By Thomas Carey. Chair of the Business Practice Group
Imagine that your company has developed a proprietary technology that it expects to license to several potential customers. The technology has great commercial potential but its use is not easy to detect. It may consist of a chip, embedded software, a manufacturing process, or even a medical implant.
Unbeknownst to you, an employee has pilfered the details of this technology. Before your company has even filed a patent application, the employee has disclosed it covertly to some potential customers, telling them to be quiet about their use of the technology.
While you are readying your patent application covering the technology, these customers are integrating it into their own products (or making products with this new process). Soon after your patent application is filed, they start selling those products without disclosing their use of the technology.
After the patent issues, you license the technology to several customers. Later, they learn that their competitors have been using the technology without a license, and that this use can be traced to development activity that predates your own patent application. As a result, they bring a lawsuit asking the court to rule that the patent is invalid because the technology was in public use before the patent application was filed. Section 102(a) of the Patent Act provides that such public use deprives the inventor of the right to a patent.
What is the outcome of this nightmare? The recent Federal Circuit court ruling in Delano Farms Company v. California Table Grape Commission suggests that your patent may yet survive. The context of this case is unusual, however, involving grapes, an older version of the Patent Act, and some skulduggery.
The United States Department of Agriculture developed new grape varieties that it called Scarlet Royal and Autumn King. The USDA obtained patents on these plant varieties and licensed them exclusively to the California Table Grape Commission, an agency of the State of California. The Commission sublicensed the patents to grape growers in California and collected royalties that it shared with the USDA.
But before the patent applications for these new grape varieties were filed (and indeed more than one year prior to that date), the USDA held an open house at the University of California at Fresno, at which the grapes (but not the vines) were displayed. Visiting growers were not allowed to view the plants in the field, only the grapes on the table.
Enter Jim and Larry Ludy, cousins who shared an interest in grapes. They struck up a conversation with a USDA employee, Rodney Klassen, and asked him if he could get them some plant material for these new varieties. Klassen had done like favors for the Ludys before and he obliged again this time. A few months later, in early 2002, Klassen gave Jim Ludy some plant material from these grape varieties and told Ludy not to let the material “get away from him” and not to “put them in a box.” Ludy understood the former comment to mean that he should keep his possession of the plants a secret and the latter to mean that he should not sell the grapes until the varieties were commercially released. (More)
Unbeknownst to you, an employee has pilfered the details of this technology. Before your company has even filed a patent application, the employee has disclosed it covertly to some potential customers, telling them to be quiet about their use of the technology.
While you are readying your patent application covering the technology, these customers are integrating it into their own products (or making products with this new process). Soon after your patent application is filed, they start selling those products without disclosing their use of the technology.
After the patent issues, you license the technology to several customers. Later, they learn that their competitors have been using the technology without a license, and that this use can be traced to development activity that predates your own patent application. As a result, they bring a lawsuit asking the court to rule that the patent is invalid because the technology was in public use before the patent application was filed. Section 102(a) of the Patent Act provides that such public use deprives the inventor of the right to a patent.
What is the outcome of this nightmare? The recent Federal Circuit court ruling in Delano Farms Company v. California Table Grape Commission suggests that your patent may yet survive. The context of this case is unusual, however, involving grapes, an older version of the Patent Act, and some skulduggery.
The United States Department of Agriculture developed new grape varieties that it called Scarlet Royal and Autumn King. The USDA obtained patents on these plant varieties and licensed them exclusively to the California Table Grape Commission, an agency of the State of California. The Commission sublicensed the patents to grape growers in California and collected royalties that it shared with the USDA.
But before the patent applications for these new grape varieties were filed (and indeed more than one year prior to that date), the USDA held an open house at the University of California at Fresno, at which the grapes (but not the vines) were displayed. Visiting growers were not allowed to view the plants in the field, only the grapes on the table.
Enter Jim and Larry Ludy, cousins who shared an interest in grapes. They struck up a conversation with a USDA employee, Rodney Klassen, and asked him if he could get them some plant material for these new varieties. Klassen had done like favors for the Ludys before and he obliged again this time. A few months later, in early 2002, Klassen gave Jim Ludy some plant material from these grape varieties and told Ludy not to let the material “get away from him” and not to “put them in a box.” Ludy understood the former comment to mean that he should keep his possession of the plants a secret and the latter to mean that he should not sell the grapes until the varieties were commercially released. (More)
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