High On The Scale Of Corporate Assets: The Intellectual Property Portfolio

Tuesday, June 1, 2004 - 01:00

Editor: Please describe your background and your reasons for choosing intellectual property law as your area of concentration.

Hewitt:
I have a degree in mechanical engineering and a law degree. I took some graduate courses in intellectual property at George Washington University while I was a patent examiner at the U.S. Patent & Trademark Office ("PTO"). I got into the Intellectual Property ("IP") field because it is an interesting combination of technology and litigation. Patents as well as trademarks and copyrights are all enforced in the federal court system before juries so all of the aspects of the practice of IP trial law are blended with inventive technology, which has always excited me. I have over three decades of experience in patent and other IP litigation, and every case is exciting because of the new technology involved.

Editor: Which areas of IP are frequently litigated?

Hewitt:
I would answer this question in terms of frequency of cases as well as economic impact. Under both measures, patent infringement lawsuits currently have the most economic impact. These are followed by trademark and copyright infringement, respectively. There are also common law areas of intellectual property and some other quasi trademark/copyright type claims relating to Internet issues that are litigated. The greatest economic impact in terms of trial days, trial preparation and expense are the patent infringement cases.

Editor: The doctrine of equivalents has undergone some twists with the Supreme Court's Festo1 decision. Is there a solid footing for the doctrine today that patentees can rely on?

Hewitt:
Yes. As you know, patents are enforced according to the scope of issued "claims" to the invention. The general public and competitors often have difficulty in trying to understand the important terms of patent claims because words can have various interpretations or scope. Sometimes changes are made to the patent claims while the patent application is pending in the PTO in order to limit the scope of the claims to obtain allowance. Those changes can, as a matter of law, under the doctrine of "prosecution history estoppel," prevent the application of the "doctrine of equivalents," an equitable doctrine used in the law to stretch claim terms beyond their literal meaning. In the last few years there have been a number of cases limiting the "doctrine of equivalents" through clarification of application of the "doctrine of prosecution history estoppel." In Festo, the Supreme Court clarified the law of prosecution history estoppel such that a member of the public or competitor can review the "prosecution history" from the PTO and rely upon statements of limitation made by the patent owner when obtaining the patent in attempting to design around an issued patent. Festo invokes a presumption that statements and claim amendments of a limiting nature do indeed limit the scope of issued patent claims. In this way, competitors can design around existing patents with greater assurance that they can compete without trespassing on another person's patent or provoking litigation.

Editor: How should a patent application be drafted to withstand a challenge?

Hewitt:
The breadth of a patent is defined by a claim. The broader that a patent is, the more likelihood that it will be found invalid. If a patent overclaims or overlaps the prior art, it may get through the PTO but face invalidity issues when it is asserted. The difficulty we have in our patent/business economy today is that the resources of the PTO are limited by Congress. As a result, patent examiners have limitations on the time they can spend examining a patent application. Also, the sources of prior art that are available to the PTO are limited. Thus, a patent can issue based upon incomplete prior art information and subsequently be found invalid because the most important and closest prior art was not considered by the PTO. As an illustration, the amount of time and energy taken by the PTO and the involved attorneys to examine and prosecute a patent application to issuance might be $50,000. But, patent litigation often costs $4 million or so for each side. The system is unbalanced because the PTO does not have the time and resources to thoroughly examine applications before they are issued, and the expenses to test the patent in the courts are enormous.

Editor: So it behooves the person applying for a patent to look at all of the prior art thoroughly in order to protect themselves against future challenges.

Hewitt:
In a perfect world it would be best for the patent applicant to do a significant prior art search and bring the prior art located to the attention of the PTO because the patent has a higher level of credibility if more prior art is considered during the application process in the PTO. A patent applicant has a duty to tell the PTO what it knows but it does not have a duty to investigate and provide additional prior art to the PTO except in rare circumstances. This has led to two different views on obtaining patents. On the one hand, some believe that it is best to do as much research and disclose all found prior art to get a patent that is as credible as possible. On the other hand, there is a countervailing view that it is best to meet the minimum standard for disclosure of prior art to the PTO, get the patent issued and sue on it.

Editor: What is the state of patentability of software and business methods?

Hewitt:
The United States has the broadest range of patentable subject matter in the world, including not only software but also business methods. A business method can be something as simple as a unique method of marketing a product. In many countries business methods and software are not patentable subject matter.

Editor: Is there a bright line that distinguishes business methods already in use from patentable ones?

Hewitt:
Technically, yes. A business method is prior art if invented before the date of invention of the patented business method. But, most prior art business methods were not the subject of patents because they were not patentable for many years before courts recognized that business methods were patentable. The PTO has been disadvantaged because it cannot locate this prior art because it is hidden in the companies that use it. For example, even though Company A has a unique business practice that is not published, the PTO might issue a patent to Company B on a similar but later developed business method because the PTO has no way of knowing Company A's prior art practice. The lack of accessible prior art has undoubtedly caused many business method patents to improperly issue.

Editor: What trademark issues are raised by companies using the Internet?

Hewitt:
There has been a litany of issues surrounding Internet sites. The first issues involved the use of trademarks on Internet sites and in domain names. These were followed by domain name protection issues that have been addressed by the policies of ICANN (Internet Corporation for Assigned Names and Numbers), which has a uniform dispute resolution procedure called UDRP that allows a trademark or domain name owner to challenge a third party's misappropriation of a domain name. The Anti-Cyber Squatting Consumer Protection Act (ACPA) also protects domain names. A recent issue concerning trademarks is the use of links to connect to a competitor's website. For example, a competitor might link to Company X's website so that if a consumer searches online for Company X by its trademark, the search may display links to the competitor's site. Company X's trademark is being misused by a competitor to siphon off customers through exposure to the competitors mark if such cross-linking causes a likelihood of confusion.

Editor: Can you provide some anecdotal evidence of practices that should be avoided in managing IP?
Hewitt:
Avoiding willful infringement is one of the biggest challenges to alleged infringers today. Once a company receives notice of a patent such as through an offer of license, the company has a duty to investigate to determine if it is infringing the patent rights. If the noticed company does not form a good faith and reasonable belief that the noticed patent is invalid or not infringed, its actions may be found by a court or jury to constitute willful infringement, exposing the infringer to paying triple actual damages plus attorneys fees. Even though investigating noticed patents is expensive, the potential economic impact of triple damages and attorneys fees require that a noticed company reasonably investigate every claim of patent infringement or offer of license.

Editor: Are there times when you advise a client to keep a novel business process or invention a trade secret rather than attempting to patent it?

Hewitt:
Theoretically, a company can keep a secret, such as the formula for Coca-Cola, forever if it cannot be reverse engineered. However, if a third party independently develops the same trade secret technology, the third party can use the technology with impunity. In other words, the only way a trade secret right can be enforced is when someone has misappropriated it from the rightful owner. Independent development is an absolute defense. In the patent system, even if a third party later independently develops the same invention, the patent can be enforced. In sum, if a newly developed technology can be reverse engineered once it is commercialized, or will likely independently be developed by competitors, patents should be obtained rather than relying on trade secret protection.

Editor: How often do you recommend that owners of large portfolios of IP assets conduct an outside audit?

Hewitt:
The challenge with patent portfolios is an economic one. Patents can be obtained in many countries so that, typically, companies have not only U.S. patents but also foreign patents, which can be very expensive. The purpose of an audit of a patent portfolio is to be certain that your patents match your commercial products and business plan. If you have patents that are outside of your commercial products and outside of your business plan, then you may not want to continue them. The timing of an audit depends on the size of the portfolio - it could be done annually or every five years.

Editor: Is there anything that you would like to add?

Hewitt:
Today virtually every company lists intellectual property such as patents among its important assets. Hopefully, as more historical information becomes available from sources such as the Internet, the PTO will be able to access the most relevant prior art during the patent application process, issue better patents, and reduce the economic burden on American businesses of having to litigate invalid patents.1 Festo v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002).

Please email the interviewee at lhewitt@akingump.com with questions about this interview.