©2017. Published in Landslide, Vol. 9, No. 4, March/April 2017, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
The U.K. government has announced that it will ratify the Agreement on a Unified Patent Court (UPC) this year. Once that happens, Europe will become even more important as a location for international patent litigation, as will China and Asia. Trade agreements, Brexit, World Intellectual Property Organization (WIPO) intellectual property (IP) treaties, and a UPC system all signal that change will accelerate over the next few years. Practitioners in the United States will increasingly need solid international IP strategies, and a foreign filing program is critical to this success.
Choosing a specific foreign filing must represent a good fit in order to justify the additional time and expense that are bound to ensue. The country of focus should offer at least one of the following: substantial current market, current place of manufacture, strategic distribution or marketing hub, be the headquarters of a current licensed partner, or be the subject of an important well-resourced licensing development program. On the other hand, a poor bet for filing is any country with yet untapped significant potential revenue.
Filing an international patent application is just the tip of the iceberg of overall costs. Neither a pending U.S. patent application nor an issued U.S. patent automatically lead to a foreign patent. The most popular initial filing strategy only preserves a right to file a foreign patent application with a claim to a priority date. Likewise, paths to obtaining foreign patents that begin with a single patent application generally only open the door to subsequent direct filings to foreign patent offices.
Cost estimates should be carefully communicated to all involved in order to ensure a successful program that meets budget parameters. For example, a simple patent application based on an already prepared and filed U.S. counterpart, filed through the Patent Cooperation Treaty (PCT), will cost over $5,000 and may cost up to $10,000.1 This PCT application will preserve the right to file in all PCT signatory countries (currently 151)2 generally within 30 months3 of the U.S. parent patent application’s filing date.
Once a location has been selected and filings are made, operations should be sustained only as long as current expectations are understood and satisfied. Things can get quickly out of hand, and it is easy to see why. A PCT patent application pursued through expiration of the patent (20 years) in all 151 countries might cost as much as $2,800,000. If that application is pursued in only 10 economies (e.g., United States, China, Japan, Germany, United Kingdom, France, India, Italy, Brazil, and Canada) through expiration, maintaining those filings over 20 years will cost approximately $200,000. If a company files just one new PCT application per month and prosecutes each one in the top 10 economies after five years, there will be 60 applications pending in 10 countries, and that company would end up spending more than $50,000 per month just to maintain its inventions.
Other foreign filing paths are available, some providing regional protection via a single foreign filing based on an original corresponding U.S. patent application.4 For example, regional patent offices exist for African nations (African Regional Intellectual Property Organization (ARIPO) and Organisation Africaine de la Propriété Intellectuelle (OAPI)), Eurasian nations (Eurasian Patent Organization (EAPO)), and European nations (European Patent Organisation (EPO)). These regional paths provide fewer options but generally have a greater initial cost. However, filing regionally where only regional coverage is desired will reduce overall filing and prosecution cost. This is especially true where a PCT application would normally be filed and then eventually prosecuted in a narrow region of countries.
It is also possible to directly file a patent application with most countries’ patent offices5 by following the directives in the Paris Convention for the Protection of Industrial Property of 1883.6 This direct filing is the preferred path for filing entities with a well-reasoned foreign filing policy if it is clear which countries are to be filed in and there is no need to see how things “play out.” A direct national filing is a reasonable, cost-effective strategy as long as the list of strategic countries is short and the market plan is well developed. In contrast, if the international strategy is still being developed, a PCT filing will give the company some time to see how things develop in the new market with its new products. In such cases, spending the extra money may well be worth it.
Selecting countries for foreign filing usually begins with how a company intends to use its patents. Factors to consider include product markets and competitor challenges, defensive positions, product type (e.g., pharmaceutical or software program), corporate reputation, and an active licensing program. A review of corporate patent expectations, product plans, and goals should be addressed as the initial candidates for filing are weighed. Considerations include (1) whether the invention is a game changer for a whole new market or simply another patent application in an already under-exploited portfolio; (2) who could or would be the infringer, end user, or a competitor; and (3) the cost and/or probability of enforcement.
Close examination of all factors and management buy-in for the best path and procedure for obtaining patent protection, associated costs, and enforceability are critical components for international patent filing strategies.
Even though patent treaties are an effort to harmonize the requirements for patentability, many countries still retain unusual subject matter limitations, requirements for patentability, unique prosecution procedures, or compulsory licensing7 or working requirements.8 Just one example: in India, a proof of working report must be filed annually for all active patents.
Other means of IP protection should also be part of a well thought out international IP strategy. A key area is the suitability of trade secret protection as an alternative to filing patents in specific cases. Members of the World Trade Organization (WTO) have some form of trade secret protection available: while its statutes are found in various titles, China’s laws are fairly robust and comprehensive;9 and the European Union is in the process of updating its trade secret laws.10 As in the states, foreign countries require that for something to be protected as a trade secret it must have some tangible business value and be kept secret and not be available to the public or competitor. These reasonable secrecy efforts must be maintained and remain in place as long as the company wants to protect its product as a trade secret. Once it becomes public, the protection ends.
Because attorneys tend to be risk adverse, they may be the ones to lean toward a “more protection is better” plan, often opting for filing everywhere for fear protection might someday be found wanting. Counsel should push the foreign filing decision and its underlying strategy back to the organization, where opportunities and their associated costs and risks are best evaluated. Cooperation between the business, technical, and attorney teams is vital when decisions on IP protection are in play. The teamwork between these groups is most effective for testing the climate and ensuring strategic success.
1. Fees can be determined at PCT Fees in US Dollars, USPTO, https://www.uspto.gov/patents-getting-started/international-protection/patent-cooperation-treaty/pct-fees-us-dollars (last modified Jan. 1, 2017).
2. Not every country is a PCT member. For example, Andorra, Bangladesh, Bhutan, Cambodia, Iraq, Jordan, Kuwait, Lebanon, Nepal, Pakistan, Taiwan, Vatican City, and Yemen are not PCT signatories.
3. An excellent date calculator is available at PCT Time Limit Calculator, USPTO, http://www.wipo.int/pct/en/calculator/pct-calculator.html (last visited Jan. 18, 2017).
5. Currently 176 countries.
6. Paris Convention for the Protection of Industrial Property, WIPO, http://www.wipo.int/export/sites/www/treaties/en/documents/pdf/paris.pdf (last updated Jan. 13, 2017).
7. Compulsory Licensing of Pharmaceuticals and TRIPS, WTO, (Sept. 2006), https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm.
8. See Thomas Cottier et al., Use It or Lose It: Assessing the Compatibility of the Paris Convention and TRIPS Agreement with Respect to Local Working Requirements, 17 J. Int’l Econ. L. 437 (2014).
9. Christina Nelson, Trade Secret Enforcement in China: Options and Obstacles, China Bus. Rev. (Jan. 1, 2013), http://www.chinabusinessreview.com/trade-secret-enforcement-in-china-options-and-obstacles/.
10. Trade Secrets, European Commission: Growth, https://ec.europa.eu/growth/industry/intellectual-property/trade-secrets_en (last updated Jan. 18, 2017).