Funding Proposals Can Jeopardize Future IP Rights

Applying for federal grants to fund research and development for new patents may imperil an inventor's future intellectual rights, a federal court has confirmed. Earlier this year, the U.S. District Court for the District of Massachusetts struck down patent infringement claims by a company that had received government assistance, but had failed to file an application for the proposed patent within a year of receiving the grant. The case is a reminder of an obscure and little-known facet of patent law, says the attorney who represented the alleged infringer in the case.

The court issued a summary judgment against American Science & Engineering, Inc., a manufacturer of X-ray inspection systems, barring the company from asserting patents for a truck-based X-ray detection system for scanning large objects and cargo containers. The case, brought by rival L-3 Communications Security and Detection Systems Corp. in 2004, sought a declaratory judgment that AS&E's patents were invalid and unenforceable.

Drawing on a lengthy history of litigation with its competitor over two X-ray detection patents, L-3 said it feared the explosive detection system manufacturer planned to assert infringement of a new patent against it. L-3's argument stemmed from a discovery that AS&E had applied for the patent, called "Mobile X-Ray Inspection System for Large Objects," in 1996, more than a year after it asked the government to fund the invention in 1994.

According to the Patent Statute, such an application is tantamount to an offer for sale of the patent, which allows the purchaser to obtain a free license. But a complex body of patent law known as the "on sale bar" says if an invention has been for sale for over one year, it is no longer patentable.