10 Points on How China is Dealing with the Patent System

This is based on a paper by Peter Drahos, ‘The US, China and the G-77 in the era of responsive patentability’, Queen Mary Journal of Intellectual Property, Vol. 2, No. 4, pp. 315-28.

1.  The patent system continues to evolve, but is selectively responsive to the wants of business interests to the extent that some question whether it actually encourages innovation.

2.  Two important things happened towards the end of the 19^th century which are relevant in this context: completion of the foundation of the international patent system in the form of the Paris Convention, and the emergence of the modern multinational enterprise which would influence evolution of the patent system.  However experimentation with the patent system by states continued until it was constrained by TRIPS.

3.  The rise of the BRIC countries has made the world more polycentric. However this has not translated into bold experimentalism with the patent system, and the BRIC countries have now essentially adopted the patent system in its current form.

4.  Brazil and India have abandoned their leadership of the G-77 coalition of developing countries.  The result of this is that poor countries have no real hope of changing the patent system to better protect their interests.

5.  China, India and Brazil are investing in their domestic patent office infrastructure. China has an ambitious target of 3.3 invention patents for every 10,000 head of population by 2015.

6.  The US gains the most from the present patent system in terms of wealth obtained.

7.  In terms of innovation China has a venture market, but has still to develop a corresponding entrepreneurial culture.  Further it is still in the process of obtaining core technologies, but has the power to negotiate with multinationals to do so as part of joint projects.

8.  China is probably looking to the future when it can benefit from the patent system as part of wealth maximisation. By allowing foreign patents into its territory it is forcing its companies to learn to cope in such an environment.  The long-term aim must be to use patents globally, including in the US, to obtain maximum gain.

9.  The US is worried about losing technological leadership to China and the resultant effects of Chinese owned patents in the US.  However the US is not averse to using anti-trust laws to protect its interests, e.g. the anti-trust action which led to the breaking up of AT & T in the 70’s.  It used compulsory licensing in the 40’s and 50’s where 40,000 to 50,000 patents were affected.

10.  In view of this the change in position of the US caused by China may trigger a change in the balance between antitrust principles and IP.

Drahos’ paper is available here.

You may also wish to see related articles 10 Points on Muzzacato's Rethinking the Role of the State and 10 Points on China.

10 Points on the Max Planck Institute’s Declaration on Patent Protection

The Declaration relates to how sovereign states can formulate domestic policy to protect their interests and remain within International law. The subtitle of the Declaration is ‘Regulatory Sovereignty under TRIPS’.

1.  Sovereign states should retain the discretion to adopt a patent system which is best suited to their technological capacities as well as their social, cultural and economic needs within International law.

2.  Four key points are relevant at this time: states are faced with an unprecedented number of patent filings which can create impediments to research and commerce, new technologies and business practices are affecting the regulatory function of the patent system (e.g. business methods, biotechnology, computer inventions and NPE’s), patents are increasingly used as strategic assets, and patent rights have gradually been strengthened without corresponding protection of public interests.

3.  There is a friction between the patent system and public policy goals such as protecting the environment and access to affordable medicines.

4.  Sovereign autonomy has been eroded by international law and agreements. The purpose of the present Declaration is to set out the options that states retain under international law, particularly under TRIPS.

5.  The impact of patents on innovation depends strongly on the level of technological and economic development of the relevant country.  Patents must not interfere with dynamic competition and there must be a balance with public policies and interests.

6.  The Declaration notes that states have often not taken full advantage of the regulatory discretion available under TRIPS.

7.  States have latitude in defining what is patentable and how patentability requirements are applied, and so patent protection can be denied for new uses of known substances, for example.

8.  States can determine whether patent rights are exhausted and have latitude over the grounds for which compulsory licences are granted.

9.  TRIPS does not limit the grounds for government use.

10.  TRIPS does not require an authority finding infringement to grant injunctive relief.

The Declaration can be found here.

You may also wish to see related articles Top 10 Controversial Patent Issues and Top 10 Points on the Trans-Pacific Partnership.

7 Points on Intellectual Property Valuation

These points are from the European Commission’s Final Report from the Expert Group on Intellectual Property Valuation.  We have not focused on the details of the report, such as specific valuation methods. Instead the aim is to give a taste of the main issues and the conclusions.

1.  The accurate evaluation of IP remains a major obstacle to its emergence as a tradable asset class.  This is not due to a lack of valuation methods per se, but because valuation requires investigation (rather than an automated approach), and an evaluation is essentially an ‘opinion’ at a particular time.

2.  A solution is needed to fund the commercialisation of innovative ideas where the value of IP can act as collateral for loans.  Essentially small companies in the innovation sector rely on loans for raising finance.  If IP assets could be used as collateral they would be in a better position to obtain low-cost loans.

3.  However IP is seen as too risky for use as collateral. There is uncertainty regarding the value of IP value within company value.  IP also has limited liquidity because the IP market is less formalised and so offers less certainty on realisable values.

4.  The value of IP can change in a short amount of time and it has a limited shelf life.  In addition the IP commercialisation process is uncertain.

5.  The report proposes ways to improve the situation.  One proposal is to improve the credibility of valuations by creating a database of anonymised IP transactions to assist valuation experts.

6.  Another proposal is to create an EU-wide organisation to independently oversee IP valuation.  This could be based on EU government bodies or a group of universities across the EU.

7.  The report also proposes a scheme where the EU would underwrite the risk for banks which lend on the basis of IP as collateral.

The report is available from here.

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10 Points on China

China’s contribution to the world economy and scientific research continues to grow.  It is filing huge numbers of domestic and foreign patent applications.  It is major investor in the US and Europe and is a vast market hungry for Western goods and services.  The purpose of this article is to provide general background on China.  It is based on a review in the Guardian of ‘The Contest of the Century: The New Era of Competition with China’.

1.  China’s economic development has been the most important global phenomenon since the end of the Cold War, fundamentally altering the balance between East and West.

2.  China has been predicted to dominate the 21^st century due to its economic prowess, its civilisation state, its Confucian heritage and its one-party political system capable of managing and coordinating sophisticated policies.

3.  However others have predicted a collapse for China given the debt build-up that happened after the 2008 stimulus program and the explosive growth of ‘shadow banking’ that happens in state banks.

4.  A third view believes China’s growth is unlikely to come to a juddering halt, but it faces a range of problems including the nature of its financial system, vast excess capacity in key industries (such as steel), backward agriculture coupled with rising food demand, and competition from the world’s other cheap manufacturing centres.

5.  China’s rulers have poor record on economic balance, wealth disparities, capital allocation, the legal system, human rights and democracy.

6.  China’s foreign policy is fragmented and lacks cohesion. Whilst Beijing complains at having to live by rules made by others it has failed to put forward alternatives or evolve a global approach.  Its claims in East Asia have pushed neighbours into the arms of the US and it faces being isolated by a US promoted free trade zone in the Pacific and a US-EU pact.

7.  China’s ‘soft power’ is a failure.  There is instead a lot of Westernisation happening in Chinese cities.

8.  The Chinese authorities do have some sense of realism.  Wen Jiabao, prime minister from 2003 to 2013 described the economy as unstable, unbalanced, uncoordinated and ultimately unsustainable.  The Chinese government also seem to realise that corruption is a major problem.

9.  A 60-point reform program was set out in the Communist party plenum last November, but it faces opposition from vested interests, and ultimately represents a change to a system.  The regime is wary of anything that may weaken its grip on power.

10.  The party newspaper, Global Times, has itself admitted that it is too early to see the world at the dawn of a Chinese century.  Thus the Chinese government does seem to realise the serious nature of domestic issues.

The Guardian review can be found here.

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10 Points on New US Post-Grant Proceedings

This is based on an article by Anthony Tridico and Timothy McAnulty in the March 2014 edition of the CIPA Journal.

1.  Since September 2012 over 1,000 petitions have filed at the USPTO’s Patent Trial and Appeals Board (PTAB) requesting the Board review issued claims. About 70% of petitions involve electrical/computer patents.

2.  The Board has been proceeding with review in over 80% of petitions.

3.  A petitioner must file a petition for inter partes review within one year of being served with a complaint for infringement.  The Board has issued 2 significant decisions dealing with this matter, Macauto v BOS GmbH & KG and Motorola Mobility LLC v Arnhouse.  In these decisions patent owners failed to fulfil all the requirements of service and therefore the one year bar was not triggered.

4.  The conditions for making amendments to claims are strict.  The amendments must be in response to a ground of unpatentability in the trial and must also be traceable back to the original claim.  To date the Board has not granted any motion that amended a claim or proposed new claims, apart from cancelling a claim.

5.  In Idle Free Systems v Bergstrom the Board explained that the patent owner needed to specifically identify the new features in an amendment and show patentable distinction, with the burden on the patent owner to show patentability.  The decision also confirmed amended claims cannot broaden scope.

6.  In Blackberry v MobileMedia Ideas the patent owner was refused the motion to amend because a construction was not provided for each new feature, an explanation was not given for how removal of certain features was responsive to a ground of unpatentability and because of the deletion of features from claims the new claims were not traceable to original claims.

7.  So far the Board has only confirmed 11 claims to be patentable (in just 2 inter partes reviews) out of the hundreds that have been challenged.

8.  Claim construction seems to be an important part of determining success.  50% of the time the Board adopts its own construction, 25% of the time it adopts a petitioner’s and 20% of the time it adopts the patent owner’s. 5% of the time it adopts construction from a district court.

9.  The Board is predominantly looking at the specification to reach a decision on claim construction, with less weight on expert declarations and prior prosecution.

10.  The Board is routinely deeming some of the proposed grounds from petitioners as redundant and so it would be wise for petitioner to stick to their strongest arguments.  However the Board has allowed multiple trials to be instituted against the same patent between the same parties where the petitioner has filed multiple petitions to avoid grounds being found to be redundant.

You may also wish to see related articles Top 10 Points on Patent Developments and Case Law in the US in 2013 and 10 Points on US Patent Law Developments Focusing on Biotech.

10 Points on Decision-Making in Patents

It is important to realise that a lot of decision-making is needed during the patenting process to create the strategy which is most suited to the commercial requirements.  Too frequently adequate thought is not given to each decision resulting in inadequate patent protection, too much patent protection and/or too much money being spent.  One should see the patenting process as one which involves constant review and decision-making, and patent attorneys should only be one component in decision-making amongst others familiar with the relevant commercial objectives. The following points do not represent an exhaustive list, but are more based on the situations we have encountered when working with our clients.

1.  Treat Each Patent Case Differently

Often companies will take the same approach to every case.  However the chances are that some cases are more important than others.  Resources should be allocated to each case depending on its importance. 

2.  Ask Why Each Case Is Being Filed

The reasons for filing each case should be reviewed, especially its commercial value, whether it can be effectively policed and the short term and long term objectives.

3.  What Claims Do You Want?

There should be a review of what claims would be desirable to have in that technology area and how possible it would be to obtain them from this case. In one sense this is a review which is semi-independent of the scientific work that forms the basis of the case.  One reason for doing this is to see if the claims can be broadened to include competitor activity or other ways of carrying out the invention.

4.  How Much Money Is Available?

The company needs to make decisions on each patent case depending on how much money is available both now and over the lifetime of the cases.  Patent costs increase with time and so there needs to be some expectation that future patent costs can be met before proceeding with a cases.

5. When To File?

In certain areas, such as biotech and pharma, cases are often filed too early with not enough supporting data.  There needs to be a balance with how much data goes in and the need to have an early filing date.  Clearly, knowing about competitor filing and publication activities will help you to make an informed decision.

6.  How Much Disclosure To Include in the Specification

This is seldom thought about properly.  However the amount of disclosure will directly affect translation costs at national phasing.  Clearly a certain amount of disclosure is needed to provide support and be the basis for amendments.  However exhaustive lists of expression vectors might not be needed.

7.  Who Will License or Buy the Case?

Thought should be given to the commercial needs of parties that may be interested in licensing or buying the case.  Their commercial objectives may be different to yours and the claim scope should be determined in view of that.

8. Is It Likely to be Challenged?

If it is likely that third parties will challenge the validity of the case in opposition or litigation then the validity of the claims needs to be critically reviewed before grant to ensure they will withstand a hostile attack.  Normal Patent Office examination may be too lenient in this situation to obtain the most robust claims.

9.  Action Against Third Party Cases

Decisions need to be taken as to the extent to which third party cases need to be monitored and whether action needs to be taken against them.  It may be better to agree an amicable approach with a third party rather than resorting to attacking their patents.

10. Whether to litigate?

Whether to litigate is a complex decision that will be very much determined by the amount of money at stake and the predicted chances of success.  The emotions of the present moment should not be a factor in deciding to start a litigation that may run for several years.

You may also wish to see related articles Advice to a Scientist Setting Up a Company and 10 Things That Go Wrong With Patent Applications and Patents.

 

10 Points on EPO Biotech Practice and Case Law

This is based on a talk by Enrique Molina Galan, a Director at the EPO, on 15 November 2013 at the CIPA Life Sciences Conference.

1.  The patentability of plants is not straightforward in Europe.  Plant varieties are excluded protection under the EPC since protection is available under the UPOV treaty.  G1/98 allowed claims which embrace plant varieties as long as the relevant technology is not restricted to a plant variety.  However it also affirmed that plant varieties were not patentable, even if they were produced by recombinant technology.  Thus the assumption was made that the method of producing a plant/variety was not relevant to patentability of the plant/variety.

2.  In the EPC the term ‘essentially biological’ was previously interpreted as applying to a process which consists ‘entirely’ of natural phenomena, e.g. sexual crossing.  However G2/07 and G1/08 said sexual crossing and subsequent selection is not patentable.  This broadened the exclusion as it meant having additional ‘technical’ steps before or after the natural steps did not make the method patentable.  It was still ‘essentially biological’.  That seems to mean that having any ‘sexual crossing’ step in a claim makes it unpatentable.  Growing plants from seeds seems to be OK, though that is not entirely certain.

3.  Now the question of whether plants produced by an essentially biological process are patentable is outstanding in G2/12 and G2/13.  Allowing such claims would circumvent legislators’ intentions as plants breeders could not be able to commercialise their products. In G2/13 there is the additional question of whether a disclaimer could solve the problem.

4.  The EPO is staying examination proceedings on relevant plant applications and in oppositions where the outcome depends entirely on outcome of G2/12 and G2/13.  Cases to genetically engineered plants are considered not affected and are not being stayed.  The EPO granted around 1,500 plant patents in 1995 to 2012, mostly 2003 onwards.  The EPO is staying cases to non-transgenic plants prepared by crossing as well as cases to plant mutants generated by conventional mutagenesis, and about 100 of such cases granted in 1995 to 2012.  Thus the number of cases being stayed is going to be small.

5.  Turning to disclaimers added to exclude unpatentable subject matter, the EPO decided in G1/03 one could disclaim subject matter for non-technical reasons in the situation where the disclaimer did not have basis in the application as filed (referred to as ‘undisclosed disclaimers’ below). In T329/06 the following undisclosed disclaimer was allowed: ‘provided that the cells are not human embryonic stem cells’.

6.  Looking again at undisclosed disclaimers, G2/10 decided that what remains after disclaiming must be present in the application as filed.  In this context T2464/10  decided that the undisclosed disclaimers ‘non-human’ (for a claim to an animal) and ‘wherein the cell is not produced using a process which involves modifying the germ line genetic identity of a human being or involves us of human embryo for industrial or commercial purposes’ were allowable.

7.  On the question of whether an undisclosed disclaimer could exclude a plant produced by an essentially biological process, Article 53(b) EPC does not exclude such plants from patentability and so at the moment Examiners will not allow this, but the situation may change after G2/12 and G2/13 are decided.

8. The speaker then addressed the question of whether the EPO listens to applicants and IP practitioners in making policy.  Added matter has been a controversial area with the EPO being seen as too strict.  However the EPO now has the intention to harmonise practice on this at the IP5 level (IP5 is made up of the five largest Patent Offices).

9.  The speaker said that Rule 36 regarding the deadline for filing divisional applications was amended in response to pressure from applicants.  The recent change to Rule 164 allowing further searches was also cited as an example of this.

10.  The EPO is also setting up a working group to look at problems associated with biotech cases, in particular the frequent lack of unity findings and harmonising internal policy on broad claims and inventive step.

You may also wish to see the related articles Top 10 Biotech Claims You Cannot Have in Europe and Top 10 Points about Gene and Protein Sequences.

 

10 Points on Indian Patent Law

These are based on a talk given by Hari Subramaniam on 15 November 2013 at the CIPA Life Sciences Conference.

1.  It must be remembered that Indian patent law had always placed considerable importance on the public interest.  It still has its uncertainties and difficulties, and is continuing to evolve.  One example is the case of injunctions which are normally difficult to get, but important given that it can take up to 6 to 8 years for a patent trial to conclude.

2.  There are several ways a third party can attack a patent.  Both pre- and post grant opposition are available.  Until recently it was possible for an opponent to keep filing pre-grant oppositions in a serial manner.  However now only a single pre-grant opposition can be filed by an opponent.  In addition previous practice meant appeal was not possible from pre-grant opposition.  However the Courts have now decided that appeal is possible for the applicant, but not for the opponent.  The opponent can appeal in post-grant opposition though.

3.  Section 3(d) is very potent weapon for an opponent.  This section requires inventions that relate to new forms of known substances to have increased efficacy.  Several cases have been lost on section 3(d) alone.  In order to avoid problems under this section the application should have good enabling disclosure, good examples of efficacy and comparisons with the parent compound or the closest prior art.  On the whole Indian patent attorneys tend to be fairly optimistic about overcoming objections under this section. 

4.  File wrappers from other jurisdictions can be important in pre-grant oppositions and post grant proceedings against the patent.  Therefore care must be taken as to what is disclosed in other jurisdictions during prosecution of equivalent cases.

5.  India has ‘working’ requirements for its patents.  Within 3 years of grant every patent has to be commercially worked.  In theory the Indian patent office can impose a fine of around $22,000 for failure to meet this, but in practice it finds it difficult to do so as there is no easy means for it to obtain the money.  One of the problems for companies is that as part of the requirement they need to submit commercially sensitive information such as the levels of revenue being generated. Instead of working a patent one can give a reason as to why it is not being worked, such as the lack of a viable business opportunity or a regulatory hurdle.  Working is defined in terms of reasonably meeting a public demand at a reasonable cost.  An interested third party can apply for a compulsory licence for an invention which is not being worked properly.  It has to make out its case for being able to supply the invention at a reasonable cost.

6.  In India there is an ongoing duty of disclosure that requires the applicant to file information about the status of corresponding applications.  Search and examination reports also need to be filed if requested by the patent office.  Failure to comply has serious consequences in that a patent can be refused or invalidated. Usually this can be rectified in pre-grant opposition by filing all the necessary information.  However in post grant opposition it could be too late.  A couple of patents have been revoked on this ground.  However the Courts might be persuaded to take a more lenient view if they had the opportunity to decide on the matter.

7.  In the famous Novartis Glivec case the patent application was rejected under section 3(d).  The appellate board said that though the new form had better properties a patent could not be granted unless those properties led to increased clinical efficacy. However Novartis did not prosecute their case well and failed to file appropriate evidence which would have been accepted by the board.  In general the patent office and appellate board are open to post-filing evidence of clinical efficacy.

8.  In BMS v BDR Pharma a compulsory licence was not granted. In the Natco v Bayer case a compulsory licence was granted, but Bayer made little effort to show why the cost of their drug was so high and fought the case badly.

9.  It was assumed that second medical use claims are not patentable in India.  However the Patent Office has now allowed such a case (IN7503/DELNP/2007) and therefore there does seem to be hope for such inventions.

10.  At the moment judicial intervention should always be seen as a possibility for sorting out problems.  Courts can make the Indian Patent Office change its practice.  However Applicants do need to be proactive and be prepared to fight.

You may also wish to see related articles Top 10 Uncertainties in Patents and Top 10 Things That Go Wrong with Patents and Patent Applications.