Harmonization of Patent Law for effective utilization of Intellectual Assets

In Depth

Harmonization of Patent Law for effective utilization of Intellectual Assets

Pinaki Ghosh | July 2015

Idea. Asset. Patents. Globally, valuable utilization of Intellectual Assets has been a challenge for the industry professionals to maze through and take critical business decisions. However, harmonization of Patent Law also plays a major role in the whole value chain. This is a continuation of the series that started in May 2015 by Pinaki Ghosh, AVP, IP Department, Reliance Industries Ltd., a vanguard in this domain. This issue is the concluding part of the series.

INTELLETUAL ASSETS
In order for an industry to transform itself into knowledge based business, it is essential that the focus on Intellectual Property (IP) shift from the administrative and judicial arenas to the business arena. The effective management of intellectual assets by an organization can give an edge to the organization both in the domestic and international market. The intellectual assets of an organization would include both the Intellectual Property (IP) and the rights granted on these IP’s. IP is viewed broadly as intellectual assets packaged as value propositions for commercial transactions, instead of being narrowly defined as legal rights (Intellectual Property Rights). 1Intellectual Property (IP) includes a range of intangible assets such as patents, trademarks, copyright and trade secrets. The effective management of these intellectual assets requires creativity and innovation with a strategy to remain oneup from the competitor.
CATEGORIZATION OF INTELLECTUAL ASSETS (AS)
There are a variety of classifications of intellectual assets. There are several different approaches to categories intellectual assets. One common approach is to classify the components
VALUE EXTRACTION OF INTELLECTUAL ASSETS
The protection of patents forms a critical part in the value extraction process, as it embodies and ingenuity and innovation of the human capital of the organization.2 An organization’s patent strategy should articulate the role of intellectual assets in the business and in so doing give clear guidance to assist decision making.3 Although intellectual assets are the source of corporate values, it is necessary, in many cases to take note of the facts that (1) intellectual assets themselves do not always have exchange value, that (2) they cannot be traded on their own, and that (3) the company does not necessary own or dictate all of its intellectual assets. This is why the value of individual intellectual assets cannot be easily determined in absolute terms. Presently, corporations are facing great challenges in coming up with accurate valuation of Intellectual Property (IP). Rules which require the valuation of IP are theoretically ideal but are not a simple task. It should be also noted that strategies and processes applied to intellectual assets create mid- to long-term values.4 An efficient intellectual asset plan in place should identify any intellectual assets that need to be protected to prevent their release to, or use, by customers and competitors, suppliers or distributors.5
IMPACT OF THE HARMONIZATION OF PATENT SYSTEM – ANALYSIS

Patents are all about the extent to which an organization can keep their competitors out of the market both in domestic and international markets. Therefore, one needs to consider where its competitors or potential licensees might wish to operate. Other things to consider are the ease with which the subject-matter can be protected in a particular country.

Cost plays a vital role in the decision making process of an organization. Currently the applicants filing for patents opt for any one of the following routes:

National Filing
Regional Filing
Patent Cooperation Treaty (PCT) Filing
Convention Application Filing

Filing through PCT fetches an applicant several advantages:

Obtaining an international filing date (Paris Convention provides the same)
Thirty-one months (in some countries thirty months) delay for entering the national phase
International search report and its publication
Optional examination report (chapter II filing)

Under the PCT system the international search reports and the optional examination reports give some credibility to the applicant’s application in the national phase, the same is not a grant as PCT is not a patent granting organization. Additionally, these reports although prepared on an international forum may not be given weightage by the national examining authorities. This leads to repeated procedural examination of the patent application and the duration of grant may vary from country to country. This can cause problems for the applicant to enforce his patent at the earliest in the country in which the protection is sought for. The need for amendments in the PCT system with a view to achieve patent protection internationally appears to be receptive.

IMPACT ON THE INFORMATION TECHNOLOGY (IT) INDUSTRY

The IT industry presently can protect their Intellectual Property (IP) by filing patents for tools, solutions, frameworks, architectures, processes, methods (including business methods) and embedded systems. The substantive patent law differs across various jurisdictions because of which different member states offer different stands to permit protection of software related inventions. For example, the United States under Article 101(35 USC) covers all forms of software related inventions, whereas EPO grants patents on computer implemented inventions (CII). India prohibits the grant of software and business methods per se under Section 3(k) of the Patents Act, 1970.

While discussing the draft roadmap in the meeting of international authorities at Seoul, it was mentioned that one of the aims is to adopt and begin use of an improved form of written opinion and international report on patentability, with style and content suitable to form a first national examination report in designated Offices (subject to addition of annexes on specific national requirements, such as exclusion of certain subject matter), with effect for written opinions carried out on or after July 2011.6 This is in conformance with Article 17(2)(a)(1) of the PCT. Article 17(2)(a)(1) of PCT read with Rule 39.1 of the PCT Rules explicitly states that the examiners would not be searching for the following subject-matter:

No International Searching Authority shall be required to search an international application if, and to the extent to which, its subject matter is any of the following:

scientific and mathematical theories,
plant or animal varieties or essentially biological processes for the production of plants and animals, other than microbiological processes and the products of such processes,
schemes, rules or methods of doing business, performing purely mental acts or playing games,
methods for treatment of the human or animal body by surgery or therapy, as well as diagnostic methods,
mere presentations of information,
computer programs to the extent that the International Searching Authority is not equipped to search prior art concerning such programs.

This is also in conformance with the TRIPS Article 27 which allows the member states to obtain patents in a few subject-matters. It is more likely that the reformed PCT system will retain the restrictions on subject-matter while carrying out the examination. Going otherwise would lead to a violation of the TRIPS agreement.

Patents being territorial in nature and the nature of grant differing based on the substantive law of the jurisdiction; under such a scenario the USPTO proposal cannot be implemented unless there is uniformity in the subject-matter criteria. Different nations restrict the subject-matter for reasons which are economic and policy based. Considering that the USPTO proposal be implemented as such without any uniformity in subject-matter would place the developed nations at an advantageous position as the developing and the least developed countries would have to begin granting patents for all types of inventions.

CONCLUSION

The modern notions of intellectual property were seen to be prominent in Venice and Britain. There were widely adopted roles of patents right from the Venetian system to the current system. What started as a privilege system has become in one way the economic backbone of a nation and the organizations within.

In the knowledge based economy, it becomes important that effective management of intellectual assets should be a playing a central role. For a strong and effective implementation of the intellectual property strategy all intellectual capital of an organization should be efficiently. What is required is a standardized procedure for protection various forms of intellectual property (IP) across multiple countries. Presently a system does exist for trademarks and designs to which large numbers of countries have contracted. A parallel system of protection for patents could lead to an effective utilization of the intellectual assets of an organization.

Criticism of the patent system has often reflected dislike of monopoly power, both because it harms consumers who have to pay high prices and because it can hinder improvements and subsequent innovations if patent holders disallow that. In developing the PCT, it is important to ensure that the system meets the needs of all of the interested parties. There are a number of aspects of the PCT which various groups interested in the Treaty (applicants, Offices and third parties) would in principle like to see changed, but which can only be revised by a diplomatic conference, followed by ratification by all Contracting States. Such matters include the details of what an international application must contain the roles of various Offices (including the International Bureau), the effect of the international application and reports within designated Offices, and the availability of different types of information.

In conclusion, while designing the current reforms great care has to be taken to issue of subject-matter variance across different nations and have a stringent evaluation system in place to avoid double patenting and ever-greening. For future research following questions needs to be addressed:

Effectiveness of proposed roadmap for the harmonization of the patent system?
Study the incompatibilities in the draft Proposal

About Author

Pinaki Ghosh

Pinaki Ghosh, AVP, IP Department, Reliance Industries Ltd.,