The Costs of Licensing -- Part 11 in our IP and Patents Series

This is the eleventh in a planned 20-part series of articles on intellectual property.  In future posts, we will explore product commercialization.

In this posting, we will provide an overview of the costs of licensing a technology. 

A license is an agreement that allows the licensee to use a technology for some purpose – usually to create products based on the technology, in exchange for a license fee and/or a commission on revenues.

In other words, the licensee will take the idea and turn it into a viable product or otherwise create some kind of revenue stream off the technology.  The inventor will then see a portion of those revenues under the terms of the license.

There are several types of costs a licensee can expect to encounter associated with the license agreement.  These costs are separate from attorney’s fees.

Initial license fee

There will typically be an initial license fee which is designed for several reasons, not the least of which is to separate the wheat from the chaff.  The licensor needs to be able to determine which licensees are serious and the quickest way to determine the seriousness of a potential licensee is to demand a check up front, with the agreement. 

The initial license fee will vary depending on a number of factors, including:

• Exclusivity / non-exclusivity
• Field(s) of use
• Market size and
• Likelihood of attaining X% of market

Royalties

On-going fees will usually consist of royalties on sales of products based on the licensed technology.   These are usually paid periodically (e.g., quarterly or annually) and their amount will depend on a number of factors, including:

• Exclusivity / non-exclusivity
• Field(s) of use
• Market conditions

Typical royalties can vary from just a couple percent to 10% or 15% depending on the above factors and other influences.  Royalty rates are published and periodically updated by some and are available in book form and on websites, paid and unpaid.  While it is good to have an understanding of the market rates, however, the bottom line will be the potential market, the potential profits and the type of license agreed to.

Lump sum payment

Sometimes, in lieu of initial license fees and royalties, the parties might agree to a lump sum payment to transfer the rights of a technology.  In our experience, this is not a common as a royalty arrangement, but it certainly exists. 

Typically, a present value calculation is made, using certain assumptions relating to anticipated sales, profits, opportunity costs, etc. over the likely term of the license and a value is established.

Patent cost reimbursement

When a licensee is negotiating for exclusivity, many times that licensee will be expected to reimburse the licensor for the fees and expenses relating to the patent.  Sometimes, non-exclusive licensees will be required to pay for a portion of these costs.

These are some of the costs that could be part of a license agreement.  Keep in mind that this is not necessarily a comprehensive list -- other costs may be considered, depending on the type of license, technology and the terms.

Details on commercialization activities will be addressed in upcoming installments.

 

Congress Does Something Right: the SBIR Program is Reauthorized

What do  Symantec, Qualcomm, Genentech, DaVinci, iRobot and Enable IPC all have in common?

They have each benefited greatly from the US government's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

Congress did a wise thing yesterday: they reauthorized the SBIR and STTR programs -- and even allowed for some expansion -- through 2017.

These programs, which began in 1982, provide funding for innovative ideas and products that can be used by the US government and/or for the direct benefit of its citizens -- e.g., military innovations, cures for diseases, advanced medical equipment, energy breakthroughs, etc.

In an age where Congressional approval hovers around 12% (and disapproval over 80%, according to the website Real Clear Politics), SBIR and STTR are examples of the US government doing something right. 

The idea is simple, and has been wildly successful: various government agencies identify needs they have, or needs they have seen in their respective areas.  Small businesses with ideas relating to the issues then submit proposals, which can turn into solutions for the government and products for the small business (e.g., the National Institutes of Health might provide funding for a small business that has a breakthrough in biomarkers for the early detection of cancer; or the Department of Defense might provide funding for a small business that has developed a lighter battery pack for soldiers).

Providing a relatively small amount of funding to develop these ideas is good for the government, which can then use them to its benefit, and it's good for the economy, because these ideas can become commercialized to benefit society as a whole.

Here's a good example: several years ago, the Department of Defense and the National Science Foundation provided about $1.5 million through several SBIR programs to a small company.  That company, Qualcomm, now has 17,000 employees and a market capitalization of $80 billion (read more about it here). 

Symantec, with 17,500 employees in 40 countries, also started with an SBIR grant.  iRobot started with SBIR funds from the Department of Defense.  SBIR success stories involving these companies, as well as Genentech, DaVinci, Balfour Technologies, Martek Biosciences and many others can be found at http://www.sbir.gov/success-stories. 

Here at Enable IPC, we have experienced the programs' success first hand as well.  SolRayo, Enable IPC's subsidiary, recently completed work under a Phase I STTR award and has applied for a Phase II.  The award could lead to a major breakthrough in battery technologies. 


The formula for SBIR/STTR awards is simple.  The government uses experts to analyze proposals and suggest awards for a proof of concept or initial investigation to determine its feasibility -- this is designated as "Phase I".  If the Phase I effort is successful, awardee can apply for additional funds under "Phase II" to bring the idea to commercialization. 


The SBIR and STTR programs had been on life support, funded by short-term extensions for the past several years, until yesterday when Congress passed a full reauthorization through 2017.  They also have provisions allowing for the expansion of the programs over the course of the reauthorization.

So, let's recap: a program that benefits everyone has been reauthorized through 2017 by Congress and even expanded a little. 

It sounds like they actually can do some things right after all!

Read more about this in an opinion column at CNBC.com written by Rep. Sam Graves, Chairman of the House Small Business Committee: http://www.cnbc.com/id/45697983

Sub-licensing, Audits and Other License Attributes - Part 10 in our IP and Patents Series

This is the tenth in a planned 20-part series of articles on intellectual property.  In future posts, we will explore licensing costs and commercialization of products.

In this posting, we will provide an overview of some additional facets of licensing agreements: including sub-licensing rights, auditing rights, early termination penalties and more.

A license is an agreement that allows the licensee to use a technology for some purpose – usually to create products based on the technology, in exchange for a license fee and/or a commission on revenues.

In other words, the licensee will take the idea and turn it into a viable product or otherwise create some kind of revenue stream off the technology.  The inventor will then see a portion of those revenues under the terms of the license.

Sub-licensing

Many licenses allow the licensee to sub-license the technology to another entity.  This can be useful in many circumstances; for example, where the licensee may want to take advantage of the use of distributorships or other means to market. 

Sub-licensing will generally only be permitted within the field(s) of use of the license and the licensor will maintain the same royalty structure as in the original license agreement.  So, if the licensor was being paid a 5% royalty on sales, the licensor will still be entitled to that royalty, despite whatever was negotiated between the licensee and sub-licensee. 

Auditing

The licensor will almost always have the right to audit the licensee’s books (or have them audited by a reputable firm) to ensure that the licensee is paying the appropriate license fee. 

As part of this effort, the licensee will be required to maintain appropriate records of sales as a condition of maintaining the license. 

Early termination

There are usually clauses for early termination in the event that the licensee fails to perform or if the market doesn’t materialize as planned.  The circumstances surrounding an early termination may, or may not, require the licensee to pay an early termination fee.

Other aspects of licensing

Most license require periodic reports (quarterly, semi-annually or annually) detailing and research efforts related to the licensed technology, the marketing effort, the number and amount of sales, etc.  These reports are designed to ensure the licensee is taking all appropriate actions to maximize sales of the licensed technology.

The license may also require that the product being sold is marked with the patent number(s) and/or other identifying marks that indicate the IP behind the technology is protected.

Licenses, as one can see, can contain a number of articles unique to the situation the licensors and licensees find themselves in.   As such, it is always good practice to consult an attorney that specializes in IP protection and licensing prior to negotiating a license agreement.

Additional details on a typical license fee structures and commercialization activities will be addressed in upcoming installments.

The License Term and Performance Milestones -- Part 9 in our IP and Patents Series

This is the ninth in a planned 20-part series of articles on intellectual property.  In future posts, we will explore additional aspects of licensing and commercialization of products.

In this posting, we will provide an overview of two more facets of licensing agreements: the license term and milestones.

A license is an agreement that allows the licensee to use a technology for some purpose – usually to create products based on the technology, in exchange for a license fee and/or a commission on revenues.

In other words, the licensee will take the idea and turn it into a viable product or otherwise create some kind of revenue stream off the technology.  The inventor will then see a portion of those revenues under the terms of the license.

In this post, we will look at the license term and milestones.  In upcoming posts, we will discuss other important license factors.

License term

The term of the license agreement can vary widely.  The license could be in effect for just a few years or for the life of the patent.  The decision to assign a term other than the life of the patent comes down to the expected useful product life cycle. 

The useful product life will vary widely from product to product.  The product life refers to the entire product cycle, from invention to the product’s replacement by a successor technology.  A good example of a complete product life cycle is the vacuum tube used in old radios and televisions.  Those of us of a certain age can remember going to the local store with a bag of tubes and using the tube tester to see which one(s) needed to be replaced.

The vacuum tube was invented in the early 20th century, but it enabled the explosive growth of electronics that was to come in subsequent years.  The tube was used in early radios and, as the radio was popularized as an entertainment medium during the 1920s and 30s, the vacuum tube market exploded as consumers bought and maintained radios.   During the 40s, the growth began to level off at a healthy rate as the market matured.

With the advent of the semiconductor, however, and despite the explosive growth of television in the 1950s and color TVs in the 60s, the vacuum tube saw decline in demand.  By the 1960s, most radios and TVs were solid state. 

So, when thinking about a license term, what needs to be asked is: how long will it be before a successor technology is likely to replace the licensed product?  Is it worth licensing the technology for the life of the patent (or as long as the technology can be protected), or should the license be limited to a shorter period of time?

The key is to not get stuck with a longer term than is needed; conversely, one doesn’t want to obtain too short of a term get too short a term or the licensee could risk having to re-negotiate the license at the height of the product demand, when the licensor could dictate terms more favorable to him. 

Milestones

Most licenses have built in performance milestone requirements.  These are generally put in place to protect the licensor from, say, a competitor licensing the technology, effectively tying up the technology and preventing its introduction in the market.

The usual terms dictate that certain monthly, quarterly or annual sales levels are to be met or certain minimum royalties are to be paid.  For example, the deal may call for royalties of 5% on sales revenues.  If the licensor expects the licensee to produce at least $100,000 in sales during a quarter, he would likely require a minimum quarterly royalty of $5,000 be paid.  So, if the sales are, say, $200,000, the licensee is required to pay 5% (or, $10,000) to the licensor.  But, if the sales are only, say, $50,000, the licensee still must pay the minimum $5,000 royalty. 

In this way, the licensee is motivated to make the sales level or risk paying a royalty despite a lack of sales and the licensor is assured that the licensee is motivated to make sales. 

Additional details on a typical license and its structure and terms will be addressed in upcoming installments.

Some interesting patent statistics . . .

Our IP attorney, Dr. Gary Schnittgrund, was checking on some outstanding patent activity we have dating back to September 2009.  We've received no word from the US Patent and Trademark Office (USPTO) since they acknowledged they received our application over 2 years ago.

In Gary's email to me, he also forwarded some interesting data and a link to a blog post[1] which published the following information:

• As of October 2011, the USPTO had 700,000 applications under review and a backlog of over 1 million more; by comparison, other reports state that in 1998, the backlog was a little over 100,000; by 2002, it was 350,000; and by mid 2009 it was 770,000 [2]
• The average time from the filing of a patent application to when the first office action is mailed from the USPTO is 26.9 months
• The average time from patent filing to final disposition (i.e., grant or denial of a patent): 33.9 months; to compare, reports state that in 1998 this process took about 18 months [3]

Of course, these numbers can vary widely depending on the type of patent application; for example, another report claims that simple design patents may only take a little over a year for the first office action, while utility patents relating to "interprocess communications" can take nearly four years. [4]

Now, Congress and the Obama administration recently passed legislation aimed at solving this issue (we've had some blog postings about this legislation [for example: click here]; we weren't that crazy about certain aspects of the legislation because it wasn't favorable to small businesses and individuals, in our opinion).  According to the blog post Gary sent us, the USPTO is working on reducing the time from application receipt to first action to 10 months, and the time to the grant of a patent down to 20 months, both by 2015.

We think we should watch the USPTO closely over the next few years and see if the changes passed by our leaders actually help the situation.  We certainly hope it does.

For reference:

[1] Patent Pipeline blog posting

[2] Invention Statistics Patent Office Backlog blog posting
[3] Ibid.
[4] patentlyo.com blog posting

Exclusivity and Fields of Use -- Part 8 in out IP and Patents series

This is the eighth in a planned 20-part series of articles on intellectual property.  In future posts, we will explore additional aspects of licensing and commercialization of products.

In this posting, we will provide an overview of two of the many facets of licensing: exclusivity and fields of use.

A license is an agreement that allows the licensee to use a technology for some purpose – usually to create products based on the technology, in exchange for a license fee and/or a commission on revenues.

In other words, the licensee will take the idea and turn it into a viable product or otherwise create some kind of revenue stream off the technology.  The inventor will then see a portion of those revenues under the terms of the license.

License terms can vary widely and can encompass many things, all of which can be very important to the parties involved.  In this post, we will look at exclusivity and fields of use.  In upcoming posts, we will discuss other important terms.

Exclusive vs. non-exclusive

One of the more important aspects of licensing is the question of exclusivity – that is, whether there will be one licensee or several. 

To the entity granting the license, factors in deciding whether to grant exclusivity will include the capability of the licensee to penetrate the markets, agreed-to minimum sales, the size of the market and other factors.  For example, if a technology is going to address a multi-billion dollar market covering multiple applications, several licensees might be in order.  However, for a much smaller market, the licensor might want to limit the licensees to one or two companies. 

The licensor will not want too few licensees or he may not be adequately covering the potential market.  However, the last thing either party wants is for there to be so many licensees that many are not successful, or the market is poisoned or confused. 

To the licensee, exclusivity is important from a competitive standpoint – they will want the market to themselves.  But, they will need to understand that, if the licensor is willing to consider exclusivity, the license fees will be higher and the licensee might be expected to pay the patent costs.

So, it becomes a negotiation that takes into account the size of the market, the penetration ability of the licensee and the willingness of the licensee to pay a premium for the exclusivity as well as meet certain performance goals to maintain the exclusivity.

Exclusivity can take on several forms, however.  They do not necessarily have to grant exclusivity or non-exclusivity for all applications or areas. 

Fields of use

Licenses will typically define fields of use.  The fields of use might be geographic, application-based a combination of the two.

The person granting the license might want someone with experience in certain fields to concentrate on those areas of expertise and leave other areas to more qualified people.  The licensee might also be interested in using the technology in a certain area, as opposed to all areas.

For example, let’s say a company is licensing a new kind of battery.  The company might be granted exclusivity for all applications in all areas throughout the world, or just for, say, batteries used in cell phones in the United States. 

Or the license could be granted for exclusivity in one or more fields and non-exclusivity in others.  For example, the battery licensee might have exclusivity for cell phones and non-exclusivity for batteries used in automobiles.

The license could also prohibit one licensee from participating in a certain application.  For example, a license could be exclusive in cell phones, and non-exclusive in all other fields of use except power tools, where a license may not be granted (or where someone else may have exclusivity).

Also, there could be strictly geographic limitations.  The licensee might have exclusivity in, say, Los Angeles County, non-exclusivity in the rest of the state of California, and be prohibited from selling in other areas.
  
Or the license could be a mixture of these factors.

It is important for both parties to understand and consider the market size and conditions, the experience and reach (or lack thereof) of the licensee and the expected impact in the various applications and geographic areas of the technology when deciding on the number of licensees and the granted fields of use.

Additional details on a typical license and its structure and terms will be addressed in upcoming installments.

An Overview of Licensing -- Part 7 in our IP and Patents Series

This is the seventh in a planned 20-part series of articles on intellectual property.  In future posts, we will explore additional aspects of licensing and commercialization of products.

In this posting, we will provide a brief summary of licensing – what it is, who grants the lcienses and what licensees can expect, generally.

What is licensing?

Licensing allows someone else to use a protected idea; that is, a license is an agreement that allows the licensee to use the technology for some purpose - usually to create products based on the technology - in exchange for a license fee and/or a commission on revenues.

In other words, the licensee will take the idea and turn it into a viable product or otherwise create some kind of revenue stream off the technology.  The inventor will then see a portion of those revenues under the terms of the license.

The license will typically have some level of restrictions on it; for example, it may allow the licensee to use the licensed technology in certain applications, or geographic areas.  In addition, it might be exclusive to one licensee or there may be multiple licensees for a given technology.

Who grants licenses?

The person or organization who grants the license is the one who has the rights to the protected technology, usually through a patent or an active patent application. 

Licensing can be a major source of revenues for inventors, research and development facilities, etc.  In fact, most major universities, and many smaller ones, have departments solely committed to licensing and related activities.  They can go by several monikers, including “Technology Transfer” or “Commercialization” or something else, but what they do is generally the same thing: take technologies created at their institution and provide the rights to those technologies to companies or other licensees so some money can be made off the idea.

One of the largest, and most successful, licensing organizations is the Wisconsin Alumni Research Foundation (WARF), based in Madison, WI.  This is the licensing arm of the University of Wisconsin.  WARF was established over 80 years ago as a patent management agency.  Their first license agreement was with Quaker Oats for a process involving vitamin D in cereals.  The license arrangement allowed WARF to control which companies received licenses to the new process.  This ensured that the process was not abused and that profits on the process would be shared with the University.

What about the licensee?

As alluded to earlier, the licensee will typically be required to pay license fees, usually determined by royalties on sales or some other commission-type structure, and could also have milestones that it will be required meet in order to maintain the license.

Details on a typical license and its structure and terms will be addressed in upcoming installments.

The Patent Process - Part 6 in our Patents and IP Series

This is the sixth in a planned 20-part series of articles on intellectual property protection. In future articles, we will also explore licensing and commercialization of products in later posts.

In this article, we will provide a brief summary of the patent process – what is involved and what to expect.

Assuming you need to file a utility patent (the most common type), the first thing you should do, in our opinion, is contact a qualified patent attorney or agent.  Patent laws are complex as is the filing process, and a good patent attorney or agent will know the intricacies involved and ultimately save you from making mistakes and missteps that would cost you money, time and possibly jeopardize your invention. 

The process that a good patent attorney or agent will walk you through, will include the following:

International protection?

Getting a patent in the United States means you have patent protection in the United States.  However, in and of itself, a US patent grants no protection in other countries.

The Patent Cooperation Treaty (PCT) established a union, which now includes most of the world’s nations, for “cooperation in the filing, searching, and examination, of applications for the protection of inventions.”[1]   The PCT reserves the right to file a patent in any of the 140+ countries that are members of the union, for a specific period of time.

By filing a PCT application you are giving yourself time to consider which additional countries you might want to file in as well. 

Provisional application?

One way to get a fast priority date and save money in the short term (but maybe not the long term) is to file a provisional application.  This consists of a “filing without a formal patent claim, oath or declaration, or any information disclosure (prior art) statement.”[2]

These are easier documents to file, can generally be filed faster and will ensure that the priority date is as early as possible. 

One of the good things about provisional applications is that it delays the need to submit a full application for 12 months, while protecting the priority date.  That will give you time to put together a good, solid complete application and to consider whether your invention is worth patenting and protecting for 20 years.

One of the bad things about a provisional patent is that it does not allow for any new matter on the invention.  So, if something comes up during the year that would apply to the invention, it cannot be added to the provisional application.  In addition, while it is less expensive to file a provisional application, and will generally cost less attorney’s fees to prepare and file, at the end of the day it will probably cost more in attorney’s fees to file the provisional, plus the full application later than if you just bit the bullet and filed the full application to begin with.

Other things to consider

There are some other things to consider, such as an expedited application, which your attorney or agent can discuss with you.  Once the application is completed and filed, the US Patent and Trademark

Office will send an acknowledgement that it received the application.  After that, it becomes mostly a waiting game.

An examiner will eventually analyze the application and will respond with an office action.  At this point, the inventor and the attorney or agent will need to respond to the office action.

If the patent is allowed, the applicant needs to pay the issue and publication fees, as well as any maintenance fees in the future.  If the patent is not allowed, the applicant may still be able to request a reconsideration or appeal. 

In summary, the single best piece of advice we can give is to contact a good patent attorney or patent agent.  In our opinion, the best way to find a good patent attorney or agent is to seek out the recommendations of colleagues.

In our next installment, we will discuss an overview of patent and intellectual property licensing.

[1]  The PCT’s website can be found here: http://www.wipo.int/pct/en/
[2]  http://www.uspto.gov/patents/resources/types/provapp.jsp

Patent Basics - Part 5 in our Patent and IP Series

This is the fifth in a planned 20-part series of articles on intellectual property protection. In future articles, we will also explore licensing and commercialization of products in later posts.

In this article, we will provide a brief summary of the basics of a patent – what it protects, what kinds of patents are available and how it is comprised.

The US Patent and Trademark Office (USPTO) determines and issues patents in the United States. 

There is a ton of information on patents at their website: http://www.uspto.gov, as well as many other sites, which are run by patent attorneys and other experts.   For detailed information, we encourage you to read those sites as well.

Contrary to what you might think, a patent (in this case, we are discussing a utility patent) does not grant someone the right to make or use or work on an invention, but rather, it prohibits others from infringing on the patent.  The law then defines infringement as when someone, without the proper authority, “makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent.“[i]   The “term” of the patent begins at the filing date, which is the date the USPTO receives a proper application.

There are three kinds of patents:

• Utility patent – this is the most common type of patent and can be issued “to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof”[ii].  A utility patent term is 20 years from the filing date.
• Design patent – protects the appearance of something.  A design patent generally consists of multiple drawings and is used to prevent someone else from making something that looks the same.  In other words, from a very basic perspective, the design patent protects how something looks, while a utility patent protects what it does.  A design patent term is 14 years from the filing date[iii].  
• Plant – this is a patent that protects plants – the kind that you find in a garden.  It can be issued to someone to protect a new kind of plant they have developed. 

Utility patents have several elements, principally[iv]:

• Utility Patent Application Transmittal Form or Transmittal Letter
• Fee Transmittal Form and Appropriate Fees
• Application Data Sheet (see 37 CFR § 1.76)
• Specification (with at least one claim)
• Drawings (when necessary)
• Executed Oath or Declaration
• Nucleotide and/or Amino Acid Sequence Listing (when necessary

All these have to be presented to the patent office with proper information in a certain way, which is why you really should hire a professional, qualified patent attorney or agent to prepare and file your patent.  Otherwise, you can cause delays in your application and possibly even lose your opportunity to file.

In our next installment, we will discuss the patent process, the time required and costs.

[i]  US Patent Act, 35 U.S.C. 271(a), which can be found at: http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_271.htm

[ii]  http://www.uspto.gov/patents/index.jsp

[iii]  Per 35 USC 173 http://www.uspto.gov/web/offices/pac/mpep/documents/1500_1505.htm

[iv]  http://www.uspto.gov/patents/resources/types/utility.jsp#non

New Inventions and Ideas: Decision Time - Part 4 in our IP and Patents Series

This is the fourth in a planned 20-part series of articles on intellectual property protection.  We will focus on patents, but we will have some limited discussion on trademarks and copyrights as well.  We will also explore licensing and commercialization of products in later posts.

You have an idea, you’ve conducted a preliminary search on Google and the patent office (USPTO) website, and it appears your idea might be original.  You have a written record of the idea, and you’ve even discussed it with some experts under an NDA.  You know you have to move quickly, so you’re ready to call the attorney.

But, before you do, you might want to consider the following final things:

Maybe just keep it a secret . . .

What is the reason you are doing this?  Now, 99 times out of 100 the answer is obvious – to protect yourself against those who would steal your idea and protect your technological and market advantage. 

However, there are some rare times when you might not want to file a patent.  Rather, you might want to keep something a trade secret.  The idea here is simple: patents are disclosed to everyone.  The secret formula you have protected through the patent office will be published for all to see, and could conceivably tempt your competitors to find ways around your idea.  It would likely even give them clues as to how to go about their nefarious activities.

But, if you kept your idea a trade secret instead, your competitors may have no idea how you maintain your advantage.  Also keep in mind that patents have limited lifespans (long - 20 years - but limited, nonetheless).   At the end of the term, the protection the patent afforded goes away. 

A trade secret, however, could be protected for as long as those who know about it keep their mouths shut.

And, before you dismiss the idea, consider that the formula for Coca Cola is a trade secret – and has been kept for over 125 years. 

Like I said, 99 times out of 100, it’s best to get the patent, but that doesn’t mean one shouldn’t consider the trade secret route.

Is there a product here?

Let’s say you received a patent for a method of growing fingernails on apples.  It may be innovative, and no one may have done it before, but is there a market for such a product?

If there is no market that you can see, perhaps there might be one in the future.   You need to think to yourself, how far in the future are you thinking about?  Remember, the life of a patent is 20 years.
Or, maybe you want the patent for other reasons – a feeling of accomplishment, for example, or to improve the perceived value of a company.  Then, it might be worth it to you to spend the time and money to acquire the patent.

How much?

If a patent is going to cost you $10,000 or $50,000 or more, you need to consider whether it is worth the expense.  Does the issuance of a patent provide more in its return to you than it will likely cost?  Will it mean enough of a market share to make it worth your while?  Or will it produce enough in gaining the confidence of potential customers to drive them to a purchase decision?

Once these considerations are dealt with, and the decision is made to apply for a patent, it’s time to scope out patent attorneys.

In part 5, we will begin to discuss the specifics of the patent process.

New Inventions and Ideas: Notebooks, NDAs and Obama - Part 3 in our IP and Patents Series

This is the third in a planned 20-part series of articles on intellectual property protection.  We will focus on patents, but we will have some limited discussion on trademarks and copyrights as well.  We will also explore licensing and commercialization of products in later posts.

You have an idea, you’ve conducted a preliminary search on Google and the patent office (USPTO) website, and it appears your idea might be original, indeed!   Congratulations!

There are a few more things to consider before deciding it’s time to call a lawyer and start the patent process.  You should move quickly, however – and you will understand why after you’ve read this post:


Is it yours?


Do you really own the idea?  Many times, employers have policies that state that employee inventions are the property of the employer, not the employee who came up with the idea.


It's best to review your employer's policies, even if you invented the thing on your own time, in your own garage, and even though the invention may have nothing to do with your employer's field of operations. 

If your employer has a policy regarding ownership of inventions while you are employed there, and you feel that you should have ownership of this idea despite the policy, you might want to review your situation with a competent attorney before proceeding.

Did you have any help?

Are there others who might have contributed to the idea? If so, they may need to be listed on any patent and you will need to get their cooperation.

If there are questions of ownership, contact a competent patent attorney. And, when you speak with the attorney, be open, honest and tell them everything so you can get some good advice. Then do yourself a favor, and follow the advice the attorney gives.

Written record

Engineers are supposedly taught early on that they need to keep notebooks.  These notebooks are records of their efforts.   They are meant to record, in sequential time, the engineer’s ideas, inventions, experiments, and possibly their musings and other data. 

The notebooks should be bound so pages cannot be added, and pages should never be removed.  Whatever is written should be in ink and not erased.  Every page should be numbered and have the date and time recorded and any record of any invention should be signed and witnessed.

Having said that, I know of only a few engineers who actually do this.  That is sad, because properly keeping a notebook can be extremely helpful in a number of ways -- from simply staying organized to defending legal challenges to patents that bear the engineer's name. 

So, when you have an idea, write it down in your engineer’s notebook.  If you don’t have one, consider starting one.  At any rate, write the idea down, in as much detail as possible, and have someone witness and date it.  In addiiton, save receipts from purchases of things you bought to test out the idea. 

Now, proving that you invented something on a certain date has recently lost some of its power (as you will see later in this posting) but it can still provide multiple benefits.

A quick discussion about NDAs

As we mentioned in the previous post, there are actually some good reasons why you may not want to tell anyone about the idea, but to some degree, that’s just impractical.  This is why the lawyers have given us the non-disclosure agreement (NDA).

A NDA is an agreement between two parties: the disclosing party (i.e., the guy with the idea) and the recipient (i.e., the guy who’s hearing about the idea).  The NDA usually binds one or both parties from revealing the idea to anyone and can also be used to ensure that the recipient of any confidential information can only use the information for certain purposes. 

For example, let’s say you invented a better battery and you wanted to take your idea to Duracell to see if they wanted to give you a ton of money for it.  You might want to sign a NDA ahead of time with Duracell, making sure that the agreement stated that Duracell (the recipient of the information) could use the idea only to evaluate its business potential and could not use it to compete with you in any way.

You can find a lot of information about NDAs online, but when you reach the point where you will be discussing the idea with a company, it is always smart to hire a qualified attorney to review and/or provide an NDA ahead of time so you can be sure you are protected.  And you should do this whether you have a patent flied or not.

Thank you, Congress and President Obama

In September 2011, Congress passed, and President Obama signed, a patent reform act which, among other things, changed the procedure from “first to invent” to “first to file.”[1]   

What this means is, you may have an invention, but if someone beats you to the patent office, you are out of luck, even though you may have had the idea before the other person.

This was meant to help streamline the patent process (which has a lot of issues, as you may see in future postings), but many complain that the "first to file" law might harm small businesses and individuals who lack the wherewithal to quickly get patents on file and, therefore, run the risk of being beaten to the punch by corporations with more resources.

So, once you’ve decided to secure a patent, it behooves you to move quickly.

In part 4, we will discuss the things to consider before moving forward with the patent process.

[i] http://www.foxbusiness.com/industries/2011/09/16/obama-signs-patent-reform-bill/

New Inventions and Ideas: Ask; Don't Tell - Part 2 in our IP and Patents Series

This is the second in a series of articles on intellectual property protection.  We will focus on patents, but we will have some limited discussion on trademarks and copyrights as well.  We will also explore licensing and commercialization of products in later posts.

OK – so you’ve developed a better mousetrap.  You have an idea – and it’s a great idea – but, speaking of ideas, you really have no idea what to do next.

Actually there are several things you will want to do.  Here are three of them – we’ll add some more in future posts:


Is it ready?

You don't have to have the idea in the form of a product yet, but it needs to be fleshed out enough so you can describe it suffuciently so that someone who is knowledgable in the area can make and use it.


Do a search (i.e., ask)

Conducting a search on your idea is probably the best, first step to seeing where you stand.  Sometimes, a search will reveal that someone has already thought of your idea and, thereby, save you a ton of time and money.  Try Google and, if you don’t find anything, try some keywords at the US Patent and Trademark Office (USPTO) website (http://www.uspto.gov).  If there are other appropriate places you know of to search (e.g., industry websites, magazines, etc.), search there as well.

If you don’t find someone already working with your idea in your initial search, then you can feel free to continue.  However, even if your search turns up nothing, you will still need to hire a professional to conduct a more thorough search down the road, when you are ready to prepare a patent application.

If you do find that there is someone else that has patented your idea, don’t despair too much.  Many times, people come up an idea, but lack the passion, guts or commitment to see it through to a product.  Perhaps you can make a deal with that person to license and commercialize the concept.  We will discuss this in later installments of this series.

Keep your mouth shut (i.e., don’t tell)

There are actually a couple reasons why you may not want to tell anyone.  In September 2011, President Obama signed a patent reform bill into law.[i]   One of the things this law does is changes the grant of a patent from “first to invent” to “first to file.”  That is, you could invent something first, but the first person to file the idea with the patent office will get the patent protection.   

There is another reason as well.  If someone hears of your invention and describes it in a publication, you have a window of opportunity to file, and that window will begin to close with the date of publication.  The US Patent and Trademark Office generally will not allow a patent on an invention that has been “described in a printed publication . . . more than one year prior to the application for patent in the United States.”[ii]

So, it’s probably best to not tell anyone about your idea, if you can help it – at least until you are ready to file to protect your idea.  If you do decide to approach a company or someone with a potential interest in your idea, consider first entering into a non-disclosure agreement (NDA).  We will briefly discuss NDAs in a future installment, but in the meantime you can find out a lot about this by Googling it.

In part 3, we will discuss some additional, initial steps in protecting your idea.

[i] http://macdailynews.com/2011/09/16/obama-signs-first-to-file-u-s-patent-reform-bill-into-law/
[ii] http://www.uspto.gov/patents/resources/general_info_concerning_patents.jsp

New Inventions and Ideas: Available Protection - Part 1 in our IP and Patents Series

This is the first in a planned series of articles on intellectual property protection and commercialization. We will focus on patents, but we will have some limited discussion on trademarks and copyrights as well. We will also explore licensing and commercialization of products in later posts.

You’ve created something new. Maybe it will save the world, or maybe it will just entertain people for a couple hours. But, it’s original and, therefore, worth something . . . at least, it’s worth something to you.

Congratulations! In many respects, our society is built on innovation.

The next thing you might want to do is contemplate whether to guard your work from someone who might want to steal, copy or otherwise use it and profit from it without your consent. You have some form of intellectual property (IP) and it probably needs to be protected.

That means you may need to make some decisions and take some action.

To know where to start, it’s best that we first understand some basics about IP types and how it is protected.

In the US, there are three kinds of protection available:

1. Patents – a patent protects the inventor from others who might make, use, offer for sale, or sell the invention.[i]   Patents have kept others from duplicating the Toyota Prius hybrid car, the Sony Blu-Ray high definition technology and balloon-expandable heart stents invented by Johnson & Johnson (although all three of these examples were challenged in some way in court).

2. Trademarks – a trademark protects a word, phrase, symbol or design that is used to distinguish one source from another. For example, trademarks keep Pepsi from naming its product Coke (and vice versa), they prevent Burger King from naming its hamburger the “Big Mac” (in case it ever wanted to), and they prevent some guy who builds custom cars in his garage from naming his enterprise “Ford Motor Company”. Trademarks identify and distinguish the source of the goods of one party from those of others.

Patents and trademarks are processed at the US Patent and Trademark Office. There is a ton of information at their website: http://www.uspto.gov.

3. Copyrights – a copyright protects original works by one author from being copied by another. These include “literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture.”[ii]

Copyrights in books prevent outright plagiarism, as well as photocopying the work and using it without the permission of the copyright holder. This also applies to other forms of expression – not just the written word. As an example, the Happy Birthday song is copyrighted. Playing or singing the song in a public performance (private, not-for-profit performances are OK) can mean hefty fines – even the Girl Scouts were warned about paying a fee if campers sang it.[iii]

Copyrights are processed at the US Copyright Office. Its website can be found at http://www.copyright.gov.

In part 2, we will discuss the initial steps in protecting your idea.

[i] http://www.uspto.gov/patents/resources/general_info_concerning_patents.jsp#heading-2 At this link, you can find the following explanation: “The right conferred by the patent grant is, in the language of the statute and of the grant itself, "the right to exclude others from making, using, offering for sale, or selling" the invention in the United States or "importing" the invention into the United States. What is granted is not the right to make, use, offer for sale, sell or import, but the right to exclude others from making, using, offering for sale, selling or importing the invention. Once a patent is issued, the patentee must enforce the patent without aid of the USPTO.”
[ii] http://copyright.gov/help/faq/faq-general.html
[iii] http://abcnews.go.com/WN/story?id=5413561&page=1

If the US Were a Household . . .

I heard this on the radio not too long ago.  When you hear about the US economy, the national debt, etc., the numbers are staggering – and difficult to comprehend.  Who thinks in terms of trillions anyway, except maybe macroeconomists and astronomers?

To get a handle on the current economic situation of the United States, let’s bring the numbers down to something we can deal with.  We will compare the numbers to a household by lopping off a few zeroes.  This may help us, in a very general way, understand our current economic situation.

If the US were a household, we would say it was bringing in $238,000 per year.  Not bad at all.

The problem is, the household spends $355,000 per year -- $117,000 more than it brings in.

And, therefore, to sustain its lifestyle, the household has been borrowing (especially in the last several years) and, therefore, owes $1,460,000.

Ouch.

Yes, we need to cut spending drastically and yes, we need to raise revenue. And, it seems to me, we certainly need to pay down that debt.

That's easier said than done, of course.

Here are the numbers, which were pulled from several sources:

Total revenue in from all sources (individual tax returns, corporation income tax, employment taxes, excise, gift and estate taxes): $2.3 trillion (Source: Tax Stats at a Glance, US Internal Revenue Service; http://www.irs.gov/taxstats/article/0,,id=102886,00.html)

Total spending (mandatory [i.e., social security, medicare, Medicaid, unemployment, interest on the national debt]: $2.2 trillion; discretionary [i.e., Departments of Defense, Energy, Commerce, Labor, etc.]: $1.4 trillion): $3.6 trillion (source: US National Budget, A New Era of Responsibility, Executive Office of the President of the United States, Office of Management and Budget, p114 [year 2010]; http://www.gpoaccess.gov/usbudget/fy10/pdf/fy10-newera.pdf)

Total national debt: (publicly held: $10 trillion; privately held: $4.6 trillion): $14.6 trillion (source: US Dept. of the Treasury, Bureau of the Public Debt; http://www.treasurydirect.gov/NP/BPDLogin?application=np)

OTC Markets Releases New Data

The OTC Markets Newsletter recently published statistics for securities that trade on the OTC Market.  The OTC Markets seem to be growing, and the increases seem to be generally from quality companies, as opposed to “dark” or firms that do not provide much information.  We compared the numbers from 2009, 2010 and the numbers as of 2011.  The OTC Markets have several tiers:

OTCQX - the highest tier for companies that go through a rigorous review and meet certain financial standards. This group has more than tripled in size since 2009:

2009:     78 companies
2010:    159
July 2011:  246

OTCQB - for companies that are "reporting" to the SEC or a banking regulator and are current in their reporting requirements. This group (with the 2009 numbers combined between the OTCBB on Pink Quote and the OTCBB only) saw an increase last year, but has seen a slight drop so far in 2011:

2009:  3,390
2010:  3,851
July 2011: 3,716

The drop could be due to a number of reasons – for example, companies could have voluntarily decided to move to the pink sheets (to save money), or they could have been forced to do so due to failures in their reporting obligations, or they may have been promoted to a higher exchange, either within the OTC Markets, or to NASDAQ or one of the other exchanges.

OTC Pink Current Information - for companies that follow certain standards and make certain information available through the OTC Market's news and disclosure service. This group has risen steadily since 2009:

2009:   1,695
2010:  1,830
July 2011: 2,043

OTC Pink Limited Information - for companies that may or may not be troubled, but have not been current in reporting through the OTC Market's news and disclosure service. This group has remained at about the same number:

2009:  739
2010:  749
July 2011: 723

OTC Pink No Information - which includes "defunct companies that have ceased operations as well as 'dark' companies with questionable management and market disclosure practices." This group rose by a whopping 38% between 2009 and 2010, but has since leveled off.

2009:  2,445
2010:  3,375
July 2011: 3,355

RFID Applications - Part 3 in our RFID series

Attaching an RFID tag to an object and incorporating that object into an RFID system, with a reader and software, can turn any object into a “smart” object, capable of communicating within the system. Long term predictions for these technologies include things like smart houses that know when you wake up in the morning, get your coffee ready for you and tell you you’re low on milk[1]; or smart shopping carts where you place what you want in a cart and walk out of the store, paying for your goods automatically when you exit.

While that sort of integration of RFID into our daily lives is years away, RFID technology is currently being used in many different industries and is expected to grow significantly in the next few years. The RFID tag industry is expected to see heavy growth in the coming years -- one third-party market research report forecasts a 14% Compound Annual Growth Rate and a total market value of $8 billion by 2014[2].

Part of the reason RFID technology is expected to see significant growth is due to its application diversity. RFID tags are used in dozens of applications in many different industries. In this section of our RFID series we will take a look at some of the wide variety of RFID uses:

Pharmaceutical companies can use RFID tags to track drugs and to verify authenticity throughout manufacturing and shipping[3]. This can help prevent fake drugs from entering their supply chains, helping to ensure drug safety to patients while allowing for much cheaper and much more efficient recalls when necessary.

Likewise, RFID can be used to track livestock from birth to retail sales. In fact, livestock tracking is predicted by British Research firm IDTechEx to be the largest RFID market by 2017 at nearly $6.5 billion worldwide[4]. This is expected to be largely propelled by government mandates requiring animal tracking for improved food safety. According to the U.S. Department of Agriculture, in the U.S. alone there are over 100 million cattle, and over 35 million additional cattle born each year[5]. In the instance of a food safety issue (like E. Coli in tainted meat), the affected products can be traced in some instances to the animal itself, as well as to any other animals or products that it may have come into contact with. This should allow quicker, more efficient and less costly recalls both in human health and money terms.

In farm management, RFID systems can be used along with software systems to allow for easier tracking of various animal characteristics depending upon the type of farm (e.g., milk production in a diary farm). This allows more tailored care and decreased labor costs. One report states that using RFID systems in such a way as to track individual cattle rather than groups of cattle has allowed one farmer to estimate saving $35-60 per head[6].

RFID tags are used in many toll roads to collect fees automatically as a vehicle drives by, while companies managing parking lots or managing auto fleets may use RFID to track vehicle locations or empty spots within their lots.

ExxonMobil has introduced its “SpeedPass” to collect payment at gas stations[7]. Credit card companies such as Visa, with its new "payWave" system, are beginning to offer RFID embedded smart cards to provide users with a more convenient "contactless" payment option[[8]]. Smart card shipments increased 16% to 675 million shipments in 2009[9]. One estimate from CHASE Card Services holds that smart cards may reduce transaction times by between 10-40%[10].

RFID can be used for security - data on the tag can attest to the authenticity of the attached document. Many nations have begun including them in passports -- the U.S. began doing this in 2006 -- and China recently completed a $6 billion project to include them in national ID cards[11]. RFID tags can likewise be placed in employee or visitor badges so organizations can use them to allow after hour deliveries or monitor visitor and staff access[12]. Some countries are considering adding tags to currency as a counterfeit measure[13].

For large retailers, RFID can significantly reduce costs despite the upfront investment in tags and systems, by reducing shoplifting and employee theft, and eliminating the need for manual inventory counting. This can also reduce overall inventory costs due to greater automation, increased data accuracy and decreased labor. It can also increase sales with better stocked shelves; according to the Wall Street Journal, an American Apparel pilot program saw a 14.3% increase in sales in RFID enabled stores due to better stocked shelves[14], and IHL group recently stated that eliminating the estimated $430 billion in sales lost due to out of stock items could help retailers improve sales by as much as 10%[15].

In addition to tracking inventory, tracking a business’s assets can also be very valuable. A Texas hospital reports saving $30,000 per month by tracking and monitoring the idleness of rented equipment[16].

Tracking assets can be an important application for businesses. According to Frost & Sullivan, hospitals lose 10-20% (approximately $750 million worth) of their assets each year. Construction companies can use RFID to make sure that tools are not left behind at work sites[17].

Businesses can also use RFID to better understand their customers. More accurate inventory data can allow a business to better anticipate future demand, and businesses have also used RFID to track promotions and sales[18]. Another application is monitoring the in-store travel of a garment from the rack to the dressing room and back to better understand consumer preferences[19].

RFID can be helpful in a business’s compliance or safety issues as well. Sushi restaurants can track raw food to make sure it doesn’t expire[20]; healthcare providers can track employee’s badges to make sure hands are washed[21] and they can track instruments to make sure they are sterilized[22]; and an Australian mining company can track vehicle traffic underground to avoid collisions[23].

Some of the more unique uses we’ve heard about are researchers tracking honeybees to study their behavior[24], casinos embedding tags in poker chips to monitor the money at their tables[25], and a waste management company using trucks with readers and RFID tagged recycle bins to measure the weight of a recycle bin prior to disposal and give the customer credit for their bottles and cans[26].

There are clearly many varied uses for RFID technology, and new ones are being dreamed up every day. It will be interesting to see what they come up with next.

[1]
Want, Roy “RFID: A Key to Automating Everything” Scientific American 8/9/2008

[2]
Overlook Seen Positive for RFID Market despite Downturn. Supply & Demand Chain http://www.sdcexec.com/web/online/IntegrationERP-Trends/Outlook-Seen-Positive-for-RFID-Market-Despite-Downturn/19$12198

[3]
O'Connor, Mary. "Pfizer Using RFID to Fight Fake Viagra." RFID Journal http://www.rfidjournal.com/article/articleview/2075/ 1/1/ 1/6/2006

[4]
Swedberg, Claire. "Food and Livestock Tagging Expected to See Bumper Gains." RFID Journal http://www.rfidjournal.com/article/view/3725/1 2 November 2007

[5]
Cattle. National Agricultural Statistics Service (NASS), Agricultural Statistics Board, U.S. Department of Agriculture http://usda.mannlib.cornell.edu/usda/current/Catt/Catt-07-23-2010.pdf 7/23/2010

[6]
Ishmael, Wes “The Power of One.” Beef Magazine http://beefmagazine.com/mag/beef_power_one/ 7/1/2010

[7]
"ExxonMobile SpeedPass" http://www.ti.com/rfid/shtml/apps-contactless- speedpass.shtml

[8]
"Visa's PayWave catching on in Canada." Contactless News. http://www.contactlessnews.com/ 2010/05/27/visas-paywave-catching-on-in-canada 3/27/2010

[9]
"Report: Smart card market to expand in 2010." Contactless News. http://www. contactlessnews.com/2010/05/12/report-smart-card-market-to-expand-in-2010 5/12/2010

[10]
The Self-Service ‘Buy-and-Pay’ Market” Vending and Foodservice Trends in the US Packaged Facts, June 2008.

[11]
Weier, Mary Hayes “Slow and Steady Progress” Information Week http://www.informationweek.com/news/mobility/RFID/221601551

[12]
“Kalorama Tech in Healthcare Bundle” Kalorama Information, A division of MarketResearch.com; November 2008

[13]
“What Every Internal Auditor Should Know About RFID”, Knowledgeleader, June 2006

[14]
Bustillo, Miguel “Wal-Mart Radio Tags to Track Clothing” The Wall Street Journal http://online.wsj.com/article/SB10001424052748704421304575383213061198090.html 7/23/10

[15]
Johnson, John “Retailers look to RFID item level tagging to kick $430B out-of-stock problem” RFID 24-7 6/6/11 http://www.rfid24-7.com/articles/060611.shtml

[16]
“Texas Health Presbyterian Hospital Dallas Uses Wireless System to Track Location of Supplies, Equipment” http://www.texashealth.org/body.cfm?id=1629&action=detail&ref=1137

[17]
Nazarov, Amy “The Internet of Things” InformationWeek 9/7/2009

[18]
Budde, Paul & Harper, Phil Australia 2007 - Mobile Data and Content,- The Long Wait for 4G;Paul Budde Communication 9/2007

[19]
Nazarov, Amy “The Internet of Things” InformationWeek 9/7/200

[20]
“When Sushi Meets Technology” http://www.todayonline.com/Business/SME/EDC110623-0000291/When-sushi-meets-technology, 1/23/2011

[[21]]
“Ecolab, Proventix become allies in RFID hand hygiene compliance monitoring”, RFID News http://www.rfidnews.org/2011/06/28/ecolab-proventix-become-allies-in-rfid-hand-hygiene-compliance-monitoring?issue=rfidnews_20110630, 6/28/2011

[22]
“Kalorama Tech in Heatlchare Bundle” Kalorama Information A division of MarketResearch.com; November 2008

[23]
Crozier, Ry “NSW mine tests RFID thesis” itnews http://www.itnews.com.au/News/264246,nsw-mine-tests-rfid-thesis.aspx, 7/21/2011

[24]
“Flight of the honey bee played to the tune of RFID” RFID News http://www.rfidnews.org/2011/05/31/flight-of-the-honey-bee-played-to-the-tune-of-rfid, 5/31/2011

[25]
Nazarov, Amy “The Internet of Things” InformationWeek 9/7/2009

[26]
Ibid.

Nanoparticles Improve Lithium Ion Batteries

We wanted to expand on our press release this morning regarding the completion of our Phase I STTR project, because this is a very exciting development.

The materials used for lithium ion batteries are expensive.  Other, cheaper materials are available, but they are not typically used because they suffer from "capacity fade" -- that is, when you repeatedly cycle (i.e., drain and re-charge) them, they don't last very long, especially in warmer environments.

Comparing battery cells with our nanoparticles (coated)
and cells without (uncoated).  After just 30 cycles in
high temperatures, the uncoated cell capacities have
dropped significantly, while the coated cells still perform
close to where they started.

We worked with the University of Wisconsin to prove that adding certain nanoparticles in a certain way to these less expensive materials deters capacity fade.

This means the less expensive materials can be used -- and this can help tremendously with the cost issues that are preventing the use of lithium ion batteries in some major applications.

We've received a lot of interest in the technology -- from a Fortune 500 company to a small but well-funded start-up.  All of these companies are working in the battery or battery materials area and each of them plan to watch carefully as we bring the technology to full commercialization.  They could very well end up being the technology's first licensees.

We will soon be submitting a Phase II proposal to fund the commercialization effort.  We should have an answer on that proposal toward the end of the year. 

Why RFID? - Part 2 in our RFID Series

Radio Frequency Identification (RFID) has the potential to dramatically alter the way people live their lives and the way businesses and governments operate. Its impact will be especially felt in business where some foresee no less than “a business revolution”[1]. RFID systems are comprised of three things, a tag with an antenna and microchip to store data, a reader to interrogate the tag and retrieve the data, and software to interpret and organize the data as desired. Much more than a “glorified bar-code”, RFID allows tracking and identification of objects in real time; some systems even allow constant tracking.

With an RFID system, we have the ability to take nearly any object and make it “smart” or at least “smarter” by allowing it to communicate back to its reader. A basic tag allows the object to communicate its location. Some tags are combined with sensors to provide more information. Think of a tag combined with a temperature or heart monitoring sensor on a patient in a hospital. Integrated into the hospital network this could allow patient location and condition monitoring in real time throughout the hospital[2].

Some of the general benefits of RFID systems are that they allow accurate and efficient data acquisition. With the increased computerization and automation provided by an RFID system there is a decrease in manual data entry and therefore fewer opportunities for errors. As RFID systems are wireless there is less need for “cumbersome cables”, they take a minimal installation time, and have low maintenance requirements[3].

For consumers RFID should yield increases in convenience, efficiency and safety. With RFID tagged retail products and checkout readers we should see more self-service retailers, perhaps even hybrid-vending machine / mini-marts with no employees other than the ones needed to tag all the mini-mart’s products[4]. RFID enabled “Smart Cards” should “reduce consumers’ average transaction time by between 10% and 40% depending on whether purchases are made in stores or at drive-throughs”[5]. On top of quicker and more convenient shopping, products should be safer as livestock, pharmaceuticals and everything else being tracked with RFID can report to consumers the product’s history, and “pedigree”, assuring the consumer of both the safety and quality of the product[6,7]. Farther into the future there are the ideas of automated kitchens; e.g., your milk carton notifies the refrigerator that it has expired, or that its contents are low; the refrigerator, in turn, notifies you, or simply orders a new carton from the store[8]. The possibilities for RFID to change our day to day lives are numerous, wondrous and limited only by our imaginations.

While the benefits of RFID for business may not be as glamorous as those for consumers, businesses will enjoy the greatest rewards from implementing these systems by being able to (to name a few):

• Better locate and deploy inventory in the supply chain
• Reduce lost shipments
• Increase sales by decreasing out-of-stocks and increasing in-store item availability
• Reduce employee theft
• Protect brands through ensuring product integrity
• Better understand consumer preferences
• Increase knowledge available to the customer
• More quickly and efficiently facilitate recalls
• Track, monitor and manage promotions and sales
• Locate, track, maintain and prevent theft of company assets
• Reduce labor’s share of operational costs through increased automation
• Increase predictability in product demand

In addition to these more generalized benefits for businesses there are many specific benefits for different particular applications or industries, too many to name here. It is clear however that because of these benefits RFID will become a major part of business operations. Businesses will eventually need to adopt RFID in order to run more efficiently and keep up with the competition.

---

[1] Budde, Paul & Harper, Phil Australia 2007 - Mobile Data and Conten,- The Long Wait for 4G; Paul Budde Communication 9/2007 http://www.budde.com.au/Research/2007-Australia-Mobile-Data-and-Content-The-long-wait-for-4G.html

[2] “Diagnostics Market Research Bundle” Kalorama2009 Diagnostic Industry Bundle; Kalorama Information A division of MarketResearch.com, May 2009 pg 116

[3] “Kalorama Tech in Heatlchare Bundle” Kalorama Information A division of MarketResearch.com; November 2008; pg 37

[4] “The Self-Service ‘Buy-and-Pay’ Market” Vending and Foodservice Trends in the US Packaged Facts, June 2008.

[5] “The Self-Service ‘Buy-and-Pay’ Market” Vending and Foodservice Trends in the US Packaged Facts, June 2008.

[6] Swedberg, Claire; “Norwegian Food Group Nortutra to Track Meat” RFID Journal; July 22, 2008 http://www.rfidjournal.com/article/view/4208

[7] “RFID and UHF: A Prescription for RFID Success in the Pharmaceutical Industry” http://www.scribd.com/doc/59002369/WP-RFID-UHF

[8] Budde, Paul & Harper, Phil Australia 2007 - Mobile Data and Conten,- The Long Wait for 4G; Paul Budde

Articles about our S/Cap RFID tag

RFID Journal, the premier publication for the RFID industry, did an article on our new S/Cap RFID tag yesterday, June 29: http://www.rfidjournal.com/article/view/8565

In addition, the product had a nice write up on VeryFields, which hosts the largest RFID tag database, on June 28: http://blog.veryfields.net/?p=2334

US patent reform

The following is an excerpt of a couple of postings from the old Enable IPC blog, dated during July and August of 2007:

The July/August (2007) edition of Forbes Small Business has an important and interesting article that discusses the overloaded US patent system. The backlog of applications is now at 800,000! … There are some reforms that are in the works, apparently. A bill is aimed at improving the quality of patent applications. However, the FSB article says that the bill would make things more difficult for small businesses.

In particular, the issues seem to be changing the protection from "first to invent" to "first to file", … -- meaning you could invent something first, but if someone else files a patent application before you, they get the rights.

The article seems to say that larger businesses are generally for this change while smaller companies are against it (the reason being, larger companies can more easily beat smaller companies to the patent office because they have greater resources).

The latest issue of Fortune Small Business contains a letter from Lynn Sky (owner of Blue Sky Gallery) that asks the question: if we change the law from first to invent to first to file, then "aren't we simply legalizing theft?"

Last week, the House of Representative passed a plan for patent reform, which includes the change to “first to file” (see http://dld.bz/aeD23 ). A number of groups continue to oppose this particular provision, including the National Small Business Association (NSBA; see http://dld.bz/aeD3k).  The NSBA also brings up the fact that patent fees are being diverted from the patent office, which is contributing to the backlog issue as well.   

The House version, however, has some differences with a Senate version that was passed earlier and the two versions now have to be reconciled.

It will be interesting to see what we end up with. We agree with the NSBA; "first to file" seems wrong and the diversion of US patent fees needs to stop. The USPTO needs those fees so they can hire and utilize additional, more experienced examiners to permanently address this backlog.

The website law.com has provided an interesting summary of where we are at today. Check it out at: http://bit.ly/kAI0GO

Enable IPC Introduces the S/Cap RFID Tag

This morning, we were excited to announce the launch of a new product: the S/Cap RFID Tag. 

RFID stands for Radio Frequency Identification.  Whether they realize it or not, most people encounter RFID everyday; when they use the EZPass tollway, when the use their "SpeedPass" device at Mobil stations, when they have the chip placed in their pets in case they get lost . . . there are many examples of RFID in use right now and many more are sure to follow.

(Check out our blog posting on RFID basics to learn more)

Our tag is geared toward asset tracking.  Companies might use it to keep track of expensive equipment.  Protecting assets means more than just ensuring no one walks away with a piece of equipment. An oft-cited 2007 report published by McAfee and Datamonitor estimates that an average laptop, which might cost $1,000, holds data worth $972,000, and could store as much as $8.8 million in commercially sensitive information and intellectual property.

Also, the internal costs – in time, productivity and cash – of physically trying to track a misplaced asset or locating and purchasing a needed replacement due to loss or theft can be enormous.

What makes our tag truly unique, however, is its power source.  Most tags do not use a power source, and those that do typically will use a small battery that will last maybe a year or two.  We don't use a battery; we combined an ultracapacitor with a small light panel instead.

The result is a read range of up to 75 feet (other tags in this class will read anywhere from 3 to 40 feet or so).  In addition, because ultracapacitors can outlast batteries by as much as 1000x, our tag could last longer than many of the assets it tracks.

So, while most tags we compete with offer 90 day to 1 year limited warranties, we offer a 7 year limited warranty.

We are excited about this new product.  We think it will enhance and expand the use of RFID, especially in outdoor and harsh environments.

The press release on our new product can be found here:  http://dld.bz/aedzC

More information on the tag, including a link to download or view a data sheet, can be found at http://rfid.enableipc.com

IP Rights: ideas vs expression

LegalZoom.com recently created a blog post that discussed the issue of ideas vs the expression of those ideas, and what can be protected under US law.  Essentially, it comes down to reducing the idea to writing as a first step -- just because someone had an idea before anyone else doesn't mean they automatically have the rights to a patent or copyright to it.

The article can be found here:  http://dld.bz/ad8tv

In the coming weeks, we plan to post a series of articles on intellectual property, patents, trademarks, copyrights and licensing from our perspective.  Enable IPC stands for "Intellectual Property Commercialization" (i.e., turning technologies into products).  We think we will have quite a bit of interesting information to share on the subject.

Some Basics About RFID Technology - Part 1 in our Series

According to the RFID journal, the idea of Radio Frequency Identification (RFID) has been around since World War II. When approaching a friendly radar position German pilots would roll their planes, which would change the signal reflection and alert the radar operators that a friendly craft was approaching; this is something like a passive RFID system. The British meanwhile, fixed transmitters to their craft to send signals to special receivers at their radar stations alerting the operators that a friendly craft was approaching (more like an active RFID system).[1]

RFID systems consist of two parts: a reader (like the radar station in the examples) and a tag (like the airplanes, or the airplane’s transmitters). An RFID tag can be as simple as a microchip and an antenna. The tag transmits information to the reader via radio waves and the reader intercepts and interprets the information.

RFID tags can further be defined as passive, battery assisted passive (BAP), or active. BAP and active tags use a power source to enhance the signal so it can be read from much further away.

• Passive RFID tags are comprised of two components: a chip and a radio antenna. The reader is used to send out a signal that 'wakes up' the chip in the tag. The tag sends back the signal ('backscatters') to the reader, transmitting the information on the chip. Passive chips backscatter 10-15% of the energy they receive and, therefore, can usually be read from only a few feet away.

• Battery-assisted passive (BAP) RFID tags contain an embedded power source – a thin film battery or other energy storage device. When receiving a signal from a reader, the power source enables the tag to backscatter much more of the energy it receives (some claim as much as 90%). BAP Tags have been shown to be read from dozens of feet to over 100 feet away.

• Active RFID tags utilize a power source (usually a stronger battery than BAP tags), are typically 'always on', and emit the energy from the battery rather than through backscatter. This means essentially that they are always broadcasting a signal and therefore do not reflect back the signal from a reader. They are needed in electromagnetically unfriendly environments and some can be read from readers over 100 feet away;  and, with additional power, some can be read from over 300 feet away.

There have been three major issues with the energy storage components of BAP and active RFID tags: cost, reliability and maintenance. Up until recently, active and BAP technologies added significant bulk and therefore cost to RFID tags. With recent thin film battery technologies bulk is less of an issue, however the thin film batteries can be less reliable and more costly. In addition, detection ranges can drop significantly with the age of the tag and battery, with some dropping from dozens of feet to a range comparable to a passive tag.

There are a wide variety of uses for RFID however, and they make use of all the different RFID characteristics. We will discuss more on RFID applications in later postings, but small, inexpensive and simple Passive RFID tags can be printed out in large quantities and used to help track large volume, but relatively low cost items such as garments for Wal-Mart. Their low-read range is not a problem when used for things like contactless payment cards, or automobile toll station passes. BAP or Active tags, while more expensive, provide options for tracking large items in large fields like containers in a dockyard, automobiles in a parking lot, or pallets in a warehouse.

At some city libraries you can now use a self-checkout where you place your stack of library books on an RFID pad (the reader), scan your library card, and within seconds the books are identified and checked out on your account. One day soon, we expect to use a “smart shopping cart” where you put the items you want in a cart, they are logged and payment is done automatically when you exit the store. Companies should see the ability to easily and cost-effectively track assets or track inventory throughout their supply chains, and food and pharmaceutical supply chains should be able to more effectively control the quality of their products making them safer for consumers.

RFID has the potential to impact all of our lives. Using the unique characteristics of different types of tags and systems RFID should see a wide variety of uses and is sure to have tremendous implications for our future.

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[1] Roberti, Mark “The History of RFID Technology” RFID Journal http://www.rfidjournal.com/article/view/1338