Attorney-client communication is crucial in the 3D printing industry, mainly because such business may involve patenting. Regardless, intellectual property is core to how the business world functions. In this episode, Tom and Tracy Hazzard talk about the importance of proper communication between a lawyer and client in getting a patent quickly. They give examples of typical mistakes that can guide you in your patenting venture. Some key things to remember in this process are collaboration, contracts, commission, and salespeople, and understanding the paperwork thoroughly. Learn more from Tom and Tracy as they dive deeper into the importance of communication in the 3D printing industry.
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Attorney Client Communication is the Key for How to Get a Patent Quickly
We got a topic today that is one of my favorite on attorney client communication. This is important for any business, but especially for the 3D printing industry where there are so many businesses are involving some kind of intellectual property especially if it involves any patents. I know that the RepRap Movement really doesn’t like patents, and they don’t like it when companies use patents and hoard things to themselves. The reality is that intellectual property is a part of the way the business world works, and many businesses in 3D printing either create the intellectual property, create things that are patentable, or they license out patents for others to use. I want to talk today specifically about if you are creating an intellectual property of any kind, whether it will be to get a patent, a trademark, or a copyright. One of the most important things that you need to understand is what we have learned in over twenty years of experience regarding attorney client communication.
Sometimes, there are really things that go wrong in attorney client communication. Everybody has sometimes needed to learn the hard way. But how you communicate with your attorneys is critical, and we are going to give you an example of what others have done, that did not work, and that will illustrate the point of what you need to do when you communicate with your attorney.
I don’t think you want to call it attorney client communication, because I think you want to call it collaboration. That is a good way to talk about it too. This is because the reality is that so often, we treat professionals like our accountants, our attorneys, any other of these professionals as those that are authorities. I am not saying that they have not gone to school and that they don’t have good advice, but they are not running your business. That is the key thing. They don’t know what it is going to be like day-to-day to enforce a contract or to live with the tax implications of something. They don’t understand that and they are not in that. What is important is that you communicate with them about that, and collaborate with them to solve any problems or to come up with solutions or ways to reword things to make a contract and make things easier. That’s a good way to have attorney client communication.
I want to use this example because it bridges both accounting and attorneys. This happens all the time with the heads of companies – where they get to negotiate some kind of a design world to deal with the head of a company. Usually they are a few hundred million dollar company. They are big enough that they have an accounting department, but they are not so big that there are all sorts of standards and systems, or having somebody who is always negotiating with you. You are still negotiating directly with the owner or the head of the company. You negotiate in terms of the deal. You come up with your principles of the deal and we are going to do this amount of work, and also get this amount of royalty. That royalty will be based on net sales, gross sales, or it will be paid monthly by the 30th day of the month. We have our standard terms and conditions that we normally use. For anyone who doesn’t have a system, we put them in place and we say that this is how you are going to pay as to how we like to be paid consistently at the same time of the month, because this makes our accounting system easy.
A lot of times, these CEOs of the company are having no clue of what they just agreed to. So the accounting department might prefer a process that is on the 15th of the month, give them two weeks to issue the checks, get them mailed out, and do all those things. Or perhaps, it might happen in reverse. They might want to do it on the first of the next month. They may have their own process and system, and now you are messing up. The CEO has essentially established something. What happens to the standpoint of the consultant coming into it, that has happened to us on one occasion, is that you don’t get paid on time and you are like, “I can’t understand it. We agreed to this contract, everything is going fine, why aren’t you paying it?”
It’s because it’s a manual and outside-of-their-system way. I would have preferred for them to just come to me and say, “Can we shift this 15 days? If we can shift these 15 days, I can guarantee you that I am always going to pay you on the 15th of the month.” Me chasing them down, and trying to figure out, creating this adversarial working relationship because we’re not being paid on time, is what usually happens. Sometimes, somebody has to manually process this, and unfortunately, they are on vacation. It just doesn’t work out. That is how it is with contracts, and how they are played out in the course of being utilized in the company, can go really wrong. Somebody just makes blanket terms. That’s what most of these contracts are.
Commission and Sales People
This is more on collaborating on the company, than with your attorney. This is a good example of figuring out how to work with the resistance of the company that you are working with. Another extension of the wave experience is that you are being paid on commission or in sales, which is a long time for you to do. For those sales or commission people out there, they get paid on the actual sales of the company. But what happens when in any given month, there are also in a number of returns? Then the CEOs or the owners of the company wanted to make sure that they are not paying you commission on things that got returned. They always want to say that sale, but less in returns, or allowances and some of these things. This is what drives the accounting departments to go nuts.
What we have done in that, is we finally came up with a system where a kind of collaboration with the company between us, and we take a slight 0.1% off of our rate to just calculate it straight. Typically a company of this case knows that they have 2% return rate or something like that for the overall year. And so we say, “We are going to give you back that 2% rate.” The first that that this happened to us was when a CFO came to us and said, “This accounting is going to cost us so much at the end of the month. Would you mind if we change you from this percentage, to this slightly lower percentage? You will never hear from me, regardless of how many things ever get returned or how many defects are there. That is on me and I will take it. If we can agree to a slightly altered commission, then that’s easier for us to account.”
That is where the mistakes happen all the time. That kind of collaboration happens. It happens with the same things on your attorneys and on contracts. When you’re going into something and you have to figure out how you are supposed to maintain it, how you are supposed to operate and do this. All sorts of things go wrong and you don’t know how to deal with them. What if they need to enforce that and you don’t have a way to do that, because you don’t have an accounting department, or perhaps you don’t have a way to handle these provisions that are in a contract. That is where you have to collaborate and say, “This doesn’t work for my company. This is not how I intend to operate. Just because it’s a blanket agreement that your law firm has done time and time again for other companies, this doesn’t always mean that this is operationally excellent for me.”
That is one way that I would like you to think about, that collaboration is necessary and that they are not just an expert. That no matter what they say, you just take it. You say, “Wait a minute. Let me think this through. How am I going to work on a daily basis with this contract in place?” If that’s going to inhibit my business, make it difficult for me to do business, and if things go wrong in the contract and make it impossible for me to stay in business, then this is not the way you want to go. Push back on them.
Two Important Aspects
This is a really good lesson that applies not just with the contracts, but it even applies to more when you are trying to get a patent. The two aspects of this that I want to highlight is (1) Making sure that you have attorney client communication or that you communicate with whoever is counselling you on these real business goals. Second thing is, (2) Making sure you read and really understand your contract. This is not a spectator sport. You got to make sure you read your contract. Even if you are not a lawyer and you don’t understand all the law, you need to understand the entire contract to make sure it’s explained to you and that all of the provisions of that. Your attorney may be trying to attend to you, but you need to make sure that it is a good fit for your business goals.
It’s the same thing when you get patents. We have seen this a lot. Patents come back so often, that the inventor gives up. The attorney may say that, “We have found all these prior works, and I don’t think that you would get a very meaningful patent, so you should stop there.” The attorney doesn’t always understand your business goals unless you have made that perfectly clear. For instance in our case, we got the same patent attorney for over twenty years. He has worked on all of our patents. Even in just this past year of 2015, we did a search for something that we would like to file a patent for, and he came back and said, “I think any patent that you get here is pretty narrow for what I can see.” Now, I went through and read all of it, searched in detail, and saw the prior references and the other patents that he has found. And saw that he didn’t really completely understand the distinction between what references he found, and what we are really intending to do. When he explained to me, he said, “Okay Tom, I think you’re right. I’m seeing it your way and you’re convincing me.” For him to say that he is convinced, he really is convinced.
The Thing with Patents
I have another good example of attorney client communication in the patent world. We have had a client that we have done work for in the last 7 years. I was flying on the plane with the CEO of the company; he was reading papers in a file, and shaking his head, putting his head on the panels. I can tell that he was distressed or frustrated about something. I asked him about it. Well, he was the type of guy that can deal with it. He said, “We got this patent that we applied for a number of years ago.” I think this was filed in 2010. He was very frustrated because there is a very big part of his business that was dealing $80 million a year in this category. This was probably a $250 million or $300 million company that time. They have filed for a patent that is something like he legitimately knew and believed that they had invented. But the patent trademark keeps rejecting it over and over again. I said, “I got a lot of experience in patents, and we already have confidentiality in our contract with you. Would you mind sharing with me the file? I will review it, give you my thoughts, and see if I agree with it.”
This is because that these guys, the owner and the other guy who did a part in the invention, did not understand patents. This is really one of the first major things that they have filed a patent utility for. Here is the mistake that they made and here is what the lesson in this is – they said, “We have invented something, but we don’t understand patents. We’re not attorneys. So we’re just going to take everything, all the drawings, all the write-ups, all the information, and we’re going to turn it over to the attorneys, and let them figure out how to file a patent, because they know the patent law and the system, and we don’t.” They never shared with their patent attorney what their business goals were, and what the real meaningful aspects of intellectual property of theirs as a business.
If you really have a really good and collaborative attorney like we do, he will act. He will push back in the system and in the information. A good attorney will. Sometimes they do that, but sometimes it doesn’t get across. Like the search that we had with our attorney, I had to explain it to him. This happens for a lot of years, so your goals change too. What happened on this specific occasion was that once I opened the file, I can easily see what happened. The patent examiner really did not understand what the purpose of this patent was. They looked at what was on the front of his face. They concentrated more on the physical structure of the invention in terms of what materials were used, how it was fabricated, how it was put together, and they weren’t looking at it from a marketing and business perspective.
In reality, what was unique about this was the way in which they were packaging and providing this product to the consumer. There was something very unique in that. Rather on concentrating on that, the PTO concentrated on the physical structure and on how to describe that. And as they did, this resulted to prior kinds of products and even dated back to the 1800s. They didn’t understand how the package was put together. It was kind of bundled. It is definitely something unique. Once you realize how this is bundled, and getting to know the marketing power of that, no one else has ever done it before. What I ended up doing is that I got involved in it. One of the things that you need to understand is that once you file an application, there is an examiner assigned, and it starts to look at, and then there is communication going back and forth. There is always initially a rejection, but once there is that first rejection and you know the examiner is, and there is a dialogue that comes on, and that becomes the negotiation usually between your attorney and the patent examiner.
That is where the power of the right attorney, the power of someone who is going to come back is very important. We often hear that offish action happens and they don’t even communicate with you. There are some firms that just don’t do that. They handle them internally and they receive the office action but they never share the details of that deal. There is a lot of ways that you do not understand that negotiate is happening. You just say something, and you say that you have to pay more money to the file to have a response. That is what you are seeing in the process, or that is all you’re looking into. You do not really understand why that office action is happening, what that means, and how you are going to respond to it. That is where you have to get involved.
Take Time to Have Time
I think that was the situation with the CEO of the company in our client, where he had got involved into that. He didn’t have time to read all of that and he left that to other people. But because he did that, and even because the other person that was involved in the invention didn’t do that, he really didn’t understand what was going on. They never reached out to their attorney to clarify things when they were seeing this in the office sections and therefore had bad attorney client communication. The attorney wasn’t negotiating with the full bit of information. The attorney kept negotiating with the examiner to get a patent, to figure out how to narrow the claims, and get something that could be granted, but not to get the right patent granted. The attorney didn’t understand the business goals, but how could he communicate that to the examiner? I got involved in this; we ended up rewriting the claims on the original subject matter and resubmitting it. It even got to the point where the examiner didn’t quite get it. I got on a conference call with the attorney.
I recommend highly that most attorneys never put you as an inventor. They would never do this. But Tom in this case was not the inventor of this particular product which helps. But I think that it is a dangerous thing to be talking to your patent examiner. I think you need to leave that up to the professionals. But in this particular case, there is some amount of translation that needed to happen. Hiring an expert to translate that might be worthwhile for the attorney or for you. But doing it yourself can happen, but it is not recommended. You certainly want to be careful on how you communicate with the patent examiner because this person has your fate in their hands. You don’t want to anger them; you want to be very careful from a political perspective. They don’t want to talk to you either because they don’t want to be hearing about your baby. But there are cases where it happens, and this was one of them. He was asked when he got a call, he agreed, and so he did it. Once we explained to him what the realities of this invention were, and what benefits were for the market and for the manufacturer, he understood it and agreed with it. The patent got granted within a month. Once he understood it, the communication was made clear and it happened.
It is actually not that different from when we interviewed Ron Hollis a couple of weeks ago about the method that he had of the online calculating of the cost of a 3D printed part for Quick Parts. His patent wasn’t granted for 7 years, and I’m sure there were a lot of similar things that happened here. He even told us that he ended up going to Washington with his attorney in a meeting with a patent examiner to explain it. Usually, it doesn’t take that kind of involvement to get a patent. We didn’t have to do that in any of ours. It really does highlight the importance of communicating not just with the invention is or what you think the invention is, what’s unique about this product, with this method, or whatever it might be, it is important that you communicate what your business goals are and once your attorney really understands that, then they can help you to achieve those goals.
Get to Understand it Thoroughly
The other thing about this when it comes to patents just like contracts, is that if you really want to make sure that you are happy with and can live with or are going to benefit from a contract that is being worked out for you, or a patent that you are negotiating with to get granted, you got to read and understand every detail of it. You got to understand why there are drawings in patents. What are these long descriptions of what is happening? What are these claims? You need to get involved and understand it; otherwise you can’t complain if you don’t get the patent you want. Or if at the end of the day, your patent is unenforceable and gets a potential infringer.
One of the important things that would happen is that we have reviewed people’s inventions and patents all of the time, when we are on the road and doing events. We hear things all the time. More often than not, they are extremely narrow. This is what we usually hear: “I have a patent on that!” I then look at it, Tom looks at it, and we read through the patent. We look at it and say, “You didn’t patent that. You patented this tiny little piece of that, and tomorrow I can go out and make something excluding that and it will still do the same thing.” You got a patent and that’s what a lot of these marketing firms that use to get that invention marketing patents. They don’t care if it is a good patent. They don’t care if it’s a valuable patent. They care that they deliver what they said that they were going to do for the price that they said that they were going to do it for. They set a meaningful patent. Is it acquirable? Is it licensable? When you have those goals, then you have to go to the right people who can make that happen, instead of just accepting it. There is a case, and we have done it for clients, where you just need a patent, so it says that it is “patent pending”. By the time that it would issue you are going to be out of the market anyway. But you need a little bit of buffer time before infringers come on.
It could be a good offensive strategy to deter others from getting new space. The interesting thing is that until your patent published, which is at least 18 months from when you have filed it, if you filed a provision it can be more than that. But for that period of time while it’s pending, you don’t have to disclose anybody on what it is that you have invented until it’s published. No one can see it. Until patent issues, nobody is technically infringing. But there is this fear of, “Are we going to spend money on tooling for something and bringing into market? And something that have threat over this intellectual property that they have pending.” It then becomes a risk assessment for a competitor and most competitors are at risk, and they’ll try to think about it. If that’s your purpose, then don’t worry about it. You can have any attorney do it, it doesn’t really matter. You don’t even have to communicate. You can just say, “Get me a patent and I can write a Patent Pending at the bottom of my product.” That is an okay purpose. There is a place for that and it does happen in the marketplace. But if your entire business is going to ride in the value of your future fail of your exit plan, your exit strategy depends on that patent being valuable, then you better get a valuable patent to begin with. That is where we talk about business goals and making sure that you are communicating with them. It is a whole different level and amount of work for an attorney as well, which means a whole different level of fees for you if you are just in it for the patent pending aspect.
To sum it all up…
There are a lot of businesses out there in the 3D printing industry that are creating things and considering patents. Since we’re not attorneys, we just want to make sure again that you understand that, but we have a lot of experience with patents, in getting them, and in licensing them. We have seen it from all angles, so we can see what it can do, what the outcome is, and what that means when you didn’t negotiate well, or when you didn’t write a good enough patent, or you didn’t have good attorney client communication. We have seen it on all sides so that is why we’re bringing you this information, because to have that kind of experience is not the case when it is your very first patent. It is not just going to happen for you, so you need an outside perspective.
To go reading through your patents, understanding the documents, and good and clear communication of what your business goals are, are the things that is critical and these are the things that can help you achieve your goals a lot better. We just seen a lot of people not doing those things, and throwing those things over the fans, leaving it for somebody else to figure it out, is not the best way to do it.
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