NAIP Patent Blog

• WTO Dispute: US: 1, China: 0 - The results of the WTO dispute between the US and China were released last week and now some analysis are seeping out. This one (of three planned) goes over the Copyright claims in some good, easy to understand detail. Download the official decision here. (from China Hearsay)

• Predictably, China continues its rise up the patent charts. - China's Huawei ranks number one on the list of top PCT filers, leading many media outlets to claim that China's takeover as world technology leader is imminent. But ZTE, the second Chinese company on the list, only ranks 38th. Click on the link for a second look at the details, or peruse the data yourself here. (from IP Dragon)

• WIPO Newsflash: IP can be a Financing Tool. - Businesses are increasingly viewing IP as a financial instrument, but many in the industry is still racing to catch up. As a result, in March, WIPO will hold an open and free meeting for interested parties to learn more and discuss the phenomenon. Registration can be completed here.

• Media: Is Asia Winning a Race to Patent Ideas in the U.S.?. - According to the numbers, yes. But does quantity equate to quality? Japan, for example, spurs patent filings by rewarding engineers per patent filed, leading to more filings. But that may actually be detrimental to efforts at effectively monetizing ideas. But then again, Canon has followed this model to become a major force in both copiers and cameras. The debate continues. (from BusinessWeek)

• Obama: Open Source IT Solutions for US. - It's likely to see US patent reform under the aministration of Obama. In order to curb government spending, Obama is investigating the possiblility of open source IT solutions. One of the first priorities of President Obama is to determine whether it is feasible to stop relying on proprietary software bought from companies like Microsoft, Oracle and IBM. (From IP Watch)

• Microsoft to cut up to 5,000 jobs. - Times are changing for the once Mighty Microsoft... with a drop of 7.9% in its Share Price (Wall Street) net profit for the three months to 31 December down 11% on last year - the future at MS is looking gloom. Richard Williams, an analyst at Cross Research, said: "Microsoft has never had a layoff like this in my knowledge, and it's sending a signal that the times are definitely changing." (from BBC )

• China says to spend $58.5 bln on 3G over 3 years. - On Thursday, the Chinese government announced that China's three mobile carrier networks will start to build out their third generation (3G) networks. An estimated US $ 58.5 billion will be invested in this project. The long awaited licences were awarded by government in an effort to catch up with worldwide mobile technology as well as video and media applications. (from Reuters UK)

Due to the Lunar New Year, the Taiwan Intellectual Property Office (TIPO), the Intellectual Property Department of Hong Kong (HK IPD), and the State Intellectual Property Office of China (SIPO) will be closed.

Like many patent offices, if due dates or deadlines fall on a day in which the Office is closed, they will automatically be "pushed back" to the first day the Office is again open.

For reference, the Office open and closed dates are marked on the charts below. Note the differences in Office closings for TIPO, HK IPD and SIPO. Also pay special attention to the "make-up" days for SIPO.

• Watch out! The changes in Chinese Patent Law are coming. - The changes to Chinese patent law go into effect in October. What effects will these changes have on the behavior of Chinese companies? What concerns do they have? Also how will it influence trends in the industry? This article provides a brief overview of theses issues that surely will become major points of focus in the coming years. (from IP Watch)

• Apply for Chinese Copyrights in Japan. - A joint venture by the Copyright Protection Center of China and several Japanese companies, called the Golden Bridge Co., will allow Japanese companies to register copyrights for China in Japan. In addition to cost savings from not having to hire Chinese lawyers as agents, companies can significantly reduce wait time by up to two weeks. (from Daily Yomiuri Shinbum)

• Zen And the Art Of Intellectual Property in China. - An interesting look (and meditation, of sorts) on how commercialization/industrialization is being used to spread the ideas of the Shaolin Monastery: Zen Buddhism, Traditional Chinese Medicines, and everyone's favorite: Martial Arts. (from IP Dragon)

• Imagine a world free from DRM, copyrights and patents. - A thought that perhaps many of us had, now unleashed onto the Internet. Here the comments are the main attraction, with some insightful, some ridiculous, and some irrelevant, but all entertaining. (from TG Daily)

by Charl Goussard, NAIP Legal Research

It's no secret that no matter where you apply in the world, patents are time and cash consuming! However, due to a unique, two-stage patent system and multiple national languages, those wishing to patent in Europe require even more time and somewhat deeper pockets.

At the European Patent Office (EPO), patents are prosecuted in one of three official languages: English, French or German. In the past, however, to be validated in a European Patent Convention (EPC) member state, the text of the patent (the specification) had to be translated into that country's national language. Considering that the EPC currently consists of 35 member states, each with its own official language, translating patents could become a huge burden! Some speculate that translation cost can easily run up to 40% of the total patent cost.¹

Apart from being time and cost consuming, the need for translated patents seems to be superfluous. Practice has shown that whenever a patent is infringed, the parties as well as the court involved exclusively refer to the text of the patent as granted by the EPO – the translated version is left in the dark!² Furthermore, since patents are usually granted three to five years after filing, the translations seldom achieve the purpose of informing others of new technology - by the time the translated version are published, the technology is already well known.


Time for a change: The London Agreement

Recognizing the need for a cheaper, more streamlined system, some EPO member states adopted the London Agreement. The rationale for the London Agreement is to cut costs in the post-grant phase of European patents, such as translation costs, publication fees as a result of fewer translations, and patent attorney fees.

Signing of the London Agreement is optional, and since its entry into force on May 1 2008, 14 EPC member states have ratified the agreement.


Implementation

The London Agreement differentiates between two types of EPC member states: those who have English, French or German as an official language (Group I) and those who don't (Group II).


All of the above countries still require that the claims of the European Patents be translated into their national language for validation.

Countries falling within the first group will no longer require a translation of the patent specification for validation of the patent in that country. Remember that it is still a pre-grant requirement that European patents’ claims be translated into English and French when the language of the application is German – and vice versa!

Countries falling within the second group will select one of the three official EPO languages as the required language in which European patents will have to be translated for validation. However, these countries retain the right to require a translation of the patent claims into one of their official languages.


Cost Reductions Scenarios

The trimming down of translation cost after implementation of the London Agreement depends on the countries designated by the patentee. The most significant cost reduction occurs where designated countries have signed up to the London Agreement.

From our explanation above we can conclude that the London Agreement generally has a cost saving effect. The countries designated by the patentees will however determine the exact extend of cost saving as a result of the London Agreement.

The following charts, aided by examples, are helpful references for the various scenarios one could encounter under the London Agreement.


General Purpose Chart





For the purpose of our examples, we assume that the language chosen by the applicant for prosecution at the EPO is English.



Example 1: Designated to the UK, France and Germany






Example 2: Designated to the UK, France, Germany, Norway and Finland






Example 3: Designated to France, Germany, Netherlands and Spain


*Translation of claims only into Dutch (The Netherlands have agreed to the London Agreement and specified English as their language of preference).




Example 4: Designated to France, Germany, Belgium and Austria


Upon grant of patent by EPO – translation of patent specifications into French and German for Belgium and Austria respectively – both have failed to join the London Agreement.


^1,2 http://www.epo.org/topics/issues/london-agreement.html

• The end of an era: John Dudas Resigns. - As expected and predicted by many, the much maligned USPTO director will resign, official January 20^th. IAM blog recaps some crucial issues during his tenure, in which both much changed, and much that was supposed to change didn't. (from IAM Blog)

• Who are the IP world's top dogs of 2008? - IEEE has compiled a comprehensive "scorecard" of businesses with the strongest and most influential IP portfolios. Based on their Pipeline Power metric, the list provides some surprising names and is perhaps a preview of the patent leaders of the future. (from IEEE Spectrum)

• Software & Business Method Patents for Japan? - A major year-long study set to begin at the end of this month will look at making revisions to Japan Patent Law on topics such as disput resolution, employee inventions, speeding up examinations, improving ease of reading text, and most important: revising the definition of "invention" in protected subject matter. The news article (English) is available here. (from 271)

• More cautious, reserved hope for Patent Protection in China. - A strong ruling in Shenzhen against software pirates may be a breakthrough for IP holders in China looking to the government for help. However, the question remains: will the rest of China follow Shenzhen? (from China Business Law Blog)

The Taiwan Intellectual Property Office (TIPO) has initiated an Accelerated Examination (AE) program that will take into consideration the examination results conducted by foreign Patent Offices. Through the program, invention patent applications may receive examinations results in as quick as six months depending on field of technology. Applications will be accepted for a trial period beginning January 1st 2009 and lasting for a duration of one year.

Taiwan currently does not participate in any Patent Prosecution Highway (PPH) programs with other Patent Offices, but the AE program will follow the same general principles and procedures. Unlike PPH programs, however, applications at TIPO already under substantive review will still qualify. Acceptable examination results must be from corresponding applications in foreign Patent Offices that have been granted—no restriction has been set as to which foreign Patent Offices are acceptable.

More information, including requirements, can be found on the TIPO website here (Chinese only).

by Charl Goussard, NAIP Legal Research

Parallel importation has long been both an opportunity and threat for companies. Today, due to the massive size and increasing complexity of markets, as well as growing competition globally, parallel importation has become an even greater issue of concern for not just businesses, but also patent holders. It is for this reason that we have decided to have a closer look at the impact of Parallel Importation on Intellectual Property Right (IPR) owners.


Firstly, What is Parallel Importation?

The World Health Organization describes parallel imports (also referred to as "grey market" imports) as “…imports of a patented or trademarked product from a country where it is already marketed….”

Parallel imports mainly occur when there are price discrepancies of the same product in different markets. These price discrepancies are most prevalent in the markets for medicine and high technology goods.

For instance: Taitiger Ltd. (Taiwanese) manufactures a notebook and exports it to Europe where its designated, exclusive agent sells the notebook for 500 EURO per unit. The same notebook however is sold by Taitiger's agent in Australia for 350 EURO per unit. Consequently, Kangaroo Exports, an opportunistic Australian trader, seizes the opportunity and buys Taitiger notebooks in Australia which he then exports to France and re-sells for 450 EURO per unit, 50 EURO cheaper than what Taitiger’s European agent sells the notebooks for, but still makes a profit.

From this example, we see parallel importation benefits some and adversely affects others. In general, however, companies prefer to maintain control over products, distributors and prices. As a result, companies go to many lengths to deal with and prevent parallel importation.


Do Patents Provide any Protection Against Parallel Importation?

In a word: Yes!

The purpose of obtaining a patent or an exclusive right to practice a patent is to legally fix a monopoly over the utilization of the whole or a part of the patent for an area in which the patent is registered.

For the sake of clarity, let us briefly review what a patent is and what kinds of rights it gives to its owners:

A patent is a collection of exclusive rights granted by a state to an inventor or his assignee for a fixed period of time in exchange for a disclosure of an invention. The exclusive right granted to a patentee in most countries is the right to prevent or exclude others from: making, using, selling, offering to sell or importing the invention.

So, is it possible for a patent owner to use his/her rights to prevent parallel imports?

From the definition above, one can deduct that a patent owner may nip parallel imports in the bud by monopolizing the 1. selling; 2. offering to sell; and 3. the importation of the invention. In addition, the patent owner may extend his rights to others by way of a license. Usually these licenses take the form of a patent license agreement, an agent or distribution agreement, or a manufacturing agreement. Some of these agreements may even grant the licensee the Exclusive or Sole right to practice the specific right pertaining to the patent.

In the example above, we assume that Taitiger's notebook is covered by patents in some European Countries – UK, France, Germany and The Netherlands. The right to import, offer to sell and resell has been exclusively licensed to Taitiger's European Agent. If Taitiger's Agent becomes aware of Kangaroo's parallel imported Taitiger notebooks in one of the mentioned countries, the Agent or Taitiger can prohibit Kangaroo from further importation and sales in the European Union (such a prohibition can be enforced on a national level by way of patent infringement litigation – or by way of Border Detention measures) .

However, the monopoly an IPR holder has over the sale and importation of patented goods is not absolute… One of its limitations can be found in Doctrine of Exhaustion.


What is the Doctrine of Exhaustion?

The Doctrine of Exhaustion is a limitation of intellectual property rights (IPRs). Once a product which is protected by IPRs has been sold by either the IPR owner or by others with his/her consent, the IPRs over this given product, as far as commercial exploitation is concerned, are exhausted. Sometimes this limitation is also called the First Sale Doctrine, since the rights of commercial exploitation (sale or offer for sale) for a given product end with the product's first sale. Subsequent acts of resale, rental, lending or other forms of commercial use by third parties can thus no longer be controlled by the IPR holder.

The Doctrine of Exhaustion can be applied on a national, community or international level. Each level affects sales and importation rights over patented goods differently.

Under national exhaustion, exclusive rights for commercial exploitation terminate upon the first sale of a product within the national boundaries, but IPR holders maintain the right to exclude parallel importers. The United States is an example of a country that follows the Doctrine of Exhaustion on a national basis (applied to patents, copyrights and trademarks). In our example above, Taitiger would be able to prohibit Kangaroo from importing notebooks into the US if Taitiger were the holder of US patents contained in the notebook. However, once Taitiger’s notebooks have been sold in the US by their agent, their IP rights are exhausted and Taitiger has cannot exercise any of its IPRs over subsequent commercial exploitation.

In the European Union, things work a bit differently. For parallel imports, the EU applies a system of community exhaustion. IPR holders may exclude parallel imports from outside the European Union, but the rights for commercial exploitation for patented goods, imported or not, are exhausted upon their first sale in any country within the Union.

To complicate the issue, Patents in Europe are enforced on a national basis. This discrepancy between the nationally imposed patents and the Community imposed Doctrine of Exhaustion creates great opportunities for traders and headaches for patent right holders within the European Union. Importers can easily dodge the net of exclusivity if the IPRs holder has selected only a few countries in Europe for patenting.

For example in the EU, once the parallel imported products are cleared by customs they may be freely traded within the EU. Kangaroo may thus decide to import the parallel goods from Australia to a country within the EU in which Taitiger has not registered their patents (any EU country except for France, Germany, UK or The Netherlands). Thus, if Kangaroo imports the goods through Italy, has Italian customs clear the notebooks, and distributes the notebooks from there, Taitiger would have no legal recourse because Taitiger has not registered their notebook patents in Italy. Taitiger has to assert their patents against Kangaroo's grey imports before these imports are customs cleared. Taitiger cannot, for instance, institute patent infringement litigation against Kangaroo in Paris – since the goods were imported and cleared in Italy.

(Please note that Switzerland is NOT a member of the European Union and that it applies the Doctrine of Exhaustion on a national basis.)

Lastly, some countries, such as Japan, apply the Doctrine of Exhaustion on an international basis. Under this system, exclusive rights are exhausted "internationally" upon first sale. Japanese IPR holders are thus without recourse against a parallel importers – good news for traders!


Conclusion

As seen above – Patenting an invention gives some monopoly over the commercial exploitation of that invention. The exclusive rights to sell and import the patented goods may be retained by the patentee or licensed to third parties.

HOWEVER: These exclusive rights are limited to the territories which the patent covers. The Doctrine of Exhaustion furthermore limits these monopolistic rights in the various territories as determined by the national/community laws applicable for such territory.

It is therefore vital that future patentees familiarize themselves with the commercial risks posed by Parallel Imports in the various markets prior to planning an elaborate marketing strategy!