Businesses forever vigilant defending patents

The problem is, the technology used in the controllers isn't owned by Sony. The patent for "vibro-tactile" technologies instead belongs to San Jose-based Immersion Corp.

And Sony's apparent violation of that patent could be costly. Sony was found guilty of patent infringement by a federal judge last week and ordered to pay Immersion $90.7 million. In addition, the judge ordered Sony to cease selling the popular controllers, although he stayed that order pending an appeal by Sony.

"We have always believed, and continue to believe, in the strength of our intellectual property," Immersion Chief Executive Victor Viegas said.

The Sony case follows two other recent patent infringement cases involving eBay, Toshiba and Lexar Media of Fremont.

For companies both big and small, how they protect their intellectual property often is as important as the product or service itself. In the last 15 years, the number of patents filed with the U.S. Patent and Trademark Office has doubled the 1.8 million on record before 1990.

"For any company, a patent, copyright or trademark is so valuable that it can almost be considered its own asset," said intellectual property expert Stephen Ackerley, a partner with McDermott Will & Emmery LLP in Palo Alto. "For some companies, they live and die based on whether they're protected."

Intellectual property is a product or service that stems from an idea and has commercial value. Depending on what that property is, the way to protect it is with either a patent, a trademark, or a copyright.

Patents are used to protect inventions. For instance if someone figures out a way to mount a camera onto a tripod, they would seek a patent.

Trademarks or servicemarks are used to protect words, names or symbols that identify the source of the product or service. For example, the "swoosh" symbol is a trademark that identifies athletic wear company Nike.

Copyrights protect authors of original works whether they are recipes, books or lyrics to songs.

When Rock McKinley, founder of Pleasanton-based ImagAbility, first decided to get into the educational toy business, he assumed the path to success would be easy. He thought he could create a great product, market it, and in turn become a business success. What McKinley didn't realize is that if his product isn't protected, he is left open to being ripped off.

"I really didn't know anything about protecting your intellectual property," McKinley said. "I had no clue how important it was to do."

It didn't take him long to find out.

Shortly after one of his products, the Wedgits Junior Set, hit the market, another company put out an identical product

of its own, even though McKinley had a patent on the product. The copycat product was a blatant ripoff of the ImagAbility product. The shape, the number of pieces and the colors were identical.

"When it happened, I was just kind of stunned, because the copies are so blatant," McKinley said. "You feel violated because you spend so much money with the development and creation of the product, and somebody just rips you off."

Counterfeiting is the most blatant form of intellectual property infringement. This is where someone takes someone's product idea or trademark, copies it, and passes it off as the real thing when it isn't.

Although many think of fake purses, watches and music or movies sold on a sidewalk stand, Darren Pogoda, a staff attorney with the International AntiCounterfeiting Coalition, says the problem is much worse.

"From pharmaceuticals to power tools, to infant formula and airline parts, it would be difficult not to name an industry where counterfeiting is not a major issue," Pogoda said. "I just don't think the public understands how widespread the problem is."

Currently, about 7 percent of world trade is in counterfeit goods, and the counterfeit market itself is worth $350 billion, the coalition says.

One of the most common ways that someone's intellectual property is violated is when a person goes to a competing company and carries with them trade secrets that are protected.

For example, if a person knows a way to make a product, he might notrealize that the "how to" that has become habit to him is in fact a product of the previous employer.

Employees also have been sued for copying a company's trade secrets and e-mailing them to their own personal accounts or others.

"A lot of employees seem to get caught when they send something from an office computer," said Patricia Eyres, president of Litigation Management and Training Services in Long Beach. "And when they get it out there, the Internet becomes the world's biggest copy machine as the secrets will be forwarded from one person to another."

In one recent case, a relationship between two companies that subsequently ended led to a patent infringement suit.

Last month a jury found that Toshiba Corp. of Japan was guilty of stealing trade secrets from Fremont-based Lexar Media Inc., which had filed a patent infringement suit in 2002. Toshiba was ordered by a jury to pay $465.4 million to the maker of digital camera memory cards and computer flash drives. It was the largest intellectual property verdict ever in California.

The jury agreed with Lexar's claims that Toshiba broke a 1997 agreement to co-develop flash memory, used in cell phones and digital cameras, and then shared it with SanDisk Corp., Lexar's largest competitor.

Experts say that protecting one's intellectual property is critical, but the challenge of doing so isn't easy. While it is easy to fill out the forms with the U.S. Patent office, the attention to detail that needs to be made should be done by someone who knows exactly what they're doing.

If a patent application for a product isn't very specific, others can figure out how to make a copycat product almost identical to it without infringing on the intellectual property.

Each element of the patent needs to be accompanied by images and layouts that support the claims made.

For example, ImagAbility's patents for one of its toys has 34 claims with detailed descriptors, subpoints and drawing references for each.

"You have to be very specific, because you need to make it clear exactly what your patent represents," McKinley said.

Also, if a company plans to sell its products worldwide, it needs to file applications with other countries.

"We missed an opportunity to file for a patent in one country by two weeks, and as a result one of our product was copied," said ImagAbility's McKinley.

The biggest challenge with protecting intellectual property is the cost.

While the U.S. Patent and Trademark Office issues protection, it doesn't enforce patents and trademarks. That falls to the company itself.

"The question is, if you are infringed upon, can you afford to take the chance to spend $1 million or $2 million in court costs to fight intellectual property abuse that you aren't certain to win," said Russ Davis, general manager and chief technology officer of Sivault, a high-tech company in San Jose. "If you are a large public company, you can. But what if you're a small company with far less money you can afford to spend?"

One company recently found that having a patent and even successfully defending it in court did not guarantee a win in the long run.

In March, a federal appeals court agreed with a lower court's ruling in 2003 that online auction company eBay of San Jose infringed on a patent owned by MercExchange Inc. of Virginia.

However, the $25 million award won by MercExchange may never be paid because just last week the U.S. Patent and Trademark Office indicated that it may revoke the patent owned by the small Virginia business.

Continued wrangling in the courts between the two companies could continue for months or years.

In some cases, companies that have invented something such as computer software or a secret recipe for a soft drink might choose not to patent it because the property is easily protected by keeping it secret.

"There's this reflex that we have to patent everything, but that's not necessarily always the case," said Richard Levine, senior manager with Accenture's Global Architecture and Core Technology Security Practice. "If what you have can't be figured out through reverse engineering, then the focus might be more how to protect the knowledge of the product within the company."

Levine agrees that inventions that can be figured out need to be protected with patents, but even that becomes a tricky situation.

"When you're writing a patent, you're walking a tight rope because you want a patent specific enough that it won't be infringed on, but at the same time you feel you don't want your competitors to know exactly what you're doing," he said.

Besides making sure that your product is protected, there is the flip side of the issue that some companies don't spend enough time on. That is making sure your product isn't at risk of being the violator.

With more and more patents filed each year, the possibility of duplication is high.

In 2004, more than 120,000 international patent applications were filed. That was a 3.4 percent increase over the number filed in 2003.

"This is a huge issue, because I think it is difficult for companies today to establish an offer into the market without facing a significant risk of copying," said Davis.

Typically, a company doesn't get sued until the product or service is making money.

And with patents and trademarks, intent doesn't need to be proven.

"You could have made the product completely out of good faith, thinking you weren't infringing on anyone, and you could still lose," Davis said. "The court could order you to pay past money made with the product as well as forcing you not to make anything else.

"And if that product or service is what makes your company, the business could be buried in a heartbeat."

David Morrill can be reached at (925) 416-4805 and dmorrill@angnewspapers.com