Patently true: understanding patent liability is the key to protecting your company against unfair competition

An understanding of patent and trademark laws isn't just something that's nice to have, it can save your company and protect your idea people.

These laws--and the lawsuits that swirl around them--have been in the news for some time now, and the furor shows no signs of abating. It's vital that designers, manufacturers and inventors familiarize themselves not only with these cases, but with the fundamentals of law that brought them to court. That's where this article comes in, offering some basics on a topic of keen interest to all industry innovators.

Property rights

Though it is possible to unknowingly violate a patent when bringing a new product to market, ignorance is no excuse in the eyes of the law. Dennis Ruis, vice president of Sta-Rite based in Delavan, Wis., has learned that research is the key to avoiding potential lawsuits.

"Once the design is finished, we'll do a patent search," Ruis says. "We have in-house counsel and outside counsel. My corporate counsel has a significant background in intellectual property."

Patents can apply to products, processes, designs and chemicals, according to Steven Getzoff, partner at the firm of Lester Schwab Katz & Dwyer in New York and an NSPI attorney. "Patents can be claimed on designs or patterns or a manufacturing process, such as in polymer science," he says.

The usual duration of a patent is 17 to 20 years, which gives an inventor enough time to profit from his or her new technology. Meanwhile, the patent application, which includes detailed information about the research that led to the invention, is published only 18 months after the patent is filed. This allows competitors an inside look at the new technology, and the opportunity to duplicate and expand upon the patent holder's work. The technology the patent once protected then becomes part of the public domain. It is here that trademark law takes over.

Trademark liability law does not protect intellectual property the same way patent law does. By registering a trademark, an inventor is guaranteed the right to develop a brand name that can never be copied. Trademark infringement occurs when a competitor is found to have attempted to "trick" consumers into buying their product by packaging it in a way similar to that of the company owning the trademark.

A global concern

Many patent and trademark infringement claims are leveled by U.S. companies against competitors who manufacture "copycat" products in other countries. While a respect for U.S. patent and trademark liability laws is built into the trade agreements our government makes with other countries, violations that occur outside our borders are much more difficult to enforce.

"The United States controls the goods flowing into the country and those manufactured by a process patented here," says Richard C. Seltzer, partner at Kaye Scholer, LLP, in New York. "If the process is patented, you are now prohibited from shipping the product made by the patented process into the United States. To be a trading partner, they must honor our laws. If they want to sell here, they enforce the laws enough to create a perception that they're enforming the laws, but it's mostly for show:"

Because international trade is exploding with the evolution of the global economy, the manufacturing capabilities of China and other nations are approaching those of America. In the near future, manufacturers and inventors may find new challenges in their efforts to establish patents and trademarks--and enforce them. Still, companies and inventors in the pool and spa industry can take heart in the victories that have been won so far.

The cost of innovation

What effect does a trend toward more patent litigation have on prices? In the charts below, a basic supply and-demand curve is used to illustrate how the costs associated with filing for more patents--and the associated attorneys' fees--can affect the cost of bringing more products to the market.

In Chart 1, we see that as demand for innovation decreases, the cost of innovation increases. At the axis of these values lies a natural equilibrium--in other words, the true market value of new products and technology, in Chart 2, this equilibrium has shifted. The cost of innovation has risen and now meets the demand curve at a higher point. The result? Less innovation ... at a higher cost.

Source: Continuing Legal Education Institute

COPYRIGHT 2004 Hanley-Wood, Inc.
COPYRIGHT 2004 Gale Group