Case analysis

Appliance Master, LLC – Patent Defense Case

Appliance Master, LLC (AM) created a household appliance that was especially effective in attracting and killing flying insects. The basic appliance had been invented in Asia over 10 years earlier and the Asian inventors were unsuccessful in obtaining a patent on the basic appliance. AM had brought the appliance to the USA and had made an improvement for which AM applied for and obtained a patent. The improvement was the addition of an air actuated damper that kept live insects from escaping before they dehydrated and died. AM had grown in its 5-year life to a company with current sales of $15 million annually.

Pest-Be-Gone, Inc. (PBG) was a competitor of AM with a bad reputation for stealing inventions of their competitors. In one case PBG infringed the patent of Big Gun, Inc. (BG), a $70 million company in the pest control industry. BG took PBG to court for patent infringement and won a $500,000 award after spending $2 million in court and attorney costs to defend its patent. (or a net loss on the transaction of $1.5 million.)

PBG copied AM’s air actuated damper in products that it is currently selling. AM asked its patent attorney to send a cease and desist letter to PBG. Three weeks after the cease and desist letter was sent, PBG sent a letter to AM enclosing documents advising that a suit in federal court had been filed against AM to invalidate AM’s patent on the grounds that AM did not file its patent application within the one year time limit after public disclosure of the invention. PBG cited AM’s dated web site that showed AM’s appliance over one year earlier than the patent application date. AM claims that its filing was timely and that the product in the web site was the model that existed before the air damper was included. However, AM believed that it would be difficult to prove that the air damper was included in public disclosures only within the 1 year time limit.

As the entrepreneur owner of AM, what would you do?