New US law is patently bad news for inventors

On March 18th, 2010, an Apple engineer left what looked like an iPhone 3 in a German beer garden in Redwood, California. Another patron later picked it up from a barstool. The next morning, the phone didn't work (having been disabled remotely) but the finder realised the device looked and felt a bit odd. He was able to remove the exterior, revealing a shiny prototype for the new iPhone 4 – a product Apple wasn't intending to announce for months.

Up until that March evening, Apple had been notoriously successful at concealing its new designs. It would wait until just before unveiling a new product design to file a corresponding design patent application. For instance, Apple filed applications for the original iPhone only four days before it was announced in 2007; for the original iPod in 2001, the filing was one day before release.

The finder of the iPhone 4 tried calling Apple to return the phone, but no one called him back. About a month later, he sold the device to a website, which disassembled it, took pictures, and posted them on the Internet. But after the photos were posted, Apple’s lawyers jumped into action. That same day, Apple sent a letter to the website asking for its property back and filed a design patent application with the US Patent and Trademark Office (PTO). Filed at 11:55pm that night, US Design Patent D627,778 was eventually issued covering the design of the iPhone 4. All’s well that ends well.

Had this story played out in the past few weeks, it might not have had the same happy ending. On September 16th, 2011, the America Invents Act (AIA), a major modification to the Patent Act, was signed into law, making the kind of “public disclosure” the iPhone 4 experienced a real impediment to an inventor’s securing a patent.

Prior to the act, inventors in the US had a one-year grace period for all activities including sale, use, and public disclosure. In other words, a design could be shown, used, or sold and the inventor could still secure patent rights, provided that the application was filed within one year of the disclosure. This grace period is why Apple was still able to secure rights in the iPhone 4 and, importantly, also preserve rights in foreign countries.

As part of the AIA, on March 16th, 2013, the US adopted a first-inventor-to-file regime. Under this regime, a public disclosure (including publication, sale, or public use of a complete product design without filing for a design patent protection beforehand) will constitute a dedication of that design to the public, including competitors. The AIA includes a limited one-year grace period for certain disclosures by the inventor or obtained from the inventor; however, the exact boundaries of this grace period are uncertain and the federal courts will take many years to define them.

If the iPhone 4 scenario occurred today, under the new AIA, there would be many questions with unknown answers. For instance, did the finder or the website “obtain” the design from the inventor at Apple? Or does the fact that the engineer lost the prototype in public somehow break the disclosure chain back to the inventor?

It will be the patent applicant’s burden to prove that the grace period should apply and that a patent should issue despite a public disclosure. It’s worth noting that appeals from an adverse decision by the examiner can take as much as four years. Thus a company could be forced to decide whether it should risk investing in a design that it may not own and anyone could use. Should a patent be granted and these types of disclosures come to light later, an accused infringer would surely raise similar issues in litigation. Uncertainties could drag on for years.

While it may seem unfair, unauthorised public disclosures have destroyed patent rights in the past. The PTO has invalidated design patents based on photographs taken without permission. Automobile trade magazines have a long history of covertly photographing new car designs on the test track and publishing the photos. In 2010, the PTO found a Ford design patent for a truck grille was not patentable, because of a poorly lit, partially obstructed view from a spy photo published in a trade magazine.

Spy photos and lost prototypes are only the tip of the iceberg. Typically, the launch of a new product design includes market research, independent testing, previews to select retailers and journalists, and discussions with suppliers about how to manufacture the proposed design. While some of these activities may be protectable under confidentiality agreements, in light of the AIA, this area of the law is far from clear.

Companies who rely on innovative product design to separate themselves from their competitors must effectively manage these risks. Some may be reluctant to file for a design patent application until a design is final, but waiting to patent until a design is “tweaked” may create more problems than it solves. Under the AIA, if a design is released to the public (and not later patented), then the public design could be used to deny a patent to the later “tweaked” design. But a company’s own pending designs cannot be used against it, if the new designs are filed before the pending designs are published – currently when the design patent issues.

In the post-AIA world, the best practice is to follow Apple’s standard procedure and apply for a design patent before any type of release outside the company. And if you’re considering releasing more than one possible design, file design applications on all of them in order to avoid creating problems later. The additional upfront costs will be negligible compared to the costs – and time, and angst – of replacing an unprotected design later on.

(– New York Times News Service)