Small Business Owners Need to Get It in Writing

ContractWhy do so many business owners only think about the contract AFTER they have done the work?

Let me set up the typical scenario:

Prospective Client:  Hi Attorney Proia.  My accountant, Joe Schmo, suggested that I contact you.

Me:  Hi!  How can I help you?

Prospective Client:  A customer called me up and needed a custom website with X, Y, and Z functionality.  The website came out great, and other customers are interested in it.  Who owns the website?

Me:  What does your contract say?

Prospective Client:  I don’t have a contract.  They needed the work done in a hurry…there was no time to lose…it was a handshake deal…


Why, oh, why didn’t you think about this stuff BEFORE you did the work?

Written contracts are important.  They define relationships.  They sort out the pesky little details like what happens if you don’t perform, who owns what, and how on earth you’re going to get paid.

When I worked in-house, legal was always blamed for holding up the deal.  If it weren’t for legal, we could have booked that order by now.  (I always liked to think that if it weren’t for legal, the company would be out of business because we’d never get paid, everyone would steal our IP, and general chaos would reign, but I digress.)

I know that negotiating contracts can be frustrating and time-consuming.  Contracts can actually be scary for small business owners.  What if I ask for too much?  Will the customer walk away?

When you think that the worst thing that can happen is the customer walking away, it feels better to just take the money without making waves.  Can’t you hear the list of excuses for not getting an agreement in writing?  They seem like nice people.  They’ll never sue me.  I know they’re good for the money.

But then you end up with uncertainty, and let me tell you, uncertainty is WAY scarier than letting the customer walk away.  In fact, after a few rounds of trying to get your money, you will wish you had let them walk right out the door.

By trying to avoid a little pain in the beginning, you could be dealing with a lot of misery in the end.

Don’t let this happen to you.  Get it in writing BEFORE the $#!+ hits the fan (because you can always use the contract to clean up after the mess.)

Obama Administration Releases the 2013 Joint Strategic Plan on IP Enforcement

I guess June must be “Let’s Talk About Intellectual Property Month” at the Obama White House.

victoriaYesterday, U.S. Intellectual Property Enforcement Coordinator, Victoria Espinel, released the 2013 Joint Strategic Plan on Intellectual Property Enforcement.

The Joint Strategic Plan expands upon the initial report released in 2010 that was meant to address industry and the Administration’s concerns about the proliferation of counterfeit goods, the increase in intellectual property theft, and the impact these have on the US economy and national security.

The 2013 plan to protect US innovation from misappropriation focuses on greater cooperation between Federal agencies to enforce intellectual property laws as well as increased cooperation with our trading partners to solve matters involving trade secret theft and counterfeit goods.  The plan supports private sector efforts to combat piracy through awareness and innovation

The report also addresses the challenges we face in a world where so much commerce (both legal and illegal) happens online.  Of specific concern are the increased capabilities of mobile devices, 3D printing, and digital goods (like music, movies, games, and software) that can be easily copied.

From the Plan’s Letter to the President and Congress:

Moving forward, the Administration will continue to improve upon these efforts. We will focus on infringement that has a significant impact on the economy, the global economic competitiveness of the United States, the security of our Nation, and the health and safety of the American public.

We will increase efforts to improve enforcement of intellectual property rights here at home, improve cooperation with foreign governments, and use our trade tools to improve protection around the world. We will promote the use of private sector voluntary best practices to reduce infringement online and in conventional marketplaces. We will press vigorously for protection of trade secrets overseas and enforcement actions to address their theft or misappropriation.

The Obama Administration has consistently recognized intellectual property theft as a major challenge to a strong and healthy US economy, and has taken action in the past to educate those most vulnerable to IP theft about the dangers as well as increasing enforcement actions against those that would violate our laws.

Increased awareness and better enforcement efforts have been amongst the Administration’s greatest improvements for protecting the IP rights of US companies and citizens.  I am happy to see that the Obama Administration continues to support these efforts.

The Only Way to Stop Patent Trolls

obamaAfter seeing the Obama Administration’s June 4 announcement on its plan to combat non-practicing entities (NPEs), a.k.a. patent trolls, and reading commentary on the President’s actions and recommendations, I’m having a hard time understanding why anyone in the patent community sees this as real progress toward a viable solution.

The Administration is going about this all wrong.  In typical Washington fashion, they’re not addressing the real problem.

The administration wants to outmaneuver NPEs by improving patent quality as well as the quality of our enforcement agencies.  It also seeks to punish trolls by allowing judges to award attorney’s fees in patent litigation where the plaintiff loses at trial.

But will that really stop patent trolls from suing companies and startups?

My answer is no.

The Administration is working off of a presumption that trolls thrive because of bad patents, in particular bad software patents. The assumption is that overbroad ill-defined patents allow trolls to go after multiple defendants even ones that the patent isn’t meant to cover.   Why doesn the Federal Government care?  If money is spent on patent litigation, it isn’t being spent on R&D thus weakening our economy.

Touting his solutions, the President is basically saying: “Ha ha, NPEs!  We’ll make better patents so you can’t enforce crappy patents anymore.  And if you try to enforce crappy patents, you’ll have to pay up.  What do you have to say about that patent trolls?”

Well if I’m a patent troll, here’s what I would say. “Thanks!  I’ll take the risk of punishment and enforce those better patents.”

Don’t get me wrong. I think improving patent and enforcement quality should be a top priority. It makes the entire system better, but I just don’t see how it specifically helps companies sued by NPEs.  It’s not like they can’t enforce better patents too.

(And just as an aside, better patents mean better ammunition for these well-funded litigation machines.  Better patents means their harder to invalidate, right?)

The real problem goes so much deeper than patent quality and punishment.

In my opinion, the real issue is the cost defendants must pay to defend themselves against patent infringement claims.

Patent litigation is one of the most expensive types of litigation a company can engage in, costing both parties millions of dollars if the case goes to trial.  Most companies, let alone startups, don’t have this type of money.

If you can’t afford to defend yourself, you will settle the case or stop the alleged infringing activity before a judge or jury can find a patent invalid or a judge can award attorney’s fees.

It doesn’t matter if the patent is good, bad, or ugly, or what powers the judge is given, if the case never goes to trial.

If Google and the other Silicon Valley technology giants really think trolls are a problem, then they need to start a fund to help startups pay for patent litigation defense.  Or better yet, stop settling these cases and use their resources to defend themselves in court.

It’s the only way the Administration’s recommendations are going to work.

Silicon Valley must stop paying Washington to solve their problems because the only solutions the President and Congress can come up with won’t work without companies challenging the NPEs in court, which means paying a lot of money to defend themselves.

NPEs aren’t banking on bad patents. They’re banking on the fact that defendants won’t be able to mount a defense.  If defendants can’t defend, patents can’t be found invalid and judges can’t award attorney’s fees.

It’s about money.  

It’s as simple as that.

Beware the Ides of March

Today I come to praise the United States First-to-Invent Patent System, and to bury it.

CaeserI was a fan of your fairness to solo and small inventors, allowing them the opportunity to compete with big business on a small budget by giving them the opportunity to prove they were the first to invent, even if it took them longer to perfect the invention and file a patent.  I loved how you made the system about the invention not the patent.

To all the inventors out there, today is the last day to file your patent applications under the First-to-Invent rules.  I know patent attorneys across the nation are working hard to ensure their clients get the benefit of the old rules, by filing thousands of patent applications by Midnight tonight.

But beware.  One amendment to the claims after tomorrow means your patent could be governed by the new rules.

Tomorrow our patent system will turn its back on small business and solo inventors in favor of those who have the money to file early, file often.  Embracing the First-to-File model means that the United States follows the herd in the name of “predictability” and “certainty of outcome” (not really, but it sounds good in soundbites), while at the same time creating uncertainty and unpredictability in our courts for at least the next 20 years.

Tomorrow we declare in unison with the rest of the world that the only thing that matters is the patent.  As if inventing somehow is the equivalent of filing a patent application.  This is such an un-American notion to me, but one I will have to live with.

At a time when we should be doing everything to help our future business leaders, we are ensuring that small startups and entrepreneurs will have to choose between designing great products and filing patents, just to win that “race to the Patent Office”.

I guess I have to accept that Congress in its infinite wisdom knows what it’s doing to help our economy recover, just like when it decided that the Sequester was the answer to our Federal budget woes.  You multi-millionaires who sit in seats of power must truly understand what this nation needs.

Maybe you are hoping to siphon off all of those extra filing fees to shore up social security.  Certainly all of the extra money spent on patent attorneys will help our sagging legal industry.

But alas, I know this is not true.  I must face reality and live with your stupid, dumb-ass attempts to fix a patent system that isn’t broken because solving the real issues that we face as a nation is just too damn difficult for you.

Our unique Patent System comes to an end to day.  A grand experiment that has helped build a great nation.

Rest in peace First-to-Invent.  American business is better today because of you.

7 Things American Companies Need to Know About the America Invents Act

patent-reformIt’s amazing how fast 18 months flies by.  It seems like just yesterday I was lamenting the passing of the America Invents Act, and now here we are mere days away from its final implementation.

If you haven’t heard, the United States will officially follow the herd and become a First-Inventor-to-File nation on Saturday, March 16.  In light of this new beginning, here are 5 things you should know about the AIA to ensure that your inventions are protected.

1.  First-Inventor-to-File Wins

Here’s the scenario.

Two competing companies are working to solve the same problem.  Both companies invent the same solution.  Each company files a patent application with the US Patent Office.  Who does the Patent Office award the patent to?

Under the First-to-Invent system, the patent would be awarded to the inventors who could show that they invented the invention first.

Under the First-to-File system, the patent would be awarded to the inventor who filed their application first.

To quote Tom Hanks’ character in Cast Away, “We live and die by the clock.”  You don’t have time to make everything perfect before you file a patent application.  Good enough will have to do.  (You might even have to settle for just OK.)

2.  You Will Spend More Money Earlier in the Process

Under the First-to-Invent rules, an inventor could tinker around with his invention, tweaking it until he turned his concept into a finished product.  At that point, he could file one patent application to cover the end result without fear that someone would step in and file their application before he was ready.

Those days are gone.

You no longer have the luxury of waiting.  An inventor will have to be on top of his patent game from the very beginning.  The new corporate patent process might look something like this: file at conception, file again, maybe multiple times, as the inventor works the concept into something that resembles a more complete product, and at the end when the final product finally reveals itself.

That’s a lot of money earlier in the process to ensure that you have won the race to the patent office.

3.  You Need a New Attitude

In order to make this adjustment successfully, your organization MUST adjust your thinking when it comes to patents.  You can’t file a patent as an afterthought in your New Product Development process.   You need a procedure to identify any and all patent issues as early in the process as possible.  If you don’t, you run the risk of losing your valuable business assets.

4.  The Strategic Use of Provisional Patent Applications

Make sure you and your patent attorney understand how to use provisional patent applications.  When money is tight and time is of the essence, these informal, non-examined patent applications may just be the answer.

5.  Amending Claims Can Change the Rules

It all seemed so simple.

Applications filed before March 16, 2013 will continue to be subject to the old First-to-Invent rules.  Applications filed on or after March 16, 2013 will be governed under the new First-to-File rules.

But nothing is ever as simple as it seems under the AIA.

What if you amend or add claims in your first-to-invent patent application after the March 16, 2013 date?

Even though you had filed your patent application prior to March 16, 2013, certain changes you make to the claims may pull your application into the First-to-File rules, and you may not get the full protection of the First-to-Invent rules you thought you had.

6.  Change to the Grace Period Rules

Like the First-to-Invent system itself, America had another somewhat unique feature in its patent system.  The United States offers what is known as a Grace Period.

In the United States, inventors were given 12 months to file a patent application after the date the invention was first disclosed to the public no matter who disclosed the invention.  That was a benefit of the first-to-invent system.

Now, the grace period only applies to disclosures made by the inventor.  Public disclosure by anyone else anywhere in the world prior to you having a patent application on file means you lose your patent rights.

(Think about how this could impact heavily competitive industries with multiple companies working to solve the same problems.)

7.  Prepare for the Unexpected

Just when you think you understand the AIA things are bound to change.  Like any new law, what the various provisions and terms of the AIA really mean will be decided by the Courts.  Over the next decade (or longer) IP practitioners will closely watch as cases wind their way through the Federal court system.  There is already talk that a Constitutional challenge will be waged against the America Invents Act itself.

Don’t be fooled.  The America Invents Act brings significant change to American business.  In 10 days, we enter into a brave new world, America.  Good luck and God speed.

America Invents Act: Hurting Startups, Helping No One

patent-reformWell, we’re almost there.  Next month the United States will implement the last phase of the America Invents Act (AIA), and the First-to-File rules will go into effect.

It’s amazing how fast 18 months passes, and how the sentiment remains the same.

Foreign commentators think it’s a move in the right direction.  It creates a ‘certainty of outcome’ is what they tell us.  Try it.  You’ll like it.  Just like we do.  The rest of the world can’t be wrong.  (Really?  What’s the latest and greatest technology to come out of your entrepreneurship communities, France?   Seriously, should I be taking my lead from a country that bans the words “tweet” and “email”?)

Despite the idea that we will be one, happy, first-to-file world, Americans still aren’t feeling the love.

Most US patent attorneys I talk to don’t like the AIA.  In fact, I haven’t talked to one that does.  There is a general feeling that the law doesn’t solve the real problems in the system, and creates a whole slew of new ones.  Some of which (like the meaning of inconsistent language) we will only start to deal with years down the road as legal cases wind their way through the US courts.  (Certainty of outcome my ass!)

Why the difference of opinion?

Well your opinion of the Act might depend on what you see as the problem.

So I asked myself, what problem(s) does the AIA solve?  How does turning the US patent system on its head help US inventors, business, and the economy as a whole? (With the short answer being:  It doesn’t.)

The AIA solves a foreign policy problem.

As intellectual property and the related issues take center stage in trade discussions, the meat of the Act, the first inventor to file provisions, harmonizes our patent laws with those of the rest of the world.  Our leaders talk about certainty of outcome and how US law will be just like their laws, and it makes our trading partners feel good.

The AIA doesn’t make American small business owners feel good. 

It doesn’t make patent attorneys feel good either.  Even large American companies don’t like it.  And this is a problem.

Large companies have an advantage.

The only certainty of outcome small business owners see is that big business have the money to play by the new rules.  Small business can’t keep up.

Last week I was asked to give a talk at an entrepreneurship event at a local university.  I told them about the changes in US patent law.  I gave them the typical advice that is emanating from patent attorneys everywhere, “File early.  File often.”   I told them what other attorneys are saying about the problems with provisional patent applications, and what all of these changes really mean for business.

And guess what?  They were angry.

No one saw these changes as helping American businesses succeed.  All they saw was a scenario where they would have to file more patents sooner in the process.

As they informed me, the biggest barrier to entry for filing patents is the cost of drafting and prosecuting a patent application.  If a bigger percentage of their limited funds have to go toward legal expenses, there’s less money to actually get a product to market.

This mean Entrepreneurs are more likely to go without patents in favor of getting a product to market.

Is this the end-result our lawmakers were hoping for?

Of course, the concerns of these startups weren’t news to me.  It’s just confirmation that the AIA doesn’t help the US and its economy, especially when the backbone of that economy is small business.  Right now, they’re the ones creating the jobs and the technology of the future.

Entrepreneurship thrives in America like nowhere else in the world.  Part of that is because of our unique patent system.  Believe it or not, the US patent system was designed to help inventors, and inventors have thrived in the US.  When we implement a patent system that’s stacked against them, what are we hoping to accomplish?

10 Intellectual Property Questions that Might Be Answered in 2013

Question-Mark-300x2252012 was a momentous year in Intellectual Property law, but it left us with a lot of unanswered questions.  Here are 10 to ponder as we start 2013.

1.  What will the fall-out be from the full implementation of the America Invents Act?

2.  What will be the impact of the First-Inventor-to-File rules being implemented in March?

3.  Will the Federal Circuit and the Supreme Court ever get on the same page when it comes to a §101 standard?

4.  What is the future of software and business method patents?

5.  Will the US Supreme Court strike down gene patents?

6.  Who will be the next Director of the US Patent & Trademark Office?

7.  Will there be peace in the Smart Phone Wars or has another offensive just begun?

8.  Will Congress grant IP protection for the fashion industry?

9.  Will we continue to see an increase in patent litigation by NPEs?

10.  Will we see more $1,000,000,000+ damage awards in patent litigation cases?

I’m not sure we’ll have definitive answers to all of these questions prior to the end of the year, but the potential for the US Courts to significantly change patent law in this country is great.

So what do you think?  Do you think software patents are history?  Do you see peace in the Smart Phone Wars on the horizon?  Share your thoughts and some questions that I haven’t mentioned in the comments below.

A Little Bit of News…

hobbes_leviathanI am so happy to report that one of my blog posts, Step Into the Arena and Be Prepared to Get Dirty, has been named one of the 25 best things they read this year by Managing IP!   I’m listed under the “Innovative Thinking” category.  I’m not so sure how “innovative” it is.  I laugh every time I see the description of the post, calling it “the Hobbesian theory of patents”.

Who knew I could write something that memorable?

Thank you Managing IP!  I am honored to be included on this list.

Step Into the Arena and Be Prepared to Get Dirty






Intellectual property is a full-contact sport.

Yes, you read that right.

I mean full-contact, complete with trash talking, gloves come off, smack-down contact.

Punches are thrown.  Combatants get bloodied and bruised.  There are winners and losers.

Don’t believe me?  Just check out the ruckus surrounding Samsung and Apple in their battle for smart phone supremacy.

Unfortunately, there are those in the media who don’t understand this simple concept.

An ill-informed media pretend that they understand the intricacies of patent law after an interview or 2 with a disgruntled company and a few hours of research.  They twist words, spew fiction as fact, and completely misrepresent the law.  Then these reporters refer to patent lawsuits as “WAR” as if U.S. lawmakers never intended for companies to sue over patent rights.

They would have you believe that IP is like golf.  That it’s a gentleman’s game where nobody gets hurt.  No one sues anybody.  Everyone gets a license with great terms if they want one, and companies that choose litigation over licensing aren’t playing by the rules.  They point to an increase in the number of patent contests as a sign that the system is broken.

But anyone who knows a thing or two about patent litigation knows that’s not true, and never has been true.

Patents first and foremost are offensive weapons.

Patents aren’t magic amulets that protect your product or your business from infringers.

They are the means by which companies assert their rights to their government-granted monopoly.  And guess what?  Lawsuits are, and have always been, the intended method of asserting those rights.

In fact, patent lawsuits have been around for a very long time.

So why is there so much criticism now?

What has changed (and brought a massive amount of exposure to patent litigation) is the number of prominent participants, especially Apple, as well as the huge amounts of money at stake.

A few high-profile technology giants decided to up the ante in patent litigation.  For the first time in decades, some of the biggest patent owners in the US turned to their patent portfolios to protect their market share.  And Apple’s involvement in serious patent litigation brought massive amounts of attention to something that no one in the mainstream media ever cared about before.

For years, most people, including journalists, never thought twice about patent litigation.  Suddenly, Steve Jobs says that Apple will go thermonuclear on Google, and people demand to know what’s going on.  A big verdict and a few billion dollar+ patent auctions later and the world as they understand it has been turned upside down.

However, the world of patent litigation, as most people understand it today, never existed.

IP has always been about how you use it to protect your market share.  It’s meant to stop anyone who would intrude on your property.  It’s is not passive or defensive.

So it’s time to stop pointing to the “Smart Phone Wars” as an example of what’s wrong with the system.


In fact, this is exactly how the system was designed to operate.  You just didn’t know that.

I’m sorry if you don’t like it.  I’m sorry if this type of aggressive action somehow offends you.

Apple, Microsoft, Samsung, Google…they all know what they are doing.  It’s the risk they decided to take when they put their products out into the marketplace fully aware that there could be patents out there that could impact their business.

So to everyone who wants to be in business today…

  1. Ignore your intellectual property at your own peril.  If you’re the second inventor or you file your patent application late, you are probably out of luck.  That great thing you “invented”.  You may not own the rights to it.  Not everyone is guaranteed a trophy in this contest.
  2. Ignore another company’s intellectual property at your peril.  You aren’t guaranteed a license.  In fact, assume you won’t get one.
  3. If the only thing you’re willing to do is get a patent, you are wasting your money.   I know I said it before, but it needs to be repeated, patents aren’t magic amulets that protect you from patent infringement.   It’s a business tool that can help you achieve great success, but only if you use it!
  4. If you aren’t prepared to step into the arena, walk up to your opponent, and throw that patent around, what are you going to do with it?  And please don’t say frame it and hang it on the wall in the lobby.

If you want your intellectual property to work for you, you have to be prepared to fight for your rights.

Don’t Get Your Legal Advice on Twitter

What do you believe to be true about intellectual property?

Are your beliefs based on truth, myth or falsehoods?

You might be surprised to find out that a lot of the ‘truths’ about IP that you believe are actually falsehoods perpetuated by the ignorance and half-truths of the media, the internet, other well-meaning entrepreneurs, and even IP practitioners themselves.

In fact, the information you have learned somewhere along your journey could be hurting the quality, quantity, and value of your intellectual property.

How do I know this?

Let’s look at a twitter exchange that I had last weekend.

Tweet from a successful entrepreneur:

“Founders: when starting out, in most cases, don’t worry about getting patents because you probably don’t have the money to enforce them.”

To which I replied:

“Naive advice. It takes 3+ years to get patent, so can’t enforce for years. You may have $$ and need to enforce in 5 years.”

Our exchange was seen by an entrepreneur from Canada who inquired:

“I’ve also been thinking this way too.. It’s a toughy. Is it worth $3,000 to apply provisional with fee to start?”

To which I responded (because originator of the conversation surely did not know how to answer the question):

“My first question would be why are you spending $3000. The fee is only $125.”

(EXPLANATION: The filing fee for a provisional patent Application in the United States is $125.  With a little bit of information, and following the instructions on the form, you don’t need a lawyer to file a provisional application.)

The Canadian entrepreneur replied:

“Ah, I found it. But typical utility, sm entity + lawyer fee is usually $1500+ no?” (with a link the USPTO website.)

At this point, I had to wonder, where was he getting these numbers?   Utility patents typically cost about $6000 on the low end, and up to $15,000+ on the higher end.  Depending on the technology involved that price could be a lot higher.

This is what I mean by truths, myths, and falsehoods.  Obviously, what this entrepreneur believes to be true about the costs of patents is actually false, and his misinformation will influence the decisions that he will make about whether or not to file for patent protection.

What else when it comes to patents does he believe to be true?

As an IP practitioner, I know this whole twitter exchange is a microcosm of a larger problem.  I know entrepreneurs everywhere don’t understand all of the intricacies of intellectual property law, but it doesn’t prevent them from making blanket statements that circulate as truth.

I know that when cash-strapped entrepreneurs see what looks like free, credible advice, they take it.  In fact, they seek out advice like this.  First, it’s free.  Second, it comes from a successful entrepreneur.   When they see a successful entrepreneur who seems to have some experience in this area say that they can ignore something, they tend to listen.  Why?  They are looking for an excuse NOT to spend their scarce money, time, or effort on it.

So, here is what you can take away from this exchange.

1.  Be careful who you take legal advice from.  If you get your legal advice in 140 character sound bites to save a few bucks, please don’t.  You know better than that, so please, before you act on someone’s free advice (a.k.a. his opinion), think twice.

2.  Be careful who you take legal advice from (Part 2.)  Even tweets from attorneys should be taken with caution.  The successful entrepreneur was not entirely wrong in his original tweet.  Not everyone needs expensive patents for their business.  However, some companies do.  So my tweet was not necessarily meant to cover every situation either.  It was merely to point out that the advice is limited, and for some people, it is absolutely the wrong advice.

3.  Get an informed opinion.  When you have a question about intellectual property (or business formation or partnerships or licensing or any of the 100s of other issues that you are facing), call an attorney and get a couple of hours of his/her time.  It’s worth the money to get the right advice for your unique situation.  Short money up front could save your business.

4.  There is a lot more to protecting your innovation than just getting patents.  Many start-ups and entrepreneurs believe that getting the patent is their only IP concern.  So if they don’t have to get patents, they falsely believe there is nothing else for them to worry about.

Oh, contraire.

The real patent issue may not be what you need to get, but what others have received.  Competitive intelligence, prior art searches, freedom-to-operate opinions, etc. may be even more important to your business than getting patents.


If you believe that you might be under the spell of some IP myths or falsehoods that you’ve learned over the years, I can help you identify fact from fiction.  Call me at 508-878-3590 or email me at to set-up an appointment to discuss your intellectual property issues and how I can help you solve them.