In this edition of the Stride 2 Freedom podcast episode, we spoke with Brooke Quist, a successful and well regarded intellectual property attorney and Partner at Seed IP. Brooke has always been fascinated with “how things work” growing up in a household with a father who was a metallurgical engineer. Brooke graduated from USC with an engineering degree and then pursued law school at University of Texas. His technical background was perfect for intellectual property law. Today at Seed IP, Brooke helps businesses of all sizes protect and enforce their intellectual property. He is the go to guy to help your organization secure patents that will protect the value of the innovations your company is designing. Shark Tank, move over.
So, what exactly is a patent and what is the process of getting one? I brought Brooke on today’s episode to really get down to the details of understanding what, when and how a patent should be pursued. Brooke discusses how he supports his clients with patent evaluation, even challenging them to think through if a patent is appropriate or necessary. Brooke is a guide for his clients and gives them the trust and confidence that their IP is being well attended to.
Brooke will help you define and protect the technology innovation you are bringing into the world and make sure your patent strategy aligns with your business goals. It was great having Brooke on the show to help shine a light on the opportunities of a strong patent strategy. So what are you waiting for? Take a listen.
Who should I interview next? Please let me know by clicking here.
In this Freedom Speaker Series episode with Brooke Quist, you will learn:
- The process of obtaining a Patent.
- How to accelerate the Patent pending examination process.
- How Brooke helps clients determine if patenting is the right answer for them.
- How failing to enforce your Patent can weaken your position and claim.
We are fortunate to have Brooke available to spend time with us on this edition of Stride 2 Freedom. If there is a speaker you’d like us to interview, click here and let us know. Stay well. Stay safe. Stay healthy.
Show Notes and Links From Episode:
Episode Transcript:
Russell Benaroya: Hey, everyone. Welcome to the Stride 2 Freedom Podcast. My name is Russell Benaroya, and I’m the co-founder of Stride Services, a virtual back office, bookkeeping, and accounting firm serving hundreds of clients around the United States.
This podcast is designed to help small business owners focus on growth and innovation. In other words, focus on those things that inspired you to start your business in the first place. We call it your genius zone.
We do our job on this podcast when business owners feel like they have the trust and confidence to build the right team of partners around them that will help them grow. Thanks for joining. Let’s go.
Hi, everyone. Welcome to the Stride 2 Freedom Podcast today. I’m Russell Benaroya, and I’m particularly excited today to talk to Brooke Quist. He is a rockstar IP attorney and partner at Seed IP. Hi, Brooke.
Brooke Quist: Russell, it’s a pleasure to be here. Thank you for having me.
Russell Benaroya: So great to have you. Before you tune out because I said the word attorney… Just kidding. Don’t tune out. Today, we’re going to dig into an area of value creation that many companies—both technology firms and non-technology firms—often overlook, and that is the capturing of value associated with your intellectual property. I’m going to let the expert explain what intellectual property means, but I’m confident that this podcast will get you thinking differently about the business you’re building.
Brooke is also a super interesting guy because I don’t bring boring people onto this podcast. Not only was he a pole vaulter in college, he was also a security guard for Magic Johnson Theatres in Southern California because of his martial arts expertise.
The question you may be asking is, what does a pole-vaulting, intellectual property attorney, and martial artist bring to the table? Well, stick with us, and let’s find out. Ready to go, Brooke?
Brooke Quist: I’m ready.
Russell Benaroya: Okay, awesome. What do we mean when we talk about the term intellectual property? What does that capture?
Brooke Quist: Intellectual property is sort of an umbrella term and it can catch a few different things. The main things that people think about are patents, copyrights, trademarks, and trade secrets. There are a few other ancillary ones, but those are the main ones.
Real quickly; trade secret, that’s something that you don’t tell anybody. You keep it under lock and key. The most famous one is the Coke secret formula. Your trademark is your designation of service. Your company name, Stride, can also be a product or a service, in addition to a company. Copyright, traditionally, was like books, poems, anything written. Today, you think about much more in terms of websites or digital media, those types of things that you can protect.
Then patents is the big dog. It’s the most complicated, but also the most powerful. That, traditionally, protects inventions or innovations. It is worth noting that that’s a utility patent. There’s also something that’s called a design patent that protects the ornamental features of something. So you can have both design patents as well as utility patents.
The first thing that usually comes to mind when people hear intellectual property is patents. For the average person, what that brings into their mind is Shark Tank and hearing the Sharks say, “Hey, do you have any patents?” when they tell them about their great idea. That’s one of the most common questions I get.
Russell Benaroya: Before the sharks go and rip it off their face.
Brooke Quist: The reason they ask that question, and it’s the same question that business owners and inventors will get from financial advisors or from People who are interested in investing or purchasing their company, is they want to know, do you have a competitive advantage in the marketplace? Is there a barrier of entry for your competition that’s going to keep you able to do what you’re doing, and not have someone else come in and trample you?
There’s always going to be someone bigger, someone with more money, someone with more resources they can throw at it. So you need to have something to protect what you’ve done. Sometimes, that is going to be intellectual property. It’s not the only option, but it’s a good one. That’s why we’re trying to help people
Russell Benaroya: Is this a uniquely United States feature or do all countries have an intellectual property regulatory body?
Brooke Quist: That is a great question. For the most part, all countries have them but they’re different in every country. Patents are a country-by-country proposition. Interestingly, patents are one of the few things actually called out in the constitution. Our original constitution calls out patent law in Article I Section 8 Clause 8.
We’re actually federal patent law as opposed to most laws—state law. That also means we get the great joy of taking two bar exams—a state one and a federal one. What that means for inventors and for business owners is that when they go and have someone like me protect their invention, what they’re protecting is their invention in the United States.
If they have interests that are going to go outside, going to Europe, or Australia, or China, or South Korea, we can go into each of those countries separately, but it’s a separate proposition. We build relationships with other law firms in other countries because only an attorney in that country can actually file with that government. We build relationships and then when we have clients that want to file abroad, we call up our associates there and they do the same for their clients when they want to file here.
There’s a series of different conventions that allow you to do that. The most well-known one is called a PCT—a Patent Cooperation Treaty. Once you file in the US, and we’re going to dispense with a few other minor things that can throw off timelines, but for the most part, when you file something in the US, you’ve got one year to either file in a foreign country or file a PCT based on that country.
The PCT is like an international placeholder. It gives you another 18 months to go into the vast majority of countries around the world, I think 173, that are convention members of that. The idea is that that gives you time to figure out what your business strategy is, what companies are really worthwhile, what countries are really worthwhile to spend the money to go into because foreign patent filing is an expensive proposition.
Russell Benaroya: There are so many products that we see on the market today. When we look at the detailed disclosure on the product, it will often say patent pending and will have a long number connected to it. What does that actually mean? What is pending? Does it mean they’re in process? Can you give us a sense of that?
Brooke Quist: That’s a great question and it’s one that we get asked a lot. Patent pending means that you have actually filed a patent. As soon as you’ve filed an application, whether it’s a utility application or design application, or even a provisional application—we’ll talk about those in a few minutes—as soon as you file something with the US Patent Office, you can say and should say that you’re patent pending.
Now the patenting process—we’re going to stick with utility applications here because that’s what most people are talking about—takes several years to get through the process. On average, the patent office likes to guess that it’s about three years. Reality is sometimes it’s shorter, sometimes it’s longer. It is a period of time.
That’s why if you have a technology that is going to be really hot but only for a year, patenting is probably not the way to go. Once you get the patent, your time is going to be passed. You want to make sure that you’re targeting technology that actually is going to be worthwhile in the long term.
Now, I should note that there are techniques that you can use to accelerate the examination. In particular, there’s a technique or a procedure called Track One accelerated examination. If you pay a fee, you can basically jump the line and they will guarantee you that you’ll either get a patent or a final rejection within one year.
So if time is of the essence, there are things that you can do. I’ve had at least three different clients, in this last year, use this procedure and get patents in eight to nine months. It is definitely something that exists and can be used.
Back to your original question: when you’re patent pending, the idea is that puts other people on notice. If you are a business person with scruples and you see a technology and you say, “Hey I want to do that,” but you see patent pending, it’s going to at least give you a pause to say, “Maybe I shouldn’t do that.”
Now, as people get a little bit wiser or a little more patent savvy, they’ll know that a patent is published unless you file documents to keep it unpublished at 18 months. They may not just be satisfied with saying it’s patent pending. They may say, “I want to go take a look at what’s filed and see if it really covers well and if I really think they have a shot at getting this patent,” because even though patent pending puts people on notice, you can’t actually enforce the patent until it’s issued.
Russell Benaroya: When we talk about that, that utility patent and something in the consumer products world, there’s something that we see, there’s a visible product. How does that work in the software world? How do I know whether or not I might be infringing on somebody’s patent because I’m just trying to build this software business that I think is going to be awesome for the world?
Brooke Quist: That’s a great question. It can be difficult. It depends on the situation. It’s easy with products because they say patent pending when it’s pending, and then when issues, they should mark it so it’s actually got the patent number on it. It says “US patent number such and such”. You can look it up and see what it says.
A patent, the protection that you get is from the claims at the end of the patent. And they can come in a couple of different forms. One form is a device or a system type of claim. That’s what you’re talking about here, where you’ll see an actual product, usually. There are also methods or process patterns that will claim a series of steps or operations or actions. Those can be more difficult to tell because there’s nothing to stamp with that label on it. Sometimes, it can be on the packaging or on marketing materials or something like that, but oftentimes, it will require you to actually go in and do some searching if you’re worried about what might be patented there.
Now, from the patent owner perspective, this brings up some other issues. If you are trying to protect a piece of software that’s going to be sold, that’s going to be downloaded, delivered, given out, then that’s something that someone can really look at, reverse-engineer, take apart. It’s something that you really should consider patenting.
On the flip side, if it’s something that’s going to be completely on the back end behind a firewall, it’s SaaS, you’ve only got a couple of employees or original partners and they’re all highly trusted so no one is going to see this, you may want to think about if a trade secret is actually a better option for you. If no one is going to get access to what’s going on and it’s a real black box—you know what’s being solved but you don’t know how it’s being solved—that may be something that you can keep secret and may want to keep secret. You may decide, at the beginning, I’m going to go the trade secret route as opposed to the patent route,
Russell Benaroya: Which is faster and less expensive?
Brooke Quist: There’s no actual cost that you pay to anyone, the only cost is in taking the proper implementations. You can’t just say something is a trade secret and not do anything about it. You need to treat it like a secret.
That can come in a lot of different ways. It can come in the types of agreements that you have with your employees or other partners, it can come with the measures that you take to keep server room secured, it can take the form of what you do with any documentation that includes this information; that you keep it under lock and key. You’ll have to take steps in that regard. Those will have some associated costs, but there are no actual fees that you’re paying to a government entity.
Russell Benaroya: Got it. If I have a patent and I do not enforce it, I see other people in the market that seemingly look like they’re infringing on my patent, but I don’t have the resources, or maybe I didn’t even know and I didn’t enforce it, does that weaken my position or claim?
Brooke Quist: That’s a great question. There has actually been some changes in the law so it’s a little bit of an open question. Traditionally, there is a legal doctrine that goes outside of patents that’s called Laches. There are other types of claims that say if you wait a long period of time, that is going to weaken your ability to enforce that. You’ve put people under the impression that they are able to use this.
That is definitely true in other types of IP and trademark and copyright. That definitely does exist. In patents, you have a six-year window, going backward, where you can collect damages. If I’m the patent owner and I realized that you have been infringing my patent, I can go back six years to collect damages.
There’s a case that came out recently that said that that six-year window is what you look at, and not any Laches. This is certainly not a settled area. I know that there’s a lot of people who disagree with that. Know that you’re probably going to be limited to that six-year window, but probably you’ll be able to get damages within that six years.
Another thing to keep in mind is there are other options. If you know of someone who is infringing your patent, you shouldn’t just sit back on your hunches because you don’t have the money. There are other things you can do and you should have patent counsel to be helping you with this. You should send them a letter. If they’re not someone who’s directly competing with you, they may be a great licensee. They may be something that you can give a license to have them continue doing what they’re doing and you get an income stream for doing nothing.
I had a client several years ago that made a small product but we had some good patents for them. In their particular area of business, there were two big competitors. One of those competitors started infringing one of her patents and she didn’t have the means to go up against them.
What we did is we went and signed a license agreement with the other competitor and gave them enforcement rights. They liked nothing better than the ability to go after their big rival with a new stick that they can hit them with. That was a way that she could get an income stream, she could let someone else fight that battle, and she didn’t have to try and go up in a David versus Goliath kind of situation. So licensing, bringing in someone else to do that.
There are also some new procedures. Amazon, for example, has a new patent procedure where you can get a patent ruling if you feel that there’s someone else selling an infringing product on their site. You can report that and there’s a procedure that you can go through that will give resolution for only a few thousand dollars, instead of potentially over a million dollars if you had to take something to court.
There are also some things that are in between. You can file something called an inter partes review that will take the patent back before the Patent Office. If you think that there’s someone else who has a patent that shouldn’t have got it, you can try and attack that patent at the Patent Office. That’s on the other side. That’s if you’re not the patent owner. That’s if you’re the potential infringee. My point is just that there are many options on both sides of the equation that can come about short of actually going to court, which is what people traditionally think about.
Russell Benaroya: There are a number of people that are going to listen to this podcast and may not be building a technology company. Maybe they’re more of a service business. Maybe they have a little bit of technology. Maybe they’re a tech-enabled service business. Maybe they step back and say, “I’d love to be able to patent something, but we don’t really do a lot of innovation in our business. I’ve never really thought about anything in my business as being patentable.” Can you help dispel that misunderstanding and maybe there is more opportunity than many people think?
Brooke Quist: Sure. Lots of times when I’ll be speaking with someone and use the word invention, if they’re not a real tech-focused company, they may say, “I don’t have any inventions.” Sometimes, if you ask them, “How are you innovating? Do you have a research and development department? What are they doing? Are there technical problems that you’re solving? Do your products or services ever have issues that then you work on and overcome? Are there things that you do that give you a competitive advantage over your competition because of something that you came up with?”
Those are the types of questions to go over that may keep people’s minds off of, “Yeah, we did do something.” Then you also have to look at things like how long it has been. Patents are something where you can actually prevent yourself from getting a patent. If you invent something, and then disclose it to the world, and then wait one year, you can bar yourself from getting a patent. If you think you have something that’s protectable, you need to talk to someone like myself sooner rather than later.
I always tell people, I’d much rather talk to you too soon than talk to you too late. I’ve talked to plenty of people and I’ve said, “You don’t need me yet, but you will in six months.” So, keep this in mind. When you get to this place, let’s have a further conversation. If you say, “I’ve got this great invention and I’ve been selling it for a year and a half,” it’s too late. We can’t help you with that.
Now, there may be a situation there where we say version 1.0 of your invention is gone, but you’re still inventing. Do you have a 2.0? Maybe we can still protect that. It doesn’t mean that all hope is lost, but it means that that original thing that you disclosed is gone if it’s been more than a year in the public realm. Meaning that you either sold it, offered to sell it, or disclosed it.
Russell Benaroya: Are there any examples that you can share where having a patent created significant value for a company upon exit? In fact, what the acquirer was really acquiring was, yes, there was a business to be acquired, but I really wanted to acquire those patents as a component of building meaningful equity value for the founders.
Brooke Quist: I don’t want to go into too many specifics because there are client issues, but I will tell you that I’ve been involved with several mergers and acquisitions, over the past several years, where IP has been a major component. One of whether the deal is going to go through, or if it’s going to go through, what the valuation is going to be on it, and what areas of that company are viewed as valuable and which are not.
Oftentimes, in that situation, the acquiring company will come in and say, “I have two main questions. The first question is, show me how your patent portfolio actually lines up with the goods or services that you’re selling, that you’re making money?” If they overlap, if they’re aligned, then I know that you have powerful IP. Particularly, if you can then show that that’s leading to those products being advantageous over competing products. If you have patents that don’t line up with your products or services, then they’re nice but they don’t really have the same value. They’re not tied to what’s making your company money.
On the flip side, you want to make sure that you’ve got your house in order. You want to make sure that you have employee agreements that say that all of your employees’ inventions, while they’re working for you, are owned by the company because that doesn’t happen by nature. You need to have good contracts that do that. There are some rights that a company can get.
The situation is the opposite for copyrights, where there’s a situation called Work for Hire Doctrine, which tends to give those automatically to the company. It’s the reversible patent; you need to have good agreements. I can think of a business deal that I saw not occur recently and the issue was, did that company have the proper employee assignment agreements? There was a question mark there and that clouded the IP. It might have been okay, but it might not have and it was just an unacceptable risk.
These are issues that have real consequences both in terms of whether deals go through and what the valuation on those deals are. I’ve also seen companies that have had their technology which was mostly patents valued at tens of millions of dollars before they had a lot of revenue because of how powerfully they had carved out a section of their technological area.
Russell Benaroya: I imagine that you get into the details in your role; very technical. So I’m assuming that you probably weren’t an English major. Maybe you were and you became very technical. You came at this through a certain course of education and chose this path of law because you had some competency there. What was your background and how common or uncommon is it in the patent law world?
Brooke Quist: Great question. As we talked about earlier, there’s a federal patent bar because patents are called out in the US constitution. To be eligible to sit for that patent bar, you have to have a technical undergraduate degree. You have to have an engineering degree or a hard science—chemistry, biology, or physics.
I was an engineer. I worked for Northrop Grumman between my undergraduate grad school. Worked on F18, B2 bomber, and other weapons of technological advancement. I actually had an interesting background before that. My dad was actually an inventor at Boeing. He worked for Boeing for 35 years and had a PhD in metallurgical engineering, and had a couple of dozen patents. I actually met patent attorneys when I was 11 or 12 years old. I had that seed planted early and then it came and flourished later on.
You have a technical undergrad. It’s nice when you’ve got some real-world engineering experience. Clients like to know that you were just not all book-study; that you went out there and got your hands dirty. It just adds to what you can bring to the table, well-roundedness.
Part of what we do is really talking with the inventor. It’s really talking with the typical engineers and pulling out and teasing out, what’s the real invention and what do we want to protect? What do you view as the boundaries of what’s protectable and what was already done before? Then try and help build value and not just help them answer the question of, can they get a patent, but really, should they get a patent? Is it going to be worth the value proposition in terms of time and in terms of money? You want to get something that’s going to give you a competitive advantage.
If you can get something that’s at a real chokepoint of technology, that’s going to be super powerful. That’s going to be really valuable. You may have something that you do that’s unique, but if there are two dozen other ways to do equivalent things, yes, you can get that patent, but it’s not going to be as powerful as if you have some choke point.
Also, if you have a technology that’s disruptive, if you’re going to turn over a market because you’re bringing green energy where it was fossil fuel, or if something is ending a previous technology, that’s going to be really powerful. Everyone’s going to be either beating a path to your door to invest or to try and bury it, but it’s going to be hot, one way or another.
Those are questions that we try to look at and help clients answer so they can make those good determinations about whether patenting is the right answer for them.
Russell Benaroya: Patent trolls have given patents a bit of a bad name. What are patent trolls and how do you defend against them? I’ve actually run a company in the past that was trolled by a company and it was frustrating and disruptive because I knew exactly what they were trying to do.
Brooke Quist: It’s an unfortunate thing that the industry is dealing with. Everyone’s going to have a little bit of a different definition of what a patent troll is. Technically, it’s considered a little bit of a derogatory term. The term keeps changing, whether it’s a patent holder entity, or a patent assertion entity, or a non-producing entity. There are all sorts of acronyms that have come out as trolls became uncouth.
Basically, the idea is, in the beginning, a patent is that asset. It’s a piece of intangible property and it can be bought and sold just like any other asset. So some people realized, at some point in time, that they could go out and find a patent that they thought was being infringed and buy it. Then try and enforce that patent against the party that was infringing it. They’ll tell you that that was an inefficiency in the marketplace that they’re helping put together.
Most people will tell you that patents were meant to help give companies the motivation to invent. They weren’t meant to make people fear infringement cases from companies that are never building or doing anything. In the beginning, you would see companies go to someone. An example is they’d go to universities. Oftentimes universities would have a lot of patents because there are really smart people, thinking on the edge of technology. The universities would be short on money so they’d be open to selling some of their IP that wasn’t getting any money for them.
They’d sell it and then these companies would go take that, and they would go file lawsuits against companies that they thought were infringing. Oftentimes, they were a stretch. It was not clear at all that those companies were infringing. Another thing that they would do, they would take advantage of the fact that patent lawsuits are expensive to defend against, even if you’re right. They’d go in knowing that their chances of winning were slim to none, but knowing that they could probably get a small settlement out of you as please-go-away money.
Sometimes they do use a strategy of putting a whole bunch of these lawsuits out, taking several smaller settlements, and using that as a war chest to go against one bigger company. They’ve been a little bit of a Bane on the system, but everyone debates a little bit about what the definition of a company is. If you are selling something but you don’t actually build it yourself, someone else builds all the subcomponents, and you put the sub-components together, some would say, “Well, you didn’t build it all yourself. You’re not a true entity that built everything from scratch. Most people don’t buy into that type of analysis.
Russell Benaroya: Boeing doesn’t build everything from scratch.
Brooke Quist: Right, exactly. Neither does Apple and most of these big companies. The point is, it’s hard to identify where the line is. It’s hard to draft legislation and it’s hard for courts to make clear guidelines because it’s elusive as to who is going to be viewed as an unfavorable party in this regard and who’s not. Some people clearly are, but there’s a big gray area.
We’ve seen a backlash against some types of patents. For example, business method patents because those were areas that had a lot of troll activity. Even now, there are several different groups that are trying to encourage Congress to pass legislation in this area, but as you’re probably well aware, Congress doesn’t agree on a lot right now. We’re not crossing our fingers if that gets solved anytime soon.
Unfortunately, patent trolls are probably going to be an issue somewhat, although we’ve seen a real drop. It doesn’t tend to be as big a deal now as it was a few years ago. Patent litigation, in general, has been declining a bit. It seems like it’s on the decline, not on the rise, thankfully.
Russell Benaroya: What can people expect when they come to you and to your firm, Seed IP? What’s the process that they can expect to go through in working with somebody like you?
Brooke Quist: One thing that we really try and that we think sets ourselves apart from others is we try and look at your company individually and provide custom solutions to you. We’re going to look at what your business plan is. Are you planning to try and keep things small and organic and self-funded? Are you looking to have a funding or exit event in the near future? Do you have a licensing type model?
We will lay out a patent strategy for you differently depending on what your goals are and really think strategically about how to lay things out. Also, we will look at not just can you get a patent, but should you get a patent. What are the costs going to be now? What are the costs going to be later? To what extent can we reduce things now if you’re going to have a funding event in nine months, and you want to try and do everything you can now on a shoestring knowing that you’re going to come back a little bit later and try and backfill everything to the extent you can.
We’ll put together really good options for you upfront. Also, our firm, Seed IP, is a large boutique. We’re over 50 attorneys, all patent attorneys. So when you come looking for a patent attorney, you want a person or a group of people who really know your technological area. Because of the number of people we have, we really saturate all the fields of technology. No matter what your issue is, no matter what your technology area is, we are going to have a team of people that are skilled in that area.
There’s not going to be on-the-job training. If you go to a two or three or four-man shop, it’s a little bit hit and miss whether there’s going to be someone there who’s really skilled in what you’re coming to them with.
Russell Benaroya: Last question for you. How do you bring your pole vaulting and martial arts experience into intellectual property? What’s the symbiotic relationship here that we need to understand?
Brooke Quist: Well, that’s a very interesting question. It may be longer than we can go through with the time we have left. You need to be a well-rounded person.
Russell Benaroya: You gotta shoot for the stars. You got to be willing to take a risk.
Brooke Quist: With martial arts, you got to take your opponent’s energy and use it against them.
Russell Benaroya: Okay, this is good. Perfect.
Brooke Quist: You need to have a holistic approach. You need to be aware of your environment. The number one consideration when you’re going into a situation like this is your environment. There are many things we could pull out. We can do a whole other podcast.
Russell Benaroya: Which I hope we can do. Brooke, thank you so much for joining us today on this edition of Stride 2 Freedom. Intellectual Property can sometimes scare people away a little bit because it’s somewhat opaque or maybe people feel like it’s not relevant to them. The truth is that IP is like this hidden gem of opportunity for value creation that, even if a company doesn’t take action to pursue intellectual property, understanding it as an arrow in the quiver of overall business strategy is super valuable.
I want to thank you for bringing your expertise and shedding light on how to think about IP for our businesses. I just want to thank everybody for listening today. Brooke, I really appreciate your time.
Brooke Quist: Fantastic. It was a pleasure being here. I look forward to talking to you again soon.
Russell Benaroya: Okay, talk to everybody next week on Stride 2 Freedom. Take care.
Brooke Quist: Thank you. Take care.
