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Patent filing strategy to minimize litigation risk

By John Moetteli, Esq., US Patent and Trademark Attorney-at-law, Da Vinci Partners, Switzerland. © 2009

Few risk managers are aware that one simple choice made as part of a company’s overall patent strategy can be fine-tuned to significantly reduce litigation risk, namely the choice of where a company starts the patent application process. Where permitted under national law and where there is a potential market for the product in the US, patent applications should be filed in the United States first. This chapter is intended to enlighten risk managers so that they can help their Europe-based clients loosen the deep-seated practice of home-country priority fi lings that, in most cases, needlessly handicaps the client vis-à-vis their US-based competitors.

Clients are best advised to start their patent filings in the country of the most commercial importance to them as determined by the market in that country, or by the presence of competitors or potential licensees.1 Systematically taking the correct first step can significantly increase the value of the company’s patent portfolio, which in turn reduces litigation risk. The practice of merely filing locally without justification other than tradition only haphazardly serves the client's best interests. Why? Because, where the US market is important, failing to file first in the United States needlessly handicaps the client's US patent rights, which may ultimately subject the client to a patent infringement suit and so cause commercial damage to the client.

Yes, for companies whose markets are local and whose inventions have little licensing value in the United States, advising the client to file a patent application locally is certainly legitimate. On the other hand, for globally minded clients and for clients whose inventions may have a significant market in the United States, clients should file in the United States first or at least concurrently with or immediately after a home-country filing. Why? If clients do not file early in the United States, they can lose significant rights because, with each passing day that the US filing is delayed, more prior art can be cited against the client's US application. If clients fail to obtain patent rights for their products in the United States, then they have no in-kind currency that can be used to entice a partner or competitor to sign a cross-licence agreement. Consequently, clients may needlessly subject themselves to a patent infringement suit, or the need to pay license fees that, had they filed the patent application in the US first, they might have been able to avoid. Besides this, filing first in the United States makes good business sense. The United States has a developed patent system (more than 200 years old) that, in many ways, has helped shape the laws of many other industrialized nations. This developed patent system helps reduce uncertainties, which increase the risks of litigation. Still further, the United States remains a dominant force in international commerce and, if clients are forced (because of budget constraints, for example) to choose one single national patent to have in their portfolio, most clients choose a US patent.2

For these and other reasons listed below, the client's US patent rights are probably the most flexible and powerful tools for monetizing an invention, particularly where a potential licensee or infringer resides in the United States. To fail to communicate the advantages of early filing in the United States is the strategic equivalent to a chess instructor failing to tell a student that the queen is allowed to move in all directions as far as the way is clear. In other words, failing to communicate these advantages typically results in diminished US patent rights caused by an up-to-one-year loss in priority for the US application. Winning at the game of intellectual property is difficult enough without being handicapped by ignorance of the rules of the game. The game is global now, and clients expect to be informed of the basic rules affecting their international patent strategy, particularly if ignorance of a simple rule subjects them to increased litigation risk.

The author has identified more than 20 reasons supporting a patent strategy that begins with an early US filing. Besides the case where a co-inventor is a resident of the United States (in which case filing in the United States first is obligatory), here is an ordered listing of the 10 most compelling such reasons.

The 10 most compelling reasons for filing first in the United States

1) Obtain the broadest possible US patent

Exceptions

Despite the above-enumerated advantages of filing in the United States first, as already mentioned, for companies whose markets are local and whose inventions have no real licensing value in the United States, advising the clients to file a patent application in their home country remains legitimate. Further, owing to national security laws, French residents must file in French in France first, using a French patent attorney. UK and German residents must file applications comprising military secrets in their respective countries first. In most other countries (including Switzerland, for example), clients are free to file first wherever they choose.

In addition, when publication or disclosure is imminent, and the inventor is not an English speaker, preparing an application in his or her mother tongue (say German) and filing in the most convenient location using an available homecountry patent attorney in order to obtain the earliest filing date may mean that filing in the United States first or on the same day as the home-country filing is not possible. Fortunately, if the US application is filed soon after the priority filing, most of the advantage of early filing in the United States can be preserved.

Finally, if the client would like to receive a US patent quickly, the filing of a US provisional patent application (which is not reviewed substantively until a regular application is filed) can delay the ultimate issuance of the US patent. Therefore, this may be a factor in the client's decision not to file a US provisional application. In this case, the client should file a US non-provisional application (which will result in a search conducted by the US Patent Office) as soon as possible or file a US provisional application along with a regular home-country application, paying the search fees and any fees for accelerated review in the home country, in order to get an early search report through the home-country patent offi ce while at the same time securing an early US filing date.

Note that one reason sometimes given for not filing in the US first is that in the US the named applicant is the individual inventor and not the client company, and so if the inventor later becomes uncooperative, this could place a cloud on the title to any resulting patent. In fact, this is a problem with all patent filings, not just US filings, and so, this reasoning is not at all legitimate.13

Conclusions

If the risk manager wishes to minimize their client's litigation risk and maximize the potential scope of protection their client can obtain for their inventions as well as maximize their licensing value, and their client's invention and provided the client is not a resident of France (or, if residents of Germany or the UK, the inventions does not comprise sensitive military technology), then the risk manager should advise their client to fi le a patent application in the United States first or at least concurrently with or soon after a priority home-country filing. If the patent application covers a commercially valuable and patentable technology with applications in the United States, then ignoring these advantages may lead to increased litigation risk. Because most large European companies rely on their risk managers for such strategic information, the author hopes that European risk managers will do their part in educating their clients of these important particularities of US law. If this is done, the typical client will be in a better position to avoid needless litigation and will be able to augment the value of their patent portfolio while keeping related costs to a minimum. What's more, the typical European client will no longer operate at a disadvantage vis-à-vis their US-based competitors.

Although this chapter is subject to copyright © 2009, the author does not object to its reproduction and redistribution provided it is copied and distributed in its entirety including endnotes.

Notes

1. Where such a choice is permitted under national law, as discussed below.
2. Companies and institutions that, from the public record, do this include: IBM Rüschlikon, Logitech, the University of Geneva, HUG, the EPFL, and many large Swiss chemical and pharma companies, for example, to mention just a few.
3. When it comes to issues in US patent law dealing with proof of inventorship, which is a unique characteristic of US patent law vis-à-vis other countries, the equal treatment provisions of the Paris Convention do not apply.
4. See Article L. 612-9 of the Code de la Propriété Intellectuelle français. However, this requirement is considered by many to be invalid under GATT TRIPS, an international trade agreement.
5. German law forbids fi ling German state secrets abroad. German state secrets are defi ned as facts and knowledge accessible to a limited number of people whose revelation would damage the external security of the German nation, section 93 Nr. 1 Strafgesetzbuch (StGB) (Ger), translated in Joseph J. Darby (1977) The Penal Code of the Federal Republic of Germany, p 118, F B Rothman, South Hackensack, NJ. Therefore, this covers almost all military-related inventions the details of which are known by only a few. As for the UK, fi ling applications abroad on military technology, or technologies that could harm national security or public safety, is prohibited under section 23 of the UK Patents Act.
6. Where a co-inventor is a US resident, a foreign filing licence must be obtained from the US Patent and Trademark Offi ce (USPTO) before filing abroad.
7. See 35 USC section 102(e).
8. See Title 35 USC section 112, first and second paragraphs for requirements for support ('best mode') and enabling disclosure, and 37 CFR section 1.83(a) for drawing requirements ('drawing in a nonprovisional application must show every feature of the invention specifi ed in the claims'). The 'best mode' requirement is a safeguard against the desire on the part of some people to obtain patent protection without making a full disclosure as required by the statute. The requirement does not permit inventors to disclose only what they know to be their second-best embodiment, while retaining the best for themselves. In re Nelson, 280 F.2d 172, 126 USPQ 242 (CCPA 1960). The duty to disclose ('duty of candor') is a statutory obligation that seeks to ensure that stiff penalties may be assessed against those who wilfully withhold known prior art in hopes that the patent examiner will not fi nd it and thus accord the client a broader (albeit invalid) patent.
9. PCT requirements deal primarily with formal matters. Therefore the PCT examiner is not charged with reviewing an application to determine whether it meets US standards. Consequently, the applicant is solely responsible for ensuring that such requirements are met.
10. The licensing value of a US patent is therefore probably much greater than any other national patent.
11. See http://www.epo.org/topics/issues/london-agreement.html for further information.
12. See above.
13. Fortunately, the risk of a struggle with an uncooperative inventor can be minimized by ensuring that the inventor has signed a contract agreeing to assign the rights in the invention to the client company, and the inventor is denied access to the serial number of the priority fi ling until after any patent application has been offi cially published by a patent office (usually 18 months after the first filing). For employees, risks can be eliminated by ensuring that each employee signed an employment agreement that clearly gives the employer exclusive rights in the employee’s inventions. Finally, country law may give ownership in inventions of an employee to the employer by statute, thereby obviating the need for employment contracts in order to secure ownership in an employee's inventions under certain circumstances (such is the case in Switzerland).

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