Global Patent Strategy: Bridging The Gap Between The Developed And Developing World

Monday, January 31, 2011 - 01:00

Patents are national rights, granted and enforced by a given country. The national characteristic of patent rights presents a significant challenge for companies operating in a global business environment. Some challenges are practical, relating to the complexity and cost involved in filing multiple applications for the same invention in patent offices around the world, each application compliant with the national rules relating to deadlines, formalities and language. Other challenges are more fundamental, relating to the development of a truly global strategy for protection, given the substantive differences in patent laws around the world as they relate to patent grant and enforcement.

The challenges are particularly greater as they relate to obtaining meaningful patent rights in developing countries. While nearly all countries recognize the need to protect patent rights in some form, the patent systems in developing countries are generally newer and relatively untested. There are also meaningful substantive differences in the laws of developing countries, including patentable subject matter and acceptable limitations on the patent monopoly in view of public policy considerations. Effectively accessing foreign judicial systems to protect patent rights can also be difficult for non-nationals.

Yet, certain developing countries - notably China and India - are among the fastest growing markets in the world. The challenge for many companies is to find a way to access developing markets effectively while safeguarding proprietary technology from unfair use. The questions of where to file, when or how to file, and then what to do when faced with infringement are key.

In general, most applicants decide where to file by imposing a cost-benefit analysis. In theory, a company could file in any country, since most grant some form of right. Yet, filing foreign patent applications is expensive, involving preparation, filing fees and (frequently) translations. The benefit offered is the opportunity to stop the use, sale or manufacture of patented technology by unauthorized users. The importance of manufacturing is particularly apparent in certain developing countries where the technical skill of the local population is high.

Once the decision is made where to file, the question becomes how best to accomplish that without undue cost or loss of rights. Several international treaties, administered by the World Intellectual Property Organization (WIPO), provide some measure of global coordination. These are generally directed to providing a relatively simple and inexpensive way for companies to begin the process of seeking foreign patent rights. The good news for the truly global applicant is that most developing countries are signatories to these treaties.

The Paris Convention for the Protection of Industrial Property (enacted in 1883) is the oldest of these treaties. It guarantees applicants who are nationals of contracting states two important rights. First, the right to national treatment, which refers to the right of a patent applicant to be treated as a national of the country in which the filing is made. Second, the right of priority, which refers to the right to file a single patent application in the applicant's home country and then wait 12 months before filing applications in other countries for the same invention. The right of priority is an important procedural advantage, given the practical complexity involved in simultaneously filing multiple applications worldwide and the associated potential for loss of rights. From an initial group of 11 signatories, the Paris Convention has become one of the most widely adopted international treaties, with 173 contracting states at present. Most, but not all, developing countries are now contracting states.

The Patent Cooperation Treaty (PCT) took procedural alignment one step further. Concluded in 1970, with over 142 contracting states, the PCT permits patent applicants from contracting states to file a single application to initiate the foreign filing process. This PCT application is sufficient to satisfy the 12 month deadline under the Paris Convention for all PCT contracting countries while offering the applicant an additional 18 months to file individual applications in those countries, the so-called "national phase." Delay can be an important advantage, given the cost of international patenting. Often, applicants can use that time to further evaluate the technology and its commercial potential. The PCT also offers some window into the challenges the patent applicant will face at the national stage by offering a patentability search and preliminary non-binding opinion on patentability. As a practical matter, the PCT report tends to streamline foreign prosecution, as national offices frequently look to the PCT report for guidance, at least initially.

While not all developing countries are currently members of the Paris Convention and the PCT treaties, there are efforts underway to encourage others to join. Non-PCT states include, for example, certain Middle Eastern (e.g., Iraq, Iran), Latin American (e.g., Argentina, Bolivia), Caribbean (e.g., Jamaica) and African countries (e.g., Ethopia), among others. These exceptions, while limited, are important for the truly global patent applicant since failure to file an individual national application apart from the treaty can result in a fatal loss of rights.

A third major treaty, the Patent Law Treaty (PLT), was adopted in 2000 to provide certain additional administrative advantages to global applicants. It is intended to make it easier for applicants to broadly file applications by simplifying and harmonizing formality requirements around the world. The PLT currently has 25 contracting states, with obvious limitations in both the developed and developing world.

The WIPO treaties are important for several reasons. First, they offer procedural advantages for patent applicants that limit the headache and cost of securing global rights. Second, and more fundamentally, the treaties represent an existing framework for developed and developing companies to cooperate with respect to international standards governing patent rights. Yet, none of the WIPO treaties dictates substantive requirements for obtaining or enforcing patents. Substantive harmonization would preserve the rights of individual countries to grant or enforce patents but permit a more predictable course of prosecution and outcome for patent applicants on a global basis.

Efforts at substantive patent harmonization have proven difficult. The developed countries - notably the U.S.- have led these negotiations by emphasizing the importance of strong intellectual property rights for stimulating foreign investment, technology transfer and domestic innovation. Efforts of the developed nations to drive this agenda have been encouraged by pressure from the pharmaceutical, software and entertainment industries in particular, frustrated by billions of dollars in lost profits in the developing countries.

These efforts have met with resistance from developing countries, notably India and Brazil, concerned with the limits enhanced patent protection would place on the diffusion of technologic advances and recently, the potential risk posed to public health. In many ways, the debate represents an issue of perspective - to the extent that limited protection for patent rights may offer short term gains to developing countries, while strong protection for intellectual property rights should support strong economic growth in the long term. Overall, cultural differences and historical conflicts have exacerbated these negotiations, with developed countries organizing in effective ways to advance their objectives. The question is generally whether developed countries have the best interests of the developing countries at heart, or simply seek to maximize profits for the multinational corporations driving their agendas.

As an advocate for substantive patent harmonization, the U.S. has and continues to be in an interesting position, given that U.S. patent laws in their detail are actually much different from the laws of many other countries, most notably in the U.S. adoption of a first-to-invent versus first-to-file system and the acceptability of relative versus absolute novelty. Despite these differences, and others, the U.S. and other developed countries have found common ground in patent harmonization negotiations, keeping the focus on minimum standards.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), adopted in 1995, represents the most significant achievement in substantive patent harmonization efforts to date. TRIPs, as administered by the World Trade Organization (WTO), establishes minimum standards for protecting intellectual property rights - including patents - to be provided by each member, in terms of rights conferred, duration of those rights and permissible exceptions. TRIPs incorporates, by reference, the obligations of the Paris Convention together with certain additional requirements to achieve the same. The agreement also addresses enforcement and creates procedures for dispute resolution.

One important feature of TRIPs is to require that all members recognize patent protection for any type of invention, including products and processes, in all fields of technology - provided that they are new, involve an inventive step, and are capable of industrial application. Historically, many developing countries only provided patent protection for processes versus the product itself. If a product could be made in any alternative way, the product itself could be sold by a competitor. Ensuring that product protection was available under TRIPs significantly strengthened patent rights, particularly for pharmaceutical products. TRIPs also established a minimum standard patent term of twenty (20) years.

Yet, TRIPs contains flexibilities that permit members to determine - as a practical matter - standards for patentability. TRIPS also permits members to exclude patent protection for certain types of inventions (e.g., methods of treatment) and to establish limits on the exclusivity of patent rights (e.g., compulsory licensing).

Compliance with TRIPs, expected of all WTO members, required major changes in the patent laws of many developing countries. The WTO established a transitional period for developing countries to implement these changes (2005), allowing additional time for the least developed countries (extended until 2013 and in certain instances, 2016). For many countries, particularly the least developed countries, this was an expensive and complex undertaking. Public health concerns proved to be a significant sticking point. Developing countries organized to express concerns that TRIPs might limit access to medication for diseases of public health importance, including AIDS. In response, after two years of negotiations, the WTO adopted the 2001 Doha Declaration, which affirms that TRIPS "does not and should not prevent Members from taking measures to protect public health."

China, which was not a member of the WTO at the time of the TRIPs negotiations, nevertheless revised its patents laws (as originally adopted in 1984) in parallel to become TRIPs compliant before the deadline. The patent laws of India underwent three separate amendments, in 1999, 2002 and 2005 to bring the Indian Patents Act 1970 into compliance with the provisions of the TRIPs. Despite the controversy that surrounded TRIPs, many developing companies have adopted patent systems that don't even include the exceptions permitted under the treaty, including compulsory licensing. Presumably, this is because many lack the expertise necessary to draft the appropriate legislation.

TRIPs' implementation is no guarantee that patent rights will be both generally available and enforced. Enforcement remains a major challenge in many developing countries, including China, where infringement is wide-spread. Strict application of criteria for patentability has proven challenging in India, where patent coverage has been denied to drugs readily patented elsewhere. As a result, patent rights - and intellectual property issues more generally - remain an important focus of negotiations between the developed and developing nations, including trade negotiations.

Efforts at substantive patent harmonization continue in the post-TRIPs era, largely through WIPO-based efforts to negotiate the Substantive Patent Law Treaty (SPLT). Gridlock best describes these negotiations presently, as WIPO members have become bogged down in the details of various alternatives. Efforts outside the WIPO have also been undertaken, also with limited success.

Ultimately, the interests of companies pursuing global business objectives involving patent protection likely rest with substantive patent harmonization. As multinational negotiations play out, companies may find short term relief through evolving efforts among global patent offices to share workloads in order to alleviate significant application backlogs. One result of this increasing coordination may be a more predictable course of prosecution and patenting outcomes for global filers. In the meantime, companies can work to develop a truly global patent strategy with advice from experienced patent counsel - often working through a network of trusted advisors at the national level - to avoid unnecessary loss of rights while achieving the broadest patent protection available under the laws as they exist today.

Rebecca (Becky) J. Kaufman is a Partner with King & Spalding's Intellectual Property Practice Group. Her practice includes U.S. and international patent prosecution, client counseling and transactional due diligence in the life sciences area.

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