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By J.D. Houvener
Patent Attorney and Founder

I’m a patent attorney and i’m the owner of both patent law so it’s a law firm we’re headquartered here in seattle we have uh three patent attorneys that are local here james bunts greg dawson and myself we have attorneys in california and chicago and tampa and we’re growing so it’s really fun to be able to serve clients nationwide and we love getting out and doing discussions like this with people like you that are out there entrepreneurs making a difference in the world education is a big part of what we believe in and making sure that we get information like this out um to the public because there’s a lot of misinformation out there about patent law you can a lot of let’s say armchair quarterbacks in this in this field and people that hear lots of things from shows they watch like on shark tank or entrepreneur world or whatever it is that they hear without actually getting the facts and with the world you know the internet we have there’s so much out there um that it’s overwhelming and so getting getting information from people in the profession much like tax or you know any other type of insurance you know it’s important to get it from someone who does that for a living so you know while i still come humbly before you as a person that’s learning in the industry it is what i’ve spent the past five years doing so i hope to share with you what i’ve learned and at least two big subject matters today we’re going to dive into patents and trade secrets this is a special focus class we did one early in january where it was covering all four areas of ip patents trademarks copyrights and trade secrets so we’re going to skip over copyrights and trademarks today that’ll be for a later session today we’re just talking about innovation and help yourself to as many of these as you want

so let’s take a look so this is part of a series um patents and trade secrets we’re going to dive in today it’s may 3rd learning about the law that’s what we’re talking about all day today and because it’s just four of us it’s going to be really interactive so if you have any questions stop me we’ll just pause and take a break and answer your question i budgeted about a half hour of q a already so you know it’s free don’t worry about knocking me off schedule next month we’re doing creating a plan i mean hopefully all at least thinking about or maybe already starting a new business um in your moonlighting or you’re already on your way uh putting ip specifically patents and trade secrets into your plan how those actually fit in uh and then last but not least in july after the holiday we’ll be implementing those so how to what actually what’s what are steps to take uh in the class it’ll be workshop style we’ll actually do some things in the class about how to do searches how to identify trade secrets how to begin classifying them and so i’m interested to see uh you know if we can get some people matriculating through the class and we only have four here today sometimes we’ll get people joining in midway it makes it really fun thanks sweetie

okay great so the agenda and our little behind snacks and all that uh we’ll do a lot just a brief around the room just so we can kind of get familiar with who we are and what kind of uh industries we have represented so if you wouldn’t just i wouldn’t mind first name um if you’ve got a business started already the business name and your industry let me start over here sir nasser and all sorts of different things good um background in tech okay since uh changed careers to therapy awesome okay there’s a lot of like innovative ideas dealing with the massage therapy trade


separate from the massage practice okay so you get a lot of things going but that’s the one major effort

good and do you have a business up and running yet business name or anything yet okay but not not for the massage therapy business yet oh you do okay do you want to share and if not bodywork seattle cool awesome man thank you so tech tech entrepreneur went to massage yeah still innovating in that in that area so excellent thanks for coming nasser okay and next to him no kanji




any specific problems being solved with your apps

i see so you’re okay doing the developing of several different types of apps got it you’re the developer

okay we should talk i’m considering doing a legal app having some issues for this excellent well it’s just kind of bouncing i don’t know i’ll just kind of keep things moving um with my mouse not my work and keith

ocean autonomy marine piloting systems autopilot that is so cool that’s so cool do you have a name for that business oh she’s not telling me thank you okay all right and uh keith perfect all right nina

okay medical diagnostic service any specific ailments or health health issues in particular

okay well for testing type stuff and do you have um a business started or it’s just kind of the very very beginning stages okay thank you for sharing nina okay excellent so um we’re gonna go over the patent law fundamentals for the first part of the session i’ll try to keep us on track and then we’ll do a bit of a workshop just to test our understanding of that and then dive into trade secret law uh talk about how laws are enforced uh statewide and how there’s a federal mandate and how to protect that through the defend trade secret act we’ll do a small workshop and then open up for questions

trade secret i don’t have any in slide information here um that is a there’s an interesting subject uh i could look into i didn’t have i don’t have anything prepared for that

okay so these are the four pillars of ip now for some of those that i think here intellectual property this is what it means there are a couple other smaller areas so i’ll mention those but patents um is the one that comes to mind first when i think of intellectual property this is inventions these are uh designs and functional inventions and they’re protected by the us government they give you a 20-year limited monopoly in exchange for you sharing your invention or how to make something work trademarks protect a brand really more to do with protecting a business uh and making sure that the customer knows where they get their goods from it’s the source identifying so brands logos that all falls underneath the trademarks copyrights is more of the juristic more the the right that protects creators you know uh authors singers performers um all different kinds right visual sculptures i mean it covers a wide range of artistic creations so that’s the domain of copyright law trade secret is um it’s quite different than the rest where you don’t actually get you know a document or a federal right it’s more of a protection that you can get if you enforce it within your employment structure so it really is all a part of being keeping things in your company in the right way and enforcing confidential uh information in the right way and i’ll go through what that means a little bit more privacy law actually does get tucked underneath intellectual property because privacy is such a big deal these days we do a separate discussion on privacy all around hipaa and compliance on government compliance and terms and conditions it does follow intellectual property related to privacy is uh famous uh famous people and personalities um so it’s a different classification but it can be considered a part of ip as well so as soon as someone has a famous of enough identity uh they can then begin suing for things like defamation or slander that all falls underneath intellectual property too but these are the four main ones that we talked about so far with with surf here in the startup so intellectual property just want to get kind of a show around the room maybe we have a volunteer how would you describe intellectual property if you had to someone asked you on the street

i just say um

description good good anything else maybe a little more specific than that like where those ideas come from


okay close close it doesn’t have to be a company it right just from you had it with person from the human mind uh that’s it that is really the the definition of intellectual property and what’s nice what i mean what i like to say to add on to that is it’s the legal protection the legal framework that supports innovations that come from the human mind okay

correct yes yes and a plant patent so we’ll get to plant pads there are you do not get to get a patent for something you discover that comes from merely natural resources you must be able to reproduce it in a lab setting and so that’s sort of plant patents

how do they get to name them

well well so that that actually goes to scientific naming conventions uh you you name i believe the genus i’m not a organic botanist but there are there are ways to actually name like animal species and the animalia and the kingdoms and all that but then uh if you’re gonna go to market with a product that would fall underneath trademark as opposed to patent law you know like you heard the famous drugs you know xanax although that really has nothing to do with the actual drug that’s just more of a trademark yeah maybe that got to your question maybe it didn’t

oh i see oh interesting yeah well uh i’ll have to come back to you on that one that’s good so okay what is intellectual property why is it important why why is it why do we care

why are you guys here

right no your first inclination is right it’s about the commercial success right it’s part of what bettering uh society through commerce uh having the uh that be the motivation prime motivation to try to help the world become a better place we want to reward innovation and so that’s why it’s so important okay thank you for participation so i want to bring it back a little bit to the constitution so believe it or not this is a quote here from article 1 section 8 to promote the progress of science and useful arts by securing for limited time to authors and inventors the exclusive rights to their respective writings and discoveries okay this uh this provision is put in because at the time of the writing constitution there were these you know secret groups and societies that would keep information for long long times they would produce products and mixtures and they would sell things and uh these groups would would maintain this knowledge and not share right this is kind of these you know this uh not it wasn’t productive right they wanted to so in order to incentivize that information to get out there in the world for people to uh want to share their information so we all would be smarter the government said look we’ll actually we’ll go to bat for you we’ll protect we’ll protect you we’ll enforce your right i’m going to give you a 20-year limited monopoly to share this with everyone if you know um if you want to tell everyone how to do it so that was uh that’s the reasoning behind patent law so let’s the first subject let’s jump in um so patent law at its heart gives to the inventor it’s just this exchange right the government gives you this right the ability to enforce protect prevent anyone else from making using selling or importing into the us right assuming we’re just talking u.s rights there are certain international rights uh to talk about with patents for 20 years from the data filing so that’s the exchange right

um so does it even qualify this is one of the first topics we talk with when we talk with inventors you know is it even eligible under the patent laws and so for utility inventions these are the four main categories uh machine manufacturer process which is what a lot of software falls into or composition of matter right this would be chemical compositions or amalgam of metals a new type of alloy machines there’s really any anything that you can touch and feel any tangible device that has functionality those are the four utility eligibility functions

a manufacturer is more than one component and it’s fascinating to know that you can actually put together an assembly of parts that were already in the common art if they produce a unique outcome so that’s really it is that if you had you know four widgets all four of those had already been patented before but you’re putting them together in a unique way and them working in as an assembly what they produce is unique uh that that whole manufacture system and assembly is going to be unique and protectable

all right so given that now even if you’ve come up with something that you think is or that is eligible right it fits into one of those four gonna be as eligible can you actually get through the patent office is the examiner gonna say okay this is good enough this meets the criteria this is what you have to prove to the examiner novelty all right this is worldwide novelty you’ve got to show and prove that what you’ve come up with is the first of its kind ever and the examiners are uh privy to very quite a bit information right not just the u.s patent office not not whatever has been filed in the u.s system but anywhere in the world that’s ever been published and trans you know translated into english language is findable they also look at what’s called nonpatent literature which is academic journals anything ever been published online um you could even cover things you know on youtube reddit strange places people have just discussed things or published them whether on purpose or not that could say no this has been this has been done before and they would cite that to reject your invention and the claims that you’ve cited um but let’s say yours really is the first of its kind and you’re able to show that in this novel you’ve still got to get past this non-obviousness barrier non-obvious non-obviousness is an insight that examiners will look at and say okay well someone in the field of your industry let’s say you’re a watchmaker and you think you’ve got a new set of gears to put together this watch but uh you know two years ago in the watchmaking magazine or the trade journal there was a paper published that talked about how you could how you could put a cog of this manner in with this type of a charger but they didn’t actually do it and there was different types of materials that they listed in that publication it would be an obvious attempt right it was discussed but it wasn’t actually ever done it was this an obvious iteration of a different uh style and so that’d be a perfect citation examiner would use to say now this is just an obvious an obvious iteration an obvious version of what’s already out there in the art so they look at what’s available to that watchmaker what’s it what’s a what are the publications what is the knowledge base of that watchmaker the watch inventor what would they be privy to to make that assessment utility is a fairly low bar but it does exist so this means does the invention actually have real life functionality today does it provide any real function today and like 99 percent of inventions pass this far sometimes you get caught up in this issue where there’s no real life application in today it’s like a futuristic application or it’s hypothetical this does come into play a lot of times with drugs where they claim to for example in a lower cholesterol and utility is the biggest bar to get past because they have to prove that actually does lower cholesterol right um or that the algorithm does actually reduce the ram you know or the the amount of electricity output whatever it is that’s being claimed for most other things it’s it’s not required but certainly for for claims that are sort of require proving it utility can become a bar but most it’s not a big deal okay so those two last slides talked mostly about utility patents and that’s what makes up about 80 of all patents that are issued today they have to meet those requirements design patents must only they’re not about functionality design only covers what something looks like and just the the pure the pure ornamental appearance of it so that’s what the design patent is it doesn’t have to prove any function or do anything it’s just merely what it looks like we talked briefly about plant pets plant patents are where you actually provide a specimen to the examiners and you you show that you’ve been able to asexually reproduce this plant you can you can down to the the chemical uh breakdown you have to provide you know the actual example so they can prove they can see that it actually is a unique strain um whatever it is you’re producing right common plant patents or those in hops or apples or flowers pineapples you know all different kinds of things and you can actually get a patent and have the only be the only one that could ever produce that or make you sell or import those recent law changes in patent law american invents act was passed in 2013 a few years back it’s still kind of coming through and getting implemented as patents are now being issued that are where it began that filed in 2013 they take a few years to get issued and so we’re seeing some interesting things happen for one the examiners are now privy to the world of all all prior art whereas before they were just looked at the u.s okay and after the aia got passed they instituted this brand new panel called the p tab it’s a patent trial appeal board it’s a special article three court where judges all the all day long all they hear is patent cases and so they they hear um invalidity uh claims and they also will hear uh reissue attempts so if you’re a patent holder and you’re seeking to enforce your rights on someone you think is infringing you take uh like say i’m you know i’m suing microsoft one of the first things that microsoft would do is this no no they’re gonna try to invalidate my patent before it even goes to federal court they’re going to want to take it to pitou and make sure that the claims i’m asserting against them are actually valid it’s sort of i think it’s a sad thing but it’s true that even if the examiner and the patent office says yep here’s your patent it can actually later become invalidated right either because a mistake an examiner made or because the law has changed so it’s one of those things like i wish i kind of wish it wasn’t the case that that could happen right you know you get these rights you’re you’re kind of cleared that you’ve got the ability to uh to prevent anyone else in the world from doing this and the law can totally change underneath you and that’s what happened with the eia is that i wouldn’t have the air but i’ll talk later about a big case about software where tons of software patents have been invalidated over the past three or four years because they’ve been they’ve been decided to be abstract all right merely algorithms there were just a sloth of them that were issued in the late 90s and early 2000s around commercial transactions around you know things that are just barely more equation based databases just doing what we already did with traditional calculators and pen and paper but just on the computer and the judges at the since then have said no no those are invalid so a lot of money had kind of been wasted and getting those rights because the law really wasn’t clear and it did change the biggest change in the ia i missed the first bullet point was that uh before this for 2013 inventors could you could uh before then used to come out of the woodworks you know an application would get filed on on a new you know rocket propulsion system and you’d get three or four inventors saying no no no i invented this first here here’s my notebook you know no no here’s my notebook i got it signed by my professor and certified and there was there are these interference proceedings that way they argue about who invented first um and it’s a mess terrible mess you can imagine so and we’re going to save a bunch of money it’s actually about who files first it doesn’t matter who actually independently invented it first it’s who gets it filed so it’s a large impetus and a large wave of new filings because of this they want you to have uh you can create some urgency you know once you’re sitting around spinning your wheels in some lab they want you to get it out to the world and publish it quicker so that’s the big push there um so with timing you know

no no the only way you you can get rights back today is if you can show that um you disclosed your invention to party b and party b then filed it fraudulently saying that they were the inventor right if you can prove that they they derived it from you there’s a derivation proceeding now in the front of the p tab so that’s why it’s very important for all inventors to document whoever they’ve disclosed their invention to and you should certainly do it under a valid contractual non-disclosure agreement if you have to but i advise my clients to file before even disclosing to third parties just to make sure because it’s that important and you can file a provisional and get that yet the whole year that a provisional can provide in order to then disclose to investors third parties bring members on do kickstarter whatever you want to do right any of the questions around that okay i’m just kind of moving quickly because of the time here so statutory bars are really important and we talked about disclosures just now but if you share your invention to a anybody from the public right without any air of confidentiality or not under an nda that starts a one year window and yeah go ahead and help yourself um and that um after that one year is up you have dedicated your invention to the public that window also starts if you put it up for sale even just offering your invention for sale begins that window and in a recent case just this year was decided that even a secret sale offering starts that window so right even if you’re under nda making an offer to sell your invention that starts to win your window for statutory bar so if you’re in that window and you’re worried about timing come chat with me later we can talk about your specific scenario um and when one cautioned with non-disclosure agreements you got to make sure that all contracting parties are going to be bound to that so who or who is in the agreement right if you are contracting overseas you got to make sure your work that contract is going to be binding with the other party’s legal system that’s a huge endeavor you know even within the states different states have different rules about contracts so make sure you’re working with an attorney to make sure it’s going to be a binding non-disclosure

agreement hey welcome so um all right so say you’ve worked so hard you’ve got all the way through the system and you’ve you’ve finally got your patent issued uh what happens if someone infringes it um so these are the the whole steps of the process um and you want to try to get through huh okay for um for most cases when we get approached by someone who says hey i found someone who infringed my own patent you know let’s go get them um we say okay hold on you know hold on that’s your first kind of emotional response is you know to go sue and go try to enforce your rights it’s important to do the homework first and be proactive instead of being called out on these steps so the first step is doing a validity opinion so what we do is make sure that those claims you’ve gotten by the way claims are the heart of a patent uh we’ll get to that i think in a little bit so claims are basically what you’re in words saying what you own we want to make sure that those would hold up in a court if they were brought you know given the current law right we just talked about the difference i think cracking it would be good yeah a couple inches yeah thanks son so um like i said before about the software patents right the laws can change on you so you want to make sure you work with an attorney know that your invention is valid before you go and force it and go write a nasty letter take someone to court you don’t want to get trumped and have to be reactive second is an actual infringement opinion right so it may actually look like there they’ve got the same product as you they’re just ripping you off but you got to take a closer look at what your patent claims say you might have these really nice visuals and designs and you may have a nice broad specification outlining how your invention works but as it happens when you go through the patent office the examiner usually makes a lot of rejections and you’ve got to usually limit your claims and your claims end up changing and almost always smaller than what you think they really are when you read all those words the more words there are it actually means the less scope you have in terms of breadth of claims what own what rights you really own and even the invention might be on a new car while your claims say you’ve got a unique fender right a unique fender with a certain bend and an airfoil that’s it and this other guy might be selling something completely different so you gotta make sure you do an infringement analysis infringement opinion so let’s say you get through those wickets and hey your claims look valid and sure enough it looks like someone’s infringing your claims um you usually want to file you send over a cease and desist letter and this may be you know sometimes even put a little step in between there and i like to have the the owner try to reach out right to the infringing party just non-attorney to non-attorney because that sometimes a lot gets done without attorneys i found and if you can get to a cordial par uh you get to your goal whether it be to stop them from producing or to have them uh come to a settlement things can get a lot be of course a lot cheaper for all everyone involved but if you need to if things aren’t working out there’s no communication they don’t really you know they kind of give you the middle finger and say whatever man then you need to step up and hire an attorney to send a cease desist letter which in essence says we demand you to not only stop but pay damages based on the sales you’ve had from this and this time and outlines in in very clear detail how they’re infringing on your claims and it’s a very threatening very serious letter that’s meant to scare them and you do threaten litigation that’s what it sees so assuming you get their attention the goal then would be to go to settlement which is a win in most cases right as a patent holder especially if you haven’t yet built up your business you’ve just got the technology and and you’re you actually may have a business partner someone that’s already building a product already you know in the stream of commerce why not think of them as a business partner and look to get a royalty right on every product they sell there’s usually a nice shining you know sort of a silver lining to a lot of this um in reaching settlement if you can’t get there go to an arbiter then we go to litigation and we like i mentioned the ptab is a common place where patents get litigated it’s a lot less expensive at the pta because they’re um those judges are knowledgeable about the law right things take less time these these judges hear patents all day long so it’s really uh the attorneys and the clients and they know what to expect when they go to the veto uh federal court is kind of sort of the last resort and going to trial is very very expensive tons of discovery experts i mean minimum you’re looking at you know two or three hundred thousand dollars to take it all the way through to verdict on most technology a different a different venue you can go to is the itc international trade control okay so this is a is an avenue to go down if you’re not necessarily interested in monetary damages okay you just want to get someone to stop shipping into the us that’s what this is for um and what’s interesting about the itc is they will not stay the hearing uh for a p tab um concurrent proceeding uh so sometimes like i could get an example earlier where you’ve got you know i’ve got a patent and i’m suing microsoft one of the first moves they might make is to go so you go take it to the p tab to go try to invalidate your claims

if you have a co-pending federal case against them the court of the federal jury at the district court will say no i’m going to wait i want to hear what the ptap says first before i continue the itc they’ll go ahead without waiting until get a nice fast response you’ll get the customs to basically stop shipment a lot quicker but it’s expensive and there’s some different pros and cons there like i said there’s no monetary damages that come out of the itc so if you want money damages you got to go to either federal court or to ptab to invalidate


so long list of things that are required to file an application i’m not going to go through every single one of these i want to just highlight the three that are required to get a filing date this is for a patent application a non-provisional patent application so while you do have to submit all this stuff eventually to get that all-important filing date you just have to file a specification claims and drawings so specification is a fancy word for a written description of your invention and drawings are needed if if it’s um i mean for almost every case you need drawings but the requirement is uh to have claims okay so claims are the heart of the patent this is what defines your rights and what you’re saying you’ve invented what you own so those are the three that are required in order to get there the spec has to be enabled so it’s a fancy word that just means you must fully describe it such that someone like yourself an inventor in your field will be able to take that writing and go build the invention go make at least one version of your invention that’s how detailed it’s got to be so here’s a as compact as i can get it sort of an abc flow chart for specification or sorry for filing an application and we meet with our clients we go through eligibility we talked about you know hey is this even fit are we even in the right game you know is this one of those four types of um patents is it a machine an assembly a process or a composition of matter um are they the right are they the only inventor sometimes it’s the case you got multiple inventors so make sure you understand who’s inventing this thing and oftentimes we end up talking with a lot of employees of businesses that are actually going to be the owner of the invention a lot of folks don’t understand that when they invent and they’re on the job an invention likely is the owner uh is owned by the company that they work for under their employment agreement so those are all things you can get upfront and clear about who the client really is and what the what the expectations are for the business a lot of inventors um it’s it’s it’s key to understand where their where their mind is what their goals are whether their goal is to just be a technologist and just come up with the new technology and license and sell it or if they want to grow a business so it’s important to understand the goals we can help advise and give recommendations uh either way right forming an entity getting an operating agreement together you know helping you with investment or just looking for licensees and buyers and so the two the big choices here after you do a patentability search is to follow a provisional or non-provisional application there’s um in in most cases a a new inventor someone that’s doing this for the first time we almost always recommend filing a provision we do this because it’s it’s a nice place to get the filing date you get the patent pending status and you don’t lock yourself into claims right away and you have all the way up to one year to file when you file that provisional you’ve got a full year to then file your non-provisional and so in that year we recommend taking it to market taking it to those people that might be interested in purchasing it build the prototypes take it to trade shows test the market to make sure this is something you really want to go after check in and see if it’s something you still want to do and if it is we’ll go ahead and write the non-provisional uh roll up any improvements that have been made in that nine to ten months write the claims at that point and that’s the strongest way to get that submitted

all right so you know i’m just trying to move quickly through this because i just got a little bit of a late start but if you guys came in you can just stop me if you want ask questions as we go


yes yeah there are cfr um 35 cfr 1.84 i want to write it down but that’s the guideline there’s actually a lot and we have we have someone in-house that’s all they do all day long is patent drawings uh they have to be line drawings at the non-professional phase and they must not have you know like three-dimensional shading you have to actually show in specific lines uh where the curves are happening and you most essentially have to point out the different elements that you’re claiming so the whole point of drawings is to be able to show the examiner show the public enable someone like you to actually go build the thing so um to as much as they’re needed to be able to you know produce the invention to be able to make it that’s how my that’s how clear you need to be for a lot of software and process patents they’re flow charts that’s all the drawings are right there’s nothing to physically show you know and you would never want to put code or any kind of uh unless you’re trying to claim a novel graphic user interface you wouldn’t want to show that like they want to keep it as a trade secret so um hopefully that got to your question great yes


yeah well there’s there’s a big market for that in what’s called litigation finance and licensing support say say i’m a brand new startup and i actually work hard for two or three years get my invention patented have granted rights and yet i see amazon or google or facebook infringing and you say like i’m enough money i can’t do this well you can actually license your right to a bigger entity right sell your patent rights to someone that could go take them on so it creates a market you get to broker


right well what’s what’s nice about the patent law is that when you file an application it doesn’t get published for 18 months okay so you do have some time and that i mean it’s with a lot of things in technology fast moving technology you’ve got to be quick to market so before you publish before you even file an app you need to be doing a lot of work to build the prototype up in-house and keeping things as trade secret before you publish them so we advise clients very carefully if they’re doing like an investor pitch uh you know pre-filing you probably got really just i advise not at all if you can if you can get the get at least a a document you know enough to get a patent filed first do it file it first before disclosing anything um and and there’s nothing to really stop you know this issue of while you’re pending so even after it gets published you know it could be pending for a year um and companies could take the risk these big companies right they could say ah there it is great idea i’m gonna go do it and and and kind of bet against you hoping that you don’t actually make it through and get the patent granted we do that all the time we’ll send out letters saying look no our client has a patent-pending invention that covers this technology we’re putting you on notice that when patents do grant we’ll be able to sue you for retroactive damages to the point all the way back to when they first got noticed so there are some there’s some methods to do that but sure there’s risks and happy to talk with you about a specific scenario if you have questions

all right so how do you make money so we talked about some of that right here okay so when you when you have a patent uh that’s granted it’s it’s like a any other property right it’s like a you know your deed to the house uh or your ownership to a car and you’ve got the ability to fully transfer that you can give it devise it through a will you can decide to sell it outright and you can license parts of it you’ve got four main rights and i mentioned these the right to make it the right to use it the right to import it and the right to so make you sell sorry to make use sell and import it and so you could license just one of those right you can line up a manufacturer and give them a license to make it you’re the only manufacturer that gets to make this product for me and so that’s ability for you to obviously get money or you get money back for being able to do that um someone’s able to sell on your behalf right they’re going to want it they’re going to pay you a royalty for uh for that license um you can litigate okay so this is sort of a way to monetize and this is sort of a you know classic patent troll non-patent and non-practicing entity type stuff right you buy patent assets and you just litigate right and you look to try to threaten people and try to get them to settle or give you a royalty because of your rights and the one nice side about patent trolls and is that the inventor who sold they got paid right so the knowledge got out to the world and the inventor got paid so in the end there is still a good side to these uh patent trolls that get a bad bad rap competitive advantage you know this is a good one right so if you’ve done your job and you’ve enforced your rights you’ve kept competitors out of your niche you have a nice broad portfolio of patents you you’ve got a market corner right you’re the only person that can sell that one or two products for that service so it’s a big way to make money the ptab i mentioned is just a different form of litigation and federal court too just to show you some numbers this is kind of fun facts this is about a year or two old but just to see okay who’s who’s out there selling um so mitsubishi actually is by far and away the most active seller of patents okay they actually sold this is just in one quarter 166 patents so this is a individual granted patents most of them are overseas but 42 of them are u.s a lot of other companies here you can see in electronics

computer science

and so universities get involved so packages means more than one more than one patent right bundled together i just want to show you some idea of how much volume right this is now who’s buying patents and speaking of speaking of patent trolls so these guys are real local right mercer island intellectual ventures these guys purchase an enormous quantity of patents and put together portfolios they’re not alone there’s a lot of other companies i never heard of these before i pulled this up um that are purchasing this is just again this isn’t just a three-month period of time data published so there’s a whole market out there um for people willing to purchase patents and how much do they go for this is interesting to find out that u.s patents are generally worth quite a bit more 30 to 40 percent more than non-us patent assets but i’m surprised actually about how low of value but i mean this is sort of in the grand scheme and this goes along with being big portfolios of 10 or 20 patents being sold at a discount per asset they’re being sold for around 200 to 250 000 okay

well i mean the u.s market is still very strong in the economic market the economic upswing was that’s my guess is that uh oh man vince i don’t know i think i think it’s kind of spools and then i’ll let it go yeah that’s my guess um is that u.s markets better just for people you know selling and then perhaps they believe that those patents issued are are stronger you know they believe in the examination that was done

all right let’s do a little workshop so i know some of you guys came in late but let’s give this a shot so i’ll give you a couple minutes to read through this hypothetical and then we’ll come back in a couple minutes and i’ll i’ll ask for you guys to volunteer so sammy takes his invention to a trade show on january 10th 2017. and people love it they found it but it doesn’t sell any he just takes it there tells people about it he makes some improvements to his invention after the trade show um and if he files his provisional january 20th 2018. when should he file the non-provisional

and why do you say that

okay um anybody else see anything here

so finish what you’re saying so you’re saying it’s too late okay

say what

yeah yeah okay good anybody find anything else in here there’s a couple there’s one there’s one other big thing i’m looking for

he didn’t

he took to the trade show i publicized it

beautiful there it is so that was the catch so a couple things we hit on so the sale part was sort of the red herring that’s the just because he didn’t sell any doesn’t matter right he published it to uh the public on january 10th and so he has only one year to file a non-provisional on what he published but the subtle catch was the improvements is it if he did not publish those improvements he could actually file on those improvements okay so he would have time assuming that uh of course he didn’t publish those improvements um so that was the one subtle catch i wanted to point out there so some people get into this issue where oh my gosh this has been on kickstarter for two years but they’ve been tweaking it right they’ve been actually modifying it quite a bit and they have a whole different version than what’s been published you could potentially file on that new version you’ve been keeping in-house it’s not totally gone okay well

say again sorry


i think um well so so i i guess i’ll just say hopefully get it right the m you so you have invention a is the core invention and you’re saying that got published and you didn’t protect it it got protected by you


okay okay man i don’t know why maybe this is late in the day i’m not following you so i don’t all i got to say is that um if the whatever has not been published to the public uh you you can seek protection for

yeah so so um there’s something already out there that has a patent right you can definitely get a patent for just an improvement on that now but you have to pass that yes so absolutely and their most patents that get issued today are improvements on current technology absolutely and but the issue is that you’re going to need to likely seek a license from that patent holder if it’s not you to be able to take it to market right so you’ve got there’s a there’s a patent on a on a new grill for a bmw right this brand new grille and you come up with a way to actually make it more aerodynamic so you’ve added this additional sealant and you’ve got a system for putting on airfoil and little vortices to break off the air wind current well but it only is able to be added to this grill right and mercedes has a patent on the grill you’re not going to market and sell your improved grill without getting a license from mercedes


okay yeah your own design yeah

okay yes so in that case in order to get it no you don’t need that but but actually what happens sometimes is the examiners will cite your own invention against you you have to build a show even for improvements that they’re novel and non-obvious above and beyond the prior art we’ve had this before our own clients right they’ve got little changes to their invention um and the examiners say no this is just an obvious change an obvious variant of your original invention so yeah so that is normally the problem anything else on patent law move on to trade secret my watch is broken do you have the time okay now we’re doing pretty good we’ll try to we’ll try to leave some time for q a um it’s a trade secret you see some really famous examples of trade secrets uh the colonel’s recipe and coca-cola’s secret recipe for the formula for the drink um so these are these are these are things that are kept within the company um with the primary reason that they believe that it’s not reverse engineerable right they they’re selling a product and they don’t think you know matter what you do you can’t figure out how to make this

you don’t

yeah yeah

yeah no it’s a trade secret that’s what we’re talking about trade secret these folks decided not to patent 110 years ago coca-cola decided uh we don’t think anybody can figure this out and so we’re going to keep this as a trade secret



pratt and whitney amg they have thousands of patents on jet engines oh my gosh yes yeah i’ve seen them i worked at boeing for 10 years been working propulsion but i’ve seen plenty of patents on actual propulsion devices and fans and blades now yeah so tell me so you’re worried about uh

yes absolutely absolutely and so that’s the idea is that that’s the big test before you uh decide to patent something uh if you can truly if you truly you know convince yourself that once it hits the market that people could not be able to break it apart you know buy it and figure out how to do on their own if they could do that you’d want to seek patent protection for it

so yeah

this is so trade secrets are yeah this is kind of like source code source uh is is trade secret and and in almost every case it wants to keep that within the company only if you ever wanted to start selling it or licensing software would you then want to seek copyright protection for code right code itself is just like a book like a story a story can be told a million different ways just like code can be written a million different ways so you keep that under copyright law so we have a whole separate section we talked about copyright law and software just like you would any other written language but this is something you want to keep in-house and under top secret so what’s the overall premise is that you know things that are not readily ascertainable in order to qualify as a trade secret it can’t be part of the public knowledge right now it doesn’t mean that nobody knows right maybe you know some people know exactly what goes into kfc recipe and they don’t know it okay but um uh it must not be readily ascertainable readily known in the public that’s one of the big ones okay you’ve got to show that you’re keeping it secret so if it’s a written piece of paper you’ve got it in a safe and it’s locked and a limited number of people actually have the key uh or if it’s if it’s in digital form you’ve got it’s fully encrypted it’s in the cloud and only a limited number of people have access to and you’re monitoring access to that if it’s you know it’s a building you know you’re building a machine you have a process that’s traded secret you have you know badges and you’ve got credentials and security that’s the element number two you’re showing that you’re keeping a secret going through efforts to show secrecy and the third one is it must be economically valuable you have to demonstrate to a court that your trade secret if it got in the hands of a competitor they’d put it to immediate use to make money so those three elements are met right not known in the public that you are keeping it secret and that it’s valuable you’ve got a trade secret so you kind of think wow okay that could mean a lot of things and it in you’re right things like customer lists are trade secret right all of a sudden your internal business processes become trade secret and so it’s really amazing how much actually is trade secret how you do what you do in your business um i mean i bet even surf right but you guys have ways in which you have positioned this office or this room you know and those are different ways you might might consider uh who has access to that information right who uh and so it really is a lot about employment controls and we’ll get into a little bit of that here too all right so people ask okay how do i know do i have a trade secret um and it’s likely yes if you have a company and it’s making money you likely do okay i would mention this not readily ascertainable efforts to keep secret and economically valuable um so what can they be you know there’s a lot of things like at boeing we you know we would have access some people would have access to uh our composite lab you know and that’s where a lot of trade secrets are housed boeing made a decision for example that they did not want to seek patent protection for certain methods of manufacturing it’s a really common thing to keep as a trade secret mainly because of enforceability issues so if you have a novel way to produce something and it’s going to only be within your buildings how on earth would you be able to tell if someone else is doing it without being inside their buildings so it’s another kind of way to look at something as well okay even if i got a patent on this what how would i build a monitor i’ve been able to tell if someone’s in infringing and if i can’t tell from the final product right if i if i look at you know this chair and i can’t tell if they used you know my foam producing method or not just by the way it’s shaped even if i open it up i can’t quite tell if they use my phone manufacturer i need to keep as a trade secret that’s a secret in-house mechanism so a lot of it’s about monitoring and being able to enforce it later software is a huge one so software and source code is definitely trade secret um and you know formula is the same thing just like coca-cola i guess it could be considered a formula um so these are these are big points uh that kind of go beyond ip law i just wanted to mention them here because they do vary state by state when it comes to employment agreements and so each state has their own laws about certain disclosure certain limitations that employers can put on employees for uh non-compete agreements right sometimes you’ll sign agreements washington is allowing is allowable right you could uh you could be signing an employment agreement that says even after you leave you can’t start a competing company for six months right this is not uncommon especially in tech world but in california they’re invalid right that’s they want to have much more competition done in california so every state’s different um non-disclosure agreements the same way right each state has their own rules around what mean what does confidential information mean there’s a whole whole baileywick of stuff to get into with regard to privacy and hipaa information exit interviews are a great point to bring this up if you’re an employer and you have employees this is huge you want to make sure that as part of that severance package that they’re getting or you’re giving them money they’re confirming that they’re leaving information behind that they’re they’re not that you then writing they say and reaffirm that they are not to take this confidential information from your company and that way you really document that and you you’d be wise especially if they’re higher ups in the company or have a lot of experience watch where they’re going right just be knowledgeable and you can actually inform their next employer just to put them on notice hey we have certain trade secrets and we want to make sure that you acknowledge without telling what the secrets are of course we want to make sure you would respect the fact that this employee has certain knowledge and you wouldn’t want to misappropriate that now would you and by doing that you might scare them enough to make sure that that employee does follow that

yeah it is and well a lot of times it’s um it’s just part of uh you know the bigger employment law concerns there’s um uh there’s um oftentimes i’m a package and i’m not an employment attorney a lot of times there’s you know certain back pay or reasons where you’re going to have to put an outlay of money out anyway that’s when you’d want to put that even if it’s not a severance package um but it’s just if they were if they didn’t sign that agreement they actually wouldn’t get their benefits um i hope that answers a little bit yeah it’s a little complicated when it comes to that if they didn’t sign you know might mean that they lose that they’re kind of waving their rights to other other privileges but the underlying point is that they’re still obligated to keep that information confidential it’s just a not really good opportunity to again get it in writing if ever they were to misappropriate um so yeah sorry i don’t have a much better answer to that um so computing security is a really big one i mentioned you know the virtual workspace i mean it’s becoming more and more prevalent this is this is huge it’s harder and harder to watch employees or they’re not always sitting in the cubicle right they’re all over the world they’re all over the country um and so making sure you can monitor access even really closely monitor where the information is going you know for our law firm for example like no attorney is allowed to save any information to their personal computer at all ever everything stays on the cloud you know that’s just one example i’m not a security expert but from what i’ve been trained to do that is the best way to know exactly where all of our data is it’s either on the cloud or not at all so it’s in my mind more secure to have it done that way now a physical office obviously you want to make sure there’s uh protections like i said badging in and out um you know protections around you know locking devices if things are being stored on computers you want to make sure they’re you know not going to get just walked out the building they’ve got monitors on them or whatever it is to to track them those are ways to keep the office secure any questions on that


sure um

oh like telling your employees that you’ve got patented

yeah i would just say being as honest as you can i think telling them everything the whole the whole story if it if you have patented technology they should know that um they will you’ll want to make sure that if it’s trade secret then you make sure that as part of your employment agreement before you even bring them on that employment agreement has confidentiality provisions that’s specific to the technology that you’re wanting to protect and before you give them access to that information that they’ve fully signed and that’s a binding agreement right so if you’re afraid of them you know taking that information away you’ve got that even more reason to have that agreement in place uh first before you bring them on uh and another clarification there a lot of times get people get confused there are different roles about independent contractors and employees um there are different rules in place and so there’s stronger so there’s more [Music] it’s easier to get enforceability for employees because they’re they have to have certain domiciliary and there’s because you’re paying for their um they’re oftentimes their training um and their hourly wage you’ve got a better you’ve got the upper hand in terms of what access they have tools and training independent contractors it’d be tougher to put restrictions on it if that contract weren’t already in in place

you lose your trade secret yeah and that’s what’s unique about trade secrets is that they don’t have to be novel right two companies could actually have the same trade secret um and if and and if whenever they become known in the public they lose their trade secret status

you have no way to enforce misappropriation right exactly and remember don’t forget the traits you don’t you don’t get rights like you do for a patent for trade you just have the ability to sue for misappropriation if you can show those three elements so you’re not able to show that it’s not readily known in the public you’re not able to show for example that it’s economically valuable whatever the reason may be then you lose the rights right now a lot of companies what they do is they’ll they’ll have these trade secrets in-house as they create prototypes and as they work on products they don’t publish them but they keep it in these labs and only when they reach a certain point they file a patent or if the timing’s right but they keep them under wraps until they feel like they’re ready to be commercialized but they’re taking the risk that no one else will innovate on that same area and take it to the public there’s actually another little interesting wrinkle there is that a lot of companies like ibm are really well known for this and doing what’s called defensive publications and so they’ll know that a competitor is working perhaps they’ll have a good idea a competitor is working in a certain area and they’ve got enough resources and money to be able to actually innovate and publish new technology just in the form of a white paper in an academic publication to where that will prevent anyone else their competitor from getting a patent on it right so it’s like wow my gosh so it’s it’s they’re they’re being really aggressive right they’re trying to block out anyone else from even innovating in a future area that could potentially compete with them so it’s an advanced way to do it um a way of providing the public you know with knowledge so it still provides a general good so it still meets the kind of the sniff test the really big case really be a case you guys might have heard in the news waymo versus uber so these self-driving cars right down in silicon valley so they’re uh there’s a huge case um oh man this narrator this computer keeps doing this but um ex-employee uh well ali was an employee at waymo which is google’s uh alphabets company google waymo um self-driving car he was a chief engineer just idiotic move downloaded 14 000 right documents from waymo’s database probably off their cloud and within a week left the company because a red flag red flag um and within a month started his own company autonomous car and then magically that company got bought by uber a competitor in very much the same field so um long story short saving you some details if you want to go dig in please do that it was going to go to trial we were all the attorneys were waiting we wanted to get a ruling on this wanted to hear what the judges had to say about trade secrets um and even had it all calendared everything but it settled okay settled but for a big number 245 million dollars huge win for um for waymo right uber had to pay uh this is a also a big feather in the cap for trade secret law right they were able to show that these were true trade secrets enough to scare uber to settle

well it’s already in the public

it’s in all these court proceedings so much of this has already been publicized there are certain parts of it that was under seal but a lot of it got out um but yeah whatever was not publicized uber is not able to use i mean my gosh if they yeah if they continue to misappropriate that would be a big deal so things that were kept under seal they would that would still belong to waymo

gosh i i think so i think so yeah yeah yeah well yeah he did and you know um it’s i believe there are criminal investigations going on on between uber right for the sort of criminal espionage or corporate espionage and um it’s ugly it’s pretty ugly yeah well and yeah it’s one of those things like nobody wants him now he’ll have to start his own deal you know but knowledgeable dude i don’t know that much about him personally maybe do you know much more about his okay uh let’s see here okay there’s a couple more slides yeah

yes yes


of course yeah you can do that no i mean that’s not that’s kind of just that’s kind of weird um why would you do that just a scenario the scenario is you don’t want your competitors to really know about it

well so i mean yeah so this is you’re saying a foreign language is that the idea or foreign yeah um yeah the in order to prevent the patent from getting issued you have to uh the examiner has to be privy to it so your idea is you’re kind of hiding it so the examiner maybe doesn’t find it

you would force your competitors to waste a lot of money thinking they can get a patent then you would just invalidate it by showing them this publication i don’t know you might get some sort of like latches you know like sort of like uh sitting on your laurels type of a thing because uh i don’t know that is an interesting case that’s i haven’t thought of that before very creative [Music]

very um

i’m taking note of that myself it’s good you’re smart people man nice well okay um how do you make money with trade secrets all right well the first one is that you’re you’re no one knows right you’ve got this way to deliver products that no one knows how you’re doing that you know they can’t figure it out and the biggie is that you’re able to do that for well beyond 20 years if you do it right and that’s the beauty right you decided i’m taking this method because you think you can do better than you can with patents listen sell trade secrets you you find a maybe after you’ve tried to exploit it you’ve sold as many um you know these golf balls you’ve got this way to put this type of material together if you’ve tapped out your resources in your supply chain but you’ve got this partner that knows how to make golf golf clubs and you want to do some license some cross licensing you know try to make some more money well you can let them in on your technology and maybe you can come up with a way to provide a novel golf club head you know or something like that sure okay

how they’re yeah made there you go so there’s a lot of hypothesis that the last couple of years they modified the manufacturing process and i think why is when they like pay for this so what they did they had x-rays baseball

right that’s cool that’s cool

[Music] yeah yeah

that’s funny huh i didn’t know that’s a great one exactly

totally totally yeah you can you can boil down the coke liquid and figure exactly the components of each chemical but what was the heat compound what did they exactly how did you get that syrup in the right proportions and you know so very interesting yeah so that’s certainly way they could um the wrong may have done that but my idea is that multiple companies can actually license and explain their trade secret taking a risk that the company will keep it secret right knowing that the company you’re talking with will keep and protect it much like you would but you can license that and transfer it to another party like any other right um and then potential patent ability i talk about this idea where you can keep things in-house for a long time and then if if you find out that it’s still commercially viable then seek to publish it as long as you haven’t sold it or published it you can seek patenting on it even if you’ve kept it in-house for five ten years so boeing does this all the time they’ve got this phantomworks they’ve got hundreds of ideas that are uh currently classified as trade secrets and they could seek patenting on them they might not they’re kind of going waffling back and forth and whether they invest money and time and effort into them or not um that’s what we do a lot of the times we help companies figure out what do they have right they’ve got r d company groups that just spin their wheels all day long a lot of times what they’re doing is not aligned with where their business is going uh the ceos have no idea what the heck how to classify what they’re doing so just sort of like racking filing putting in the right priority items to go take to market so really quick workshop here i got another story for you guys this is a little interesting one so okay while working at on the job at big tech sammy signs an nda non-disclosure agreement with his boss to learn about a secret project called neptune it contained information about all the employees allergies he later decided to share the spreadsheet with a large email distribution included vendors suppliers and employees to help raise awareness is sammy liable for trade secret misappropriation

yeah well so it’s just with his boss just within the within their their company for now for this argument that’s a great question by the way i assumed this would be a non-disclosure between just within big tech he’s limited to distribution with only within big tech

not from yeah exactly so that’s


okay do you think there is trade secret appropriations

nailed it nailed it most people don’t get that so right so you think oh my gosh this has got to be trade secret info but now allergies well there could certainly be hipaa violations here and probably other privacy issues it’s not economically valuable to big tech to know about employees allergies so

there is probably there could be

so it’s extending the family of who gets access information but of itself it’s not necessarily a violation it’s not the general public

rights business business is about blackmail their employees about their [Laughter]

[Music] [Laughter]

it’s about technology


yeah yeah that wasn’t where i was going but yeah totally yeah

when i wrote this i thought of my daughters no no my daughters have nut allergies so maybe this employee was like oh my gosh i don’t want anybody to bring nuts into the company i mean that’s the idea raise the raise awareness of certain allergies that’s all but you guys spot you hit around that’s one thing i wanted somebody to pick up on is that it really wasn’t economically valuable yeah at the high level so one favorite favorite quotes from mr addison’s geniuses one percent inspiration and 99 perspiration so what we can yeah right but so you can learn all you want about the law and it’s awesome you guys are here but it’s going to take a lot of hard work to bring it to mark and get these projects off the ground but the fact that you’re here has demonstrated that you’re willing to do this you know thursday afternoon so let’s talk any questions

man i like to think everybody has one percent inspiration yes um


yeah you you um let’s go through the rules so not really ascertainable um

keeping it secret within the company and economically valuable sure

sure sure yeah but i mean as soon as you went public or as soon as you sold it

no no you can you have a full year after you sell but i’m saying as soon as you disclose it the government is going to find out about it uh and at that point at that point you know you you not only yeah you’d get completely uh stopped and stopped using you know government eminent domain type of thing they could come in and prevent you from doing anything and put you under oh yeah the government has enormous powers yeah yeah i don’t i’m not in the government but this is all kind of through here saying through knowledge uh lane and law school yes there’s tons of authority the government has to prevent just individuals out there in the world from doing certain things

yeah they wouldn’t they may not know well right they if and until they know right yeah and and there probably are rules um [Music] kind of like whistleblower type rules you know for certain things uh you know weapons of mass destruction um you know certain types of things that could put people at risk and nuclear you know where even if even if your boss tells you don’t tell anybody you know you’ve got whistleblower rules you know there’s certain privileges where you’re able to do that i mean you know this is my thought

yeah right so that’s yeah so so assuming it’s patentable assuming it’s eligible and patentable and you’ve not sold it or published it more than a year ago it’s eligible this is the rule under under 35 usc 101 uh 102a yeah 102a uh it’s whether it’s sold or published you’ve got one year and i mentioned earlier even if it’s a private sale even if you’re under nda talking with your manufacturer overseas making it just negotiating hey if you make this for me here’s what it is if you make this for me i’ll you know um i’ll give you a license or you know we’ll sell it to you i’ll license this to you for this amount that starts to win your window so no real disclosure still can start the winner timer

and yeah

india india or native americans india india okay yeah so you said the government has a really high power on that so in the meantime the court actually can order through their their secret recipes to check out their poison or i don’t know i don’t know um so you’re saying that people from india were being alleged that they were being harmed by consuming beverages

your question is whether the indian government the us government could demand

i would imagine that they have the rights to do that um if they felt it necessary i thought the uh that situation in india had to do with the manufacturing plant not the consumption of the product yeah they did it at first but yeah it’s not the case

i mean i don’t know um the answer is i don’t know okay i’m sorry i haven’t i haven’t researched that it’s a very interesting question i think if you’re coca-cola you would try to cooperate to the best your ability without giving up that rest without giving up that method you tell them all the ingredients you know as much as they needed um but yeah uh david david okay the magician yeah uh-huh so his case it came oh really man you’re up on this all right dude i need to talk to you this is great

uh the details of a trade secret one of his trademark tricks okay wow in order to provide evidence that the format the construct of the trade secret who is not liable she only obviated his liability for any damages

[Music] wow would you send me that i’d love to look at that i’d love to look at that that’s great man earlier this week and i was like wow awesome you’re welcome take care keith yeah

but still private judges know about that but that’s the thing was it wasn’t a direct assault against the sanctity of trade secrets it was uh it was an obligatory uh disclosure in order to demonstrate that they actually did not


well that’s curious so that’s i’m going to look that up yeah i’m going to look at it i got to see yeah i’ll go read the case is it five or is it six okay good yeah that’s awesome i’ll look that up thank you great questions man

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J.D. Houvener is a Registered USPTO Patent Attorney who has a strong interest in helping entrepreneurs and businesses thrive. J.D. leverages his technical background in engineering and experience in the aerospace industry to provide businesses with a unique perspective on their patent needs. He works with clients who are serious about investing in their intellectual assets and provides counsel on how to capitalize their patents in the market. If you have any questions regarding this article or patents in general, consider contacting J.D. at