Black Friday Special: A Look at Current (and Future) LED TV Tech

So, we're doing something a little different today. Black Friday is in a few days and we're going to geek out on TVs. 

If you're looking at a new TV purchase, three new technologies are coming down the pipeline that you may want to know about. Two will already be on the shelves this Friday. 

#1 The Completely Wireless TV by Samsung           

Samsung has, at least in my mind, always been at the forefront of aesthetics. It always has one of the slimmest bezel designs.  It recently released TVs with stands that allow one to route the cables through the stands to hide them from view. One of their most expensive TVs has a hub that interfaces your bundle of cables to the TV through a single cable that is more easily hidden in a wall or the TVs stand while the hub can be hidden in a nearby cabinet. And it was even the first, and seemingly only, company to come out with a framed TV--a TV including a custom picture frame along with a picture frame matte, special lighting and reflectivity to make a still image on the screen look like a real photo or painting.  It’s perfect for those times when you’re not watching TV, but don’t want a giant ugly black rectangle disrupting your otherwise harmonious feng shui.

Goodbye Wires

A recently-published Samsung patent application, US20190067996, suggests that Samsung will continue this quest for sleek and unobtrusive TVs with a completely wireless TV. The published design forgoes all HDMI, sound and even power cables. It's entirely wireless.

And it’s being made possible by improvements to the same inductive power transfer seen in wireless phone chargers and induction stoves.  However, unlike those older versions of power transfer through magnetic fields where direct contact between objects is needed, Samsung has optimized the magnetic field projections so that power and data can be transferred wirelessly over a distance of up to a few feet (i.e., the distance between your TV cabinet and the TV hanging on the wall above the cabinet).   

We won't be seeing the wireless TV this year, but right now you can get TVs with quantum dots and micro LEDs.

#2 Quantum Dots

Every company seems to be using quantum dots in their higher end TVs. Vizio uses them in their M and P series TVs.  Sony calls it Triluminos. Samsung denotes quantum dot technology with its QLED varieties. 

To understand why quantum dots are the rage, and why they're the next stage of evolution for TVs, you almost have to break down the entire panel of a TV and understand how that works.

On a TV you've got three pixel colors: red, blue and green. Every traditional LED TV also has a backlight, which is typically an array of blue LEDs behind a white phosphorescent layer--the blue light is absorbed by the phosphorescent layer, which emits white light--the backlight.  Each pixel includes a different color phosphor which takes the white light and converts it to red, green or blue, and an LCD layer above this controls the amount of light leaving the TV, or brightness, for each pixel. By mixing the brightness of each of these three colors most 2K TVs can produce around 16 million colors, while 4K HDR TVs can achieve around 1 billion colors. 

The problem is that since we started with blue light, the blue pixels tend to be brighter than the red and green ones, and thus TVs use a complex system of color mixing and filters to even out the baseline for these three colors. However, while the filtering process purifies the colors and evens out pixel brightness, it also means that you filter or lose some of the brightness that you started with.  

It's an inefficient process. TV performance often comes down to brightness and contrast, and contrast is partly a function of how bright the TV is. In the filtering process we lose brightness, and thus contrast.  But what if the filters could be eliminated?

How Small is Small

Quantum dots eliminate the need for filters and thus produce better contrast and brightness. They are tiny semiconductor compounds, particle size typically around 2-10 nanometers across. For reference, that’s around 200 to 2000 times smaller than the average human hair. And the cool thing about quantum dots is that they emit colored light, not according to their atomic structure, but rather according to their size.  Chemists control the size of quantum dots through the amount of heating, time of heating, and chemicals used to make the quantum dots. Smaller dots emit bluer light and larger dots emit redder light. Thus, Samsung, Sony, and the rest can accurately control the color of light for each pixel by adjusting the size of quantum dots used in each pixel during manufacturing. Since filters are not needed, far more light reaches the viewer than in a traditional LED TV. 

Result?  We don't lose much of our brightness. All the light that we put in, more or less, we get on the way out.  This brightness enhances contrast, and that’s one of the keys that TV buyers look for.     

Their price point sits right in between top-of-the-line, and pricey, organic LED TVs, and the tried and true filtered LED TVs that we've been buying for years. 

Essentially, quantum dots give TVs near-OLED contrast without the steep prices. 

#3 The Micro LED

In a micro-LED TV, every single pixel is an LED. There's no backlight.  No need to convert blue or white light to red and green using phosphors.  No filters. You have one tiny red, green, and blue LED for each pixel trio--no conversion, no filtering, no loss of brightness. All the light is preserved, and we see brightness and contrast that betters quantum dot TVs and probably even OLED TVs.

It’s not an easy display to manufacture.  Typical LED pixels are around 100 microns across, but the LEDs used in the backlight can be much larger.  Micro LED TVs have to produce very tiny LEDs, the same size as each pixel, and find a way to quickly move thousands of these LEDs from a freshly-printed wafer to a display substrate.  You can imagine that trying to pick up and accurately place objects that are no bigger than a hair’s diameter can be tricky and slow. Each LED of a given color also has to have the same tone of that color and the same brightness--a feat of quality control that evades many fabrication lines today.  Often, an LED fabrication line trying to produce a particular color of blue LED will end up with dozens of different shades of blue that have to be separated, and then only those LEDs in a given separated set can be used together. Obviously, the consistency needed for micro-LED fabrication is difficult to achieve.

But, the result is a stunning display--and a stunning price tag.  Don’t expect to see Black Friday deals on micro-LED displays. In fact, pricing isn’t even available.  Samsung’s ‘The Wall’ can only be seen at two locations in America, and only by appointment. The standard configuration is an array of 16 displays linked together to form a TV that is about 10.5 feet across and 5.9 feet tall.

Betamax vs. VHS Again?

So why bother with Micro LED? Currently, it seems like quantum dot vs micro-LED is a case of Betamax vs VHS. Each system has unique challenges.

Ultimately, the price should come down on Micro-LEDs because the structure is much simpler. There are fewer layers and thus potentially simpler fabrication. 

Fewer layers means thinner displays, whereas with quantum dots, you're still kind of in that old regime with backlights and many layers forming a somewhat thicker display.  

So, when you’re sitting around the turkey and gravy dreaming about that TV that you may splurge on come Friday morning just after midnight, maybe you can now do so with a greater appreciation for the incredible genius, ingenuity, and dedication of thousands of chemists, physicists, and engineers that worked tirelessly this year to make in-home cinema all the more engrossing.   

Eminem, Meet the Supreme Court of the United States

Eminem, Meet the Supreme Court of the United States

Eminem Sues Spotify!  At least that’s what one might take away from headlines regarding a copyright case that could find its way to the Supreme Court next year.  But the reality of this latest in a string of copyright infringement suits against Spotify, is that the artist Eminem isn’t even involved. His publisher, and partial composer of the #1 hit single, “Lose Yourself,” is filing the lawsuit independently from Eminem.  This is just a first indication of the complexity of copyright law in the digital arts, and tells an interesting story for those looking to protect IP in the digital arts 

Related: What Tom Brady, LeBron James & Ohio State University Can Teach You About Advanced Trademark Laws

Setting the Stage

To set the stage for this face-off between musical powerhouses, let’s look at the two primary licenses that artists, publishers, and streaming services deal with. 

Production companies, those recording and producing a song, sell a “master license” to streaming services. There may be many master licenses that a streaming service has to choose between, since each different recording of a song over the years requires a different master license to be streamed.  If Spotify streams the original studio recording of Maroon 5’s Memories, one master license is required, while a second is required if a live performance version at Red Rocks is streamed.  If Spotify streams a cover band version of this song, a third master license would be needed for that instance.

Despite the number of master licenses, they are typically owned by a large production company like Sony, Universal, or Warner Brothers, and are therefore straightforward to track and pay for, so there’s generally not a lot of litigation surrounding these. 

A second type of license that streaming services must obtain for every song that is streamed, is a “Mechanical License,” and these are more complicated, harder to track, and the reason that Spotify could find itself before the Supremes. Mechanical licenses arose during the age of player pianos, when artists first had to start seeking payment for a machine rather than a human performing their songs.  Additionally, mechanical licenses must be sought from a song’s composer and must include anyone who created music and/or lyrics. Quite a few different people can be involved in the composition of a song and sometimes those people don’t even include the artists themselves. For instance, Eminem’s Lose Yourself has three composers including Eminem.  Understandably, the number of entities that may own a Mechanical license tends to be far greater than the number of Master rights owners, and the Mechanical rights owners tend to be smaller entities.  This makes tracking down owners of Mechanical licenses much harder.   

If you’re a streaming service with 20 million songs, many of which are different artist’s renditions of the same original song, and many of those artists are smaller names with maybe a handful of songs, it becomes very challenging to figure out who you might pay for the mechanical licenses. You may even have to calculate a split in a license between the various composers involved. 

Because of this potential confusion, most of the litigation surrounding streaming services over the past decade has dealt with mechanical licenses, not master licenses. 

How Did We Get Here?

Over the years, Spotify has been sued many times for copyright infringement because they’ve allegedly failed to pay on mechanical licenses. In almost every case, they’ve settled — for hundreds of millions of dollars at times. It’s been one of their biggest challenges, and until last year threatened their IPO. Since there was never a case that made it past settlement, we don’t have conclusive proof that Spotify fails to pay composers on mechanical licenses.  However, given the number and size of the settlements, the facts that emerged in those cases, as well as the technical challenges of paying mechanical licenses, there’s a good chance that they have been failing to pay some, if not many, mechanical licenses.

One of these lawsuits occurred several years ago, with the National Music Publishers Association (NMPA). The complaint of the lawsuit stated that, stretching back to 2011, Spotify had racked up between $60 million and $120 million in unpaid songwriter royalties. Spotify settled the case before trial. But, as a result of that settlement, several very large publishers became major equity holders in Spotify, who along with the NMPA, drafted the Music Modernization Act (MMA), which passed in 2018 and essentially made it impossible to sue Spotify. 

Related: Someone Knocked Off My Product... Now What?

Which brings us to the lawsuit between Eight Mile Style and Spotify. Eight Mile Style was not part of the drafting of the Music Modernization Act, which allows Spotify to avoid being sued for copyright infringement if it takes certain steps relative to songs that it cannot match to a mechanical license holder (e.g., set aside a stipulated licensing fee in the event that the license holder can later be found). Meanwhile, Eight Mile Style is trying to claim that the MMA is unconstitutional and should be tossed out, while also saying that Spotify failed to follow the MMA’s guidelines when it came to Eminem’s songs.   

If Eight Mile Style Wins the Lawsuit: Part 1

Regarding the first part of the allegation and the MMA’s constitutional standing, the question is, was there a due process violation in Congress basically taking away the right of composers and publishers to sue for infringement damages? 

If the MMA is dissolved, then composers will once again be looking at the ability to recover statutory damages of up to $150,000 per infringed song, plus attorney fees. 

If Eight Mile Style Wins the Lawsuit: Part 2

The other side of the lawsuit is the determination of whether or not Spotify jumped through the required hoops to avoid a copyright lawsuit under the MMA. 

The MMA, in general, creates a big database where publishers can put their songs, making it easier for Spotify and other streaming services to notify the owner of a song that they streamed that song and intend to pay royalties. At its core, the MMA aims to solve a very real problem. There are tens of millions of songs out there with different composers, songwriters and versions. Finding the composers of each version can be really difficult. The MMA’s database sought to simplify the issue. 

Spotify farms out the license matching work to a third party, but the biggest player in this third-party matching industry does not have a high success rate for making matches.  Despite being one of the largest-used companies, court records show that it is only matching about 15% of the songs in the Spotify catalogue! 

When the matching company can’t perform the match, then the MMA grants Spotify a “compulsory license” from the unknown composer. Spotify then sets aside the stipulated fee for this license. Unfortunately, this means that the composer only receives the stipulated fee--a constant across all artists and songs, regardless of the song’s popularity.  In other words, when the match finally occurs, the artist has no chance to negotiate for the royalty that a high-value song may be worth. And if Spotify is unable to make a match, it automatically gets to pay this stipulated, likely lower royalty rate, than if it had made the match and had to enter negotiations with the composer. So, there is a clear benefit to streaming services failing to match high-value songs.

Eight Mile Style is alleging that the third-party company did not correctly match Eminem’s songs to Eight Mile Style on behalf of Spotify, instead indicating that many of Eminem’s songs could not be matched, and thereby enabling Spotify to take a compulsory, and relatively inexpensive license, for those songs.  Eight Mile Style argues that this failure to match one of the most well-known songs in decades is intentional. But is that the case? Are they really incompetent? Or is there a technical issue? Does the entire system need a fix?

The Top Take Away For Those in the Music Industry

We’ll have to wait to see what happens with this case, but if the MMA is struck down, be prepared to go back to the old way of doing things. If it’s not, don’t just assume that the MMA is working for your benefit. As Eight Mile Style has shown, even wildly popular songs aren’t getting matched and royalties are going unpaid. You really have to watch your back and make sure that Spotify and other streaming services are following the rules. 

Are You Overlooking the Importance of a Design Patent?

Are You Overlooking the Importance of a Design Patent?

When we think of patents, many people think first of utility patents — the kind that protect the function of an invention. But there’s another type of patent that recently made news headlines that could be crucial to protecting your intellectual property.

In Automotive Body Parts Association (ABPA) v. Ford Global Technologies, Ford was trying to block the ABPA from making replacement parts for Ford’s F-150 hoods and headlights, both of which are protected by design patents. The ABPA was trying to limit the reach of the patents, arguing that they were largely functional in nature — something that, if proven, can preclude design patent enforcement. The Federal Circuit court ruled in Ford’s favor.

For replacement parts manufacturers and consumers alike, it wasn’t the best news. Everyone knows that you can purchase replacement parts cheaper from a third-party manufacturer than you can from the car’s manufacturer. 

But for Ford and other manufacturers of products with a large market of replacement parts (e.g., inkjet printers, construction equipment, etc.), this win greatly increases the potency of a design patent portfolio used to corner the market on replacement parts. While car owners may cringe at the inevitable increase in auto repair costs, this is a totally legal and very effective strategy for the manufacturers.  

Many of our own clients have products where replacements parts do exist and there is significant revenue to be made from those replacement parts. These clients are turning to design patents to gain a larger share of the marketplace. Read on to find out if a design patent is right for your IP.

Utility vs. Design Patents 

Utility patents protect the function of a product, such as the interaction of gears within a clock, whereas a design patent primarily protects the aesthetics, such as the shape of the hands on the clock. 

Design patents are not intended to offer protection of functional aspects of a product. But there are many situations where aesthetics and functionality overlap, and thus situations where design patents can legally cover functional aspects of a design (where the design is not primarily functional). 

The law comes down to a question of whether or not the design is primarily functional. As long as there’s a significant overlap between aesthetics and functionality, there’s a reasonable chance that the design patent will stand up in court. 

Examples of Design and Utility Patents In Use

Design patents are very often used to protect consumer goods, when aesthetics play a big role. Look at the beverage industry. The shape of your bottle can make a big impact on who buys your product versus the bottle that’s sitting next to it. In that case, the shape of the bottle has little functional advantage over its neighbors, but the aesthetics can make or break a brand. That would be a perfect instance where a design patent would be utilized. 

Going back to the auto manufacturing example, a manufacturer would likely use a utility patent to protect aspects of a vehicle that are functional, such as a more efficient engine or a new lane-departure sensor. The same manufacturer might use design patents, though, to protect the shape of a car’s windows, wheel designs or the shape of the fenders. 

Interestingly, all of these shapes can also have functional benefits such as increased visibility for the driver, reduced weight in the wheels, and increase laminar flow for the fenders. In the case of electric cars, the shape of the vehicle might serve both aesthetic and functional purposes. The shape of an electric car plays a big role in increasing laminar flow and reducing drag, thereby improving gas mileage. So, you could have utility and design patents covering the shape of a vehicle. 

Limitations of Design Patents in Action 

  • Utility patents take longer and cost more to acquire. They do, though, make it more difficult for competitors to “design around” your product.
  • Design patents are faster and cheaper to acquire, but also easier to design around.

Related: What Overseas Lawyers Need to Know About Filing U.S. Trademark Applications

Depending on your industry, a design patent might not even be a question. For some of Neugeboren O’Dowd’s clients, like those in software for example, the focus is primarily on utility patents. In software, there’s often little to protect with a design patent anyway. 

For some software clients, though, the user interface is very important. Look at the aesthetics of the iTunes interface, the Netflix home screen, or the smart display of an LG or Samsung TV. Some of those have highly visible and desirable aesthetic interfaces, which could be protected with a design patent. 

The tricky thing is, unlike with utility patents, it doesn’t take that much of a design change to get around a design patent. In some cases, a competitor could change minute details to mimic the look of your product or interface. They would then benefit off the goodwill and brand recognition of your user interface. 

Design Patents Abroad 

In the consumer product space, design patents have a much greater role. This is especially true as you deal with products that have a lot of knock-offs coming out of low-cost manufacturing locales like China. 

Related: Update on China’s Amended Trademark Law

A design patent can be a really effective means of stopping those types of infringers. In many cases, the infringers are creating near-perfect duplicates. They aren’t even trying to design around your product. They’re knocking off hundreds of different products. If they run into an infringement issue with one, they’ll just toss that product and focus on the others.  So, design patents can be very effective against this type of copycat. 

In comparison, international utility patent families can often cost upwards of $50,000 to over $100,000. An international design patent can be a much more affordable way for a business to protect their product. 

Do You Need a Design Patent?

When it comes to protecting your IP, a design patent could be useful, especially if you’re selling a consumer product, on a limited budget, or worried about IP protection on an international scale. Design patents can be a highly effective addition to your portfolio if you stand to lose revenue from third-party knockoffs, rely on replacement parts revenue, or if your product relies heavily on aesthetics rather than function.

Pitfalls to Avoid When Collaborating on Intellectual Property

In many cases, IP collaborations take place out of necessity. Oftentimes, various firms work together to overcome hurdles of building prototypes and getting a project into production. However, the law surrounding IP collaborations can be a bit sticky. 

When you have multiple inventors, regardless of which company they’re from, and how much or little each contributed, each has an undivided and equal right in the patent. This means that any of those inventors can give a license for the product to another party without asking the other inventors to sign off on that activity or provide them any of the license proceeds. Two inventors can even independently license the same patent to two competing companies. Conversely, you can’t bring a lawsuit into the picture to enforce the patent unless you have all of the inventors on board.

As you can guess, this can lead to some very tricky business situations. Here are things to keep in mind when you collaborate on IP ventures.

The Ideal Collaborative IP Scenario

Anyone who leaves patents in the hands of inventors is making a really big mistake from the get-go. Companies should, as soon as possible, ensure that patents are assigned to the company itself. Not multiple companies, just one. You want to avoid a co-ownership situation. 

Related: Protecting Your Intellectual Property: Operating, Employment, and Founders’ Agreements

Even the most amiable partners can disagree, and this is especially tricky when co-ownership of patents is involved. Enabling one partner to control the IP is the simplest way to avoid enforcement and licensing issues. 

Assigning the patent to one company will take a lot of negotiation up front. But, it’s much better to deal with ownership up front than in the heat of a partnership conflict, when no one will be able to agree as to who contributed what and how much those contributions were worth. 

Avoiding the Pitfalls of an IP Collaboration 

Collaborations for the sake of R&D aren’t inherently problematic. Co-ownership is, though. Here are a few ways to approach your collaboration to avoid co-ownership headaches.

Related: Selling Your Company? The Exit Strategy That Doesn’t Involve Giving Up Your IP Rights

Get it in writing

Before any meetings or collaborative efforts, agree in writing which company will end up with the IP that results from the collaboration. 

Record your communication 

Whether you can agree in writing or not, make sure you record all your communication. This includes emails and verbal exchanges in meetings. Get any documents or drawings signed, dated, and notarized. This will make it much easier to go back to those records later to have evidence of everything that was said. Think of all these records as evidence that may have to be presented in a court of law — they may very well end up in that role. 

File your IP ahead of discussions

In some cases, two parties may come to the table with the same invention or idea in mind. However, the first person who vocalizes that idea in a meeting may thereafter claim that they were the first to conceive of the invention, since the other party won’t have any evidence to the contrary. 

You can protect yourself from these types of situations by filing a provisional patent covering every possible invention that you might bring to a meeting. Any IP that you plan on discussing with your collaborator, file for it, even if it’s as late as the day before the meeting is scheduled. Provisionals are quick and dirty, and can be filed last minute and at low cost if need be. You don’t want the other party to be able to lay claim to your invention.

This applies to trade secrets as well. If the other party discloses an idea similar to one of your trade secrets, there is nothing preventing them from filing for a patent on it the next day. To fend off this risk, file a provisional on any trade secrets that may arise during the meeting, and then abandon the provisional if the other party doesn’t mention a similar concept. Recall, provisionals never publish unless you convert them. If the other side does disclose a similar idea, then at least you can convert the provisional and preclude the other side from patenting what is effectively your trade secret (and obtain valuable IP at the same time).   

Engage Your Attorney 

Engage your corporate or IP attorney as early in a corporate collaboration as possible. If you haven’t already, do it now. The sooner you get them involved, the lower the chances that you’ll find yourself in court with your own R&D partner burning resources litigating over IP ownership. 

DIY Prior Art Search? Yeah, You Can Do That.

Want to save some money and some frustration with a lawyer? Do some of your patent legwork up front with a DIY prior art search.

What is Prior Art?

Prior art is any article, publication, product, issued patent, or patent publication that’s publicly accessible before the filing date of your patent application (or up to one year before, with some caveats).

In terms of patent determination, prior art could very well be something out there that exactly mimics what your invention is trying to do. But even where there is not an exact match out there, you can still get a patent rejection. A patent examiner may find something that’s close enough to your product that they do not feel there’s enough of an inventive leap between what’s come before and what you’re trying to patent.

In these cases, an examiner will put together what’s known as an “obviousness rejection.” These obviousness rejections usually include an examiner picking two different pieces of prior art that are close enough to your invention that, when combined, disclose all aspects of your invention.

Why is a Prior Art Search Important?

To avoid these rejections, and make the most of your time with an attorney, it’s important that you do some prior art searching, ideally before you hire a lawyer.

Don’t think that “no one’s ever done this” or “no one else in the market is doing this.” There’s a very good chance that someone has done something very similar to what you’re trying to do and, if you’re only looking at the marketplace of products, you may be missing someone who’s currently out of business, or never got started, but who already tried to do exactly what you’re doing (or something very similar).

With a prior art search, you can look for all the hidden ideas that may result in a patent rejection, including the failed ideas, those that never made it to market and those that didn’t last long on the market. With a stronger understanding of the prior art in hand, you can more effectively convey the uniqueness of your idea to your patent attorney — for instance, why your invention will make a feasible or profitable product where others have failed in similar attempts to solve the same problem.

Tools to Use for a DIY Prior Art Search

The first thing you should start with is Google. Just see what kinds of products, articles, and academic papers are out there that might impact your invention or business. Dig deep. Look for the mom-and-pop shops and the tiny businesses.

Then, move on to patent searching. Google Patents is one of the easiest to use interfaces I’ve found and it’s even more useful than the patent office’s own interface. Google is constantly adding upgrades to the system and making it more and more efficient. Additionally, Google Patents is free to use, as is the U.S. Patent Office’s search tool. After performing searches using keywords, and especially a variety of synonyms of keywords, copy the abstract of a close prior art hit and paste this into the search field.

In general, your DIY prior art search should take five to 10 hours, and will save you thousands of dollars.

Tips for Your DIY Prior Art Search

The right mindset

Already be in the mindset that you’re going to find something. If you assume you’re not going to find your invention already out in the world, then chances are, your DIY prior art search will fail.

Even if you do find something, it doesn’t mean you can’t go to market. It just means you need to identify the reasons why your product will succeed and the existing attempt(s) failed. Doing a prior art search can actually help you identify important marketing distinctions in your own product or help you brainstorm improvements to your own idea. This makes your resulting patent more valuable, as you’re forced to ensure your product stands apart in a significant way.

If you start with this mindset, you have a much better chance of entering the right search terms and putting in the correct amount of effort when it comes to your prior art search. You really don’t want to talk to a patent attorney without some close prior art in hand.

The right words

Keep in mind that, even within a given industry, engineers describe inventions in vastly different ways. Attorneys, in many instances, come up with their own terminology within a patent. Use a thesaurus in your DIY prior art search to find instances of your invention being described in unique ways.

What to Do When You Find Similar Prior Art

Maybe your general concept has already been achieved and patented, but that doesn’t mean that the details to making it a winning product have been patented yet. That’s a distinction to think about. Again, just because you’ve found something during your prior art search, doesn’t mean you have to give up on your idea — you just have to make it better.

Once you’ve done some patent searching (whether or not you’ve found something) and you’re looking for your next steps, it’s time to talk to a patent attorney. If you come to an attorney having done your due diligence with the prior art search, you’ll have easily saved thousands of dollars of attorney fees, and more effectively described the heart of your invention.

Questions about protecting your intellectual property? Schedule a consult.

Can You Patent Faulty IP? Theranos Did, and It Made Them Rich.

The Theranos scandal made headlines last year. It gained a spot in nearly every respected publication, from podcasts to its own documentary. If you’ve somehow missed all the hoopla, here are the basics.

Elizabeth Holmes, a Stanford dropout, founded healthcare company Theranos in an effort to revolutionize blood testing. Theranos, based in tech-forward Silicon Valley, received high-profile investors and huge valuations from the beginning. In 2014, Holmes was named “the next Steve Jobs” and the youngest self-made female billionaire in the world. Theranos was valued at $9 billion.

Just the next year, though, Theranos began to come under fire from the medical community. In October, The Wall Street Journal published a report quoting ex-employees showing the company’s deception and overall ineptness. Retail deals folded. The FDA found the company used some uncleared medical devices. The CMS said Theranos labs were a threat to patient health and safety. More articles were published accusing Theranos of rigged tests.

Then, in 2018, the U.S. Securities and Exchange Commission charged Holmes with fraud and conspiracy. They said she and others made inaccurate claims about their technology in order to raise funds. This eventually spelled the end for the company.

From an IP standpoint, where did Holmes and Theranos go wrong?

Faulty IP is Approved By the Patent Office Far Too Frequently

One of the questions lawyers are asking when looking at the Theranos story is, was the IP valid? Or was there fraud on the IP and the patent office?

It’s a difficult question to answer and a bit of an inherent problem in the U.S. patent system. There is a legal requirement to both have a useful patent that has utility, and a patent that is enabled such that those of skill in the art can practice the invention if they read the patent. However, these legal requirements are rarely enforced.

This is partially due to examiners simply being too busy to properly examine each patent. Examiners have, on average, 10–20 hours to address an office action. This is not enough time to both address prior art and dig into the science of the technology detailed in a patent, to figure out if the technology will or will not work.

Even if the examiner did have time to do this, it would be very difficult to do so with the paperwork they’re given. In many instances, invention test results are necessary and then the examiner would need to examine those test results — a practice that’s far beyond the current capabilities of the patent office.

This is, at least in part, where Theranos fell short. They had a great, new idea, but it had not been verified to discover whether or not the technology would actually work.

Due Diligence Falls to the Investor

Since the Patent Office does not have the resources or ability to vet utility, investors have to be careful not to assume that patents provide a quick way to assess engineering viability.

Many companies suffer from the same problem Theranos had — inventors often file for and receive patents on prototypes before practical feasibility and manufacturability have been sussed out. Yet, many of these innovators have funding.

Since all founders are also required to be adept promoters of their technologies, investors have to do more than just assume that the existence of patents means they are buying into a viable product. Thoroughly reviewing patents is necessary to know what you’re dealing with and what kind of company you’re investing in.

Unfortunately, most investors do not invest in this part of due diligence, instead allocating their resources to the corporate side of an investment or M&A transaction.

And until this glossing over of IP during due diligence ends, Theranos-like companies will continue to pop up.

The Wizard of Oz Effect: Don’t Show Investors the Wizard Behind the Curtain

Theranos has been awarded more than 200 patents — a vast number that caused many to assume that the company was an innovation powerhouse. Anyone coming up with this many new innovations, investors assumed, had to be legitimate. Investors took the existence of these patents as proof of the technology’s credibility, rather than digging into the company’s actual technological success.

Of course, some of Theranos’ patents probably are legitimate, especially the ones Elizabeth Holmes wrote in the company’s early days. If Holmes had had more time to implement these early ideas, and wasn’t beholden to the five-to-ten year-exit timeline of most Silicon Valley funding sources, perhaps Theranos could have been a success and changed the world.

But in Silicon Valley, investors are expecting to see progress and exits in a short period of time. If your technology doesn’t advance as quickly as you hope, you can fail, or possibly, concoct false results to appease your investors.

Holmes chose the latter. And in this case, Holmes as a founder was a very good salesperson and cover-up artist.

Investors, who often look at a founder’s skills and demeanor over their actual technology, were looking at what they believed to be a uniquely gifted founder, allowing her to keep the ruse going for longer than less-talented visionaries could have.

Don’t Go Down the Theranos Path: Staying Legal While Attracting Investors

Attorneys have a responsibility to ensure that clients are engaging in ethical activities when submitting items to the patent office, and also when investors are looking at a potential technology to invest in. In the case of Theranos, it’s possible that the attorneys didn’t step up and perform this duty.

It’s extremely easy for inventors and clients to cross a thin line into illegality and fraud, and many don’t get caught. However, attorneys should have enough pride in their profession to step back and be willing to take a smaller paycheck in order to guide their clients along the straight and narrow.


Protecting Your Intellectual Property: Operating, Employment, and Founders’ Agreements

As soon as you bring other people into your business, you’re putting your intellectual property (IP) at risk. Whether that person is a co-founder or employee, no matter how good your relationship is with them, they pose a threat to your company’s IP.

The best way to ensure protection on all sides? Draw up an operating, employment, and/or founders’ agreement as soon as you bring another person into the mix.

Protecting IP Among Founders

The Thing About Founders’ Agreements…

Founders’ agreements are . . . uncomfortable. It’s like asking your spouse for a prenup. It’s the acknowledgment that something between founders might go wrong, that your relationship might not work out in the end.

How could you possibly have such a negative thought toward this person, your partner? Do you not trust them?

So much in business can change over the years. Regardless of your confidence in the relationship and trust of your business partner now, founders’ agreements are crucial from the start.

Say you have a business partner who comes up with an idea years down the road that drastically changes the direction of your company. Not everyone might agree with this partner’s vision or the value of that contribution.

Or, perhaps you have an instance where one business partner is putting in more effort and time into the company than the other. They may feel they deserve more in return.

Feelings change. Relationships change. Two founders can reach a point where they’re at odds. Having guidelines from the beginning is essential for dealing with these difficult situations.

Get It on Paper

Once you and your co-founders are in agreement that some sort of documentation is necessary to protect each party, there’s a lot to consider. Points that might come up include…

  • Intellectual property rights
  • Distribution of equity
  • Long-term company goals
  • Roles and responsibilities
  • Termination

Start by discussing these issues amongst yourselves, and once you are on the same page, it’s time to set up a meeting with your corporate attorney. The longer you wait to get operating and employment agreements in place, the harder it will be to come to a satisfactory agreement for all.

Protecting IP Among Your Employees

Who Does This IP Belong To?

Beyond agreements with your co-founders, it’s crucial to include IP clauses in your employment agreements with new hires

Within your operating and employment agreements, intellectual property can cover not only patents and trademarks, but also marketing materials, packaging, web presence, and business plans. Requiring confidentiality for all of this intellectual property and the requirement to assign all IP to the company ensures that all assets belong to the company and not to employees/founders that come and go (sometimes taking with them a piece of the IP that they can later leverage or hold ransom, if that IP has not been assigned).

If a member of your team has not assigned their intellectual property to the company, especially patents, and they walk out the door or are let go, key aspects of the company can be held hostage by this former employee’s continued rights in the IP. That former team member can ask however much money they want in exchange for assignment of the IP to the company.

Needless to say, requirements to assign IP in employment and founders’ agreements are anything but trivial.

Maintain Good Relationships

Employment agreements often ask for employees to give up quite a lot by agreeing to hand over any future intellectual development. Typically, blanket agreements ask each employee to relinquish all rights to future contributions, no matter how big or small. So, if an employee comes up with a remarkable discovery or invention after signing such an agreement, there’s no guarantee that they will be compensated for this contribution.

It’s important, then, to reward your team for those contributions. Often, an increased bonus is a great starting point, but sometimes a reward program in addition to year-end bonuses can create more effective incentives since an inventor does not have to wait until New Year’s to reap the rewards of their innovations.

Additionally, reward programs can include public acknowledgment (e.g., patent plaques, or box seats for the most innovative groups), since different employees respond to different incentives. A reward program can be as simple as movie tickets or a free dinner for smaller contributions, all the way up to thousands of dollars for a filed or issued patent.

Some companies do more, some companies do less, but even a small sign of appreciation goes a long, long way.

Within our practice, our most innovative and prolific clients are the ones with incentive programs in place.

Protecting Your IP Beyond Your Own Four Walls

In addition to protecting your intellectual property among your internal team, you need to consider extending protections outside your own walls.

Protect Brainstorming Sessions

While it might not be immediately obvious, protecting brainstorming meetings — particularly with individuals who do not fall under your employment, operating, and founders’ agreements such as joint development staff from another company — can be vital to your organization’s success.

For example, you might go into a brainstorming meeting with a partner company with solutions in hand. The other company’s staff may add some ideas during the brainstorming session and all of a sudden there is a disagreement as to who contributed what.

Without a provisional patent filing prior to the meeting, it can be very difficult to prove what ideas your team brought to the meeting.

Another protection? Record your meetings (with the other side’s permission). Most importantly, though, file for patent protection on any ideas that you take into the meeting.

Provisional patents can be filed in as short as 24–48 hours and for as little as a few thousand dollars. Then, put something in writing with the other party that explicitly states how intellectual property from the meeting is handled. Finally, any ideas that your team develops at the meeting should be provisionally protected within days of the meeting.

Will My NDA Protect Me?

In the instance above, a non-disclosure agreement (NDA) will also help dissuade the other side from publicly disclosing the information discussed in your brainstorming session or trying to patent it themselves. However, even an NDA is only as valuable as your ability/willingness to enforce it in court. Therefore, a combination of all of the above tactics is the best way to create a diverse defense against stolen ideas.

Know what kind of IP protection you need based on your company’s current status and the entities you’re working with (co-founders, employees, or colleagues) ahead of meeting with your attorney.

This preparation will not only save you time but legal fees as well, and you can get back to doing what you do best — creating innovative products and business solutions, knowing that your IP is well-guarded from all angles.

Design Arounds Could Be a Lifesaver for Your Next Product and Patent

Last summer, I was working on IP due diligence for a private equity group making a $50 million bid for an innovative and established company (whose product I actually saw recently on “This Old House”). The target company had spent hundreds of thousands of dollars over the past decade building a robust and broad patent portfolio.

Despite all that effort to protect their own products, we discovered a competitor’s patent that appeared to pose a risk to the target’s most lucrative product. What’s more, the competitor not only had really broad protection, but was a major player in the industry with deep pockets.

What was really saddening was that the target company’s CEO had long known about the risky patent. Despite having spent loads of money to protect his own products, he had decided, without input from his attorney, that this existing patent did not pose a threat. And because of this, he didn’t even disclose it during the due diligence.

When we discovered the patent on our own and came to a different conclusion regarding the risks than the CEO had, it largely sunk the deal.

It is a scenario that is fairly common in the intellectual property world: You have developed a new product or process and are prepared to seek a patent. There is just one problem — there’s a similar product or process already in the marketplace.

What now? Find a design around. This approach means that being second to market doesn’t have to mean scrapping your product.

What Is a Design Around?

A design around means developing your product with existing patents in mind and adding consumer value with new innovation.

The starting point for this process is a patent search. Although our clients are often experts in their industries, they may not have sufficient insight into the patent landscape of that industry. Many patents do not relate to a product that made it to market, but still may be held by a competitor. Some basic patent searching will begin to shed light on a design-around path.

It’s a task that your designers, developers, or product managers can undertake without formal training in patent search. Google has a very strong natural language searching interface and algorithms. I advise all clients to work this searching into their product development timeline.

The Danger of Skipping a Design Around Analysis

One of the most common things we see is a company choosing to proceed to market without doing their due diligence. It happens all the time.

In a lot of cases, it stems from the false assumption that no one else is pursuing the same innovations, but they often end up walking into a minefield because patents often protect ideas that have not been transformed into real products. So, doing internal patent searching or asking patent counsel to do some brief searching needs to be a part of your product development timeline.

And while internal searching is very helpful, that may not be enough for the most important products in your lineup. Patent counsel should always be looped into the effort.

I often find existing patents in a matter of minutes that clients weren’t able to find during hours of searching. Or, the client sees little risk in the claims of a patent that they find, but the legal analysis shows far more risk. In other cases, the client shies away from a product that could have been pursued with a stronger design around analysis from counsel.

Cost Analysis: Pay Now or Pay (Much More) Later

The cost of performing a more formal search and brainstorming design arounds with counsel is certainly a lot of money for any company that’s trying to bootstrap.

But, if you forego this and grow rapidly in your industry, there’s a good chance that you’ll run afoul of someone’s patent. There are just too many companies out there, too many people coming up with new ideas, to imagine that your innovation doesn’t have some similarities to an existing patent.

Don’t Be an Armchair Patent Attorney

I like to compare the armchair patent attorney to the DIY work I have done around my house.

I’ve done a lot of electrical and a little bit of plumbing. I learned how to do most of it by watching YouTube videos. What you find after you do enough work on your own home is that you can do those tasks when everything lines up with the way that YouTube portrayed the challenges.

But when you run into one of those situations where something comes up that didn’t match what you saw on YouTube, you’re clueless. And that’s when you burn down your house.
Similarly, in patent law, people reading things on the internet can get maybe 40% of the way to the finish line on their own. Most of the time, though, things come up that those resources do not prepare you to handle.

I’ve worked in this field for 10 years and I know all of the strategies to avoid making those mistakes. No one reading Wikipedia is going to be prepared for the unknown. More likely than not, they’re going to make mistakes and it is going to tank their patent and their company.

Questions about protecting your intellectual property? Schedule a consult.