THE PPP AFFILIATION RULES: THOUGHTS ON A WORKAROUND

On March 27, 2020, President Trump signed into effect the Coronavirus Aid, Relief, and the Economic Security Act (the “CARES Act”), which includes, among other relief provisions, the Paycheck Protection Program (the “PPP”) aimed at providing liquidity to help small businesses maintain their existing payroll by making certain (forgivable, in part) loans available through the Small Business Administration (SBA). On April 2, 2020, the SBA issued its Interim Final Rules regarding the administration of the PPP, which provides the framework under which businesses with under 500 employees (generally) can take advantage of the PPP, if they certify that “current economic uncertainty makes this loan request necessary”.

Venture and PE Back Entities and the Affiliate Attribution Problem

Unfortunately, for a large swath of the small business community, including many start-ups, the rules around PPP eligibility present a significant roadblock to their participation. Since the program is administered by the SBA, the SBA’s general rules and regulations are applicable to the program. One particular aspect of those rules, regarding how to count ‘employees’—the so called “Affiliation” rules—is problematic in that it may require attribution and aggregation of employees with other ‘affiliates’. In this context, it is suggested that affiliates may have to include any investors who hold a ‘controlling interest’ in the company and any other companies in whom that investor also holds a controlling interest.

With that level of attribution, it becomes highly likely that any given investor (often, PE, VC or even Angel) backed company will quickly exceed the 500 employee maximum level under the PPP, and, therefore, will not be eligible to participate. With time being of the essence, and an already limited (and rapidly dwindling) level of available PPP funds to access, it is imperative that these businesses—often some of the US’ most promising young enterprises, including in the biotechnology space—proactively find a safe and compliant way to participate in this important economic stimulus (or ‘emergency distress relief’, depending on your perspective) program.

Defining ‘Control’

At the heart of the problem here is what constitutes a ‘control investor’ under the applicable SBA regulations. We will not attempt, in this column, to explicate the nuances around every direct and edge case that might constitute control. Others have done a great job summarizing and explaining the same (including an excellent rule / example chart here). Suffice it for our purposes to say, however, that ‘control’ can be expressed or implied as a result of any of the following conditions:

  • Common Ownership – Ownership of >50% of voting equity.
  • Present Effect – The rules will give present effect to potential future events, such as the exercise of options, warrants, etc., that could affect control.
  • Common Management – Where sister entities share controlling executive officers and/or directors, for example.
  • Identity of Interest (Family Relationships) – Where sister entities are owned / controlled by close family members.
  • Identity of Interest (Economic Dependence) – Where a company derives 85%+ of its revenues over the previous 3 fiscal years from another entity.
  • Identity of Interest (Common Investments) – Where management / shareholder groups have substantial investment and economic overlap with other entities.
  • Newly Organized Concern – Applicable where a key stakeholder in one entity begins to perform work for another, and maintains substantial overlap of resource usage from the old entity.
  • Successor-in-Interest – Applicable in cases involving a consummated strategic transaction, where the successor may be aggregated with the predecessor entity.
  • Totality of Circumstances – When the facts and circumstances suggest that two companies are very closely intertwined, they may be deemed affiliated.

As mentioned above, in the event that a control condition exists, then it is highly likely that attribution with an investor and with the investor’s other portfolio companies will exist, such that the employee headcount metric for any given company could be significantly increased, resulting in PPP ineligibility.

Suggesting a ‘Workaround’ Framework

Generally

In our view, the best and most logical outcome here is for the Treasury and the SBA to directly fix this problem—either by updating their rules and guidance, or by issuing waivers. As of this writing, we remain hopeful of the probability of that outcome.

However, in the event that this does not happen, it may fall to business and legal advisers to consider creative ways that their clients may stay outside of the attribution rules, and still fit within the letter and spirit of the PPM framework.

We would suggest that there are three obvious ways to potentially deal with (portions of) this issue, and they all involve the full participation of the investor community.

  • Note – For the sake of brevity and clarity, the following analysis is based on and assumes a Delaware domiciled for-profit corporation, which has adopted standard NVCA investment documentation, and which requires a simple majority of preferred holders to effect charter / material document modifications or waivers (that being the ‘Requisite Holders’).

What We Believe Can be Solved For by Action…

Solving for any of the control issues detailed above is almost certainly going to require manipulation of existing provisions in companies’ Certificates of Incorporation and possibly Bylaws (collectively, the “Charter”), as well as certain collateral shareholders rights agreements (inclusive, broadly, of the typical Investors Rights Agreement, Right of First Refusal (“ROFR”) and Co-Sale, and Voting Agreement). Collectively, these documents contain a number of provisions that are, generally, prophylactically protective of investors’ rights, that may cause attribution control issues. Specifically, investors are often granted dedicated board seats and certain investor protective provisions (veto rights) over certain key material company transactions. Depending on the existing deal in place, investors may also have conversion rights that give them effective voting control (under the ‘Present Effect’ prong), which are likely baked into the Charter documents.

Individually or collectively, these rights almost certain cement a ‘control’ relationship, that would put any such company squarely in the attribution dead-zone described above.

We believe, however, that a mix of the following techniques could be effective in rebutting a number of these presupposed conditions.

Charter Amendments

The most obvious and robust place to start unwinding disqualifying ‘control conditions’ is in the company’s Certificate of Incorporation (and any corresponding provisions in the company’s Bylaws, if any). In the standard NVCA form, this will also certainly involve direct amendments to the Board of Directors composition / voting section, as well as the Preferred Stock Protective Provisions Section (both usually contained in Section 3 of the NVCA model form of Amended and Restated Certificate of Incorporation).

What we would suggest is that an abrogation of the rights contained in those Sections may be directly necessary in order to comply with certain of the control conditions detailed in the rules. Each situation could, of course, be slightly different, so a universal approach is likely impossible, but the principals around what would need to be changed should be fairly universal.

Or, what if a more universalist approach, is possible? For example, what if, a company and investors representing the Requisite Holders could agree to some form of the following new, ‘temporary’ Article in a standard Certificate:

FOURTEENTH: For purposes of the rules of the US Department of the Treasury and the Small Business Administration (to the extent applicable) (the “Rules”), in connection with any loan obtained by the Company under the Paycheck Protection Program (PPP), for so long as any principal or interest may be outstanding under such loan, all holders of [Series A Preferred Stock] agree that the provisions contained in Article FOURTH, Section B of this Certificate related to preferential voting by such holders on any matters, including, but not limited to matters related to the Board of Directors and any special protective provisions shall be fully suspended, and that such holders shall, in lieu of such rights, be entitled to vote on any or all such matters on a theoretical as-converted to common stock basis only. This provision shall be automatically abrogated, and shall be of no further force or effect, upon the earlier of (i) the repayment, forgiveness, novation or other extinguishment of such loan and the Company’s obligations with respect thereto, or (ii) any modification of the Rules that would no longer necessitate the same, as a condition of participation by the Company in the program(s) underlying such loan.

The benefits of this approach are obvious. It is relatively simple and easy to implement. But would it be respected by any examining authorities, and be sufficiently ‘unambiguous’ not to fall foul of the law of unintended consequences on other matters? These may not be answerable without some leap of faith (which, of course, will put a lump in legal counsel’s throat). But we would suggest that, if the now fairly standard Certificate provision dealing with Section 500 of the California Corporations Code (dealing with certain repurchases) is working in Delaware Certificates, then there is no obvious reason why some version of this approach should not also work.

Waivers

Waivers are the fastest and easiest way to deal with required corporation actions. The model NVCA Certificate provides a simple and easy to use waiver provision for use by the preferred Requisite Holders (See Article FOURTH, Section B.8.). In theory, this provision could be used, in a blanket fashion, to obtain well designed and thorough waivers from preferred holders to address one or more blocking control conditions (including all those mentioned above). Another benefit of waivers is that they are much easier to update, modify, repeal, etc., in the event that the same is required by any regulatory authority, and/or the underlying conditions for their need have ceased to exist.

However, effecting by waiver everything which is necessary to mitigate away control condition risk seems unlikely. For one thing, it may not be obvious how the regulatory authorities (or a Delaware court, for that matter), would treat a ‘waiver’ of an otherwise obviously codified right in the Certificate (such as a Board seat nominating right), and such an approach seems like a recipe for corporate governance ambiguity. Further, it is not obvious how the regulatory authorities would view a waiver, that may otherwise have legal revocability, in light of the ‘Present Effect’ and ‘Totality of Circumstances’ prongs; and may choose to look through the same.

Accordingly, although useful (and, in the case of non-Charter documents, perhaps perfectly adequate), we would suggest that the Charter Amendment approach is an obviously more robust and defensible approach, if possible to actuate.

Business Structuring / Recusals

It is somewhat less clear whether provisions that provide conditions of control that are contained within collateral company documents (such as, e.g., the IRA, Voting Agreement and ROFR Co-Sale), as opposed to the Certificate and Bylaws, would also have to be amended, or whether waiver would be sufficient; especially since these documents are a matter of contractual private relationships, not public record. However, in the interests of caution, we would suggest that corresponding amendments and/or waivers also be cascaded down to these documents. Afterall, there is no point in committing to this strategy and amending a company’s Charter only to fumble the ball on technicalities at the five yard line. Accordingly, we would recommend corresponding changes / waivers to these documents as well.

Further, in order to deal with certain remaining prongs of the control relationship tests, we would suggest that intelligent business structuring and recusal strategies can be actuated (and documented) in order to solve for issues presented by the ‘Common Management’, ‘Identity of Interest – Family Common Investments’, and ‘Newly Organized Concern’ prongs. For example, careful investor divestiture of interest in certain entities (choosing carefully, obviously), recusal or resignation from certain boards / management roles for sister entities and/or a rethinking of certain strategic plans of portfolio companies may all be useful techniques to deal with issues in these verticals.

What May Not be Solved For…

Some of the control conditions above will simply have to mechanically ‘not be the case’, as they can’t practically be solved for in legal documentation alone. Those would include, self-evidently, the ‘Common Ownership’, ‘Identity of Interest – Family Relationships’, ‘Identity of Interest – Economic Dependence’ and ‘Successor in Interest’ tests. Accordingly, not every business is going to be eligible here, no matter what is undertaken.

Further, the ‘Present Effect’ rule presents a possibly serious problem here as well. Charter amendments and waivers are clever, but, if they contain obvious snap-back provisions that make them, essentially, perfunctory in nature, then it is likely that any examining authority would view them with a jaundiced ‘substance over form’ eye. We would suggest that any changes that have true substantive effect, and are not reversable for the life of the PPP loan should be respected as satisfying the spirit of the program, and, thus, out of reach of the Present Effect prong, but, admittedly, this is, perhaps, a tautological conclusion.

Lastly, the ‘Totality of Circumstances’ test (a perpetual law school and legal profession favorite!) is never going to be completely solvable. If it walks like a duck and quacks like a duck, it’s a duck. However, what we would suggest is that if this prong is to be solved for, it will have to come from the Treasury / SBA itself in public guidance (i.e., something akin to a ‘no action letter’, for properly structured workarounds). Doing so would send a strong signal to the business and legal community that the government is not hostile to this process, and, in fact, encourages its use.

Investor ‘Buy-in’; the Big Unknown

There is no practical way to implement the foregoing without buy-in from the investor community. None.

If investors are not willing to work with their portfolio companies to actuate a mixture of the foregoing strategies (as different use cases require), then the possibility of the same is a purely academic exercise. And many of these choices may be difficult and imperfect, under the heat of the moment on a compressed timeframe. For example, how can an investor reasonably and responsibly choose, in, say, 72-hrs, which of its portfolio companies has the ‘best chance’ to succeed and should pursue the PPP program, and in which of those it should simply resign its Board seat? … Investors will have to pivot to a mindset of trust, greater good and long-term thinking to effectively hedge risk in such matters.

However, we would suggest that this is likely in the best interests of basically all investor portfolio companies and the investors themselves. For most businesses, there would appear to be very little downside to participation in the PPP. In fact, for most, it may be a crucial survival lifeline, at a minimum, and possibly even a booster rocket to spur growth and innovation (which the US always, always needs more of, in the best and worst of times). If the alternative is the failure of one or multiple investor portfolio companies, then we would suggest that the waiver or abrogation of certain investor rights, temporarily, is a trifling matter to accept.

We would also suggest that, if pressed, most investors will accept the foregoing logic (with the admittedly very large caveat assumption, of course, that their own fund charter documents will even permit them to do so). In fact, we would suggest that the investor (PE, VC and Angel communities) will likely embrace at least some of the solutions to this dilemma (the foregoing, and others that will undoubtedly be forwarded in the days to come), in light of the unappetizing alternatives that are very much in play here.

Having said that, it is impossible to predict in advance. As an admitted digression, but by way of example, we have been arguing to anyone who would listen for 8+ years now that it is time to do away with Legal Opinion delivery in Series A rounds, as nothing but a pointless, expensive waste of scarce time and resources, but we are still swimming upstream against larger law firms on that fight! Here is to hoping that times may be changing in creative and cost-effective legal practice.

Will it Work? The Fine Print…

The foregoing is a suggested framework for businesses and legal practitioners to begin to think about how venture backed small businesses, who would otherwise be eligible to participate in the PPP, may be able to take advantage of the program without violating the letter or the spirit of the program.

Unfortunately, as with many matters that are new and cutting edge, and with rough contours (and, as of the date of this writing, this one has a lot), the question of whether or not this framework will work—from a business and/or legal perspective—is unknowable. Accordingly, we are not offering this framework as a ‘silver bullet’ of any kind, or offering any legal advice to any party, with respect hereto. The truth is, we just don’t know.

However, we are hopeful that this framework will spark a conversation around creative ways to address these roadblocks, which may, or may not, include some mixture of the foregoing techniques. We posit that it is likely that a framework that is workable for investors, businesses, counsel, the SBA and the US Treasury will be rolled-out, and likely in the next 3-4 weeks, at most. The stakes are too high for these parties not to work together.

We would suggest that the most robust (and still most likely) solution to this issue is for the Treasury and SBA to issue the necessary amendments, waivers or modifications of the regulatory framework. However, if this does not occur, then we fully expect that industry will find one or more solutions to fit quality, investor backed small businesses into the definitional framework of the PPP.

Conclusion

In the days and weeks to come, if we do not see a systemic fix to these issues—which, at present, are working to exclude a huge and hugely important sector of the US small business ecosystem—we will be developing and rolling out suggested documents for our clients who may be able to take advantage of these techniques. At such time, we will also make those documents publicly available, to the extent that it is prudent and helpful to do so.

In the meantime, we welcome all inquiries from businesses who may potentially benefit by participation in the PPP and are looking for forward pathways, and, of course, any and all constructive criticism from industry on the usability of the foregoing framework.

*     *     *

Dated April 7, 2020

Written by Jeff Bekiares, Ed Khalili and Stan Sater

If you are a business that has questions about the Paycheck Protection Program (PPP) and how the laws impact your business, contact our Founders Legal team at [email protected][email protected], or [email protected].

How Do I Add Details to My Invention After I Filed for a Patent?

I’ve added additional details to my invention/idea but I’ve already filed for patent. Can I modify my patent application after I’ve already filed it?

A very common question indeed. The break down is quite easy to understand when following this logic:

 

ADDING NEW SUBJECT MATTER

  1. Any Patent-Pending Application, whether it is Provisional or Non-Provisional, cannot be modified to include additional details (referred to as “New Subject Matter”) after its filing date.
  2. To add New Subject Matter to any pending application (referred to as the “priority application”), an additional patent application for the New Subject Matter must be filed before the priority application is granted or expires.  
  3. The additional patent application is known as a CIP Application.

CIP EXAMINATION

  1. The CIP Application, in its documentation, establishes a priority claim to the previously pending patent application to which the new subject matter relates.
  2. The CIP Application receives a separate patent examination from the priority application.
  3. During Examination, New Subject Matter receives a patent priority date even with the date of CIP filing while the Subject Matter Included in the Priority Application retains its earlier patent priority date.

CIP TIMING

  1. Therefore, the timing of the CIP filing is important.  It should occur as soon as the new subject matter is conceived and the value of the subject matter is confirmed for patent filing.
  2. The CIP Application can be filed as either provisional (informally) or non-provisional application. However, filing a CIP as a provisional is only recommended if its priority application is also a provisional AND the applicant is still not prepared to convert the provisional patent application to a non-provisional patent application.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

What Does International Patent Protection Mean?

A question I get asked rather often – what does International Patent Protection mean? Then, after I recommend the filing of an international patent application (known as a PCT application, but will get to that later), my clients frequently ask: “wait, I have to file for an international patent application and it’s not even a patent recognized around the world?” Yep, that’s right.

There is no single “Patent” that is recognized around the world.  Rather, 148 countries (listed here: http://www.wipo.int/export/sites/www/pct/en/list_states.pdf) have entered into a Patent Cooperation Treaty (known as the PCT).  Under the PCT, each country must recognize a single international patent application (known the PCT application) and its patent priority date.

A PCT application may be filed up to 12 months after a national application has been filed in any one of the 148 countries that are members to the PCT.  This means within 12 months of filing either a US provisional patent application or non-provisional utility patent application, you may decide to step up and take your patent protection to the international level.

Prior to the PCT, if you were interested in international protection, you would have to file a patent application in each country all within 12 months of your national patent filing date under the Paris Convention for the Protection of Industrial Property (established back in 1883)!  This would be rather difficult and expensive experience.

With the PCT, a patent applicant need only file a single PCT application within that same 12 month period.  This single application is examined by a recognized international authority which issues a ‘patentability opinion’.  This patentability opinion, however, does not serve as a granted patent or a patent right. The Applicant has the opportunity to persuade the international authority of the patentability opinion if the opinion is not favorable.

In order to convert the patentability opinion to an actual patent, the PCT applicant may take the opinion and present it to any of the patent offices of the 148 countries that recognize the PCT applicant.  This must be done within 30 months of the applicant’s patent priority date (the date of the earliest national filing, if there was one).

If the patentability opinion issued by the international authority is favorable, the national patent office frequently adopts the opinion (subject to some local, national laws and exceptions) and grants a patent within its jurisdiction.  Even if the patentability opinion issued by the international authority wasn’t favorable, the applicant may still submit it to the national patent office and attempt to persuade the national patent examiner of the application’s patentability on the national level.

If you’ve understood my explanation correctly – you’ll see that there is no such thing as an international patent.  Rather, there is an internationally recognized patent examination process used to streamline the prosecution of patent rights when the patent applicant is seeking patent protection in many countries.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

Can I Get Trademark Protection For A Board Game?

Most savvy entrepreneurs know to apply for trademarks on their product names, company names, logos and slogans. Of those, inventors who make board games often go straight to patent filings and forget about the trademark analysis, as explored in my article here: This article considers a sub-category of trademark law that allows for some interesting board game protection: it’s sometimes known as Trade Dress protection.

Trade Dress protection serves to protect products that, on their face, remind consumers of the entity that provides those products. Take, for instance, a Coca-Cola bottle. Even if the trademarks Coca-Cola name didn’t appear on the bottle, the appearance of the bottle itself instantly reminds consumers of the brand the bottle belongs to. -OR- How about this car

Bottle of soda isolated on white background. Clipping Path                               lamborghini-593105_1280

You don’t need an emblem or a name tag to recognize this design as the legendary Lamborghini.

Trademark law is meant to protect a company’s branding. Of times, the product design goes hand-in-hand with the company’s brand. In those instances, where the product design can be shown to remind consumers of the origin of the product itself – Trade Dress protection can be granted.

So, what does it mean for your board game? It means that, even if you can’t get a patent on your board game, getting a trademark on the board design can still be an option. And, unlike patents that expire within certain periods of time (20 years of utility patents and 14 years for design patents), a trademark lasts for as long as the company uses the mark (which, in this case, is the design itself).

Here is a good example of a board game that has been granted Trade Dress protection.

In some cases, you can even file trade dress on particular “Hexagons” of your board:

IN JAIL JUST VISITING

FREE PARKING

GO TO JAIL

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

Are Templates And Forms Protected Under Copyright Law?

Here is a common question I get from clients: I invented a new type of diagram design related to social sciences. How can I legally prevent anyone else from teaching and displaying my diagram? Let’s say I was the first to invent the Venn diagram. Can I obtain a copyright or a patent prevent anyone from using or displaying it?

You are right to gather that the law surrounding copyrights of diagrams is difficult to generalize. Typically, a “template” or “fill-in-the-blank” diagram is not copyrightable. So a “Venn Diagram” man not be protected by copyright law, since it can be regarded to as a ‘template’.

When a completed diagram (e.g., on that is ‘filled-in’) is copied, as a whole, without much ‘transformation’, it may be considered a copyright infringement. The extent of transformation required relative to the original work is typically assessed on a case-by-case basis.

In general, blank-forms or templates are not considered a work of authorship sufficient for copyright protection. This is because such templates/forms reflect general IDEAS. Ideas are not copyrightable. Rather the Expression of the Idea is copyrightable. Your words/illustrations/creations used to bring an Idea to life are considered the copyrightable expression. This is why, in general, blank forms are not protectable under copyright law whereas completed-filled-in forms would be protectable.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

Can I Infringe on a Patent Application That Is Currently Pending?

Clients often present to me some ‘patents’ they found through Google and ask me if they infringe the subject matter of the patent. This is a very loaded question and difficult to answer. But before even getting to the answer, it’s important to understand what the “patent” document cited by the client actually is.

First, it is important to distinguish a granted patent from a patent application publication. A granted patent entitles the patent owner 20 years of rights to exclude others from making, using, and selling the patent invention (as listed in the patent claims portion of the publication). A patent application publication (which is what you listed) only discloses to the public that the patent applicant has applied for a patent. It does not mean that a patent has been granted.

Both patent applications and granted patents are published. This means that a single patent filing will publish twice if it passes examination: first prior to commencement of the patent examination and again after examination has determined that the patent application is to be a granted patent. The first publication is mean to put the public on notice of a patent-pending examination, while the second publication is meant to put the public on notice of an actual granted patent.

Almost every non-provisional patent application that is filed to the USPTO gets published 18 months after its earliest filing date (whether the filing date of a related provisional or the filing date of the non-provisional patent filing itself). Sometimes, and for strategic reasons, the patent application may request that the patent application remain unpublished unless a patent is granted (in which case publication occurs post patent-grant).

Until a patent is granted, it is hard to determine what activity would constitute an infringement – simply because we do not know 1) whether the patent application will be issued as a patent by the patent examiner; and 2) what scope of patent protection will ultimately be granted to the patent application. This is an important distinction as the subject matter a patent applicant hopes to obtain patent (and as applied for in the published patent application) usually differs from the subject matter that is actually granted patent (due to patent examination requirements).

So, if you are trying to determine if you would be potentially infringing a patent application – It is important you monitor this application, and any other related application, to see what might issue to patent. Until then, you may act at your own discretion, knowing that there is a risk of patent infringement if the patent is to be granted. Until a patent is granted, infringement cannot occur.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

Can I Break a Provisional Patent into Multiple Filings?

One provisional may serve the basis to as many non-provisionals as you would like. As long as you file at least one non-provisional within 12 months of the provisional, you can continue to file additional non-provisional claiming priority back to the same provisional SO LONG AS you do not add ‘new subject matter’ that was not covered/anticipated by the provisional.

This means that you can split the provisional into two or more non-provisional utility patent filings claiming priority back to the same provisional, so long as you don’t add anything new to any application. If you have additional subject matter you would like to include, the additional subject matter should be filed in a separate filing known as a Continuation-in-Part (CIP). For CIPs, the new subject matter gets a patent priority date even with the CIP’s filing date, while the originally presented subject matter keeps its original patent priority date.

Exception: if you come up with NEW ideas that aren’t covered by the provisional, but it’s still too soon to file the non-provisional (your product isn’t at its final stage), it would be advisable to file a second provisional. Then, a non-provisional utility patent can claim patent priority back to multiple provisional applications. In this way, you get the earliest possible priority date for each of your inventions.

Consider this article for further reading.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

When Should I Convert My Provisional Patent Application to a Non-Provisional Utility Patent?

I usually get asked the question: If I rush to convert my provisional to a non-provisional patent filing, does that reduce the risk of someone having a third party receiving a patent on the same subject matter?

Typically, there is NO rush in filing the non-provisional utility patent application once you’ve already secured a provisional patent application. Whether you file the non-provisional patent application the next day or 11 months and 20 days from the priority date established by the provisional, your patent priority rights will be the same.

In fact, the long your wait, the longer your effective patent coverage may actually be. Consider that a utility patent grants the inventory rights to exclude others from making, using, and selling the patent invention for a period of 20 years after the non-provisional patent filing date. So, if you have a priority date 1 year prior to the non-provisional filing date, that creates an effective patent priority of 21 years.

But there’s a catch to waiting – Warning: The longer you wait to convert your provisional patent application to a non-provisional, the greater the potential of someone obtaining a patent on the same subject matter as you – even if you have an early patent priority date established by your provisional patent filing.

Here is why: consider that a provisional patent application is never disclosed to the public. It’s kept confidential by the USPTO, and not even patent examiners assess provisional patent applications when they examine non-provisional utility patent applications.

This means that, while you are ‘patent pending’ with a patent priority date secured by a provisional patent filing, another applicant may apply for a non-provisional patent. In some instances, the patent examiner may begin examining their patent application while your provisional patent is still pending under confidentiality. This means that your provisional patent application may not be used as prior art against the subsequent patent filer. In turn, the subsequent patent filer may be granted a patent, even though you had an earlier filed provisional!

Correcting this is an up-hill battle and the subject of a different article.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

I Received a Provisional Patent Filing Receipt in the Mail – What Does It Mean?

A provisional patent application filing receipt indicates that the USPTO has granted you a patent priority date. The patent priority date is the same day as your patent filing date in the case of a provisional patent application filing. From this date forward, you have 12 months to file a non-provisional patent application claiming priority to the provisional. If you miss this deadline, your provisional patent priority date will expire and not be recoverable!

Three important things to note, however.

First – make sure that the filing receipt isn’t accompanied by any other notice. For instance, the filing receipt may accompany a notice to file missing application parts or a notice to file corrected application papers. These notices indicate that your application was filed with defects which, if not corrected within a specified date, will cause your application to be rejected and the patent priority date lost. In some instances, if you’ve already missed the deadline – an extension filing is possible. It is advised that you immediately consult a Patent Attorney if you received such notice.

Second – This document does not mean your patent application was deemed patentable. In fact, in the case of a provisional patent filing, the United States Patent and Trademark Office (USPTO) does not examine the patent application on its merits (e.g., it doesn’t consider the subject matter of your patent app). Rather, it merely makes sure that all of the administrative formalities have been properly accounted for and, with such accounting, holds your patent priority date for twelve months.

Third – A Foreign Filing License (or a Foreign Patent Filing License) is granted. With each patent filing, the USPTO makes sure that the subject matter of the patent filing is not under export control. Typically, inventions that may be modified for use as a weapon, as well as several other inventions under export control, are tagged for confidentiality and prohibited from disclosure outside of the US. (See International Traffic in Arms Regulations (ITAR) and EAR). This happens in a very small fraction of all patent filings. As such, the USPTO requires that all inventions conceived in the US are first filed with the USPTO before the inventor can file outside of the US. Once cleared, a foreign filing license (FFL) is issued to the inventor/applicant.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal

Intellectual Property 102 – Identifying, Securing, Capitalizing, and Early Stage Enforcement

Legal mistakes can doom even the best startup concepts and founding teams. It is important to know who owns the IP, the proper timing for registration, and how to enforce your legal rights. This presentation gives you a legal road map to successfully safeguard your product or idea.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

Source: Smartup Legal