Author: by Matthew Moersfelder

Patents have always had an important role in the game industry and that role is growing in importance each year. People in the industry have mixed feelings about using patents, and everyone agrees the patent system could use some structural improvement. Yet, the game industry is becoming a mature business and with that maturity comes more resources and intellectual property sophistication.

Beyond our collective reservations about the patent system and any moral notions about the “rightness” of patents, we all have to deal with the practicalities associated with the growing competitiveness of the marketplace. One of those practicalities and the main point of this article is that an introductory understanding of patent law is important for every game company.

For most small and mid-sized companies patents do not play as large a role as the other forms of intellectual property: copyright, trademark, and trade secret. However, as the importance of patents continues to grow, it becomes increasingly more important to understand what a patent is and what patents can do for your game company.

What is a patent?

In legal language, a patent is a statutory grant from the United States government that gives an inventor a limited monopoly for the subject matter of the patent. In regular language, a patent is a deal with the government where a person tells the public about an invention and in exchange for that information, the government grants protection for a limited time over that invention.

While this seems like a simple concept, when examined against the backdrop of the intense distrust of monopolies in the United States, the power and significance of the patent emerges. One may ask, if the United States distrusts monopoly power so much, why is it willing to give an inventor exclusive rights to a life saving drug or other revolutionary technology? While there are many possible answers, two come immediately to light: 1) providing the limited monopoly to an invention provides tremendous incentive for individuals and companies to develop new and useful inventions that otherwise may never have been discovered; and 2) providing the limited monopoly granted under a patent occurs after full disclosure by the applicant. This disclosure ensures that once the term of the patent has expired the invention will be put in the public domain, where it will be freely usable and accessible to everyone.

The limited monopoly of the patent is just that, limited. Contrary to what many people believe, a patent does not give a person the right to do anything. Instead a patent gives a person the right to prevent people from practicing the subject matter of the invention. This is a very important, but rarely grasped, distinction. A patent is merely a means to prevent others from practicing an invention. The following example will attempt to clarify this point.

Example A. Monopoly Power of the Patent.

Andy invents and obtains a patent on an input device for games. Andy is not guaranteed that he can raise money to manufacture his invention. The patent merely gives Andy the right to prevent others from making the controller. If Beth raises money and makes the same controller, Andy has the right to stop her. He also has the right “not” to stop her. By that, we mean that Andy has the right to license the patent to Beth so that Andy can receive a portion of the sales from the production of the controller.

As Example A illustrates, obtaining a patent will not necessarily lead to instant riches. Instead a patent must be part of an overall business plan that will capitalize on the unique monopoly granted by the patent. Some other ways of effectively exploiting a patent will be discussed later in this article.

Just as it is important to understand that a patent does not give the right to do anything, it is equally important to understand what types of inventions can get a patent. What is eligible for the limited monopoly granted by the Untied States? The United States patent law states that anyone who invents a new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, is entitled to receive a patent on that invention from the United States Patent and Trademark Office (USPTO). But what does this actually mean?

The invention must be new and useful. “New” means both that it has not been invented previously and that it would not have been obvious to someone familiar with the relevant field. “Useful” means that the invention has to have some identifiable use that is beyond a merely speculative use. To understand what these terms mean we return to the previous example. In Example A, Beth had developed a new controller for the input device. In Example B, we will examine two separate controllers to determine whether they would be patentable.

Example B. New and Useful.

Beth comes with two ideas to improve Andy’s input device: 1) taking an Atari 2600 standard joystick and attaching it to the input device; and 2) developing a controller that responds to a user’s body odor.

If Beth attempts to patent the Atari 2600 joystick paired with Andy’s input device, the United States Patent and Trademark Office (USPTO) is likely to reject the invention because even though Andy’s input device did not previously use an Atari 2600 joystick, it would be obvious for an Atari 2600 joystick to be used as an input device and therefore Beth would have added nothing new to the art.

On the other hand, if Beth sought to patent the body odor activated improvement to the input device, it is likely that the USPTO would find the invention new,1 but Beth may have difficulty convincing the USPTO of the usefulness of such a controller.

Even being new, useful, and non-obvious will not allow a person to obtain a patent if the subject matter is not within that allowed by the patent statute. The patent statute allows patents on any process, machine, manufacture or composition of matter, and any new and useful improvement thereof. For instance, algorithms or other pure mathematical or scientific concepts are not patentable. These concepts need to be put into direct tangible applications to be eligible for patent protection.

1 _{To the best of the authors’ knowledge there is thankfully no computer or console control that utilizes the body odor of an individual for gameplay.}

The good news for the game industry is that much of the new creative work that is done in this industry may be eligible patents. For example, as discussed earlier a new controller may be patentable or a new video card or even a new way of visually displaying the graphics on a computer. Patents have been granted on such things as the rumble feature available from some video consoles as well as the way that the three dimensional graphics are displayed via camera functions.

Even though the scope of possible subject matter is very broad, not everything is subject to the grant of a patent. To understand what is not covered by a patent it is helpful to examine the other areas of intellectual property. Trademarks, for example, cover the identifying marks on goods and services of a company. These marks are indications of source and allow the consumer to recognize a source of consistent quality. These marks however, would not normally be covered by patent law because they are not adding any new and useful technology.

In the context of the game industry, copyright and patent law may be considered to be different sides of the same coin, both potentially protecting separate and distinct portions of the same work. Copyright is directed to the protection of a work of authorship or expression. Specific to the game industry, copyright can be used to protect the underlying coding used to write software, hardware design, or the specific story involved in a game.

To understand how these three types of intellectual property work together, we revisit our friend Beth who has decided to take her new controller to market.

Example C. Patents and Trademarks and Copyrights, Oh My!

By some future miracle, body odor is actually useful in gameplay mechanics. In this alternate universe, Beth does manage to patent her body odor controller. Now, armed with a patent Beth is ready to market her new controller to the odoriferous public. To make sure that the new controller will interface correctly with any computer, Beth writes a program containing complex and specific code which she then includes with every controller.

During one of her many brainstorming sessions, Beth decides to name her unique controller the ODORFRON 2010. Days before the ODORFRON 2010 is going to market, Beth suddenly realizes that she only has applied for a patent on the controller and seeks advice on how to protect the rest of her intellectual property. Her legal counsel informs her that she will not be able to protect the name ODORFRON 2010 through the patent law. The name ODORFRON 2010 may, however, be registered as a trademark.

Depending on the software implementation, the invention embodied in the code might be patentable in some countries. In addition, copyright protection is also available because copyright for source code is allowed in most countries.

This example hopefully has provided a general understanding of some of the differences between and applications of copyright, patents, and trademark.

Anatomy of a patent: What does a patent look like?

Every patent is composed of the same general parts. On the first page or “face” of every patent issued by the USPTO it lists the title of the patent, the patent number and the date on which the patent was granted. The inventors of the patent are also listed on the face of the patent. This includes anyone who contributed to conception of any part of the patent.

Immediately below the inventors is listed the entity to whom the rights in the patent were given at the time the patent issued, also known as the assignee. This can be deceiving because this information does not change if the rights of the patent are given to another entity after the grant of the patent. Therefore, there is no guarantee that the assignee appearing on the face of the patent has not given its rights to another entity who has in turn granted its rights to yet another entity. The current owner of the patent rights can be crucial information if the patent covers subject matter that your company needs or would like to use. To assist with this issue, the USPTO provides on its website information about the current assignee.2 The face of the patent also contains the abstract of the invention which is a very brief summary of what is protected by the patent.

On the pages following the face of the patent is the section called the specification. This section includes the background to the invention including the state of the technology on which the patent is based. The specification then explains the invention that is the subject of the patent. The purpose of this portion of the specification is to allow a person working in the same field that the patent pertains to be able to carry out the invention based solely on the specification. The specification typically will also include technical drawings and examples to assist in the understanding of the patent.

2 _{This information is available generally at} http://assignments.uspto.gov/assignments/q?db=pat_{. Although the PTO attempts to keep this information up to date, it may not always be 100% accurate. Nevertheless, it is the place to start looking for the current owner of the patent rights.}

Patent Claims – The Most Important Part

The final section of a patent is the most important but also potentially the most confusing to persons not familiar with patent law. This section is the patent claims. The claims of the patent are the numbered sentences at the end of the patent that actually define what is protected by the patent; if an invention is not in the claims then it is not protected. Any part of the invention disclosed in the specification but not contained in the claims will not be protected by that patent.

Indeed, if something is disclosed in the specification but not in the claims it may constitute a dedication to the public of the disclosed but unclaimed subject matter, thereby making it impossible to ever obtain a patent on those portions. Therefore, it is crucial that every aspect of the invention that an inventor wants protected is included in the claims.

Yet even with the clear guidelines that all the protected subject matter must be contained in the claims, the claims themselves may be incomprehensible without a firm understanding in patent law. Imagine trying to read a story in a language that you are not fluent in; you may know at least one translation of each of the words, but without a full understanding of all possible definitions and how the words and sentences interrelate it is difficult to completely understand what is being said.

This can be especially dangerous in attempting to decipher the scope of protection of a patent because the wrong interpretation may open an individual or company to millions of dollars of liability. As discussed below, this is an important reason to seek specialized help when dealing with patents

How does my company get a patent?

Process

Obtaining a patent is done through the USPTO through a process known as prosecuting the patent. Prosecuting a patent typically begins with filing an application with the USPTO. The application can be a standard patent application or a provisional application. A provisional application is similar to a standard patent application but the USPTO does not examine the application.

Instead it serves to hold a priority date for one year which allows the filer to decide whether to pursue the application. The provisional application is often an attractive option for small and mid-sized game companies as it costs significantly less then filing a normal non-provisional application. If the filer ultimately determines to go ahead with a regular application it gives one year to raise funds for the application process.

Once a standard patent application is filed or a provisional application is converted to a standard application after one year, an examiner of the USPTO will examine the application to determine whether the claims contained in the application should be allowed. When the examiner has made her determination regarding the patent she will issue what is known as an Office Action.

The Office Action sets forth the USPTO’s decision regarding the patentability of the subject matter of the application. In this decision the patent can either be allowed, rejected for failing to meet the requirements of the statute, or objected to for failing to comply with the rules and formalities of the patent statute. If the patent application is allowed the patent is then allowed to issue. On the other hand, if the examiner finds that the application is unacceptable then the applicant has an opportunity to address the examiner’s concerns either by arguing that the examiner is wrong or by amending the application to comply with the patent statute.

It is rare that a patent will issue on the first office action. More commonly, several exchanges between the examiner and the applicant are required before both parties can agree on a specification and claims that are allowable.

This is not a perfect process. Examiners frequently have less than 8 hours to review a patent and the relevant prior technology before making a determination on whether a patent should be granted. This can lead to patents not getting allowed that should be allowed, and patents being allowed that on closer examination should not have been allowed.

To some degree this is addressed by the applicant’s duty of candor to disclose anything that it is aware of that will help the USPTO make its decision fairly and efficiently. However, unlike some foreign countries, the applicant has no duty to make an affirmative search for art that may be relevant to the determination. This has created in the United States a situation where it is often better to do no searching so as not to find anything that may potentially prevent a patent from issuing.

Timeline and Patent Term

The timeline to obtain a patent can seem very daunting. From the time a patent application is submitted to the PTO to the grant of the patent can take several years. This can be both beneficial and detrimental to a patent applicant. It can be beneficial because this allows the applicant to spread the cost of the prosecution of the patent out through many years. While this may help the applicant financially it may not be the best strategy because of how the term of the patent is calculated. Generally the patent term is 20 years from the filing date of the patent.3 This is important because although an issued patent expires 20 years from application for the patent, no protection is provided by the patent until it actually issues.

3 _{Although this can be extended based upon delay by the USPTO (delay attributable to the applicant will not increase the term of the patent), 20 years is a good rule of thumb.}

Cost

Of all types of intellectual property, patent protection is the most expensive and most time intensive to obtain. Generally having an attorney who specializes in patent law file a patent will cost between $12,000 and $22,000. The cost after filing will vary depending on the complexity of the claims that the applicant is trying to get and the number of responses that must be drafted to address the USPTO’s Office Actions.

As the complexity and number of responses increase the number of billable attorney hours required on the patent also increases, which increases the cost. The costs above include the fees charged by the USPTO, which can be substantial.

Those price numbers tend to give people a bit of a shock especially in light of the relative cheapness of obtaining a trademark or copyright registration. It is possible that at this point in the article you are certain that you have heard of better “deals” for obtaining a patent. Perhaps you have been up late at night wondering if your fledgling company is going to survive with all the bigger fish in the sea, and out of nowhere, as if in answer to your prayers, the man on the television promises to help protect your inventions on the cheap! Also, there are all those websites that promise to do a patent application for $4,000. Are those advertisers lying to you about the cost?

Before you call that number on your screen, there are a couple of considerations that should be kept in mind before you enlist the service of a bargain basement provider of patent services. There is an old joke about tires for sale at one half price. After you are on the hook, you find you have to pay for all the extras, like “Do you want them on the car?” While in the beginning it may seem like the best way to save money, the low cost patent drafter may not be a bargain at all in the long run. Once an inventor has paid for the drafting of a patent, the drafter loses incentive to spend time on the application.

This can be especially detrimental when the patent application is in a field that is unfamiliar to the drafter and/or the patent is very complicated. Furthermore, many times the costs quoted by these services contain fine print that indicates that the “fixed” cost is only for the services provided by the drafter. This means that all the costs levied by the USPTO will be passed on to the applicant on top of the quoted price. The fixed costs also do not usually include answering office actions, any patent searching, and other parts of patent prosecution that are commonly necessary.

It is possible that in some circumstances a fixed cost or lower priced patent drafter may save your company significant money. Just be very careful about interviewing these potential candidates on their background in patent drafting and know exactly what is covered in the services for the quoted price.

Do I need an attorney?

The answer is that having an attorney for this job is usually a good idea.4 After reading about the cost of having a patent prosecuted and the pitfalls of going to a low cost patent drafter, you are probably asking whether you would be better off drafting the patent yourself. Well, you can take out your own infected appendix but it probably isn’t the best idea, even if you do own the complete set of Do It Yourself Home Surgery Books. Unfortunately for small companies and individuals, patent law is one of the most complex areas of the law. Although an individual is allowed to file for a patent in his own name with no formal training, the authors strongly recommend against it.

Patent law is one of the few areas of law that requires an additional test, beyond the regular bar exam, in order to be allowed to practice before the USPTO. Furthermore, only people with scientific backgrounds are allowed to take the examination and even then, the test has a low pass rate. This ensures that only people with scientific training, an understanding of the rules of the patent office, and an understanding of patent drafting are allowed to help others apply for a patent. When an individual passes the test he or she is assigned a Registration number that allows him or her to practice in front of the PTO.5

Having an experienced practitioner will make the process much smoother and help to ensure that the broadest possible scope of patent protection is obtained. Recall earlier where the patent claims were analogized to a foreign language; patent attorneys are your interpreters for this world. If you do chose to go it alone there is every possibility that one word might make your patent essentially unenforceable and allow competitors to appropriate your technology freely.

4 _{Some types of intellectual property protection, like copyright registration, are fairly straightforward and most people can handle that type of project on their own. Patent applications are much more complex.}

5 _{Incidentally, whenever you seek help drafting a patent you should inquire as to whether the person has passed the USPTO examination and is eligible to practice before the USPTO.}

Now that I have my patent, what do I do with it?

Swinging the hammer

Now that your company has a patent, it is time to retire and buy that private island, right? Wrong. Metaphorically, the hammer is tough to build and it takes even more strength to swing it.

As discussed earlier, contrary to popular belief, a patent does not give a company the right to do anything. Instead, a patent gives a company the right to prevent others from doing something. Specifically, a patent gives a company the right to prevent others from making, using, selling, or importing a patented invention. Keeping others from practicing an invention usually means litigation or at least the threat of litigation.

Patent litigation is expensive. How expensive? As a general rule, it is fair to say that patent litigation is the most expensive type of intellectual property litigation and one of the most expensive types of litigation in any area of law. It is sometimes jokingly called “The Sport of Kings” among attorneys.

Completing a patent case in the early stages with a quick injunction, summary judgment, or settlement is possible, but rare. Even then, the costs for such action are minimally several hundred thousand dollars. More likely patent litigation budgets range from 1 million to as much as 8 million dollars depending on issues like the number of parties involved in the case, the possibility of appeal, the complexity of the technology, the number of patents, and the market size of the product(s) being attacked.

This budget range makes more sense when we put it in context of recent game industry litigation where damages or threatened damages were more than 90 million dollars. We have had more than one example of that type of case in the last five years. In those instances it makes sense for the plaintiff and defendant to have a large budget to fight over that amount of money. The main point here is that very few companies can truly afford patent litigation. In the game industry, only the most successful hardware manufacturers, developers, and publishers could use patent litigation as a real enforcement mechanism.

Alternatives to Swinging the Hammer

So we have gone through this entire discussion, and then told you that you are not going to be able to afford to sue anyone. Does that mean that your patent is totally worthless? No; it means that understanding how to use your patents is that much more important. Without a true understanding of the power of your newly acquired patent, it is nothing more than a pretty piece of paper to hang on the wall. Below, we discuss some ways that patents can be used by most companies.

Financially speaking, a patent is an asset. Because patents are assets, they have financial implications for the companies that own them. It is possible to use patents to secure loans from individuals or financial institutions. Patents usually add value to a company for investment purposes.

If a company is interested in taking a round of investment, public or private, the patents a company owns will be considered in that valuation, almost certainly increasing that valuation. A patent is also an excellent way to set your company apart from the other companies also seeking investment. It can show that you are both dedicated to protecting your intellectual property as well as sophisticated in how you go about doing so.

A patent can also be used as a strong marketing tool. “Protected by U.S. Patent” sends a little shiver of anticipation down the back of the consuming public. “Patent Pending” has a similar effect. It tells the consumer that they will not be able to get this controller or this type of game experience from anyone else. The patent can also be used to set your product apart because no one else will be able to use its particular features (without your permission).

The perception associated with patents is real and should be an important consideration. Therefore, in the eye of the public or potential investors, some may believe your patent protected ODORFRON 2010 must be better than the competitors. Thus the patent can serve to increase interest in your products and be used to charge a premium for those same products.

A patent can also be used in licensing situations. People are often intimidated by the word license. Licenses can be complicated and they can involve extensive obligations on behalf of all the parties.

However, the basic notion of a license that all other notions spring from is really an uncomplicated one. At root, a license is a promise not to sue. That is all. When one company gives another company a license, the first company is merely promising not to sue the second company for using some protected information/technology (e.g. a patented invention). And this promise not to sue can be extremely lucrative.

There are several ways to realize the value of a patent through licensing. The first way is to simply license the technology of the patent to other companies who pay for that right. This method has the advantage that it is generally the patent holder (i.e. you) who is in control of the arrangement. More likely for a small and midsize game company, the patent will be on technology that improves other patented technology.

This opens up the opportunity to enter into a cross-license with the other patent holder. Both parties can benefit because both parties will be agreeing not to sue under their respective patents so that one or both can use both patents to create a super product. This has the potential to lead to increased revenues for both parties.

Finally a patent can be used as defensively against competitors entering your field or asserting patents against you. Whether a competitor is trying to enter into your technological niche or threatening to sue you, having a patent offers some evidence that you have the right to do what you are doing and no one else does.

The patent acts as a symbol of intellectual property sophistication and is a threat that may keep other parties out of your space. Even when a patent is just sitting on the shelf, it is in the public record and may be working for your company in ways you will never fully appreciate. Specifically, other companies may be considering moving into your space, but the discovery of your patent may dissuade them. The other companies know that while the patent can be challenged, the cost of litigation makes it unlikely that it will be.

There are many uses of patents outside of litigation. If understood and used correctly a patent can have value that far exceeds the cost of the prosecution of that patent.

Conclusion

Whether we like it or not, patents absolutely have an important place in the game industry. As the industry continues to mature, that place will grow in importance. Without question there will be more patents in the game industry ten years from now than are currently in the industry. This means it is critical to understand how patents can work for or against your game company. Part of this understanding is knowing that the purpose of patent protection varies based on your company’s goals, resources, and position in the industry.