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I Invented a Box Containing Hot Air: Shoot the Moon or File 13?

I Invented a Box Containing Hot Air: Shoot the Moon or File 13?

Similar to the public’s verdict about 1800s’ snake oil salesmen, the colloquialism “selling hot air” generally voices a negative connotation. But until Congress changes Title 35 of the U.S. Code, the ultimate arbiters of patentability are statutory requirements—not public opinion.

To understand how the United States Patent and Trademark Office (USPTO) evaluates an invention, let’s look at four different examples of “a box” to see what lands in the trash can (File 13) and what gets a shot at a patent (Shoot the Moon).

  1. The Unpatentable Box

The Setup: A sealed cardboard box containing nothing other than ambient air at 100 degrees Fahrenheit.

The Verdict: High probability of File 13.

Standard cardboard boxes have been available for hundreds of years, and the statutes dictate that Natural Phenomena—such as ambient air—are not patentable. Simply trapping hot air in a standard container doesn’t cut it.

  1. The “Something Different” 

The Setup: An open-close box containing air, a cushion liner on the inside of the box, and a location tracker.

The Verdict: Possible, but likely File 13.

Under some narrow circumstances, this might be patentable if it features a brand-new location tracker that measures travel speed and position connected to the Cloud. However, there are already numerous tracking devices used by international carriers to move boxes around the globe. Without an additional search of the prior art, this one faces a steep uphill battle.

  1. The Box with Internal Climate Control

The Setup: On the outside, it looks like a standard cardboard box that can be opened, closed, and sealed (cardboard is a cheap insulator). On the inside, the ambient air is actively controlled by a thermal heating and cooling system built into the inner liner. Along with a small vent, the box includes a microcontroller/processor, a mini-heat pump, a voltage supply, a temperature sensor, and tracking module circuitry with a transceiver connected to the Cloud.

The Verdict: High probability of Shoot the Moon!

It’s an integrated system. You aren’t patenting the air or the cardboard; you are potential a novel, man-made utility system that manipulates the internal environment.

  1.  A Very Soft Malleable Blanket

The Setup: On the outside, a durable, protective shell capable of absorbing extreme external shock. On the inside is a harvested donor heart traveling 400-plus miles to a waiting patient. The heart rests in a sterilized, malleable blanket that conforms to its exact shape, preventing it from contacting anything else. The box’s vent includes a microfilter to block pathogens. Alongside the processor, mini-heat pump, voltage supply, and Cloud transceiver, the box includes a supply of saline, a mini-fluid pump, and a layer of graphene contacting each millimeter of the heart’s external surface area.

The Verdict: Ultimate Shoot the Moon!

This is a highly sophisticated, life-saving apparatus with clear, markedly different structural and functional characteristics from anything found in nature. (Note: While highly patentable, you will definitely need FDA certification before introducing it into commerce!)

The Takeaway

Never assume your idea is too simple or too strange to be patentable. As humans, we often lean toward keeping the old rather than embracing the new. We weren’t there, but based on human nature, when the first person put a wheel on a peg, his peers likely laughed at him.

Ironically, we recently watched a documentary about the ten greatest inventions in human history. The wheel did not make the top 10. Something doesn’t seem quite right about that!

At the end of the day, some of the most valuable innovations look like “hot air” to the public until a granted patent proves otherwise.

Ask Us Anything… about Intellectual Property!

Business Patent Law, PLLC is headquartered between Louisville and Lexington, Kentucky, serving a diverse range of clients—from innovative startups to successful companies of several decades whose business interests cause BPL’s practice to span across seventeen time zones.

If you have a topic or question you would like our editorial staff to address, please send us an email. Business Patent Law, PLLC provides intellectual property and business counsel. If you need assistance, contact us today.

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Prepared by the Business Patent Law, PLLC, editorial staff.

 

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Divisional: How One Filing Can Create Two Expiration Dates

Really? Two Expiration Dates? Yes.

The Usual Sequence

The patent examiner declares in the First Office Action that there is more than a single invention disclosed in the parent patent application which allows the filing of a divisional. Before further examination, the examiner requires that the Applicant select a first invention for examination. This is known as a Restriction Requirement.

The Statutory Combo: 35 U.S.C. § 154(b) (PTA) + the § 121 Divisional Safe Harbor

This combination of statutory law allows the extension of a divisional patent application’s term beyond the parent’s twenty-year legal monopoly.

  • 35 U.S.C. § 154(b): Governs Patent Term Adjustment (PTA). As a result of USPTO delays in examination that exceed three years, the PTA adds “bonus life” to the patent term. (Note: Over the years, Business Patent Law, PLLC has seen extensions of four years or more.)
  • 35 U.S.C. § 121: This provides the “Safe Harbor” for divisional applications. It states that a divisional application filed because of a restriction requirement cannot be rejected based on the parent patent for double patenting.

How PTA Calculations Work

The PTA is calculated independently for each application. Depending on the USPTO’s specific delays, the parent and the divisional patent applications are eligible for different PTAs. Upon filing a divisional, its own PTA clock begins.

When a divisional application is filed because the examiner issued a restriction requirement, the USPTO cannot use the parent patent as a reference to reject the divisional for double patenting (and vice-versa). Since you aren’t forced to file a Terminal Disclaimer, every single day of PTA belongs to the owner of the divisional patent.

Turning a Restriction into an Enhanced Asset

  • Multiple Monopolies: In the IP world, distinct but similar inventions are a preferred way of doing business.
  • Stepped Expirations: Staggered expiration dates provided by a divisional make it much more difficult for competitors to “design around” or wait out your protection.
  • Mutually Beneficial: When innovation and engineering are symbiotic, we can precisely select which inventions should be maximized by the PTA and include several of those into the parent application to trigger the divisional process.
  • Too Much Of A Good Thing: Being overzealous can be detrimental if there are too many inventions flowing from the parent application.
  • Management’s Wisdom: Just because you can, does not mean you should. The “good ole days” of “submarine patents” are a vapor in time, but the divisional patent PTA is the law of the land today.

Business Patent Law, PLLC can assist your company with the strategic architecture of parent and divisional patent applications.

Ask Us Anything… about Intellectual Property!

Headquartered between Louisville and Lexington, Kentucky, Business Patent Law, PLLC serves a diverse range of clients—from innovative startups to successful clients of several decades. Our clients’ business interests means BPL’s practice spans across seventeen time zones.

Business Patent Law, PLLC provides intellectual property and business counsel. If you need assistance, please contact us today.

Stay up-to-date with news that impacts your business and intellectual property—sign up for Business Patent Law’s Monthly Mailer™ newsletter. If you have a topic or question you would like the editorial staff to address, please reach out.

Prepared by the Business Patent Law, PLLC, editorial staff. Counseling the Creative®

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Should I Have a Holding Company for Intellectual Property?

A holding company is created to hold something, and it’s a business decision that depends on your preferences.

In the Intellectual Property world, these companies (LLC or Corporation) own patents, trademarks, and copyrights. The holding company owns legal monopoly rights. A third party pays the holding company for the rights to practice those monopolies, or the third party can buy the assets outright.

Holding Company Advantages

  • Asset Protection: If your operating company is commercializing the rights of the IP and is sued for infringement, the IP is held safely by your holding company. To own the IP is not an infringement. Likewise, if a defective product suit is the alleged reason for a lawsuit, the owner of the IP is not typically a party to the negligence claim. Additionally, the holding company’s assets are shielded from the operating company’s creditors.
  • Centralized Licensing: If your holding company owns multiple intellectual properties licensed with third parties, it collects all milestones and royalties in one place. This can reduce the paperwork for licensors/licensees.
  • Succession and Sale: Most of the time, it is easier to sell one or more intellectual properties when they are owned by a holding company. Without a clear title, most sales never occur; having the holding company as the sole owner is one of the easiest ways to maintain that clear title. The same principle works when the holding company itself is acquired.
  • Tax Efficiency: I am not a tax attorney, but according to my understanding, in select jurisdictions, a holding company can provide tax advantages.

Holding Company Disadvantages

  • Maintaining the Corporate Veil: This must be done or the advantages, such as shielding from personal liability, are lost. You need clear and distinct business operations and documents for each company. Separate officers or managing members must sign for the company and not for themselves. Not doing so can cause massive heartache.
  • Administrative Overhead: There are more books and more government filings. You are now managing two sets of books, two sets of tax filings, and formal “inter-company” licensing agreements.
  • Government Fees & Forms: Corporations and LLCs are a matter of state law. Each state has its annual fees, forms, and taxes; some states are much more expensive than others. For example, Delaware requires the use of Delaware law firms or organizations to file documents with the state government. For startups, these costs can trump the immediate benefits.
  • The “Arm’s Length” Requirement: Do not commingle the holding company’s and the operating company’s accounts, business agreements, capital, or other funds. The IRS may disregard the entities and “dump” it all into your lap—a mess that is difficult, if not impossible, to fix. Further, in an adversarial proceeding, opposing counsel will want to pierce the corporate veil so that all of your assets are available for judgment.
  • Initial Complexity: Setting this up correctly requires tight coordination between your patent attorney and your tax advisor. A poorly drafted license agreement between your own companies can lead to legal headaches down the road.

Whether to “hold ‘em or fold ‘em” is dependent on your risk-reward tolerance.

Ask Us Anything… about Intellectual Property!

Business Patent Law, PLLC is headquartered between Louisville and Lexington, Kentucky, serving a diverse range of clients—from innovative startups to successful clients of several decades whose business interests cause BPL’s practice to span across seventeen time zones.

If you have a topic or question you would like the editorial staff to address, please send us an email.

Business Patent Law, PLLC provides intellectual property and business counsel. If you need assistance, please contact us today.

Stay up-to-date with news that impacts your business and intellectual property—sign up for Business Patent Law’s Monthly Mailer™ newsletter.

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I Know It’s Worth A Million!

I Know It’s Worth A Million!

Occasionally, a first-time inventor sits down with Business Patent Law, PLLC (BPL) to discuss a new mechanical or electromechanical invention. Before the hour ends, the excitement usually peaks: “Let me tell you, it’s worth a million!”

It’s an inspiring sentiment, but as a firm that has spent decades in the trenches of intellectual property, a million-dollar idea is only the first brick. To turn that “worth” into “wealth,” you need a foundation that can hold the weight of a business.

The Legal Foundation: The Patent

Before any money is made from your invention, there must be a patent.

  • The Industry Standard: The USPTO’s current allowance rate for mechanical-type applications is approximately 65-70%.
  • The BPL Advantage: Fortunately, BPL’s clients consistently maintain a higher allowance rate than the national average.

However, a granted patent is not a check; it is a legal monopoly right – it means you hold the exclusive rights to make, use or sell. To be “in the money,” the patent must be used in a manner that creates value that can be reduced to cash.

The Million?: Sales vs. Licensing

Once you have the patent, you have two primary paths to your “million”:

  1. Licensing or Selling: This is the path where you rent or sell your rights to a third party. In my 38 years as a patent attorney, only three times, have I seen a third party offer to buy a mechanical invention based solely on the patent only. And, to my knowledge, none of those resulted in a viable commercial deal.
  2. Building the Business: The clients who created truly valuable patents were generally persistent ones. They didn’t wait for a buyer; they started an LLC and began selling the device themselves.

The most successful inventors didn’t just invent a product; they built a customer base. When an LLC reaches a “magic number” in annual sales—proving the market exists—that is when an acquiring company steps in to pay an impressive Return on Investment (ROI).

“Born to Invent”: The 1.5%

Why is the invention path so difficult? Because the innovation “gene” is a rare human trait. Statistics suggest that roughly 1.5% of the population creates the vast majority of inventions. These individuals are a necessary cylinder of our economic engine, but they often face lopsided odds.

While some look to Venture Capitalists (VCs) to bridge the gap, the numbers are sobering. Only about 5-10% of VC deals generate a worthwhile ROI for both the founder and the VC, especially in the high-cost manufacturing world of tangible consumer devices.

The One In A Million Longshot

For a first-time inventor, the “million-dollar” dream is, statistically, a longshot. But world-changing technologies generally start that way. In its earliest days, few people were interested in cell phones—they were bulky, expensive, and lacked the clarity of a landline.

Success requires more than a better idea; it requires serendipity and a legal team you are comfortable with. BPL can write the patent application, suggest architecture for your business, and answer your questions when they arise.

Ask Us Anything… about Intellectual Property!

Business Patent Law, PLLC is headquartered in Nicholasville, Kentucky, serving a diverse range of clients from innovative startups in Lexington and established industry leaders in Louisville, to businesses across the United States and the world.

If you have a topic or question you would like the editorial staff to address, please send us an email.

Business Patent Law, PLLC provides intellectual property and business counsel. If you need assistance, please contact us today.

Stay up-to-date with news that impacts your business and intellectual property—sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Prepared by the Business Patent Law, PLLC, editorial staff.

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Energy Is Neither Created Nor Destroyed, It Merely Changes Form

“Energy is neither created nor destroyed, it merely changes form.”

— First Law of Thermodynamics

The Energy Footprint of a 90-Page Patent Application

Applications are written in a plethora of forms. Some are better than others. But what is the true “cost” of preparing a 60-page Specification with 30 pages of Drawing sheets?

In the United States, we instinctively think of energy in terms of the grid: atomic, electrical, gas, oil, water, and wind. These are the literal fuels of the Digital Infrastructure. The workstations, servers, Cloud Computing, AI, and CAD software required to render 30 sheets of technical drawings consume significantly more energy than a common household appliance.

Cognitive Energy Burn

The human brain is an energy-hungry organ, consuming about 20% of the body’s daily fuel. During the “Deep Work” of drafting complex claims, glucose consumption spikes. A patent attorney may spend 40–80 hours in this high-intensity state.

The draftsman, likewise, expends massive number of calories transforming rudimentary sketches into a technical masterpiece. Behind it all, the inventors expend countless hours of physical and mental energy.

Energy Type Source Estimated Output/Use
Metabolic Attorney/Draftsman/Inventor ~12,000–20,000 Calories (15–25 or more days of food energy)
Electrical Hardware, AI & IT Infrastructure ~15–25 kWh (Running a modern fridge for a week)

The Hidden Grid

This “Hidden Grid” is the invisible foundation that supports your Patent Application. It encompasses a massive web of societal energy:

  • The Providers: Water suppliers, farmers, and breeders who fuel the people doing the work.
  • The Infrastructure: Transportation networks (railroad, trucks, ships) and the energy companies maintaining the lines.
  • The Protectors & Administrators: Government workers—including the USPTO examiners who review your claims and the police who protect our commerce.
  • The Support System: The educators who train the next generation of innovators and the healthcare systems keeping the workforce healthy.

More likely than not, the total synergy costs of the world around us are much greater than any specific cost to prepare and file your Patent. When viewed from this perspective, a U.S. Patent Application is a real bargain to potentially procure a limited monopoly.

The New Paradigm: Synergy is neither created nor destroyed; it merely changes form.

Ask Us Anything…about Intellectual Property!

Business Patent Law, PLLC is headquartered in Nicholasville, Kentucky, serving a diverse range of clients from innovative startups in Lexington and established industry leaders in Louisville, to businesses across the United States and the world.

If you have a topic or question you would like the editorial staff to address, please send us an email.

Business Patent Law, PLLC provides intellectual property and business counsel. If you need assistance, please contact us today.

Stay up-to-date with news that impacts your business and intellectual property—sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Prepared by the Business Patent Law, PLLC, editorial staff.

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Inventions: Artificial Intelligence and Patents

Human Conception not Artificial Intelligence

Following the landmark Thaler v. Vidal ruling and the Revised Inventorship Guidance issued in late 2025, the USPTO has clarified that AI systems—no matter how autonomous—cannot be named as inventors. The law recognizes AI as an instrument of innovation, analogous to a microscope or a CAD program, rather than a “natural person” capable of conception.

The Threshold: Human Conception not AI

To secure a patent, at least one human must have made a significant contribution to the invention’s conception. Under the current framework, “conception” is the “touchstone of inventorship.” It requires a definite and permanent idea of the complete and operative invention in a human mind.

What Does NOT Count as Human Inventorship:

  • Simple Prompting: Asking an AI to “design a more efficient battery” is considered identifying a problem, not conceiving a solution.
  • Ownership: Simply owning the AI or the data it was trained on does not grant you inventorship rights over its outputs.
  • Verification: Merely recognizing that an AI output is “clever” or “useful” (without further modification) is generally insufficient.

How to Protect AI-Assisted Innovations

To ensure your IP stands up to USPTO scrutiny and future litigation, businesses should adopt three “Safe Harbor” practices:

  1. Document the Prompt Engineering: Maintain logs of the specific, technical constraints and iterative instructions provided to the AI. This demonstrates that a human was “steering” the creative process.
  2. Focus on Human Refinement: The strongest patent claims often come from what a human does after the AI provides an output—testing, modifying, and integrating that output into a practical application.
  3. Audit Your Disclosures: Ensure your patent counsel understands exactly where the AI’s work ended and the human’s work began. Misstating inventorship can lead to the total invalidation of a patent down the road.

Human Conception not AI

Artificial Intelligence can accelerate your speed-to-market, but it cannot hold legal rights. At Business Patent Law, PLLC, we help companies navigate these new boundaries.

Ask Us Anything…about Intellectual Property!

If you or your business are in the greater Cincinnati, Indianapolis, Lexington, or Louisville standard metropolitan statistical areas and have a topic or question you would like Business Patent Law, PLLC to address in the blog, please send us an email.

Business Patent Law, PLLC provides intellectual property and business counsel for businesses and companies.  If you need assistance, please contact Business Patent Law, PLLC.

If you would like to stay up-to-date with news that impacts your business and intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

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Patent Applications Unlock Innovation

💡 Patent Applications Unlock Innovation

Patent applications unlock innovation and are one of the most crucial steps an innovator can take to protect an invention and secure its commercial future. It’s more than just paperwork; it’s a strategic business asset that offers significant advantages to individuals and companies alike.

🛡️ Patent Applications Unlock Future Exclusionary Rights

The primary and most powerful benefit of a patent is the exclusive right it grants to the inventor/owner for a limited time. In the United States, that time is 20 years from the first nonprovisional patent application.

  • Preventing Infringement: A granted patent allows you to stop others from making, using, selling, offering for sale, or importing the invention without your permission. This legal monopoly is the bedrock for successful commercialization.
  • Controlling the Market: You gain the power to set prices and control the supply of your patented product or process in the marketplace, which can lead to substantial financial returns.

💰 Patent Applications Unlock Potential Value

A patent transforms an idea into a tangible, valuable business asset that can be leveraged for growth. Some patent applications are exceptional and have value before the patent is granted. Multiple patent applications can unlock the next generation of assets.

  • Licensing and Royalties: You can license the patent to others, generating a steady stream of royalty income without having to manufacture or market the product yourself.
  • Attracting Investment: Patents signal to investors and venture capitalists that your technology is novel and legally protected, making your company a safer and more attractive investment opportunity.
  • Standalone Sale: The owner of the patent can sell to patent to the highest bidder.
  • Increased Company Valuation: For startups and established firms, a robust patent portfolio increases the company’s net worth and provides a stronger position during mergers and acquisitions (M&A).

🚀 Strategic and Competitive Edge

Beyond immediate financial gain, a patent provides a vital competitive advantage in the business landscape.

  • Competitive Deterrent: The existence of the patent can deter competitors from entering your market space, saving costs and headaches of future litigation.
  • Defensive Protection: Patents can also be used defensively. If a competitor sues for infringement, your company’s patents can be used as counter-leverage in negotiations.
  • Public Recognition: The patent document provides public recognition of inventorship, enhancing your company’s reputation as a leader in innovation and technology.

The Takeaway

Don’t leave valuable innovation exposed! Filing a patent application is an essential investment that secures enforceable rights, enhances financial prospects, and a businesses potential for long-term success.  And exceptional patent applications unlock royalty streams before the patent issues.

Ask Us Anything…about Intellectual Property!

If you or your business are in the greater Cincinnati, Indianapolis, Lexington, or Louisville standard metropolitan statistical areas and have a topic or question you would like Business Patent Law, PLLC to address in the blog, please send us an email.

Business Patent Law, PLLC provides intellectual property and business counsel for businesses and companies.  If you need assistance, please contact Business Patent Law, PLLC.

If you would like to stay up-to-date with news that impacts your business and intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

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Exploring the World of Sensory Marks

What are Sensory Marks?

When you think of a brand, what comes to mind? Likely a name, a logo, or perhaps a catchy slogan. These are the traditional trademarks we encounter every day. But in our increasingly immersive world, brands are engaging our senses in entirely new ways, leading to the rise of Sensory Marks.

Sensory Marks are a fascinating category of non-traditional trademarks that appeal to our senses beyond just sight. While challenging to register, they offer powerful ways to distinguish your brand.

Sensory Sound Marks 🎶

This is perhaps the most recognized category of sensory marks. A sound mark is a distinct sound that identifies the source of goods or services. Think of iconic audio cues like the Netflix “Tudum,” the MGM lion’s roar, or the Intel Inside jingle. These sounds aren’t just background noise; they instantly connect you to a brand.

  • Key Challenge: The sound must be inherently distinctive or have acquired distinctiveness through extensive use. Common sounds (like a standard phone ring) are generally not registrable.

Sensory Scent Marks 👃

Imagine walking into a store and recognizing the brand solely by its unique fragrance. A scent mark uses a specific smell to identify goods or services. These are extremely difficult to register due to the subjective nature of smell and the challenge of consistently reproducing a scent. However, successful examples exist, such as the smell of Play-Doh for “modeling compound.”

  • Key Challenge: Describing the scent accurately and demonstrating its non-functional, source-identifying nature is crucial.

Sensory Taste Marks 👅

While incredibly rare, a taste mark would involve a specific, non-functional taste that serves as a brand identifier. The hurdle here is immense: taste is intimately linked with the product itself (e.g., you can’t trademark the taste of an orange for oranges). For a taste to function as a mark, it would likely need to be a unique and arbitrary taste for a product that doesn’t inherently have that taste.

  • Key Challenge: Proving distinctiveness and non-functionality, especially given the inherent functionality of taste in food and beverages.

Motion Marks 🎬

While not strictly a “Sensory Mark” in the same vein as sound or scent (as it relies on visual perception), motion marks are often discussed alongside them as non-traditional marks. These are short animations or sequences of movements that act as a brand identifier. Think of the distinct opening animation of a movie studio’s logo or a specific digital animation that signals a brand.

  • Key Challenge: Clearly defining the sequence of movements and demonstrating its use as a source identifier.

Color Marks (as applied to an entire product) 🎨

Again, strictly visual but often grouped with non-traditional marks due to their unique nature. While a logo containing a color is traditional, a color mark protects a specific color as applied to an entire product or its packaging, acting as a source identifier. Iconic examples include Tiffany Blue for jewelry boxes or UPS Brown for delivery services.

  • Key Challenge: Proving that consumers associate the color alone with the brand, not just as an aesthetic choice. This usually requires significant evidence of acquired distinctiveness.

The Future of Sensory Branding

As technology advances and consumer experiences become more sophisticated, we anticipate even more innovative ways brands will seek to connect with audiences through sensory engagement. Protecting these unique brand assets requires a nuanced understanding of intellectual property law.

If your business is creating a distinctive sensory experience, reach out to Business Patent Law, PLLC. We can help you explore whether your unique brand elements qualify for trademark protection and guide you through the complexities of non-traditional mark registration.

Ask Us Anything…about Intellectual Property!

If you or your business are in the greater Cincinnati, Indianapolis, Lexington, or Louisville standard metropolitan statistical areas and have a topic or question you would like Business Patent Law, PLLC to address in the blog, please send us an email.

Business Patent Law, PLLC provides intellectual property and business counsel for businesses and companies.  If you need assistance, please contact Business Patent Law, PLLC.

If you would like to stay up-to-date with news that impacts your business and intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

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Operating Agreement? Yes, From Day One!

Why LLCs Need a Strong Operating Agreement From Day One

Starting a new venture, especially one built on your great invention or idea, is exciting! You’ve filed your Articles of Organization with the State, and your Limited Liability Company (LLC) is officially born. It’s tempting to jump straight into selling your “widget” and chasing those initial sales.

But here’s a crucial lesson many successful (and struggling) founders learn the hard way: Skipping the Operating Agreement is like building a skyscraper without blueprints. As a small intellectual property firm, we see how often this oversight leads to painful, expensive conflicts later.

Even the simplest “garage-type” startup can quickly explode into a multi-million-dollar international company. When that happens, relying on faulty human memory and vague understandings is a recipe for disaster among the founders. A well-drafted Operating Agreement is the essential legal document that guides your LLC, protects your IP, and makes the road to achieving your business goals much smoother.

Your Operating Agreement: The Blueprint for Success

Think of the Operating Agreement as the constitution for your company and the safeguard for your most valuable assets—your Intellectual Property (IP). It doesn’t just address who owns what; it lays out the rules for everything from daily operations to major life-cycle events.

Key IP and Equity Issues to Define

For an LLC founded on an invention or creative IP, your Operating Agreement must clearly define:

  • Declaration of Ownership Interests: This is critical. It must explicitly state each member’s exact percentage ownership in the LLC’s Intellectual Properties (patents, trademarks, copyrights, trade secrets, etc.), not just the company itself.
  • Equity Unit Types and Contributions: How are ownership units issued? The agreement should clarify the type of equity a member receives for different contributions, such as capital, licensed/leased IP, or sweat equity.
  • Vesting: Define the vesting schedule for members’ rights and privileges to ensure founders are incentivized to stay with the company as it grows.

Navigate Management and Growth

As your company transitions from a startup to a mature business, the Operating Agreement provides the framework for efficient operation:

  • Day-to-Day Management: Will the LLC be managed by the members or by a hired non-member manager? Crucially, what are the restraints on management’s authority?
  • Meetings and Decisions: Clear rules on annual and special meetings, including quorums, majority, and supermajority voting requirements, prevent stalemates when big decisions are needed.
  • Membership Qualifications: Set clear criteria for new members or investors, including limits on the maximum number of shareholders, which can be vital for compliance with federal securities law.

Strong Operating Agreements Plan for the Unexpected

Successful companies experience business cycles, and sometimes, members leave or need to be replaced. You need a plan for those “up-and-down” moments:

  • Withdrawal: Set the requirements for a withdrawing member or the estate of a deceased member. This prevents the chaotic valuation and transfer of ownership upon a departure.
  • Forced Withdrawal: Outline the specific conditions under which a member can be forced to withdraw from the LLC (e.g., breach of fiduciary duty, criminal conviction, etc.).
  • Exit Strategies (Milestones): Establish clear milestones for selling the LLC (asset purchase, equity sale, merger) or ceasing operations (bankruptcy). This ensures all owners are aligned on the criteria for a significant life-cycle event before a high-pressure offer is on the table.

A strong Operating Agreement, crafted with the future success and complexity of your Intellectual Properties in mind, is an investment that pays dividends by preventing disputes, clarifying ownership, and allowing you to focus on sales and profitability.

Ready to protect your IP and ensure a smooth operational path for your LLC?

Ask Us Anything…About Intellectual Property!

If you or your business are in the greater Cincinnati, Indianapolis, Lexington, or Louisville standard metropolitan statistical areas and have a topic or question you would like Business Patent Law, PLLC to address in the blog, please send us an email.

Business Patent Law, PLLC provides intellectual property and business counsel for businesses and companies.  If you need assistance, please contact Business Patent Law, PLLC.

If you would like to stay up-to-date with news that impacts your business and intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

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Public Use Bar

Public Use Bar: A Cautionary Tale for Innovators

For anyone in the world of Patents, the terms “public use” and “public disclosure” are critical—and often misunderstood. 35 U.S.C. § 102 defines these terms and their implications for patentability.

Grace Period

A key point to remember:  the U.S. has a unique one-year grace period for filing a patent application after a public disclosure. In most other countries, any public disclosure can immediately bar you from obtaining a Patent. This is a crucial distinction that can make or break your intellectual property.

Defining the Public Use Bar

What exactly constitutes “public use bar”?  Can a use be “public” even when it’s hidden from the public eye?

The U.S. Supreme Court’s 1881 decision in Egbert v. Lippmann (104 U.S. 333) provides a fascinating and enduring lesson. The inventor in this case created improved corset steels in 1855, giving them to a single individual to use. Even though the steels were never publicly seen, the Court ruled that this was a public use. The inventor’s subsequent patent, filed years later, was therefore invalidated.

The Egbert Court’s conclusions still stand as a stark warning:

  • A single public use is enough. You don’t need to have a crowd of people using your invention to trigger the bar.
  • Unrestricted use is public use. If you give or sell your invention to another person without any confidentiality agreements or restrictions, that use is considered public.
  • However, experimental use is an exception. A use that is open to public view but is made in good faith solely for testing and experimental purposes does not count as a public use.

Egbert serves as a powerful reminder: the definition of “public use” is far broader than most people realize.

Protect Your Innovation

Don’t let a seemingly private action become a public forfeiture.

35 U.S.C. 102, in part, reads:

(a)    Novelty; Prior Art.—A person shall be entitled to a patent unless—

           (1)     the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

          (2)    the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.

(b)    Exceptions.—

          (1)     Disclosures made 1 year or less before the effective filing date of the claimed invention.—A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if—

                    (A)    the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

                    (B)    the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

Get Help With Your Invention

Ask Us Anything…about Intellectual Property!

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