Your company drafted and filed a patent application with the United States Patent and Trademark Office (USPTO). A good deal of the company's resources, both dollars and manpower, were devoted to the process. Now you can relax and wait for the USPTO to examine the application, right? Not so fast. Long before the USPTO performs its initial review, your patent attorney will ask whether you would like to file the patent application in foreign countries and, if so, where. How do you decide?
Three Foreign Filing Options
If a patent applicant files a patent application overseas within one year of a U.S. filing date, the applicant will retain that filing date as the priority date for the overseas patent application. Maintaining this priority date is often critical to ensure that the foreign patent application predates prior art or a company's own disclosure of the technology described in the U.S. patent application. Three foreign filing options exist in this scenario. A direct national filing is a foreign patent application directly filed in a given country. A regional filing is a patent application filed with a regional patent examining authority, such as the European Patent Office. Regional examination means that patent prosecution takes place once, before a single patent examining authority, but the resulting patent is (or can be made) effective in multiple countries. An international patent application is filed with an international patent authority through the Patent Cooperation Treaty system. The application is examined on its merits, followed by an optional patent prosecution procedure. But the international application is more of a placeholder than a true patent filing. At the end of the international process (typically 30 months from the priority date), the patent applicant must pursue direct national and/or regional filings as described above.
The company's profile, budget, and business plan determine which filing options are appropriate. Furthermore, irrespective of the company's size, the type of technology being protected can influence the choice. Certain countries are known to favor or disfavor certain technologies, and protection in those countries, while otherwise not particularly important, may be valuable in a specific instance.
Considerations For Smaller Companies
The smaller company should consider the location of its markets and manufacturing, protecting products where they are sold and preventing the production of knockoffs. Additionally, consider the locations of potential business partners and competitors. Having patent protection in a partner's backyard lets you deal with it from a position of strength. Patents in a competitor's country prevent it from undercutting you in their own country. Consideration should also be given to the priorities of investors and potential acquirers.
Considerations For Larger Companies
A larger company should focus on many of the same criteria as a small business. The location of your markets, manufacturing facilities, potential business partners, and competitors are all relevant. While every company eyes the bottom line, as a larger company, you may have some flexibility to procure and maintain a larger number of patents. In fact, your reach may be more global in nature, and it may be necessary to have protection in more countries than a smaller company.
Time And Cost Of Foreign Patent Applications
The length of time required to obtain a foreign patent and its cost must also be considered. It is generally assumed that a direct national filing will produce a patent in the shortest amount of time, regional filings will take longer, and international filings will take the longest. Oftentimes, however, the speed with which a patent is obtained is outweighed by the cost. The delay afforded by an international patent application, for example, allows you to develop a better idea of your markets, partners, and competitors before filing expensive national and/or regional patent applications. If you wish to move the foreign application process forward more quickly, even though the slower international patent application route was chosen, a direct national or regional filing can take place in advance of the final deadline for doing so.
Additionally, because national or regional patent authorities often follow the lead of the international patent authority, filing an international patent application may simplify prosecution at the national or regional stages, or at least help focus the issues in advance.
If you choose a direct national filing or a regional filing, each country or region's patent office has an independent look at the patent application. Different examining authorities may raise different issues, producing inconsistent results. There may be no economy of scale in addressing the same or similar issues. Additionally, most countries require periodic maintenance payments to keep the patent application and/or patent in force. Thus, the cost over the life of the patent must be analyzed to ensure that it makes economic sense to make the filing in the first instance.
Strategic Recommendations
Both large and small companies often choose an international patent application as a first step. Delaying cost and allowing markets to develop while maintaining flexibility in foreign filing options is desirable in many instances. Most companies thereafter will file a regional patent application through the European Patent Office. Once patent prosecution is finished, the granted patent can be validated in any or all of the states belonging to the European Patent Organization (a current list of EPO member states can be found at http://www.european-patent-office.org/epo/members.htm), assuming they were designated when the application was filed. The choice of countries varies based on the factors mentioned above. However, an important consideration is that European states have entwined economies, so that in some circumstances, obtaining patents in a subset of European countries has nearly as much value as obtaining patents in all of the European states. Investors frequently expect to see actual or pending patent protection in Europe because of the large European market.
Another choice amongst many companies is Canada. Although its economy is only a fraction of the U.S. economy, its proximity to and treaties with the U.S. make it a likely place for business or manufacturing to take place. Many investors in early-stage companies look for actual or pending Canadian patent protection. Although Mexico is also adjacent to the United States, its patent examination process tends to be slow and enforcement of rights is suspect in Mexico, making it a less attractive option.
Japan's highly developed economy makes it a logical choice for many businesses, but the cost of obtaining a patent in Japan is relatively high. Documents must be translated from English to Japanese, and the official fees and periodic maintenance fees are expensive. To the extent a company intends to do business in Japan, however, the benefits often outweigh the cost. For the smaller company the choice can be difficult. Many times investors expect to see actual or pending patent rights in Japan, but, with limited resources, a smaller company may decide the market is simply too small or the risk from competitors too remote to justify the expenditure.
Australia is a relatively inexpensive country in which to file, and no translation is required. So, too, the market is relatively small. Many companies choose to file in Australia due to its relatively low cost. As tempting as the low cost might be, a company should critically evaluate the size of the market in Australia before jumping in. Additionally, many high technology companies will obtain patent protection in Israel because of its highly developed economy and skilled workforce.
China presents an interesting conundrum. In the past it was generally accepted that a filing in China was not worthwhile. However, with signals that China will now more vigorously enforce patent rights, the analysis has changed. China is an enormous potential market as well as an important manufacturing country. To the extent patent protection can be obtained, it may turn out to be valuable. For the larger company, Chinese patent protection may be in order so as to hedge its bets that the protection will be valuable. For the smaller company, it may be best to focus on the other core countries and regions, unless it has near-term business prospects in China.
Final Thoughts
By approaching the filing options with an eye towards both actual costs and potential payoffs, your company can rationally decide how to spend a limited intellectual property budget. Investing a relatively small amount of time to consider the issues saves money spent on unnecessary foreign filings, and can ultimately generate a significant amount of revenue through market exclusivity, licensing, or joint-venture arrangements.
Published May 1, 2005.
