The recent Supreme Court case of Alice Corp. Pty. v. CLS Bank International, has shaken, but certainly not stirred, the software industry. Under the Alice decision, software patents that claim abstract ideas and nothing more, including business methods, are likely not valid. The patents at issue in Alice cover software applications that disclose a scheme for mitigating “settlement risk” by facilitating the exchange of financial obligations between two parties by using a computer system as a third-party intermediary (a/k/a “an escrow agent”).
The court concluded that “the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention.” Accordingly, the Court held that since the claims are drawn to a patent-ineligible abstract idea (e.g., software that carries out the function of an escrow agent), they are not patent eligible under 35 U.S.C. §101 of the Patent Act.
Determining software and other patent eligibility requires a two-step analysis. Step one: identify whether the claims are directed to a patent ineligible concept, such as an abstract idea. Step two: determine whether the claims contain an inventive step sufficient to transform the abstract idea into something significantly more. If your software patents or applications do not pass this test, they are likely dead.
The decision in Alice should end the practice of taking abstract ideas from the public domain and simply embedding them within computer software applications and connecting them with generic computer implementation, which has created monopolies where they simply do not belong. This decision should have the effect of eliminating poorly drafted and poor quality software patents that do not contain inventive steps sufficient to transform abstract ideas.
Alice and other recent decisions rendered by the Supreme Court regarding patent eligibility are likely only the tip of the iceberg. We will likely see more Supreme Court decisions in the coming years that further limit patent eligibility subject matter and aim to promote free market principles rather than stifle marketplace competition. Those decisions will also likely continue to erode the rights of and create higher financial barriers for patent trolls.
In the wake of Alice, many owners of software patents are wondering if their patents are valid. Many of those owners, and owners of pending software patent applications, might be contemplating whether copyright or trade secret protection should be considered if their patented ideas have fallen back into the public domain. Unfortunately, however, copyright does not protect the functionality of software, thus competitors may simply “draft around” the code, and trade secrets would likely prove difficult to maintain as “secrets” for software. So what is a company facing this dilemma to do? Well, if it has not already done so, and if there is no room for substantial improvement eligible for patent protection, it should immediately start building its brand and portfolio of trademarks as it may be only a matter of time before competition creeps into the marketplace with better branding, better trademarks and better management all of which would likely spell doom for the once holder of monopoly power.
Building a powerful brand and trademark portfolio requires thoughtful analysis and consideration and involves many factors, including the following:
I. Brand and product name selection need not be difficult. Proper consideration of brand names does take time and thought-provoking analysis, however. Not considering the following four brand name factors could potentially prove fatal for a company’s new product launch.
- Distinctiveness – Is the name legally protectable?
Terms/names that are considered to be generic for products are never protectable as trademarks. For example, the term CloudSoftware.com for providing online software services should never receive trademark protection. Selecting a generic term as a trademark is brand suicide.
Further, names that merely describe certain attributes of a product will not receive trademark protection upon first use and may never receive trademark protection. Although descriptive terms may become eligible for trademark protection once the “mark” has been put to continuous and substantially exclusive use – that can take years and potentially millions of advertising dollars.
Tip: Select brand names that are legally protectable upon first use.
- Distinguishable – Is the mark distinguishable from the competition?
Why select a mark that is not distinguishable from the competition? Although a selected mark may be “legally” distinguishable from competitors’ marks, it may still become lost in a noisy marketplace of similar trademarks.
Companies that use marks similar to their competitors’ marks run the risk of losing sales and potentially developing bad reputations that belong to their competitors. For example, if a competitor’s product with an overall similar name receives bad press or even worse kills someone – that publicity may inevitably rub off on those companies with products with similar names. Why take that risk?
Tip: Only select names that are legally protectable and sufficiently distinguishable from the competition.
- Da Position – Does the company have a positioning strategy?
A brand name should communicate a product’s positioning strategy. Select a name that begins the positioning process. For example, which products have the slogans “Melts in Your Mouth Not in Your Hand” and “The Uncola?” Those slogans positioned their products at the top in their respective categories. Also consider whether a slogan can re-position the competition. Think about how Procter and Gamble re-positioned Listerine with the simple slogan “Medicine Breath.” Re-positioning a competitor with a slogan is one way of gaining market share.
Tip: Select a mark or slogan that will capture the position or niche and then don’t let it go!
- Da Attributes – What are prospective purchasers looking for?
Selecting a mark that suggests an advantage of a product or a result that consumers want from a product can be a game changer. Rather than look at how a company perceives its own product, a company should look at how consumers already perceive it, then look for the solution in the mind of consumers. Then select a name that reinforces consumers’ perceptions. What do consumers want from car batteries, for example? Of course, they want a long-lasting dependable battery. That’s why the mark “Die Hard” has been a huge success.
Tip: Select marks that convey attributes desired by consumers.
II. Building Global Trademark Portfolios. Many factors come into play when launching global brands and brand names. Just ask those that do it for a living! As for the brand name itself, I’ve listed below some of the factors brand owners should consider well in advance of product launch. And, yes, I do mean well in advance of product launch. Do I need to say that one more time? I know that I do, but I won’t.
Below are eight aspects brand owners should bear in mind when planning a global brand name launch:
1. Does the name have language barrier issues? There have been many stories – some of which may be nothing more than folklore but are nonetheless fun to talk about – of companies launching new brand names to later learn – much to their chagrin – that they convey negative connotations in other languages and cultures. Take, for example, the well-known story of the Chevy Nova. As the story goes, the term NOVA in Spanish means, “won’t go.” Probably not the best name for a vehicle would you say? As the story continues, maybe it was the name itself that explains why the Nova didn’t do so hot in the Spanish-speaking markets.
Companies must also know whether new brand names would have distasteful connotations in other languages and cultures. Another example is the story of PepsiCo launching the slogan “Come Alive with the Pepsi Generation” in China. The story goes that the meaning of the slogan was terribly lost in Chinese translation. Chinese speaking folks translated the slogan to: “Pepsi Brings Your Ancestors Back from the Grave.” Houston, we have a problem.
2. Consider adopting an international icon or logo. One great way of avoiding the language barrier issue is to adopt an international logo design. That way if the name has negative connotations in certain languages or cultures, the brand owner can either drop the name altogether or change the name but still use the universal design logo, which may become recognized across all languages and cultures. Think of the Good Humor® icon.
3. A term that is legally protectable in one country may not be protectable in another. A term or mark that is protectable in the U.S., for example, may not be protectable in the European Union or China. Although U.S. trademark law may render a mark suggestive, thus legally protectable upon first use in the U.S., EU or Chinese trademark laws may render the same term or mark as being non-distinctive, thus unprotectable. If there are any doubts as to a selected mark’s distinctiveness in a certain jurisdiction, an inquiry as to the mark’s distinctiveness should be made with foreign counsel. If it’s too late, and the mark has already been launched, one way to avoid the non-distinctiveness refusal in certain countries is to simply add a design element to the word mark.
4. Budget. Budget. Budget. Consider the costs of clearing and protecting selected marks in certain jurisdictions and countries. Although the cost to clear marks in all selected countries and jurisdictions may be cost prohibitive, it still makes sense to clear marks in those top priority countries/jurisdictions. Those top” countries/jurisdictions are those that are expected to result in the majority of sales. Also, the costs to secure trademark registration protection on a global basis add up quickly. The best strategy is to know the marketing strategy and only seek protection in those jurisdictions that correspond with that strategy. If money is not an issue, and the brand owner fears that competitors might register the name in certain countries where the mark will not be used, seeking defensive registrations may be part of the strategy.
5. Clearing and registering a mark in the U.S. does not mean the mark is clear to use in Canada, Mexico or any other country. Remember that trademark laws are country specific. A U.S. trademark registration does not generally grant the right to use the mark in any other country.
6. Does the brand owner want/need to reserve country code top-level domain (“ccTLD”) names? If a company wants to use ccTLDs (i.e., .CN for China or .JP for Japan), it should ensure that the domain names are available during the clearance stage and, if they are, reserve them immediately.
7. Where should trademark registration be sought? Deciding where to seek registration is an important aspect of the protection process. Due to cost barriers, companies should consider protecting marks in stages, which may mean over a certain number of years. Start with the top priority jurisdictions, including those jurisdictions where the majority of sales are expected to take place, customers are located, licensees are located, advertising is planned and manufacturing and distribution will take place. The lower priority countries are those of which sales are not expected to be of any significance for a few years. Protecting the name in the lower priority countries can simply be staged over coming years in an effort to spread out costs. Companies should be mindful of the brand expansion strategy, which could mean rolling out the product in certain countries over a 2, 3 or even 5 year period. It’s generally highly recommended that the trademark filings stay ahead of the product rollout strategy.
8. Trademark application filing strategy: National registrations, Community Trademark, International Registration? How about a combination of all three? There are a number of factors to consider when planning a filing strategy. Considerations should include national filings and their prosecution costs, vulnerability of home country applications or registrations on which International Applications are filed via the Madrid Protocol, the number of jurisdictions in which protection is sought, which countries or jurisdictions belong to the Madrid Protocol, first-to-file countries, distinctiveness of marks and potential for oppositions to registration in certain jurisdictions. There is not a “one plan fits all” strategy. Strategies should be considered on a case-by-case basis. Whether to use the Madrid Protocol and/or Community Trademark filing mechanisms or other jurisdictional filing mechanisms or a national application filing strategy or a combination of those options should be fully considered well in advance of product launch.
I cannot stress more that sufficient time should be allotted for planning a global filing strategy. In some instances, the time needed to clear marks for a global launch can take weeks and possibly months. And that’s if the first choice is available. So take some time out of your busy day of planning the branding strategy and give ample time to the planning of the brand name protection strategy – you will probably need it. Trust me.
Now that Alice has placed many software patent holders (and applicants) on notice that their software patents are invalid, it is time for those parties to build, if they have not already done so, strong and valuable national and/or global brands.