Intellectual Property Management - Claas Junghans - E-Book

Intellectual Property Management E-Book

Claas Junghans

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This concise introduction to European patent law and global patent perspectives combines the legal and economic perspectives to adopt a unique approach that serves both inventors -- engineers and scientists -- as well as financiers and economists. Written by experts with first-hand knowledge this book is completely up-to-date, taking into account recent additions to European patent law, especially in the field of biotechnology and genetics. While concentrating on the EU, the world perspective is nevertheless represented, including US particularities. The result is a set of guidelines allowing readers to develop a holistic patent strategy suitable for their specific needs. For scientists, engineers, managers and financiers in the chemical industry.

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Table of Contents

Cover

Series page

Title

Copyright

Preface

Authors

Abbreviations

1 Terminology

1.1 The Terms of Patenting

1.2 Business Brief

2 The Economic Objectives of Protection

2.1 Filing Strategy

2.2 Claim Breadth: The Scope of the Desired Protection

2.3 Factors Influencing Filing Strategy and Claim Breadth

2.4 Financial Resources and Attitude Towards Risk

2.5 Business Brief

3 Patenting

3.1 Preparation

3.2 Drafting the Patent Application

3.3 Prosecution

3.4 Strategy

3.5 Conflict

3.6 Business Brief

4 Ownership

4.1 The Rights of the Inventor

4.2 Disputed Ownership

4.3 Employee or Service Inventions

5 Trademarks and Designs

5.1 Protection of Distinctive Marks

5.2 Designs

6 Licensing

6.1 Licence Agreements – an Overview

6.2 Sub-Licences

6.3 Up-Front Payments

6.4 Milestone Payments

6.5 Non-Cash Consideration

6.6 Taxation of Consideration

6.7 Representations and Warranties

6.8 Maintenance and Prosecution of IP Rights

6.9 Confidentiality

6.10 Competition Law

6.11 Governing Law and Dispute Resolution

6.12 Negotiating Licence Agreements

6.13 Business Brief

7 Starting up and Financing Your Venture

7.1 Risk, Return and Control

7.2 Strategy

7.3 Company Formation

7.4 The Business Plan

7.5 Financial Forecasting and Valuation

7.6 Financing the Venture

7.7 Negotiation

8 The Importance of Business Structures to the Exploitation of IP

8.1 Legal Forms of Transferring IP Ownership

8.2 Intellectual Property and Financial Reporting

8.3 Tax Aspects

9 List of Annexes

Annex 1 Paris Convention for the Protection of Industrial Property (January 3

rd

, 2005)

Annex 2 PCT Contracting States (as of July 7

th

, 2005)

Annex 3 EPO member states and extension states as of July 2005:

Annex 4 Nice Classification of goods and services (8th edition) – Headings Goods and Services

Annex 5 International Classification for Industrial Designs under the Locarno Agreement – Headings Goods and Services

Annex 6 European Community Member States

Annex 7 Member countries of the Madrid Agreement and Madrid Protocol

Annex 8 ARIPO member states

Annex 9 OAPI member states

Annex 10 Order of country codes (Situation at 9. 3. 2005)

Index

End User License Agreement

List of Tables

5: Trademarks and Designs

Table 5.1 Official fees for filing and registration of trade marks in selected countries.

7: Starting up and Financing Your Venture

Tab. 7.1 Simplified illustration of successive funding rounds.

List of Illustrations

1: Terminology

Fig. 1.1 Patent process: The national (left side) and the PCT pathway (right side) differ in how quickly an enforceable patent is issued. Many applicants choose the PCT pathway to file in many countries with one single application, because costs are deferred until later in the process.

Fig. 1.2 The front page of an international application under the Patent Cooperation Treaty (PCT). Reproduced with permission by WIPO and the European Patent Office/espacenet.

Fig. 1.3 The international search report of the application shown on the previous page. All cited prior art is labelled “A”: the office considered the documents found in the search of no particular relevance with regard to the patentability of the patent’s claims. Such report is a good indication that the claims have a high probability to be granted in examination. (Reproduced with permission by WIPO and the European Patent Office/espacenet.)

2: The Economic Objectives of Protection

Fig. 2.1 Possible alternative filing strategies.

A:

The invention is deposited with a national office. Within 12 months, a PCT filing is deposited. Costs for both applications are moderate (grey boxes). Costs are incurred again at the end of the 30 month-deadline of the PCT international period, when the application must be regionalized (here: before the EPO, in the USA, Japan, China and Russia), translated into the respective languages and submitted through local attorneys. The issueance of patents depends on many factors and can take up to five years.

B:

A national application is filed to determine a priority date for the invention; within 12 months, national applications are filed directly. Costs are incurred earlier, but patents are issued more quickly.

C:

the invention is protected by simultaneous applications in national and regional offices. This strategy, paired with accelerated publication and examination, is very high-risk but leads to the accelerated generation of enforceable rights if the invention is found patentable.

Guide

Cover

Table of Contents

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cover

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Intellectual Property Management

A Guide for Scientists, Engineers, Financiers, and Managers

Claas Junghans

Adam Levy

With Contributions ByRolf Sander, Tobias Boeckh, Jan Dirk Heerma, and Christoph Regierer

Authors

Dr. Claas Junghans

Oldenburger Str. 37

10551 Berlin

Germany

Adam Levy

4 Birchencliffe Cottages

Pott Shrigley

Cheshire

SK10 5SE

UK

Dr. Rolf Sander

Stapel Rechtsanwälte

Marburger Str. 3

10789 Berlin

Germany

Dr. Tobias Boeckh

HERTIN Anwaltssozietät

Kurfürstendamm 54–55

10707 Berlin

Germany

Dr. Jan Dirk Heerma

SJ Berwin LLP

Kurfürstendamm 63

10707 Berlin

Germany

Dr. Christoph Regierer

Dr. Röver und Partner KG

Auguste-Viktoria-Str. 118

14193 Berlin

Germany

All books published by Wiley-VCH are carefully produced. Nevertheless, authors, editors, and publisher do not warrant the information contained in these books, including this book, to be free of errors. Readers are advised to keep in mind that statements, data, illustrations, procedural details or other items may inadvertently be inaccurate.

Library of Congress Card No.: applied for British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library.

Bibliographic information published by Die Deutsche BibliothekDie Deutsche Bibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data is available in the Internet at <http://dnb.ddb.de>.

© 2006 WILEY-VCH Verlag GmbH & Co. KGaA, Weinheim

All rights reserved (including those of translation into other languages). No part of this book may be reproduced in any form – nor transmitted or translated into machine language without written permission from the publishers. Registered names, trademarks, etc. used in this book, even when not specifically marked as such, are not to be considered unprotected by law.

Typesetting Kühn & Weyh, Satz und Medien, Freiburg

Bookbinding Litges & Dopf Buchbinderei GmbH, Heppenheim

ISBN-13: 978-3-527-31286-3

ISBN-10: 3-527-31286-2

Preface

To the uninitiated, the world of intellectual property often appears an impenetrable collision of legal, scientific and economic themes. Indeed, the study of intellectual property draws from these three disciplines in a way that our educational and philosophical systems struggle to reconcile. Technically-expert lawyers, scientists and economists find it equally difficult to adopt a holistic overview and to look beyond their specialised field.

Whilst Patent Offices have recently intensified their efforts to be more accessible, publishing readable introductions to the very basic terms of intellectual property, and guides to initial patent application, these laudable efforts fail to penetrate the heart of the problem as we see it: the connection of legal procedure, beyond its mere application, with technological development and the business strategy that drives it.

“Intellectual Property Management” provides an introduction to the world of creating value through inventions. This book is written by international experts who from their day-to-day experience are able to position the technical and legal nature of patents within an economic and commercial framework. Readers are given a clear view of patents as a rational business process, and are presented with a toolbox with which to make careful assessment of the time and money that inventions warrant, concentrating on an assessment of risk, and within this framework, on maximising both value and personal return. From these carefully elaborated fundamental principles, we progress to address more complex and sophisticated issues of intellectual property strategic planning and wider corporate strategy.

The first four chapters of this book treat the aspects of patenting that both an inventor and a manager of an invention-intensive business will need to understand to make meaningful decisions on the subject. In doing so, the authors have concentrated on the underlying principles of the process, which are similar to almost all countries, rather than on precise definition of local regulations. Indeed, readers may note a certain European bias in the book. The European Patent Convention is both the largest judicial entity in the world of IP, and its law, in its synthesis of both Anglo-Saxon and French-German legal influences, presents a paradigm for most other patent systems in this world. The great exception to this rule is the USA, which treats many problems differently from all other systems. Important differences are highlighted wherever necessary. Moreover, where easily readable literature exists in the English language on patenting, it is likely to concentrate on the US system, and the reader desiring to learn specifically about this system will find literature easily. Nevertheless, we hope that such readers will benefit from our specific treatment of the economic perspective.

Chapter 1, “Terminology”, defines the patent landscape, providing an elementary terminology and foundation upon which the reminder of the book builds. Readers already familiar with the world of patents may refer to this chapter as reference whenever needed.

Chapter 2, “The Economic Objectives of Patenting”, sets the economic framework in which patents reside, with an emphasis on the formulation of a basic patent strategy and a comprehensive explanation of patent routes and of patent scope and claim breadth. The authors have debated extensively the position of this chapter within the book. We have finally opted for moving it before the technical chapters on patenting, authorship and licensing. This position follows our conviction that in order to make a meaningful use of the legal tools that IP offers, one must define the economic objectives that drive the patenting process. All too often, resources are spent unwisely because the applicants did not consider their motives in submitting the application until far into the patenting process.

Chapter 3, “Patenting”, is the most technical chapter of the book. It discusses patent searching, drafting and application, and at what point, and how, to hire an attorney. The chapter concludes with an explanation of patent strategy in a dynamic research environment, and the exploitation of patent families. It must be emphasized that this book does not pretend to be a “do-it-yourself” guide to successful patent applications. Although there are cases where inventors have successfully patented and marketed their inventions, we do not encourage the reader to do so. Nevertheless, the cost and satisfaction of collaborating with a professional patent attorney can, in our view, often be improved substantially if the client, the inventor or applicant, has a good basic knowledge of the process and the variables of patenting.

Chapter 4, “Ownership”, takes a step backwards to identify the personal, legal and corporate issues around the ownership of patents, particularly those made by employees, whether or not related to their work.

Trademarks, design rights and other non-patent intellectual property rights are highlighted in Chapter 5. While most chapters address themselves mainly to readers interested in technical innovation, this book’s focus on the economic perspective of protection requires the complementary treatise of these “soft” non-technical rights in this context. This protection, which is often more effective in the market and easier to enforce in court, is not of the inner technical “idea” or inventive essence of a product, but of its name and design. Capturing value through product innovation requires the protection of both marketing and technical elements.

Chapter 6, “Licensing”, takes a corporate perspective, discussing the licensing of technology IP, exposing the reader to the complexity of commercial and competition law. In doing so, the reader will be prepared to address the key aspects of license drafting and to work fully and successfully with professional advisors.

Chapter 7, “Starting Up”, revisits ideas around risk and return, and relates these carefully to the inventor or entrepreneur, outlining how to establish a start-up company around an intellectual property portfolio. Assuming that the inventor takes the advice of the previous chapters, Chapter 8 discusses the real-life application of tax laws around IP for both the individual and corporation. As becomes apparent, consideration of these parameters may have a profound influence on the overall financial balance of the inventive process.

“Intellectual Property Management” covers the spectrum of the patent world, from basic patenting to corporate taxation. This breadth is somewhat unusual, but reflects the authors’ conviction that the effective and competitive management of innovation is dependent on an integrated and considered strategy. Engineers and scientists today must be encouraged to think about the commercial applicability and, more specifically, patentability of their inventions. Only with the careful definition of the economic drivers behind an invention, will such patenting create value for its inventors, and more widely, make a meaningful contribution to the broader economy. Poorly written and badly planned applications congest the legal and patent systems, lead to poor resource allocation and are an impediment to economic and technical development.

Well-written, granted patents, on the other hand, that respond to the commercial profile of the applicant, that can be licensed, and which are optimally adapted to the competitive landscape, will have fulfilled their potential, and that of the invention. That is the goal of this book.

Adam Levy and Claas JunghansOctober 2005

Authors

Claas Junghans studied chemistry, molecular biology and intellectual property law in Berlin and has held senior management positions in several biotechnology companies.

Adam Levy has a Natural Sciences degree from Cambridge University and an MBA from INSEAD, Paris, and has held senior management and board positions in several start-up biotechnology companies.

Rolf Sander studied chemistry and physics, and practices intellectual property law as an in-house counsel for Siemens AG, and as German and European patent attorney at Stapel Rechtsanw(lte, Berlin.

Tobias Boeckh studied chemistry and biochemistry in Berlin and practices patent law, trademark and design protection as a partner at Hertin, a law firm based in Berlin.

Jan Dirk Heerma is a partner in the Berlin office of the pan-european law firm SJ Berwin. He is head of SJ Berwin’s Technology Group in Germany and specialises on licensing and R&D agreements and the IP-aspects of corporate transactions.

Christoph Regierer is a tax-lawyer and chartered auditor and practices corporate and tax law as a senior partner of Röver & Partner in Berlin. He is chairman of the European Fiscal and Tax Group of Moores Rowland International.

Abbreviations

CTM

Community Trademark

ECLA

European Classification System

EP

European Patent, country code for the EPO

EPC

European Patent Convention

EPO

European Patent Office

IP

Intellectual Property

IPC

International Patent Classification

IR

International Registration

PCT

Patent Cooperation Treaty

USPTO

United States Patent Office

WIPO

World Intellectual Property Organization

1Terminology

Claas Junghans

For those who have had little or no prior exposure to the field, this chapter serves as a primer to the world of inventions and patents and introduces the topics that will be discussed in more depth in further chapters.

1.1 The Terms of Patenting

1.1.1 The Patent

Territoriality

A patent is a legal document that specifies a technical invention. Patents are territorial and relate to a specific country and the same invention can therefore be patented in a number of countries. Usually, these patents have the same owner, and are related to one another by their process of application; if that is the case, they form a patent family.

It is possible, however, for different owners to have rights to the same invention in different countries. This situation can arise if different applicants apply for patents on the same or similar inventions in different countries, or if the original inventor or applicant sells the patent rights for each country individually.

Exclusionary Rights

The owner of the patent is given certain rights to exclude others from making commercial use of an invention; specifically the right to exclude others from commercially using, selling, offering and keeping in stock an invention as specified in the claim section of the granted patent, in the particular country of the patent. Since the law governing patent protection differs across geographical jurisdictions, the scope of this protection varies for patents within the same family.

Similar exclusionary rights can be obtained on designs, and in certain cases on names used in the context of a business, termed trademarks. There are important differences between the protection of patents on technical inventions, also termed “utility patents”, which are the main subject of this book, and design patents and trademarks, which are discussed in Chapter 5. Utility patents have a maximum term of 20 years from the day of filing the application; other forms of intellectual property (IP) have different terms.

Reward for Disclosure

The patentee is awarded the right to exclude competitors as a reward for the public disclosure of an innovation, intended to stimulate scientific development. To meet this criterion, however the patent must describe the invention in a way that enables others to reproduce the invention. US law is especially stringent in its demand for a “best mode” disclosure, non-fulfilment of which may lead to invalidation of the patent.

First-to-Apply

More than one inventor may independently make an invention. Europe and most other nations, with the exception of the USA, grant the patent right to the applicant who first files an application on the invention in their country. In the USA, the right to patent is granted to whomever first made the invention regardless of the time of filing. Efforts are ongoing to bring US law in line with the rest of the world, but it is not clear whether this particular harmonisation will be successful.

1.1.2 The Process of Patenting

Drafting

Patenting an invention is a formal process resembling a dialogue between the applicant, who submits a patent application on an invention, and the national or regional Patent Office, which decides whether and to what extent the invention is patentable.

The process of drafting entails the collection of all material describing the invention, as well as publications that describe the technical background of the invention. A skilled professional, most likely a patent attorney or in-house patent agent, then drafts a patent application specifying the invention in all necessary detail, and claiming the essential principle and important embodiments that are to be protected.

Application

The first formal step in achieving patent protection is the submission of a patent application. This application alone confers only marginal protection to its owner, and most countries grant provisional protection rights to the applicant after the application is made public, usually after 18 months.

An applicant may choose to send several patent applications originating from the same invention to different individual countries. Alternatively, an application can be submitted to trans-national offices acting on behalf of countries bound together by an international treaty. Examples of such transnational offices are the European Patent Office (EPO) and the office of the World Intellectual Property Organisation (WIPO). In most cases these pathways only facilitate the patenting process, and the applicant ultimately ends up with a family of national patents.

A “world patent” does not exist, but an application under the Patent Cooperation Treaty (PCT) allows the applicant to submit applications to a very large number of countries in a single filing. The applicant will send a “PCT filing” to a national or regional office, either as a first or as a follow-up filing. The applicant will then have up to 30 months after the initial first filing to decide in which other countries of the PCT member states an application should be submitted. Commercially, the most notable exception to PCT membership is Taiwan, which has instead bilateral treaties with most countries to the same effect.

Fig. 1.1 Patent process: The national (left side) and the PCT pathway (right side) differ in how quickly an enforceable patent is issued. Many applicants choose the PCT pathway to file in many countries with one single application, because costs are deferred until later in the process.

Priority

Priority is a technical term referring to a ranking or “time-stamping” of inventions by calendar date. The earlier an invention has first been registered as a patent application at a Patent Office, the earlier its “priority”. Of two applications that describe a similar invention, only the application with the earlier priority can give rise to a patent in any particular country.

A priority application can also be used as the basis for a second, extended application that encompasses its content. The content is then treated as if it had been submitted at the earlier priority date. The submission of an application therefore confers the right to be considered prior to others, and this right may extend to other applications.

This concept of a “priority right” was initially applied to individual offices, but today, most offices work together under the terms of an international treaty, the Paris Convention, in recognizing applications from other offices and priority rights can be used almost worldwide. The applicant may submit an application for a patent in only one country, and wait up to twelve months until submitting further applications relating to the same invention in many more countries. These later applications benefit from their claim to priority of the first application.

A follow-on application is granted a 20-year term, and an important result of submitting such applications using the priority of an initial filing is the effective prolongation of the invention’s protection to 21 years. Whilst in fast-moving technologies this may have little importance, in technologies with long lifetimes, this mechanism may be very relevant to the total balance sheet of the patent.

Prior Art

Publications made before the priority date, which describe the elements and technology of the invention, form the “Prior Art”. Publication does not have to be made in writing; public disclosure in a speech, or presentation, or over the internet also can form part of the prior art, though written disclosures are easier to track and date.

The existence of prior art describing an invention or elements of an invention, is an important weapon in contesting a patent, and a lot of prior art case law has therefore been compiled. Selling an invention before submitting a patent application, for instance, will in most cases make the invention part of the prior art, and hence unpatentable, even if the invention was not readily seen from the sold object. As always, however, what constitutes publication and what exact effect this has on patentability, is regulated nationally and may differ between countries.

Search Report

Many patent offices conduct a search of previous patent applications to identify the extent to which the claimed invention has been anticipated in the state of the art, or indeed, which documents can be found to come closest to the invention. The applicant thus receives official notification by a competent patent office as to which publications, if any, may interfere with the patentability of the invention. Decisions as to how to proceed with research and patenting activities may be influenced by this report. This search report is usually published with the application 18 months after the priority date.

Examination

Depending on the country, patent applications may be subject to mandatory examination, or may remain at the application state until the applicant or another interested party requests examination. The USPTO (United States Patent and Trademark Office) examines applications automatically without a need for further request. In many other jurisdictions however, the request for examination is a separate step in the procedure and can be delayed until a search report by the respective patent office has been issued. This gives the applicant a chance to amend or abandon the application in light of the findings of the search report.

For applications being processed by the European Patent Office, requesting the examination is mandatory within the first two years after application. Although there is a requirement to explicitly request examination before the EPO, the application form already contains this official request. The applicant must remember to pay the examination fee however. In Japan examination is mandatory three years after application and the German office requires no mandatory examination for the first seven years after the initial application.

Despite numerous differences in practice, all national and transnational offices require that formal and material requirements are met and that fees are paid. The examiner eventually issues a communication on the patentability of the submitted claims, and a dialogue ensues that will either lead to a granted patent or the abandonment of the application. Usually, failure to adhere to formal obligations stipulated by law or the corresponding office, or failure to pay the necessary fees, results in an application being deemed abandoned or withdrawn, although recourse may be possible.

Granting, Opposition and Revocation

If the patent is provisionally granted, it will be published by the relevant office. In many jurisdictions there then follows a period during which interested parties, often competitors, may submit a notice of opposition to the patent. In the case of the EPO this period lasts nine months. Other jurisdictions have a shorter opposition period (three months for the German office), or do not provide for opposition at all. US patent law does not currently provide for an opposition procedure, though it seems likely that one will be adopted within the next few years.

Once the patent is granted and any opposition period has expired, the last recourse against a patent is the process of revocation by the national courts. Revocation procedures are rare. Revocation aside, a granted patent will be in force for the duration of the patent term; 20 years from the date of the application from which it originated, provided maintenance fees are paid. In most countries, the patent owner must pay such maintenance fees in order for the patent to remain in force, and these fees usually rise steeply towards the end of the 20-year term. This is intended as an economic incentive to allow old patents to expire, allowing technology to become publicly available.

1.1.3 The Value in a Patent

The financial value of a patent stretching over its twenty-year lifespan is discussed fully in Chapters 6 and 7.

In-House Use, Licence or Sale

The immediate benefit that a patent confers to its owner is the power to exclude others from the use of the invention specified by the patent claims. This monopolistic power gives the patent owner special power in its market, and permits the realisation of greater profits. Four different principle mechanisms exist to derive value from a patent:

an improved market position for the patented invention marketed as a product or employed as a process, directly by the patent owner (“in-house use”),

revenue from licence payments paid to the patent owner by a third party operating under the cover of the patent,

direct sale of the patent, or

blocking or “fencing-in” of competitors, without making use of the patented invention.

The process by which value may be extracted from a patent is not as straightforward as a simple economic monopoly model would suggest however. It is complicated by inter-patent dependence, patent enforceability and cost issues.

Dependence and Multi-Patent Products

Often more than one patented technology is present in a product. If these technologies belong to different parties, their presence influences the ability of each patent owner to capture value. Indeed, the competing interests of the patent owners will need to be resolved in order for the product to be marketed, and for any of the parties to capture value from their inventions.

Different technologies may be independent of each other, such as the wheels and the chain of a bicycle. Often, however, there is some technological hierarchy or dependence. One frequent example is a patented improvement of an already patented innovation.

Such dependence can effectively bar an inventor or patentee from using an invention. It cannot be sufficiently stressed that owning a patent is not a licence to practise the patented invention; the power conferred by the patent is purely to exclude others from the practice of that invention (see Box 1).

Box 1 Dependency

Consider the invention of the steam cooker. The principle of this invention is to cook food in hot, pressurized steam. The simplest essential equipment for practicing the invention could be a pot with a steam-sealed lid, and a patent on the invention would have an independent claim reading:

Apparatus for the cooking of food comprising a pot (1) and a lid (2), characterized by the lid being fastened to the pot in a steam-tight fashion, creating a chamber (3) that can be pressurized.

In the absence of a mechanism to avoid the formation of pressure above the technical limit of the pot’s material, the steam cooker is likely to explode if not heated carefully. The need for technical improvement is clear.

If a second inventor came up with a safety valve, this invention would certainly aid the safety and marketability of the product. A claim on this invention may read:

Steam cooking apparatus comprising a pot (1) and a lid (2), where the lid is fastened to the pot in a steam tight manner creating a steam-tight chamber (3), characterized by a safety valve (4) being comprised in one of the enclosures of the steam-tight chamber.

The owner of the initial patent could market the pot alone, without the safety valve, and is legally independent. The second inventor, however, could not market the pot-cum-valve without a licence from the owner of the initial patent, since this invention includes all the elements of the first claim. The second inventor is dependent on the first.

Economically, however, the first inventor cannot sell pots without a valve, since they tend to explode. This inventor is legally independent, but in the absence of a technical alternative to the safety valve, is economically dependent on the valve technology to make the steam cooker pots marketable. The first inventor is “fenced in”. If it is in the commercial interests of the inventors, the twin issues of dependency and fencing-in can be addressed by patent cross-licensing.

Enforcement

The cost and practicality of patent enforcement is an important issue. The value of a patent is derived from the power it confers to engage in litigation against competitors who make commercial use of the patented invention without having obtained a licence. Such competitors must be identified, demonstrated to be in contravention of the patent, and compelled to make amends; overall, an expensive process.

The detection and demonstration of infringement requires a network of local surveillance. Large multinational companies have such systems in place, but smaller businesses operating from a single location must invest in this architecture. If the patent relates to a physical object, it is possible to substantiate infringement easily, but if the patent relates to a process, proof of infringement may be more difficult, particularly if the process relates to a product that can be made by a number of routes. Whilst proof may ultimately be attainable, this comes at a significant cost.

The subsequent process of enforcing a patent includes, in its extreme form, lengthy and expensive court battles involving specialist lawyers. The overall cost of this legal enforcement greatly depends on the case, and potential litigants must consider both the merits of their legal arguments and the likely response of the infringer. Some large companies have significant resources and a history of stringent and successful litigation. Confrontation will be regarded differently depending on the situation of the patentee; a university clerk bound to a strict budget, the owner of a small business, or a large multinational protecting a key patent will all have different attitudes to the risk and cost of litigation.

There is no recipe for patent enforcement; only a principle. Legal enforcement is an integral conclusion to the patent value chain, to be avoided if possible, but considered from the outset of application.

Costs

A balance must be struck between the expected value of a patent and the costs of securing and enforcing it. These costs can vary immensely. Important variables are the pathway the applicant chooses to pursue, in which countries the invention is to be patented, whether and which patent lawyers or agents are employed, the field and scope of the invention, and the amount of correspondence between the office and the patent agent.

A valid patent can be registered for under $500 in the US; similar figures for Germany and the UK are about €500 and £200, respectively. These figures include examination fees levied by the patent offices, but no legal fees paid to an attorney or representative. Substantial worldwide protection, managed by a patent agent or attorney and through the necessary network of local representatives, can cost significantly upward of 100.000 €. Indeed, even restricting oneself to the major markets in Europe, the Americas and Asia may carry a similar cost.

The delicate balance between cost and value is individual to each patent and each applicant. Not all costs arise immediately after filing, and nor must an invention reach the market before a return can be made. The sophisticated applicant is able to devise a strategy to maximise the return based on their level of investment, and on their appetite for risk. This relationship between cost, value and risk is a major topic of this book.

1.1.4 Anatomy of a Patent Document

Front Page

The Front Page of a patent application shows the title of the invention and the issuing organization or country and presents information pertaining to the type of document, the inventors and the applicants, references to documents in the same family, and most importantly, to key dates in the patenting schedule. Since the reader may not be familiar with the language or even the script of a document, a code has been established that associates datasets with numbers. For example, (22) codifies the filing date of an application, and (71) the applicant. These numbers may not be present on older applications.

Fig. 1.2 The front page of an international application under the Patent Cooperation Treaty (PCT). Reproduced with permission by WIPO and the European Patent Office/espacenet.

The examining office also gives patents or applications unique identifying numbers, and these appear both in the patent database and on the front page of any patent document. These numbers provide information as to the type, geography and status of a patent application. Usually, both applications and granted patents appear in databases as a combination of letters indicating the country, followed by a number and a letter. The letter “A” denotes applications, and this is changed to a “B” upon grant of a patent. There may be subsequent numbers and letters other than A and B depending on the country. The exact codes used by every country and their significance can be found on patent office websites.

Description and Drawings

The main section of a patent document always specifies the invention in words, and often in drawings. Typically, the description begins with a summary of the field of the invention and the technical shortcomings of the state of the art. Reference is made to the technology upon which the invention improves. This general section is often concluded by the formulation of a particular technical problem posed by the state of the art.

The invention will then be described in general terms and in detailed examples. Often, statements will be included in the description that make sweeping claims about what embodiments and alternative solutions to the technical problem fall within “the scope of the invention”. The description in many patents will be worded so as to be very far-reaching.

It is important for the novice in the field to realise that this description does not define the exclusionary rights conferred by the patent. It is rather the “claims” of a patent that act to define these exclusionary rights. The description supports the claims, and in cases of doubt, offices and judges will refer to the content of the description in determining the exact scope of the claims.

Claims

The claims of an application define the exclusionary rights that the applicant wants to reserve, though these are often subsequently narrowed by examiners to meet patentability criteria. A claim is a one-sentence definition of the invention (technically not even a proper sentence, as the main verb is missing), but since inventions may be complicated, a claim can be very long and complex in wording. One way to analyse this complexity is to break the claim down into components or elements. An element is the indivisible base unit of the invention.

To infringe or fall under the scope of a claim, any product or process must comprise or contain all the elements of the claim. Claims, therefore, with few elements cover a wide area of technology, as products are more likely to comprise all the elements of such claims. Such claims are said to be broad. Broad claims suffer from a higher likelihood of the existence of prior art, and are more likely to be found non-patentable by examiners. In addition to broad, independent claims, patent agents therefore usually draft “dependent” claims with additional elements to provide a fallback.

Fig. 1.3 The international search report of the application shown on the previous page. All cited prior art is labelled “A”: the office considered the documents found in the search of no particular relevance with regard to the patentability of the patent’s claims. Such report is a good indication that the claims have a high probability to be granted in examination. (Reproduced with permission by WIPO and the European Patent Office/espacenet.)

If a product does not contain all elements of the claim, it does not fall under the scope of the claim. If it contains all elements of the claim, and at least one more, it falls under the scope of the claim and yet may constitute a novel invention (see Box 1).

The Research Report Page

Patents and applications that have been submitted to a formal search of relevant literature by a patent office contain a section with the citations of identified prior art. This information can be a valuable indicator of what prior art has been considered in the granting of the patent, or what prior art the office may consider in a subsequent examination.

The search report format chosen by the European Patent Office (EP documents ending in A1 or A3) and similarly used in documents published by the PCT pathway (document numbers beginning with WO) is especially useful. Possibly relevant documents are given with an indicator of their importance to the patentability of the claims. Prior art labelled as X or Y renders the patentability of a claim at least dubious. The report is useful in giving a competitor or potential investor a formal opinion on the patentability of the claimed invention.

1.1.5 Patentability of an Invention

Invention

Although the colloquial term “invention” means many things to many people, the law of each country has clear definitions of what constitutes a patentable invention. For the purpose of patent law, an invention is a new solution to a technical problem, which meets stringent criteria of novelty, inventiveness and technical content. These legal criteria may vary, in some cases enormously, from one country to the next. Although a process of harmonisation is currently under way it will be several years until these differences in patentability criteria become extinct.

Product, Process and Method Claims