This Week In Law

Thanks to Denise Howell for having me on the show again. Video and blurb from http://twit.tv/twil appear below.

Host: Denise Howell

Bilski decision and the validity of business method patents, improving the Patent Office, finding relevant prior art, and more.

Guests: Erik Heels, J. Matthew Buchanan and Stephen Nipper

Download or subscribe to this show at twit.tv/twil.

Talking points on Delicious

We invite you to read, add to, and amend our show notes.

TWiL on Friendfeed

Special thanks to Nigel Clutterbuck for the TWiL theme music. Thanks to Cachefly for the bandwidth for this show.

It Don't Mean A Thing If It Ain't Got That Swing

On 06/28/10, the Supreme Court of the United States decided Bilski v. Kappos, a case about what subject matter (including software and business method patents) is eligible for patent protection under US law.

Unfortunately, the Supremes blew it. Here's why. Bear with me, this will take some time to explain.

Table Of Contents

I. Separation Of Powers – Who Does What In The US Government
II. Patent Law In Practice
III. A Brief History Of Patent Law
   A. The Constitution
   B. The Patent Act
      0. Definitions, 35 U.S.C. §100, 35 U.S.C. §273(a)(3).
      1. Subject Matter, 35 U.S.C. §101.
      2. Novelty (statutory bars), 35 U.S.C. §102.
      3. Utility, 35 U.S.C. §101, 35 U.S.C. §112 (first paragraph).
      4. Nonobviousness, 35 U.S.C. §103.
      5. Specification (written description, enablement, best mode), 35 U.S.C. §112 (first paragraph).
IV. Patent Law: What It Says vs. What It Means
   A. What Patent Law Says
   B. The Supreme Court's Pre-CAFC §101 Trilogy
   C. CAFC Created; Fewer Supreme Court Patent Cases Heard
   D. CAFC: Alappat, State Street, Reaction By Congress
   E. CAFC: Bilski
V. The Supreme Court Bilski Case
   A. Kennedy's "Majority" Opinion
   B. Stevens's Concurring Opinion
   C. Breyer's Concurring Opinion
   D. Summary: You may ask yourself, where does that highway lead to?
Appendix A – Related Patent Commentary by Erik J. Heels
Appendix B – Third-Party Commentary On Bilski
Appendix C – Patent Law Chronology
   1. 1952 Patent Act (Congress).
   2. 1972, Benson (US Supreme Court) ("§101 Trilogy" 1 of 3). Laws of Nature, natural/physical phenomena, and Abstract Ideas Fail §101.
   3. 1978, Flook (US Supreme Court) ("§101 Trilogy" 2 of 3).
   4. 1980, Chakrabarty (US Supreme Court).
   5. 1981, Diehr (US Supreme Court) ("§101 Trilogy" 3 of 3).
   6. 1982, CAFC Formed.
   7. 1994, Alappat (CAFC).
   8. 1998, State Street (CAFC) – Useful, Concrete, and Tangible Result.
   9. 2010, Bilski (US Supreme Court).

I. Separation Of Powers – Who Does What In The US Government

There are three branches of government in the United States. Each branch has a defined role. Two of the three branches are supposed to be able to overrule the other so that no one branch has absolute power. All of this was decided by the people in the form of the US Constitution.

• The Legislative branch (the Senate and the House of Representatives, collectively and informally called Congress) writes the laws.
• The Executive branch (the President and agencies such as the Department of Commerce) executes the law.
• The Judicial branch (trial courts, appeals courts, and the Supreme Court) explains the laws.

To paraphrase what the late great Professor David Gregory said:

"[W]hat the state courts say is not the law. What the circuit courts say is not the law. And what the dissenting Supreme Court opinions say is not the law. The only thing that is the law is what the majority of the Supreme Court says is the law. And so the best way to truly learn the law is to read the major Supreme Court decisions about the law, to read only the majority opinions, and to read all of them."

I am reminded of a political cartoon from the 1980s showing a king shouting from a balcony to his rioting subjects below: "You have to do what I say or I can't be king anymore!" Exactly.

• Writing laws is easy.
• Executing laws is easy.
• Explaining laws is hard. As the only unelected branch of government, the judicial branch derives its legitimacy and authority from and in proportion to its ability to do its job well, to explain the law.

The Supreme Court must explain the law or it is not the supreme court anymore.

II. Patent Law In Practice

The following drawing and explanation are excerpted from my Drawing That Explains Patent Laws article.

At the top of the pyramid is the United States Constitution. Article 1 Section 8 of the Constitution says:

"The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"

So patent rights and copyright rights come from the same clause in the Constitution. Oddly, the Constitution says nothing about trademark rights. And in our government, the Patent Office and the Trademark Office are combined (in the United States Patent and Trademark Office (USPTO)), but the Copyright Office is separate. So Congress doesn't always do things the way the drafters of the Constitution thought that they would.

Next in the pyramid (working top to bottom) is the Patent Act. When our lawmakers in Congress (the Senate and the House of Representatives) want to make a new law, they write it, debate on it, and, if they agree on it, then the new law becomes part of the United States Code. The United States Code is divided into smaller pieces called titles, parts, chapters, and sections. The Patent Act is the short name for our patent laws, which exist in Title 35 of the United States Code (35 USC for short). The version of the Patent Act that I use is about 88 pages long.

Next in the pyramid is the Patent Rules (also called patent regulations). Congress writes the laws, but different agencies of the government have to carry out those laws. The Federal Rules are the rules that the agencies write to help explain the laws and how they'll be carried out. For patent laws, the USPTO writes the Patent Rules, and those appear in Title 37 of the Code of Federal Regulations (37 CFR for short). The version of the Patent Rules that I use is about 336 pages long.

The bottom of the pyramid is the Manual of Patent Examining Procedure (MPEP). The MPEP was written by the USPTO for patent examiners to help them do their jobs. Most patent examiners are not lawyers. So the MPEP is designed to help them understand and apply patent law (the Constitution, the Patent Act, and the Patent Rules). The MPEP is the most frequently used reference book for patent examiners. So it is helpful for patent lawyers like me to know the MPEP. The version of the MPEP that I use is about 3000 pages long.

So we've gone from one sentence (Constitution) to 88 pages (Patent Act) to 336 pages (Patent Rules) to 3000 pages (MPEP).

The fun part about the patent laws is that they are constantly changing. The job of the courts (and ultimately the Supreme Court) is to determine what the law is – what it means. So whenever there is a patent dispute that ends up in court, the courts will be interpreting what the patent laws (the Constitution and the Patent Act) mean. Congress can also change the Patent Act, but that is harder to do. And the people of the United States can change the Constitution, but that is even harder to do.

At the same time, the USPTO is constantly revising the Patent Rules and the MPEP. And sometimes the way the USPTO thinks the patent laws should be applied differs from how the courts think the patent laws should be applied.

III. A Brief History Of Patent Law

A. The Constitution

Keep in mind the above drawing. The Constitution says that:

"The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"

B. The Patent Act

Here are the key sections of the Patent Act, two sections of definitions, 5 basic requirements for patentability:

0. Definitions, 35 U.S.C. §100, 35 U.S.C. §273(a)(3).

Note the circular definition of "process."

35 U.S.C. 100 Definitions.

When used in this title unless the context otherwise indicates -

(a) The term "invention" means invention or discovery.

(b) The term "process" means process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.

Note the definition of "method" for defenses to infringement.

35 U.S.C. 273. Defense to infringement based on earlier inventor.

(a) DEFINITIONS. For purposes of this section– …

(3) the term "method" means a method of doing or conducting business…

(Added Nov. 29, 1999, Public Law 106-113, sec. 1000(a)(9), 113 Stat. 1501A-555 (S. 1948 sec. 4302).)

See:

http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_100.htm
http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_273.htm

1. Subject Matter, 35 U.S.C. §101.

35 U.S.C. 101 Inventions patentable.

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

See:

http://www.uspto.gov/web/offices/pac/mpep/documents/0700_706_03_a.htm

http://www.uspto.gov/web/offices/pac/mpep/documents/2100_2106.htm

2. Novelty (statutory bars), 35 U.S.C. §102.

35 U.S.C. 102 Conditions for patentability; novelty and loss of right to patent.

A person shall be entitled to a patent unless –

(a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or

(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States…

See:

http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_102.htm

3. Utility, 35 U.S.C. §101, 35 U.S.C. §112 (first paragraph).

The term "useful" appears in 35 35 U.S.C. §101 and "use" appears in 35 U.S.C. §112.

See:

http://www.uspto.gov/web/offices/pac/mpep/documents/2100_2107.htm

4. Nonobviousness, 35 U.S.C. §103.

35 U.S.C. 103 Conditions for patentability; non-obvious subject matter.

(a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains….

See:

http://www.uspto.gov/web/offices/pac/mpep/documents/2100_2141.htm

5. Specification (written description, enablement, best mode), 35 U.S.C. §112 (first paragraph).

35 U.S.C. 112 Specification.

The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

IV. Patent Law: What It Says vs. What It Means

A. What Patent Law Says

The legal meaning of words in laws frequently differs from the literal meaning. This problem is compounded by the fact that language itself evolves. That's why we have courts: to explain what the law means.

The Constitution places no limitations on what "Discoveries" may be entitled to patents.

The current Patent Act was enacted in 1952. The Patent Act enumerates broad categories of inventions/discoveries that may be patentable, including "process, machine, manufacture, or composition of matter" (35 U.S.C. §101) where "process" is further (circularly) defined as "process, art, or method" (35 U.S.C. §100), which leaves us with the following patentable subject matter:

1. process, art, or method
2. machine
3. manufacture
4. composition of matter

As you can probably guess, "art" in this context does not mean "works of visual art" such as paintings and sculptures. Similarly, "process" and "method" do not mean what mere mortals think they mean.

Explain to us, o courts of law, what these terms mean.

B. The Supreme Court's Pre-CAFC §101 Trilogy

Between 1972 and 1981, the Supreme Court issued a trilogy of cases on computer-related subject matter patentability (Gottschalk v. Benson, 409 U.S. 63 (1972), Parker v. Flook, 437 U.S. 584 (1978), Diamond v. Diehr, 450 U.S. 175 (1981)), concluding that 35 U.S.C. §101 should be interpreted broadly and does not exclude computer-related inventions. A fourth case (Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980)) also addressed subject matter patentability. Taken as a whole, these four cases created three exceptions to the broad categories of patentable subject matter outlined in 35 U.S.C. §101. Namely, according to the Supreme Court, even though 35 U.S.C. §101 does not explicitly say so, the following categories are not patentable subject matter:

1. laws of nature
2. natural/physical phenomena
3. abstract ideas

These judicially-created exceptions to 35 U.S.C. §101 would come back to haunt the Supreme Court in its 2010 Bilski decision. More on this below.

C. CAFC Created; Fewer Supreme Court Patent Cases Heard

In 1982, Congress created the Court of Appeals for the Federal Circuit (CAFC). Unlike the other federal circuit courts (1st Circuit through 11th Circuit), the CAFC's jurisdiction is based on subject matter (including patents) rather than geography. So while the CAFC's creation eliminated any issue of conflicting opinions between the various federal circuit courts on patent-related cases, it also reduced the necessity of having any such conflicting circuit court cases appealed to the Supreme Court. As a result, the Supreme Court has had fewer opportunities to rule on patent law post-CAFC.

Which is why every single patent law case that the Supreme Court does rule on is supremely important.

D. CAFC: Alappat, State Street, Reaction By Congress

In 1994, the CAFC restated the Benson-Flook-Diehr (Supreme Court §101 trilogy) rule that (1) laws of nature, (2) natural/physical phenomena, and (3) abstract ideas are not patentable subject matter. In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994).

In 1998 the CAFC ruled (in a nine-page decision by 94-year-old Judge Giles Sutherland Rich) that a computerized business-related patent was valid and specifically rejected the "so-called 'business method' exception to statutory subject matter." State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F. 3d 1368 (Fed. Cir. 1998). The CAFC restated the Supreme Court rule that abstract ideas are not patentable subject matter and stated that it had previously held that "mathematical algorithms are not patentable subject matter to the extent that they are merely abstract ideas." At this point, the State Street court was not necessarily trying to make new law. But in continuing to explain how the subject matter of the patent at issue was patentable and distinguishable from "abstract ideas," the State Street court (perhaps inadvertently) created an exception to the previous judicially-created exceptions, ruling that "to be patentable an algorithm must be applied in a 'useful' way," and that "the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces 'a useful, concrete and tangible result' – a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades." (Emphasis added.)

The State Street case has been interpreted to stand for the notion that business methods are patentable. From the table below, you can see why it lends itself to this interpretation, even though the subject matter at issue in State Street was a computerized invention that was ruled to be a machine.

For those of you scoring at home, in 1998, we had:

1998 Patentable Subject Matter (35 U.S.C. §101)	1998 Non-Patentable Subject Matter (Exceptions Created By The Supreme Court)
process, art, or method machine manufacture composition of matter an abstract idea (presumably including any business method) that (1) produces a useful, concrete, and tangible result, (2) is applied in a useful way, or (3) is reduced to a practical application (State Street)	laws of nature natural/physical phenomena abstract ideas

In 1999, in response to the CAFC's controversial State Street decision, Congress amended the Patent Act by passing the American Inventors Protection Act (commonly referred to as the First Inventor Defense Act) to provide a defense to those sued for infringing business method patents. See 35 U.S.C. §273(a)(3) above.

E. CAFC: Bilski

In 2008, the CAFC issued a decision (nine to three in 132 pages of concurring and dissenting opinions; Chief Judge Michel wrote the majority opinion) that interpreted the Supreme Court's Benson case and other Supreme Court cases to mean that a claimed process is patent-eligible under 35 U.S.C. §101 only if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In re Bilski, 545 F. 3d 943 (Fed. Cir. 2008). This so-called "machine-or-transformation" test was used to uphold the rejection of Bilski's patent application, which had previously been rejected by both the USPTO examiner and the USPTO Board of Patent Appeals and Interferences (BPAI). The CAFC Bilski majority specifically rejected the State Street "useful, concrete and tangible result" test in favor of the "machine-or-transformation" test.

In a concurring opinion, Judges Dyk and Linn reviewed the history of the 1793 Patent Act and the 1952 Patent Act to support the conclusion that Bilski's claim did not recite patentable subject matter.

In a (scathing and well-reasoned) dissenting opinion, Judge Newman wrote that:

• the Bilski patent application had never been properly examined under non-§101 criteria (including the requirements of novelly, non-obviousness, utility, and Section 112);
• the Patent Act places no restrictions on the terms "process, art, or method;"
• the majority's decision conflicts with the Supreme Court's §101 trilogy and CAFC precedent;
• the majority's citations of Supreme Court cases are dicta or taken out of context (what Newman called "the strained new reading of Supreme Court quotations");
• the majority and concurrence use undefined and vague terms (including "business method" and "organizing human activity"); and
• the court's decision "usurps the legislative role."

In a dissenting opinion, Judge Mayer wrote that State Street should be overturned because business method patents do not promote the "useful arts" (citing the Constitution).

In a dissenting opinion, Judge Rader wrote that the Bilski patent should have been rejected as being an "abstract idea" (citing the Supreme Court's §101 trilogy).

For those of you scoring at home, in 2008, we had:

2008 Patentable Subject Matter (35 U.S.C. §101)	2008 Non-Patentable Subject Matter (Exceptions Created By The Supreme Court)
process, art, or method that passes the machine-or-transformation test (Bilski) machine manufacture composition of matter an abstract idea that (1) produces a useful, concrete, and tangible result, (2) is applied in a useful way, or (3) is reduced to a practical application (State Street)	laws of nature natural/physical phenomena abstract ideas

Bilski appealed to the Supreme Court.

V. The Supreme Court Bilski Case

The CAFC Bilski decision was appealed, and the Supreme Court agreed to hear the case. There were 78 amicus curiae ("friend of the court") briefs (dated 01/28/09 – 10/02/09) filed with the court for the two questions presented:

"[1. ] Whether the Federal Circuit erred by holding that a 'process' must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ('machine-or-transformation' test), to be eligible for patenting under 35 U.S.C. §101, despite this Court's precedent declining to limit the broad statutory grant of patent eligibility for 'any' new and useful process beyond excluding patents for 'laws of nature, [natural/]physical phenomena, and abstract ideas.'

[2. ] Whether the Federal Circuit's 'machine-or-transformation' test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect 'method[s] of doing or conducting business.' 35 U.S.C. §273."

On 06/28/10, the Supreme Court ruled (in 71 pages of concurring and dissenting opinions), answering both of the questions above in the affirmative.

A. Kennedy's "Majority" Opinion

Justice Kennedy wrote the 16-page majority opinion, which was joined by Justices Roberts, Thomas, Alito, and Scalia (except that Justice Scalia did not join parts II-B-2 and II-C-2).

Justices Stevens, Ginsburg, Breyer, and Sotomayor wrote a 47-page concurring opinion.

Justice Breyer and Scalia wrote a 4-page concurring opinion.

So that's 4.5 justices for the Kennedy "majority," 3.5 for the Stevens concurrence, and 1.0 for the Breyer concurrence (since Bryer joined the Stevens concurrence and Scalia joined the Kennedy opinion in part). Hurray for clarity.

Kennedy's opinion starts by framing the question oddly as "whether a patent can be issued for a claimed invention designed for the business world." It seems to me that this it a simple question to answer: yes. He continues by omitting the preamble from the cited Claim 1, thus depriving the claim of its proper context. (Compare this to how Judge Rich cited the claim at issue in the State Street case.)

Kennedy then reviews the Supreme Court's §101 trilogy and concludes that the judicially created exceptions to 35 U.S.C. §101 are consistent with the notion that a patentable process must be "new and useful." While 35 U.S.C. §101 does include the words "new and useful," the concepts of "novelty" and "usefulness" are defined elsewhere in the Patent Act, namely 35 U.S.C §102 (novelty) and 35 U.S.C. §112 (utility). A well-reasoned §101 determination should not be made based on terms primarily defined elsewhere in the Patent Act.

In Section II-B-1, Kennedy tries to explain the Court's unwillingness to create new judicially-created exceptions to patently subject matter despite the fact that its trilogy of §101 cases created three such exceptions (namely, laws of nature, natural/physical phenomena, and abstract ideas). This is a big hurdle to overcome. Respondent (Kappos) and various amicus brief writers would have the Supreme Court carve out new exceptions for software patents, business method patents, or both. Kennendy's response? "This court has not indicated that the existence of these well-established exceptions gives the Judiciary the carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design."

I have a better idea. Throw out all of the judicially-created §101 exceptions. Because §101 is, and always has been, a red herring. I have not yet met a patent claim for a law if nature, a natural/physical phenomenon, or an abstract idea that would pass scrutiny under the Patent Act's requirements of novelty, utility, and non-obviousness. Gravity? Not new. E = mc²? Not new. Bilski's hedging? Obvious. And so on.

Kennedy then states that "[t]he machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible 'process.'" In other words, if a claimed invention passes the machine-or-transformation test, then it is patent-eligible under §101, but if it fails the machine-or-transformation test, then that is not the end of the §101 inquiry.

Kennedy discusses software patents in Section II-B-2, which is not joined by Scalia. With only four justices concurring on this section, the court's musings on software patents are, effectively, dicta. Kennedy states that "the machine-or-transformation test would create uncertainly as to the patentability of software…" and that "the Court today is not commenting on the patentability of any particular invention, let alone holding that any … technologies from the Information Age should or should not receive protection." In other words, a minority of the Justices are not saying that software is or is not patentable. This section concludes with what I like to call the "good luck to you all" clause: "[T]he patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles." Translation: patent law is challenging, but we the Court choose not to give y'all the guidance you are desperately seeking.

Kennedy's weakest argument appears in Section II-C-1, where he states that since Congress included the phrase "method of doing or conducting business" in 35 U.S.C. §273(a)(3), then "the statute itself acknowledges that there may be business method patents." But this simply ignores that 35 U.S.C. §273(a)(3) was enacted by Congress in response to the CAFC's controversial State Street decision in order to give business owners a we-invented-it-first defense if they were sued for infringing a business method patent. A repudiation of State Street by Congress is not an endorsement of business method patents. A better line of reasoning would have been to state that 35 U.S.C. §101 includes the word "method," that "business method" is poorly defined, and that §101 should be read broadly. (Besides, §101 is a red herring. And most so-called "business method" patent applications would fail the separate statutory requirements of novelty, utility, and non-obviousness. But I digress.)

Then, Kennedy either confuses §101 with §102, §103, and §112 or acknowledges that §101 is a red herring: "Finally, even if a particular business method fits into the statutory definition of a 'process,' that does not mean that the method should be granted. In order to receive patent protection, any claimed invention must be novel, §101, nonobvious, §103, and fully and particularly described, §112." So close to reason, yet so far.

In Section III, Kennedy concludes that Bilski's claimed invention is an "abstract idea" without providing any support for this conclusion. I don't know a single patent agent or attorney who was not taught to claim inventions with specifically defined language. Bilski's U.S. Patent Application Serial No. 08/833,892, claim 1, states:

"managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price," and consists of the following steps:

"(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumers;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions."

Which part of claim 1 is the "abstract idea" part? If Kennedy is hanging his hat on this peg, then he should have pointed this out. And if this claim is inadequate, then shouldn't that be addressed under §112 or other provisions of the Patent Act?

Kennedy's opinion concludes by punting §101 jurisprudence back to the CAFC: "In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text."

B. Stevens's Concurring Opinion

Stevens writes that it would have been wiser for the Court to hold that Bilski's claim was not patentable because "it describes only a general method of engaging in business transactions — and business methods are not patentable … 'process[es]' under §101."

Stevens relies heavily on Judges Dyk's concurring opinion in the CAFC's Bilski decision. But that decision, as pointed out by the (better reasoned) dissenting opinion of Judge Newman, presents a selective history of U.S. and English patent law that is both out of context and inapplicable (since the patent laws of the new United States were already diverging from English common law when the 1793 Patent Act was enacted).

In Section II, Stevens generously refers to the Court's opinion as "less than pellucid in more than one respect…" On this point, I agree. Stevens correctly points out that specificity objections should be raised under §112 and novelty under §102. In his most well-reasoned argument, he states: "The Court essentially asserts its conclusion that petitioner's application claims an abstract idea. This mode of analysis (or lack thereof) may have led to the correct outcome in this case, but it also means that the Court's musings on this issue stand for very little." In other words, assertion is a poor substitute for reasoned analysis. Unfortunately, in footnote 9, Stevens makes the same assersion-ain't-analysis mistake that he criticizes the majority for making when he states that "many processes that would make for absurd patents are not abstract ideas. Nor can the requirements of novelty, nonobviousness, and particular description pick up the slack." Really? Why not. I think that novelty, nonobviousness, and particular description can pick up the slack and that §101 is a red herring.

Stevens goes off on a tangent, criticizing imagined patents on "training a dog" (for example) while ignoring the fact that passing a §101 test is only one step towards getting a patent granted. The Court loses credibility when it criticizes any particular subject matter as "absurd" or "comical." One man's junk is another's fortune. And besides, novelty, nonobviousness, and particular description can pick up the slack.

Regarding the lack of a historical basis for business method patents, Steven cites a 1778 business method patent, which actually supports the opposite conclusion.

The strongest argument made by Stevens appears in Section V and counters the weakest argument made by Kennedy, namely that the 1999 enactment of the American Inventors Protection Act by Congress in response to the CAFC's State Street decision cannot logically be viewed as an endorsement of business method patents. This section is an example of strong reasoning:

If, tomorrow, Congress were to conclude that patents on business methods are so important that the special infringement defense in Sec. 273 ought to be abolished, and thus repealed that provision, this could paradoxically strengthen the case against such patents because there would no longer be a Sec. 273 that 'acknowledges … business method patents,' [citation omitted]. That is not a sound method of statutory interpretation.

In the so-close-but-so-far category, Stevens then writes: "Section 273 is a red herring; we should be focusing our attention on §101 itself." But §101 is also a red herring.

Stevens later asserts that "patents on methods of conducting business generally are composed largely or entirely of intangible steps." Really? I've never seen an issued patent claim containing a single intangible step.

C. Breyer's Concurring Opinion

Breyer agrees with Stevens that a "business method" is not a "method" under 35 U.S.C. §101. Bryer wrote separately to highlight the points on which the court "agrees" (since the other 67 pages of opinion do a poor job of this).

First, that §101 is not limited. My response: we already knew this from the judicially-created exceptions (laws of nature, natural/physical phenomena, abstract ideas).

Second, that "[t]transformation and reduction of an article to a different state or thing is the clue to the patentability of a process claim that does not include particular machines." Diamond v. Diehr, 450 U. S. 175, 184 (emphasis added; internal quotation marks omitted). My response: this "the clue" language must be put in context of the trilogy. The Supreme Court explicitly declined to "hold that no process patent could ever qualify if it did not meet [machine or transformation] requirements." Gottschalk v. Benson, 409 U.S. 63, 71. Flook took a similar approach, "assum[ing] that a valid process patent may issue even if it does not meet [the machine-or-transformation test]." 437 U.S., at 588, n. 9. (See Kennedy's majority opinion pp 7-8.)

Third, the machine-or-transformation test has never been the sole test for determining patentability. My response: agreed. There's also §102, §103, §112.

Fourth, "[t]o the extent that the Federal Circuit's decision in this case rejected [the State Street 'useful, concrete, and tangible result'] approach, nothing in today's decision should be taken of disapproving of that determination. Translation: In other words, we the Supreme Court were not asked to overrule State Street but would love to do so.

D. Summary: You may ask yourself, where does that highway lead to?

For those of you scoring at home, in 2010, we have:

2010 Patentable Subject Matter (35 U.S.C. §101)	2010 Non-Patentable Subject Matter (Exceptions Created By The Supreme Court)
(a) process, art, or method that passes the machine-or-transformation test (CAFC's Bilski) OR (b) process, art, or method that passes some other to-be-defined test (Supreme Court's Bilski) machine manufacture composition of matter	laws of nature natural/physical phenomena abstract ideas

In other words, 2010 looks a lot like 1982.

In short, the Supreme Court ruled in Bilski that the CAFC erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ('machine-or-transformation' test), to be eligible for patenting under 35 U.S.C. §101, because the Supreme Court's precedent has declined to limit the broad statutory grant of patent eligibility for any new and useful process beyond excluding patents for "laws of nature, natural/physical phenomena, and abstract ideas."

In so doing, the Supreme Court failed to define a new §101 test and failed to define key terms (including "abstract idea," "software patent," and "business method") upon which it bases its decision.

The worst part of Bilski is that no single decision is consistently well-reasoned. The judicial branch is the only branch which must explain its actions, and it derives its authority from and in proportion to its ability to do so. A weak decision like Bilski weakens the Court. The patent community waited nearly a year and a half for this decision yet did not get the certainly, reasoning, and guidance that it deserves. We waited for answers, we got nothing but questions.

As a practitioner, I do not now look to the 2010 Supreme Court for patent law guidance. I do not look to the CAFC. I look instead to the 1982 Supreme Court.

Paraphrasing William Shakespeare's Macbeth, Bilski is a tale full of sound and fury, signifying nothing.

Besides, §101 is a red herring.

Erik J. Heels writes about technology, law, baseball, and rock 'n' roll. He is @ErikJHeels on Twitter and is a mere mortal.

Appendix A – Related Patent Commentary by Erik J. Heels

1. Stop Wasting Money On Patents
   Patent Law Is Broken
2. LawLawLaw 2009-01-29
   Apple vs. Google, Bilski, Recession Ending?
3. LawLawLaw 2009-10-17
   Technology, Law, Baseball, Rock 'n' Roll, Etc.
4. LawLawLaw 2008-11-24
   Technology, Law, Baseball, Rock 'n' Roll, Etc.
5. Reinventing Patent Law
   Death, taxes, and uncertain patent laws.
6. Patent Reform Turns Patent Attorneys Into Patent Pending Attorneys
   Expect to pay more for, wait longer for, and get less from your patent application.
7. Drawing That Explains Patent Laws
   From Chief Justice to the patent examiner.
8. Easy To Infringe
   Draft to the rule, don't draft to the exception.
9. How To Get And Defend A Patent Without Going Broke
   It is possible for independent inventors and small businesses to acquire patents and protect their ideas without going broke in the process.
10. Software Patents: Good Or Evil? (Part 1)
    From the fourth annual Law and Technology Conference at the Technology Law Center of the University of Maine School of Law.
11. Patents vs. Trade Secrets
    The advantages and disadvantages of protecting business ideas with patents and trade secrets.

Appendix B – Third-Party Commentary On Bilski

1. Supreme Court Rules Narrowly In Bilski; Business Method & Software Patents Survive from Techdirt by Mike Masnick
2. Second Thoughts On Bilski: Could Another Case Get A Direct Ruling On Business Method Patentability? from Techdirt by Mike Masnick
3. Supreme Court: Software is Patentable… Sometimes from ReadWriteWeb by Mike Melanson
4. Bilski v. Kappos from Patently-O by Dennis Crouch
5. Bilski v. Kappos and the Anti-State-Street-Majority from Patently-O by Dennis Crouch
6. The Supreme Court Punts On Business Method Patents from TechCrunch by Erick Schonfeld
7. Supreme Court Ruling Leaves Future of Software Patents in Limbo from Mashable! by Christina Warren
8. Guest Post: Why Bilski Benefits Startup Companies from Patently-O by Ted Sichelman
9. Guest Post on Bilski: Throwing Back the Gauntlet from Patently-O Shubha Ghosh
10. Bilski v. Kappos: The Supreme Court Declines to Prohibit Business Method Patents from EFF.org Updates by Michael Barclay
11. It's Time To Get Rid Of Business Method Patents from Silicon Alley Insider by Fred Wilson
12. Bummed Out About Bilski from Feld Thoughts by Brad Feld
13. Sawyer on Why Bilski Really Means That Software Companies Should Leave the US from Feld Thoughts by Brad Feld

Appendix C – Patent Law Chronology

Except where stated otherwise, the text below is excerpted from the USPTO's 10/16/05 and 11/22/05 subject matter patentability (35 U.S.C. §101) guidelines.

1. 1952 Patent Act (Congress).

————————————————————

"Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. §101.

"The term 'process' means process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." 35 U.S.C. §100(b).

2. 1972, Benson (US Supreme Court) ("§101 Trilogy" 1 of 3). Laws of Nature, natural/physical phenomena, and Abstract Ideas Fail §101.

————————————————————

One may not patent every "substantial practical application" of an idea, law of nature or natural/physical phenomena because such a patent "in practical effect be a patent on the [idea, law of nature or natural/physical phenomena] itself." Gottschalk v. Benson, 409 U.S. 63, 71-72, 175 USPQ 673, 676 (1972) (finding a machine-implemented method of converting binary-coded decimal numbers into pure binary numbers unpatentable).

Thus, a claim that recites a computer that solely calculates a mathematical formula (see Benson), a computer disk that solely stores a mathematical formula, or a electromagnetic carrier signal that carries solely a mathematical formula is not statutory.

3. 1978, Flook (US Supreme Court) ("§101 Trilogy" 2 of 3).

————————————————————

Parker v. Flook, 437 U.S. 584, 589, 198 USPQ 193, 197 (1978).

4. 1980, Chakrabarty (US Supreme Court).

————————————————————

Thus, "a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter" under Section 101. Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980), 206 USPQ at 197.

5. 1981, Diehr (US Supreme Court) ("§101 Trilogy" 3 of 3).

————————————————————

"In determining the eligibility of respondents' claimed process for patent protection under §101, their claims must be considered as a whole. It is inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis. This is particularly true in a process claim because a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made." Diamond v. Diehr, 450 U.S. 175, 188-89, 209 USPQ 1, 9 (1981).

"It is now commonplace that an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection." Diehr, 450 U.S. at 187, 209 USPQ at 8 (emphasis in original).

"While a scientific truth, or the mathematical expression of it, is not a patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be." Diehr, 450 U.S. at 188, 209 USPQ at 8-9 (quoting Mackay, 306 U.S. at 94).

6. 1982, CAFC Formed.

————————————————————

http://en.wikipedia.org/wiki/United_States_Court_of_Appeals_for_the_Federal_Circuit

7. 1994, Alappat (CAFC).

————————————————————

Two en banc decisions of the Federal Circuit have made clear that the USPTO is to interpret means plus function language according to 35 U.S.C. §112, sixth paragraph. In re Donaldson, 16 F.3d 1189, 1193, 29 USPQ2d 1845, 1848 (Fed. Cir. 1994) (in banc); In re Alappat, 33 F.3d 1526, 1540, 31 USPQ2d 1545, 1554 (Fed. Cir. 1994) (in banc).

The plain and unambiguous meaning of section 101 is that any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may be patented if it meets the requirements for patentability set forth in Title 35, such as those found in sections 102, 103, and 112. The use of the expansive term "any" in section 101 represents Congress's intent not to place any restrictions on the subject matter for which a patent may be obtained beyond those specifically recited in section 101 and the other parts of Title 35…. Thus, it is improper to read into section 101 limitations as to the subject matter that may be patented where the legislative history does not indicate that Congress clearly intended such limitations. Alappat, 33 F.3d at 1542, 31 USPQ2d at 1556.

8. 1998, State Street (CAFC) – Useful, Concrete, and Tangible Result.

————————————————————

The Court of Appeals for the Federal Circuit issued opinions in State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F. 3d 1368, 47 USPQ2d 1596 (Fed. Cir. 1998) and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352, 50 USPQ2d 1447 (Fed. Cir. 1999). These decisions explained that, to be eligible for patent protection, the claimed invention as a whole must accomplish a practical application. That is, it must produce a "useful, concrete and tangible result." State Street, 149 F.3d at 1373-74, 47 USPQ2d at 160102.

9. 2010, Bilski (US Supreme Court).

————————————————————

Decided 06/28/10.

Patent Law Is Broken

Attention People of Earth:

Patent law is currently broken. Especially software patent law. A pending Supreme Court case (Google Bilski for more info) may fix it or make further break it. In short, you can expect to pay more for, wait longer for, and get less from your patents than you would have 5 or 10 years ago.

• Cost – At my IP law firm, the average cost to file a patent is $11.5K. This represents about half of the overall cost of getting a patent. File it for $11.5K, finish it up in a few years for another $11.5K, total cost $23K. (There is a large standard deviation. Two thirds of our patents are filed for between $7K and $17K, so you are unlikely to pay less than $14K or more than $34K.)
• Time – Your patent will be pending for years, 5-6 years for software patents. Your patent will likely be pending before you need to make the decisions about filing foreign patents. In most cases, your patent will be pending long after the product (that is the subject of the patent) has reached the end of its lifetime in the marketplace. In some cases, the patent will be pending long after the company (that owns the patent rights) has been sold or has gone out of business.
• Rights – Less than 50% of filed patents will issue, so your chances of getting a patent, starting out, are less than getting heads in a coin flip. If your patent is a combination of previously existing elements, then the chances are closer to five percent that a patent will issue (Google KSR for more info). Is your invention above average? Are you an above average driver? Note that 80% of people surveyed answer "yes" to the second question, but 37.5% of them are wrong.

In most cases, filing a patent application is a waste of time and energy. Especially for startups. Your money and time would be better spent hiring programmers, marketers, and a sales force.

If you must spend your IP budget on something, then do this:

• Trademarks – Trademarks last as long as they are used. Search the USPTO's trademark database to see which of your trademarks (company names, products, services, taglines, slogans) need to be registered. Then register them.
• Domain Names – Domains last forever (as long as you pay the trivial annual renewal fee). Use the DomainTools domain typo search tool to see which of your domain names have been registered by cybersquatters. If you haven't registered all of your trademarks (and all common misspellings thereof) as domain names, then do it now. Then regain control of the domains that are currently out of your control (via UDRP or otherwise).
• Usernames – Usernames, on social networking sites (such as LinkedIn, Facebook, and Twitter) and the like, last as long as those companies last. Or until the companies are acquired by a clueless monopoly. If your brands have been Twittersquatted, then try to get them back. Use claim.io, namechk.com, and/or usernamez.com to search for the availability of your username on multiple social networks.

If you've read all of this and still want to proceed with patents, then go for it. Clock Tower Law Group is not the right law firm for every company, but it is the right firm for companies who appreciate that we tell it like it is.

Erik J. Heels writes about technology, law, baseball, and rock 'n' roll. He is @ErikJHeels on Twitter, where he tells it like it is.

Related Posts

• How To Register A Trademark: Part 3: Trademark Filing
  File your trademark application with TEAS.
• How To Register A Trademark: Part 2: Trademark Search
  Search trademarks to rule out likelihood of confusion.
• How To Register A Trademark: Part 1: Choosing A Good Name
  A trademark is to your business as a foundation is to your house.
• How To Twittersquat The Top 100 Brands
  A call for the creation of the Uniform Username Dispute Resolution Policy.
• Domain Name Law
  White hat domainers are not black hat cybersquatters.
• Patent Reform Turns Patent Attorneys Into Patent Pending Attorneys
  Expect to pay more for, wait longer for, and get less from your patent application.
• Drawing That Explains Patent Costs
  How to control the cost of filing a patent.
• How To Get And Defend A Patent Without Going Broke
  It is possible for independent inventors and small businesses to acquire patents and protect their ideas without going broke in the process.
• Just Say Moo – How To Name And Brand Your Product To Make It Stand Out From The Crowd
  Good branding can separate your cow from the other cattle.
• How To Name Your Company, Trademark Your Domain Name, And Domain Name Your Trademark
  Think there are no cool domain names left? Think again. I found 201 cool domain names that are taken but six (count 'em, six) that are not. Some of them from a box of crayons. Plus strategies for protecting your trademarks, domain names, and company name.
• Patents vs. Trade Secrets
  The advantages and disadvantages of protecting business ideas with patents and trade secrets.
• Top 10 Things Every Business Should Know About Intellectual Property
  The law governing intellectual property is a complex web of state law, federal law, Constitutional law, statutory law, and case law. And in the age of the World Wide Web, it is increasingly important for businesses of all sizes to acquire, protect, and avoid infringing others' intellectual property assets.

Apple vs. Google, Bilski, Recession Ending?

Greetings,

Welcome to the latest installment of my LawLawLaw newsletter.  2010 is the 10th year of the newsletter, and for this issue, I'm going retro: plain text, no graphics.  I'm also using MailChimp for delivery.

Why the name LawLawLaw?  Originally, LawLawLaw mapped nicely onto intellectual property law's three areas: patent law, trademark law, and copyright law.  Plus I owned the lawlawlaw.com domain name, so it was an easy choice!

Over the years, LawLawLaw has morphed into my observations on trends in technology, IP law (trademarks, domain names, and patents), baseball (long story), and rock 'n' roll (longer story).  I summarize stories from other sites and provide links.  I'm good at spotting trends, connecting people on social networks, and a handful of other things.

I try to keep LawLawLaw short, relevant, and timely.  It is published about quarterly.  Feel free to forward this to anyone else who might be interested.  Thanks!

Regards,
Erik
–
Clock Tower Law Group [trademarks | domain names | patents]
2 Clock Tower Place, Suite 255, Maynard, MA 01754-2545
website: http://ClockTowerLaw.com
email: info@clocktowerlaw.com
phone: 978-823-0008
fax: 978-246-0256

—snip—

=================================================================
LawLawLaw                                              2010-01-29
Technology, Law, Baseball, Rock 'n' Roll, Etc.
=================================================================
http://LawLawLaw.com is a periodic publication of Clock Tower Law
Group.  The opinions in LawLawLaw do not necessarily reflect the
opinions of Clock Tower Law Group, its employees, or the author.
Feel free to forward this to any colleague who might enjoy this
newsletter.  Please direct content or subscription questions to
info@clocktowerlaw.com.  Thanks!
=================================================================

— TECHNOLOGY STUFF ——————————————–

Google launched at least three new products: court opinions on Google Scholar, tracking ordinary websites in Google Reader, and Google Public DNS.  I prefer to rely on Google for those products that I pay for, such as Google Apps for business (which we use at my firm).  I love Google Reader, but I'd feel better if I could pay for it, if there were a quid pro quo, and if there were a corresponding support phone number where I could reach humans.  Google doesn't have the best reputation for customer support, especially for free products.

* Google Scholar Adds Lots Of US Caselaw
http://googleblog.blogspot.com/2009/11/finding-laws-that-govern-us.html

* Google Reader Tracks Feedless Websites
http://lifehacker.com/5456657/google-reader-gets-smart-tracks-updates-on-feedless-web-sites

* Google Launches Public DNS (8.8.8.8, 8.8.4.4)
http://gizmodo.com/5418210/google-continues-eating-the-internet-with-google-public-dns

Apple, on the other hand, has a great reputation for customer support.  They launched the iPad and corresponding iBooks store this week.  Perhaps you heard about it.  I think the latter may be more significant than the former, as Apple breathes life into one segment of old media.

* Macro Chart Of Product Offerings From Google, Microsoft, Apple, And Yahoo
http://gizmodo.com/5455267/empire-building-visualizing-google-microsoft-apple-and-yahoo

Speaking of old media, Rupert Murdoch continues to be the poster child for Not Getting It as he tries to block Google and hide News Corp's content behind a paywall.  Yeah, that'll work.  And The New York Times has also boarded the failboat.  See you online – not!

* Murdoch: Take Your Google Ball And Go Home
http://mashable.com/2009/11/24/murdoch/

* The New York Times Planning To Commit Suicide With Paywall
http://techdirt.com/articles/20100117/2309157783.shtml

— LAW STUFF —————————————————

Dan Wallach's article on software in dangerous places reminded me of a 2002 MIT Technology Review article on why software is so bad.  Manufacturers of software products, unlike manufacturers of other products, have long been given a Mulligan on product liability.  Why is this so?  Should it be so?  I don't belive it will always be so.  As some point, non-negotiated shrinkwrap and clickwrap "licenses" will be a thing of the past and softawre makers won't be able to dislciam all liability just because their EULAs claim to do so.  Calling a dog a cat doesn't make the dog meow.

* Software In Dangerous Places
http://www.freedom-to-tinker.com/blog/dwallach/software-dangerous-places

* Why Is Software So Bad?
http://erikjheels.com/?p=423

On 11/09/09, the US Supreme Court heard oral arguments in the Bilski case.  Bilski involves business method patents and the court's (still pending) ruling has the potential to bring massive change to patent law, including business method patents and software patents.  Not all companies rely on intellectual property.  Your company should be planning for the end of software patents.  It should also be planning for the expansion of software patents.  The ruling could go either way.

* Abandoning Software Patents?
http://www.patentlyo.com/patent/2009/11/abandoning-software-patents.html

* Google Doesn't Rely On Intellectual Property
http://techdirt.com/articles/20091110/0843176877.shtml

— BASEBALL STUFF ———————————————-

The 2009 season was one to forget.  Some team from someplace won the World Series.  The good news is that pitchers and catchers report in 17 days!  Plus, the end of Bug Selig is in sight.

* Bud Selig To Step Down As MLB Commissioner In 2012
http://sports.espn.go.com/mlb/news/story?id=4695595

* Martha Coakley Calls Schilling a Yankees Fan
http://www.survivinggrady.com/2010/01/martha-coakley-thinks-curt-schilling-is.html

— MUSIC STUFF ————————————————-

Rolling Stone continues to squander one of its biggest assets: five-star reviews.  Here are the latest:

* Rolling Stone Announces More Five-Star Rated Albums And All I Got Was This Lousy Feed
http://erikjheels.com/?p=1173 (main article)
http://erikjheels.com/?p=1173&cpage=1#comment-369177 (latest five-star reviews)

Yes, all music is the same 12 notes (at least in most Western music).  And all blog posts are the same 26 letters (at least in English).

* All Music Is The Same Four Chords
http://www.buzzfeed.com/lindseyweber/all-music-is-the-same-four-chords-ru/

* Or Perhaps The Five Chords Of Pachelbel's Canon in D
http://techdirt.com/articles/20090118/1543483450.shtml

— RANDOM STUFF ————————————————

I remain cautiously optimistic about the economy.  I believe that the rate of new startups is a leading indicator of the health of the economy.  The trends for the last several months are encouraging:

* 900 #Startups Formed In Massachusetts In 12/2009
http://erikjheels.com/?p=2010

Other stuff for your reading and viewing pleasure:

* First Video Taken From A plane, Wilbur Wright, 1909
http://kottke.org/09/10/first-video-from-a-plane-1909

* The 2000s Decade (Whatever It's Called) In Review
http://kottke.org/09/11/from-wassap-to-obama-a-decade-in-review

* Dilbert Comic 2009-11-17
Dogbert the CEO.
Dogbert: We're going into the Internet news business.
Dilbert: We're hiring reporters?
Dogbert: No, we'll summarize stories from other sites and provide links.
Dilbert: So… we'll be parasites?
Dogbert: Go buy a vinyl record, grandpa.
http://dilbert.com/strips/comic/2009-11-17/

END

Technology, Law, Baseball, Rock 'n' Roll, Etc.

The opinions expressed in LawLawLaw do not necessarily reflect the opinions of Clock Tower Law Group, its employees, or the author. All your base are belong to us.

Doing Our Part To Fight The Recession: Clock Tower Law Group's $45K Stimulus Program

We added 30 new clients during our seven-month FreeTrademarksForStartups.com promotion, which was a $1500 credit for the filing of a trademark application. We were glad to be able to help startups such as http://NewEnglandBreeze.com, http://Rail-Pod.com, and http://Costumezee.com. And even though new companies continue to be formed at a slower rate than last year, we are optimistic about the future!

Software Patents: Not Dead Yet?

This fall, the US Supreme Court will have its say on software patents in the Bilski case. Will the Supremes say definitively that software cannot be patented? That it can? If past rulings are a guide, then we'll get something in-between, further muddying the legal waters. Software companies considering patents might want to consider (1) protecting their ideas with trade secrets, (2) following Google's lead and filing design patents, or (3) filing provisional patent applications to get an "extra" year of patent-pending protection while the law settles down. Stay tuned.

Protecting Your Brands In The Age Of Social Media

Got a registered trademark and its dot-com domain name? Good start. Today, smart companies are also protecting their brands on rapidly growing social networking sites. Twitter finally issued a Twittersquatting policy, and Facebook jumped on the vanity URL bandwagon. It costs 20 times more to fix problems like Twittersquatting than it does to prevent them. So an ounce of prevention really IS worth a pound of cure. Here's my prevention prescription: learn how to read blogs with Google Reader, read up on Twitter, register your typo domain names, and pick brands that are easy to comprehend when read over the phone.

But Daddy, It's Soxtober!

So said my 11-year-old daughter when the Red Sox were swept by the Angels in the ALDS. "Believe it or not," I replied, "the Red Sox don't win the World Series every year." So to get you through the offseason, here's some interesting reading on baseball patents and why curveballs confuse batters. Just wait 'til next year!

Client News

Congratulations to Kayak for winning a Webby Award for Travel Site of the Year. And congrats to BzzAgent for launching BzzScapes, user-generated brand communities. See? Your brands are everywhere!

Just For Fun

Thing 1: I have nothing to say.
Thing 2: You should blog about it.

Erik's Life In Links: Boston, Maine, MIT, Rautaruukki (in Finland), BBN, Air Force, Cayman Systems, "The Legal List" (and my 15 minutes in Wired and The New York Times), Maine Law, FPLC IPSI, LCP, Heels.com, ALM, "nothing.but.net," Inherent.Com, RedStreet, Colorado, Verio, Acton, Clock Tower Law Group, MCats (rockin' on for our kids).

Today, we’re tweeting with @erikjheels: lawyer, electrical engineer, columnist, Red Sox fan, former Air Force Captain and more.

By Lance Godard

First published 5/14/2009; 22tweets.com; 22 Tweets

Erik J. Heels.

Trademark, domain name, patent lawyer and more.

Founder, Clock Tower Law Group.

Avid blogger.

MIT Engineer.

Today, we're tweeting with @erikjheels: lawyer, electrical engineer, columnist, Red Sox fan, former Air Force Captain and more .

1. @Erikjheels, thank you for joining us today on 22 Tweets. Tell us: who is @Erikjheels?
   

   Trademark, domain name, and patent lawyer; MIT '88. Red Sox fan, music lover, author. See http://ErikJHeels.com for details.

2. Tell us about your law practice.
   

   @ClockTowerLaw helps startups acquire and defend US and foreign trademarks, domain names, and patents. This is our 9th year.

3. What type of startups do you represent?
   

   @ClockTowerLaw's clients are mostly high-tech startups, and 3 clients have been acquired by public companies, which is nice.

4. What is the single most important legal issue affecting your clients?
   

   #Twittersquatting, the equivalent of cybersquatting. Trademarks are being hijacked on Twitter and other social networks.

5. What do you tell every new client before you start working for them?
   

   There are good and bad lawyers at big and small law firms. We like to think we're good lawyers at a small law firm.

6. Your track record supports that statement…. What was the most significant client representation you've had?
   

   All clients are significant. But http://RightMedia.com was acquired by @Yahoo, http://Inceptor.com by http://Verizon.com.

7. Agreed. Why do your clients hire you?
   

   Because we understand how IP works in the real world. We understand entrepreneurs because we've started our own companies.

8. Hard to argue w/ that! How are you and your firm responding to financial difficulties your clients may be experiencing?

   Our established clients are doing fine in this recession. For new clients, we offer http://FreeTrademarksForStartups.com.

9. How did your life as an engineer prepare you to help clients as a patent / trademark attorney?
   

   Like other @MIT_alumni, I learned how to break complex problems into smaller solvable ones. IP law is a lot like engineering.

10. That's an interesting perspective. What led you to found your own law firm, @ClockTowerLaw, in 2001?
    

    I was fortunate to be able to ride out Web 1.0. When that wave crashed (or bubble burst), I decided to be a full time lawyer.

11. Your resume reads like an adventure novel. What's the next big adventure you're planning?
    

    Most technology that is foisted on lawyers sucks. I'm going to spin out a software project or two to try to fix that.

12. Look forward to hearing more about that. How do you market your practice?
    

    I believe in a balanced marketing portfolio. A little bit of everything. Twitter is hot now, but it's not the be-all end-all.

13. How much time do you spend each day developing / enhancing your brand?
    

    I get up at 5:30am each day to do stuff like this Twitter interview. Probably an hour per day before I get to the office.

14. Time well spent…. You've been blogging since 1987 (not a typo) at http://bit.ly/oNAlP. What keeps you going?
    

    I do add legacy stuff to my blog, hence the 1966-present copyright notice. I enjoy writing, so blogging is a good fit for me.

15. You're clearly actively engaged in social media. Who should read your blog / follow your tweets / subscribe to your feed?

    I don't really care who reads my blog or tweets. I write for my own edification. If others benefit from it, that's gravy.

16. Beyond general branding, what's been the impact of your social media activities on your law practice?
    

    Since launching http://FreeTrademarksForStartups.com via Twitter in 11/2008, we've been adding one new client per week.

17. Wow. That is impressive. Let's switch gears: what is the most significant issue currently facing the legal profession?

    Learning to speak Plain English. The @creativecommons copyright licenses are a good example of anti-legalese legal writing.

18. What will the legal landscape look like in 10 years?
    

    Smaller firms in the AmLaw 100. More focus on international issues such as PCT for patents, Madrid Protocol for trademarks.

19. What would you do if you weren't a lawyer?
    

    I'd teach startups to grow by using balanced marketing portfolios. In my spare time, I'd be rocking with http://MCatsBand.org.

20. Looks like you're doing some of that already! How do you want to be remembered?
    

    @ErikJHeels was a good friend.

21. Other than rockin' with the MCats band, what do you do when you're not working?
    

    Hacking with computers, writing, baseball, and seeking the perfect Hammond B-3 sound on my keyboard.

22. Last question for you: what advice do you have for people going to law school today?
    

    Be yourself. That's what my mentor (Tom Bohan of http://mtcforensics.com) told me. Be yourself, and you'll be fine.

That's great advice. Thank you very much for answering our questions today; this was a great twitterview.

This is a transcript of an interview of @ErikJHeels by @22twts that took place on Twitter on 05/14/09. Reprinted by permission of both parties. Erik J. Heels is not a new media guru. Neither are you. On Twitter he is @ErikJHeels.

Related Posts

• Stay Connected Episode II
  My latest TV appearance.
• 25 Random Things About @ErikJHeels
  25 random things about me.
• My Social Networks
  Social networking sites come and go. Here are the ones where I'm currently active.
• Drawing That Explains Social Networking
  How to visualize social networking.
• My Google Resume
  There's more about your on Google then you'll find on www.google.com.
• Erik Heels Email
  Email addresses for Erik J. Heels.

My latest TV appearance.

I recently did a public access cable TV show about starting a company during a recession. It's a rate opportunity to see me in a suit. If you're reading this in a feed reader, then you may need to click through to the website to see the video:

Here's what I talk about and when:

• 06:03 – startups in a recession
• 90:08 – choosing a name and domain name for your startup
• 12:05 – how to choose a good domain name
• 16:45 – patents vs. trade secrets
• 21:24 – how many domain names to register

And here are the details from the producer:

Produced in March of 2009 By Thomas J. Dyer in Partnership with the Middlesex West Chamber of Commerce.

This show is about Starting a Business or Buying a Business.

The guests are Erik Heels of Clock Tower Law Group, Harry Mink of Alpha Business Solutions and Kerri Salls of Breakthrough Enterprise. They offer some sound advice on starting a business or if you would like to purchase a business.

The show is hosted by Thomas J. Dyer a Financial Planner with Integrated Financial Partners. His office is in Acton, MA. For more info on the show you can reach him at tjdyer@aol.com.

The show is Co-hosted by Ceri Ruenheck. Ceri is the President of It's Your Call, a business marketing firm in Harvard, MA. She can be contacted through her web site at www.itsyourcall.com.

File your trademark application with TEAS.

This is part three in an ongoing series about why and how to register your trademarks. Erik J. Heels is both the founder of domain name, trademark, and patent law firm Clock Tower Law Group and the owner of many trademarks and domain names.

1. Where To Start

To file a US trademark application, go to the TEAS (Trademark Electronic Application System) page and click the File NEW Application link. You will be presented with a dizzying array of choices (nice web design, USPTO), including:

1. Trademark/Servicemark Application, Principal Register
2. Trademark/Servicemark BLANK Application, Principal Register
3. Trademark/Servicemark Application, Supplemental Register
4. Certification Mark Application, Principal Register
5. Collective Membership Mark Application, Principal Register
6. Collective Trademark/Servicemark Application, Principal Register
7. Transformation into a National Application

In 99% of the cases, you'll want to choose the first option: applying for a new trademark in the Principal Register.

2. TEAS or TEAS Plus?

Next, you have to choose between the TEAS Plus Form (which costs less) and the TEAS form. TEAS Plus is, in general, a trap for the unwary and is rarely the right choice. With TEAS Plus your listing of goods/service (the stuff that you want to trademark) must come from the USPTO Acceptable Identification of Goods and Services Manual. If you choose a goods/services description that is too broad, then you run the risk of getting a likelihood-of-confusion rejection from the USPTO. Or worse, you run the risk of having a third party oppose your mark.

In addition, choosing TEAS Plus can delay your trademark from registering in certain situations. For example, you may want to narrow your goods/services listing after your trademark has been approved but before it has issued (for example, in response to a consent agreement entered into with a third-party and designed to mitigate confusion between your trademark and the third party's trademark). Since you "saved" money by filing the TEAS Plus application (which limits what you can include in your goods/services listing), you now have to make a supplemental filing and pay an additional fee (the difference between the fees for TEAS and TEAS Plus). More filings, more time. If the application were TEAS application, you might be able to resolve the issue by calling the examiner and having him/her issue an Examiner's Amendment.

Bottom line: don't choose TEAS Plus. Choose TEAS.

3. Applicant Information

After a few more clicks, you'll be ready to actually enter information into the TEAS form. Here's what the first form looks like:

Fields marked with a red asterisk are mandatory.

For the Owner of Mark section, use the company name as it appears in the Secretary of State's corporations database for the state in which the company is organized. In this case, the owner of the RedStreet trademark is GiantPeople LLC (no comma). Commas are generally not required in company names and should be avoided (IMHO) for the inevitable confusion they will cause. So when you incorporate, do so as "Example Inc." not "Example, Inc." For corporations and LLCs, include the state of organization. For most other entity types, include the names and citizenships for all owners. Forgetting to include citizenship information is a common mistake.

The other sections are mostly self-explanatory. Use the USPS-approved abbreviation for your street address (e.g. "St." for "Street") and don't put dots in your phone number (it's not an IP address).

4. Mark Information

This section is relatively straightforward. You have to choose (1) what type of trademark you're filing and (2) whether or not you need to make any additional statement.

I'll translate the USPTO's legalese into English. The vast majority of trademarks fall into one of two categories: words only, which the USPTO calls "Standard Characters," or logos, which the USPTO calls "Special Form (Stylized and/or Design)." In this case, the RedStreet trademark is a word mark ("Standard Characters"). Older trademark attorneys use ALL CAPS for trademarks because that's how trademarks used to be filed. But since there is a world of difference between PenIsland (pen store) and PenisLand (something else), I prefer to present the trademarks how they are used: same use of spaces, same use of case.

For the additional statement section, simply check the appropriate statement(s) and fill in the requested info. Don't worry if you don't know what to include. If you omit something that you should have included, then the USPTO will initially reject your trademark application (by issuing an "office action") and will give you six months (in most cases) to fix the problem. If your problem can't be remedied by an office action response, then you can always refile your trademark application. Of course, you will lose the original filing date and will have to pay another filing fee when you refile.

The additional statement options are as follows (fill in the BLANKs):

1. DISCLAIMER: "No claim is made to the exclusive right to use BLANK apart from the mark as shown."
2. PRIOR REGISTRATION(S): " The applicant claims ownership of U.S. Registration Number(s) BLANK, BLANK, BLANK." (Required if warranted by facts of application.) NOTE: Entry must not include any commas, and must be 7 numerals long (if necessary, add leading 0's to number, e.g., 0086417).
3. TRANSLATION: (Required if warranted by facts of application.) "The English translation of in the mark is BLANK." OR: "The wording BLANK has no meaning in a foreign language."
4. TRANSLITERATION: (Required if warranted by facts of application. NOTE: Not required for any standard character marks.) "The non-Latin characters in the mark transliterate to BLANK and this means BLANK in English." OR: "The non-Latin characters in the mark transliterate to BLANK and this has no meaning in a foreign language."
5. SIGNIFICANCE OF WORDING, LETTER(S), OR NUMERAL(S): "BLANK appearing in the mark means or signifies in the relevant trade or industry or as applied to the goods/services listed in the application." OR: "The non-Latin characters in the mark transliterate to BLANK and this has no meaning in a foreign language."
6. §2(f), based on Use: "The mark has become distinctive of the goods/services through the applicant's substantially exclusive and continuous use in commerce for at least the five years immediately before the date of this statement."
7. §2(f), based on Prior Registration(s): "The mark has become distinctive of the goods/services as evidenced by the ownership on the Principal Register for the same mark for related goods or services of U.S. Registration No(s). BLANK."
8. §2(f), based on Evidence: "The mark has become distinctive of the goods/services, as demonstrated by the attached evidence."
9. §2(f), IN PART, based on Use: "BLANK has become distinctive of the goods/services through the applicant's substantially exclusive and continuous use in commerce for at least the five years immediately before the date of this statement."
10. §2(f), IN PART, based on Prior Registration(s): "BLANK has become distinctive of the goods/services as evidenced by the ownership on the Principal Register for the same mark for related goods or services of U.S. Registration No(s). BLANK."
11. §2(f), IN PART, based on Evidence: " has become distinctive of the goods/services, as demonstrated by the attached evidence."
12. NAME(S), PORTRAIT(S), SIGNATURE(S) OF INDIVIDUAL(S): (Required if warranted by facts of application.)
    "The name(s), portrait(s), and/or signature(s) shown in the mark identifies BLANK, whose consent(s) to register is made of record."
13. "The name(s), portrait(s), and/or signature(s) shown in the mark does not identify a particular living individual."
14. USE OF THE MARK IN ANOTHER FORM: "The mark was first used anywhere in a different form other than that sought to be registered at least as early as BLANK, and in commerce at least as early as BLANK." NOTE: If the use in another form claim does not relate to all classes in a multi-class application, specify within the miscellaneous statement section, below, the exact class(es) the claim covers.
15. CONCURRENT USE: Enter the appropriate concurrent use information, e.g., specify the goods and the geographic area for which registration is sought. WARNING: Enter text in the box only if you (1) intend to initiate a concurrent use registration proceeding before the Trademark Trial and Appeal Board; or (2) have a final determination by a court establishing your concurrent right to use the same or similar mark in commerce in a limited geographic area. BLANK (Required if warranted by facts of application.)
16. MISCELLANEOUS STATEMENT: Enter information for which no other section of the form is appropriate. BLANK

Two of the most common additional statements are (1) consent of a named/pictured individual and (2) disclaimers of descriptive terms. For example, even though Barack Obama campaigned for change, you still can't trademark his name or image without his permission. Regarding disclaimers, if your trademark is ACME BOOK STORE, then you should disclaim the descriptive "BOOK STORE" portion. See also my CLOCK TOWER LAW GROUP example above.

By far the biggest problem we see with trademark application is poor trademark selection. At this point, you might want to review the choosing a good name article.

For the RedStreet trademark application, the mark was a word mark, and no additional statement was required.

5. Goods/Services and Filing Basis

It's best to use a customized goods/services listing rather than one from the USPTO Acceptable Identification of Goods and Services Manual. But use the manual as a guide.

You should select the "Entering Free-form text" option and click the "Add Class(es) of Goods/Services" button.

When selecting the International Class for your goods/service statement, you should ask yourself a couple of questions:

• What do you sell, to whom, and how?
• What is your cattle? In other words, what do you put your brand on?

It's really easy to get the international class part wrong. For example, a shoe manufacturer such as Mephisto makes shoes, and the Mephisto trademark is in class 25. Zapppos, on the other hand, is a shoe retailer, and the Zappos trademark is in class 35. Both sell shoes, but one is a wholesaler, the other a retailer. They belong in different classes.

The filing basis part is easier. Your choices are:

1. Section 1(a) – Actually using mark in commerce now
2. Section 1(b) – No use of mark yet, intending to use
3. Section 44(d) – Foreign application exists for same goods/services
4. Section 44(e) – Foreign registration exists for same goods/services

For US applications, you should choose either 1(a) (use-based) or 1(b) (intent-to-use, also called ITU). ITU applications generally end up costing more, because there are two filings: the initial filing followed by a second filing (a specimen with a Statement of Use) demonstrating proper trademark use. In general, if you are already using your trademark properly, then you should file a use-based application.

The RedStreet trademark is clearly in use, but what are the goods/services? RedStreet the company used to provide Internet consulting services to law firms. But RedStreet the website is now an archive of law firm website reviews provided by GiantPeople LLC. Here's the goods/services as filed for the RedStreet trademark application:

Providing a website featuring reviews of other websites, particularly websites which provide legal services (in international class 042)

6. Specimen

For use-based applications, after you've chosen your international class, goods/service description, and filing basis, you'll need to upload your specimen and specify the use dates.

A "specimen" is an example of the mark being used in commerce as a trademark. In order for something to serve as a trademark, it needs to be a source-identifier for the specified goods/services. This typically means that the trademark should be prominent and should stand out from non-trademarked terms. Each trademark specimen needs to show:

1. the trademark,
2. being used as a trademark,
3. on the goods (or, in the case of services, near the description of the services),
4. that are described in the trademark application.

For goods (including software), acceptable specimens include product labels, tags, containers, displays, instruction manuals, and photos of the mark as actually used on or in connection with the goods.

For downloadable software goods, an acceptable specimen may be a screen shot of the mark as actually used in the software.

For services, acceptable specimens include newspaper and magazine advertisements, brochures, billboards, handbills, direct-mail leaflets, menus, website screenshots, and the like. Since websites are inherently interstate and inherently relate to commerce, a good specimen would be a screen shot of a page from your website showing the mark being used as a trademark.

For the RedStreet trademark application, we used various screenshots of the RedStreet website for the specimen.

7. Attorney Information and Signature

The final two sections are attorney information (self explanatory) and signature. The "signature" is something of your choosing enclosed in slashes, such as /JohnQPublic/.

Validate your application, pay the filing fees, submit the application, and save your receipt. A new feature lets you save a PDF version of your application.

8. Next Steps

• Junk Mail. Since your company name is (or soon will be) in public files at the USPTO, you may receive offers from various vendors for trademark-related services. Some of these vendors make their mail look like official government mail, so be alert for possible scams.
• Examination. If the USPTO determines that the application meets all filing requirements, then the application will be processed, and in approximately eight months, you will hear from the assigned examining attorney. The examining attorney may ask for more information or may reject the trademark application, and you will have an opportunity to respond to any of the examiner's questions.
• Use Statements. For Intent-To-Use applications, an applicant may file an Amendment to Allege Use any time between the filing date of the application and the date the Examining Attorney approves the mark for publication. If an Amendment to Allege Use is not filed, then the applicant has six months from the issuance of the Notice of Allowance to file a Statement of Use, unless the applicant requests and is granted an extension of time. The deadline can be extended up to 36 months.
• Certificate Of Registration. It is difficult to say exactly how long it takes from the filing of your application to the receipt of a final Certificate of Registration, because numerous issues can arise during the examination process that can lengthen the process. However, if there are no substantive or procedural problems and no third party files a Notice of Opposition, then it may be possible to obtain a Certificate of Registration within 11-13 months from the application's filing date.

9. Summary

It is possible to file your own trademark application, but it is also extremely easy to make mistakes. And not all mistakes can be remedied. The purpose of this series is not to give legal advice but rather to semi-live blog the RedStreet trademark application and discuss the issues as they arise. An ounce of prevention is much less expensive than a pound of cure, but, FWIW, my law firm makes more money fixing applications filed pro se than we do from filing trademark applications from scratch.

Related Posts

• How To Register A Trademark: Part 2: Trademark Search
  Search trademarks to rule out likelihood of confusion.
• How To Register A Trademark: Part 1: Choosing A Good Name
  A trademark is to your business as a foundation is to your house.
• FreeTrademarksForStartups.com: Free Trademarks For Startups
  The best time for entrepreneurs to start a new business is during a recession.
• Madrid Protocol: Affordable International Trademarks For Startups
  The Madrid Protocol is a great option for startups who want foreign trademark protection but don't want to file trademarks in separate countries.
• Domain Name Law
  White hat domainers are not black hat cybersquatters.
• Trademarks For Slogans And Taglines
  Trademarking slogans and taglines.
• Trademarks For Product And Service Names
  Trademarking product and service names.
• Trademarks For Logos
  Trademarking logos.
• Trademarks For Company Names And Nicknames
  Trademarking company names and nicknames. Just drop the "Inc."
• Just Say Moo – How To Name And Brand Your Product To Make It Stand Out From The Crowd
  Good branding can separate your cow from the other cattle.

Ideas are cool, but execution is key.

I have ideas for new companies every day. One problem with the current recession is that not enough people are starting new companies.

So here's three free ideas for new companies. I'm not going to patent these ideas. I'm not going to pursue them. I'm going to tell the world about them and see what happens. I guarantee you that if I've had these ideas, then so have others.

Ideas are easy, execution is difficult (see also the value of ideas and the value of content vs. services).

Idea 1: Email Tagging And Social Networking Manager

The problem: Email remains the lowest common denominator for social networking. But there is no way to tag your email addresses with labels (think "friend" and "customer" – and yes, one person can be both), keep track of those tags, and automatically update your social networks with this data.

The solution: A web-based portal for syncing Gmail with your social networks. A tagging syntax for email that allows for other functionality.

All problems don't have to be solved simultaneously. Start with updating your social networks, work on the tags thing next. Every month, I do this:

1. Export my Google Apps Email contacts to my desktop, import them to my Gmail contacts in my vanilla GMail account.
2. Sync Constant Contact with Gmail contacts (client email only)
3. Sync Twitter with Gmail contacts
4. Sync FriendFeed with Gmail contacts
5. Sync FriendFeed with Twitter followers
6. Sync LinkedIn with Gmail contacts
7. Sync Facebook with Gmail contacts
8. Sync Plaxo with Gmail contacts
9. Sync MySpace with Gmail contacts

Automate the above, solve lots of pain, and that's your beta release.

Version 1.0 is tagging. I currently tag my email addresses in one master email database, which lives in FileMaker Pro, and which I sync with Gmail via some custom plugins and scripts. None of my social networks really knows who my friends and clients are. The only reliable version of this data lives in FileMaker. Create the standard for tagging email to solve this problem.

Version 2.0 is other stuff. Once the tagging problem is solved, it enables other features. For example, I will unfollow somebody on Twitter if they write something objectionable. I'd like to remember why I unfollowed them (by tagging them). That way, when a Twitter suggestion service like Mr. Tweet suggests that I follow them, I'll remember why I chose not to. Again, I have this data, but it's all in FileMaker. It should be in the cloud.

Idea 2: Identify And Notify Domain Name Cybersquatters

The problem: Trademarks, brands, and names are cybersquatted daily. You can use services like Mark Alert from Domain Tools to find some of them.

The solution: Create a better domain name search engine. Glue other services to it, such as automated email warning to cybersquatters.

Mark Alert only searches for exact strings. A fuzzy search is needed to find look-alike and sound-alike domain names that are confusingly similar to registered trademarks (and the like).

Once the search engine is in place, scrape the WHOIS data, find the email address of the registrant, and decide whether or not to send them a warning email, a cease and desist letter, or whatever. We have this functionality in my law firm, but it is semi-automated and imperfect.

Idea 3: Trademark And Brand Central

The problem: The trademark application process occurs largely in a vacuum. Google has not directly indexed the USPTO's TARR database. As a result, the USPTO registers trademarks that it should not have. Trademark monitoring and watching services exist, but they are crazy expensive.

The solution: Make it harder to register bogus trademarks by forcing transparency on the trademark process. Create a centralized portal where users can search for and comment on expired, registered, and pending trademarks. Like Wikipedia for trademarks. Allow fuzzy searches. Provide updates via email or feeds. Support the whole thing with advertising.

Summary

About 500,000 people per month are losing their jobs. Some will be forced to start new companies. The key to startup success is execution. Solve some pain, add some value, and you have a viable company idea. Execute well and you win.

Terminating your attorney-client relationship.

I have met many businesspeople who feel like they are stuck in a bad relationship with their lawyer and don't know how to end it. It's simple. Put it in writing. Like a "Dear John" letter.

If you want to fire your lawyer (i.e. terminate your attorney-client relationship), then simply write a letter, fax, or email to your lawyer saying "Please stop working on all matters. I am hereby terminating our attorney-client relationship."

Your Relationship With Your Law Firm Is A Contract

Chances are, when you hired your lawyer, you were asked to sign an engagement letter. Most lawyers ask for clients to sign one (1) so that they can check for conflicts of interest and (2) because their malpractice insurance policy requires them to.

An engagement letter is a contract. That contract should say what is expected of each party and what happens when the relationship ends. Clock Tower Law Group's engagement letter is very simple. In it, we basically say:

1. We'll do the trademark, domain name, and patent work you hired us to do.
2. You'll pay your bills.
3. If either of us ends our relationship, then you agree to pay our fees and expenses (through the date of termination), and we will furnish you with copies of any work product produced for you (through the date of termination).

But even if you don't have a signed engagement letter, then you still have a contract. To end your attorney-client relationship, you need to terminate that contract. The termination doesn't necessarily have to be in writing, but it certainly helps.

Why Fire Your Lawyer?

One of our biggest source of new business is companies that are disillusioned with high bills from big law firms.

However, when prospective clients complain about the high cost (or poor results) from large law firms, I always defend the large firms by explaining how they operate. In large law firms, a patent attorney is required to bill between 1800 and 2000 hours per year. That works out to be eight billable hours per day. Usually you must work between 1.5 and 2 hours in order to bill one. Young associates are under considerable pressure to meet their billable targets, because failure to do so often means that they won't make partner or will lose their jobs. So when there is a new client matter, there is sort of a "feeding frenzy" for all attorneys associated with a particular project to bill, bill, bill. Lawyers are working 12-hour days because they are trying to keep their jobs.

This is my ninth year running Clock Tower Law Group. Our annual billable targets (they are not quotas) are about half those of large law firms. I can count on one hand the number of times that I've had to work on a weekend. That doesn't make us better than large firms, just different.

Can we do a better job than big law firms? Maybe, maybe not. There are good and bad lawyers at big and small firms. We like to think that we're good lawyers at a small law firm. But with patent allowance rates plummeting, no patent lawyer can guarantee success.

I can tell you one thing. If a prospective client bad-mouths a former attorney, then I will not take them on as a client. I believe that lawyers in firms big and small are trying their best, but even in litigation, you win only half of the time.

Pay Your Bills

If you want to fire your lawyer, then be prepared to pay your outstanding bills. Read your engagement letter. It probably specifically states that outstanding balances must be paid upon termination of the attorney-client relationship.

Get Your Files

Our files are primarily electronic. When we transfer a case to another firm (which sometimes happens when one of our startup clients gets acquired), we send the new firm a CD-ROM with all of the client files, organized in the same manner as our paper files. We provide an index for the CD-ROM and the paper files. We highlight which deadlines are coming up in the next 90 days.

I lost respect for one Boston law firm years ago when we inherited several patent matters from them. The firm unceremoniously dumped five boxes of paper on our office. No index. No electronic files. No indication of deadlines (and their was a foreign filing deadline the next day). I called the firm to ask if they had any of this information electronically, and they tersely replied, "No." The last law firm in Boston using typewriters. This ended up creating a whole bunch of extra work (and expense) for my client.

You are entitled to the files that you have paid your law firm to create. Get copies in electronic form. It will save you money when you change law firms. Or if you decide to proceed pro se.

Summary

Don't be afraid to fire your law firm. In these tough economic times, companies are doing what they can to cut costs. Companies are born. Companies die. Clients come and go. We inherit matters from other firms more frequently than we transfer them away, but we try to make both processes painless. I guarantee you that if you have been professional in your dealings with your lawyer, then they won't take the breakup personally.

Related Posts:

• How To Twittersquat The Top 100 Brands
  A call for the creation of the Uniform Username Dispute Resolution Policy.
• FreeTrademarksForStartups.com: Free Trademarks For Startups
  The best time for entrepreneurs to start a new business is during a recession.
• Madrid Protocol: Affordable International Trademarks For Startups
  The Madrid Protocol is a great option for startups who want foreign trademark protection but don't want to file trademarks in separate countries.
• Domain Name Law
  White hat domainers are not black hat cybersquatters.
• Patent Reform Turns Patent Attorneys Into Patent Pending Attorneys
  Expect to pay more for, wait longer for, and get less from your patent application.
• Clock Tower Law Group Clients Sold To Public Companies
  Three companies sold to public companies.
• Drawing That Explains Patent Costs
  How to control the cost of filing a patent.