Business of Patents

Invention Prototyping via the Internet – the TOS Agreement Landmine

Instant Prototyping Gratification –

We live in remarkable times with respect to developing and bringing new inventions to market.  Advances 201503 LM minein rapid prototyping technology in the past decade have compressed the development cycle for virtually all products that have mechanical components.  By using additive manufacturing methods, often referred to as 3D printing, an invention can go from a vague concept on a scrap of paper to a 3D model in software to a physical prototype literally in a matter of a few days.  And it’s not just prototyping speed that’s made a recent quantum leap – costs have also dropped dramatically in the past few years.  3D printed prototyping is now an affordable way to develop a product for the solo inventor in his garage, as well as the high tech startup and the Fortune 500 giant.

A New Market of Buyers and Sellers

These advances in 3D printing and other rapid prototyping technologies have opened vast new opportunities, and there has been no shortage of entrepreneurs seeking to take advantage of them.  There are hundreds if not thousands of 3D printing vendors offering prototyping services via the Internet to a customer base that is probably in the millions, or soon will be, if the household use market takes off as predicted.

With such an abundance of choices, another problem has arisen.  Suppose you need to have a prototype of an invention or its components made. You could buy your own printer and some supplies, throw it all together, and hope for the best.  Not ready to make that plunge? A quick Internet search produces pages of options for prototyping services.  But you just don’t have the patience to contact and screen dozens of vendors.  Are the ones that make page one of the search any good, or just good at search engine optimization.  What to do?

Not surprisingly, entrepreneurs have also stepped in to address this problem.  There are now matchmaking websites, operating as brokers who match up 3D printing service providers with potential customers.  Why spend hours combing through search results and contacting vendors, when you can at least get an initial screening to narrow down the choices, and find some reviews and recommendations from other users as well?  Undoubtedly, these brokers provide a valuable service to some customers, and they are apparently serving a market need.

Caveat Emptor

If the prototyping that you want done is for parts that have no inventive aspects, such as basic commodity parts, or something that is simply not patentable, then you likely have no problem (at least with respect to your own intellectual property rights) by contracting with a 3D printing service provider through a matchmaking site.  But if you are contracting for prototyping of an invention that is potentially patentable, and especially if you haven’t filed a patent application on it, there could well be unseen landmines in using that 3D printing broker.

“If you are contracting for prototyping of an invention using a 3D printing broker, there could be a landmine in the broker’s TOS Agreement that could shred your IP rights.”

The mine could be buried in the Terms of Service (TOS) Agreement of that broker’s website.  We’ve all seen online TOS Agreements, and we’ve all blown them off without reading them, clicking “I accept” in order to proceed in a rush to use a website or download some piece of free software.  What’s the risk, right?  Maybe our e-mail address gets sold to some marketing firm and we get a little more incoming spam.  That’s what spam filters are for.

Exhibit A – a Bad TOS

Not so fast.  There could be terms in that TOS Agreement that could blow your patent and IP ownership rights to shreds.  We learned of this first hand recently when one of our clients asked about possibly using a particular 3D printing broker.   In particular, the client had noticed some language on the broker’s website to the effect that it reserved the right to display images of the customer’s prototype on its website.  The client asked if that might be a problem.

Huge red flag.  Yes, that would be a big problem, especially since a patent application on the client’s invention had not yet been filed.  After a bit more discussion, we drilled down into the website further and found the broker’s TOS Agreement.  It was quite remarkable, to say the least.  The Agreement had some truly egregious terms with respect to intellectual property rights – probably not for nefarious reasons, but instead a consequence of crossing a “CYA” mentality with the “everyone owns everything so nobody owns anything” social media era we live in.

First, there is the definition of “User Generated Content,” which includes “all uploaded 3D designs, pictures of your 3D objects, pictures of any model, comments on the Website, as well as the printed model we create for you based on your User Generated Content.”  The TOS Agreement then states that by uploading a 3D design to the website, the user grants permission to the broker company to display the user’s design on the broker company’s website.

With respect to patentability, this is a major problem if a patent application has not yet been filed on the invention (i.e.,”the design”).  Under 35 U.S.C. 102(a), which was significantly revised1 under the American Invents Act, if “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention,” that is considered prior art, and a patent is denied.  There are exceptions, including circumstances where disclosure is made by a third party who obtained the subject matter from the inventor.  However, the burden would be on the Applicant to prove such a third party relationship, and there is uncertainty on how certain language such as “on sale” is going to be interpreted by courts in the future.  Moreover, any such publication of the user’s design would likely be a bar to patentability in almost all foreign countries, most of which have an “absolute novelty” requirement for patentability.  Stated simply, you should never risk allowing your invention to be published in this manner before filing a patent application on it.

Giving Away the Store

As if that weren’t enough, their TOS Agreement goes from bad to worse with this language:

“[B]y submitting User Generated Content through the Services or Website, you hereby do and shall grant us a worldwide, non-exclusive, royalty-free, fully paid, sublicensable and transferable license to use, edit, modify, reproduce, distribute, prepare derivative works of, display, perform, and otherwise fully exploit the User Generated Content in connection with the Website, the Services and our (and our successors’ and assigns’) businesses… You also hereby do and shall grant each user of the Website and/or the Services a non-exclusive license to access your User Generated Content through the Website and/or the Services, and to use, edit, modify, reproduce, distribute, prepare derivative works of, display and perform such User Generated Content.

And subsequently, there is this clause:

“By uploading your 3D design to the Website, you grant [the company] a non-exclusive, royalty free worldwide transferable license on your design (i) to use it for the manufacturing of your model in order to fulfill your order and if you so indicate during the upload process: (ii) to display it on the [Company] Website; (iii) to use and modify it for the manufacturing of your model in order to fulfill the order of any other Website user.”

Say what?  Are we reading that correctly?  It looks as though if you use this 3D printing broker’s services, you’ve just licensed all of your rights away to not only the broker, but to every other user of the broker’s website.  So even if you’ve filed a patent application prior to contracting with the broker and eventually obtain a patent, you’re moving forward with a whole herd of “worldwide, non-exclusive, royalty-free, fully paid, sublicensable and transferable” licensees.

To confirm and enhance our understanding, we asked our friend John Herbrand, Esq., a Rochester attorney who focuses his practice in business startups and related IP transactions, for his thoughts on this broker’s TOS Agreement.  He clearly sees a problem with such TOS Agreements.  “The terms and conditions (variously called Terms of Service, Terms of Use, etc.) published by a website operator for the use of its website form a part of the “contract” between the operator and the user.  A user who uses a website without understanding those T’s and C’s may be unpleasantly surprised if a dispute later arises between the operator and the user.”

Regarding the licensing-related language of the above example, he states, “Some sets of T’s and C’s clearly overreach and the user unknowingly may be giving away important intellectual property rights.  Other sets may be vague, confusing or internally contradictory, leading to a protracted and expensive dispute that might ultimately be resolved to the detriment of the user.  Additionally, the terms of use of a website used to transmit IP to a third party typically do not address the third party’s use and treatment of the IP.  Users, particularly those transmitting IP through a website to third parties, should carefully consider the website’s terms of use and should have in place a clear and unambiguous written agreement with the third party concerning the use and treatment of the user’s IP before the IP is transmitted.  Early consultation with an attorney can help protect your IP.”

Proceed With Caution – and Control

The key takeaway from this narrative should be obvious: if you are developing an invention and need to outsource prototyping services, don’t use a third party broker to find and engage with a vendor.  Instead, do your homework and find a qualified vendor on your own. Before disclosing any proprietary information, proceed with caution and with the safeguards recommended by Mr. Herbrand.  At the very least, begin by executing a non-disclosure agreement3 with the vendor that you have obtained from a qualified attorney4.  With appropriate safeguards in place, you will be well-positioned to move forward in further developing your invention, while also protecting your intellectual property rights.

  1. See The Limited Monopoly® October 2011.
  2. See also The Limited Monopoly® March 2013.
  3. See The Limited Monopoly® June 2014.
  4. Readers may contact either of the authors if a referral to a qualified attorney is needed.

PHOTO CREDIT:  3D printed replica of WWII land mine – photography by the authors.

 Authors John M. Hammond P.E. (Patent Innovations, LLC and Robert D. Gunderman P.E. (Patent Technologies, LLC are both registered patent agents and licensed professional engineers.  They offer patent-related seminars that may be approved for PDH credits.  More information can be found at  Copyright 2015 John Hammond and Robert Gunderman, Jr.

Note:  This short article is intended only to provide cursory background information, and is not intended to be legal advice.  No client relationship with the authors is in any way established by this article.PDF printer wo icon

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