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Patent It Yourself - PDF Archive

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ChaPter 15 | After Your PATENT ISSUES: Use, MAINTENANCE, and INFRINGEMENT | 433<br />

R. Your <strong>Patent</strong> Is Subject to<br />

Interference for One Year<br />

For one year following the issuance of your patent, you are<br />

potentially subject to losing it if another inventor who has<br />

a pending application on the same invention can copy your<br />

claims in their application and can get the PTO to declare<br />

an interference. If the other inventor wins “priority” in the<br />

interference—that is, the PTO finds that the other inventor<br />

“reduced the invention to practice” (built and tested it or<br />

filed a patent application) before you, or conceived it first<br />

and was diligent in effecting a reduction to practice—you’ll<br />

effectively lose your patent or any claims in issue. While<br />

conflicts between patent applications and in-force patents<br />

are relatively uncommon, they do occur, due to the failure<br />

of the examiner to spot the interfering application before<br />

your patent issues. (See Chapter 13, Section K, for more on<br />

this.)<br />

S. Tax Deductions and Income<br />

I include this brief section because, unfortunately, most<br />

inventors give no thought whatever to taxes, either with<br />

regard to the money they spend to get their patents, or to<br />

the money they make when they sell or license their patents.<br />

I say “unfortunately” because the government will effectively<br />

subsidize your patent expenses by allowing you to deduct<br />

them. Because of space limitations, I can’t provide a full<br />

guide to all of the patent-tax rules, but here are the basics.<br />

You should consult a tax professional or the IRS for the final<br />

word:<br />

1. You can legally deduct your patent and invention<br />

expenses (i.e., the cost of this book, patent searches,<br />

drafting and attorney fees, PTO fees, technical<br />

research, models, experimentation and testing, up<br />

to $25,000 of depreciable property, etc.) if the IRS<br />

considers that your inventing constitutes a trade or<br />

business. If you buy depreciable property above the<br />

$25,000 limit, you must depreciate this over its useful<br />

life. If you meet the trade or business test, you’re in<br />

luck: You can deduct any net Schedule-C loss against<br />

your other (ordinary) income. However if the IRS<br />

considers that your inventing is a hobby (that is, you’re<br />

a dilettante) they will allow you to deduct your patent<br />

and invention expenses only against any income that<br />

you receive from the hobby. What do you have to do<br />

to meet the trade or business test? The taxman will<br />

consider that you have engaged in a trade or business<br />

if you can show that you have been serious, diligent,<br />

and have spent substantial time on your invention<br />

activities. In other words, Uncle Sam will give you a<br />

passing grade if you kept careful records, had a model<br />

made, did prior-art and marketing research, made<br />

substantial efforts to sell or license the invention, acted<br />

in a businesslike manner, etc.<br />

2. If you license your invention on a nonexclusive basis<br />

(see Chapter 16), you haven’t given away all of your<br />

rights, so your royalties are considered ordinary<br />

income. Report on Schedule C or Schedule E.<br />

3. If you sell all of your patent rights, or grant a full<br />

exclusive license, the IRS considers that you’ve sold<br />

it all; your receipts or royalties, even though received<br />

over a long number of years, are considered capital<br />

gains; report on Schedule D.<br />

T. <strong>Patent</strong> Litigation Financing<br />

Because of the high cost of litigation, cost assistance (at<br />

a price) is now available from several companies. Lloyds<br />

of London (www.lloyds.com) and Intellectual Property<br />

Insurance Services Corp. (www.infringeins.com), 9720<br />

Bunsen Parkway, Louisville, KY 40299, 502-429-8007, write<br />

policies directly. These companies will, in return for an<br />

annual premium, reimburse part or all of the cost of patent<br />

enforcement litigation, up to the policy limit. You can even<br />

begin coverage while your patent application is pending.<br />

However, some companies may have a less-than-optimum<br />

rating and some may require you to jump through difficult<br />

hoops, such as getting an infringement and validity opinion<br />

from an independent attorney, before they will reimburse<br />

your expenses.<br />

Below are some companies and firms that finance<br />

contingent-fee patent litigation. Carefully investigate any<br />

company before engaging them. Also, as stated, most<br />

litigating attorneys will take on contingent-fee litigation<br />

if the damages are substantial, the defendant has a deep<br />

pocket, and the patent is strong and clearly infringed.<br />

Below are just a few of the many litigating patent attorneys<br />

and services who have handled contingent-fee litigation.<br />

These listings do not imply any form of endorsement or<br />

recommendation of these attorneys or their services.<br />

• Enpat, Inc. (www.enpat.com)<br />

• General <strong>Patent</strong> Corporation International, (www.<br />

patentclaim.com)<br />

• <strong>Patent</strong> Enforcement and Royalties Ltd. (www.Pearlltd.<br />

com)<br />

• Costello, John P., Esq. (patents@cwnet.com)<br />

• Hosteny, Joe, Esq. (jhosteny@hosteny.com)<br />

• DiPinto & Shimokaji (shimokaji@dsattorneys.com)<br />

• ThinkFire Services USA, Ltd. (info@thinkfire.com)

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