Archive for the ‘Business Law’ Category

Apr
17

The Next Frontier in Patent Law – Can Artificial Intelligence Qualify as an Inventor?

On April 5th, a federal judge in the U.S. District Court of Virginia heard summary judgment arguments on this very issue in Thaler v. Iancu.  Thaler brought this action to challenge the current legal definition of inventorship of patent applications after the United States Patent & Trademark Office had rejected two of his patent applications for failing to identify a person as inventor in non-compliance with the Patent Statute’s statutory requirements.  Instead, he had named an artificial intelligence (AI)-based system, DABUS, as the inventor and disavowed any notion of being named a sole or at least a joint inventor.  Thaler may well have brought as a test case given AI’s increasing role in R&D in industries ranging from the life sciences to chemistry to engineering.

The judge is expected to rule in favor of the USPTO on the basis of the patent statute’s definition of inventor which states:  “The term “inventor” means the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention.”  Any change in the definition of inventor to include AI will require intervention by Congress.

The issue is not, however, as simple as expanding the definition to include the AI.  For example, an Inventor must contribute to the conception of the invention.  As the Manual for the Procedure for Examining Patents (MPEP) states, “[t]he threshold question in determining inventorship is who conceived the invention.  Unless a person contributes to the conception of the invention, he is not an inventor.”  MPEP § 2019.

In understanding the legal definition of inventorship, it is important to understand that the inventor is not required to reduce the invention to practice.  “Difficulties arise in separating members of a team effort, where each member of the team has contributed something, into those members that actually contributed to the conception of the invention, such as the physical structure or operative steps, from those members that merely acted under the direction and supervision of the conceivers.”  MPEP § 2019 citing a 1991 case from the Board of Patent Appeals and Interferences.

Can AI spontaneously conceive of an invention without any human input or is it actually being directed to reduce a human-inputted concept to practice?  Under this scenario, AI cannot be an inventor even if the definition for inventor is expanded to include AI.

Additionally, assignment of patent rights is a common practice.  Generally, any scientist or engineer employed by a company is required to execute and assignment of any patent rights resulting from his or her endeavors to the company-employer.  The company generally files the patent application as the assignee wherein the inventors must always be named.  Another common patent assignment scenario is one where the inventor, as the patent owner, assigns another person, often a business entity, to commercialize the patent.   Patent licensing is another common business transaction surrounding issued patents.   These routine contractual business transactions will clearly become complicated if AI is allowed to be named as an inventor.  Why? Because the party to an agreement must have the requisite intent to enter into the agreement.   Can AI have that requisite invent to assign its patent rights or enter into a licensing agreement?

Other considerations include:  1) An AI machine’s ability to have standing to sue or be able to testify as the inventor in a patent infringement lawsuit; 2) Ownership rights in any resulting patentable invention if the AI machine was designed by an independent person and purchased by the inventor.  Here, any purchase contracts should unequivocally state that any resulting patentable technology resulting from the usage of the AI machine belongs to the purchaser of that machine.  But what if the AI machine is named as the inventor?  The point is that any such contracts involving AI must be carefully tailored to anticipate possible scenarios.

This commentator is not in favor of having AI named as an inventor perhaps because of a bias in favor of the human brain as the ultimate source of creativity and ingenuity.  Instead, Congress should first address the upheaval in intellectual property law caused by simply bad court decisions in U.S. patent law concerning patent eligibility under § 101 and just this month, the questionable application of the fair use doctrine in a copyright law case.  Click here for a link to the blog on the copyright case.  There is also no question that human ingenuity is what created AI in the first place and that AI is here to stay.

As an alternative to complicating the patent law business transactions that are so essential to acquiring investment funding and commercially exploiting patented inventions, a separate statute for thoughtfully addressing the unique aspects of AI-involved inventions is suggested.  This suggestion of a separate patent classification has precedent through plant patents and design patents – types of patents that are separate and distinct from utility patent applications, the very type of patent application at issue in the Thayer case.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

 

Intellectual property law is a complex area of the law.  Contact us at 305-279-4740 for a complimentary consultation on protecting your inventions, creative works, brands, and proprietary information through patents, copyrights, trademarks and trade secrets or our litigation services involving intellectual property disputes.   We represent both individuals and business entities.  Our mission is to serve innovators and creators in protecting the fruits of their hard work and ingenuity through our Client Services Creed:  Conscientious, Rigorous, Energic, Empathetic, and Diligent legal services. 

 


© 2021 by Troy & Schwartz, LLC

 

 

 

Feb
09

THE TENSION BETWEEN TRADE SECRET PROTECTION AND PATENT PROTECTION

In Dec. 2020 the U.S. Court of Appeals for the Ninth Circuit held that the publication of a trade secret in a patent application extinguishes trade secret status.  Attia Architect PC, et al.  v. Google LLC, et al.   Architect Attia developed a system and method for automated design, fabrication, and construction called Engineered Architecture (EA).    In 2010 Attia entered into a partnership with Google wherein he disclosed his trade secrets related to the technology to Google.  A year later, Google filed patent applications related to the technology’s trade secrets.  Attia executed patent assignment agreements effectively transferring any rights in the patents to Google.  The patent applications were published 18 months from the filing date pursuant to 35 U.S.C. § 122(b)(1)(A) making the alleged trade secrets publicly available.  Google then allegedly excluded Attia from the project and used EA to create a platform for use by building professionals to streamline the design process by relying on artificial intelligence.

Attia sued Google for trade secret misappropriation under California’s trade secrets statute and the federal Defend Trade Secrets Act (DTSA). The district court dismissed his federal claims with prejudice and declined to exercise supplemental jurisdiction over state law claims.  Under both California state trade secrets law and the DTSA, the disclosure of the alleged trade secrets in the published patent application publication extinguished their status as protectable trade secrets.  (Click here for a previous blog concerning the same decision which  addressed another issue involving the DTSA). Nor was this a situation where Google had filed the patent applications without Attia’s permission.

Is it possible for trade secrets and inventions to co-exist?  Maybe.  Inventors may try to maintain what they as deem as trade secrets by failing to disclose key elements of the invention in the patent application and specification.  This approach can be difficult to navigate because inventors may risk invalidating a patent by withholding critical information from the patent examiner during prosecution of the patent.   But see Pike v. Texas EMC Management, LLC (Texas state appellate court finding that EMC had “purposely excluded certain information” from its patent application in order to maintain it as a trade secret and was thus entitled to maintain its claim against Pike for trade secret misappropriation.

Any information disclosed in a patent application publication or issued patent, is by definition, published and not subject to trade secret protection.   If the invention disclosed in a patent application is or will not be the subject of a foreign application, the patent applicant can file a non-publication request under 37 CFR 1.213(a) to prevent its publication 18 months later after the filing date.  For utility applications relying on the filing date of a provisional patent application (PPA), the clock starts ticking from the PPA’s filing date.  The non-publication request will allow the application to be maintained as a trade secret over the invention during the patent application prosecution process which can take many years.

If a patent does not issue, trade secret protection will continue until when and if the trade secret(s) become publicly available, through e.g., the inventor’s failure to maintain the trade secret in confidence.  If, on the other hand, the examining attorney concludes that claims are patentable, the inventor can make the determination as to whether issuance is “worth” giving up trade secret rights in the published patent document by deciding to withdraw the patent from issuance under 37 C.F.R. § 1.313.

Take Aways

  • Dlsclose any trade secrets related to your invention to your patent attorney.  Ask the attorney whether inclusion of the trade secrets in the patent application is essential to meet the USPTO’s invention disclosure requirements.
  • Consider filing a non-publication request providing you have no intention of filing a foreign application. If you do end up filing a foreign patent application, remember that that your U.S. patent application may also become subject to publication.
  • Be sure to continue safely guarding your trade secrets quite apart from any confidential patent application.  Trade secret protection is an on-going endeavor
  • Contact us for a complimentary trade secret checklist to get you started in understanding trade secret protection.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR   INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

 

Intellectual property law is a complex area of the law.  Contact us for a complimentary consultation on patents, trademarks, trade secrets, and copyrights.  Our mission is to serve innovators and creators in protecting the fruits of their hard work and ingenuity through our Client Creed:  Conscientious, Rigorous, Energic, Empathetic, and Diligent representation.

 

May you and your loved ones stay safe & be well during these challenging times.


© 2021 by Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship

 

Jan
24

TRADE SECRET MISAPPROPRIATION CLAIMS ARISING FROM CONDUCT PREDATING THE DEFEND TRADE SECRETS ACT OF 2016 ARE ALLOWABLE ACCORDING TO THE NINTH CIRCUIT COURT OF APPEALS – A WIN FOR PLAINTIFFS

On Dec. 16, 2020 in Attia, et al.  v. Google, LLC, et al.,  the Ninth Circuit Court of Appeals held that a misappropriation claim under the Defend Trade Secrets Act of 2016, §18 U.S.C. 1836, et seq. (“DTSA”) may be brought for misappropriation that started prior to the DTSA’s enactment as long as the claim also arises from post-enactment misappropriation or from the continued use of the same trade secret.

The DTSA mirrors the Uniform Trade Secrets Act (“UTSA”) and also expands the Economic Espionage Act, which criminalizes misappropriation of certain trade secrets. Many states, including Florida, have based their trade secrets laws on the UTSA.  Until the enactment of the DTSA in 2016, trade secret misappropriation claims were generally brought under state statutes, e.g., Florida’s Uniform Trade Secret Act (“FUTSA”).

The DTSA allows plaintiffs to bring a federal claim for any trade secret misappropriation that occurred on or after May 11, 2016.   In Attiva v. Google, LLC, the Ninth Circuit decided that a claim under the DTSA can still be brought, even if the misappropriation actually started before the enactment of the DTSA, as long as the misappropriation continued through the DTSA’s enactment date (May 11, 2016) and involved the same trade secret.  In reaching its decision, the Ninth Circuit explained that the Uniform Trade Secrets Act (“UTSA”), includes an anti-continued use provision while the DTSA lacks a similar provision.  Noting that Congress was aware of the UTSA at the time the DTSA was enacted, the court concluded that the apparently deliberate omission of an anti-continued use provision indicated that the DTSA was not intended to be limited in this way.  In its reasoning, the Ninth Circuit pointed out that the DTSA language discussing “a continuing misappropriation constitutes a single claim of misappropriation” relates only to a statute of limitations argument and does not intrinsically prohibit DTSA misappropriations claim from being brought on the basis of continued use.

Although the DTSA is a relatively new statute and has not “seen” much litigation, the Attiva decision clearly expands the DTSA’s reach and is expected to be relied on by other federal courts asked to rule along the same lines.   Additionally, the decision represents a significant shift in trade secrets law which may cause more plaintiffs to commence trade secrets misappropriation actions in federal court because:

  • it allows for claims of trade secrets misappropriation to be brought under the DTSA at least in district courts “under” the Ninth Circuit even if the misappropriation began before the 2016 enactment of the DTSA;
  • it expands potential liability for defendants of trade secret claims under the DTSA;
  • it provides plaintiffs with protection where state statutes following the UTSA may not.

 

WE THANK YOU FOR READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  If you have any questions about trade secret misappropriation as either a potential plaintiff or defendant, contact us for a consultation.  Also contact us for a complimentary trade secret checklist to ensure you or your company are taking the appropriate steps to protect your trade secrets.

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

 

 

 

Jan
13

NON- DISCLOSURE AGREEMENT WORDING:  THE POTENTIAL TO IMPACT THE OUTCOME OF A PATENT-INFRINGEMENT LAW SUIT

These days, Non-Disclosure Agreement (NDA) templates are readily available on-line, often free-of-charge, making them an attractive alternative for many.  The problem with these templates is they are not necessarily applicable to the contracting parties’ unique circumstances and/or do not properly anticipate dealings between the parties. A poorly drafted, one-size-fits-all NDA can make or break a patent-infringement case many years into the future.   These assertions are supported by the Dec. 7, 2020 decision in Sionyx, LLC v. Hamamatsu Photonics K.K. by the Court of Appeals for the Federal Circuit (CAFC).

In Sionyx, the CAFC concluded that the district court mistakenly concluded that it lacked authority to compel the transfer of ownership of foreign patents from Hamamatsu Photonics, K.K. (Hamamatsu) to Sionyx, LLC (Sionyx).  Moreover, the lower court abused its discretion in distinguishing between the U.S. and foreign patents at issue in the case. The CAFC affirmed the district court on most other issues, including that Hamamatsu breached its non-disclosure agreement (NDA) with Sionyx, and that Sionyx was entitled to co-inventorship and sole ownership of the U.S. patents, as well as damages and an injunction.

The decision is largely based on the NDA signed by the parties in 2006.  This blog discusses the decision and emphasizes that an NDA can have consequences years later.  As the decision demonstrates, had the NDA lacked certain wording, Sionyx may well not have prevailed.

Background

In 1998, Professor Eric Mazur and his student, James Carey, discovered a novel process for creating “black silicon.” The two inventors filed a provisional patent application on May 25, 2001, from which U.S. Patent 8,080,467 ultimately issued, among other patents. Four years later in 2005, the inventors founded Sionyx and met with Hamamatsu – a company that produces silicon-based photodetector devices – a year later.  The two companies entered into an NDA to share confidential information for the purpose of “evaluating applications and joint development opportunities of pulsed laser process doped photonic devices.”

The NDA stipulated that a party receiving confidential information “shall maintain the information in strict confidence for seven years after the expiration of the agreement, after which the receiving party may use or disclose the confidential information.”  Commentator’s emphasis. The NDA also said that the receiving party of confidential information acknowledged that the disclosing party claims ownership of the information and all patent rights “in, or arising from” the confidential information.  Commentator’s emphasis.   The NDA also required that all confidential information received must be returned within 30 days of the termination of the agreement.  The term of the NDA was three years.

Hamamatsu and Sionyx worked together for about two years, at which time Hamamatsu said it wished to develop its products alone. Surprisingly, Sionyx did not request the return of any confidential information from Hamamatsu.  Hamamatsu began developing its own products and emailed Sionyx in 2009 to alert the company that it would be releasing a new photodiode at an upcoming exhibition that it did not believe infringed Sionyx’s IP or breached the confidentiality obligations. Hamamatsu then filed Japanese patent applications for photodetector devices and later filed in several other countries, including the United States, claiming priority to the Japanese patents.

One of Simony’s customers alerted the company to Hamamatsu’s U.S. patents five years later, in 2014.  When discussions between the two company’s failed, Sionyx sued Hamamatsu in the District of Massachusetts for (1) breach of contract; (2) unjust enrichment; (3) infringement of the ’467 patent; and (4) the equitable relief to transfer the foreign to Sionyx and name Carey as an inventor.

District Court Declines to Transfer Foreign Patents

A jury found in favor of Sionyx, awarding almost $800K for breaching the NDA in February 2009, when it first referred to Sionyx’s confidential information in an internal report, and almost $600K in damages for unjust enrichment. The jury also found that Carey should be added as a co-inventor to the U.S. patents. At the post-trial motion stage, the district court then granted Sionyx sole ownership of the disputed U.S. patents, injunctions on Hamamatsu’s accused products practicing those patents and the ’467 patent, pre- and post-judgment interest on damages for breach of contract, and pre-judgment interest on damages for unjust enrichment. The court denied Sionyx’s motions for ownership of the disputed foreign patents because it was uncertain that it had jurisdiction to grant ownership of foreign patents and because Sionyx had failed to adequately identify the foreign patents for which it was requesting ownership.

Sionyx appealed the district court’s decision to refrain from transferring the foreign patents.  The CAFC agreed with Sionyx, holding that “the evidence that established Sionyx’s right to sole ownership of the Disputed (Hamamatsu) U.S. Patents also applies to the Disputed Foreign Patents.” The decision added:

As we discussed above with respect to the Disputed (Hamamatsu) U.S. Patents, we agree that the jury’s findings compel the conclusion that those patents arose from Sionyx’s confidential information and that Hamamatsu has not shown that it contributed [its own] confidential information entitling it to joint ownership. And because the Disputed U.S. Patents claim priority from Hamamatsu’s Japanese patent applications, the Japanese applications must be for the same inventions as the Disputed U.S. Patents. See 35 U.S.C. § 119(a). Thus, Hamamatsu’s Japanese patent applications and any applications claiming priority from the Japanese applications in other countries must also have arisen from Sionyx’s confidential information.

Simply put, the CAFC found that Hamamatsu’s Japanese and U.S. patents emanated from Sionyx’s confidential information which Hamamatsu became privy to under the terms of the 2005 NDA.  According to the court, Hamamatsu itself never provided its own confidential information to Sionyx, which might have justified joint inventorship of the patent with Cary as the jury had concluded.

Abuse of Discretion Standard

Accordingly, Sionyx was entitled to sole ownership of the Japanese applications and any foreign applications claiming priority therefrom. The CAFC further explained that “it is well established that courts have authority to compel parties properly before them to transfer ownership of foreign patents, just as they would any other equitable remedy,” since such an order is “an exercise of the court’s authority over the party, not the foreign patent office in which the assignment is made.” As such, the district court abused its discretion in distinguishing between the two groups of patents.

The CAFC denied Sionyx’s motion for fees under 35 U.S.C. § 285 on cross-appeal, declined to address the issue of willfulness, and affirmed the following findings by the district court: a) Hamamatsu breached the NDA; b) Sionyx is entitled to the damages and pre-judgment interest awarded by the jury, as well as post-judgment interest at the statutory rate for its breach of contract and unjust enrichment claims; c) Carey is a co-inventor of Hamamtsu’s U.S. Patents; Sionyx is entitled to an injunction prohibiting Hamamatsu from practicing its U.S. Patents for breach of the NDA; and d) Sionyx is entitled to an injunction prohibiting Hamamatsu from practicing its 467 patent.

Conclusions

The outcome may well have been different had the NDA not “directed” the ownership of all future patents emanating from Sionyx’s confidential information to Sionyx.   Furthermore, any resulting patent relying on confidential information emanating from both parties should have designated both Cary and an Hamamtsu inventor as joint inventors no matter where the patent applications were filed.  Inventorship does not, however, mean that the inventor(s) is also the owner(s) of the patent.  Generally, R&D and engineering personnel who work for companies assign any patent rights they may have over to their employer-company (e.g., Hamamtsu).  Or, where inventors establish a business entity, the inventors often assign their patent-related interests over to the company as part of their capital contribution.  (e.g., Sionyx).

As this case illustrates, an NDA can be a critical factor in determining patent (and other IP) ownership.  An NDA should be tailor-made for the particular situation at hand with particular emphasis on protecting the disclosing party which is often an individual inventor or a small start-up company.  Anticipate problems into the future since patents in particular can take several years to issue meaning that infringement lawsuits, patent ownership disputes, etc. may occur many years down the road.  It is also important that the disclosing party take steps consistent with protecting its confidential information upon early termination of the NDA or expiration by time.  For example, it is not clear why Sionyx did not insist on the return of all its confidential information when Hamamatsu indicated negotiations were over.

Take Home Points

1. Do not presume a generic NDA template will adequately protect your interests.  An NDA should reflect the parties’ particular situation and the nature of their business relationship under which confidential information may be disclosed.

2. Know and follow the procedures required of you and your company in the NDA as the Disclosing or Receiving Party.

Contact Susan at 305-279-4740 on matters related to your NDA to ensure it addresses potential scenarios consistent with the particular circumstances involving the contracting parties.   We are here to serve you and answer your questions related to intellectual property & business law in both transactional matters and litigation.  Check her reviews at AVVO.com where she has received Client’s Choice Badges for both 2019 and 2020.  She is a registered patent attorney.

WE THANK YOU FOR READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.

 

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

 

 

Jan
12

COPYRIGHT LAW UPDATE

THE CASE ACT OF DECEMBER 2020 CREATES A SIMPLER COPYRIGHT INFRINGEMENT CLAIMS PROCESS FOR PHOTOGRAPHERS & OTHER CREATIVES

The Copyright Alternative in Small-Claims Act (the CASE Act) became law on Dec. 27, 2020 and is a welcome alternative to expensive federal court lawsuits by individual creators and small businesses (Creators) across the country who all too frequently have their copyrighted works infringed.   Prior to the Act, all copyright right infringement claims had to be brought in federal court, effectively discouraging many Creators from suing infringers due to the high costs involved.  Additionally, federal court copyright cases are generally very complex and can go on for a long time, further adding to the legal costs and plaintiffs’ frustration.   As a result, infringements regularly went unchallenged, leading many Creators or the small business owners of the Creators’ works to feel disenfranchised by the copyright system.  In effect, these individuals/businesses had rights but no reasonable remedies.

Rather than file a federal court lawsuit, Creators will now be able to bring their infringement claims before a Copyright Claims Board (“CCB”) within the U.S. Copyright Office – a three-member panel of experts on copyright law.   The panel will have the right to award, e.g., photographers, up to $15,000.00 per work and $30,000.00 per claim, assuming the works have been registered with the office.  For unregistered photos, the amount of the award is reduced by fifty percent.  In addition to monetary penalties, the Board could also issue a notice to the infringer to cease the infringement.

The commentator notes that a copyright infringement action brought in federal court requires that the work has actually been registered with the U.S. Copyright office.   See the March 4, 2019 decision by the U.S. Supreme Court in Fourth Estate Public Benefit Corp. v. Wall-Street.com. It is not clear why this requirement is not required for a CCB proceeding.  The commentator still recommends that a creator secure a registered copyright by filing for copyright registration within 90 days of publication to take advantage of the potentially greater monetary award provided by the CCB for registered works, or, in the alternative to have the option of a proceeding in federal court.

The CCB officers are appointed by the Library of Congress.  The candidates must have demonstrated expertise in copyright law.  For example, they must have represented or presided over a diversity of copyright interests, including those of both owners and users of copyrighted works.   This helps to ensure that the officers are fair and unbiased.

Another problem with federal copyright infringement cases is that the judges cannot usually be expected to be subject matter experts in this complex area of the law.  This lack of consistency in judicial background and experience has led to inconsistent copyright infringement decisions across jurisdictions or even within the same jurisdiction.  Since the CCB experts will be subject matter experts, the expectation is that the decisions will lead to more consistently correct decisions than in federal courts.  Hopefully, the CCB’s decisions will be published so they can be relied on in federal court cases.

There are numerous other provisions in the CASE Act beyond the scope of this Law Update.   Contact us to discuss your options in bringing a copyright infringement claim under the CASE Act.  We would be honored to represent creatives in their quest to protect the fruits of their creativity at a one-time flat fee.

WE THANK YOU READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  IF YOU ARE CONTEMPLATING ANY ACTION THAT MAY HAVE LEGAL CONSEQUENCES, CONSULT WITH AN ATTORNEY.

 

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

 

 

 

 

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