Start-Up Launchpad Blog

Patent Laws: A Cold Reality for One Business Owner - July 27, 2012

Emily E. Harris, Patent Attorney

Failing to understand United States Patent Laws can lead to an unpleasant outcome for business owners. Dippin' Dots, the maker of the delicious frozen treat sold at ballparks, malls and fairs across the country, is one such example. The company, a startup founded in Kentucky, owned a patent for its popular method of making tiny beads of ice cream using liquid nitrogen. All was well until Dippin' Dots tried to enforce its patent rights against its competitor, Frosty Bites, which led to a legal battle with the patent system.

 

A patent gives its owners the right to prevent others from making or selling a similar invention. As is typical in patent infringement lawsuits, Frosty Bites defended the lawsuit by claiming that the patent was invalid. During subsequent investigation, Frosty Bites discovered that more than a year before applying for a patent, Dippin' Dots sold about $850 of ice cream at a small local market. These sales were a violation of a U.S. patent law that prohibits patenting if the invention is sold more than one year before a patent application is filed. This "on-sale bar", if not raised before a patent is granted, will cause an issued patent to become invalid and thus worthless.

 

As a result of these sales, the court declared the patent invalid and Frosty Bites was allowed to go on selling its own version of the ice cream treat. The owner of Dippin' Dots has said that $850 of early sales cost his startup $10 million in legal fees alone, and he subsequently filed for Chapter 11 bankruptcy in late 2011.

 

As the Dippin' Dots entrepreneur can attest, the patent system is incredibly complex. These laws define a very particular sets of circumstances in which an inventor can obtain a patent. Subtle rules-like the on-sale bar that tripped up Dippin' Dots-can add difficulty in navigating the process.  Dippin' Dots, the "Ice Cream of the Future," may well be condemned to a historical footnote as a result.