Patent Puzzle : New Jersey Intellectual Property Lawyer & Attorney : Richard Gearhart Law Firm : NJ Patent & Entrepreneurial Services : Patent Puzzle Law Blog

One of the most important clauses in a license agreement is the “grant clause”. The grant clause defines the scope of the legal rights that the patent holder (or “Licensor”) gives to the user (“Licensee”). The scope of the grant clause has significant implications for the commercial use of the invention.

Here is a typical grant clause that could be found in a license agreement – there are many ways to grant rights in a patent, the one below will suffice for illustrative purposes:

“The Licensor hereby grants the Licensee an exclusive, royalty bearing license in US Patent 9,999,999  in the territory defined as the United States.”

The grant clause is full of important information.

First, the grant clause states the license is exclusive. This means that nobody except the Licensee will have the right to make, use or sell the technology.   The parties have agreed that only this one user will have the right to commercialize this invention. This is in contrast to a “non-exclusive” license. A non-exclusive license gives the patent holder the right to grant additional licenses to other users. In some cases, the license can be drafted in a way to start as an exclusive license, then change to a non-exclusive license. This can be conditioned to happen if the user does not meet certain conditions of the license, such as minimum sales requirements. Sometimes, the patent holder agrees to give a time advantage to the first user, then after a year open the market to other users.

Second, the grant clause above states that the license is royalty bearing. This means that the user will pay the licensor a fee for the right to use the technology. Usually, the royalty is paid on a per unit sold basis, although other methods of calculation are possible. The royalty can be paid on a net profit or a gross profit basis. Royalty rates, or the percentage paid per unit, can very greatly depending on the product and industry. The percentage is usually an important focal point of the negotiations.

The grant clause also refers to a specific patent, here fictionally referred to as US Patent No. 9.999.999. It could also refer to several patents, a patent portfolio, or even to just one or more claims to a patent. So a license can grant rights in multiple patents as well as

a single patent.

The last part of the clause states the geographical region in which the license is granted. In this case, the grant is in the United States. This can be altered to be a region or territory, or expanded to be global, or a region.

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               Patents are property so, like any property, ownership can be transferred from one person or company to another. A patent attorney can help prepare an assignment for the inventor. 

               A “patent assignment” is the legal document that makes this transfer happen.

A common type of assignment is the transfer of ownership of the patent or patent application from the inventor to the inventor’s LLC.

 In the United States, patents are filed in the name of the inventor. If the inventor has patented the invention, the inventor can keep ownership of the patent in his or her name, or they can make it an asset of an LLC. If the patent or patent application is to be owned by the LLC, an assignment is executed by the inventor and the transfer becomes effective.

If there are multiple inventors on a patent application, then both inventors may assign the patent to the LLC. The LLC document (or operating agreement) can spell out how the profits from the venture are to be allocated.

            Inventors often sell their patent as a way to profit from it. An assignment will also be executed if the patent is sold to a third party.

            Inventors who invent for their employer may have an employment contract that requires them to assign the patent to the employer. An assignment will be executed in this case. Again, a patent lawyer will help prepare the needed documentation.

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One of the most common ways an inventor can take advantage of their patent is through licensing. A license gives another rights to make, use or sell an invention. However, the patent holder retains ownership of the patent.   A license is a bit like a renting a piece of real property. The owner still owns it, but lets another use it, usually for a profit. When it’s a real property license, the payment is called “rent”. If it’s a patent that’s being licensed, the property is called a “royalty”.

Licenses allow the inventor to share in the profits of the manufacturer or producer of the invention. Often, the license will be based on the number of units sold by the producer. This arrangement is advantageous for the producer, since the producer only pays the licensor based on the producer’s sales. 

The license can take many different forms and can be tailored to the needs of the parties to the transaction. For example, the license can be exclusive or non-exclusive to the party receiving the license. If the license is exclusive, then only the party receiving the license can make, user or sell the invention, and nobody else. If the license is non-exclusive, then the owner of the patent can license it many different parties.

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What happens if someone infringes on another person’s patent? The inventor who holds the patent can sue in court for damages. If a judge finds that patent infringement has occurred, the court may rule that the infringing party discontinue production and sales of the product. The court may also award damages to the person whose patent was infringed.  Often the cases are settled by the patent attorneys without going to trial and the infringing party pays the other a royalty for the use of the technology.

If you are accused of infringement, or if you find someone infringing your patent, a patent attorney can help you decide how to proceed.

A patent is only valuable if it is enforceable and can withstand the rigors of litigation. Likewise, the patent professional you choose for your patent needs should have an understanding of what can happen to your patent if it ends up in court. There is no substitute for an understanding of how your patent will be challenged by an alleged infringer.

At Gearhart Law, we have many years of litigation management experience, and have learned first hand how your competitors will seek to avoid or invalidate your patent in court. This experience is invaluable in helping you to achieve the best possible protection for your invention.

For example, in the case of Wesley Jessen v. Bausch & Lomb, Richard Gearhart, Esq. was involved in every aspect of the case, including discovery, motions, trial, and appeals, and with the help of other attorneys obtained an injunction preventing Bausch & Lomb from selling it’s product for the life of the patent.

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Many of my clients in New Jersey ask about the steps for filing a patent. There are three main steps to patenting an invention.

       First, a global or US patent search is conducted to make sure your invention is original.

       Second, the patent must be drafted and filed with the patent office.

       The final step is to prosecute the patent.

There are many databases, including the US Patent and Trademark Office (USPTO) website which list published patents. Searching the USPTO site for patents on inventions similar to yours (prior art) is the first step. In order to get an invention patent, your invention must be unique enough to be allowed by the patent office. An examiner at the patent office looks at all the prior art when determining whether to allow your patent. Experienced patent attorneys will make a judgment on what they think the USPTO will allow when evaluating your patent application. The patent attorney will then write your application in a way to maximize your chance of success and, after your review, will file it with the USPTO.

The next step in getting an invention patent is prosecution. The USPTO does not grant a patent just because the paperwork has been filed; the patent attorney must argue the points of the patent with the patent examiner and convince him or her that the invention meets all of the USPTO requirements. Your chances of success in this step are increased if you use an experienced patent attorney who has dealt with the USPTO on patent inventions and is familiar with their requirements.

Need to get an invention patented or conduct a US patent search? Call Gearhart Law today.

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 So you’ve gotten your patent application on file, the rush and the fuss are over with for the time being, you’ve hit your deadline before the presentation or the trade show. Fortunately the patent decisions have been made now and you can forget about this part of your project at least for awhile. And maybe you take a deep breath, because the financial hemorrhage from the patent work is at least on hold.

But soon you get a letter from your patent attorney advising that the one year deadline is fast approaching and you need to decide whether you want international protection. What do you decide? How do you decide? What countries do you file in? Is worth the money it will cost?

Well the answer to the question “do we need international protection” is a qualified “maybe”.

Obviously, if you don’t plan to do business outside the US, then the answer is a clear “no”. If you get a US patent, you can always prevent people from importing into the US from another country. The US is all you need.

If you plan to sell outside the US, then you want to consider patents in the major markets where you plan to sell. If you plan to sell in Japan, for instance, consider a patent in Japan. That too is obvious.

But just because a patent is available doesn’t mean you want one. Here are some additional considerations.

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You may be surprised to realize your patent has many audiences. The list includes you (the inventor), your inventor peers, Patent Examiners, investors and business people, other lawyers, and in some cases, a judge and jury. A good patent application will effectively address the needs of each audience.

Obviously, the application reflects the inventor’s work and creativity. Often the application will include parts and descriptions written by the inventors, and so has the inventor’s own voice. The patent provider will incorporate as many of the inventor’s ideas and suggestions as possible with the goal of protecting as many variations of the invention as possible. In any case, you, the inventor, should be happy and satisfied with the application's content.

It may also be read by your peers. This happens frequently in highly technical fields, such as biotechnology and engineering. Here a premium is placed on scientific content and accuracy.  Most inventors enjoy the feeling of statisfaction that comes when their application publishes and their ideas have become a part of the technical literature. Published patents provide important teachings and are considered an important scientific resource. The publication part of the process helps fulfill the patent systems constitutional purpose of advancing the useful arts and sciences, by making technical knowledge publicly available that may otherwise remain secret.

Another important reviewer is the patent examiner at the US Patent and Trademark Office. The patent examiner has highly regulated criteria that the patent must be met before allowance.  The Manuel of Patent Examining Procedure (MPEP) is the reference source for the patent examiner and contains thousands of pages that direct the Examiner though the proper examination of the patent application. The patent must meet the criteria set forth in the MPEP and the patent laws in general including novelty and non-obviousness, as well as numerous other details of a highly complex nature.

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Richard Gearhart is the principal and founder of Gearhart Law, LLC a law firm specializing in patent services. The firm provides an array of services in the mechanical, software and chemical arts, and includes patent application drafting, domestic and international patent prosecution, opinion rendering, agreement and transactional work, and litigation support. Gearhart Law’s clients range in size from individual entrepreneurs to multi-million dollar businesses. For more information on patents and/or the firm’s services, call (973) 410-4005 or visit the website at www.GearhartLaw.com.

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Some criteria to look for when choosing a patent attorney include:

1. Experience writing and defending patents.

A patent attorney who has a lot of experience will know what the USPTO expects in terms of the patent content, and will tailor your patent to fit those expectations. In addition, an attorney who has experience working with the patent examiners at the USPTO will better know what arguments to present on your behalf during the prosecution phase.

2. Litigation background.

A patent attorney who has been involved in litigation of patents, either for infringement purposes or other aspects of patent law has an understanding of what will hold up in court and what is likely to be challenged, and how to meet those challenges with arguments of his or her own.

3. Responsiveness.

Any patent attorney you choose should return your phone calls! They should answer any questions you have to the best of your ability.

4. Search criteria.

A search is essential for identifying prior art. Prior art is the set of patents for inventions that are similar to your invention. An experienced searcher knows what terms to use and how to identify relevant prior art. If there is prior art that is very close to your idea, then you can’t get a patent on your invention. It will most likely get rejected by the patent examiner, and you need to know that before you invest any money. If there is prior art that is close but not too close, then you need a patent attorney to help determine if there is a possibility of obtaining a patent.

5. Length of time to complete the patent search.

It should take only 1-2 weeks to get your search results. It may take a little longer (1 week) if the field of prior art is crowded with many inventions that are similar to yours.

6. Length of time to complete the patent.

This partly depends on you, because you should be involved with every step. After either meeting with the attorney to describe your idea or sending him or her the invention disclosure, the attorney should work with you to draft the claims. This should happen within 3-4 weeks of your meeting (the attorney needs time to draft some rough claims to discuss with you). After the claims are drafted, they are sent to you for review and/or revisions. Once the claims are written to your satisfaction, the drawings are requested from the draftsman; after the drawings arrive, the specification is drafted. This takes another 3-4 weeks for a relatively simple patent. Depending on the complexity of the patent and your responsiveness, you should have a first draft to review within 2 months of hiring a patent attorney. Of course, a more complex patent will take more time, usually an additional month or two. The patent should be filed with the USPTO within a week of your approval of the final draft.

7. Experience with international patents.

A patent attorney should know what the requirements, including timelines, criteria, and rough costs are of filing internationally.

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