Last year's move by Congress to revise the patent laws is forcing companies to take a new look at how they protect the fruits of the research they pay for.
Here's the way it used to work: Suppose you invent an important new way to make a chemical compound. You could patent the process, and, as you find improvements, you could patent them, too. But if I refined your invention, I could not win a patent on my improvement -- unless it was as significant as your original finding.
That made good sense when inventions came from -- or at least were thought to come from -- the imagination and midnight oil of garage tinkerers. But today, a more typical inventive climate is an industrial laboratory, where a number of scientists, perhaps schooled in different specialties, work together. When the hoped-for synergy develops, the most likely sources of improvements are the colleagues of the person who made the initial discovery. The company for which they work owns all the discoveries, but under the old law, the improvements, because they came from the mind of someone other than the original inventor, could not be patented.
But for the past two months, improvements uncovered by members of the same corporate research team have been patentable. It's "the most significant change in patent law since 1952," claims patent expert Marcus J. Millet of White Plains, N.Y.
But companies can take advantage of the new law only if their paperwork is in order. It has long been good practice to insist that every employe engaged in any scientific investigation sign a document promising to assign to his or her employer all patents arising from that research. Companies should have similar agreements with consultants they hire. But in fact, firms often are sloppy about seeing that such agreements are signed. Important inventions are not that common, and even without an enforceable agreement, most company scientists are willing to assign their inventions to their employers, who have the means to work out the bugs and the incentive to fund future investigations. The moral obligation to turn over patent rights is usually met. MM oral obligations carry no weight under the new law, M however. The improvement made by Employe B on the invention of Employe A can be patented only if Employe B had a legal obligation, at the time the discovery was made, to assign the ownership of the invention to the company for which both work. That's why Millet's firm, Vogt & O'Donnell, recently warned clients that "a company policy to bind every employe upon commencement of employment with a written instrument setting forth an obligation of assignment appears even more essential now than in the past."
The kind of paperwork heretofore used for patent assignments no longer may be good corporate practice. For example, it has been common for the inventor to turn over patent rights to the company at the time a patent application is filed. But the new law requires that ownership -- or at least the right to ownership -- exist when the invention actually is made.
In addition to rewriting those forms, companies are changing the wording on warranties. Generally, companies have required the inventor to warrant that he or she has clear title to the discovery at the time of assigning it. But, of course, such a statement could be used by someone who opposes a patent on the improvement as evidence that the company did not have a legal claim at the time the invention was made. So corporations now are drawing up forms that say there is an obligation to turn over the invention, and asking the employe to warrant only that no outsider has a claim to the invention.
As with most new laws, the patent revisions leave a lot of questions that will be answered only through litigation. The Vogt & O'Donnell memo, for instance, warns that when companies pool their research -- perhaps by vesting the rights to inventions in a separate corporation owned by all the participants in the plan -- the advantages of the new law may be lost. Employes would have an obligation to turn over improvements to the company for which they work, but the original invention actually would be owned by the joint company, which courts might rule is a separate entity. Even a limited interpretation of the new law, however, gives corporate researchers protections they did not have before: The open issue is not whether business benefits or not, but merely how much it benefits.
The message, says Millet, is that "if you have any kind of R&D going on, now is the time to review. If you want to get the benefits of the new law, you've got to be real careful."