A property planned and effective patent awareness and risk policy is an essential component of corporate self-governance in today’s business environment. As part of the responsibility of self-governance, management must implement an effective patent risk management program and ensure that it is properly maintained over time. Periodic self-assessment is an important tool for evaluating the effectiveness of an organization’s patent awareness efforts, especially in today’s environment of intense competition for intellectual property rights. By isolating weaknesses and creating a conducive environment for detailed self-analysis, periodic self-assessments have been found to help an organization in meeting its risk assessment needs. There are six main areas to assess for IP risk assessment. They are as follows:
Area 1: Right-To-Use and Patent Screening
Question 1A: Does your organization have an established policy of obtaining right to use opinions?
- Effect of a Yes Answer: The right to use opinion may provide valuable guidance on whether proposed new design can be manufactured, used or sold without potential liability or infringement of other issued patents. Moreover early detection of potentially relevant patents may create an opportunity design around the existing patents. Alternatively the acquisition of favorable license from the patent holder can be considered.
- Examples of Procedures: In-house or outside patent counsel may institute a patent search to uncover patents relevant to the proposed new product. They will identify from the search results those patents that may pose a problem, and often conduct further investigation of these patents. Extensive search may be time-consuming and expensive; however, a limited search can usually decrease the risk liability for patent infringement.
- Effect of a No Answer: Damages for patent infringement may be awarded regardless of whether the infringer had actual notice of the infringed patents. Lost profits or reasonable royalties, as well as prejudgment interest, will begin accruing once a valid patent issues and then infringing product is thereafter made, use, or sold. Additionally the patent holder can seek injunctive relief, including in joining the infringers entire production of the infringing product.
Question 1B: Is the right use opinion updated periodically?
- Effect of a No Answer: The US and patent trademark office maintains all patent applications in secrecy until they are issued. Therefore the longer it takes between the first right to use opinions in the actual production of the product, the more the threat that potentially relevant patents have been issued in the interim. Thus periodic updates of the original search will help identify newly issued relevant patents.
Question 1C: Has your organization set up an internal search policy to screen potentially relevant patents?
- Effect of a Yes Answer: Having trained personnel conduct prior art searches on a regular basis is an efficient way to monitor competition and identify relevant or potentially problematic patents with regard to both infringement by your products and possible patent applications for your inventions. Results of prior art searches should be reviewed by competent patent counsel. Moreover, updating can also be conducted prior to and after commercial production.
- Examples of Search Procedures: (1) Searches of commercially available online database services are invaluable tools when searching for patents relevant to your organization’s technology or proposed and products; (2) searches of the records in the US patent and trademark office should be conducted on a regular basis, either by your trained personnel or by professional searchers; (3) some companies find it efficient to maintain their own collection of patents in classification categories that to relate to a particular industry or product line. This facilitates searching for relevant patents; (4) the search personnel, whether in-house or outside professionals, would notify patent counsel of patents uncovered during the search that are potentially relevant to contemplative products or patent applications.
Question 1D: Does your organization have assigned personnel responsible for administration of patent screening functions?
- Effect of a Yes Answer: A centralized administrative unit that acts as a clearinghouse for all right to use opinions and screening activities, and maintains all related records, will provide for an efficient patent risk management program. The unit can also act as a liaison between patent counsel another management and technical personnel. Thus whenever propose new designs are taken into serious consideration or invention is considered to be potentially patentable, patent counsel may be asked to provide right to user patentability opinions based on the results of prior searches. The unit’s other responsibilities may include: keeping track of opinions and searches that have been or need to be done; keeping track of follow-up opinions and searches as well as updating activities; making sure that all open questions are pursued to an end; keeping track of all issues, actions and results; keeping track of all resulting records and documents in generated during the searches.
- Effect of a No Answer: Failure to organize or maintain an effective administrative unit can result in a failure to properly address a potentially problematic patent, or to address patents of which the organization is unaware, in a timely manner. Indeed, perhaps the highest risk is that certain patent studies may simply fall through the cracks. Lack of an effective administrative unit may also result in duplicative efforts by various arms of an organization, thereby substantially decreasing productivity and increasing costs. This is particularly onerous in view of the time and expense involved in procuring appropriate patent searches and preparing right to use opinions.
Area 2: Past or Pending Claims or Actions and Willfulness
Question 2A: Does your organization maintain an established policy with respect to potential claims of infringement by other patent holders?
- Effect of a Yes Answer: An established policy will result in a uniform and efficient approach for responding to patent holders who have accused your company’s products and services of patent infringement. Since continued infringement of a valid patent after notice can result in a finding of willful infringement and hence exposure to possible increased damages, is important that all contracts and correspondence are maintained, responded to and tracked in a deliberate and timely manner. Notice of a patent can be any knowledge of a patent, no matter how acquired. There’s no requirement for communication by the patent holder’s representative. Such a policy would normally allow for maintaining information to provide responses to the following questions (which could prove important and subsequent litigation):
- Questions relating to maintaining key records: What claims, actions or other contacts have you had in the past regarding infringement, potential infringement or licensing? Who contacted you and what was the nature of the demands?
- Questions relating to actions taken in response: How did you respond to each claim, action or other contact? How did the other party react? Did you ask for an opinion from the patent counsel with respect to the infringement and validity of the patent claims in question? Was a decision made to redesign the accused product?
- Questions relating to the results obtained: What where the results and consequence of each claim, action or other contact? What is a current standing of the claim? For any such claim, action or contract it did not end in litigation, is there a procedure to keep all relevant materials accessible in case a claim, action or contact revives? Do you have an established time limit, after which you consider the non-litigating claim, action or contact no longer a threat?
Question 2B: Does your organization obtain opinion letters?
- Effect of a Yes Answer: Any actual notice of patent rights, perhaps most often acquired via a letter from the patent holder or representative, creates an affirmative duty to exercise due care in determining whether or not there is infringement. In order to show compliance with such a duty an accused infringer must show that it had a good faith belief that it no liability under the patent in question and that belief was reasonable based on objective criteria. A competent opinion of patent counsel remains the best defense against finding of willful infringement.
Area 3: Document Retention
>Question 3A: Does your organization have a written document retention policy?
- Effect of a Yes Answer: Because there is a substantial cost associated with responding to such retention requirements, including the time spent to search for all copies of each of the documents, and so an organized record-keeping policy will often provide considerable savings. Further for certain issues, such as willfulness or copying, retained documents may go a long way in either refreshing old memories or indirectly proving just what actions or precautions did or did not take place. Thus the document retention policy must take into consideration the nature of the types of documents as well as the respective potential importance in a future lawsuit.
- Effect of a No Answer: Rights provided under a patent extend for 20 years. In view of such a relatively long life, pertinent document should be retained for considerable period of time depending in part on the nature of the documents in the particular circumstances involved.
Area 4: Invention Management
Question 4A: Has your organization implemented a standard policy on submission of ideas by outsiders?
- Effect of a Yes Answer: A standard policy for receiving ideas from outsiders can protect your organization from unwarranted claims of misappropriation. In order to minimize the risk of such exposure a nonemployee submission contract drafted by counsel and periodically reviewed and updated should be used before entertaining any submissions by outsiders. The agreement should primarily waive any confidentiality relationship between the parties; the submitter’s rights may be limited by contract to those acquired under patent, trademark or copyright laws. Submissions might be rejected unless they are accompanied by an existing patent or proof that the patent applications are pending. Compensation may be provided if the ideas to be used. All documents and any correspondence relating to the submission should be maintained for reasonable period of time, consistent with effective document retention policies.
- Effect of a No Answer: A submitter of an idea may recover for actual use of the idea by the receiving company if it is established that the idea was received, that it was disclosed under confidential relationship, and that there is at least the implication that the use would not be made without compensation.
Area 5: Training
Question 5A: Has your organization implemented a training program to alert employees of the legal implications of their actions as they relate to patent matters?
- Effect of a Yes Answer: Due to liberal discovery processes during litigation, many documents and memoranda generated by employees are discoverable by the opposing party. Therefore care must be taken not to create a trail of documents that contain excessive puffery. Exaggerated predictions of success or the value of the product may be used by the other side in a later legal action to establish the existence of commercial success, or royalty rates that the parties would have agreed to, even if they are subsequently proved to be unrealistic. Indeed damages under some circumstances have been awarded in excess of the actual profit made by an infringer because he it is the profit that the infringer expected to make, not what he actually made, that is often the touchstone of patent damages. Similarly documents on competitive studies should contain well substantiated and thought out analyses. Unsubstantiated conclusions that a competitor’s product is better, perhaps made only in an effort to promote a change in the current line of products, might nevertheless be used to support the argument that the commercial success of the patented products was due to the patented invention when in reality it stemmed from marketing or unpatented know-how.
- Effect of a No Answer: Exaggerated statements regarding the value or merit of an invention or patented product, or the expected commercial success of an infringing product, could come back to hurt the company in a later patent infringement action.
Area 6: Patent Portfolio
Question 6A: Has your organization established a policy to acquire and maintain a patent portfolio?
- Effect of a Yes Answer: Patents may be considered as the single most important type of intellectual property and industry today. For example the patents of Texas Instruments provided the company with over a billion dollars in royalties from licensing activities, more than the company made from its core operations over the same time period. In the early 1980s a big damage award was counted in terms of tens of millions of dollars. Currently damage awards have exceeded the billion-dollar mark. Maintaining a patent portfolio can also be used as a shield against infringement claims. Many times early settlement may be achieved by entering into cross-licensing agreements with other parties who asserted their patents against your organization. Many activities relevant to minimizing the risk of infringement can also be useful when acquiring and maintaining a patent portfolio. For example, the result of prior art searches can also be analyzed to render patentability opinions.