truck stop for those great pancakes.

In the end, the mystery of the Patented Pancakes was solved.  And, the owners were changing their menus to reflect the status of “trade secret” as we were driving off.

An Invention is Born….or Not…..

Posted in Patent

This is a true story.

I’m a runner. Well . . . I’m a runner when I’m listening to music. Otherwise, I’m a jogger.

I have a problem that I am convinced all runners have – my earphone cords bounce as I run which causes an unpleasant sound in my ears. To limit the motion of my earphone cords I string the earphones down the back of my shirt. The end at the bottom of my shirt gets plugged into the music playing device (Ipod®, smartphone, MP3). The top part of the cord ends in the earphones which come over the neck of my shirt.   The earphones are then ready to be used.

Although this reduces some of the noise, there is still some motion noise.

My solution . . . my invention . . . the next best thing since sliced bread is a shirt or other covering (jacket, sweater, etc.) that has a housing for the headphone wires. The long part of the wire would run down the middle of the back of the shirt with the earphone wires coming out of the neck portion of the shirt. The wires would be pulled out of the neck and adjusted to length. My hand drawing is below.

Smart Running Shirt 2

My first thought was: “Someone must make that!”  I shopped the relevant websites and did extensive Google searches but, couldn’t find anything like it.  So, my invention was born!  I was ready to hire a designer, file my patent application, and hit up my favorite athletic clothing manufacturers for licensing agreements.

But then, that inner patent attorney made an appearance.   Many times, even though a patent on an invention has been issued or a patent application has been filed, the invention is not being manufactured.  An existing patent or patent application could prevent me from obtaining a patent.  And, worse, making or selling a product that has been patented would open me up to an infringement law suit.  Imagine, investing money in a company to manufacture a single item only to find out later that you cannot manufacture that item.  In the alternative, even if you could make and sell the product, you could not prevent anyone else from doing the same.  The market would soon be saturated and your investment would be lost.   My inner patent attorney reminded me that it was a good idea to conduct a prior art search before investing time and money into this product.

A prior art search allows an inventor to know existing or similar developments or inventions. There are a couple of type of searches that can be done:

• a novelty search that helps inventors determine if the invention is novel before committing resources.

• a clearance search that helps inventors determine whether a product violates an existing patent.

I took 10 minutes and conducted a quick novelty search and my dreams of being the next Nike® or REI® came to a screeching end.   Here are links to the prior art I found: US Patent No. 8,411,891 and US Publication No. 2013/0044908 A1.

In reality, no matter my disappointment, this was a good thing.    The moral of the story is that a wiser person would spend a little bit of money up front conducting a prior art search before spending a larger amount of money filing a patent application that would never mature into a patent.  In my opinion, a worse scenario would be to find out that I were infringing on someone else’s patent.

The moral of this story is that an entrepreneur should do a little bit  of research prior to jumping down the rabbit hole.

(BTW, that picture up above is of me finishing the Hot Chocolate 15K, in Seattle, in March).