Maintaining IP

Most business owners and managers are aware of intellectual property rights, such as domain names, trademarks and patents and use them to a greater or lesser extent in the conduct of their businesses. Depending on the particular business, at least one of the numerous intellectual property rights can usually provide the business with enough of a competitive advantage to make obtaining and maintaining the rights a worthwhile investment.

Some intellectual property rights are subject to a registration or similar process, mostly, governmental, but in some cases private. Maintaining these rights is often conditioned upon paying a registration, renewal, or maintenance fee. Examples of intellectual property rights that are subject to such fees are patents, trademarks, copyrights, and domain names. Failure to pay these fees results in loss of the right. In some cases, the right may be re-instated during a limited grace period, but in other cases, the right may be permanently lost as a result of failure to pay the fee.

Domain names are privately registered and are subject to renewal. Some registrars allow a grace period for renewals, but some do not. Once a domain name has expired it becomes available and may be registered by another person or entity. The prior owner may still have trademark rights that can be asserted to prevent the use of the domain name by another, but resorting to trademark enforcement to defend lost domain name rights is far more expensive and time-consuming than simply paying the domain-name registration renewal fee.

The term of a United States registered trademark is 10 years provided the trademark owner files a Declaration of Continued Use between the fifth and sixth year from registration. A trademark can be renewed for subsequent 10 year periods, provided the owner files a Declaration of Continued Use along with a renewal application at the start of the ninth year. The law provides for a six-month grace period to file the Declaration of Continued Use and the renewal application with a late fee. The late fee is assessed per class in which the mark is registered. If the mark is registered in multiple classes, the cumulative late fees can become expensive.

If a trademark owner fails to file the Declaration of Continued Use, the registration is canceled and if a renewal application is not filed, the trademark expires. In either case, the owner loses the benefits accorded a federally registered mark. Once federal registration is canceled or expires, the owner is limited to its common law trademark rights which only extend to the geographic territory in which it conducts commerce. The owner also loses its right to automatically bring enforcement actions in the United States federal court system and may be required to file enforcement actions in state courts. Another application can be filed for registration of the mark, but the owner is, in effect, starting over.

Periodic maintenance fees are required to maintain issued United States patents. These fees are due 3.5, 7.5, and 11.5 years after the patent issues. If the maintenance fee is not paid, the patent expires. Notice is not given when the maintenance fee is due, and a reminder is sent by the United States Patent and Trademark Office to the patent owner if the fee has not been paid. There is a six-month grace period in which to pay the maintenance fee, but the United States Patent and Trademark Office imposes a surcharge for late payment of a maintenance fee. After expiration of the patent, a petition may be filed to re-instate the patent. In cases where the failure to pay was unintentional, the petition must be filed within 24 months of the expiration of the six-month grace period. In cases where the failure to pay was unavoidable, the petition may be filed at any time. In either case, there is a substantial petition fee, as well as attorney fees for the preparation and filing of the petition.

Foreign patent applications and patents are subject to periodic fees, usually due annually and referred to as annuity fees. If these fees are not timely paid, the application becomes abandoned or the patent expires. In some countries, the application or patent can be reinstated by late payment of the fee within a grace period, but in most cases the application or patent cannot be re-instated.

From the above, two things become clear. First, and perhaps most importantly, not all intellectual property rights can be reinstated after they have been lost for non-payment of fees. Second in the instances where it is possible to reinstate such rights after they have lapsed due to non-payment of fees, reinstatement is significantly more expensive and time consuming than it would have been to have paid the fees in a timely manner. In addition in the case of United States patents, reinstated patents are subject to intervening rights of third parties who used the invention after the six-month grace period but prior to the late payment of fees.

During economic downturns, it may appear tempting to business owners and managers to realize savings by deciding not to pay the various fees necessary to keep intellectual property rights in force. While short-term savings can certainly be achieved in this manner, business owners and managers are well advised to educate themselves concerning the long-term consequences of these economic measures.

Ken D'Alessandro is a partner with Lewis and Roca LLP and focuses his practice in the areas of patent, copyright and trademark law. Contact him at KDAlessandro@LRLaw.com or (775) 321-3451.