WIPO / UNITAR
Workshop on International IP
WIPO Coordination Office
New York
March 25, 2008
BASIC PRINCIPLES OF PATENTS
Karl F. Jorda
David Rines Professor of Intellectual Property Law
& Industrial Innovation
Director, Germeshausen Center for the
Law of Innovation & Entrepreneurship
Franklin Pierce Law Center
Two White White Street, Concord, NH
Basic Principles of Patents
I. Utility Patents
II. Design Patents – Industrial Designs
III. Plant Patents – Plant Variety Protection
Certificates
IV. Petty Patents – Utility Models
V. Integration of Patents and Other IPRs
VI. Trade Secrets
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Preface
Live in “Golden Age” for IPRs
•Patent filings and issuances are skyrocketing
•Talk of patent “revolution,” “explosion,” “frenzy”
•Anything under the sun that is made by man” is patentable
•Courts, Congress, Justice Department — pro IPRs
•Corporations built on patented technologies
•Motto: Innovate or perish
•Value of IPRs for securing exclusivity — simply invaluable
•Royalties for licensing IPRs in 2002: $150 billion
•Over $1 billion for some companies
•Universities jumped on bandwagon
•Getting patents, concluding licenses, collecting royalties
Ronald Myrick, formerly of General Electric, put it this way: “The
attraction of IP is simple; it’s at the forefront of the technology that’s
driving the world and IP is one of the unique entities in the law where
you’re actually creating assets.”
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Introduction
A patent is a grant from the government giving its owner the right to
exclude others from making, using, selling, offering for sale or importing
the claimed invention.
There are three types of patents in the United States:
•
A utility patent, with a life of 20 years from filing, for any new and
useful process, machine, article of manufacture or composition of
matter.
•
A design patent, with a term of 14 years from issuance, for any
new, original, and ornamental design for a manufactured article,
such as the design of a table lamp.
•
A plant patent, having a life of 20 years from filing, for any new,
distinct variety of an asexually reproduced plant.
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I. Utility Patents
•
An invention to be patentable must not only be useful and novel
but also unobvious.
•
Novelty: the invented technology must not be anticipated by being
identical to technology disclosed in a single piece of prior art.
Absolute novelty is not required as inventors are given a one-year
grace period after divulgation or public use of the invention.
•
Test for unobviousness: whether “the differences between the
subject matter sought to be patented and the prior art are such
that the subject matter as a whole would have been obvious at
the time the invention was made to a person having ordinary skill
in the art to which said subject matter pertains.”
•
This is a subjective standard so courts consider objective indicia
of nonobviousness such as long-felt unsolved need, failure of
others, commercial success, acquiescence by others, copying of
the invention by an infringer.
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Utility Patents (continued)
•
To enforce rights conferred by patents, patent owners can file patent
infringement lawsuits against infringers in appropriate federal district
courts.
•
A patent is presumed to be valid.
•
A patent can be literally infringed or via the doctrine of equivalents, if a
product or process, which does not literally infringe, performs substantially
the same function in substantially the same way to obtain substantially the
same result as the patented product or process (function/way/result test).
•
The remedies for patent infringement are
– preliminary and permanent injunctions;
– compensatory damages based on lost profits or reasonable royalty;
and
– increased damages (up to treble) for willful infringement.
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Utility Patents (continued)
• The American Patent System was revitalized by the creation in 1982
of the Court of Appeals for the Federal Circuit (CAFC), considerable
pro-patent legislation in recent years as well as less antitrust
enforcement, so much so that we speak of a Golden Age for patents.
Patents are indeed more valuable and courts “read the riot act” to
infringers.
• The U.S. Patent Law is expansive: “Everything under the sun made
by man is patentable” (Supreme Court, 1980).
Computer programs and business methods are also patentable
(CAFC, 1998).
• Patents are not “monopolies” per se but property rights, per U.S.
patent code and Supreme Court decisions.
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II. Design Patents
Industrial Designs
• Appropriate only for ornamental designs.
• An industrial design in other countries “is the ornamental or
aesthetic aspect of a useful article…. The ornamental
aspect may consist of the shape and/or pattern and/or color
of the article. The article must be reproducible by industrial
means; this is why the design is called industrial.
• There is a WIPO Model Law for Developing Countries on
Industrial Designs, which protects designs insofar as they
“can serve as a pattern for a product of industry or
handicraft.”
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III. Plant Patents
Plant Variety Protection Certificates
• In the U.S., IP protection of plants can be achieved pursuant
to the
– Plant Patent Act of 1930;
– Plant Variety Protection Act of 1970 (PVPA); and
– Utility Patent law as of 1985.
• The requirements for Plant Patent protection are: novelty,
recognition of novelty, asexual reproduction, nonobviousness,
distinctiveness and unique-name designation.
• Among the rights conferred are: exclusion of others from
asexual reproduction, selling or using the so reproduced plant.
Sexual reproduction (seed) and independent creation are not
protected.
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Plant Patents (continued)
•
The PVPA protects sexually (seed) reproduced plants, other than fungi,
bacteria and tuber-reproduced crops.
•
Requirements: novelty (not sold or distributed in U.S more than one year or
outside U.S. more than four years — six years for a tree or vine),
distinctiveness, uniformity and stability.
•
PVPA Certificates are issued, after examination, by the U.S. Department of
Agriculture.
•
Rights conferred for 20 years are: exclusion of others from selling, reproducing
or importing, from using the variety to produce a hybrid or different variety and
from selling seed of varieties which are “essentially derived” from the protected
variety.
•
Farmers may reproduce for their own use only and a research exemption
permits plant breeding to develop new varieties.
•
After amendments in 1994, the PVPA complies with the International
Convention for the Protection of New Plant Varieties (UPOV Convention), which
guarantees to plant breeders in member nations national treatment and the
right of priority.
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IV. Utility Models
Petty Patents
•
Many countries have a separate type of protection for inventions
known as a utility model or petty patent, to permit certain
inventions such as mechanical devices, which do not rise to the
level of the normal standards of patentable invention, to be given
some degree of exclusivity and protection for a shorter period of
time.
•
While some novelty is required, the degree of inventive advance
can be more modest than that required for a utility patent.
•
There is no examination for prior art.
•
The duration of protection for utility model is usually much shorter
than for a patent, averaging from 6 to 10 years.
•
The U.S. has never had utility model protection.
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Utility Models (continued)
Such second-tier protection is needed, given the strict patentability
requirements, the long pendency and the high cost of utility patents.
Utility models would provide coverage for a large area of innovations
which:
• fall between design and utility patents;
• cannot be protected by trade secrets; and
• for which present utility patents are out of reach because of
high patentability standards and/or excessive costs.
If sui generis protection was fashioned for microchips or mask works
in a very short period of time (which some now believe was done
improvidently), why not establish protection in the “twilight zone of
subpatentable inventions” for the benefit of private inventors,
entrepreneurs and small entities?
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V. Integration of Patents with Other IPRs
•
In our knowledge-based high-tech era it is important to exploit the
overlap between IP categories for dual or multiple protection.
•
This is true especially between patents and trade secrets.
•
Patents and trade secrets are not incompatible but dovetail: the latter
can protect volumes of collateral know-how.
•
This results in synergistic integration and secures invulnerable
exclusivity.
•
Most technology licenses are hybrid licenses covering patents and
trade secrets.
•
Licenses under patents without access to collateral know-how are
insufficient for commercial use of patented technology.
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Integration of IPRs
From former fragmentation by specialties, IPRs are now a “seamless web,”
due to progress in technology and commerce, per Professor Jay Dratler.
Professor Dratler was the first one to “tie all the fields of IP together.”
“Integrative treatment.” (Intellectual Property Law: Commercial, Creative,
and Industrial – 1991)
In 1997 the authors of “Intellectual Property in the New Technological Age”
(Professors Merges, Merrell, Lemly & Jorde) also
• avoid the fragmented coverage
• approach IP as a unified whole; and
• concentrate on the interaction between different types of IPRs.
Thus we now have a unified theory in the IP world, a single field of law with
subsets and significant overlap between IP fields. Several IPRs are
available for the same IP or different aspects of the same IP for dual or
multiple protection. Not taking advantage of the overlap misses
opportunities or, worse, amounts to malpractice.
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Integration of IPRs (continued)
One IPR category is center of gravity and more important—most often patents — especially
in fields of technology.
Other IPR categories are then supplementary but very valuable to
• cover additional subject matter
• strengthen exclusivity
• invoke additional remedies
• standup if primary IPR becomes invalid
and thus provide synergy and optimize legal protection.
Multiple forms of protection are especially important in the fields of biotechnology and
computer.
The most important strategy is exploiting the overlap between patents and trade secrets.
Illustrative examples are:
• GE’s industrial diamond process technology
• Wyeth’s Premarin process
• Pizza Hut decision
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Multiple Protection in Biotech
Protection for a diagnostic kit involving
monoclonal antibodies:
• Product patent on the test kit
• Process patent on the preparation of the
antibodies
• Copyright for test kit’s instructions
• Trademark
• Trade secrecy for production know-how
• Trade secrecy for collateral know-how
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Multiple Protection for Computers
A data processing system can involve:
•
patented hardware and software
•
patented computer architecture on circuit designs
•
patented business methods
•
trade secret production processes
•
trade secrecy for collateral know-how
•
copyrighted microcode
•
copyrighted operating system
•
copyrighted instruction manual
•
semiconductor chips protected as mask works
•
consoles or keyboards protected by design patents
•
or as trade dress under trademark principles
•
trademark registration
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IP Integration Concepts
EXPLOIT THE OVERLAP
DEVELOP A FALL BACK POSITION
CREATE A WEB OF RIGHTS
BUILD AN IP ESTATE
BUILD A WALL
BUILD A RINGFENCE (India)
OVERPROTECT
LAY A MINEFIELD
for
SYNERGISTIC EFFECT
via
DUAL OR MULTIPLE PROTECTION
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VI.
Trade Secrets
The Importance of Trade Secrets
Trade secrets are the “crown jewels” of corporations — not the “cesspool
of the patent system.”
Mark Halligan: “Trade secrets are the IP of the new millennium and can no
longer be treated as a stepchild.”
James Pooley: “Forget patents, trademarks and copyrights…trade secrets
could be your company’s most important and valuable assets.”
88% of responses in an IPO Survey indicate trade secrets to be the really
important intellectual assets because patents have limits: patentability
requirements, publication and invent-around feasibility.
Trade secret misappropriation recently cost Walt Disney $240 million,
Cargill $300 million, and Toshiba over $400 million.
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The Importance of Trade Secrets (continued)
Trade secret protection operates without delay and undue cost against
the world — unlike patents which are territorial and so expensive to
obtain and maintain that only very selective foreign filing is done.
Patents are tips of icebergs in an ocean of trade secrets
• Trade secrets cover over 90% of new technology
• Over 80% of technology licenses cover trade secrets or are
licenses
hybrid
Trade Secrets are the “workhorse of tech transfer.” (Bob Sherwood).
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Patent/Trade Secret Interface
As a practical matter, licenses under patents without access to associated,
collateral know-how are often not enough, because patents rarely disclose the
ultimate scaled-up commercial embodiments of products and processes.
“In many cases, particularly in chemical technology, the know-how is the most
important part of a technology transfer agreement.” (Homer Blair).
“It is common practice in industry to seek and obtain patents on that part of a
technology that is amenable to patent protection, while maintaining related
technological data and other information in confidence. Some regard a patent as
little more than an advertisement for the sale of accompanying know-how.”
(Peter Rosenberg).
In technology licensing “(r)elated patent rights generally are mentioned late in the
discussion and are perceived to have ‘insignificant’ value relative to the knowhow.” (Michael Ward, Honeywell VP Licensing).
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Patent/Trade Secret Interface (continued)
“Trade secrets are a component of almost every technology license…(and) can
increase the value of a license up to 3 to 10 times the value of the deal if no trade
secrets are involved.” (Melvin Jager).
“One potential shortcoming of focusing on patents as a measure of innovation, besides
the fact that it ignores the other types of intellectual property, is that patents are often
valueless absent the ‘know-how’ that translates protected intellectual property into
viable products.” (Gavin Clarkson, Harvard).
“A company with one or more patents for its technology will usually have substantial
valuable technical and business information related to, but outside the direct coverage
or disclosure obligations of, its patents. The company can maintain vigorous efforts in
both areas of legal protection. (Jerry Cohen, Perkins, Smith & Cohen).
“It is frequently stated that know-how is the most valuable element of technology
transfer. This is consistent with the writer’s own experience.” (Robert Goldscheider).
Failed Brazilian tactic — translation of foreign patents
CIBA-GEIGY examples: Eastman Kodak & DuPont patent licenses were useless.
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Patent/Trade Secret Complementariness
•
Supreme Court (Kewanee Oil, 1974): perfectly viable alternatives.
•
Not mutually exclusive but mutually reinforcing — dovetail, in harmony
•
“Coexistence is well-established.” (Don Chisum).
•
Inextricably intertwined: Most R&D data and collateral know-how
cannot and need not be included in patent applications — grist for
trade secrets.
•
All patents are born as trade secrets. Trade secrets precede,
accompany and follow patents.
•
Tom Arnold: it’s “flat wrong” to assume that “because the patent law
requires a best mode requirement, patents necessarily disclose or
preempt all the trade secrets that are useful in the practice of the
invention.”
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The Best Mode Requirement
Conventional wisdom: coexistence is impossible because of the “best mode”
requirement.
The “best mode” requirement applies
• only to the knowledge of the inventor,
• only at the time of filing and
• only to the claimed invention
Hence “best mode” requirement is no impediment, because —
1. Patent applications are filed early in the R&D stage to get the earliest possible
filing or priority date.
2. The specification normally describes in but a few pages only rudimentary lab
experiments or prototypes.
3. The best mode for commercial manufacture and use remains to be developed
later.
4. Patent claims tend to be narrow for distance from the prior art.
5. As shown by case law, manufacturing process details are, even if available, not
a part of the statutorily-required “best mode” disclosure of a patent.
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Exemplary Trade Secret Cases
1. GE’s exclusive industrial diamond process technology
•
Holds patents (some expired) and trade secrets
•
Refused to grant licenses
•
Fast-track GE scientists stole trade secrets for Far Eastern interests for
million dollar payments
•
In the end got caught, tried, jailed
2. Wyeth’s exclusive Premarin manufacturing process
•
Has market exclusivity since 1942
•
Patents expired decades ago
•
Closely guards its trade secrets
•
Natural Biologics stole these trade secrets
•
Wyeth sued, got sweeping injunction
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Exemplary Trade Secret Cases (continued)
3. Pizza Hut case
•
Pizza Hut supplier, C&F Packing, invented and patented a
manufacturing process for pizza sausage toppings and kept
improvements secret
•
Pizza Hut misappropriated trade secrets and got sued
•
Court decision:
1. patents are invalid on on-sale bar grounds (on Summary
Judgment)
2. trade secrets are enforceable and Pizza Hut had to pay
$10.9 million (after trial)
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Conclusion
• Trade secrets are indeed a viable mode of protection.
• They can be used in lieu of patents but, more
importantly, they can and should be relied upon at the
same time and side by side with patents to protect any
given invention as well as the volumes of collateral
know-how.
• Hence, it is patents and (not “or”) trade secrets. A happy
marriage!
3.18.08
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