Patent Considerations When Approaching a Manufacturer

Patent protection can be a crucial asset to innovative startups and established companies alike. An issued patent can limit competitor activity in a particular market and/or provide a significant income stream from licensing for many years. The following topics offer patent-related best practices and other guidance for companies developing new and innovative products.

File Patent Applications Early

Since 2013, the United States has employed a first-to-file patent system, meaning the right to a patent for a particular invention lies with whoever files an application first (regardless of who is the first inventor). Filing early may increase the odds of beating a competitor’s filing date, particularly in fast-moving technology fields. Thus, companies should strive to develop organization-wide processes and procedures for capturing inventions early in development to ensure the earliest-possible filing date. Such practices should strive to document all new innovations (including new products and improvements on existing products), who contributed to those innovations (including those outside the organization), and the date those innovations were conceived.

When a potential invention is identified, all communication regarding an invention should (ideally) be limited to those inside the organization prior to the patent application’s filing date. Even when the patent application has been filed, those engaged in external communication should limit the communication to only what is covered in the patent application.  Disclosing non-covered information, such as new innovations developed after the filing date of the patent application, can jeopardize the patentability of those new innovations. To avoid such unintentional disclosures, it is important that all employees, particularly marketing and sales teams, are in sync with those managing the company’s intellectual property.

Avoid Pre-Filing Activities That Compromise Patentability

Ideally, a patent application is filed prior to external communication of the innovation.  However, in some situations, filing a patent application first is not possible or practical.  In such situations, it is important for companies to understand how activities involving those outside the organization can affect the potential for patent protection down the road. For example, printed publications that precede a patent application’s filing date may qualify as prior art that may render the invention unpatentable. Examples of such printed publications include marketing materials, publicly-available technical publications, information available on a website, etc. In the United States, these printed publications prevent one from obtaining a patent if a patent application is not filed by the one-year anniversary of the publication.  Certain foreign jurisdictions lack this one-year grace period, and patent rights are lost upon publication.

Non-public actions may also bar patentability. For example, United States law categorizes certain “offers for sale” as prior art, barring any invention from patenting that has been for sale for over one year prior to the patent filing. An “offer” alone is sufficient, even without acceptance. Further, these actions create prior art even when they are intentionally hidden from public view.  Therefore, non-disclosure or confidentiality agreements will not protect the company in such circumstances.

Perhaps surprisingly, a manufacturer’s activities (rather than the company’s) in a private relationship may also constitute an “offer for sale” affecting patentability. A specific pitfall may arise when the manufacturer offers to produce and then sell the products back to the company. To reduce the risk of the relationship creating prior art, the company should consider engaging with the manufacturer through partnership or consulting agreements (i.e., where services are sold rather than products), and direct purchase agreements involving new products should be avoided. These agreements should include clear language that explicitly forbids the manufacturer from presenting commercial “offers for sale” to the company (and others). Direct supply of raw materials, from the company, may also protect against an unwanted “offer for sale” by clarifying the manufacturer is compensated for its manufacturing service rather than for selling the company’s products. When this is not plausible, the company should consider contracting with third-party suppliers itself rather than allowing the manufacturer to subcontract. Even when taking these precautions, the company should aim to file a patent application within one year of any contact with the manufacture to avoid any ambiguity (at least in the United States).

Patent Ownership Considerations

By default, each inventor (i.e., one who contributes to the conception of the invention) has joint ownership, with full authority to license (to others), make, sell, and use. Employees and contractors are typically required to assign these rights to their employers, but potential issues may arise when multiple organizations believe they are entitled to rights in an invention. When a patent application is filed early (by the company) and fully covers the inventive aspects of a new product, ownership is clear. However, products often evolve when manufacturing processes are developed, and it may be unclear whether the company’s employees or the manufacturer’s employees are the rightful inventors. To avoid a potential conflict, both parties should discuss patent ownership ahead of time and engage in an agreement that provides for situations where the manufacturer’s employees makes improvements.

If you have any questions concerning these or other patent issues, please contact Joe Hetz at [email protected]

Joe Hetz has over 23 years of experience as a patent attorney and has prosecuted over 3,500 patent applications. Joe has represented clients of all sizes, from Fortune 500 companies to start-ups, and is known for his creative, value-added approach to helping clients develop portfolios that can be monetized or otherwise used to satisfy strategic needs. His patents have gained national media attention for their broad scope and have generated millions of dollars in licensing fees. Joe is a shareholder at Brinks Gilson & Lione, an IP law boutique that’s been around for over 100 years.