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08.17.2020 Ten Patent Myths and How They Can Hurt Your Business By: Clinton H. "Clint" Brannon

Patents are a complex subject governed by rapidly evolving statutory, judicial and administrative regimes. Even sophisticated executives at large companies often have misconceptions about what patents are, how they work and the ways in which they can help (or hurt) their business’s bottom line. Below is a list of ten “patent myths” that may prove costly to your company, as well as recommendations to help you realistically evaluate potential intellectual property issues.

Myth No. 1:  We don’t need to worry about our competitors’ patents because we have our own patents on our products.

While there are many good reasons for a company to develop a strong patent portfolio, insulating its products from infringement claims is not one of them. It is very common for a product to be covered by dozens of different patents. For example, the same product may be covered by patents related to: (1) how its parts are arranged or connected; (2) the chemical or metallurgical properties of its constituent materials; (3) the software and sensors used to control its functionality; and (4) the methods used manufacture it.

In addition, it is common for patents to involve improvements or refinements to older, previously patented technologies. Thus, if your company patents a new and improved version a product, your product might nevertheless infringe patents related to the original technology.

Accordingly, even if your company develops its own patent portfolio, it is still important to take steps to ensure that it is not infringing the patents of others, such as performing an intellectual property clearance of new products and services.

Myth No. 2:  We can’t be sued for patent infringement because the technical components of our products are made by our suppliers.

Although it may seem unfair that a company can be sued for using components made by someone else, this is in fact a common occurrence. Anyone who makes, uses, sells, or offers to sell a patented invention can be sued for patent infringement. In practice this means that a patent plaintiff may be able to sue multiple companies in the supply chain that incorporate an infringing component part.

However, one way that a company can mitigate the risks of such claims is to negotiate strong intellectual property indemnity provisions from its suppliers and vendors. The terms of such indemnification provisions will vary based on the type of products involved, the significance of the component to the overall product, and weather the component is a commodity or a difficult to source, customized part.

Myth No. 3:  We can’t protect our products and services with patents because we are in the software business.

Although there has been backlash against “software patents” in the past due to concerns over the breadth and vagueness of some patents directed to software, there is no hard and fast rule precluding the patenting of software inventions. In fact, in recent years, the United States Patent and Trademark Office has attempted to provide clearer guidance to patent applicants as to how they may draft software patent applications so that they result in patentable subject matter.

If the bulk of your company’s intellectual property is derived from software, you should discuss what aspects of that software may be patentable with a patent attorney.

Myth No. 4:  We are a government contractor, so we don’t need to worry about whether we infringe any patents.

While it is true that, in general, the federal government, and not the contractor, must be sued for patent infringement based on the use or manufacture of items procured pursuant to a government contract, that does not mean that contractors are free from all liability. Many (if not most) government contracts include patent indemnity provisions that require the contractor to indemnify the government against any liability and costs resulting from the infringement of patents.

Government contractors should identify contracts that may put them at an increased risk infringing others’ patents, and ensure that they negotiate appropriate limitations to any indemnification clauses incorporated into those contracts.

Myth No. 5:  We cannot infringe a patent because we did not copy anyone else’s products.

With some exceptions, patent infringement is a “strict liability” cause of action—one can be found to infringe even if they had no intent to copy or infringe another’s patent, or even they were unaware that the patent existed.

While “willful” infringement (i.e., infringement that was intentional) can lead to enhanced damages in patent cases, it is not necessary for a patentee to prove that infringement was “willful” in order to prevail in a patent suit and recover damages.

Again, one way to reduce the risk of infringement claims to perform an intellectual property clearance of new products and services prior to their launch.

Myth No. 6:  We are using old technology in our products, so we don’t have to worry about patent infringement claims.

In general, a patent does not expire until 20 years after its filing date. Thus, in some circumstances technology that is nearly 20 years old may still be patented by others, and a company may find itself subject to patent infringement claims based on “old technology.”

However, a well-designed clearance process will attempt to evaluate risk from older patents as well. 

Myth No. 7:  We don’t have to worry about any patents that issue after we have launched our product.

This myth is frequently premised on the idea that, because a product launched before a patent issued, the product came first and would invalidate the patent. But the effective filing date of the patent, and not the patent’s issue date controls this analysis. Unless your product predates the effective filing date of the patent, it will not be viewed as coming before the patent. Moreover, because patents are frequently pending for several years, it is not uncommon for a patent to issue as long as five years (or more) after its effective filing date.

For this reason, in some industries it is advisable to update product clearance activities periodically to account for newly issued patents that may have been filed years earlier.

Myth No. 8:  We filed an international patent application, so we will have worldwide patent protection.

An international patent application filed pursuant to the Patent Cooperation Treaty (“PCT”) does not automatically lead to patent protection in every country. Instead, the patent applicant must file further papers in each jurisdiction in which patent protection is desired. It must then comply with each individual country’s patent application process and rules. Because each additional jurisdiction in which a patent is sought adds to the total cost of patent protection, it is unusual to seek patent protection in more than a handful of countries.

Accordingly, companies should identify which jurisdictions are most important for patent protection. Generally, they should look at countries where there is a good market for the relevant products, and which also have strong intellectual property rights.

Myth No. 9:  We shouldn’t bother seeking patent protection because it takes too long for a patent to issue.

The USPTO reports average patent application pendency on a regular basis. In 2012, it took approximately 2.8 years on average for a patent to issue. As of June 2020, it was slightly under 2 years as the average patent application pendency. In other words, patent pendency has generally been trending downwards in recent years. In addition, many of the delays in patent issuance are under the control of the applicant, and there are several steps an applicant can take to move their patent application along more quickly than the average application.

Myth No. 10:  My products use industry standard or standard essential technology, so I don’t have to worry about patent infringement.

This myth is similar to Myth No. 2. However, the incorporation of industry standard or standard essential technology into your products will not shield the products from claims of patent infringement. Most standards are covered by many patents, some owned by companies that participated in the standard setting process, and others developed independently of that process. The policies and practices concerning IP related to standardized technology vary significantly from industry to industry. In some industries, it is customary to provide royalty free licenses to patents related to standard essential technology. In other industries, it is common to negotiate bilateral royalty bearing license agreements with numerous patent holders.

Accordingly, you should determine what standards are relevant to your industry and what kind of license agreements are customary. If royalty bearing licenses are common in your industry, a patent portfolio of your own may help reduce license fees by providing the ability to enter into cross-licensing agreements with other patent holders.