Dear Rich: I entered into a corporate agreement with someone who had a patent pending idea. After a year of back and forth, we finally started a corporation in February 2010. In total we spent 1 year talking about creating a corporation together and 1.5 years involved in the corporation; she always kept meeting the next big investor at the club where she worked and would drop me until the investor lost interest. As per our agreement, she was to bring the patent into the corporation and I was to bring the business management and necessary prototyping funding. In the agreement, I was getting 38% of the company, she was getting the remainder. At the this point, the patent is close to being finalized, the trademark and slogan are now done, and the prototyping is virtually done. Unfortunately, she now wants to terminate the agreement and is going around me and telling the patent attorney and others not to speak with me. Her certified termination letter to me states nothing in regard to the amount of time, money, and work I have put into our company. We have a corporation formed with an operating agreement clearly indicating our roles and percentages. She now has amnesia and says she never agreed to give me part of the patent even though she has the original contract and corporate operating agreement. Ideally, I feel she has defaulted from the agreement and loses any rights whatsoever on the patent. This would have been the case had done something similar; I would lose my investment, work, time, and ownership if I defaulted and acted unethically behind her back. How should I best handle this situation? What would happen to one of the entrepreneurs on Shark Tank if they tried to do this to one of the Sharks? Please don't ask the Dear Rich Staff hypothetical questions about reality TV shows. We're not equipped to answer. It's not so much that we're old and out of touch (which is true), it's just that after the first season of Survivor -- the one where Susan and Richard got on each other's nerves ("Your inability to admit your failures without going into a whiney speech makes you a bit of a loser in life ...") -- we decided that the human race had created a fork in the road and we would take the path without reality TV.
Right, you had a question. The resolution of your problem depends on two things: your paperwork and the amount of money each party is willing to spend on a legal battle. Your lawyer needs to review the initial agreement, the corporate formation documents, and hopefully, if there is one, the assignment of patent rights. Even if there is no assignment to the corporation, your lawyer may still be able to force the transfer of rights (or at least a financial judgment tied to the value of the patent) if the remaining paperwork conclusively proves that the inventor was going to hand over the invention. In any case, based on the facts in your letter, it appears as if this matter is headed for some legal martial arts so we urge you to see an attorney ASAP.
Alternative courses of action. If you have an arbitration clause in your agreement, that may enable you to resolve the matter quicker, or you could always ask for arbitration if the inventor is willing to agree. More importantly, have you evaluated the patent's commercial potential? We know that you believe in the patent so much so that you're willing to fight about it, but the objectivity of a third-party evaluation my save you a lot of time and effort. As you may be aware, it's estimated that 50% of patent applications never become patents and of those that do get issued, less than 2% are commercialized (offered for sale). (We're not sure how reliable these statistics are but they give you an idea.) In other words if the idea is uncommercial, its possible that your inventor friend is offering you a chance to walk away from your obligations without any more risk or investment. That may be a better choice than being trapped in a reality TV show with your so-called "partner."
Showing posts with label invention. Show all posts
Showing posts with label invention. Show all posts
The Lawyer Who Invented Copying
Wow are we annoyed! We missed celebrating Chester Carlson's 100th birthday last month. Oh well. Here's an article we recently wrote about one of the coolest inventors ever.
Snazzy inventions aren’t just for science geeks and movies about time travel—they also changed the way that law offices did business in the twentieth century. The ballpoint pen made it easier to sign contracts, by eliminating attorney’s fountain pens and inkwells. Post-Its made it possible to flag legal errors and provide handy “sign here” notes. Liquid Paper enabled secretaries to make corrections (instead of retyping whole briefs), the Rolodex simplified keeping client information, and, of course, Scotch tape enabled lawyers to tape together legal bills after clients ripped them to shreds.
But one invention—the Xerox 914—turned out to be the most profitable device to drop into the law office. And surprise, surprise, it was invented by an attorney.
Like many people who worked with legal documents, Chester Carlson was frustrated by inefficiency. Back in the early 1930s before he became a lawyer, Carlson worked in the patent department of Bell Laboratories. He quickly tired of copying patents using carbon paper. The reproductions were time-consuming and prone to errors. (For those too young to remember, copies used to be made by jamming sheets of carbon paper between sheets of paper, stuffing them into a typewriter, and typing firmly enough so that the carbon made imprints—then swearing up a storm if there was a typo.)
At about the same time, Carlson’s hypercritical mother-in-law moved into his apartment. To avoid her unpleasant nightly tirades, Carlson enrolled in law school. While hand-copying passages from law books one night, Carlson again ran into the same frustration. Why wasn’t there a simple method of reproducing copies on paper? Carlson began to pursue an obscure idea—a process that would fuse fine black powder to paper using electrostatic charges. Carlson originally called his process “electron photography,” and then nicknamed it xerography (from the Greek words xeros (dry) and graphein (writing).
In 1937, by which time he was a patent attorney, Carlson perfected his theory and used his legal drafting skills to patent his revolutionary process. But he still had no actual proof that it worked. He offered his patent to IBM for a $10,000 advance and 5% royalty—in hindsight, one of the best offers of the twentieth century—but IBM passed. (Twenty years later, IBM still failed to see the potential when it reviewed the first Xerox copier and concluded that the device “has no future in the office copying market.” Ouch!)
It wasn’t until 1945 that Carlson partnered up with a nonprofit R&D firm in Ohio, which improved on the invention and licensed manufacturing rights to the Haloid Company, a tiny photographic paper manufacturer in Rochester, New York. Things dragged on until the mid-1950s when—just as Carlson’s initial patents were expiring—the Haloid Company (now renamed Xerox) perfected
Carlson’s process and tested it in nearby offices. Xerox knew it had a hit when the testing companies asked to keep their demo machines.
The debut of the Xerox 914 was one of those rare moments in inventing history when a device transforms the environment in which it is placed. Xerox believed that businesses would use the 914 primarily to make duplicates of outgoing correspondence. They never imagined that employees—no longer encumbered by messy and time-consuming copies—would use it for internal document reproduction, such as memos, reports, newsletters, and even personal documents or their faces and other body parts. The result was an explosion of office and personal copying. Within seven years of its introduction, Xerox was the 15th largest publicly owned company in the United States.
It’s said that the business of law is really about selling paper to clients; and the Xerox machine put that principle into overdrive. The law firms devised a clever system of markups. Initially, they leased copiers and paid per copy, allowing them to mark up and pass along those charges to clients. But even after law firms began to own their photocopiers, they retained the per-copy charges for clients. A few cents per copy may not seem like much at first, but hey, what if everyone is suddenly buried in paper?
And buried they are. Consider, for example, when one business sues another. As a normal part of the pretrial discovery process, in which each side asks to see evidence held by the other, attorneys review the other side’s relevant memos, phone records, financial records, and other documents. With piles more photocopied documents at each business, however, it creates an exponential increase in the size of discovery requests—literally boxes, and sometimes trucks of documents being sent back and forth. To deal with this paper explosion, law firms added more staff, thereby increasing the billing. In short, Xerox had created a cash machine for law firms.
The copier also triggered illegal activity (always a boon for lawyers). For example, there was office espionage, loss of trade secrets, and even fraud (for those who understood how to create fake photocopied documentation). The Xerox machine launched many copyright lawsuits: for example, a series of cases where authors and publishers protested the fact that people—students and teachers, in particular— were no longer buying their books and scholarly journals, but simply slapping a borrowed original onto a copy machine. Legislators took the device into consideration when creating the 1976 Copyright Act, by including provisions on academic photocopying. Although we now take the photocopier for granted, it was essentially the original VCR or Napster—a device that, for the first time, put infringement into the hands of ordinary Americans.
Carlson earned millions from Xerox, but never measured success by money. He had spent his childhood in poverty—during his last year in high school he lived in a converted chicken coop—and had a goal to rid himself of his wealth before he died. He spent his final years getting rid of his royalties via charitable contributions and pursuing spiritual goals. His process—which remains virtually unmodified from his 1937 patent—continues to supply copies to his legal brethren via photocopiers, laser printers, and fax machines.
Snazzy inventions aren’t just for science geeks and movies about time travel—they also changed the way that law offices did business in the twentieth century. The ballpoint pen made it easier to sign contracts, by eliminating attorney’s fountain pens and inkwells. Post-Its made it possible to flag legal errors and provide handy “sign here” notes. Liquid Paper enabled secretaries to make corrections (instead of retyping whole briefs), the Rolodex simplified keeping client information, and, of course, Scotch tape enabled lawyers to tape together legal bills after clients ripped them to shreds.
But one invention—the Xerox 914—turned out to be the most profitable device to drop into the law office. And surprise, surprise, it was invented by an attorney.
Like many people who worked with legal documents, Chester Carlson was frustrated by inefficiency. Back in the early 1930s before he became a lawyer, Carlson worked in the patent department of Bell Laboratories. He quickly tired of copying patents using carbon paper. The reproductions were time-consuming and prone to errors. (For those too young to remember, copies used to be made by jamming sheets of carbon paper between sheets of paper, stuffing them into a typewriter, and typing firmly enough so that the carbon made imprints—then swearing up a storm if there was a typo.)
At about the same time, Carlson’s hypercritical mother-in-law moved into his apartment. To avoid her unpleasant nightly tirades, Carlson enrolled in law school. While hand-copying passages from law books one night, Carlson again ran into the same frustration. Why wasn’t there a simple method of reproducing copies on paper? Carlson began to pursue an obscure idea—a process that would fuse fine black powder to paper using electrostatic charges. Carlson originally called his process “electron photography,” and then nicknamed it xerography (from the Greek words xeros (dry) and graphein (writing).
In 1937, by which time he was a patent attorney, Carlson perfected his theory and used his legal drafting skills to patent his revolutionary process. But he still had no actual proof that it worked. He offered his patent to IBM for a $10,000 advance and 5% royalty—in hindsight, one of the best offers of the twentieth century—but IBM passed. (Twenty years later, IBM still failed to see the potential when it reviewed the first Xerox copier and concluded that the device “has no future in the office copying market.” Ouch!)
It wasn’t until 1945 that Carlson partnered up with a nonprofit R&D firm in Ohio, which improved on the invention and licensed manufacturing rights to the Haloid Company, a tiny photographic paper manufacturer in Rochester, New York. Things dragged on until the mid-1950s when—just as Carlson’s initial patents were expiring—the Haloid Company (now renamed Xerox) perfected
Carlson’s process and tested it in nearby offices. Xerox knew it had a hit when the testing companies asked to keep their demo machines.
The debut of the Xerox 914 was one of those rare moments in inventing history when a device transforms the environment in which it is placed. Xerox believed that businesses would use the 914 primarily to make duplicates of outgoing correspondence. They never imagined that employees—no longer encumbered by messy and time-consuming copies—would use it for internal document reproduction, such as memos, reports, newsletters, and even personal documents or their faces and other body parts. The result was an explosion of office and personal copying. Within seven years of its introduction, Xerox was the 15th largest publicly owned company in the United States.
It’s said that the business of law is really about selling paper to clients; and the Xerox machine put that principle into overdrive. The law firms devised a clever system of markups. Initially, they leased copiers and paid per copy, allowing them to mark up and pass along those charges to clients. But even after law firms began to own their photocopiers, they retained the per-copy charges for clients. A few cents per copy may not seem like much at first, but hey, what if everyone is suddenly buried in paper?
And buried they are. Consider, for example, when one business sues another. As a normal part of the pretrial discovery process, in which each side asks to see evidence held by the other, attorneys review the other side’s relevant memos, phone records, financial records, and other documents. With piles more photocopied documents at each business, however, it creates an exponential increase in the size of discovery requests—literally boxes, and sometimes trucks of documents being sent back and forth. To deal with this paper explosion, law firms added more staff, thereby increasing the billing. In short, Xerox had created a cash machine for law firms.
The copier also triggered illegal activity (always a boon for lawyers). For example, there was office espionage, loss of trade secrets, and even fraud (for those who understood how to create fake photocopied documentation). The Xerox machine launched many copyright lawsuits: for example, a series of cases where authors and publishers protested the fact that people—students and teachers, in particular— were no longer buying their books and scholarly journals, but simply slapping a borrowed original onto a copy machine. Legislators took the device into consideration when creating the 1976 Copyright Act, by including provisions on academic photocopying. Although we now take the photocopier for granted, it was essentially the original VCR or Napster—a device that, for the first time, put infringement into the hands of ordinary Americans.
Carlson earned millions from Xerox, but never measured success by money. He had spent his childhood in poverty—during his last year in high school he lived in a converted chicken coop—and had a goal to rid himself of his wealth before he died. He spent his final years getting rid of his royalties via charitable contributions and pursuing spiritual goals. His process—which remains virtually unmodified from his 1937 patent—continues to supply copies to his legal brethren via photocopiers, laser printers, and fax machines.
Nonobvious Prior Art Claims
Dear Rich: Say there is a known prior art that currently has a patent pending and I file for a provisional stating claims with which I believe are nonobvious to the prior art. [Hi Readers. Before we lose you in a torrent of inventor-speak, allow us to provide a short translation. This inventor has come up with something that he believes to be new and not obvious (nonobvious) to those in the field of invention. (These two standards -- new and nonobvious -- are the basis for getting a patent.) Another inventor has filed a patent application for a related invention (the "patent pending" reference). In summary, the inventor doesn't believe his invention is substantially similar to the existing technology in that patent application (or "prior art"). What follows are his questions and our answers.
1. Can they accuse me of infringement and take me to court? The other inventors cannot sue you for patent infringement until their patent is granted. If 18 months have passed since the other inventors filed a patent application and the application has been published, they can notify you about the application and then sue you for any infringements that occurred after notification. (We've discussed that previously here). In either case, the actual lawsuit cannot be filed until the patent is granted. Whether the inventor succeeds obviously depends on whether you guessed right about the prior art.
2. Can I sell during my provisional status and if or when do I have to stop selling because there is a known prior art with a patent pending status? You can sell any time you want but if you sell your invention and it infringes, you'll be liable once the other patent is granted.
3. If this invention which I believe is nonobvious to the prior art shows that it has commercial value, but there's a known prior art, is it worth filing a non-provisional after 8-12 months? We're kind of going around in circles. If you have commercial potential and you're concerned about infringement (or issues of prior art) you should bring in a patent attorney to provide an opinion before you waste your money or time on the pursuit. Keep in mind that whether you're right or wrong about the prior art, the other inventor can come after you if there's enough of a case to get in court. And then you'll be spending money on a court battle when you could be devoting the time and money to some other great new idea.
4. If my invention is non-obvious to the prior art will a patent be issued and do I still have to license the basic idea of the prior art? If your invention is new, nonobvious and meets all the patent requirements, you're entitled to a patent. Keep in mind, these determinations are tied to the interpretation of the patent claims, explained here.) If the invention doesn't infringe, do you have to license rights from the other inventor? No.
5. I read in your book that changing something small may be considered as a novelty and may be considered patentable (if I am correct). If so, do you have to go to court to prove that, or can the examiner just approve it, and when a patent is issued to the nonobvious then you are protected? In some cases, small changes are enough to get a patent, in other cases, no. If an examiner feels the application is sufficient, you'll get your patent. Alas, that patent can always be challenged and then you may have to deal with two battles, a patent reexamination and a court case.
1. Can they accuse me of infringement and take me to court? The other inventors cannot sue you for patent infringement until their patent is granted. If 18 months have passed since the other inventors filed a patent application and the application has been published, they can notify you about the application and then sue you for any infringements that occurred after notification. (We've discussed that previously here). In either case, the actual lawsuit cannot be filed until the patent is granted. Whether the inventor succeeds obviously depends on whether you guessed right about the prior art.
2. Can I sell during my provisional status and if or when do I have to stop selling because there is a known prior art with a patent pending status? You can sell any time you want but if you sell your invention and it infringes, you'll be liable once the other patent is granted.
3. If this invention which I believe is nonobvious to the prior art shows that it has commercial value, but there's a known prior art, is it worth filing a non-provisional after 8-12 months? We're kind of going around in circles. If you have commercial potential and you're concerned about infringement (or issues of prior art) you should bring in a patent attorney to provide an opinion before you waste your money or time on the pursuit. Keep in mind that whether you're right or wrong about the prior art, the other inventor can come after you if there's enough of a case to get in court. And then you'll be spending money on a court battle when you could be devoting the time and money to some other great new idea.
4. If my invention is non-obvious to the prior art will a patent be issued and do I still have to license the basic idea of the prior art? If your invention is new, nonobvious and meets all the patent requirements, you're entitled to a patent. Keep in mind, these determinations are tied to the interpretation of the patent claims, explained here.) If the invention doesn't infringe, do you have to license rights from the other inventor? No.
5. I read in your book that changing something small may be considered as a novelty and may be considered patentable (if I am correct). If so, do you have to go to court to prove that, or can the examiner just approve it, and when a patent is issued to the nonobvious then you are protected? In some cases, small changes are enough to get a patent, in other cases, no. If an examiner feels the application is sufficient, you'll get your patent. Alas, that patent can always be challenged and then you may have to deal with two battles, a patent reexamination and a court case.
Subscribe to:
Posts (Atom)

