This is a copy of our general
introduction, not only as a guide for what we do, but as a guide for what we believe is a
good cost structure for intellectual property matters. We believe that the patent,
trademark, and copyright information contained in this handbook will be of value to you.
Please keep this handbook for future reference, and feel free to copy and distribute it to
others if you would like.
Our firm specializes in all levels of patents, trademarks, copyrights, trade secrets, and their taxation. Our combined backgrounds in electrical engineering, chemical engineering, and business enable us to be particularly attentive to high tech areas. Our experience includes patents in a wide variety of areas such as lasers, antennas, chemicals, chemical processes, control systems, fiber optics, and more.
Please keep in mind that I am not currently engaged by you as an attorney, nor is any other member of my law firm, and that a pre-requisite to any such engagement is a signed attorney-client agreement.
Discussed below are some of the basics with respect to copyright, patent and trademark, including considerations we feel are important with respect to each kind of intellectual property. Additionally, we have included information that should give you a good idea of what services we provide with respect to each kind of intellectual property and how those services are performed. We hope you find this information helpful, and we encourage you to call us if you have questions after reading this material.
The three kinds of intellectual property, listed in the order in which they are covered in this handbook, include (1) copyright, (2) patent, and (3) trademark.
A copyright protects the expression of an idea as long as it is original and complete. For example, literary works, musical works and words, audio-visual works, sculptural works, and computer programs may be protected using copyright. A computer program that does not run and has no utility, on the other hand, might not be protected by copyright because it is not complete.
With regard to copyrights, we charge for actual time spent in preparing the paper work. Where multiple copyrights are involved, or where there is a series of applications over time, a significant savings can be had. It will be important for you to provide all related information, particularly information regarding the derivation of a computer program from any pre-existing programs, if applicable. In addition to being copyrightable, computer programs may also be patentable.
Keep in mind that any copyright item that you have authored which can stand alone should be copyrighted separately. For example, if each chapter in a book you authored could conceivably be sold as a stand-alone unit, each chapter should be copyrighted separately from the others; as a final measure of protection, the entire book with all chapters assembled should also be copyrighted. Remember that copyright only protects an expression in the exact form in which it is copyrighted.
If the material to be protected is straightforward (a single book, for example), a copyright application is a fairly simple and relatively inexpensive process that some authors elect to pursue independently. Copyright protection may be applied for via mail or on-line, and detailed instructions for both application processes may be found at http://www.copyright.gov.
There are 3 basic kinds of patent: (1) utility patent, (2) design patent, and (3) plant patent. Put simply, a utility patent protects things and the way they work. For example, a utility patent protects machines, chemicals, processes (including mechanical, chemical, and certain computer processes, articles of manufacture, and software to name a few. A design patent generally protects the look of something which is functional. For example, a design patent would protect the look of an automobile, a computer, a pair of tennis shoes, or a vacuum cleaner, but not a figurine because a figurine is not a functional item. Finally, a plant patent protects flowers and certain agricultural plants, such as varieties of
orchids, roses, or apple trees.
When you hold a patent, you have the right to prevent others from making, using and/or selling the patented invention. Having a patent does not give you an affirmative right to manufacture, make, use or sell the invention yourself since doing so may infringe someone else(s patent or may be illegal (like manufacturing a weapons silencer in the U.S., for example).
The main areas of patent for which our firm provides services include (1) patent procurement and (2) patent licensing. With respect to timing, it is best to apply for a patent before (1) sale, (2) offer of sale, or (3) public use or disclosure to maximally protect your rights in the invention. Before you apply for a patent, your item or process should be in its final form. By final form, we mean that your invention must be so complete that you will reasonably have no further manufacturing improvements and that the product can be manufactured in its current design. If you have a version which can be made by hand and a version which can be made from high-speed manufacture, the high-speed manufacturable version will provide the best patent protection. The reason we require this level of completion is as follows: if your invention is still susceptible to manufacturing improvements when your patent is filed, then the invention you end up manufacturing (or which has the highest value) may not be the same as the invention for which you received a patent! If your patent does not protect the version that you are manufacturing, your patent will not have as great a value to you. Having a BEST and FINAL version of the invention is an absolute must if you want to avoid applying for a patent which has no economic value because it covers a non-profitable or less than optimum configuration. In the alternative, if you are developing a product line which is undergoing significant development, it is possible to file a patent based upon each version of the invention as soon as it is available. Each subsequent patent filing which adds additional matter is termed a continuation-in-part and adds to the patent. Because we charge by the page and sheet of drawing, each additional continuation-in-part will only cost a $800 minimum service fee, against the usual rate for additional pages, sheets of drawing, and the additional filing fees.
With regard to design patents, the cost and quality of a design patent application is driven by number and quality of drawings describing the applied for design. Excellent quality design patent drawings can be obtained for about $130 per sheet or more. In a design case, it is not recommended that you scrimp on the drawings because they are the heart of the case. The attorney prepared portion of the case includes a written description of the drawings, and a single standard claim. Because of the predictability involved in preparing a design case, we charge a fixed attorney's fee for this type of case; for example, where only one embodiment is involved, we typically charge about $1,800. The cost may vary if the views to be shown are excessive or complex.
With regard to utility patents, our charge for patent procurement is $380 per hour plus costs. A utility patent of average complexity requires approximately 10 to 15 hours of attorney time. Costs will include the preparation of drawings at approximately $130 per sheet, the filing fee/mailing and copies (which is approximately $730 for a computer filing for small companies having less than 500 employees, i.e., small entities. Optional costs include the preparation and filing of an assignment ($240, including the recordation fee) and the preparation of a disclosure statement where known references are involved ($380 for five or less references).
Total cost for a patent application is based on a per-page rate of $190. Our minimum retainer initial fee is $6000, against which is charged the attorney's fees, drawings charges and filing fees. Ideally, a client will supply us with all necessary information, drawings, and diskettes having detailed text material relating to (1) the closest known structure or process over which the invention is an improvement, (2) all aspects of the inventions which are new, and (3) a detailed explanation of how the invention works, including an illustration of the operation of the invention by example where necessary.
EXAMPLE 1: Given the above fee schedule, and assuming an average preparation time of 8 hours, (such as for a VERY simple mechanical patent having no more than 3 sheets of drawings), assuming a disclosure statement is necessary (which is not always the case), and including the cost of 3 sheets of drawings, the charges will be as follows:
24 pages @ $190/pg = $4560
Drawings, 3 @ $130 = $ 390
Disclosure statement = $ 380
Filing cost = $ 730
Another measure we use to determine fees is an hourly rate of $380. Our hourly rate will usually apply where special circumstances are present, such as where we are invited to review or file a case which has already been prepared. Of course, not every case requires drawings; for example, it is typical for a chemical patent application not to have drawings. Where drawings are present, the number of sheets will vary depending upon the complexity or volume of structure that needs to be illustrated. In some cases, graphical illustrations are necessary in addition to structural illustrations.
Once a patent is filed, a first office action will issue, typically in about 1-2 years after filing. In the first office action, an examiner may both deny the claims and argue against the validity of the claims, and may also cite other references in support of his position. We will report the office action, which involves some analysis of the Examiner(s position and options available, and we will extract the cited references and provide them to you, typically at a cost of about $380. Then, if you wish to proceed, office actions are responded to by us at the above rate of $380/hour, or preferably $190/page, and, on average, require 4 to 6 hours of preparation. Office action responses range in length from about 6 to about 12 pages, depending upon the magnitude and severity of the action. If a patent is granted, the USPTO charges an issue fee of $755 for a small entity in addition to a $300 mandatory publication fee. We currently charge $450 for handling the issue papers and issue fee.
EXAMPLE 2: As an continuing example of the total cost to achieve issuance of a patent, assume that small entity filing fees apply and that an initial office action response is prepared by us (occurring about 1 year to 2 years after filing) followed by an allowance to issue. The additional charges (in excess of the amount shown in EXAMPLE 1 above) might be as follows:
Receiving and Docketing an Office Action from the PTO = $ 190
Collecting & printing references = $ 190
Office Action Response 10pgs@ $190/pg = $1900
Issue fee handling = $ 450
Government Issue fee = $ 890
Government Utility Publication Fee (USPTO) = $ 300
($3920 + $6060 from above) Running Total $9980
The USPTO no longer gathers, prints, & mails paper copies of U.S. references. As a result, we are obligated to do this for our clients so that we, along with the client, can evaluate the Examiner's rejection. Depending on the number of references, this charge may exceed $190.
The PTO charges post-issuance fees, which are due at 3.5, 7.5, & 11.5 years. Including our $450 fee for handling, small entity post-issuance fees for a small entity are $1250, $2050, and $4150, respectively. For large entities, these costs, including our handling fee are $2050, $4050, and $7850, respectively. These amounts are for payment by the 3.5, 7.5, & 11.5 year levels. Payment after these time periods but before the 4.0, 8.0 and 12.0 year time periods involves a $80 additional "surcharge" for small entities and a $160 additional "surcharge" for large entities. These fees are paid to keep the patent in force. A decision to keep the patent in force may be made at each of the aforementioned points in time, but once the patent is allowed to lapse, it generally cannot be retrieved without loss of intervening rights of others who could have noticed the lapse and acted to make additional investment in the patent. However, the USPTO may allow the revival of a patent for which the maintenance fee has lapsed, providing the lapse was unintentional, and providing the fees are paid within 24 months past the abandonment date. New micro-entity fees are believed to be dangerous unless it can be proven beyond any doubt that the inventor / patentee is entitled to them, such proof including a search for prior cases and the income tax returns of the inventor and spouse.
Once a patent has issued, an inventor may keep the invention or may license it to others; licensing agreements may range from a non-exclusive license to an exclusive license constituting a sale. The patent number should be marked on goods covered by the patent, or on goods related to patented processes, as soon as the patent issues.
Currently, changes have been made to the utility patent term of enforcement under the provisions of the GATT agreement recently passed into law. The agreement contained provisions which significantly affect our patent system. The term of a utility patent is 20 years from the date of filing or (but no less than 17 years from the date of issuance for cases filed prior to June 8, 1995). There are some provisions for extension, not to exceed 5 years, for reasons such as delays based upon an appeal. Changes under GATT do not apply to design patent cases.
The validity of maintained patents is for a term beginning on the date on which the patent issues and ending 20 years from the date on which the application for the patent was filed in the United States or, if the application contains a specific reference to an earlier filed application or applications under section 120, 121, or 365(c) of this (35 U.S.C.) title, from the date on which the earliest such application was filed. If applicants know in advance that they will not want to file in a foreign country, a special form can be used which will suppress publication of their application until issuance. There are term extension indicated by the patent office in some cases.
Where a continuation application is filed, regardless of whether the case is published, the 20 year period will be computed from the filing date of the parent case. Thus, the applicant will be arguing to the USPTO at the applicant's own expense in terms of time lost from his 20 year potential patent period.
Such a 20 year from filing rule will also mean that the practical benefits of continuation-in-part applications which are filed late during the 20-year period may also be diminished. A continuation-in-part application is one which contains new material in addition to the old material of a parent case. The continuation-in-part application operates under the same section of the patent code as continuation applications, and thus operates under the new rules to limit the patent term to 20 years of the filing date of the earliest parent patent from which the continuation-in-part depends for priority.
With regard to patent enforcement, if someone infringes your patent, you may invite him to license it, or you may command him to cease his infringing activities. Once the infringer is placed on notice and has had a chance to investigate the legitimacy of the patentee's claims, any further infringing acts are considered willful, and such acts create the potential for infringer liability for up to treble (triple) damages as well as attorney's fees. Any legitimate dispute concerning coverage of the patent can be addressed in settlement/licensing proceedings. Most settlements involve a license of some sort. The phrasing of the cease and desist letter must be carefully drafted to avoid laches (this principle bars one from asserting damages during the period in which one has unreasonably delayed pursuing the claim) and estoppel (this principle bars one from asserting any claim against the infringer upon which the estoppel was based).
For small businesses, even a single infringer can cause loss of profits and income, and can completely drain advertising expenditures; further, pursuing the infringer may take a serious toll on the cash position of the business. For these reasons, we strongly recommend patent enforcement insurance to help defray the costs of stopping infringers.
Another consideration is that
insured intellectual property may be more attractive to investors and licensees,
and thus may increase the value of a patent. Currently, there is only one
company that we are aware of within the U.S. which provides patent enforcement
insurance. An abatement policy that financially insures efforts to stop U.S.
infringers is offered through Intellectual Property Insurance Services
Corporation (IPISC), which is located at 9720 Bunsen Parkway in Louisville,
Kentucky. They may be reached by phone at 800-537-7863 or 502-491-1144. Their
web page is located at www.infringeins.com, and their email address is
firstname.lastname@example.org. Like any other insurance, the cost of enforcement
insurance is based on the amount of coverage desired.
A patentability search enables the patent applicant to get some idea of how crowded the area of art is, and how the invention compares to the level of knowlege in the world. The cost of a patentability search may even be less than $1,000 for simple mechanical cases, but you are warned that this level of search may likely be statistically meaningless. (Please see our article entitled "Do You Really Need a Patent Search?" on our website, http://patentax.com/library/psrch.html )
One problem with searching is the dependency upon English language translations of only the abstract. Abstracts typically omit at least half of the important aspects of a reference. Lately, computers have been used to translate the content of foreign language patents and details are often obscured by this process. Machine transation has not yet approached the passing of the "loop" test (lossless translation into and out of the foreign language) and consequently can obscure important details.
If a search reveals differences between the found references and the invention, and if
those differences are sufficiently great, a patent can be applied for at a reasonable
cost. They key to this type of search is to compare the disclosures of the found
references with the invention as it will be claimed in a patent application. Further,
search results may allow us to better craft the application to emphasize those aspects of your
invention which are lacking in the found references identified in the search.
A second level of patent search is an infringement search; this type of search generally requires more time than that required for a patentability search. Unlike a patentability search, the key to an infringement search is a careful reading of the claims of valid patents with an eye to the finished product which the client intends to produce. These searches start at a cost about $5,000, and are more detailed in analysis, since the idea is to try to determine if the product or process the client intends to make or perform infringes a valid patent. These searches are usually performed where a client wants to either minimize the probability that his product/process may be infringing a valid patent, or do some form of due diligence to a given level of expenditure. These searches are also open ended, requiring additional information, such as file histories to be obtained for any suspected close patents.
Such an infringement study has nothing to do with application for a patent, except that the references discovered are required to be reported on a patent application and would normally be used to hone the patent application (as would the results of the patentability search). Remember, you CAN get patent protection for subject matter relating to a product that would infringe another patent if that product were produced. Nonetheless, your patent would have value if your improvement was significant because a manufacturer would still be liable to you (and perhaps to the other patent holder as well).
The third type of patent search is a validity study. Where a client's manufactured product is threatened by an issued patent in a country of interest, a search similar to a patentability search is performed in the country of interest. In a validity study, the search starts by looking for references before the threatening patent's filing date for most countries (and more than one year before the threatening patent's filing date if the threatening patent is a U.S. Patent). the search and then goes backward in time for hundreds of years. Much of the success of such validity studies comes from patent searches in Japan and Europe. This process typically involves setting a spending limit, for example $10,000; one must then decide how much to spend in each country. One must also decide whether to file a petition for re-examination based upon the number and quality of the prior references uncovered.
If you are considering filing for a patent, you may also want to consider a petition to make the application special if you are entitled to do so. Prior to June 8, 1995 the average current delay period in the USPTO was about one year. This means that at least one year will pass from the date of filing before a Patent Examiner in the USPTO will even take up your application and begin to examine it. However, under certain circumstances, you can petition to have the case pushed to the head of the queue and examined immediately. Historically, the specific circumstances necessary to be able to file such a petition (available from 1995 through August 25, 2006) were (1) prospective manufacture, where a manufacturer binds himself to produce the product in the U.S. or increase production in the U.S. upon the issuance of a valid patent; (2) infringement, where the invention is currently being infringed by someone else; (3) applicants health, where the inventor/applicant is so sick that he might not be available to assist in the prosecution (doctor's certificate required); (4) applicant's age, where applicant is over 65; (5) environmental quality, where the invention will materially enhance the nature of the environment; (6) energy, where the invention will materially contribute to the discovery or development of, or more efficient utilization and conservation of energy resources; (7) DNA, for inventions relating to recombinant DNA; AND (8) single invention applications, where the scope of the claims cover one invention alone (this is available where a search was performed and where a detailed statement is made by the attorney as to how and in what areas the invention is patentable, in addition to other requirements); and (9) superconductivity inventions. HOWEVER, starting on August 25, 2006, all of the above-listed justifications for a petition to make special were funneled into a "super category" in which the application is made to convert and file the entire case as an electronic filing, perform his/her own search by class and subclass, and, in essence, restrict his/her claims to a single invention. There are only 2 exceptions to this new mass grouping: item (3) - applicants health (where the inventor/applicant is so sick that he might not be available to assist in the prosecution - doctor's certificate required), and item (4) - applicant's age, where applicant is over 65.
Regardless of the mechanism used
to "make special", it is believed that,
anyone seeking a quick prosecution will have a quick prosecution, but it will
likely result in claims which may be very narrow. The reason that the "make
special" status has been important since the introduction of the
20-year-from-filing rules is that applications which linger in the USPTO under
the 20-year-from-filing rules are not merely delayed; rather, they use up the
patent owner's potential monopoly period. As the time of processing has taken
longer, the PTO has been under pressure to speed things up. This generalized
acceleration method will be aimed at critics of the PTO delays, who can only
argue that it will kill their potential patent breadth. To speed up the process
without harming the patent, the qualifying status of sickness or age are the
only remaining excuses which will permit patent processing to occur normally.
With regard to making and selling the invention, the U.S. allows a 1 year grace period (beginning at the time the invention is first marketed) before imposing the requirement that a patent be filed on the invention, but a U.S. inventor should AVOID relying upon this grace period if humanly possible, because other countries have a ZERO time grace period. If the product is published on the Internet or becomes known in other countries BEFORE a U.S. Patent Application is filed, the inventor's rights in all foreign countries would be lost.
Note that one of the most delicate and dangerous areas in intellectual property law involves the disclosure to others either (1) through their collaboration with the inventor or (2) when the inventor puts the item on the market. You should ensure that those you work with in developing the product (1) have signed a non-disclosure agreement and (2) agree that whatever contribution they make to the development of the product will be owned by you. Great care should be taken here, because the standard for "becoming an inventor" is very light; a contributor deemed to be an inventor can end up owning an undivided interest in the patent.
In some cases, the market for a product is suppressed and develops after about the same delay as the year or two that it takes to obtain a patent. In other cases, the market can sky-rocket and then plummet before patent protection is obtained. So, in some narrow instances you may want the patent period delayed, and in other cases you may want to advance it by filing a petition-to-make-special to get the process moving.
In any case, a filed patent can help with disclosure problems. A non-disclosure agreement which references a patent that has already been filed is quite strong from an evidence standpoint. Usually, where there is a fight going on between an inventor and a company that has usurped the inventor's idea, the company will claim that the inventor disclosed virtually nothing to them (or at least nothing of any value) while the inventor will assert that he has disclosed great details. Absent a series of photographs or videotaping of the disclosure session, a patent is the best deterrent against such claims, because a non-disclosure statement can recite the identity of the application by number, partial number, (or by other indicia where the application number has not yet been received). Further, the patent application can prove helpful in bargaining because it gives potential buyers/licensees a concrete idea of what they will receive in the transaction. Moreover, the transaction can be limited to the application rather than future and/or ancillary inventions by the inventor, any or all of which can be reserved to the inventor.
With regard to filing for a patent in foreign countries, the general rule is that actual filing must occur before the invention is (1) known or used in that country, or (2) printed in a publication anywhere in the world. Foreign filing may be accomplished through any one of four mechanisms:
1. Filing in the U.S. with a regular non-provisional patent application and then filing in a foreign country within one year's time. If the second application is filed within one year, priority dating back to the filing in the first country may be obtained. This is because most countries will allow anyone filing subsequently to be given a "first in line" priority in the subsequent filing as if it were filed on the same date as the first filing, so long as the subsequent filing is accomplished within a year.
2. Filing foreign based upon first filing a U.S. Patent Application to take advantage of the no-cost foreign filing license grant (from U.S. Department of State and U.S. Department of Defense). About (currently) 1 month after your U.S. filing, you will receive a filing receipt which may state that the U.S. Department of State and U.S. Department of Defense have seen your application and have no objection to your filing overseas. If you were to blindly proceed to file overseas, or if you were to file overseas despite the withholding of a foreign filing license, the penalties could involve jail time. Further, if your invention is believed to be HIGHLY valued, such that it should be kept secret from the international community, the government may invoke a protective order placing the inventor under threat of jail if the patent is disclosed. The procedure allows for some examination and arguments during the secrecy period, but no patent will issue until and unless the secrecy order is lifted.
3. Filing in a country where priority is NOT claimed, either through inadvertent omission to file early or because the decision to file foreign was not made until after the one year deadline. This will be possible only if the patent has not been published and is still secret.
4. Treaty filing, typically under PCT. It must be remembered that not all countries are PCT signatories; therefore, PCT is not available in all countries.
Previously, an applicant had to designate each state affirmatively in a PCT application. Recently, however, the procedure has been changed so that states are automatically designated and the applicant has the option to withdraw designations for states not wanted. The laws in these some countries are such that filing an international application causes an earlier national application to lose effect.
The European Patent Office (EPO) is treated as a single entity which includes Austria, Belgium, Switzerland and Liechtenstein, Germany, Denmark, Spain, France, United Kingdom, Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands, Portugal, Sweden, and more. If 3 or more European countries are of interest, an EPO filing may be the preferred route. The EPO filing in many cases takes at least eight years, involves EPO maintenance fees, but may at least save the applicant costs during the prosecution phase.
Most properly, the PCT application will be filed within 1 year of the first country filing and will claim priority of such first country filing date. The filing of a PCT application will extend the time for filing in each country or member selected for at least 30 months (or in some cases 31 months) from the priority date. A very few countries require an additional filing (Chapter 2 filing) by 19 months from the priority date. So, unless the applicant is specifically interested in these countries, or where the applicant needs to amend his application, there may not be a need for a second filing. Many people wait until the 10th or 11th month after their first country filing to file the PCT application. Assuming that the PCT application is filed during, and before, the termination of the 12th month of their first county filing, the initial effect of the PCT filing is to extend the necessity to file in each PCT elected country by an additional 18 months. PCT and other foreign filing should be considered no later than 10 months from the US filing date for two reasons: (1) it may take some time to convert an application to the PCT format, and (2) the applicant may have additional invention which can be filed as a continuation-in-part at the same time that the PCT application is filed. This will save the applicant from having to file two PCT applications to capture the additional invention!
An applicant who files a PCT application without an earlier priority date takes the filing date of the PCT application as his priority date (provided his invention has not been published and is generally private). This has the advantage of setting the associated time periods from the date of the PCT filing. However, it is recommended to always start with a national filing, as the applicant has the ability to use the 1-year Paris Convention to obtain priority in other non-PCT countries (Argentina, for example). The cost for the PCT application will depend upon how many pages and sheets of drawings the application contains.
Our charge for a PCT filing is roughly $2,000 plus government fees and mailing costs. The average PCT government fee is about $2,500 and is based upon the number of pages in the application. Subsequent charges can also be imposed by the government for excess inventions if applicable. Much of the difficulty in PCT practice is in making certain that you, the client, are ready to file foreign at the end of the PCT 30-month period because a PCT filing is not an application so much as a time delay device. Where you are sure that you want foreign protection in certain countries, it is best to file as soon as possible after the US filing to both avoid the extra expense of a PCT filing and to avoid loss of that portion of the potential validity period which will be wasted during pendency of the PCT filing for the countries of interest.
Filing a European Patent Application before the EPO typically involves three initial fees, (1) the filing fee, (2) the country election fee, and (3) the request for examination fee. We collect, file, and transmit fees initially based upon all three in order to minimize the need to bill these large sums over the period for which they are due. Somewhat dependent upon the currency fluctuation, the initial cost for this is between $12,000 and $15,000 given the severe devaluation of US currency over the past few years, and depending upon the number of claims and when the EPO application is filed. Once filed, renewal fees are due for the next several years and average about $1,500 per year for as many as 8 or 9 years. Once the EPO case issues, (which right now is running at about 7 to 8 years after the earliest priority date) it is required that the claims at least be translated into English, German and French. In addition, any countries where the issued European Patent is to have effect must be formalized in the country selected within a SHORT period of time after allowance. For countries whose language is English, formalization can require attorney fees which are less than about $1,500 per country selected; where a translation is involved, the cost is likely to be about $6,000 per country due to the additional cost of translation fees. Enforcement of the European patent is not unified, and the laws of the country where the EPO patent enforcement is sought will vary significantly from country to country. Very few clients who file and EPO application see it through the 7 to 8 years of maintenance, examination, office actions, formalization, and final country translation and activation. Thereafter, the individual countries charge annual maintenance fees.
U.S. rights Before the U.S. Patent Issues
New provisions include section 1.54(d) provisional rights enacted November 29, 1999. This gives a "reasonable royalty" to infringing acts occurring after publication, but does not apply to cases which are inaccessible prior to publication, such as design applications, provisional applications, and applications under a secrecy order. Section 1.54(d) provides that (subject to a number of conditions) inventors may receive a reasonable royalty beginning on the publication date (either 18 month rule or PCT) and ending on the date the patent issued (provisional rights). At this time, we are unsure of the mechanism for incorporating these rights into a proof of infringement. If the case is allowed, the PTO adds a charge of $300 (the publication fee shown in the calculations) to the issue fee papers to cover the cost of publishing both issued applications and
applications which never issue.
To avoid publication, inventors/applicants must file a statement that they will not file in any country with an 18 month publication requirement. Inventor/applicants must notify the USPTO within 45 days of any foreign applications or else risk abandonment of the U.S. application (a severe penalty). There are further provisions for a redacted copy where foreign filings comprise only a portion of the subject matter contained in the domestic filing. A separate publication fee is included with the notice of allowance to cover many of the additional (and we believe unnecessary) costs for this whole system. Publication provisions were effective on November 29, 2000.
A foreign priority claim must be made within the later of (1) four months from the date of filing, or (2) sixteen months from the filing date of the prior application. Name, number, country, day, month and year of filing are required. The same rule applies to domestic priority claims as well. Further, the first sentence of PCT priority application must cite the publication date.
Objections to drawings that the Examiner makes in an office action must be corrected with the office action response or the reply will be considered non-responsive. This could be a major burden if the applicant is made to correct drawings on a case that he or she may not take to issue for reasons such as dissatisfaction with the scope of claims allowed or a decision to keep the information in the application a trade secret.
After publication, an information disclosure statement may be submitted by the public. Such third party disclosures can be made with a fee and must be served upon the applicant. Such disclosures must be made within 2 months of publication or prior to the mailing of a notice of allowance, whichever is earlier. The PTO also provides for deferred examination of up to 3 years. All of the new rules do little to advance the interests of individual inventors.
BEWARE PROVISIONAL PATENT APPLICATIONS!!!!
In our experience, applying for a pharmaceutical-based invention where FDA approval can be sought with guaranteed privacy seems to be the only valid reason for utilizing a provisional application. In general, provisional applications may be a trap for the unwary inventor for the following reasons:
1. The paris treaty states, under article 4(A.):
(2) Any filing that is equivalent to a regular national filing under the domestic legislation of any country of the Union or under bilateral or multilateral treaties concluded between countries of the Union shall be recognized as giving rise to the right of priority.
(3) By a regular national filing is meant any filing that is adequate to establish the date on which the application was filed in the country concerned, whatever may be the subsequent fate of the application.
U.S. Patent Term is set to the "regular" filing date. Does this mean that provisionals shall be given "regular filing status" only if they are actually "back converted" to regular cases rather than claimed as a continuation filing so that the provisional will then have the U.S. "regular" filing date? No one wants to hear about any part of this. If I were a German attorney fighting a case based upon a U.S. provisional patent that was not "back converted" to regular, I would raise the argument that the U.S. provisional "might not be a regular filing" because the "date of the application in the U.S. came later than the provisional filing and that it has no priority under the Paris Treaty. Provisional filers get quite angry whenever this is pointed this out.
2. If the invention becomes known, for example on the Internet, the inventor may have to
specially convert the provisional application to a regular application, provided that he
is not barred from doing so. Consequently, an inventor is likely to be better served by
a regular application initially, rather than a provisional application.
3. Provisional applications which are specially converted may result in problems with later-added claims, because these claims must match the level of disclosure of the provisional application and are therefore subject to rejection on that basis. On the other hand, a regular application with a complete set of claims matching the disclosure is not likely to have this problem.
4. Generally speaking, provisional applications present additional and unnecessary expenditures of funds and filing efforts.
5. During the pendency of a provisional application, the invention must be kept as a closely guarded trade secret; otherwise, the inventor risks loss of foreign rights if the provisional application is not specially converted to a regular application, assuming such an option is available.
6. With respect to filing foreign applications, the entire purpose of the one-year treaty rule is to allow an inventor to improve his knowledge of how a product is going to perform. Only a regular application gives an inventor the ability to fully exercise free expression through advertising and publication of the invention (with an eye toward the one-year priority date, of course). Often, when a provisional application is specially converted to a regular application, an inventor will be surprised to find that the foreign filing must be accomplished based on the original date of the provisional application. This leaves little time to gauge a market reaction, especially where an inventor has kept an invention secret (which should be the case) during the pendency of a provisional application.
Further Note on Patent Divisionals:
New rules which go into effect on November 1, 2007 will severely restrict the ability to file straight patent divisionals (currently temporarily suspended). Maintaining a system of temporally linear patents may in some cases need to be augmented by new invention over time.
THREE IMPORTANT POINTS TO REMEMBER ABOUT YOUR PATENT PROJECT:
1. FINISH THE INVENTION COMPLETELY
By finishing the invention, you will know the cost for materials, labor, production, and packaging. This is important because the process of doing so will help you to refine the design and production. As a result, you will have an item which you know you can make for $10 (for example) and sell for $40 rather than the other way around. If you apply for a patent based upon a first design and then change the design, the first patent may be of lesser value (or even worthless) and will require you to file a second patent to cover your final design. However, where your product has an on-going improvement activity, filing a string of continuations-in-part may be more advantageous. Our fee schedule is geared for inventors who seek to keep their patents alive and track their product changes.
The following list is illustrative of the information you should know relative to your finished invention, and is provided to help you survey invention completeness:
a) All technical data, circuit schematics, performance criteria, block diagrams, process flow diagrams, communications protocol, mechanical specifications, costs for manufacturing the item, costs for packaging the invention, performance boundaries if any, temperatures, pressures, voltages and other scalar magnitudes.
b) A description and knowledge of what it is about your invention that is BETTER, CHEAPER, FASTER, etc., than the products of your competitors. This may be multi-dimensional and may involve focusing on synergistic interactions between the elements. Emphasize any omitted components, for example a device that performs two functions by sharing circuitry, structure, etc.
c) A good knowledge of WHY your competitors' CONSUMERS will choose your product over the closest available alternative.
2. LET US HELP YOU APPLY FOR A PATENT.
To enable us to accurately and completely describe your invention, it is crucial for us to have all available information: drawings, discussion, theory, formulas, product specifications, materials of construction, and everything else you have that is related to the invention. For utility patents, we require a check for $6,000 to get your application process started (assuming that the invention is of average complexity and is not based on computer software or a business method, both of which require $8,000 to start). Against this amount will be charged our fees and costs, which will include $190 per page of specification, $130 per sheet of drawings (if any - chemical cases may not usually have drawings) and $575 for filing mailing and copies (small entity), assuming no excess claims charges. Assignments and information disclosure statements require additional fees as described above. For design patents, we require a check for $1,600, which is full payment for filing a design patent with only a single embodiment. You will also need to provide us with the following information:
a) A complete description of WHO THE CLIENT IS. If the client is a corporation, we will need the exact spelling of the company name and the name of the company president who will sign papers, including the attorney-client fee agreement. This information is also necessary to execute an assignment. If the client is a sole inventor, we will need the inventor's name. If the client is a partnership or other entity, we will need you to describe the entity and tell us who is in charge of the entity. Remember, a patent is normally not assigned to a corporation, or significant tax losses will occur.
b) Citizenships of the inventors.
c) Complete name & contact information for all inventors, including telephone and fax numbers and e-mails.
d) Home addresses of the inventors.
e) Printed copies (two each) of prior art references (so that we can prepare an information disclosure statement if necessary).
f) Electronic copies, if possible, of all the information relating to the case.
g) Initial payment of $6000 ($8000 if the patent is computer or web based, computer base or is a complex machine or complex process)
h) Specific explanation on how the product is used, a short note on the closest product currently available, and a short note on why others have been unable to achieve what you have achieved (i.e., a technical statement, not merely a statement that no one else thought of it).
I) All designs, photos, write ups, and explanations on how the product is used.
Once we get a basic amount of information from you to enable us to formulate an attorney-client fee agreement, we will send an attorney-client fee letter to you explaining how the charges are computed. After you have signed and returned the attorney-client fee agreement to us, as well as all of your data and information above, we can begin work on your case. In approximately 2 to 3 weeks, we will provide you with a first draft of the patent application. Once you have examined the first draft and have made us aware of any changes you deem necessary, we will provide you with the final product, again with price computed at $190/pg for text, $130 per sheet for drawings & $530 for filing, plus additional charges for any excess (extra) claims. We will then file your application with the USPTO and will wait for the first office action to be issued by the examiner, typically in about 1 to 2 years.
Assuming your invention is a device you will be launching immediately, we strongly urge you, while awaiting your first office action, to prepare numerous announcements and press releases for publication AFTER the patent is filed. Note that because many publications accept articles on new products, this can mean tens of thousands of dollars in free advertising!
3. SELL, SELL, SELL!
Once you have finished the invention (i.e., you know everything there is to know about it and you know the cost to make it down to the penny) and your business plan is in place, if someone makes an offer at a price you find attractive, we will try to help you formulate a license agreement which both (1) motivates the licensee and (2) gets a flat 15% federal capital gains rate (this rate may change in 2012) for you, if we are able to help you negotiate a license which constitutes a sale. We will also try to help you with a comparison between the self-manufactured after-tax profit at ordinary rates (typically from 40% to 55%) based upon what is expected to be higher profit associated with ownership of the goods, versus the passive 15% tax rate on capital gains from pure licensing.
GENERAL TAX INFORMATION
Patents have significant tax advantage (as of the end of 2011). First, the cost for a patent filing is not high. It is about 1/6 the cost of buying a new SUV, but it gives you outstanding tax benefits such as instant capital gains on sale, and instant deductibility on expenditures related to obtaining the patent. However, you should also analyze your position against alternative minimum tax, which is increasingly coming to the forefront of our tax system.
To compare personal expenditure against the advantages of patent, and as a first example; if you bought a new Ford Explorer for $30k, you would not be able to write it off on your tax return. If you then sold it for $40k, you would pay ordinary income rates ($3,500 at the 35% top federal rate -- even though the rate in 2013 is 39.6%) on the $10k profit and you would pocket only 65% of the gain, or $6,500 (taking into account federal tax only).
Turning now to a second example, for a utility patent of medium complexity at a cost of approximately $5,000 to file, you would be able to write off the entire amount, which would essentially result in a government subsidy of $1,750 (figured assuming a marginal ordinary income tax rate is 35% rate) and thus a total cost to you of only $3,250 after taxes (again assuming a 35% rate). If you then sold the patent for $15,000 (but note that patents usually sell for much more), even before it issues, you would pay capital gains tax of only 15% (not including the Obama 3.8% surtax and assuming that the inventor makes less than the amount needed to trigger the top 20% capital gains rate) on the $15,000 as profit, without subtracting the previously deducted $5000. Note that the outlay to acquire the patent only becomes part of the patent basis if you elect to treat expenditures as a capital item (this may be the case where there is an excess loss carry-forward). As a result the tax will generally be calculated from a zero basis, i.e., 15% of $15,000, or $2,250.
So, for a smaller, tax subsidized investment, you would be able to pocket far more money in the final analysis. In the first example (for the SUV), you would have an outlay of $30,000, a gross profit of $10,000 and a net profit of $6,500 after taxes. In the second example (for the patent), the actual outlay would be $3250 (accounting for the $1,750 subsidy), and you would pay tax of $2,250 (again, computed on the entire $15,000), leaving $9500 after accounting for both the taxes and the initial outlay. Of course, transactions involving greater sums of money produce significantly larger leveraging. Much of the above will also depend upon the level of your personal marginal tax rate.
In general, the law treats trademarks as if they are unique associational tags for (1)a SOURCE of goods or services, and (2) a corresponding level of quality. First, using EXXON as an example, EXXON is a mark that was carefully selected by its owners, and their selection process was in accordance with the five golden rules listed below. Consequently, the EXXON mark is so unique that it requires little effort to defend and maintain. This is an important point, because money spent establishing and defending a trademark must be capitalized; in other words, it is not currently allowable as a deductible expense. Additionally, a crucially important reason for having a trademark in the first place is to gather goodwill over the life of the trademark (in addition to asset value) with an eye toward capital gains treatment on later sale. From a tax standpoint, if a trademark meets the general standard set forth at the beginning of this paragraph, a near-perfect "goodwill reservoir capacity" will be created.
When a business owner makes the mistake of selecting a mark that is descriptive of the goods or services he provides, the owner and his business are certain to suffer. As a basis for understanding why this is so, it is important to know that each time a business spends one dollar on advertising, two things happen to the business as a result: (1) the business experiences a return ratio on its products, and (2) the business develops "phantom goodwill dollars" which can be redeemed in future if the quality of goods and services is high. When a weak trademark is selected, several harmful results occur:
1) Each dollar spent on advertising results in an ever-reducing proportion product sales and an ever-increasing proportion of those product sales going to competitors who sell the same-named (or similarly-named) product or offer the same-named (or similarly-named) services.
2) The owner of a weak trademark cannot force others to stop using his trademark (and properly so, because a trademark that is descriptive is not truly "owned"), and competitors have a colorable justification for either copying the mark (worst case), especially if it is descriptive, or coming close enough to copying the mark that they are able to pull buyers (and profit) toward their own products and services.
3) If a trademark is weak or descriptive, it cannot be successfully defended, and many imitators are likely to be attracted to the mark. In this case, the trademark will generate zero goodwill because no one is likely to be interested in buying a lawsuit regardless of how outstanding the goods and services may be.
4) The strongest competitors will act to secure rights in the mark, even though it may be a losing proposition for them, and the result may be that the client who adopted the mark will be forced to stop using the mark altogether! Even if the trademark was weak, being forced to surrender the mark and start over with a new mark means that the business owner will become anonymous to his prior clients who have been using the mark as a method of contact identity.
5) Finally, a poorly chosen mark can pull the net value of the business below zero. No one is likely to be interested in purchasing a company that is constantly under fire because of its poorly selected trademarks. Additionally, some buyers may be forced to resort to the headache and expense of corporate reorganization in order to be able to acquire the company assets without taking on the company's liabilities.
THE FIVE GOLDEN RULES FOR SELECTING A STRONG TRADEMARK:
1) Name should not be descriptive of the goods or services provided under the mark. (See A, B, C, E, & F below)
2) Name should not contain any geographical designations, no matter how small or little-known a place or landmark may be (See C, E & F, below)
3) Name should not be found in any dictionary (See B & F below) û also, no look-alike, sound-alike, or spell-alike names.
4) Name should be not be a person(s last name (See D, & F below) û also, no flags or government coats of arms, or Olympic symbols.
5) Name should not be scandalous, lewd, or vulgar (this is against public policy).
Further detailed in points A through E below are at least 5 ways you can lose money (perhaps even to the extent of bankruptcy) if you disregard the above rules and select a weak mark.
A. When a mark is descriptive of the goods and services provided under the mark, it is equivalent to advertising which benefits your competitors! Confused customers will use your advertising dollars to locate and do business with your competitors. You cannot stop others from using the descriptive name or variants, therefore your lawsuit money will be often spent and always wasted.
B. Because a trademark has an infinite life, money spent on litigation cannot be deducted. Thus, if you earn $1,000,000 in before-tax profit, but must pay your trademark attorneys $1,000,000 in legal fees to defend your mark, not only will you NOT break even, but you will have to borrow $350,000 (plus any state taxes due) to pay the tax on the $1,000,000 you earned!
C. All geographical designations within a trademark are rejected or required to be disclaimed. This will be the case because a product is either (1) associated with the geographic designation and denied because it is descriptive, or (2) is not associated with the geographic designation and is rejected as being misdescriptive. All geographic and disclaimed designations in a mark reduce the trademark's strength and reduce the company's value.
D. Last names as potential trademarks are
sure to generate rejections at the PTO (we even had an unusual Hispanic name rejected
because the Examiner found 5 people in the U.S. with that name). Where others entering
into the market either change their name or obtain an endorsement from someone with the
same name, there is nothing to be done other than initiating a large lawsuit, which
introduces the possibility of losing such a lawsuit and even having to borrow money to pay
taxes. Furthermore, in the rare case where the PTO may approve the use of a last name, it
customizes a company to the extent that it becomes worthless to others, especially in the
case where the owner after whom the company is named has died.
E. As stated above, a weak mark is economically fatal in terms of future value. No one wants to buy a trademark and goodwill or a business which is enmeshed in litigation and controversy, especially where there is no potential for exclusive control of the customers' perception of the identity of the source of goods and services. TRADEMARK is an excellent ONE-WAY street toward capital gains provided that care is taken in choosing a strong mark. Once the goodwill is held more than one year, the sale of the asset results in CAPITAL GAINS which are currently at a 15% federal rate level (for pass through entities and LLC's). The idea is to provide a clean set of goods and services so that when you leave the business, your stock is high or your business value is high.
F. Stay out of the dictionary. If you cannot look the mark up in either English or another language, the Examiner (who is trying to prevent your getting the mark) cannot look it up either. A mark which is not readily found through any avenue of search (Internet or otherwise) and which cannot be split into words found in the dictionary has the ability to capture ALL AVAILABLE GOODWILL and thus become a "coined mark." When a mark acquires the status of coined mark, it means that the mark has recognized protection OUTSIDE its normal stream of commerce. EXXON is a great example of this principle.
For instance, because EXXON is a coined mark, it cannot be used on shotguns, even though
Exxon Corporation does not make shotguns. It is simply VERY POWERFUL as an indicator of
the source of goods and therefore it has extreme impact outside the normal channels
of goods and services. Additionally, it is probably a safe bet that Exxon's trademark
litigation files are extremely small because challenging a mark as strong as
EXXON would almost certainly be a waste of time and resources. Finally, consider that,
even if the EXXON mark were sold with no gas stations and no oil reserves, it would likely
still be worth BILLIONS of dollars.
What about SECONDARY MEANING? This rule enables a descriptive mark to be obtained once enough advertising is done to cement the name in the consciousness of the customers, such that a SURVEY would cause a high percentage of the customers/public to associate an otherwise undesirable name (last name or descriptive name, for example) with the SOURCE of the goods rather than with its descriptive meaning. So, for example, you might have to spend $1 billion advertising during the super bowl, and then $50 million per year until you get the desired public level of association. But, by doing so, you have built your company into an "advertising drug habit" which requires the expenditure of millions per year to keep the trademark in question out of the public domain. This is not just value loss, it is value suicide. The principle here parallels the purchase of stock: it is never a good idea to buy high (e.g., all your advertising investment to protect a word which was descriptive) and sell low (e.g.,your profits and later sale of the business likely will not be able to make up for all the money you have spent trying to acquire secondary meaning for a descriptive mark). You will also need a healthy litigation program in place (i.e., plenty of insurance to cover the costs of having to defend the mark frequently, etc.). This combination of advertising losses, litigation losses and loss of value in the going concern is likely to result in the death of your business, and a painful death at that.
TRADEMARKS WITH LOGOS
To demonstrate how the use of a logo affects the strength of a mark, the Coca-Cola mark provides an excellent example. Coca-cola is actually a combination of three marks:
(1) the word itself (COCA COLA), (2) the specialized font (Coca Cola with differential capitalization and having the "oca" and "ola" portions in a sweeping font), and (3) the graphic artwork (coloration and swath against which the mark is set).
The first mark (word only) is the strongest mark. On a scale of 1 to 10, where 10 is the strongest, the first mark is a 10. The words COCA COLA are protected no matter how they are written, no matter what font they are written in, no matter what size or color they are written in, and without regard to capitalization of any kind. This trademark protects the sequence of letters itself, so that even a purple truck with black letters spelling out COCA COLA would constitute trademark infringement.
The second mark (sweeping font and differential capitalization) rates a 5 on a scale of 1 to 10, where a 10 is the strongest. This mark protects the sequence of letters, but ONLY if they appear in this same way (with sweeping font and differential capitalization). A purple truck bearing COCA COLA in block letters, therefore, would NOT constitute trademark infringement if this were the only level of trademark protection in place. However, a purple truck bearing COCA COLA written in sweeping fashion could constitute trademark infringement because it looks like the sweeping Coca Cola mark at a glance.
The third mark also rates a 5 on a scale of 1 to 10, where 10 is the strongest. Any graphic of the sort and coloration (background and swath) will constitute trademark infringement regardless of what words are included.
A fourth mark is available here, which is the combination of all three of the above described marks: the word, stylization of the word, and the background or graphics against which the word is set. This possibility yields the weakest mark, a 1 on a scale of 1 to 10, where 10 is the strongest. Registration of this trademark will only protect against infringers who copy the mark and ALL of its features EXACTLY with no variation. Clearly, this level of protection is extremely narrow and is not useful, since any variation in the copied mark may remove the would-be infringer from the ambit of infringement.
Ideally, where a logo is involved, it is advisable to apply for separate trademarks for the name alone and the logo alone. Additionally, separate the name from the logo on goods where possible. Name-logo combinations are weak, thus the reason it is better to protect each separately. Beyond the typed mark, if a client wants a logo (less protection for the money), we suggest a second set of marks in these countries. However, if the mark is powerful, it may be fine to apply only for the typed mark. Often, if a mark is applied for as a logo or stylized letters, the PTO may force the applicant to DISCLAIM the very word the applicant is trying to protect. This is not the case with regular typewritten work mark applications, where the PTO has to either reject it or allow it as a complete whole. With the typewritten work mark applications, the PTO will stand and fight against you for the meaning of the letters because disclaiming the typewritten words in a mark is essentially rejection of those words.
Stay away from differential capitalization. Differential capitalization weakens a mark, and where combinations or parts of words are used, it telegraphs the pronunciation and meaning. For example: TreeExam (one word with differential capitalization) is the same as TREE EXAM (two words without differential capitalization) in they eyes of the trademark office, and would also be descriptive of a tree surgeon's services. It is less clear whether TREEEXAM (one word, no differential capitalization) would be viewed by the trademark office as TREE EXAM, TREXEX AM, or TREEEXAM.
Beware of letting marketing and ad companies choose your mark for you. Although they may provide fine marketing and ad copy for what you pay them, it has been our experience that they are adept at finding obscure marks owned by others. In one case, on the recommendation of a marketing company, we did three full searches sequentially on three different marks. Each search turned up an obscure record which would have cost the adopter thousands (and more) to litigate. In other words marketing companies tend to re-remember old marks and forget that they are not new.
Keep in mind that the primary object in trademark is not to be cute, catchy, or pretty. The primary goal is to choose a trademark that will be a vessel for goodwill so that, on later sale of the business, (1) the potential is high for additional gain (over and above what is received for assets) from the sale of goodwill, and (2) the additional gain derived from goodwill is taxable at the capital gains rate, which is currently 15%. Goodwill is virtually always assigned to the trademark, so a weak mark may mean no buyers for your business, products or services. The end goal is to put more money in your pocket at the end of your work life (rather than spending it on litigation to protect a weak mark).
THE TRADEMARK TREATY
A "regular" trademark application is a filing which occurs after the trademark or service mark has been used in interstate commerce. A regular application generally claims as its priority date the date of first use in interstate commerce (or a date at least as early as that date). A trademark or service mark MUST be used in interstate commerce before it can issue into a registered trademark.
On the other hand, an "intent to use" application (ITU) is an application filed before use occurs, and for which priority is given based upon the filing date once the application is converted to a regular application. Typically, the ITU application is used where the actual product may not come on-line for 6 months or more. If the period is less than 6 months, it may be more beneficial to wait for actual use and then apply (rather than
file an ITU application and convert). Where the period is more than 6 months, an applicant can benefit from the earlier priority date.
Further, and even more importantly, the trademark treaty gives those who have filed an ITU application in the U.S. (or other home country) the right to file a corresponding application in another country with a filing priority based upon the filing date in the home country, so long as the foreign ITU is filed within 6 months of the filing date of the home-filed ITU. The same does not hold for REGULAR U.S. filings which are based upon having previously used the trademark in the U.S. The advantage of the ITU application is also a disadvantage when used by others.
A filing in England, for example, gives the filer a right to file in the US within 6
months of the England filing and he can claim the England filing date. However, a full
search of the US records would not show anyone with rights either through ITU or by actual
use. This would lead a searcher to believe that it might be safe to adopt the mark.
The potential adopter either files an ITU application or begins using the mark, not
that the individual or company who first used the mark in England is about to file in the
US using treaty priority, thus defeating the potential adopter.
There is the possibility, as mentioned above, of filing an ITU and later amending the form of the application to a REGULAR status; however, given the increased cost of conversion (approximately $400 for our charges, not including the government fee), most U.S. filers who have previously used the mark simply elect to have a regular filing. An ITU is converted to a regular application by filing a paper which includes the date the mark was used in interstate commerce and includes 3 specimens of the mark. If conversion takes place before the ITU application is allowed, it is called an "amendment to allege use." If conversion takes place after the ITU application is allowed, it is called a "statement of use." The trademark can pass to registration only after the specimens and date of use have passed muster.
If an ITU application is allowed, there are (5) six-month periods (a total of 30 months) in which use must occur and conversion must be completed, or in which an extension must be made. The first six-month period is free and follows the notice of allowance. Four additional 6-month extensions may be purchased to extend the time for use to the full 30 months after the notice of allowance. Each extension costs the same as a conversion. We charge $400 as our fee for either a conversion or an extension but the conversion governement fee ($100) is less than the government extension fee ($150) which is in addition to our fee even though each has a different . The maximum would be purchased extensions, followed by a conversion between the 24th and 30th month.
The extensions must be filed timely. As a result, dilatory actions (i.e., waiting until the last minute) are stressful for everyone concerned. Unlike patent cases, an extension of the period for response may not be purchased. Moreover, after the first purchased extension, additional facts must be shown indicating that the applicant is serious about eventually using the mark.
Practically speaking, the trademark treaty is rarely used except in cases where a new product trademark is to be secured months in advance of actual introduction of the product. One reason the treaty may be so popular in other countries is that many of their trademark applications must originate as ITU applications, usually with requirements to use the trademark over a much later time frame. In other words, most countries are not concerned with whether you have initially used the mark in their country, so long as the mark is ultimately used within their applicable time period, typically about 5 years. This type of format eliminates the necessity to use the mark before it is registered, i.e., during a time when litigation might follow if the use is impermissible or if the trademark is owned by someone else.
EUROPEAN UNION TRADEMARK (EU TRADEMARK)
The European Union has adopted a delay-based search system to enable a single community mark to be obtained. It utilizes a time-limited search, to be carried out by the 25 member countries, after which the mark is either objected to or the objection is waived by each country in the European Community Mark system. Countries who delay their own search, either through lack of funding or because of simple administrative overload, and who fail to object to a mark will be considered as having accepted the EU by default action.
The advantage of this method is its low expense; however, this method can also be economically disadvantageous if it becomes necessary to file in each non-objecting country. A further disadvantage of this method is that the searches conducted by the member countries are often slow and lack detail.
When you consider the possibility of searching each country in Europe at about $2500 per search, especially now that the EU has 25 members, it becomes clear that the cost of doing so would be prohibitively expensive. The cost of filing separately in each country at about $2000 per country is also quite costly. The EU application has a filing phase which, combined with our fee for filing (about $800), comes to about $3000. There is also a registration fee which, combined with our fee for reporting and handling ($400), comes to about $2500, for a total of about $5500. Currency rates can change quickly and we should be asked for a quote before filing.
One remaining disadvantage of the EU system is the possibility that ONE of the 25 member states objects to the mark. If this occurs, then no EU trademark can issue. An applicant then has the option to USE the EU application as a filing priority basis from which individual country filings in the non-objecting countries can be accomplished. A further consideration is that each country also has a filing and registration fee which may average about $2500. This expense will almost certainly force an applicant to carefully evaluate the countries in which he genuinely wishes to file. The search which was generated from the failed EU application can be used to increase the likelihood that ultimate registration will be allowed in the continuation-filing country of choice.
With regard to trademarks, our charge is typically $950 per trademark per class in which protection is sought. Included at no charge is our analysis of and warnings relating to your mark selection. This fee includes preparing and filing the application, and also includes transmitting various papers to the client such as filing receipt, notice of publication, and the formal trademark registration document. The fee also includes docketing your case for the due dates of 8 and 15 affidavits which are due in the fifth year after registration. Each application requires 3 specimens showing the use of the mark in conjunction with the goods. Information that we require from you includes the date of first use, the date of first use in interstate commerce (i.e.., the date that goods, with labels affixed, are shipped across a state boundary in the United States, either to another state or overseas), an expansive description of all of the goods on which the mark is to be applied (so that we can determine whether you need to file additional marks in other classes), the EXACT identity of the owner of the trademark, and 2 specimens (labels) showing the precise mark for which you are applying (or 2 ad brochures where the mark is a service mark).
When first adopting a trademark, it is highly advisable to have a full search performed at a separate charge of about $1600 (depending upon the lead time before the full search is done) to avoid a charge of negligent adoption by someone else who may have superior rights. This search can help determine what the possible ramifications of using a mark will be, and can also help predict what the chances are of getting a particular mark on application. A search at this level can deter a charge of negligent adoption as long as the 5 rules above for selecting a strong mark are followed. If the 5 rules listed above for selecting a strong mark are NOT followed, this level of search will only generate reasons NOT to select the mark. Sometimes, when a client is trying to select a name, we will also recommend a short statistical search to help pre-qualify the name so
that the big expenditure will not have as great a chance for a negative result.
It has been our experience that, unless a trademark has been chosen deliberately to provoke an adversary or as part of an opposition, a mark generally proceeds to registration with little more than some brief attention to formal matters, questions from the examiner, and the like. This is true for approximately 80% to 90% of all cases, and these clients typically do not hear from us again until 5 years after registration when renewal is due. As a result, it is extremely important that you keep us informed of your current addresses, fax numbers, telephone numbers and e-mails.
In about 5% of cases, the trademark is flatly rejected. In this case, you may simply abandon the case or proceed to an appeal. Generally, this occurs because the trademark is already registered or the examiner will not allow registration of the mark in view of an already-registered mark. If the examiner rejects the mark but the client believes that there is a chance to go forward with arguments that can distinguish the mark, the client may elect to have us prepare a formal response as described below.
This is one of the reasons it is extremely important to choose a mark carefully. Where the applicant has only recently started in the use of the mark, the applicant has the fewest rights and generally the least chance to justify his registration in a contest. This is even more important when you consider that the mark can be taken from the applicant through a petition for cancellation at any time before the applicant accrues five years after registration, typically at the time for the 8 and 15 affidavits necessary to keep the trademark registration in force.
Note also that we highly recommend that your trademark be owned by a corporation rather than a person. A trademark owner is per se responsible for determination of the nature and quality of the goods and services. As a result, the owner of the trademark under which goods or services are sold will be held personally liable for product or service failure, even if the product or service was sold through a corporation.
Further, since the tax treatment of trademarks is similar to the tax treatment on gains
for sale of appreciated corporate stock providing that a pass-thru structure is
used, (i.e., capital gains are not instant), and since
the built-in value of goodwill occurs over time much like the accumulation in value of
stock, an LLC or other pass through entity ownership of trademarks is predominantly
desirable. However where a complete corporation is sold via sale of stock,
capital gains are also possible, but the buyer inherits the tax attributes of
In about 5% to 10% of cases, it is necessary to prepare a formal response arguing the difference between two marks, including a letter of consent from a prior registrant where possible. In these cases, we charge approximately $190 per page with respect to the trademark response and $380 per hour for any time beyond the formal response.
Our method of billing eliminates the necessity for us to bill you for letters, transmittals, or phone calls to the trademark office to answer examiner questions or to clarify problems. If a trademark matter can be handled by phone call to the PTO, there will be no extra charge to you. Because we have eliminated the need to prepare billing invoices, we save ourselves additional work, thus saving the client money. If we billed for preparing a letter or mailing, we would spend half as much time billing as we spent preparing or mailing the letter, which does not make much sense to us. However, when we have to respond formally to the USPTO, especially when we must argue that marks or lines of marketing and commerce are separate, or where we must cite prior cases, there is an extra charge as outlined above.
There is also an extra charge and the requirement of a deposit account balance (with replenishment) of $5000 if you hire us and we have to prepare and file (or defend) an opposition. An opposition is a small federal lawsuit before the trademark trial and appeal board, in which one person or company either (1) seeks to prevent a mark from being registered, or (2) tries to cancel a registration. The opposing party's mark is usually not in jeopardy in these cases. Because this is a lawsuit, there are deadline dates for discovery, document production, depositions, preparation of briefs, and arguments to the Trademark Trial and Appeal Board. Therefore, if your mark is opposed during the period for opposition, or if you have a petition filed to cancel registration of your mark, this is a separate matter which is NOT included in our stated $950 fee for trademark application.
IMPORTANT POINTS TO REMEMBER ABOUT TRADEMARK:
Remember that a trademark should not be a geographical name, should not be descriptive of the goods and services it represents, and, similarly, should not be misdescriptive of those goods and services. The mark selected should be far different from other marks which are used to describe goods and/or services in the same classification. Also remember that separate applications may be made for trademarking a name, a logo, and name in combination with a logo. Often, this combination of coverage is sought to achieve maximum trademark protection because competitors may try to copy or closely approximate the name without the logo or the logo without the name. Marks having the name and logo are narrower in scope than either a logo mark or a name mark, and this narrowness will usually encourage additional application for the name mark alone and the logo mark alone in an attempt to acquire the broadest trademark protection possible.
With respect to ITU applications:
1) An ITU filing is used with the 6-month statute to file in other countries.
2) An ITU filing must eventually be converted to a regular filing.
3) Each 6 month deadline extension, or a conversion at any time, requires action, and the time for response at each six month period cannot be extended.
4) Where use will occur soon, and where the mark is not so popular that it is believed others may grab it, it is more economical to wait until actual use occurs to apply for the mark.
5) On average, an ITU filing is examined in less than a year, will be published (if allowed) at about 12 months and will generate a notice of allowance at about 14 months. Adding 30 months means that you can keep the ITU going for about 3.5 years before finally having to actually use it in the U.S.
6) The ITU filing, if use occurs, causes the filing date of the ITU to become its priority date, meaning that the trademark predominates over other trademarks, even where use occurs before the ITU use. Example: an ITU filing on January 1, followed by use in December of the same year, will win out over one who simply started using in June. Even though the user in June used before the ITU user, the priority date swears back to the ITU filing date.
7) At a MINIMUM, our charge for an ITU will be the filing fee $950 and at least one conversion fee (and possibly a series of extension fees for each extension) and may involve several thousand dollars. Please note, however, that PTO fees rise from year to year.
The procedure for trademark is generally as follows:
1) Call us and tell us what the mark is to let us help you choose a mark which is not descriptive. If the mark is problematic, you can spend $100,000 and still not get it.
2) If the mark is not descriptive (or otherwise violative of the 5 rules listed above), we will look on a US database for "popularity measure".
3) You can choose a full search (recommended) or decline a full search. We can then apply for the trademark.
4) Give us the information enumerated above (i.e., owner, contact information, date the product /service was first used in interstate commerce, etc., and a complete listing of products for each trademark).
5) Make sure you have product liability insurance before entering business.
6) We will send you the papers for signing in special and unusual cases.
7) You sign an attorney-client fee agreement and pay the $950 fee, and we will file the case.
The application process requires approximately one year for the case to be taken up by the USPTO. The government attorney then performs a search and makes a ruling on the registrability of the case. Thereafter, the mark is published to give members of the public an opportunity to consider whether they would be damaged by it. Once the period for a member of the public to make a written opposition has passed, the mark is registered. After 5 years beyond registration (which may come out to about 6 years of continuous use given PTO delays), the owner has the option to file a renewal. At this time, the owner can also file to make the mark incontestable (because up to this point, the mark is still contestable), which is highly recommended.
Special Note: After January 2000, the PTO has tightened up on its goods and services descriptions. As a result, more specific descriptions of goods and services are required, in many cases to the point of absurdity. You should have a complete list of goods and services in EXTREME DETAIL, as you will not be allowed to add goods and services at a later time. This is NOT a small change and now dominates much of the application procedure.
We hope the preceding information was helpful to you. Please let us know if we can assist you in applying for your copyright, patent, or trademark. If you have any questions, we welcome your phone calls and hope that you will not hesitate to contact us. Additionally, we invite you to visit WWW.PATENTAX.COM for updates, newsletters, and informative articles. We appreciate your interest and we look forward to speaking with you in the future.
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