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Provisional Damages

Posted Thursday, February 2, 2012 by Mike Cicero

The most obvious underlying theme of the United States patent system is to incentivize innovation and disclosure. Of course, the incentive is the possibility of being granted a patent or, more specifically, a monopoly over practicing the invention during the patent term. It is during that period that inventors often recover the financial investment that went into both the creative and patent prosecution processes. This is straightforward and, since many people are by nature self-interested, many people who have sought patent protection have thought of and are motivated by this incentive.

Although less obvious, another theme of our patent system is to put the public on notice of precisely what is covered by the patent claims. This theme is codified in 35 U.S.C. § 112, second paragraph, which states that “[t]he specification shall conclude with one or more claims particularly pointing out and distinctly claiming the sub¬ject matter which the applicant regards as his invention.” According to the Manual of Patent Examining Procedure (MPEP) §2173.02, in order to comply with the second paragraph, the claim must be sufficiently clear and precise so as to provide “clear warning to others as to what constitutes infringement of the patent.”

Because these themes coexist, laws must balance the competing interests that each represent. A prime example involves published patent applications which have yet to mature into an issued patent. In this situation, because the patent has not issued the possible future patentee does not have a monopoly over practicing the invention. Even so, it would be unfair to allow an entity to do what would later be infringement during the sometimes lengthy process of patent prosecution. This would be especially so if that entity actually learned of the invention from the published application and was not a true inventor. To resolve this conflict 35 U.S.C. § 154(d) provides an applicant with provisional rights. Once a patent has issued, a patentee may assert provisional rights to obtain a “reasonable royalty” from an entity that has infringed on that patent’s previously published application. The time period for which royalties can be obtained begins when the application published and ends when it issued as a patent.

While the prospect of having to pay out royalties is likely to deter unethical application infringement, it would still be unfair to penalize an entity that had no reason to know that such provisional rights might exist. It would also be unreasonable to expect decision makers to stay current with publishing patent application in order to avoid future litigation. Often times the phrase “Patent Pending” or “Patent Applied For” is placed conspicuously on a product to alert other entities that patent rights are being sought after. This might deter an entity from investing time and resources toward bringing a product to market, but the phrase is still merely a deterrent and holds no legal effect. That is because it would be unfair to the public to place legal effect on these phrases for the same reason it would be unfair to place legal effect on ambiguous patent claims; both fail to provide the public with a clear warning as to what constitutes infringement. Therefore, 35 U.S.C. §154(d)(1)(B) requires a patentee to have provided the specific entity with “actual notice of the published patent application” in order to assert provisional rights. Additionally, 35 U.S.C. §154(d)(2) precludes the patentee from obtaining the “reasonable royalty …unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.” An entity can’t be provided with a moving target and expected to rationally plan its actions to avoid infringement.

In sum, provisional rights provide inventors with a powerful tool to deter infringement prior to the patent actually being issued while also protecting third parties from being blind-sided with infringement claims that it couldn’t have reasonably predicted.

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