Northern Colorado Business Report
Vol. 9, No. 22
July 9, 2004

Keeping An Idea Safe Takes Money
by Jane D Albritton

There is a one-two punch line to the modem tale concerning the protection of intellectual property, which begins with Article 1, Section 8, of the U.S. Constitution: "The Congress shall have the Power ... To promote the Progress of Science and useful Arts, by securing for limited limes to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Punch One: Right now the most economically valuable property to promote is conceptual, not physical (meaning that you cannot just throw up a fence and post a guard to protect it).

Punch Two: If you are an entrepreneur or a small company with more good ideas than cash, good luck protecting your property from intruders, poachers and other pests,

Regarding Number One, no less a person than Alan Greenspan, chairman of the Federal Reserve Board, has weighed in on the subject. In his address at the Stanford Institute for Policy Research Economic Summit on Feb. 27, 2004, Greenspan identified the protection of intellectual property as "a key ingredient of growing a modern economy."

He noted that over the past 50 years, "the increase in the value of raw materials has accounted for only a fraction of the overall growth of U.S. gross domestic product (GDP). The rest of that growth reflects the embodiment of ideas in products and services that consumers value."

High-stakes poker game

Regarding Number Two, patent attorney Bill Cochran, of Cochran Freund & Young LLC, makes the second point in plainer language.

" This is the largest-stake poker game you can get into," Cochran said. "If you want to play this game, you have to have money."

When the framers decided to include patents in the Constitution, they offered inventors and authors a little monopoly time as a reward for their originality, a strong incentive to keep on creating and reaping exclusive rights to the fruits of their labor. They understood that nurturing invention was important to the growth of a new nation.

Since that time, the laws surrounding the protection of property - intellectual or otherwise - have become more complex and have settled into four basic areas.

" The four main areas of protection are patents, copyright, trade secrets and trademarks," Cochran said. "Together, they allow an inventor an opportunity to profit."

Cochran noted, however, that after the crash of 2000, companies cut their intellectual property budgets. in his view, such cuts are short sighted because without sufficient protection, an inventor may lose an economic advantage.

" The defensive value of a patent is huge," he said. "We are suing Johnson & Johnson on behalf of a Denver dentist who patented a toothbrush design that they copied. We have several other lawsuits going on for patent infringement."

Cochran added that the worst fear of huge corporations is the individual inventor who cannot be threatened because, like the dentist, he does not make products. Even so, Cochran is concerned that in time mega-corporations will be able to use their market power to steamroll over small companies and inventors.

" Any weakening of patent law will eventually kill entrepreneurship," he said.

Fort Collins attorney Rick Martin of Rick Martin, PC., pointed out that there are only about 30,000 patent attorneys working in the United States, and of those only a handful represent the small inventor. The rest are retained by large corporations.

" IBM has the resources to write patents with sharks' teeth," he said. "The ordinary guy can only afford one tooth."

Bundling of rights is key

Craig Miles of Fort Collins-based CR Miles PC, added that it is in the bundling of rights (drawing from all four of the basic protection groups) that an attorney can build a sufficiently strong wall around intellectual property to defend against even the most determined assault.

" An exclusionary right, such as copyright, is not nearly as robust as a patent," he said. "In the creation of software, for example, copyright protects only the software as it was written. It does not protect the functional aspects of the application. To protect the architecture, you need a patent.

" The question is not, 'Can we get a patent,' but 'Can we get a commercially meaningful patent?," Miles said. "Actuat costs are not the measure. You can spend $30,000 to protect a meaningful piece of intellectual property and make millions. Or you can waste $2,000 on a worthless document."

Cochran, a third-generation patent attorney, has worked on both sides of the game. He pointed out that very few patent applications were approved on the first round.

" As a patent examiner in Washington, D.C., I prosecuted thousands of patent applications, and only a handful received a first-action allowance," he said. "The government is careful about granting monopolies."
Which brings us back to Number Two: the high stakes part of protecting intellectual property.

The costs for securing a patent begin with the search and, if the patent is successfully prosecuted (the word "prosecution" having nothing to do with criminal law), end with the last maintenance fee paid 11.5 years after the patent is issued. Between those two points, costs of $30,000 to $40,000 are not unusual (and do not include the per country costs of $15,000 to $25,000 to secure and maintain foreign patents).

While the costs of assembling and shaping that "bundle of protection" seem to be growing, attorneys argue that the defensive value of patent protection on economically valuable property more than returns the investment in legal fees. What they believe should be worrying inventors is a trend to weaken the patent system in ways that would disadvantage individual inventors or small, creative companies.

Martin (whose Web site www.patentcolorado.com offers some interesting insights into the patenting process) said that over the last 10 years, changes in patent law have cut in half an inventor's chance for competing with IBM.

" We have had the strongest patent protection in the world," he said. "Germany and Japan have no small inventors because they have no protection."

Dr. Mervyn Jacobson, CEO and president of Fort Collinsbased XY Inc., (a young company involved in the research, development and commercialization of sex-selection techniques in non-human mammals, including cattle, horses, pigs and endangered species) added that protection is critical to invention.

" Patents allow creative people to take risks," Jacobson said. "We create value through invention and ideas, and those ideas have to be protected."