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A pending Federal Circuit decision may force licensing counsel to rethink one of the most routine provisions in patent settlement agreements — the licensee’s denial of infringement.

Patent settlement agreements usually contain a denial of liability by the defendant/licensee, e.g., “[l]icensee denies any infringement of the asserted patents.”  For decades, this language has largely been viewed as harmless boilerplate — a standard concession to the settling defendant with no apparent downstream consequences. However, an appeal pending before the Federal Circuit suggests that this boilerplate sentence may have effects far beyond the agreement in which it appears.

The case, VDPP, LLC v. Volkswagen Group of America, Inc., No. 24‑2226, arises from VDPP’s August 2023 lawsuit in the Southern District of Texas asserting U.S. Patent No. 9,426,452 (the ’452 Patent), which is directed to a 3D display and glasses system. VDPP — a non-practicing entity (NPE) — accused Volkswagen of infringement for certain surround‑view camera systems.  Volkswagen moved to dismiss, arguing that VDPP failed to comply with the patent marking statute (35 U.S.C. § 287(a)) before the patent expired. The district court agreed with Volkswagen and dismissed the case with prejudice, denied leave to amend, and later granted Volkswagen’s motion for attorneys’ fees under 35 U.S.C. § 285 holding both VDPP and its counsel jointly and severally liable. VDPP appealed. Oral argument was held on April 9, 2026, before Chief Judge Kimberly Moore, Judge Alan Lourie, and Judge Tiffany Cunningham.

The issue on appeal, in plain terms

Under 35 U.S.C. § 287(a), a patent holder who licenses patented technology must ensure that products covered by the license are properly marked. If the patent holder — or its licensees — fail to mark, damages are limited to the period after the accused infringer receives actual notice of infringement. For an expired patent where only pre‑suit damages are available, failure to mark can eliminate any recovery entirely.

For NPEs that do not themselves manufacture products, § 287(a) often lies dormant. The obligation typically arises only once the patent holder licenses others to make products under the patent.  

The unresolved question now before the Federal Circuit is whether that marking obligation is triggered by a settlement agreement — even when the agreement contains an express denial of infringement by the licensee.

A skeptical reception at oral argument

VDPP’s position on appeal is that its prior settlement agreements with other alleged infringers were not the kind of licenses that trigger § 287(a) at all. According to VDPP, the agreements were simply litigation settlements in which the respective defendants paid to resolve disputes while expressly denying infringement. VDPP argued that the agreements did not permit the defendants “to produce a patented article for or under” the ’452 Patent and, therefore, should not be viewed as licenses in the traditional sense such that any imposed a marking obligation.

The panel appeared unpersuaded. For example, when VDPP claimed that the licensees’ denial of infringement should be dispositive, Chief Judge Moore pushed back:

Every defendant insists they don’t infringe.  And if I were to adopt a rule that says a patentee has no obligation to force marking upon a licensee if they claim they don’t infringe, then I fear we would pretty much never have marking by licensees.

What to watch for when the decision drops

The central question is whether denial-of-infringement language insulates a settlement from the marking trigger of § 287 — or whether the court will look past the label to the substance of what the agreement actually permits.  

If the court focuses on substance over form, a licensor with a portfolio of prior settlement agreements — each framed as a dispute resolution — may have unknowingly started a marking clock years ago. Subsequent defendants could point to those prior agreements and argue that the patentee and prior licensees were obligated to mark but failed to do so, cutting off all pre‑expiration damages. And if the court signals that substance controls, the choice of settlement instrument will likely matter far more than it has historically: A covenant not to sue or a bare release of past claims may be treated differently than a license, giving practitioners a structural tool to resolve disputes without inadvertently triggering obligations that could impair future enforcement.

Practical steps before the opinion issues

Counsel advising patent holders with enforcement portfolios should not wait for the decision to begin reviewing their settlement agreements. Three steps worth taking now:

  1. Audit prior settlement agreements. Review existing agreements to determine whether any were structured as outright licenses versus covenants or releases. If licenses exist, assess whether marking occurred — or realistically could have occurred — during the license period.
  2. Revisit current templates. For any active licensing negotiations, consider whether the settlement agreement being used is appropriate given the marking risk, particularly for patents approaching or past expiration.
  3. Address § 287 expressly. If a denial-of-infringement clause is non-negotiable, consider pairing it with explicit language requiring the licensee to mark any covered products — notwithstanding the denial.

The panel’s questioning at oral argument suggests an uphill battle for VDPP. But the § 287 issue presented here — whether a denial-of-infringement in a settlement agreement defeats a marking obligation that would otherwise attach — is genuinely novel. A clear ruling in either direction will be a meaningful addition to patent licensing practice. 

Stay tuned.

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Last week, the Supreme Court vacated a copyright infringement judgment against an ISP provider and remanded the case to the Fifth Circuit for reconsideration in light of the Cox Communications decision (Grande Comm’s Networks v. UMG Recordings, Inc., 2026 WL 922501, at *1 (U.S. April 6, 2026)). Specifically, the Court directed the Fifth Circuit to reconsider its prior decision upholding a contributory infringement liability verdict against ISP Grande Communications Networks.

The Fifth Circuit concluded that a Texas federal district court had correctly upheld a jury verdict finding Grande Communications Networks liable for the willful contributory copyright infringement of over 1,400 songs after being made aware that its service subscribers were peer-sharing copyrighted songs. At the trial court level, the record label plaintiffs claimed Grande Communications Networks was liable for secondary copyright infringement for failing to ban its subscribers who the labels had accused of illegally sharing copyrighted material through the software BitTorrent. On the issue of contributory copyright infringement, the three-judge panel of the Fifth Circuit determined that the district court applied the correct legal standard by determining that Grande Communications Networks could be secondarily liable for copyright infringement committed by its subscribers “if it induced, caused, or materially contributed to its subscribers’ infringing activity.”

Grande Communications Networks argued before the district court that material contribution is not a valid basis for contributory copyright liability because “the Supreme Court has recognized two — and only two — types of contributory copyright infringement: (1) where the defendant distribute[s] a product or service without any commercially significant, non-infringing use, and (2) where there is clear expression or other affirmative steps taken to foster infringement by the defendant.” The district court instructed the jury that Grande Communications Networks was contributorily liable if it induced, caused, or materially contributed to the infringing activity, and that this standard was met if Grande Communications Networks “could have taken basic measures to prevent further damages to copyrighted works, yet intentionally continued to provide access to infringing sound recordings.” In its opinion, the Fifth Circuit panel — relying in significant part on the Fourt Circuit’s decision that was reversed in the Cox Communications case — found that there was “no basis to reverse the jury’s verdict that Grande is liable for contributory infringement” because “(1) intentionally providing material contribution to infringement is a valid basis for contributory liability; (2) an ISP’s continued provision of internet services to known infringing subscribers, without taking simple measures to prevent infringement, constitutes material contribution; and (3) the evidence at trial was sufficient to show that Grande engaged in precisely that conduct[.]”

Recall that in the Supreme Court’s March 25 decision Cox Communications v. Sony Music Entertainment, which was the subject of a previous blog post, the Court held that Cox Communications, also an internet service provider, could only be found to be contributorily liable for copyright infringement if it affirmatively induced infringement by a subscriber or offered a service designed primarily for infringing uses. In Cox Communications, the Court held that an ISP cannot be held contributorily liable for copyright infringement merely because it continued providing internet service to its subscribers who had been the subject of infringement complaints, and that contributory liability requires proof that the provider actually intended its service to be used for infringement — shown either through active inducement or by offering a service with no substantial non-infringing uses. The holding in Cox Communications appears to vindicate Grande Communications Networks’ position before the trial court, as well as setting a significantly higher bar for contributory copyright infringement than the “material contribution” standard applied by the district court and Fifth Circuit.

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Cox Communications v. Sony Music Entertainment | Decided March 25, 2026

On March 25, 2026, the U.S. Supreme Court delivered a landmark decision that will reshape not only how copyright law applies to the internet for years to come, but could impact other areas of intellectual property law as well. In Cox Communications, Inc. v. Sony Music Entertainment, the Court held that internet service providers cannot be held indirectly liable for their customers’ copyright infringement simply because the ISPs knew the infringement was happening but failed to prevent it. The decision reversed and remanded a billion-dollar judgment against ISP Cox Communications and drew a more clearly defined line around secondary copyright liability.

How We Got Here

In 2018, Sony Music Entertainment and dozens of other major record labels sued Cox Communications — with six million subscribers, one of the largest broadband providers in the United States — in federal district court in Virginia. The theory of liability? Cox Communications had received thousands of infringement notices between 2013 and 2014 identifying specific subscriber accounts that had been repeatedly caught pirating the plaintiffs’ copyrighted music. Cox Communications terminated only 32 customers for copyright infringement during that period — while simultaneously terminating hundreds of thousands of subscribers for nonpayment. The labels argued that Cox Communications’ decision to keep known infringers on its network was motivated by a desire to protect subscription revenue, a combination that made Cox Communications legally responsible for their customers’ copyright-infringing misconduct.

A jury agreed with the plaintiffs, finding Cox Communications liable under two separate legal theories — contributory infringement and vicarious infringement —awarding the music labels $1 billion in statutory damages for willful copyright infringement.

On appeal, the Fourth Circuit split the baby: It threw out the vicarious liability finding but upheld the contributory infringement verdict, reasoning that knowingly supplying a service to someone you believe will use it to infringe copyrights is “exactly the sort of culpable conduct sufficient for contributory infringement.” The Fourth Circuit ordered a new trial on damages, and Cox Communications appealed. The Supreme Court granted cert in June of 2025 on the contributory infringement question.

What the Court Decided

Writing for seven justices, Justice Clarence Thomas reversed the Fourth Circuit in Cox Communications’ favor. The opinion’s core holding is seemingly and certainly consequential: “Under our precedents, a company is not liable as a copyright infringer for merely providing a service to the general public with knowledge that it will be used by some to infringe copyrights.”

Instead, to prove contributory infringement, a copyright owner must show that the provider actually intended for its service to be used for infringement — and the required intent can be established in only two ways. Either the provider affirmatively induced the infringement, or it offered a service specifically designed or tailored to facilitate the infringing activity.

The Court held that Cox Communications did neither. The Court acknowledged that Cox Communications knew infringement was occurring on its network. But general internet access, the Court noted, has numerous non-infringing, lawful uses — it is not a service designed for piracy the way that, say, certain peer-to-peer file-sharing platforms had been (more about Grokster later). And Cox Communications did not encourage its customers to download music illegally; its terms of service explicitly prohibited it. Failing to terminate known infringing accounts, the Court concluded, is not the same as intending infringement.

The opinion puts it plainly: The Fourt Circuit’s reasoning conflicted with the “Court’s repeated admonition that contributory liability cannot rest only on a provider’s knowledge of infringement and insufficient action to prevent it.”

The Court also addressed the labels’ argument that the Digital Millennium Copyright Act (DMCA) — which creates a “safe harbor” for ISPs that take steps to address repeat infringers — implies that providers who fail to meet those safe harbor requirements must therefore be liable. The Court rejected this reading, noting that the DMCA expressly states that failing to qualify for a safe harbor “shall not bear adversely upon” an infringement defense. In other words, missing the safe harbor does not automatically equal liability.

Why This Decision Is Bigger Than Music

The music industry is continuing the fight; the Recording Industry Association of America called the ruling a disappointment and urged policymakers to examine its impact. The labels argued throughout the case that Cox Communications knowingly facilitated “theft on a massive scale,” and there was trial evidence suggesting that some Cox Communications employees were reluctant to terminate infringing accounts precisely because they did not want to lose subscription revenue. However, none of that, in the Supreme Court’s view, is enough.

But the decision’s reach extends well beyond streaming services and record labels. The case attracted amicus briefs from a wide range of civil liberties and First Amendment organizations. The Fourth Circuit’s reasoning, if left standing, would have threatened to hold any general-purpose internet platform liable when users commit infringement, so long as the platform knew about it and did not act decisively enough. That standard would have hung over every social media platform, cloud storage provider, and AI company that hosts or processes user-generated content.

X’s amicus brief to the Court put it thusly: The lower court’s rule could “wreak havoc” on the technology industry and specifically on AI, noting that if content creators can sue AI platforms whenever users employ their tools to violate copyright, tech companies would have no choice but to drastically curtail their services. Given the wave of copyright litigation currently targeting AI companies, the Court’s decision to cabin contributory liability to intentional actors arrives at a particularly consequential moment.

Cox’s Potential Impact Beyond Copyright Law – Patent Law Practitioners, Pay Attention

Central to Justice Thomas’ opinion is something that patent litigators cannot/should not ignore: a deliberate, explicit alignment of contributory copyright liability with its counterparts in patent law. The Court did not stumble into patent territory by accident. It went there on purpose, and in doing so it may have set the stage for a tightening of indirect patent infringement doctrine.

To understand why Cox matters for patent law, you need to understand where copyright’s secondary liability doctrine came from in the first place: patent law. Copyright’s contributory infringement framework has no explicit statutory basis. Unlike the Patent Act — which codifies both induced infringement under 35 U.S.C. § 271(b) and contributory patent infringement under 35 U.S.C. § 271(c) — the Copyright Act says nothing about liability for facilitating another person’s copyright infringement. Courts (including the Supreme Court) have filled that gap by borrowing from patent law, citing what the Court in Cox called the “historic kinship” between the two fields of IP law.

The Court acknowledged in Cox that this kinship runs through a trio of the Court’s landmark secondary liability decisions: Kalem Co. v. Harper Brothers (1911), Sony Corp. of America v. Universal City Studios (1984), and Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd. (2005). In each of those cases, the Court looked to patent law’s standards for indirect infringement — particularly the staple article of commerce doctrine and the inducement rule — when deciding how far copyright’s secondary liability should reach. Cox is the latest branch in the copyright-patent indirect liability family tree.

1. What Cox Actually Holds — and Why It Tracks Patent Law So Closely

Justice Thomas’ majority opinion makes the patent law connection explicit and structural. After announcing the two-pathway framework for contributory copyright liability — inducement or a service tailored to infringement — the opinion states flatly: “These two forms of contributory infringement track patent law.”

The majority then walks through the patent parallels in detail. Under § 271(b), a party is liable for actively inducing patent infringement only when it expresses “an affirmative intent that the product be used to infringe.” Under § 271(c), contributory patent infringement requires that the defendant sell a product “knowing the same to be especially made or especially adapted for use in an infringement of such patent” — but the Court has long held that mere knowledge is not enough; instead, the product must lack substantial non-infringing uses. Both of those standards map directly onto the two pathways for indirect copyright infringement the Court adopted in Cox.

The opinion then drives the point home with a passage that will surely become a staple in indirect patent infringement defense briefing: “This Court has repeatedly made clear that mere knowledge that a service will be used to infringe is insufficient to establish the required intent to infringe.” While the statement was made in a copyright infringement case, because it was made by deliberate reference to patent law’s borrowed structure, how can it not also be read as an endorsement of the same principle across both fields?

2. Broader Implications for Patent Indirect Infringement Doctrine

The timing of the Cox decision is significant. Just five weeks after Cox was decided, the Supreme Court is scheduled to hear oral arguments on April 29 in Hikma Pharmaceuticals USA, Inc. v. Amarin Pharma, Inc., a pharmaceutical patent case squarely about the standard for induced infringement under § 271(b).

But the effects of Cox likely will not stop at the pharmaceutical industry.

The staple article doctrine found in § 271(c) already protects sellers of components that have substantial non-infringing uses from contributory patent infringement. Cox reinforces the same logic in the copyright context and — given the explicit cross-referencing — could be cited to cabin future expansions of either doctrine. Defendants in technology patent cases who supply general-purpose components will seemingly have a cleaner road to arguing that their products are not “especially adapted” for infringing use.

Just as the Court held in Cox that an ISP providing general internet access does not contribute to infringement simply because some users infringe, software platform companies facing patent claims over end-user conduct will argue that general-purpose platforms — those capable of substantial non-infringing uses — should be evaluated by the same demanding intent standard. The logic is seemingly the same whether the underlying IP right is copyright or patent.

The Federal Circuit Court of Appeals (which has exclusive jurisdiction over cases arising under patent law) has at times allowed induced patent infringement cases to proceed on less robust allegations of specific intent, particularly in the Hatch-Waxman context. Cox at least would seem to foreclose the proposition that knowledge of infringement plus inaction equals inducement liability, requiring instead positive conduct that promotes infringement. For instance, the Court identifies in Cox the kind of conduct that would seemingly be necessary to support a finding of inducement — “evidence of express promotion, marketing, and intent to promote” infringement — which might mitigate against findings of inducement in the patent context on a more passive standard.

Cox Communications, Inc. v. Sony Music Entertainment, No. 24-171, 607 U.S. ___ (2026). Decided March 25, 2026. Opinion by Justice Clarence Thomas, joined by Chief Justice John Roberts and Justices Samuel Alito, Elena Kagan, Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett. Justice Sonia Sotomayor concurred in the judgment, joined by Justice Ketanji Brown Jackso

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Elon Musk’s year of controversy continues as startup Operation Bluebird attempts to take flight with its rival social media platform — “twitter.new” — by asking the U.S. Patent and Trademark Office (USPTO) to find that Musk’s X Corp. has abandoned its “Twitter” and “tweet” trademarks. X Corp. responded to this petition on December 16 by asking the District Court of Delaware to find that Operation Bluebird is actively infringing on X Corp.’s trademarks by publicly positioning itself to take over the world-famous branding. While Musk publicly remarked in 2023 that X would “bid adieu to the Twitter brand and, gradually, all the birds,” the USPTO and the U.S. District Court for the District of Delaware will soon be tasked with determining whether the marks are deemed “abandoned.”

Key Elements of Trademark Abandonment: Non-Use and Intent Not to Resume Use

The Lanham Act provides that a mark is deemed abandoned “[w]hen its use has been discontinued with intent not to resume use.” In practical terms, a party claiming abandonment must establish two elements: (1) the mark’s non-use and (2) intent not to resume use.

Courts may infer intent to use from the circumstances. Importantly, any “use” must constitute a bona fide use in commerce — that is, use made to identify the source of goods or services and not merely to reserve rights in the mark. The Lanham Act further provides that three consecutive years of non-use creates a rebuttable presumption of abandonment, shifting the burden to the trademark owner to produce evidence of continued use or intent to resume use.

Beyond statutory abandonment, trademarks may also be abandoned in other ways. For example, owners risk losing marks when they become a generic identifier of goods or services, when the associated goods or services are discontinued, or when the owner neglects to police or protect its rights.

An Owner’s Rebuttal: Proving Use or Intent to Resume Use

A trademark owner’s strongest chance of surviving an abandonment claim is evidence of the mark’s current use in commerce, which may include advertising or marketing materials, website screenshots, product packaging or labels, social media promotion tied to sales, or shipping and transaction records. Even where a mark has fallen out of active commercial use, an owner may rebut abandonment by demonstrating a documented and objective intent to resume use. Such evidence can include business plans referencing the mark, product development timelines, licensing negotiations, draft marketing materials, or internal communications discussing relaunch plans.

What Happens After Abandonment?

Once a trademark is deemed abandoned, for all practical purposes, the owner loses all rights associated with the mark. Any protection tied to prior use is extinguished, and the mark generally returns to the public domain — available for adoption and registration by others. While a former owner may attempt to revive the mark, prior registrations typically provide little advantage. Abandonment is, in most cases, permanent.

Potential Abandonment of the Iconic Blue Bird

Despite X Corp.’s successful renewal of its “Twitter” trademark in 2023, Musk and the X Corp. formally dropped the Twitter branding in July of that same year. Operation Bluebird is thus poised to argue that, as of July 2026, X Corp. has presumptively abandoned the mark due to three years of non-use.

Notably, X Corp.’s renewal filing included a screenshot of a “Twitter Ads” webpage featuring both the “Twitter” word mark and the iconic blue bird logo.

Today, however, that same webpage — ads.twitter.com — appears without either mark. While a Google search still displays the hyperlink title “Advertise on X (Twitter)” and X Corp.’s new suit indicating that users still access the platform through the domain “twitter.com,” such residual references may not qualify as bona fide trademark use. X Corp. also proffered within its new suit that they still actively defend and maintain the Twitter trademarks, but those efforts still may fall short.

Given the marks’ apparent absence from active branding, the USPTO and Delaware District Court will need to determine whether X Corp. can demonstrate a concrete and ongoing intent to resume use of the Twitter marks. Perhaps revival plans exist behind the scenes or perhaps the blue bird has truly flown the coop.

If X Corp. fails to muster up the evidence and the marks are deemed abandoned, maybe a new social media tycoon may well be born from Twitter’s discarded feathers. Until then, we can perch by our windowsills and watch how it all unfolds.

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If you’ve spent time in the trenches of a tech deal (as a buyer, a seller, or an advisor), you know that intellectual property (IP) representations and warranties can be a minefield. They look simple on the surface: The seller represents that they own the IP, have the right to use it, and that no one else is infringing or claiming rights. Easy enough, right?

But in the fast-moving world of technology, those IP clauses can carry big risks. A single poorly defined representation can turn into a post-closing headache or even a full-blown dispute. Let’s break down what IP representations and warranties really mean in tech deals, the common pitfalls to watch for, and how to keep your deal from turning into a last-minute scramble.

The Risk with “Standard” IP Representations

Most deal templates start with a “standard” set of IP representations. They usually include statements like:

  • The company owns or has sufficient rights to all IP used in its business.
  • No third party is infringing the company’s IP.
  • The company’s products don’t infringe anyone else’s IP.

These sound harmless (maybe even necessary), but the problem is that in tech deals, standard often means overbroad. A typical rep might say something like, “The company owns or has valid rights to all IP necessary to operate the business.” That might be fine if you’re selling a single product that was built entirely in house. But if your business touches multiple product lines, uses open-source components, relies on third-party APIs, or licenses content from vendors, that clause can sweep in assets outside the scope of the deal.

For example: Imagine a company selling its e-commerce platform division. The IP representations might inadvertently cover the company’s internal HR software, its data analytics engine, or even shared brand assets that aren’t part of the sale. Suddenly, a representation intended to cover “deal assets” has ballooned to include unrelated tech.

When reviewing IP representations, pay attention to scope.

  • Define what exactly is included in “intellectual property” or “IP” and include a schedule listing all intellectual property included in the deal.
  • Limit representations to “IP owned or used in connection with the business” being sold — not the entire company.
  • Be clear about what “the business” actually means in the definitions section.
  • Confirm that shared assets, like code libraries or trademarks used across divisions, are carved out or properly licensed post-close.

If you’re the seller, you want to make sure you’re not inadvertently representing ownership of IP that isn’t being sold. If you’re the buyer, you want comfort that the assets you’re acquiring are actually covered by the representations and warranties, but not so broad that you inherit unrelated risk.

Carveouts and Limitations: “Material,” “Knowledge” and the Art of the Qualifier

Once the basic scope is in place, the next question is how robust should the representations be? That’s where carveouts and qualifiers come in. Without qualifiers, IP representations can be dangerously absolute.

For example: “No third party has claimed that the company’s products infringe any IP rights.” That sounds good, but what if some random patent troll sent a demand letter two years ago that everyone ignored? Without a qualifier, that’s technically a breach, even if the claim was baseless.

However, the scope of the rep can be reined in by adding: “To the company’s knowledge, no third party has claimed in any material respect that the company’s products infringe any IP rights.” Now you’ve narrowed it to actual or constructive knowledge of key personnel and filtered out minor or immaterial issues.

Here are a few qualifiers that you’ll see in almost every tech deal:

  • “Material” or “material adverse effect”: limits representations to issues that would actually matter to the business.
  • “Knowledge”: restricts the rep to what management actually knows (or should reasonably know).
  • “Except as set forth on Schedule [X]”: lets the seller disclose known exceptions, like ongoing IP disputes or open-source dependencies.

Buyers generally want representations to be as tight as possible, while sellers push for these qualifiers to reduce risk. Sometimes, the appropriate qualifiers can depend on the size of the deal. The sweet spot is somewhere in between: meaningful protection for the buyer without setting traps for the seller.

Pro tip: If you’re the seller, resist the temptation to gloss over open-source use, pending IP claims, or third-party licenses. Disclose them clearly on the schedules. Buyers appreciate transparency, and properly disclosed issues usually won’t count as a breach later.

Post-Closing IP Issues: The Work Doesn’t Stop at Signing

Even with the cleanest IP representations, your work isn’t done when the ink dries. In tech deals, post-closing IP housekeeping is critical and often where problems surface.

1. Updating and Assigning IP Agreements

    After closing, someone has to make sure all the underlying IP agreements are properly updated or assigned. That includes:

    • Updating license agreements to reflect the new ownership structure.
    • Reassigning employee inventions and contractor IP to the right entity.
    • Recording patent, trademark, and copyright assignments with the U.S. Patent & Trademark Office or the U.S. Copyright Office.
    • Updating domain registrations, source code repositories, and cloud accounts with the new ownership and contact information.

    If these details slip through the cracks, the buyer could end up using assets they technically don’t own, which can create big problems down the line, especially if you need to enforce IP rights or bring in investors.

    2. Revising Licenses and Commercial Agreements

    Tech businesses rely heavily on licensed-in technology — APIs, SDKs, databases, or software libraries. Post-closing, those licenses often need to be revised or re-papered to reflect the new structure. You might find that a license was “non-assignable,” meaning it doesn’t automatically transfer with the sale. In that case, you’ll need a new agreement or consent. Skipping this step could mean you’re technically in breach of a key vendor contract.

    3. Monitoring for Indemnity Triggers

    Most purchase agreements include IP indemnities — promises that if someone sues claiming infringement, the seller will step in and cover it. Post-closing, buyers should keep an eye out for any IP claims or demand letters that might trigger these provisions. The key is to act quickly: Most indemnity clauses require prompt notice to the seller, and missing that deadline can waive your rights. Sellers, on the other hand, should keep tabs on what’s happening with the IP they sold. If the buyer starts using the technology in new ways, say integrating it into a new platform or launching in new markets, those uses might not be covered by the original indemnity.

    Wrapping It Up: Practical Tips for Tech Deal IP Representations

    When it comes to IP representations and warranties, clarity beats coverage every time. Overbroad, absolute language might feel protective, but in practice it just creates uncertainty and post-closing risk. Here are a few practical takeaways:

    1. Define the “business” precisely. Make sure IP representations only apply to assets used in the business being sold.
    2. Use qualifiers wisely. “Material” and “knowledge” can save both sides headaches, but overuse can make representations meaningless.
    3. Schedule everything. If there’s an open-source dependency, a pending dispute, or a third-party license, put it on the disclosure schedule.
    4. Follow through post-close. Update assignments, revise licenses, and monitor for indemnity issues. Deals don’t end at signing; they just move into maintenance mode.
    5. Collaborate between deal teams and engineers. Legal teams often draft representations in isolation, but engineers know where the IP skeletons are buried. A quick internal audit before signing can prevent surprises later.

    At the end of the day, IP representations and warranties aren’t just legal boilerplate — they’re the connective tissue of a tech deal. They ensure the buyer actually gets the technology they’re paying for, and that the seller isn’t on the hook for risks they didn’t intend to assume. Handled thoughtfully, these clauses protect both sides and keep the focus where it belongs: growing the technology, rather than litigating over it.

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    The Federal Circuit’s recent decision in Canatex Completion Solutions, Inc. v. Wellmatics, LLC is a good example of the courts’ ability to correct obvious errors in patent claims through claim construction. Indeed, the panel’s reversal of the lower court’s ruling demonstrates that judicial correction of evident errors in patent claims — even when the error appears multiple times throughout the patent document — is available to patentees when only one reasonable correction exists.

    The Technology and the Typographical Trap

    The technology at issue in U.S. Patent No. 10,794,122 centers around a releasable connection device used in oil and gas well operations. More specifically, the two-part downhole tool allows operators to disconnect components when the lower part of the tool becomes stuck in the wellbore, thus enabling retrieval of the upper part while leaving the stuck component for later recovery. The claimed connection device includes a “first part” (further downhole in the wellbore) with an external connection profile and a “second part” (closer to the surface) containing a releasable engagement profile that internally engages the first part’s connection profile. Claim 1 of the ʼ122 patent reads as follows:

    1. A releasable connection for a downhole tool string, comprising

    a first part comprising an external connection profile; and

    a second part comprising:

    an outer housing;

    a releasable engagement profile which internally engages the connection profile of the first part and which is configured to expand radially to release the connection profile of the first part;

    a locking piston positioned within an internal cavity of the second part, the locking piston configured to move axially along the second part between a locking position that directly constrains the releasable engagement profile into engagement with the connection profile of the first part and a release position that permits the releasable engagement profile to expand radially to release the connection profile of the second part;

    an expansion chamber in fluid communication with the locking piston; and

    a source of fluid pressure in communication with the expansion chamber, wherein, upon activation, the source of fluid pressure is configured to apply fluid pressure to move the locking piston from the locking position toward the release position.

    The remaining two independent claims also contain the italicized language in claim 1 above that dictates how a locking piston moves between positions to control the connection between the first and second part. In the release position, the piston “permits the releasable engagement profile to expand radially to release the connection profile of the second part.” The problem is that the claims never previously mentioned any “connection profile of the second part” — only a “connection profile of the first part.”

    The District Court’s Indefiniteness Determination

    Boring down on this antecedent basis problem during claim construction, defendants Wellmatics and GR Energy Services argued the claims were invalid for indefiniteness due to “the connection profile of the second part” lacking any prior reference in the claim. Canatex acknowledged the error but contended it had a simple, obvious correction: changing “second” to “first” so the phrase would refer to “the connection profile of the first part” — the only connection profile actually described in the claims.

    The District Court for the Southern District of Texas disagreed and held all asserted claims of the ʼ122 patent invalid for indefiniteness. The court reasoned that the error was not evident from the patent’s face because it appeared pervasively throughout the ʼ122 patent — in all three independent claims, in the abstract, and twice in the written description. This pervasiveness suggested “an intentional drafting choice and not an error at all.” In fact, the court speculated that the drafter may have intended to provide an antecedent basis for a connection profile of the second part, making the error the use of “the” instead of “a.” The court also took issue with Canatex’s failure to seek correction from the USPTO under 35 U.S.C. § 255, which suggested the error was “neither minor nor evident.”

    The Federal Circuit’s Reversal: A Rigorous Standard Met

    Applying the demanding standard for judicial correction of claim errors, the appellate panel reversed the district court. The opinion articulates several necessary requirements for judicial correction via claim construction:

    1. The error must be evident from the patent’s face — obvious from the perspective of one skilled in the art;
    2. The correction cannot be subject to reasonable debate based on the claim language, specification, and prosecution history; and
    3. The correction must involve only obvious minor typographical or clerical errors.

    The demanding standard for judicial correction serves multiple purposes. First, it respects the public notice function of patents by ensuring corrections are limited to situations where relevant readers would constructively understand the intended meaning. Second, it distinguishes judicial correction from USPTO correction under Section 255, which covers broader classes of errors and operates only prospectively because it can result in claim scope different from what readers would have understood. The panel’s opinion emphasized that while the standard is exacting, it was clearly satisfied here.

    Why the Error Was Evident

    The Federal Circuit found the error obvious on multiple grounds. Starting with the claim language itself, the panel explained that a skilled artisan would immediately recognize that the phrase “the connection profile of the second part” requires but lacks an antecedent. No connection profile of the second part appears anywhere earlier in the claim. In addition, the reference to the second part in this context was not deemed to make any functional sense. The claim structure requires the second part’s “releasable engagement profile” to engage with the first part’s connection profile by embracing it internally. Upon activation, the locking piston moves to a release position that permits the releasable engagement profile to expand radially. According to the appellate panel, the idea that this expansion would release an unidentified component of the second part itself — rather than the first part’s connection profile that it embraces — is “jarringly anomalous.”

    Turning to the specification of the ʼ122 patent, the appellate panel found that it confirmed the error’s obviousness. In particular, the figures lack a “connection profile” in the second part. In addition, a portion of the written description states that the locking piston “locks releasable engagement profile 26 into engagement with connection profile 16 of the first part, and a release position… that permits releasable engagement profile 26 to release connection profile 16 of second part 14.” This portion both correctly identifies connection profile 16 as belonging to the first part and incorrectly attributes it to the second part — making the error undeniable to a relevant reader.

    Why Only One Reasonable Correction Exists

    The panel found that changing “second” to “first” in the phrase at issue was the only reasonable correction because the claim language and specification both show that what gets released through radial expansion is the connection profile of the first part — the very component the releasable engagement profile embraces in the connected state. In this regard, the Federal Circuit rejected the proposed alternative corrections from defendants as unreasonable. For example, one proposed correction from the defendants echoed the district court’s view that the device contains an unnamed “connection profile” on the second part, so the claim could be corrected by changing “the” to “a” or adding antecedent language. In making this proposal, defendants pointed to “tubing connector 22” as a possible connection profile of the second part. The panel found this proposal to be illogical given that tubing connector 22 sits at the far proximal end of the second part and serves to connect the device to the wireline extending to the surface, and not to connect or disconnect the device’s two parts. The panel likewise dismissed defendants’ expert’s opinion that the varying language across instances (sometimes adding figure reference numbers) suggested deliberate drafting rather than copy-paste error, noting the variations merely added figure labels without changing component understanding. Defendants remaining proposed alternatives were deemed by the panel to not be reasonably debatable alternatives to the simple, logical change of one word because each would substantially alter claim scope and meaning beyond what the claims and specification clearly describe.

    Key Takeaways

    The case now returns to the district court for further proceedings with the corrected claim construction. With “second” properly read as “first,” the parties can now address infringement and any remaining validity issues on the merits. Regardless of how it turns out, this decision reinforces some key takeaways for navigating claim construction and adjacent validity challenges:

    Correction Must Be Textually Simple

    The correction here changed a single word without altering claim structure or adding new limitations. More complex corrections that significantly revise claim language or add substantial new text will not qualify as “minor” corrections even if otherwise appropriate.

    Pervasive Errors Do Not Preclude Correction

    The district court’s conclusion that repeated errors suggest intentional drafting was rejected by the Federal Circuit. While obviously not optimal, consistent copy-paste errors throughout a patent document do not transform an obvious mistake into deliberate language choice. A court should focus on whether the error and its correction are evident to skilled artisans, not on how many times the error appears.

    Functional Context Reveals Errors

    The Federal Circuit emphasized how the claim’s functional description made the error obvious. When claim language describing mechanical interactions makes no physical or logical sense as written, a simple correction to restore coherent meaning consistent with the specification might be the answer instead of invalidation under 35 U.S.C. § 112.

    Specification Passages Can Confirm Errors

    Self-contradicting specification language — such as the passage correctly identifying a component as belonging to the first part while later attributing it to the second part — provides strong evidence that similar claim language contains the same error.

    Failure to Seek USPTO Correction Is Not Dispositive

    The district court gave weight to Canatex’s failure to pursue Section 255 correction before litigation. The Federal Circuit’s reversal indicates this factor should not preclude judicial correction when the demanding standard is otherwise met. Indeed, Canatex did seek USPTO correction during the appeal, which the PTO denied — but this did not prevent the Federal Circuit from making the correction judicially.

    Prosecution History Matters But Was Absent Here

    The court confirmed that prosecution history can preclude correction if it suggests a different claim interpretation. However, neither party identified anything in the prosecution suggesting the disputed language should be read other than with the obvious correction. This distinguishes the case from Chef America, Inc. v. Lamb-Weston, Inc. where prosecution history confirmed the patentee’s claim language was problematic.

    In short, Canatex demonstrates that the claim construction process remains flexible enough to correct obvious mistakes when doing so gives effect to the meaning skilled artisans would clearly understand from the patent as a whole. Accused infringers considering indefiniteness arguments should carefully evaluate whether claimed errors are genuinely ambiguous or merely typographical before getting too comfortable relying on this type of invalidity challenge. More promising indefiniteness challenges will involve claim language where multiple reasonable interpretations exist or where the specification provides no clear resolution.

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    In a pair of recently issued companion decisions, the Federal Circuit awarded Causam Enterprises, Inc. a victory on patent ownership (Causam v. ITC (ITC appeal)) only to pull the rug out from under the company by declaring the very patent claims at issue unpatentable (Causam v. ecobee (IPR appeal)). Unfortunately for Causam, this is a shining example of winning the battle but losing the war.

    The saga centers on U.S. Patent No. 10,394,268, which relates to demand response functionality for electric power grids designed to help utilities balance supply and demand. Causam filed a complaint with the International Trade Commission alleging that respondents Resideo Smart Homes Technology, its domestic affiliate Ademco, Inc., and other respondents imported smart thermostats that infringed the ʼ268 patent. At the same time, ecobee Technologies, which also had been named as a respondent in the ITC complaint, petitioned for inter partes review of the patent claims before the Patent Trial and Appeal Board (PTAB) (IPR2022-01339). The two proceedings wound their way through the system in parallel, ultimately landing before the Federal Circuit on the same day for oral argument.

    Causam has asserted the patent against a range of smart thermostat and energy management companies, including ecobee Technologies ULC and Resideo Smart Homes Technology (Tianjin).

    Round One: The ʼ268 Patent Ownership Drama

    In the ITC proceeding, the respondents challenged whether Causam even owned the ʼ268 patent — a threshold question intended to defeat Causam’s standing to even bring the ITC case. The ownership dispute turned on a series of agreements involving inventor Joseph Forbes. In 2007, Forbes assigned the ancestor application (the ʼ909 application) to America Connect, which later became Consert. That assignment covered “all divisions, reissues, continuations and extensions thereof” but conspicuously omitted continuation-in-part applications.  

    So, here is where it gets interesting. The ʼ268 patent claimed priority to the ʼ909 application through a continuation-in-part — the ʼ761 application, which was filed in 2012. A 2013 settlement between Forbes and Consert listed the ʼ761 application as an “Excluded Patent.” Forbes then assigned the ʼ268 patent to Causam in 2014.

    Despite the lack of any reference to continuation-in-part applications in the 2007 assignment to Consert, the administrative law judge (ALJ) ruled that the assignment to Consert from Forbes covered “all progeny” and, thus, Causam could not and did not own the ʼ268 patent.  The ALJ also found that accused smart thermostats did not infringe the asserted claims of the ʼ268 patent. The full commission adopted the ALJ’s infringement finding, but punted on the ownership issue.

    On appeal, the Federal Circuit addressed whether Causam had Article III standing to challenge the commission’s decision — which required determining if Causam actually owned the patent. The court held that at this stage (after a full evidentiary record), Causam needed to provide evidence of ownership, not just assert it. Citing its tandem decision in the IPR appeal, the appellate panel explained that the burden is “the same as that of a plaintiff moving for summary judgment in the district court.”

    The panel then dove right in to contract interpretation. Despite intervenors arguing that “continuations” in the 2007 assignment should be read to include continuations-in-part, the Federal Circuit explained that continuations and continuations-in-part are “widely understood to be different” and have been treated separately in the Manual of Patent Examining Procedure since 1948. Critically, a continuation may not add new matter to the parent application, while a continuation-in-part does include new matter. Indeed, an inventor “might well wish to assign away continuations of an invention and keep the rights to continuations-in-part (and the included new matter).”

    The panel further opined that reading “continuations” to include continuations-in-part would amount to “insert[ing] words into the contract that the parties never agreed to.” On this basis, the court concluded that the 2007 assignment unambiguously excluded the ʼ761 application, so Forbes had good title when he assigned the ʼ268 patent to Causam in 2014. Victory for Causam, right? Well, not so fast.

    Round Two: The IPR Appeal Delivered the Knock-Out Punch

    While Causam won on the ownership issue, the holding in the companion IPRappeal mooted the noninfringement issue in the ITC appeal. In this aspect, the panel declined to address Causam’s challenge to the commission’s noninfringement determination in the ITC appeal based on its affirmation of the PTAB’s holding that all challenged claims of the ʼ268 patent — including claim 1 (the only claim at issue in the ITC appeal) — were unpatentable as obvious in the IPR appeal. Claim 1 reads as follows:

    1. A method for managing an electric power flow within an electric power grid, comprising:

    a client device receiving a power control message from a load management server, the power control message indicating at least one of an amount of electric power to be reduced and an identification of at least one controllable device to be instructed to disable the electric power flow to at least one associated power consuming device;

    the client device issuing a power management command to the at least one controllable device, the power management command causing the at least one controllable device to disable the electric power flow to the at least one associated power consuming device to provide a reduction in consumed power; and

    generating measurement and verification data corresponding to the reduction in consumed power.  

    The italicized claim limitation was front and center in the IPR appeal. During the IPR, Causam argued this required generating data during the demand response event. But, the PTAB disagreed, construing the limitation to encompass both actual measurements during the event and estimates based on device power usage measured before the event. 

    The Federal Circuit sided with the PTAB explaining that the claim language itself imposed no temporal restriction and that adopting Causam’s narrow construction would exclude embodiments disclosed in the specification. For example, one embodiment described a system that determines “the amount of steady-state power each device consumes when turned on” and uses that known consumption data when deciding which loads to turn off during high-demand periods.  Those “known” power-consumption loads are estimates obtained before any demand response event occurs — directly contradicting Causam’s proposed limitation. Another embodiment described accessing a database after a power savings event ends to find “the actual amount (or average amount) of power that would have been used” during the event. With the panel’s finding that claim 1 of the ʼ268 patent had been properly construed by the PTAB, Causam’s obviousness challenge collapsed and the PTAB’s unpatentability determination stood.

    Because Section 337 — the basis for the ITC action — requires infringement of a “valid and enforceable” patent, Causam had no right to an exclusion order. The panel thus proceeded to dismiss the ITC appeal as moot, leaving Causam with nothing but an empty victory on the ownership question.

    The Takeaways

    Parallel proceedings can create strategic nightmares. Causam fought hard to establish ownership in the ITC case, only to watch the patent claims evaporate in the IPR. The company ended up with clear title to an unpatentable patent — a trophy nobody wants. However, these companion appeals at least offer several drafting lessons:

    • Be careful what you disclose in your specification. Causam’s broad embodiments — using estimates and measurements taken before or after demand response events — undermined its attempt to narrow the claims during litigation. The Federal Circuit will not let you exclude what you have already clearly described as within the scope of the invention without something more in the prosecution history.
    • When preparing assignment agreements, be specific. The distinction between continuations and continuations-in-part matters, and courts will not read one term to include the other. If you want comprehensive coverage, say so explicitly. 
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    The Federal Circuit’s recent decision in Apex Bank v. CC Serve Corp. serves as a pointed reminder to the Trademark Trial and Appeal Board (TTAB) that it must maintain consistency across its DuPont factor analysis. While the appellate panel affirmed the TTAB’s finding that the parties’ services were highly similar, it vacated and remanded the TTAB’s analysis of two critical factors after finding the board applied inconsistent standards for determining what constitutes “similar” services.

    Background: A Tale of Two ASPIRE Marks

    CC Serve Corp. has owned the registered trademark ASPIRE for credit card services since 1998, with a priority date of October 1996. The company partners with banks to issue ASPIRE-branded credit cards, with CC Serve and its affiliates handling account servicing.

    Apex Bank, a Tennessee retail bank with 18 branch locations, filed intent-to-use applications in August 2019 for ASPIRE BANK word and design marks covering “banking and financing services.” Apex Bank planned to use these marks for a new internet banking venture under a different brand. Notably, Apex does not currently offer credit cards. Despite CC Serve’s letters of protest during prosecution, the examining attorney at the USPTO approved Apex Bank’s marks for publication. 

    CC Serve promptly filed an opposition in February 2020, alleging likelihood of confusion with its ASPIRE mark. 

    The Federal Circuit’s Analysis: When Similar Isn’t Similar Enough

    An opposition requires the TTAB to determine whether registration of the opposed mark should be refused on the basis that “confusion is likely because of concurrent use of the marks of an applicant and a prior user on their respective goods.” Likelihood of confusion is a question of law “based on findings of relevant underlying facts, namely findings under the [13] DuPont factors.” The TTAB is not required to consider all 13 DuPont factors; rather, it must only consider those DuPont factors that are relevant and of record. Here, the TTAB held that the sixth DuPont factor did not weigh in favor of Apex and the first and second DuPont factors weigh in favor of CC Serve. On this basis, the TTAB concluded that consumer confusion was likely and sustained the opposition under Section 2(d) of the Lanham Act.

    On appeal, Apex argued that the TTAB erred in its analysis, specifically with respect to these three factors. While the appellate panel affirmed the TTAB’s analysis of the second DuPont factor, which assesses similarity of goods and services, it was troubled by the inconsistencies in the TTAB’s approach to the remaining factors.

    Second DuPont Factor – Services Similarity: Affirmed

    The Federal Circuit found no error in the TTAB’s analysis of the second DuPont factor, which assesses similarity of goods and services. Indeed, the appellate panel found that the TTAB had carefully examined the relationship between credit card services and banking/financing services, ultimately determining they were “legally identical, in part.” The board noted that dictionary definitions of “banking” and “finance” encompass extending credit through credit card issuance, and supported this finding with third-party registrations covering both types of services.

    Sixth DuPont Factor – Third-Party Use: The Inconsistency Problem

    The sixth DuPont factor considers the number and nature of similar marks used on similar goods or services. Evidence of widespread third-party use can demonstrate that a mark is weak and entitled to only narrow protection, as consumers become more adept at distinguishing between similar marks in crowded fields.

    Here’s where the board stumbled. Apex had submitted evidence of 42 third-party marks using “Aspire” in connection with various financial services. However, the TTAB narrowed its analysis to consider only nine marks specifically related to credit card services, dismissing the broader financial services marks as “essentially irrelevant.” The appellate panel found this approach legally flawed and emphasized that, if the board determined in its analysis of the second DuPont factor that the parties’ services are highly similar — even “partially legally identical” — then the board must maintain that same scope of similarity when analyzing other DuPont factors.

    First DuPont Factor – Mark Similarity: Collateral Damage

    The Federal Circuit also vacated the TTAB’s analysis of the first DuPont factor (similarity of marks in appearance, sound, connotation, and commercial impression) because the reconsideration of third-party use evidence under the sixth factor could affect the determination of the mark’s commercial strength or weakness, which, in turn, influences the overall commercial impression analysis.

    Key Takeaways

    • Consistency Across Factors Is Non-Negotiable – While the TTAB has considerable discretion in weighing DuPont factors, that discretion must be exercised within a coherent analytical framework. Inconsistent application of similarity standards across factors may result in flawed likelihood-of-confusion analyses that cannot withstand appellate scrutiny.
    • Interconnected Analysis – The DuPont factors do not exist in isolation. Changes to the analysis for one factor can have cascading effects on others, particularly when commercial strength and overall commercial impression are involved.
    • Third-Party Use Evidence Deserves Broader Consideration – When analyzing market conditions under the sixth DuPont factor, practitioners should compile comprehensive third-party use evidence across the full spectrum of related goods and services, not just those that are most directly competitive. In crowded trademark fields, demonstrating that consumers are accustomed to distinguishing between similar marks can be crucial to avoiding likelihood-of-confusion findings.

    The Road Ahead

    While this remand doesn’t guarantee success for Apex Bank, the remand certainly gives it another chance that it did not have before the Federal Circuit took issue with the TTAB’s lack of rigorous, consistent analysis in its likelihood-of-confusion determinations. The TTAB will now need to reconsider whether CC Serve’s ASPIRE mark is entitled to broad protection or whether the crowded field of “Aspire” marks in financial services warrants a narrower scope of protection.

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    Intellectual property (IP) is one of the most important assets many technology companies will ever own. Patents are a key part of a company’s IP portfolio. Investors often view a company’s patent portfolio as a signal of innovation, defensibility, and long-term value. Yet patent strategy is rarely at the top of a founder’s to-do list in the early stages of product development.  Understandably, the focus often is on getting a product to market, finding customers, and raising capital. Seeking patent protection can fall down priority lists. But overlooking patents and other IP assets can leave a technology company exposed, sometimes fatally so, if competitors copy a product or if disclosures prevent future patent protection.

    This post outlines some of the fundamental decisions every tech company should understand, including whether to start with a provisional or non-provisional patent application, how to weigh patents against trade secrets, and the practical cost and timing considerations that shape a technology company’s IP strategy.

    Provisional vs. Non-Provisional Applications

    For technology companies, this decision often ties directly to product roadmaps and investor timelines. A provisional can align with beta releases or funding rounds, while non-provisionals may be timed to coincide with major product launches or strategic partnerships.

    An early-decision technology companies may face is whether to begin with a provisional patent application or jump directly to a non-provisional filing.

    A provisional application is often compared to planting a flag in the ground. It can be prepared relatively quickly, entails less formality, and requires far less expense. By filing a provisional application, a tech company secures a priority date, the all-important timestamp in patent law that establishes who invented something first. Provisionals allow companies to mark products as “patent pending” and give them a 12-month window to test the market, refine prototypes, or secure funding before deciding whether to invest in the full non-provisional application.

    A non-provisional application, by contrast, is the complete application that gets examined by the U.S. Patent and Trademark Office (USPTO). It must include formal claims, supporting drawings, and a thorough written description. If granted, it confers enforceable rights for up to 20 years from the filing date.  In addition, a patent’s term is measured from the earliest non-provisional filing date. That means filing a provisional can extend the ultimate life of a patent, and it defers some of the cost until non-provisional filing. This gives technology companies financial breathing room, especially during their startup phase.

    Timing is critical. Public disclosures, product launches, and even investor presentations disclosing an invention can start the one-year statutory clock to file a patent application. If a provisional or non-provisional is not filed within that year, the invention may be barred from patent protection altogether. For technology companies moving quickly, it is often better to file a lean but adequate provisional than risk losing rights entirely.

    Patent vs. Trade Secret

    Technology companies should carefully consider how customer-facing versus backend innovations are protected. For example, user interface features may be better suited for patent protection, while algorithms and data processing methods may be more valuable kept as trade secrets.

    Not every innovation should be patented. Some are better kept as trade secrets. The distinction often comes down to one question: Can your competitors reverse engineer it?

    Patents are powerful because they create a legal monopoly. For up to 20 years, no one else can make, use, or sell your invention without your permission. They allow owners to license and commercialize the patent to others. But the tradeoff is disclosure: The patent application must explain the invention in enough detail that someone skilled in the field could replicate it. Once that information is published, competitors can learn from it — even if they wait until the patent expires.

    Trade secrets work differently. Trade secret laws (e.g., the Defend Trade Secrets Act of 2016) protect confidential information that gives a company a competitive edge, so long as it remains secret. Crucially, this protection can last indefinitely. Examples include formulas, algorithms, or manufacturing methods. Coca-Cola’s recipe and Google’s search algorithm are classic trade secrets. Unlike patents, trade secret protection can last forever. But there are risks: If someone independently develops the same idea, or figures it out through reverse engineering, the protection vanishes.

    For technology companies, the decision often hinges on how the innovation reaches the market. If the product will be sold widely and its workings can be discovered, a patent may be the safer choice. If the innovation is embedded in internal processes or software code that is not publicly exposed, keeping it as a trade secret might make more sense.

    Timeline and Cost Considerations

    For technology companies, budgeting for IP protection is often weighed against software development, cloud infrastructure, and customer acquisition costs. Integrating patent filings into overall financial planning ensures that IP does not become an afterthought but a deliberate part of the growth strategy.

    Every technology company operates with limited resources, and patent strategy must be realistic about cost, especially early on. A provisional can often be prepared in a matter of days and filed for a few thousand dollars. This makes it attractive when a company is racing toward a demo day, fundraising pitch, or product launch and needs to secure rights quickly.

    A non-provisional, however, represents a much larger commitment. The initial filing may cost tens of thousands of dollars, and the prosecution process, which can stretch three to five years, involves additional attorney fees and USPTO charges. Periodic maintenance fees must be paid once the patent issues. If a company plans to seek patents internationally, the costs multiply.  Managing those expenses while still funding product development presents a challenge for early technology companies.

    Still, a thoughtful IP strategy pays dividends. Even pending applications can increase valuation during fundraising or provide leverage in partnerships. For companies considering acquisition, patents can be the crown jewels that make the deal attractive. The key is to align patent spending with business milestones — file provisionals to protect early concepts, convert to non-provisionals as funding allows, and prioritize inventions most central to the company’s competitive edge.

    Final Thoughts

    Ultimately, technology companies that view IP as an integrated part of their technology strategy, not just a legal checkbox, are best positioned to leverage patents and trade secrets for competitive advantage.

    Patents and trade secrets are tools, not ends in themselves. The best strategy depends on a company’s product, business model, and growth trajectory. File too late, and rights may be lost forever.  File too broadly or too often, and scarce startup resources may be drained with little return. The companies that succeed are the ones that treat IP as a business asset, not just a legal requirement.

    These are only some of the important issues technology companies may face when protecting their innovations, and every situation is different. Technology companies can navigate these challenges by working with legal counsel experienced in protecting IP rights in their technology. By understanding the basics and working with legal counsel to plan ahead, technology companies can protect their innovations, attract investors, commercialize their IP, and build long-term value around their ideas. In short, patents matter, and for a technology company, the right patent strategy can be just as important as the right product or the right team.

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    The Federal Circuit’s recent decision in Future Link Systems, LLC v. Realtek Semiconductor Corporation offers important guidance on what it means to be a “prevailing party” and the standards for awarding attorney fees, costs, and sanctions in patent litigation. This ruling, which vacated in part, affirmed in part, and remanded the district court’s decisions, is particularly instructive when compared to other recent Federal Circuit cases addressing exceptionality and litigation misconduct.

    Background

    Future Link Systems, LLC filed two patent infringement suits against Realtek Semiconductor Corporation in the Western District of Texas, alleging Realtek’s integrated circuit products infringed U.S. Patent Nos. 8,099,614 and 7,685,439. The litigation involved electronic circuitry technology, a complex procedural history, including motions to dismiss, requests for sanctions, and discovery disputes.

    Some of the conduct argued by Realtek to be egregious included Future Link’s agreement with third party MediaTek, Inc., where MediaTek would pay Future Link a lump sum amount if Future Link filed a lawsuit against Realtek. Notably, after Future Link voluntarily dismissed both cases, the district court converted those dismissals to dismissals with prejudice as a sanction for litigation misconduct by Future Link. However, the district court declined to find Realtek a prevailing party and, as a result, denied Realtek’s motion for attorneys’ fees under 35 U.S.C. § 285 in one case and fees and costs under 28 U.S.C. § 1927 in both cases.

    Prevailing Party Status: The Gateway to Fees and Costs

    A central issue on appeal was whether Realtek qualified as a “prevailing party” entitled to attorney fees under 35 U.S.C. § 285 and costs under Federal Rule of Civil Procedure § 54(d)(1). According to Supreme Court precedent:

    [t]he touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties.

    [and]

    [w]hen a plaintiff secures an enforceable judgment on the merits… that plaintiff is the prevailing party because he has received a judicially sanctioned change in the legal relationship of the parties.

    To be clear though, securing an enforceable judgment on the merits is not a predicate for achieving prevailing party status. Rather, Supreme Court precedent emphasizes that a party prevails when it successfully rebuffs the opposing party’s claims, regardless of whether the case is resolved on the merits or through procedural means.In this aspect, the court cited cases such as CRST Van Expedited, Inc. v. EEOC and B.E. Technology, L.L.C. v. Facebook, Inc., reinforcing that a defendant can prevail even if the dismissal is for reasons such as mootness or lack of standing. Here, Realtek’s success in converting the dismissals to “with prejudice” ensured that Future Link could not reassert the same claims. On this basis, the Federal Circuit found that the district court’s conversion of the voluntary dismissals to dismissals with prejudice (even if not intending to do so) constituted a judicially sanctioned change in the legal relationship between the parties making Realtek a prevailing party.

    While Realtek was deemed a prevailing party by the appellate panel, the Federal Circuit remanded the case for the district court to determine whether the case was “exceptional” under § 285, which is a prerequisite for awarding attorney fees. On remand, the district court will surely consider other Federal Circuit decisions, such as OneSubsea, IP v. FMC Technologies, Inc. and United Cannabis Corp. v. Pure Hemp Collective Inc., when deciding whether the case was exceptional under § 285. Federal Circuit precedent makes it clear that aggressive litigation tactics or hard-fought disputes between competitors do not, by themselves, make a case exceptional. Instead, exceptionality requires litigation misconduct or a case that “stands out” due to its substantive weakness or unreasonable conduct. Indeed, the court must find something more — such as objectively baseless claims or clear litigation misconduct — to warrant exceptionality under § 285.

    Sanctionable Conduct: Not Enough Bad Behavior Here

    The Federal Circuit also addressed Realtek’s requests for Rule 11 sanctions, which was denied by the district court. The panel found that Future Link’s pre-filing investigation met the minimum requirements for a reasonable inquiry with a reminder that “testing of an accused product is not necessarily a required part of an adequate pre-filing investigation.” Because Future Link performed a comparison of the claims against the accused products prior to filing suit, the panel held that the district court did not abuse its discretion in finding that Future Link’s infringement claims were sufficiently factually supported. Moreover, the panel explained that “[i]f a reasonably clear legal justification can be shown for the filing of the paper in question, no improper purpose can be found and sanctions are inappropriate.”

    Key Takeaways for Patent Litigants

    • Prevailing Party Status – A defendant can be a prevailing party entitled to fees and costs even if the case is dismissed with prejudice for reasons other than a merits determination.
    • Exceptionality Standard – Attorney fees under § 285 require more than just aggressive litigation; there must be clear evidence of misconduct or a case that is objectively baseless.
    • Sanctions – Rule 11 sanctions are reserved for egregious conduct, not for mere litigation losses or strategic decisions.

    The Future Link decision reinforces the Federal Circuit’s consistent approach: While courts will not hesitate to sanction true litigation misconduct, they will not penalize parties simply for vigorously defending their interests in complex patent disputes. This clarity benefits both patent owners and accused infringers by setting predictable standards for fee-shifting and sanctions in federal court.