Intellectual Property

Small Business and Patents

Patents are big part of almost any business venture, even a small business. Your business might make money by selling patented goods or by making things that are covered by patents. Or, maybe your employees create new products that are later patented. Whatever the case might be, if you're an employee or an employer, you should know some things about patents, like:

  • What they cover, that is, what a patent protects
  • Who owns a patent
  • How the patent law protects your invention

Patent law is very complex- from determining what can be patented, to applying for one, to suing someone for using your invention without permission. If you have questions about any of these matters, you need to carefully examine the federal patent laws, as well as court cases that interpret that law. Of course, because of the complexities, it's probably best if you get some help from an attorney experienced in business or patent law.

Patents in General

Patents are granted by the federal government for new, useful and non-obvious inventions, such as a machine, process or product. Generally, a patent is good for a period of 20 years from the filing date of a patent application, and provides the patent owner the right to prevent or stop others from making, using, offering for sale or selling the invention in the U.S., or "importing" the invention into the U.S.

The patent does not give you the right to make, use, sell or import the patent, but only the right to stop others from doings do so.

To get a patent, the inventor has to file an application with the U.S. Patent & Trademark Office. A patent application is a very complex legal document, in which the nature of the invention must be completely disclosed, along with a detailed written description (and drawings, if necessary) so that the public can make the invention. There are also fees associated with the application.

There are three types of patents:

  • Utility patents are for things like new and useful processes- a way of making or doing something- and machines, or a new and useful improvement on a process or machine
  • Design patents are for new, original and ornamental designs for something, that is, the appearance of some object or good
  • Plant patents are for distinct and new varieties of plants that are reproduced asexually

Some things can't be patented, such as an abstract idea, laws of nature and mathematical formulas. However, a process that uses a mathematical formula can be patented so long as the formula is only part of the process and the patent applicant doesn't ask for exclusive use of the formula.

Patents in the Business Setting

Under the patent laws, patents can only be issued in the name of an individual: the inventor. It is very common, however, for an employee to "assign" or transfer his or her right to a patent to his or her employer. Sometimes an employer will give the employee-inventor a share in the royalties (revenue) that the employer makes on the patented invention, or maybe a bonus. Often, however, employers require their employees to sign an agreement that requires the employee to assign inventions to the employer without additional compensation.

In addition, even if there is no contract or agreement, if an employee was hired for the specific purpose of inventing, the employer will own the patent rights to the resulting inventions.

Also, there are times when an employer can use an employee's invention without getting an assignment and without paying for its use. If an employee-inventor uses the employer's tools or resources to make an invention, the employer can have a "shop right" to use the invention for free. Of course, the employee owns the patent, and he or she can charge others to use it.

Finally, in recent years, "business methods" have been granted patents. In the financial services industry, for example, business method patents now abound for things such as the management of portfolios and methods and techniques for allocating risk and assets. Patents can also have a huge impact in e-commerce (electronic commerce or sales). For example, a well-known internet-based bookseller has a patent on the method of ordering goods with "one click" of a mouse.

The penalties for using a patent without permission (called, "infringement") can be severe. The guilty party could have to pay the patent owner lost profits, interest, and attorney's fees. If the courts find that the infringement was "willful," that is, the infringer acted in disregard of the infringed patent with no reasonable basis to believe he or she had a right to do the acts in question, the infringer could have to pay three times the patent holder's damages.

Questions for Your Attorney

  • How much will cost to register my employee's patent and how long will it take?
  • Is my patent good in other countries?
  • If my employee creates an invention at home but it's based on things we do at work, can I force him to assign the patent to me?
  • What happens after 20 years? Can I reapply for another patent on the same invention?

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