Demystifying international patent rights

Seeking patent rights in the U.S. can be daunting enough to prevent some from seeking protection, and the thought of seeking patent rights outside of the U.S. is unfathomable. But even though the process can be arduous, the benefits of patent rights can far outweigh the time and expense to obtain those rights. 

While the patent process does not always make sense and can seem to be a foreign language, adding the complexity of protection outside of the U.S. should not be overwhelming. The benefits of patent rights outside the U.S. can enhance the value of a product line and can increase the value of a company as a whole. In some instances, patent rights outside of the U.S. can create new revenue streams from markets previously inaccessible to a company.

One challenge for international patent protection is that patents are jurisdictional with each country having different rules for filing, examining, issuing and enforcing patent rights. While there has been some harmonization, there are still many differences around the world. What is generally common is that a patent grants the patent owner the right to exclude others from making, using, or selling what is claimed in a patent within the particular jurisdiction or country. This means a patent owner can prevent manufacturing, sales, importation and exportation of products that are covered by an issued patent. 

When reading a patent, there are pictures, a lot of descriptions, which can be confusing and contradictory at times, and then the claims; a numbered list typically found at the very end of the document. It is the claims of a patent that are examined and must be interpreted to determine the rights granted by the patent. As such, the particular value or importance of a particular patent comes down to what is covered by the claims.

The value of patent rights

The value of being able to exclude others from practicing the claims of a patent can give a company a competitive advantage. A patent may allow a company to differentiate its products from its competitors. Having patent rights, even if only patent pending, discourages unlawful competition by requiring competitors to review the existing and potential patent rights before entering the market. In some instances, licensing patent rights to others can create a revenue stream from markets that may not be easily accessible. Seeking a patent can prevent others from obtaining patent rights that prevent a company from continuing to offer its own product. This may sound odd, but it can happen. 

If patent rights are to be sought, there remains the question of when to consider filing a patent application. While the U.S. provides a one-year grace period from a public disclosure, many jurisdictions (e.g., Europe and China) have an “absolute novelty” requirement such that any “public disclosure” or sale before filing may create a loss of patent rights. 

One method for preventing a disclosure from being considered a “public disclosure” is to have a Non-Disclosure Agreement (NDA) in place. An NDA can be useful when it is necessary to disclose aspects of an invention to another company to manufacture the product, to test the product, or to otherwise review the product. However, some types of disclosure require more than a traditional NDA.

If the disclosure is to another company to further develop or modify the product, an NDA may prevent the disclosure from being considered public but may result in the other company becoming a co-owner of a jointly developed product. When such a collaboration is anticipated, a Joint Development Agreement (JDA) should be considered or included in the NDA. A JDA can, from the outset, set terms of a collaboration and make sure patent rights stay with the intended company. While a JDA can take a little more effort than an NDA, the efforts are well worth avoiding future disputes over ownership of patent rights.

When to file

When a contemplated disclosure is a trade show, a website, an offer to sell, an actual sale of the product, a social media posting or other public disclosure, then it is time to preserve patent rights with a patent filing. As such, it is important for all departments, including marketing, to understand what is and is not a public disclosure. 

In addition, while an imminent public disclosure may justify a filing for patent rights, the U.S. and the majority of the world are now a first-to-file patent system, which means that if two independent patent applications are filed for the same invention, the first filed application wins. Thus, in rapidly advancing industries, an early patent filing may be warranted, even if there is not a pending public disclosure.

Where to file first

But where should the initial application be filed?  To make this decision, is important to remember that patents are jurisdictional. For example, a U.S. Patent would prevent any activities in the U.S. but would provide no protection for activities in Europe or China that do not reach into the U.S. However, if a product is made in China and then imported to the U.S., a U.S. Patent would provide protection. As such, if a company is only concerned about the U.S., a U.S. Patent may be sufficient. For this reason, an initial U.S. filing is generally recommended for U.S.-based companies. 

There is, however, an additional consideration: a foreign filing license (FFL). An FFL is required by some countries, including the U.S., based on the location of invention or the nationality of the inventors. The purpose of an FFL is to prevent crucial technologies from being publicly disclosed (think nuclear secrets). As such, for most patent applications an FFL is more of a formality. However, the failure to obtain an FFL can result in a patent being unenforceable and, in some countries, criminal penalties. The U.S. will grant an FFL to U.S. utility applications and PCT applications that are filed in the U.S. Patent Office.

Types of applications

The next question is the type of application to file. In the U.S., there are three types of applications to consider: provisional, non-provisional or utility application, and patent cooperation treaty or PCT application. A provisional application is a place holder application that establishes a priority date for future applications. A provisional application is never examined and is not accessible to the public unless a later filing claims priority to the provisional application within one year. While a provisional application is never examined, a provisional application should fully disclose the invention to provide support for a subsequent filing. 

The second option is a utility application that gets examined which typically begins 14-24 months after filing; a utility application can be expediated to have examination begin in less than 12 months for an additional fee at filing, typically less than 4 months. 

The final option is a PCT application that is similar to a provisional application in that it maintains a priority date but does not grant any rights in and of itself. However, once a PCT application is filed, an International Search Report and Opinion are provided to the applicant. This report can be useful in determining the potential scope of patent rights available. 

A PCT application allows national stage patent applications to be filed in the U.S. and other jurisdictions within 30 months from the original priority date in most countries. A qualified attorney should confirm that particular countries of interest recognize the priority and term of a PCT application. A utility or PCT application can claim priority to a provisional application if filed within one year and will publish 18 months from the priority date. 

Once the initial application is filed, there is some time to decide which countries warrant the expense of seeking patent rights and where the company is willing to enforce patent rights. As such, while protection may be desired in a country, if it is difficult or expensive to enforce rights in that country, it may be desirable to identify other countries that will provide suitable protection. 

Deciding on international filings

Determining which countries to seek protection should be a business decision and should be based on the answers to questions such as: 

• Which countries serve as the current or potential future market for the product?  
• In what countries will manufacturing take place?  
• Where are competitors manufacturing, or will competitors manufacture, competing products?  

The importance of “where are the sales?” is easy to understand, but manufacturing may be less apparent. 

Patent rights in the country of manufacture may seem redundant if the markets are covered; however, this protection can prevent future disputes and provide additional revenue. In today’s economy, it is common for a product to be manufactured in China and then sold in the U.S. and Canada. Thus, if the majority of sales and importation are into the U.S., U.S. patent rights may be sufficient. 

It is not unheard of, however, for a factory to seek protection in its own country to protect against being second-sourced. While it may not be proper, such a patent may create difficulties. In addition, a factory may have access to markets that the U.S. company may not currently exploit. For example, the factory may have relationships in the European or African markets. If there is no protection in China, the factory would be legally free to do so. However, if there were a Chinese patent, the factory could be stopped or required to pay a royalty for products made for other markets providing an additional revenue stream.

Patent rights in the countries where direct competitors manufacture may provide additional hurdles for competitors. For example, a competitor may manufacture and sell in another market to make it difficult to enter that market in the future. Having patents in the competitors’ countries of manufacture may keep additional markets open for the future.

In short, a PCT application can preserve international patent rights for up to 30 months to allow time for a product to have commercial success. This may allow a patent pending product to cover the expense of obtaining those international patent rights and possibly enforcement of those patent rights. Moreso, just having pending patent rights can deter others from entering a particular market and will likely increase the expense to do so. Thus, the benefits of seeking patent rights may extend beyond what is directly quantifiable. 

It is important to note that the information above is general information and that every invention and situation is unique. As such, it is crucial that a qualified patent practitioner is contacted when seeking patent rights for a specific invention.

Cory Schug is a partner in the Womble Bond Dickinson (US) LLP law firm (Affiliate ATA member), specializing in Intellectual Property Law. He is based in Greensboro, N.C. https://www.womblebonddickinson.com/us/people/cory-schug