Where Should Foreign Patent Protection Be Pursued?

Once a client has made a decision to file a patent application, invariably, at some point during the patent procurement process, assuming foreign protection is not barred, the client will be asked whether it desires to pursue patent protection for the invention in foreign countries. Patents are territorial and have no applicability outside of the country in which they are granted. A United States patent would afford no protection in a foreign country against a competitor that manufactured, in a foreign country, a product covered by the claims of the United States patent and sold such products outside of the United States. Generally, to prevent manufacture, use or sale in any given country one must obtain a patent in the respective country.

The pursuit of patent protection in foreign countries is costly. With exceptions involving the filing of regional patent applications subsequently discussed, it is necessary to file and prosecute a separate patent application in each country in which patent protection is desired. To file a patent application in a foreign country, a foreign associate that is licensed to practice in the respective jurisdiction must be engaged and translations of original patent applications must be obtained for filing in non-English speaking countries. Thus, the costs involved in the pursuit of foreign protection in each country include the professional fees of the U.S. attorneys and the respective foreign associate, as well as the government fees. It is not uncommon for the prosecution of a single patent application in a foreign country to involve an investment of $10,000-$20,000 or more with no assurance that the patent will necessarily be granted.

A European patent application may be filed in the European Patent Office (EPO). The European patent application is an example of one notable regional application that affords the benefit of a single examination of the application that is accepted by all of the member states. The filing costs for an EPO application can be significantly higher than direct filings in most individual European countries but the ability to pursue a single examination in the EPO can provide cost savings if patent protection in multiple countries in Europe is sought. Furthermore, filing in the EPO affords flexibility with respect to the member states in which protection is finally obtainable since the decision to select the European countries in which a patent will be granted may be deferred until after the grant of the European application by the EPO.

So, with that background, the question remains where should foreign patent protection be pursued? No companies seek patent protection in all countries since to do so would be cost prohibitive. Moreover, it may not be an effective strategy to file in a country where a competitor would only be expected to manufacture a competitive product since the competitor could elect to manufacture the product in another country where no patent protection had been obtained. The most reasonable course of action often involves determining which jurisdictions represent the most significant markets and pursuing patent protection in those jurisdictions.

Finally, it is often desirable to file a Patent Cooperation Treaty (PCT) application to preserve foreign filing opportunities. A PCT application may be filed as the first filed application or within one year of a patent application on which it relies for priority. The PCT application never issues as a patent, but rather, is a placeholder that defers the deadline by which applications in foreign countries (“national phase applications”) must be filed. In most cases the filing of a PCT application permits the deferral of the timeframe in which to file a national phase application up to 30 months from the priority date of the earliest filed application.

The deferral of the filing of foreign applications by utilizing the PCT process offers several benefits:

1. The filing costs associated with national phase applications are delayed, which is helpful to many startups and growing companies for cash flow reasons.
2. The deferral of national phase filings affords the applicant more time to assess which markets are likely to be significant and which are not. As a result, filings in certain countries along with the attendant costs may be avoided based on observations of the marketplace that become evident over time whereas a broader filing strategy may have originally been felt necessary in the absence of actual market data.
3. The deferral of foreign filings via a PCT application permits the filing of national phase applications in any PCT member state well beyond the timeframe in which direct filings would otherwise need to be made. As a consequence, startups and small companies contemplating a liquidity event may be able to defer significant filing and prosecution costs for foreign applications until a time when another party with deeper pockets assumes responsibility for the applications or until a time when financial resources are more plentiful. Additionally, it is often beneficial for a company contemplating a sale of the business to file a PCT application even if it does not have significant foreign markets since a potential acquirer may value the ability to obtain patent protection in major foreign markets of the potential acquirer.

Viewed in the above framework, a decision can be made as to where and how foreign patent protection should be pursued in a cost-effective manner.

Recent Trends in Global Trademark Publications

A recent study indicates that in 2013 China again held the title of most trademark applications published by a national trademark office in a given year.  And, while the United States retained its hold on the number two position, Brazil saw major increases in published trademark applications in 2013 and claimed third place.

The data, published by Thomson Reuters® and culled using its SAEGIS® on SERION® trademark search platform, finds some shuffling in the ranks of the top ten trademark publishers for 2013.  Canada, Germany, and the United Kingdom fell out of the top ten, while India, Mexico and Taiwan took their places.  And while most of the top ten saw fairly steady numbers of trademark publications compared to the previous year, both South Korea and Brazil saw marked increases in 2013.  Aside from those already mentioned, the top ten countries include Turkey, Japan, and France.

A word on methodology: since China requires a separate trademark application for each class of goods or services for a given mark, unlike other countries that allow multi-class applications, one cannot compare the gross number of publications alone.  Rather, Thomson Reuters looked at the number of discrete marks that were published in a given year.  In other words, if a mark was published in three classes in China, it would still count as one published mark for purposes of this study.

Taking a closer look at the data, China saw an almost five-fold increase in the number of published marks from 2007 to 2010, to a peak of approximately 1.2 million published marks.  The numbers fell back in 2011 to under 1 million, and fell further to some 860,000 published marks in 2013.

In the U.S., publications fell off a bit in 2009 and 2010, compared to previous years, which would be consistent with a decline in filings in the immediate aftermath of the recession that began in 2008.  The numbers have been fairly steady over the past three years, at about 325,000 publications per year.

The biggest increases in the number of publications from 2012 to 2013 were found in Brazil, South Korea and Turkey.  Thomson Reuters reports a 53% increase in publications in Brazil last year, a 23%  increase in South Korea, and about an 18% increase in Turkey.  While we do not have empirical evidence to back this up, one wonders if the 2014 FIFA World Cup® and 2016 Summer Olympic Games have contributed to the increase in Brazilian publications.

While it is interesting to see how the gross numbers of published marks compare between countries, it is important to note that the most popular classes of goods and services vary from country to country.  In China, the most popular class for published trademark applications in 2013 was International Class 25, which includes clothing, footwear, and headgear.  Second place in China was Class 35: advertising and business management.

In the United States, most trademark applications were published for goods in Class 9, which includes scientific, photographic, measuring and signaling instruments.

Interestingly, in Turkey, France, and Brazil, the most popular class was Class 35: advertising and business management.  This class was also the most popular world-wide in 2013.

This data suggests that there is a lot of interest in protecting brands in developing economies, and that at least for the near term we expect this trend to continue.  The more challenging task is identifying the countries that will see new or continued growth in filings.

[All trademarks used in this article are the property of the respective owner.]

Sometimes, It's Just the Simple Things

While I was in law school, I had the opportunity to work as a part-time law clerk for a patent law firm.  I helped to prepare responses to office actions, perform legal research and search prior art patents.  I was going to law school full-time after having been an engineer for over eight years so this was some of my first exposure to what being a patent attorney was going to be like.

One project involved reviewing patents in the areas of car alarms and anti-theft technology.  This was last century, back in the early 90s, so many of the patents came from a time before the proliferation of mobile phones, tablets and (gasp!) the internet.  There were references to car phones but they were described as being the size of a shoe box and built right in.

I do remember coming across one patent where the inventor had used the original stereo speakers as the basis for retro-fitting a car with an alarm system that included a motion sensing component.  The inventor connected to the voice coils on the speakers and used the speaker cones as the vibration sensors.  For those readers who might not understand how a speaker works, normally the speaker voice coil is driven by an input signal, e.g., music, which causes the speaker cone to vibrate, which results in sound.  This inventor, however, realized that the speaker could be used “in reverse” in that whenever the speaker cone is shaken, for example, when the car is being broken into or moved, it will cause a signal on the voice coil and that signal can be detected.  As a result, each of the speakers in the car became a vibration sensor as part of an anti-theft system without the need for extensive re-working or running of wires.
 
I thought that was a very elegant solution.  Now, that may just be my geek flag flying, but I realized then that an invention doesn't have to be super complex to merit protection.  There was something about this “simple” solution to a problem that earned it my respect.

I believe that this is something that we should all keep in mind.  When you are conducting your patent harvesting reviews, i.e., evaluating your technology and deciding what might be the subject of a patent application to add to your portfolio, you should keep in mind that it's not always just the most complex ideas or technology that merit a patent application.  Those “simple,” but important, concepts also may need to be protected.

Trade Secrets and Economic Espionage

On April 29, 2014, U.S. Senators Orrin Hatch (R-Utah), the former Chairman and a current member of the Senate Judiciary Committee, and Chris Coons (D-Del.), a member of the Senate Judiciary Committee, introduced the Defend Trade Secrets Act of 2014 [the “DTSA”].  The DTSA is a bipartisan bill that proposes to amend the Economic Espionage Act of 1996 [the “EEA”] to create the first federal private right-of-action for theft of trade secrets.

Trade secret theft is on the rise.  According to Senators Hatch and Coons, theft of corporate trade secrets results in an estimated loss of $160 billion to $480 billion each year in the United States.  In this information age, trade secrets may be vulnerable to theft by a few keystrokes from a remote location, compared to the bygone era when trade secret theft may have required accessing and photocopying paper documents stored under lock and key.  Trade secrets are increasingly stolen at the direction of a foreign government or to benefit a foreign competitor.  “The intellectual property that drives the U.S. economy has never been more valuable, or more vulnerable,” according to Senator Coons.  “American companies are losing jobs because of the theft of trade secrets every day.”

Currently, trade secret misappropriation claims are generally brought under state laws.  Trade secret laws vary from state to state, which can create problems for trade secret owners and make it difficult for U.S. companies to develop uniform policies.  Although the EEA made trade secret theft a federal crime, federal criminal laws do not appear to have successfully stemmed the tide.  The Department of Justice brought only 25 cases of criminal trade secret theft in 2013.
 
The availability of a federal civil cause of action may harmonize U.S. trade secret law, enable companies to develop a unified set of nondisclosure policies with federal protection, create a uniform standard for trade secret misappropriation, and facilitate access to federal courts.  The DTSA bill would arm trade secret owners with federal rights and remedies, including:

• ex parte orders to preserve evidence and seize property;

• injunctions or royalties in lieu of an injunction;

• damages for actual loss plus unjust enrichment to the extent not compensated by an award of actual loss, or a reasonable royalty in lieu of damages measured by other methods; 

• potential treble damages for willful or malicious trade secret misappropriation; and

• reasonable attorney fees for willful and malicious misappropriation, bad faith claims of misappropriation, or motions to terminate an injunction made or opposed in bad faith.

Rapid changes in technology and increases in employee turnover in today’s job market warrant appropriate measures to preserve and protect trade secrets.  This federal legislation may help companies protect their valuable trade secrets, but trade secret owners will need to continue to rely on state laws for the time being.
 

Benefits of Utility Model Protection

Some countries have a form of patent protection for inventions which do not qualify for regular patent protection.  This type of patent—generally called a utility model, and sometimes known as a petty patent—has a lower standard of patentability than regular patents.  Utility models, in most applicable countries, must relate to apparatus and not to methods, and generally have a term of 10 years.

While the United States does provide for utility model protection, many countries have such protection, including Australia, Germany, China, Taiwan, Japan, Korea and other countries in Europe, South America and Africa.  Since the patentability standard for utility models is lower than for regular patents, utility model protection can often be obtained for incremental or small improvements where regular patent protection is not available.  Therefore, utility models present options for some level of patent protection rather than no patent protection at all.

In many countries with such protection, a utility model application can be filed after a regular patent application has been rejected or even after such an application has lapsed.  A regular patent application can often be converted to a utility model application, to provide an avenue for protection where regular patent protection appears doubtful.  In some countries, both regular and utility model patent applications can be filed concurrently to provide a hedge that some patent coverage will more likely be achieved.

Many countries have no substantive examination of utility model applications and thus utility model patents will be granted so long as the formalities of the application are met, including payment of applicable filing fees.  Where applicable, a benefit of utility models is the availability of a grace period (generally six months) in which to file for utility model protection after public use of an invention outside of the home country.  Such earlier use will normally bar regular patent protection.

Thus, utility models can provide opportunities for some level of patent protection in instances where a regular patent is not achievable.

Priority in Patent and Design Applications

Noteworthy Changes for Patent Applicants related to the Patent Law Treaties Implementation Act (PLTIA) effective December 18, 2013.

Although the Leahy-Smith America Invents Act (AIA) gets most of the attention, the Federal rules revised for consistency with the PLTIA include some noteworthy changes related to, among others, the restoration of the right to priority and revival of abandoned applications.

Under the revised rules, applicants have two additional months to restore a right to priority to a previously filed foreign, provisional or design application as long as the delay in filing the priority claim was unintentional. The applicant must file two petitions: 1) a petition to restore the right to priority; and 2) a petition to claim priority.  The petition to restore the right to priority must include the priority claim in an application data sheet, the petition fee and a statement that the delay was unintentional.  The petition must be filed within 14 months of the filing of the priority foreign or provisional application or within 8 months of the filing of the priority design application.  The petition to claim priority must include an application data sheet identifying the priority application, a certified copy of the priority application if required under the Rule 37 CFR §1.55(f) unless previously submitted, the petition fee, and again a statement that the delay was unintentional.  The Director may require additional information where there is a question regarding whether the delay was unintentional.  Each petition requires a hefty $1700 petition fee for applicants other than small entities for a total of $3400.

Applicant may also file a petition to revive an abandoned application as long as the abandonment was unintentional.  Thus, the revived rules eliminate the “unavoidable” delay standard for application revival.  The petition must include the reply required to any outstanding office action or notice unless previously filed, the petition fee, any required terminal disclaimer, and a statement that the delay was unintentional.  The petition fee is yet another hefty $1700 for a non-small entity applicant.

At the end of the day, the good news is that applicants now have an extra 2 months to restore a right to priority as long as the delay was unintentional.  Of course, for practitioners and clients alike, the moral is to follow best practices: consider claims to priority at the time of filing and not after the fact, and avoid unintentional abandonment.  For those interested, the details of the new rules are spelled out in 37 CFR §§ 1.55, 1.78 and 1.137 in the Federal Register dated October 21, 2013.

Is Your Intellectual Property House In Order?

When a company is seeking an infusion of capital, a loan, is involved in merger and acquisition (M&A) discussions, or considering an initial public offering (IPO), invariably an investigation of the intellectual property assets (IP assets) of the company ensues. The entity that represents the source of funds, a suitor or the underwriter wants to be sure that all IP assets, and particularly patent and trademark assets, are assigned to the company, that all such assignments have been properly recorded and that the recorded assignments establish a clear and uninterrupted chain of title to the company.

It has been observed that companies frequently do not pay attention to the housekeeping associated with their IP assets, and for one reason or another, assignments of IP assets have not been obtained or have not been recorded in the USPTO. By way of example, companies frequently are not diligent in obtaining assignments of patent applications from all named inventors on patent applications, do not record assignments of patent applications with the USPTO, or have not obtained and recorded IP assets at the time of an acquisition or merger. Additionally, in transactions which involve foreign IP assets, it is common for companies to neglect to correct or intentionally defer the correction of the ownership records for the foreign assets.

The failure to address the housekeeping associated with the company's IP assets is almost universally a mistake. While it is quite straightforward to deal with such issues contemporaneously when inventors work for a company or when parties exist and recognize the benefit of dealing with such matters, the passage of time frequently changes the landscape. It may become difficult or impossible to locate inventors no longer employed by the company, inventors may die and inventors may become uncooperative if the separation from the company was not amicable. Additionally, it may become difficult to find persons who will execute assignments on behalf of companies that no longer exist.  Consequently, developing a clear chain of title to the IP assets, which is almost universally required by the funding source, the suitor or an underwriter, can become problematic.  While it is usually possible to address such issues after the fact, it is almost always more difficult and costly.

For the above reasons, it is recommended that companies contemporaneously deal with assignment obligations as they arise.  If this has not been the normal and customary practice, it is recommended that a review of the company’s intellectual property assets be conducted to identify and address any matters that have not previously been dealt with. Such a review pays dividends when a company is seeking financing, initiates M&A discussions or is approaching an IPO.