International patent strategy: tips for selecting countries in which to file

A question that patent attorneys often receive from clients who are relatively new to international patent filing procedures is “where outside of the U.S. should I file my patent application?” While the attorney typically can’t provide the answer — each client must choose the countries that make sense for its business —  the attorney can help lead the client to the answer that’s right for them by asking a few key questions. Here are key factors that I typically ask clients to consider when deciding where to apply for patent rights outside of the U.S:

What is the cost in each country?

The budget is always going to be a very important factor. After the U.S. patent application is filed, international filing costs typically vary from about $2,000 to $8,000 per country.  Costs of prosecution and maintenance can raise the cost to $20,000 or more per country over the life of the patent.

Since 148 countries are currently parties to the Patent Cooperation Treaty, international filing costs can add up very quickly.  Patent applicants should balance the cost of filing in each country against the benefits of filing or losses that can result from not filing  (more on that below) and select countries where the costs are justified.

Where are your customers?

A key reason to apply for patent protection is to protect market share for a product or service. Any country where the market is likely to be significant — or at least a substantial multiple of the patent cost —  is a candidate for patent protection.

However, patent applicants should balance market size against the practical realities of market opportunities. China and India are by far the world’s largest markets, but unless a company has the connections, expertise and resources to break into the Chinese or Indian market, a patent filing may be wasted in those countries.

In addition, in some cases one or two countries may be sufficient to protect the lion’s share of the market in a particular region.  For example, if 80% of a company’s South American sales occur in two South American countries, then filing in those two countries may be sufficient to deter others from trying to capture your South American market.

Where are your competitors?

This question may yield the same answer as the “where are my customers” question. However, a patent provides exclusive rights to make, use and sell an invention. Often, a product may have a large market in one country, but manufacturing may occur in another country where costs are lower. Filing in countries where key competitors have their manufacturing operations can help you stop infringement at its source.

Where are your suppliers?

If you are contracting your manufacturing to an overseas supplier, you will be teaching that supplier exactly how to make your product. The supplier and its personnel will gain expertise, and perhaps even have tooling in place that is especially suitable for the product. If your relationship with the supplier sours, a patent can help you ensure that the supplier won’t continue to supply your product or service to others without you.

Where might I set up a regional operation in the future?

Enforcement efforts are often more successful for businesses with “boots on the ground” (and eyes and ears, too) in a country. If you are planning a regional office in a location, then it can be valuable to have patents in that location because your local representatives can help you yield results from those patents.

Are there any country-specific laws to consider?

Finally, a handful of countries have laws can affect a patent filing decision.  For example, countries such as India have imposed compulsory licensing requirements on certain drug patents. While the licensing requirements can still result in royalties, these laws change the economics and need to be considered. As another example, Europe generally frowns on software patents, although devices and systems that perform certain processes often can be patented in Europe.

10 things software patent applicants need to know about the USPTO’s Glossary Initiative

In an effort to combat criticisms about poor quality and ambiguity in software and business method patents, the USPTO has announced a new “Glossary Pilot Program” that encourages applicants to provide a glossary of clear definitions for important claim terms.

Patent applicants who include such a glossary can benefit from expedited processing up to the first Office Action. In addition, the USPTO is hopeful that the clarity resulting from the use of a glossary will improve examination and patent quality, resulting in more certainty for patent applicants and those who are accused of infringing the patents.

Here are the key features of the new Glossary Initiative that patent applicants need to know:

  1. Only new applications filed on or after June 4, 2014 are eligible. The Glossary Pilot Program is only available to original, non-provisional applications.  Continuation, divisional, reissue and national stage applications are not eligible.  However, continuations-in-part and utility applications that claim priority to a provisional application may be eligible for the program.  The request to participate in the Program must accompany the original filing.
  2. Only certain technologies are eligible. The Program is only open to applications that the USPTO assigns to its Technology Center 2100 (Computer Architecture, Software, Information Security), 2400 (Computer Networks, Multiples Communication), 2600 (Communications), or the Business Methods area of Technology Center 3600. Although an applicant may suggest a particular classification, Technology Center assignment is ultimately a decision of the USPTO.  So, an applicant won’t know whether it will satisfy this requirement until after it files the application.
  3. Act fast – supplies are limited.  The Pilot is only available to the first 200 applicants, or until December 31, 2014, whichever occurs first.
  4. Limit your claims.  The application may contain no more than 4 independent claims, no more than 30 total claims, and no multiple dependent claims.
  5. Formatting requirements apply.  The glossary must be at the beginning of the Detailed Description section of the specification, identified with a heading, and presented on filing the application. The glossary can’t be a separate filing, an appendix, or added after the filing date.
  6. The definitions must be useful. According to the USPTO:  “The glossary should include definitions that will assist in clarifying the claimed invention and creating a clear application file wrapper record. Suggestions for definitions include key claim terminology (such as a term with a special definition), substantive terms within the context of the invention, abbreviations, acronyms, evolving technological nomenclature, relative terms, terms of degree, and functional terminology.”
  7. The definitions must not be open-ended or incomplete. The glossary can’t refer to or rely on other parts of the application, nor may it incorporate other documents by reference.  The glossary may include examples, but a particular definition may not rely solely on examples. In addition, the glossary cannot define a term solely by what it doesn’t mean.
  8. The applicant must not contradict the definitions. The description may not disavow or contradict the claim terms, such as by stating that the definitions aren’t limiting. This requirement applies to other parts of the application, as well as subsequent communications with the USPTO.
  9. Use the form and file electronically.  The application must include a completed USPTO Form PTO-SB-436, and it must be filed through the USPTO’s electronic filing system.
  10. The Glossary Pilot Program provides a quicker, but not necessarily the fastest, option.   Expedited processing is likely to result in a much shorter wait time than the current 19-to-24 month average wait for first action in software and business method patent applications. However, expedited processing is not a guarantee of action within any particular time period.  Other options, such as the USPTO’s Track One Examination Program, typically yield a final result within one year of the filing date. That said, the Glossary Pilot is certainly a less expensive option:  Track One requires a substantial ($2,000 – $4,000) additional filing fee.

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Penn State University to license patents via online auction

Penn State University is primed to launch the country’s first online auction of patent rights resulting from university research. According to a Penn State news release:

About 70 engineering patents in areas as diverse as acoustics, fuel cells and sensors will be available for license in this first auction. Required bid minimums on many will be as low as $5,000.

Available patents are listed on the Penn State Intellectual Property Auction Website. Bidders must pre-register to participate in the action. In addition to single patents with minimum bids as low as $5,000, the auction will include several patent bundles with minimum bids ranging from $10,000 to $50,000. The auction will open March 31, 2104 and close on April 11, 2014.

Winning bidders will need to enter into a license agreement with the University’s Office of Technology Management. The agreement will require the winning bidder to also pay all patent maintenance fees. However, unlike typical university research licenses, no ongoing royalties will be due. Penn State also retains the right to pursue third-party infringers; the licensee can only participate in enforcement if Penn State’s enforcement efforts are not successful after a six month period.

Patent auctions have met with limited success over the years. However, Penn State is tempering expectations with low minimum bids and realistic public statements. Penn State’s news release notes that a key goal of the auction is to “raise awareness among interested parties in business and industry that the University does have licenses available whose commercial applications could prove extremely valuable.”

A small license fee is certainly better than no license fee, especially for patents that are just sitting on the shelf.  In addition, by calling attention to its portfolio of IP in fields such as antenna systems, superconductors, and ground water remediation, the auction will certainly help draw attention to the university’s diverse research capabilities.

Getty Images makes photo collection available for free use: but watch the fine print

Stock photo giant Getty Images has announced a new “embed” feature in which it will make a substantial portion of its image library available for free use on websites and in social media.

While many news reports are (rightly) touting this as a major new resource for online publishing, publishers should take care to read the fine print before cutting and pasting any images.  It’s important to remember that “free” doesn’t mean “no strings attached.”

Most importantly, Getty Images is not permitting cutting and pasting at all.  Instead, it will require that its images be embedded using a tool that provides credit and a link back to the source.  This could give Getty Images the opportunity to include ads or collect data relating to usage, much like video and music sharing sites do now when allowing others to embed their content.

In addition, the license only permits use for editorial purposes.  As stated in Getty Images’ Embedded Viewer Terms and Conditions:

You may only use embedded Getty Images Content for editorial purposes (meaning relating to events that are newsworthy or of public interest). Embedded Getty Images Content may not be used: (a) for any commercial purpose (for example, in advertising, promotions or merchandising) or to suggest endorsement or sponsorship; (b) in violation of any stated restriction; (c) in a defamatory, pornographic or otherwise unlawful manner; or (d) outside of the context of the Embedded Viewer.

Other digital media companies have found embedded viewers to be a strong revenue source.  With the limited license governing the embedded viewers, Getty appears to be seeking to improve revenue from an area (social media) that had been very difficult to monetize without except through substantial enforcement efforts.

Texas court unveils fast track option for patent cases

The Eastern District of Texas has launched a new case management procedure for patent infringement lawsuits.  The new procedures, dubbed “Track B” in the court’s General Order 14-3, are designed to give litigants an option that can help save money and move a case to resolution more quickly.

Key features of the Track B case management procedures are:

  • within 14 days after the defendant files an answer or motion, the plaintiff must (i) serve infringement contentions, and (ii) disclose all licenses and settlement agreements involving the patents in suit;
  • within 30 days after service of the infringement contentions, all parties must provide initial disclosures, and the defendants must produce summary sales information regarding the sales of accused products and reasonably similar products; and
  • within 14 days after the initial disclosures and summary sales information, both parties must file a good faith estimate of damages;
  • within 14 days of the good faith estimate, the defendant must serve its invalidity contentions.

After serving invalidity contentions, the case will quickly move to a management conference and discovery plan.  Discovery prior to the conference will be limited to 5 interrogatories, 5 requests for production, and 5 requests for admission per side.

The Court’s traditional case management procedures (now called “Track A”) will remain the default.  The court will apply Track B if and when the parties request it.

Upcoming Supreme Court decision could shape future of internet video streaming

This year the U.S. Supreme Court will review the Second Circuit’s decision in American Broadcasting Companies, Inc. v. Aereo, Inc The result could affect how and when consumers can receive broadcast television over the Internet.

In its decision to grant certiorari, the Supreme Court agreed to consider the question:

Does a company “publicly perform” a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet?

The case involves Aereo, Inc., which allows subscribers to watch broadcast television programs over the Internet for a monthly fee. Aereo’s system uses antennas and a remote hard drive to create individual copies of the programs. Users of Aereo can watch programs while they are being broadcast, or they can record them to watch at a later time, like an online DVR.

Several plaintiffs who held copyrights in programs broadcast on network television sued Aereo for copyright infringement, arguing that Aereo should not be permitted to transmit programs to its subscribers while the programs are still airing because the retransmission infringed their exclusive right to publicly perform their works. The plaintiffs also asserted that Aereo infringed their exclusive right of reproduction of the copyrighted programs, as well as contributory infringement.

The plaintiffs moved for a preliminary injunction, and the district court denied it. The plaintiffs appealed, and the U.S. Court of Appeals for the Federal Circuit affirmed. The plaintiffs have now appealed again to the Supreme Court, which is expected to consider the case in early 2014.

The Second Circuit’s decision found significant the fact that Aereo made individual copies of broadcasts. Rather than being a “public” performance, the Court found Aereo’s system to provide private retransmissions “since the entire chain of transmission from the time a signal is first received by Aereo to the time it generates an image the Aereo user sees has a potential audience of only one Aereo customer.”

The Supreme Court’s decision could be significant regardless of the result. If the Court upholds the decision, depending on the Court’s reasoning the case could make it difficult for over-the-air broadcasters to police against retransmission of their content online.  Or, if the Court reverses, the reasoning may prompt significant changes to the business models of Web-based (and perhaps even in-home) video transmission products.

Medtronic v. Mirowski Family Ventures: Supreme Court decision affects patent license disputes

A recent Supreme Court decision may prompt patent holders to review license agreements and build in extra protections against actions filed by their licensees. In the case, Medtronic Inv. v. Mirowski Family Ventures, the Court held that a patent holder has the burden of proving infringement in a declaratory judgment action brought by a licensee.

The case was based on an arrangement in which Mirowski Family Ventures held several patents relating to implantable heart stimulators. Medtronic was party to a license agreement with Mirowski, as Medtronic was successor in interest to the original licensee (Eli Lilly). The agreement gave Medtronic a license to produce certain products under the patents in exchange for royalty payments. The agreement also included a procedure for bringing new products under the license. Specifically, if Mirowski notified Medtronic that a new product was infringing any of the patents, Medtronic could either cure the infringement by paying royalties or challenge the infringement by filing a declaratory judgment action.

The dispute arose when Mirowski notified Medtronic that seven new products infringed the Mirowski patents. Medtronic disagreed and brought an action for declaratory judgment of non-infringement. Ordinarily, in any patent infringement dispute, the patent holder bears the burden of proof of infringement. However, the lower court (the Federal Circuit) held that where the dispute is one between a licensor and licensee, the burden of persuasion shifts to the licensee (to prove non-infringement) if the licensee brings a declaratory judgment action.

In its opinion of the appeal from the Federal Circuit decision, the Supreme Court provided a very concise summary of the question and its conclusion:

We now turn to the question presented. A patent licensee paying royalties into an escrow account under a patent licensing agreement seeks a declaratory judgment that some of its products are not covered by or do not infringe the patent, and that it therefore does not owe royalties for those products. In that suit, who bears the burden of proof, or, to be more precise, the burden of persuasion? Must the patentee prove infringement or must the licensee prove noninfringement? In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit.

Thus, in a unanimous opinion, the Court reversed the decision of the Federal Circuit.

An implication of the decision is that patent licensors should be cautious when accusing licensees of patent infringement, whether the accusation is based on non-payment of royalties or on the sale of non-licensed products. Accusations of infringement could result in a declaratory judgment action by the licensee. If the declaratory judgment action involves only the patents and not the license agreement, the licensee may be able to select the venue for the declaratory judgment action.

Because of this, patent holders may wish to consider certain changes to their typical license agreements.  For example, if a choice of venue clause refers only to disputes under the agreement, disputes regarding unlicensed products could be considered to fall outside of the agreement. So, a patent holder may consider bringing any disputes relating to the licensed patents into the choice of venue clause.  This could limit the locations in which the licensee can bring a declaratory judgment action, and perhaps make it more inconvenient for the licensee to do so.

However, the extent to which a patent holder can place other limits on declaratory judgment actions is not as clear. For example, the licensor could include a clause that permits termination of the license agreement if the licensee brings a declaratory judgment action. Whether such a clause will be upheld on public policy grounds has been questioned by a number of commentators after cases such as MedImmune v. Genentech.  Until such clauses are definitively upheld or struck down many patent holders are including such clauses to provide an extra degree of protection in licensing arrangements.