Header graphic for print

WinTech

Legal Insight for Start-Up and Established Technology Businesses

Hiring Consultants

Posted in Technology Transactions

Technology companies receive services from a variety of individuals and often use consultants, either for marketing advice, for software development or for other discreet tasks. It’s important to be sure the consultants are properly classified as such (in which case, they are “independent contractors”) and that they should not be classified as employees. If you fail to make the correct classification and treat employees as independent contractors, your company could be liable for a wide variety of claims, including employee benefits, overtime pay, workers’ compensation insurance, back taxes, interest and penalties. Moreover, in some cases, this liability may extend to you personally and not just to your company.

The IRS and the Department of Labor have each developed a list of factors that play a part in determining whether a “consultant” is an independent contractor or an employee. Based on whether enough of these factors are present, a determination is made on a case-by-case basis. Some of the factors are:

  •  Independent contractors do not have to follow specific instructions about how to accomplish the task they are charged  with. They only have to deliver the result.
  •  Independent contractors don’t receive training from the company.
  •  Independent contractors may hire employees or subcontractors to complete the job.
  •  Independent contractors can set their own hours and perform their duties at any location; or, if the independent contractor works at the company’s office, he or she is not under the supervision and control of the company.
  •  Independent contractors typically engage in projects other than the one they are engaged in for your company.

Typically, a company would prefer to classify a worker as an independent contractor rather than an employee. There are a number of reasons for this, including:

  •  With an independent contractor, a company is not required to withhold income taxes, withhold and pay in Social Security and Medicare taxes, or pay unemployment tax for employees.
  •  Independent contractors are not entitled to “time and a half” for overtime as certain employees are.
  •  The company does not provide an independent contractor with any benefits, such as health insurance, vacation, etc.
  •  Independent contractors typically use their own facilities and equipment, making it less expensive for the company to complete a specific project.

There are also disadvantages to hiring someone as an independent contractor rather than as an employee, including the following:

  •  A company does not have control over the manner in which the work is performed – the independent contractor simply has to complete the designated project.
  •  Independent contractors are free to change their rates as they see fit on future projects or to decline to take on future projects.
  •  Independent contractors will not take on a variety of additional duties and many small companies need people who can “wear many hats.”
  •  Independent contractors do not have a “duty of loyalty” to the company, as an employee does. This duty impacts a person’s overall behavior vis-à-vis the company and its business and can be very important to the company’s success.

There is a significant risk to misclassifying employees as independent contractors. If the mistake is discovered, the company will be required to pay back taxes and interest and, in many cases, will also be required to pay penalties. Moreover, under certain circumstances, the executives of the company will be personally liable for these taxes, penalties and interest.

Structuring an Agreement Among Owners

Posted in Technology Transactions

When forming a new technology company, there are very few documents as important (and unfortunately, as overlooked) as a Shareholders’ Agreement. The discussion in this post is couched as an agreement among shareholders of a corporation but the same principles apply to members of a limited liability company and partners of a partnership.

The founders of a company rarely have differences of opinion, nor are the relationships among the shareholders acrimonious, at the beginning of a new venture; however, as time passes, divergence of opinions often arise and various events can (and do) occur that cause reasonable minds to differ. A Shareholders’ Agreement is an effective way to handle these situations.

Here are some (but not all) of the provisions that a Shareholders’ Agreement should include:

A. Right of First Refusal. Every Shareholders’ Agreement should contain a right of first refusal, in case one of the shareholders receives an offer from a third party to purchase his or her stock. If there are more than two shareholders, each non-selling shareholder usually may purchase his or her pro rata portion of the shares. The right of first refusal is an equitable way to permit a shareholder to cash out, but to protect the company and other shareholders from having unwanted shareholders.

B. Transfer Upon Death, Dissolution or Liquidation. In contrast to the voluntary transfer described above, involuntary transfers may be triggered by a shareholder’s death, divorce or bankruptcy. In each instance, a company may end up with undesirable shareholders. The Shareholders’ Agreement should give the company and the other shareholders the option to buy the shares on these occurrences.

C. Election of Directors/Voting Agreements. A Shareholders’ Agreement sometimes provides how many Board seats there will be and who has the right to be elected to these seats.

D. Preemptive Rights. “Preemptive rights” refers to the right of a shareholder to purchase enough shares to maintain his percentage ownership in the company if the company issues additional shares. A preemptive rights provision is also sometimes included in a Shareholders’ Agreement.

E. Purchase Upon Termination. If shareholders of the company are also employees, provisions giving the company the option to purchase their shares when their employment ends, either voluntarily or involuntarily, are important.

F. Proprietary Information/Non Competes. Shareholders’ agreements should require that all shareholders will maintain the company’s proprietary information in confidence. In addition, a Shareholders’ Agreement should include a provision that all intellectual property relating to the business of the company created by the founders, either before or after the creation of the company, will belong to the company. Finally, a shareholders’ agreement should prohibit the shareholders from competing with the company while they own an interest in the company and the shareholders should consider whether the non-compete should extend to some reasonable period of time, scope and geographic area after they no longer hold an interest in the company.

There are numerous other provisions that may be included in a Shareholders’ Agreement, including provisions relating to a company’s S-corporation status (if applicable), unanimous board/shareholders’ approval for certain events, co-sale rights, “tag along/drag along” provisions, and other corporate governance type provisions. The provisions of the Shareholders’ Agreement should be reviewed closely with your attorney.

 

Beware of IP Scams-Invention Development

Posted in Development & Commercialization of Technology, IP Counseling and Strategies, Technology News & Events, Technology Transactions

Information about patent and trademark applications, processes and maintenance requirements is much more accessible to the public than it used to be.  In particular, the United States Patent and Trademark Office (USPTO) has very good information available (www.uspto.gov).  Surprisingly, patent attorneys continue to find the same faulty understandings and confusion about the patent and trademark processes.   Not surprisingly, in view of the confusion, there are many scams focused on taking advantage of inventors.   The following advice has been derived from several initiatives the USPTO has directed to advising the public about common scams, in particular about invention development companies.

TOP TEN SCAM WARNING SIGNS

1.       Slick ads on radio, TV and magazines.  [These are the first "hooks".]

2.       Refusal to respond to your questions in writing signed by a company official. [Legitimate companies will provide the answers in writing.]

3.       Salespersons want money right away …up-front.

4.       You are told to describe your idea in writing, mail it to yourself and don’t open the envelope. [This is worthless advice.]

5.       You are promised a patent search but no patentability opinion by a patent attorney/agent. [This should be provided to you.]

6.       You are guaranteed to get a patent or your money back. [No one can guarantee issuance of a useful patent.]

7.       You are advised to apply for a design patent. [This type of patent has limited applicability to many inventions.]

8.       You can’t reach salespeople of company officials without leaving many messages [Maybe there is no real office location or company.]

9.       You are told that your idea is a “sure-fire” hit! [Probably every client of this company is told that. Be skeptical.]

10.     Refusal to provide client references or copies of forms and agreements for your review. [Get at least five names to contact and show the forms to an attorney before signing.]

          The prevalence of scams and fraudulent invention disclosure firms has been such a problem that the federal government has formally addressed it.  The FTC has investigated, fined, and permanently enjoined some companies and individuals from the business of “invention development.  The USPTO advises inventors to always check the reputation of invention promoters/promotions firms before making any commitments, and to remember that not all invention promoters/promotion firms are legitimate. Inventors thinking about using one of these firms should ask for references from their current clients and check the firm’s reputation by:

  • Looking for complaints listed on the FTC or USPTO web site
  • Consulting the Better Business Bureau
  • Consulting the Chambers of Commerce in your area

While the USPTO does not investigate complaints or participate in any legal proceedings against invention promoters/promotion firms, under the American Inventors Protection Act of 1999, the USPTO does provide a public forum for the publication of complaints concerning invention promoters/promotion firms. Also, in the forum, the USPTO publishes responses to the complaints from the invention promoters/promotion firms.

The USPTO accepts complaints filed against invention promoters/promotion firms and forwards these complaints to the invention promoters/promotion firms for response. Both the complaints and the responses are published in the public forum so that they are publicly available. The USPTO does not accept complaints submitted under this system if the complainant requests confidentiality.

Additional information can be found at the following links

THE MIS-“CONCEPTION” OF BEING AN INVENTOR

Posted in Patent Counseling & Strategies

Scientists often confuse “authorship” in a manuscript with “inventorship” in a patent application or a patent.  More often than not, scientists will list everyone involved with an invention or a manuscript describing the invention, as inventors while filing a patent application.  These include individual(s) involved in determining whether the invention works, writing the analysis, or supervisors.  However, inventorship in a patent bestows exclusive property rights to patent holders as reward for innovation and therefore, there are strict legal requirements for who qualifies as an inventor for a patent.   Incorrect inventorship on a patent can jeopardize the validity of the patent.  On the point of inventorship, in the case of Pitts v. Hall (2 Blatchf., 229), Judge Nelson said:

“A person, to be entitled to the character of an inventor, within the meaning of the Act of Congress, must himself have conceived the idea embodied in his improvement.  It must be the product of his own mind and genius, and not of another’s.”

Conception is more or less the “touchstone of inventorship.” A person is deemed to be an inventor of the subject matter of a claimed invention if he conceives of it.  Conception is defined as “the complete performance of mental part of the inventive act….” Coleman v. Dines, 754 F.2d 353, 359 (Fed. Cir. 1985).  Where the original conception is complete, a practitioner is able to reduce the invention to practice with nothing more than routine skill.  In such a scenario, the contributor to the conception of the claimed invention, and not the practitioner, who reduces the invention to practice, is an inventor.  Under these criteria, not all authors of a manuscript describing the invention may qualify as inventors on a patent application or a patent. In today’s collaborative environment, where teams of people work to produce a “joint invention”, these rights and restrictions take on new significance.

From time to time, inventorship on a patent application may have to be reviewed because of changed circumstances.  For example, if during prosecution of a patent application, the claims containing an inventor’s contribution are cancelled, then the listed inventor may no longer be an inventor on the patent application.  Inventorship errors are more difficult to correct in issued patents than in pending applications and require the cooperation and consent of all inventors and assignees.  Thus errors involving inventorship should be addressed as early as possible.  The AIA has streamlined the process for correcting inventorship and made it much easier to correct such errors.  Specifically, AIA removes the requirement of proving an absence of deceptive intent for correcting inventorship.  Additionally, the consent of an assignee is no longer needed.  However, an intentional failure to name inventor(s) by anyone associated with patent prosecution, including the named inventors, may result in a finding of unenforceability due to inequitable conduct against the named inventor(s).

An omitted inventor also has several options for correcting inventorship.  The omitted inventor can choose to file a written third party protest against the other inventors’ application alleging fraud or incorrect inventorship or file their own application to provoke an interference proceeding.  Finally, the unnamed inventor can also choose to file an action in district court to correct inventorship.  However, a presumption of laches applies to any action brought after 6 years from the date that the patent issued.

1. 35 U.S.C. § 116

2. 35 U.S.C. § 256

3. 35 U.S.C. § 262

4. 37 C.F.R. §  1.48 (a) – (f)

5. 37 C.F.R. § 1.291

6. Fina Oil v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997).

7. Coleman v. Dines, 754 F.2d 353, 359 (Fed. Cir. 1985).

8. Burroughs Wellcome Co. v. Barr Lab., 40 F.3d 1223, 1229 (Fed. Cir. 1994).

9. Perspetive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315, 56 U.S.P.Q.2d 1001 (Fed. Cir. 2000).

10. Frank’s Casing Crew and Rental Tools v. Pmr Techs., 292 F.3d 1363, 63 U.S.P.Q.2d 1065 (Fed. Cir. 2002).

Patent Definiteness Requirement Update

Posted in Definiteness/Indefiniteness, Intellectual Property Litigation

The Supreme Court recently “conclude[d] that the Federal Circuit’s formulation, which tolerates some ambiguous claims but not others, does not satisfy the statute’s definiteness requirement.” Nautilus, Inc. v. Biosig Instruments, Inc., No. 13-369 (2014). Instead, the Court concluded that “a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.”  Id, at 1.

Under 35 U. S. C. §112, ¶2, the Patent Act requires that a patent specification “conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as [the] invention.” Prior to Nautilus the Federal Circuit has stated that “a patent claim passes the §112, ¶2 threshold so long as the claim is ‘amenable to construction,’ and the claim, as construed, is not ‘insolubly ambiguous.’” Nautilus, Inc., at 1. However, it was noted Nautilus that it “cannot be sufficient that a court can ascribe some meaning to a patent’s claims; the definiteness inquiry trains on the understanding of a skilled artisan at the time of the patent application, not that of a court viewing matters post hoc. To tolerate imprecision just short of that rendering a claim “insolubly ambiguous” would diminish the definiteness requirement’s public-notice function and foster the innovation-discouraging ‘zone of uncertainty’…”  Id, at 12.

In reaching its conclusion that “a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention,” the Court noted:

First, definiteness is to be evaluated from the perspective of someone skilled in the relevant art.

Second, in assessing definiteness, claims are to be read in light of the patent’s specification and prosecution history.

Third, “[d]efiniteness is measured from the viewpoint of a person skilled in [the] art at the time the patent was filed.”

Id, at 8-9.

 

Alice in Wonderland: The Ongoing Impact of Alice Corp. v. CLS Bank Int’l on Computer-Implemented Inventions

Posted in Biotechnology, Development & Commercialization of Technology, Nanotechnology, Patent Counseling & Strategies

On June 19, 2014, the U.S. Supreme Court issued a unanimous decision in Alice Corp. v. CLS Bank Int’l (Alice)[i].  In Alice, the Court held that several patents that pertained to a computerized platform for eliminating risk in conducting financial transactions between two parties were ineligible for patenting under 35 U.S.C. §101[ii].  The Court reasoned that the patents were merely drawn to an abstract idea of intermediated settlement that utilized a “generic computer implementation.”

In response to the decision, the United States Patent and Trademark Office (USPTO) issued preliminary examination instructions to patent examiners for determining the patent eligibility of computer-implemented inventions involving abstract ideas (Guidelines)[iii].  The Guidelines indicated that patent examiners can utilize a two-part analysis for evaluating the patent eligibility of abstract ideas.  First, examiners must “determine whether the claimed invention is directed to an abstract idea.”  Second, if an abstract idea is present, the examiners must determine whether the claimed invention is sufficient to ensure that it amounts to “significantly more than the abstract idea itself.”[iv]

Since the issuance of Alice and the Guidelines, the USPTO and the lower courts have challenged numerous computer-implemented inventions.  For instance, the USPTO has withdrawn the notice of allowances for several patent applications that were deemed to be patent ineligible in view of Alice.  Likewise, several lower court decisions have relied on Alice to invalidate computer-implemented patents.  Some examples of these court decisions are summarized below:

  • Digitech Image Technologies v. Electronics for Imaging, Inc., et al., C.A. No. 2013-1600-1618 (U.S. Fed. Cir., July 11, 2014). A patent that utilized a computerized system to ensure that images displayed consistently on different kinds of devices (e.g., computer screens and printers) was held to be invalid because the computer-implemented processes were allegedly abstract ideas that could have been performed by human beings.
  • Planet Bingo, LLC v. VKGS, LLC, C.A. No. 2013-1663 (U.S. Fed. Cir., August 26, 2014).   Patents relating to the implementation of a bingo game on a computer were held to be invalid because the processes were allegedly directed to abstract ideas (i.e., mental steps) that could have been performed by human beings through the use of “pen and paper.”
  • Buysafe, Inc. v. Google, Inc., C.A. No. 2013-1575 (U.S. Fed. Cir., September 3, 2014).  A patent directed to methods and machine-readable media encoded to perform steps for guaranteeing a party’s performance of its online transaction was held to be invalid because the methods and media were allegedly directed to an abstract idea.
  • Dietgoal Innovations, LLC v. Bravo Media LLC, C.A. No. 13 Civ-08391-PAE (U.S. Dist. Ct., S.D.N.Y, July 8, 2014).  A patent relating to the use of a computer to plan meals and achieve diet goals was held to be invalid because the process was directed to an abstract idea that could have been performed by human beings.
  • Comcast IP Holdings, LLC v. Sprint Communications Company L.P., et al., C.A. No. 12-205-RGA (U.S. Dist. Ct., Del., July 16, 2014).  A patent relating to a computerized telecommunications system that checked with a user before deciding whether or not to establish a new connection was held to be invalid because the process was allegedly directed to an abstract idea that could have been performed by human beings.
  • CMG Financial Services, Inc. v. Pacific Trust Bank, F.S.B., C.A. No. CV-11-10344 PSGA (U.S. Dist. Ct., C.D.CA., August 29, 2014).   A patent on a method of paying down a mortgage early when funds are available and then borrowing funds as needed to reduce the overall interest charged by the mortgage was held to be invalid  because the process was allegedly directed to an abstract idea.
  • Loyalty Conversion Systems v. American Airlines, Inc. et al., C.A. No. 2:13-CV-655 (U.S. Dist. Ct., E.D.TX., September 3, 2014). Patents on computer-implemented systems for converting reward points from one store to another store was held to be invalid because the process was allegedly directed to an abstract idea without any significant additions.
  • Walker Digital, LLC v. Google, Inc., C.A. No. 11-318-LPS (U.S. Dist. Ct., Del., September 3, 2014).  Patents directed to systems and methods for controlling the release of confidential or sensitive information in anonymous communications was held to be invalid because the systems and processes were allegedly directed to abstract ideas.
  • Tuxis Tech v. Amazon, C.A. No. 13-1771-RGA (U.S. Dist. Ct., Del., September 3, 2014).  A patent directed to a computerized process for individualizing up-selling based on the identities of the purchaser and the product to be purchased was held to be invalid because the process was allegedly directed to an abstract idea.
  • Eclipse IP, LLC v. McKinley Equipment Corporation, C.A. No. CV-14-154-GW(AJWx) (U.S. Dist. Ct., C.D.CA., September 4, 2014).  Patents directed to computer-implemented systems for asking people to perform tasks and monitoring the performance of those tasks were held to be invalid because the systems were allegedly directed to abstract ideas.
  • Every Penny Counts, Inc. v. Wells Fargo Bank, N.A., C.A. No. 8:11-CV-2826-T-23TBM (U.S. Dist. Ct., M.D.FL., September 11, 2014).  Patents directed to methods and systems for automated saving or automated charitable giving were held to be invalid because they were allegedly directed to abstract ideas.
  • McRO (Planet Blue) v. Activision Blizzard, et al., C.A. No. CV-14-336-GW(FFMx), (U.S. Dist. Ct., C.D. CA., September 22, 2014).  Patents directed to computer-implemented methods of automatically animating lip synchronization and facial expression of animated characters were held to be invalid because they were allegedly directed to abstract ideas.
  •  Open Text v. Alfresco Software, C.A. No. 13-CV-04843-JD (U.S. Dist. Ct., N.D. CA, Sept. 19, 2014).  A patent directed to a computer readable storage medium for facilitating a network based dialogue with customers was held to be invalid because it was allegedly directed to an abstract idea.

The aforementioned developments could make it easier to challenge inventions directed to software, computer implementations, and business methods.  However, it is doubtful that all software, computer-implemented and business method inventions will be affected by Alice.  For instance, software inventions that improve the functioning of a computer may still be eligible for patent protection.  Likewise, software inventions that improve other technical fields may also be eligible for patent protection.  Nonetheless, the full effect of Alice remains to be determined.


[i] Alice Corporation Pty. Ltd. v. CLS Bank International, et al., 573 U.S. ___, No. 13-298 (June 19, 2014).

[ii] 35 U.S.C. §101 states that, “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  Judicial exceptions to what constitutes patent eligible subject matter have included “abstract ideas,” “laws of nature,” and “natural phenomena.”

 [iii] June 25, 2014 Memorandum issued by Andrew H. Hirshfeid, Deputy Commissioner For Patent Examination Policy, to the Patent Examining Corps, entitled “Preliminary Examination Instructions in view of the Supreme Court Decision in Alice Corporation Ply. Ltd. v. CLS Bank Illternational, et al.”  http://www.uspto.gov/patents/announce/alice_pec_25jun2014.pdf

 [iv] A prior WinTech blog post provides a summary of Alice and the Guidelines.  See: http://www.wintechblog.com/2014/07/are-computer-implemented-inventions-patent-eligible-go-ask-alice/

Adam Carolla Gets It On with Personal Audio Settlement

Posted in E-Commerce (Internet Agreements and Issues), Intellectual Property Litigation, Technology News & Events

As part of their settlement, Adam Carolla and Personal Audio LLC agreed to not make any public statements concerning their patent infringement lawsuit until September 30th.[1]  On Wednesday’s podcast, Adam Carolla and Mike August, a former attorney, discussed the lawsuit and the settlement that was reached between Carolla and Personal Audio.[2]

Personal Audio had filed their lawsuit against Carolla in January of 2013, and the trial was scheduled for this past September in the Eastern District of Texas.  Carolla and August revealed that when the discovery phase of the lawsuit started around March 2014, about $100,000 a month was spent on legal fees during the four months of discovery.

The approximately $475,000 that was crowdfunded through the internet for Carolla’s litigation expenses has since been exhausted.  Carolla estimates that about $650,000 to $675,000 has been spent on defending the lawsuit, and Carolla needs to raise an additional $200,000 to pay for the incurred litigation expenses.  If Carolla had allowed the lawsuit to go all the way to trial, August estimates that it would have cost an additional $750,000 to $1 million.

For both Carolla and Personal Audio, it was not in their economics interests to incur additional litigation expenses in light of the low amount of damages that was at stake.  According to August, Personal Audio was willing to dismiss the case if Carolla would “shut up” about their lawsuit because Carolla was “killing the jury pool” for Personal Audio’s other lawsuits filed in Texas against CBS and NBC.

Since the settlement was first announced, Carolla has been criticized for going against his words by settling with Personal Audio.  Carolla, however, explains that the “settlement” does not involve any payment to Personal Audio, and he considers the settlement to be a victory for him and other podcasters that are not economically desirable for Personal Audio to sue.  But even if the settlement is a victory for such podcasters, media companies with deeper pockets could still be targeted by Personal Audio under their currently valid patent, as recently seen in the September 15 jury decision determining that CBS is liable to Personal Audio for $1.3 million dollars.[3]

With the Carolla lawsuit dismissed, trollhunters will be keeping their eyes on a petition filed by the Electronic Frontier Foundation (EFF) to invalidate Personal Audio’s podcasting patent.[4]  The EFF petition is expected to be heard later this year by the Patent Trial and Appeal Board.  In the meantime, Carolla’s supporters can continue to get it on by donating to Carolla’s FundAnything campaign to help cover that $200,000 deficit from his litigation expenses.[5]


[1] Agreed Motion to Dismiss Claims without Prejudice, No. 2:13-CV-00013 (E.D. Tex. Aug. 15, 2014), available at https://www.eff.org/files/2014/08/18/ecf_272_-_mot_to_dismiss_pa-carolla.pdf.

[2] Rich Eisen, Eric Stonestreet and Mike August, The Adam Carolla Show (Oct. 1, 2014), http://adamcarolla.com/ rich-eisen-eric-stonestreet-and-mike-august/.

[3] Joe Mullin, Jury Finds CBS Infringes Podcasting Patent, Awards $1.3 Million, Ars Technica (Sept. 15, 2014, 7:23 PM CDT) http://arstechnica.com/tech-policy/2014/09/jury-finds-cbs-infringes-podcasting-patent-awards-1-3-million/.

[4] EFF v. Personal Audio LLC, Patent No. 8,112,504 (USPTO Mar. 4, 2009), available at https://www.eff.org/document/podcasting-petition-inter-partes-review.

[5] Save Our Podcasts Legal Defense Fund, FundAnything: Money for Your Dreams, http://fundanything.com/patenttroll (last visited Oct. 1, 2014).

USPTO to Host America Invents Act Roadshow in Seven Cities Nationwide

Posted in Biotechnology, Development & Commercialization of Technology, IP Counseling and Strategies, Technology News & Events, Technology Transactions

Forwarded by Robert Shaddox from the article of the same title. U.S. Patent & Trademark Office (08/26/14)

The U.S. Patent and Trademark Office announced that it will host seven roadshow events across the country to increase public understanding of the First Inventor to File (FITF) provisions of the America Invents Act. The roadshow events, which will be hosted between Sept. 16 and Oct. 9, will feature USPTO subject matter experts and stakeholders, and will focus on FITF provisions and updates since March 2013. Experts and stakeholders will speak specifically to inventors and their representatives about filing and prosecuting patent applications under the FITF system in an effort to raise public understanding of the provisions. Topics of discussion will include administrative processes, FITF statistics, the applicability of FITF to new patent applications, the statutory framework and its exceptions, and sample scenarios presented by experts to illustrate the FITF provisions. The roadshow events will be held in Concord, N.H., Madison, Wis., Dallas, Texas, Silicon Valley, Calif., and Atlanta, Ga. Two other roadshow events at USPTO campuses in Alexandria, Va., and Denver, Col., also will be webcast live on USPTO’s website.

Board Oversight of Cybersecurity

Posted in Biotechnology, Nanotechnology, Technology News & Events

 Cyber-attacks on U.S. companies have increased over recent years resulting in significant costs to companies.  According to surveys, U.S. companies have experienced a 42% increase between 2011 and 2012 in the number of cyber-attacks they experienced per week[1] and the average annualized cost of cyber-attacks for various U.S. companies surveyed in 2013 was $11.56 million, which represents a 78% increase since 2009.[2] Cyber-attacks may also expose companies to business disruptions, negative publicity, reputational harm and litigation.

SEC Commissioner Luis Aguilar addressed cybersecurity threats in his presentation at the “Cyber Risks and Boardroom” Conference held in June, 2014.[3]  At this conference, Commissioner Aguilar stressed the importance of board oversight of cybersecurity risks stating that “. . . ensuring the adequacy of a company’s cybersecurity measures needs to be a critical part of a board of director’s risk oversight responsibilities.”[4]  In addressing the oversight responsibilities of boards of directors, Commissioner Aguilar stated that, at a minimum, boards of directors should work with management to assess company policies with respect to cybersecurity to ensure that such policies are consistent with the National Institute of Standards and Technology’s Framework for Improving Critical Infrastructure Cybersecurity.[5]

Commissioner Aguilar stated that companies may consider implementing one of the following measures to help ensure that the board of directors have the ability to adequately meet their cybersecurity oversight responsibilities:

  • Require mandatory cyber-risk education for directors;
  • Have the board be adequately represented by members with a good understanding of information technology issues that pose risks to the company; or
  • Create a separate enterprise risk committee on the board.[6]

Commissioner Aguilar’s comments do not necessarily represent the views of the U.S. Securities and Exchange Commission.


[1] See 2012 Cost of Cyber Crime Study: United States, Ponemon Institute LLC and HP Enterprise Security (Oct. 2012) available at http://www.ponemon.org/local/upload/file/2012_US_Cost_of_Cyber_Crime_Study_FINAL6%20.pdf.

[2] See HP Press Release, HP Reveals Cost of Cybercrime Escalates 70 Percent, Time to Resolve Attacks More Than Doubles  (Oct. 8, 2013), available at http://www8.hp.com/us/en/hp-news/press-release.html?id=1501128.

[3] See Cyber Risks and the Boardroom, Commissioner Luis A. Aguilar (June 10, 2014) available at http://www.sec.gov/News/Speech/Detail/Speech/1370542057946#.U_8-Wz4o6Um.

[4] See id.

[5] See id.

[6] See id.

Personal Audio No Longer Trolling Adam Carolla

Posted in Intellectual Property Litigation, Technology News & Events

Adam Carolla has reportedly settled the lawsuit that was filed against him by Personal Audio LLC.[1]  The Agreed Motion to Dismiss Claims is available for review, but the specific terms of the settlement have not been disclosed—the parties have agreed to not make any public statements concerning the litigation until September 30th.[2]  Nonetheless, there are a few observations that can be made in light of the settlement.

As of today, Carolla has raised $475,352 through his crowdfunding campaign to help pay for his legal defense fees.[3]  If, however, the lawsuit had gone to trial and Carolla had prevailed on the merits, Personal Audio could have potentially been required to pay Carolla for his defense fees.  The payment of fees could have consequently been a huge deterrent to future litigation by Personal Audio.

Furthermore, Personal Audio’s patent remains valid because the lawsuit never went to trial, and Personal Audio could potentially sue other podcasters for allegedly infringing its patent.  According to Daniel Nazer from the Electronic Frontier Foundation (“EFF”), this is, however, unlikely to happen.  Personal Audio made a press release in July, stating that it had offered to drop the lawsuit against Carolla after learning through discovery that Carolla’s podcasting business does not generate a significant amount of revenue.  Nazer suggests that because Adam Carolla is one of the most successful podcasters in the business, it is unlikely that Personal Audio will sue other podcasters.[4]

Although the patent is currently valid, the EFF had filed a petition for inter partes review that is scheduled for a hearing in December with an expected ruling by April 2015.[5]  If the inter partes review is decided favorably for EFF, this could be the final nail in the coffin for Personal Audio’s patent and another victory for all of the trollhunters.


[1] Jefferson Graham, Adam Carolla settles podcasting lawsuit, USA Today (Aug. 19, 2014, 5:08 PM), http://www.usatoday.com/story/tech/2014/08/19/adam-carolla-settles-podcasting-lawsuit/14301105/.

[2] Agreed Motion to Dismiss Claims without Prejudice, No. 2:13-CV-00013 (E.D. Tex. Aug. 15, 2014), available at https://www.eff.org/files/2014/08/18/ecf_272_-_mot_to_dismiss_pa-carolla.pdf.

[3] Save Our Podcasts Legal Defense Fund, FundAnything: Money for Your Dreams, http://fundanything.com/patenttroll (last visited Aug. 20, 2014).

[4] Personal Audio, Adam Carolla Rejects Dismissal from Podcasting Lawsuit (July 29, 2014), available at https://www.eff.org/files/2014/08/18/personal_audio_press_release_7-29-14.pdf.

[5] EFF v. Personal Audio LLC, Patent No. 8,112,504 (USPTO Mar. 4, 2009), available at https://www.eff.org/document/podcasting-petition-inter-partes-review; see also EFF v. Personal Audio LLC, Electronic Frontier Foundation: Defending Your Rights in the Digital World, https://www.eff.org/cases/eff-v-personal-audio-llc (last visited Aug. 20, 2014).