Patents, trademarks, copyrights, and trade secrets are the four basic elements of what is known as intellectual property (IP). As the world becomes flatter and the human race grows more dependent on technology, the value of human creativity becomes more important to high-tech companies both globally and locally, especially in New Jersey.
Since 1968, when I was a patent examiner at the U.S. Patent Office, I have witnessed a number of major changes in U.S. and international IP law. Following are 10 recent, relevant trends that affect high-tech companies in New Jersey:
Trend 1: Intellectual property is becoming a larger part of the market value of publicly traded companies.
As one of the most developed nations in the world, the economy of the United States over the last 50 years has become less and less driven by needs-based commodities. The economy of the United States, and in turn, New Jersey, is increasingly dependent on the ownership and marketing of ideas, that is to say intellectual property.
A patent gives its owner a 20-year monopoly over the patented invention and the market value of intellectual property. Intangible assets (leases, customer lists, etc.) has increased from approximately 29 percent to 79 percent from 1975 to 2005 for the Standard and Poors 500 companies.
For companies such as Microsoft and Google, the percentage of market value attributable to intellectual property and intangible assets is at least 95 percent. All of which means that investors are placing an increasingly high value on intellectual property.
Trend 2: “First to Invent” is probably dying in the United States. It is dead everywhere else in the world.
The United States is one of the few countries in the world where the first individual to invent may be granted a patent even if that individual is the second person to apply for a patent in the United States. In virtually all other countries, the first individual to apply is the person who gets the patent.
Because there is a tremendous amount of pressure on the United States to harmonize its laws with foreign countries, it appears likely that the “first to invent” rule will end up in the great dustbin in the sky within the next five to 10 years. This will probably encourage inventors to file patent applications as soon as they can and will likely result in more patent applications filed in the U.S. Patent Office.
Trend 3: Most applications now are based upon provisional applications, followed by Patent Cooperation Treaty and National Phase Applications.
The patent system has changed dramatically. In the old days it was relatively simple. A patent search was commenced to seek out similar inventions. If the results of the search were encouraging, a U.S. patent application was filed. If the inventor wanted to obtain international patent rights, then foreign patent applications had to be filed within one year of the U.S. patent application filing date.
Today many inventors file a less expensive provisional patent application, and within a year of the filing date they file a Patent Cooperation Treaty (PCT) application. Generally, national phase applications in countries such as the United States, Europe, and Japan are filed within 30 months of the initial provisional application filing date. The patent application process has thus become more complicated, but it has also provided the opportunity to lower costs by increasing the number of options available to the inventor.
Trend 4: There is an increased demand on the U.S. Patent System.
When I left the U.S. Patent Office in 1972 there were fewer than 1,000 U.S. Patent examiners. There are now more than 3,400. Thirty years ago it was not uncommon for patent attorneys to know many U.S. patent examiners by name. That is almost impossible now due to the explosion of high technology. Because finding U.S. patent examiners who have a high tech background has become extremely difficult, many of the newly hired examiners are from overseas. For many of these examiners English is their second language.
Trend 5: Business method patents and software patents are increasingly under attack and increasingly harder to get.
Modern folklore suggests that the U.S. Patent Office encourages business method patents (those that claim new methods of doing business) and software patents. That is not the case. The U.S. Patent Office has never cared for either, but has had to cope with them because the courts have forced them to do so. Due to the negative public reaction to many business method patents, the U.S. Patent Office has made these more difficult to obtain. For example, business method patents are the only area of the U.S. Patent Office where applications are examined twice by different examiners.
Trend 6: It will be harder to get U.S. patents in the future.
Not only is it harder to get business method patents and software patents, it is now getting more difficult to obtain traditional utility patents. A few years ago the U.S. Supreme Court issued the Festo decision, which requires inventors to identify all alternative embodiments that are covered by his or her patent claims. If those embodiments are not described in sufficient detail, then the claims and the related patent are deemed not to cover the alternative embodiments.
More importantly, the U.S. Supreme Court issued the KSR decision in April, 2007, which effectively gives U.S. patent examiners broader powers to make a determination that an invention is “obvious” and, therefore, unpatentable.
Trend 7: Intellectual property is becoming more international.
As far as patents, trademarks and copyrights are concerned the world is definitely getting flatter. Approximately 47 percent of all patents filed in the United States come from overseas. As the dollar weakens it becomes cheaper for foreign companies to file their patents in the United States. In addition, new international conventions, such as the Madrid Protocol, make it easier to file U.S. trademark applications worldwide.
Trend 8: New Jersey is still a leader in intellectual property — but is very slowly losing its top tier status.
In 2007 U.S. patents were issued to 3,185 residents of New Jersey, placing the state eighth in the country in terms of issued patents. It used to rank higher. That number is not terrible, however, compared to the 2,980 patents issued to residents of Pennsylvania, given the fact that Pennsylvania is substantially larger. Pharmaceutical and biotech companies have a strong presence in New Jersey.
There has been a modest expansion of biotech companies in New Jersey even during the recent economic slow-down. In addition, there are a large number of non-biotech high-tech companies including approximately 2,700 software companies. In short, New Jersey does very well in high-tech, but it is slipping out of the top 10.
Trend 9: Most good trademarks are taken.
It has become progressively harder to obtain a U.S. trademark. There are approximately 3.3 million trademarks in the U.S. Trademark Office database and only 30,000 words in the typical English vocabulary, which means that the average English word shows up over 100 times in the U.S. Trademark Office database. This makes it increasingly difficult to obtain and police a trademark that is used in everyday speech. Accordingly, there is a greater trend toward fictitious or suggestive trademarks such as eBayr or TiVor.
Trend 10: Almost all good URLs are taken.
As of 2007, there were 47 million issued domain names. Therefore, nearly every recognizable English word has been taken. Clients are continually amazed how often words that they want to use as domain names are unavailable. Accordingly, a lot of thought should go into the selection of a domain name. Care should be taken when selecting a domain name to avoid including someone else’s registered trademark. Also, individuals should be resigned to the fact that they are not as likely to get a simple domain name as they could five or 10 years ago.
Richard Woodbridge is a partner at Fox Rothschild, headquartered at 997 Lenox Drive, and has been involved in intellectual property law for more than 40 years. A native of Princeton, Woodbridge has a BS in electrical engineering from Princeton and a JD from George Washington University, which he earned in 1971. He has been in practice in the area since the 1972, specializing in computers, communications, and software.
Woodbridge ran his own law firm until 2003, when he merged it with Synnestvedt and Lechner. Last month Synnesdvedt, Lechner, and Woodbridge merged with Fox Rothschild.