Biotechnology Intellectual Property Manual
Prepared by Spruson and Ferguson Patent and Trade Mark Attorneys
this
Biotechnology Intellectual Property Manual
Note to Readers and Users of this Manual This manual aims to alert the reader to the broad areas at issue in respect of IP identification, creation, protection, management and exploitation. While the authors have endeavoured to ensure that the manual provides a current and accurate overview of relevant IP law as at the time of writing, the authors are not qualified IP practitioners in jurisdictions beyond Australia and New Zealand and accordingly descriptions of the law in other jurisdictions may be incomplete. Further, IP law is constantly evolving and a new decision from any court in any jurisdiction could result in at least certain parts of this manual being rendered inapplicable. Therefore please view this manual as providing an introductory guide on IP management and not a complete statement on the subject. Please use the manual as a starting point and not as a source of specific advice. The reader should seek appropriate professional advice prior to commencing any course of action.
This manual was commissioned by Biotechnology Australia and written by Spruson and Ferguson Patent and Trade Mark Attorneys. In particular Biotechnology Australia wishes to thank the principal authors Andrew Blattman, Shahnaz Irani, John McCann and Colin Bodkin of Spruson and Ferguson Patent and Trade Mark Attorneys.
ISBN 0 642 72129 7 ISR 2001/106 © Commonwealth of Australia (2001) This work is copyright. It may be reproduced in whole or in part subject to the inclusion of an acknowledgement of the source and no commercial usage or sale. Reproduction for purposes other than those indicated above, require written permission from the Commonwealth available through AusInfo. Requests and inquiries should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 1920, Canberra ACT 2601.
Contents 1. Introduction
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1.1 Outline . . . . . . . . . . . . . . . . . . . . 1.2 How to Use this Manual . . . . . . . . . . . 1.3 Why Protect and Manage Intellectual Property 1.3.1 An incentive for innovation . . . . . . . 1.3.2 Lost opportunity . . . . . . . . . . . . 1.3.3 Freedom to operate . . . . . . . . . .
2. Intellectual Property 2.1 Types 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8
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of Intellectual Property . . What is intellectual property? Patents . . . . . . . . . . Trade marks . . . . . . . . Designs . . . . . . . . . . Plant Breeder's Rights . . . . Copyright . . . . . . . . . . Trade secrets . . . . . . . . Patents v. trade secrets . . .
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2.3 Australian Patent Procedure . . . . . . . . . . . . . 2.3.1 Filing . . . . . . . . . . . . . . . . . . . . . . 2.3.2 Examination . . . . . . . . . . . . . . . . . . . 2.3.3 Opposition . . . . . . . . . . . . . . . . . . . 2.3.4 Sealing . . . . . . . . . . . . . . . . . . . . . 2.3.5 Re-examination . . . . . . . . . . . . . . . . . 2.3.6 Compulsory licences . . . . . . . . . . . . . . 2.3.7 Patentee rights . . . . . . . . . . . . . . . . . 2.3.8 Infringement of patents . . . . . . . . . . . . . 2.3.9 Revocation . . . . . . . . . . . . . . . . . . . 2.3.10 Annuities . . . . . . . . . . . . . . . . . . . . 2.3.11 Patent applications concerned with microorganisms 2.3.12 Extension of term for pharmaceuticals . . . . . . 2.4 Invention v. Discovery . . . . . . . . . . . . . . . . . 2.4.1 Patentable inventions . . . . . . . . . . . . . . 2.4.2 Novelty . . . . . . . . . . . . . . . . . . . . . 2.4.3 Inventive step . . . . . . . . . . . . . . . . . . 2.4.4 Utility . . . . . . . . . . . . . . . . . . . . . . 2.4.5 Prior secret use . . . . . . . . . . . . . . . . . 2.5 Patent Procedure in the United States and Europe 2.5.1 United States . . . . . . . . . . . . . . . . 2.5.2 Europe . . . . . . . . . . . . . . . . . . .
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2.2 International IP Law – International IP Treaties . . . . . . . . 2.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 Paris Convention . . . . . . . . . . . . . . . . . . . . 2.2.3 Patent Cooperation Treaty (PCT) . . . . . . . . . . . . . 2.2.4 Budapest Treaty . . . . . . . . . . . . . . . . . . . . . 2.2.5 Trade Related Aspects of Intellectual Property Rights (TRIPS)
2.6 Prosecution Costs
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2.7 Patentability of Biotechnological Inventions 2.7.1 Australia . . . . . . . . . . . . . . . 2.7.2 United States . . . . . . . . . . . . . 2.7.3 Europe . . . . . . . . . . . . . . . . 2.8 Breadth of Biotechnology Patent Claiming 2.8.1 Australia . . . . . . . . . . . . . 2.8.2 United States . . . . . . . . . . . 2.8.3 Europe . . . . . . . . . . . . . .
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2.9 Patentability of Methods of Medical Treatment of Humans 2.9.1 Introduction . . . . . . . . . . . . . . . . . . . . 2.9.2 Australia . . . . . . . . . . . . . . . . . . . . . 2.9.3 Other jurisdictions . . . . . . . . . . . . . . . . .
3. Searching
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3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Patents as a Source of Information . . . . . . . . . . . . . . . . . . Patentability Search . . . . . . . . . . . . . . . . . . . . . . . . . Infringement Search . . . . . . . . . . . . . . . . . . . . . . . . . Validity Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . State of the Art Search . . . . . . . . . . . . . . . . . . . . . . . . Bibliographic Searches . . . . . . . . . . . . . . . . . . . . . . . . How to Perform a Search . . . . . . . . . . . . . . . . . . . . . . . 3.8.1 Limitations of searching . . . . . . . . . . . . . . . . . . . . . 3.9 IP Informatics & Information: Web Access to IP Tools and Databases
4. Development
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4.2 How to Read a Patent Specification . . . 4.2.1 Reasons for reading a patent . . . . 4.2.2 Requirements of a patent specification 4.2.3 Parts of a patent specification . . . . 4.2.4 Reading a patent specification . . . .
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Using IP in Decision – Making for R&D . . . . . . . Aligning IP and R&D with Business Strategy . . . . IP Inventory Audit . . . . . . . . . . . . . . . . . . Procedural Audit . . . . . . . . . . . . . . . . . . Assessing the Competitive Landscape – IP Mapping State of the Art Searches . . . . . . . . . . . . . . Avoiding Infringement (Freedom to Operate) . . . . Strategic Approaches to R&D and Patent Filing . .
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5. Strategic Management of IP Resources 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8
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4.1 Identifying Inventive Subject Matter . . . . . . . . . 4.1.1 Introduction . . . . . . . . . . . . . . . . . . . 4.1.2 Factors which may indicate invention . . . . . . . 4.1.3 Examples of inventive subject matter . . . . . . . 4.1.4 Factors to consider when determining inventiveness
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6. Research Management and Laboratory Practice 6.1 Laboratory Notebooks . . . . 6.1.1 Formulation of an invention
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6.3 Agreements . . . . . . . . . . . . . . . . . . . . . . . . 6.3.1 Legally binding agreements . . . . . . . . . . . . . 6.3.2 Care when entering into an agreement With an individual such as an inventor . . . . . . . . 6.3.3 Need for caution when signing ANY agreement . . . . 6.3.4 Entering into other agreements concerning IP . . . . . 6.3.5 Examples of implementation of ownership by agreement
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Form of IP Protection is Appropriate for Results of R&D? . . . . . . . . . . . 97 Does the innovation have commercial potential? . . . . . . . . . . . . . . . . . 99 Can the innovation be discerned from the final product? . . . . . . . . . . . . . 99 Can the innovation be kept secret essentially indefinitely? . . . . . . . . . . . . . 99 Is the innovation inherently unpatentable? . . . . . . . . . . . . . . . . . . . . 100 Publish or develop further . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 File a patent application? . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
6.5 IP Record Storage Practices . . . . . . . . . . . . . . 6.5.1 Personnel practices . . . . . . . . . . . . . . . . 6.5.2 Identification and protection of confidential information 6.5.3 Review of communications . . . . . . . . . . . . .
7. Decision to Patent
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7.1 Should a Patent Application be Filed? . . . . . . . . . . . . . . . . . . 7.1.1 Have the prospects of obtaining a valid patent been assessed? . . . . 7.1.2 How much protection will the patent give? . . . . . . . . . . . . . . 7.1.3 How easily could infringement of the patent be detected? . . . . . . . 7.1.4 Is there relevant competitor activity? . . . . . . . . . . . . . . . . . 7.1.5 Has the relationship of the patent with other IP been assessed? . . . . 7.1.6 Does the commercial potential or return justify patenting? . . . . . . . 7.1.7 Has the likely effect on competitors been assessed? . . . . . . . . . . 7.1.8 Does the organisation have the capability and intention to commercialise the invention itself? If not, do possible licensing opportunities exist? . . 7.1.9 Has the invention been published? . . . . . . . . . . . . . . . . . . 7.1.10 Has the invention been used commercially? . . . . . . . . . . . . . . 7.2 7.3 7.4 7.5 7.6
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When to File a Patent Application . . . . . . . Preparation of a Patent Specification . . . . . How to Use the Year After the First Filing Date When to Publish . . . . . . . . . . . . . . . . Review of Publications . . . . . . . . . . . .
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6.2 Ownership of Invention . . . . . . . 6.2.1 Rights of ownership . . . . . . 6.2.2 Identifying ownership of invention
6.4 What 6.4.1 6.4.2 6.4.3 6.4.4 6.4.5 6.4.6
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8. Commercial Exploitation
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8.1 Introduction . . . . . . . . . . . . . . . . . . . . . 8.1.1 How to commercialise . . . . . . . . . . . . . 8.1.2 How to commercialise IP successfully . . . . . . 8.1.3 Using others’ IP as a commercial tool . . . . . . 8.1.4 Using IP in business strategy . . . . . . . . . . 8.1.5 Successfully commercialising IP through licensing 8.1.6 Going it alone – start-ups . . . . . . . . . . . . 8.2 A Collaborative Approach to Commercialising IP 8.2.1 Agreements and contracts . . . . . . . . . 8.2.2 Due diligence . . . . . . . . . . . . . . . 8.2.3 Licensing v. assignment . . . . . . . . . .
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8.3 IP Valuation: How Venture Capitalists and Independent Valuers Value IP . . . . . . 143 8.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 8.3.2 How does a valuer view IP? . . . . . . . . . . . . . . . . . . . . . . . . . . 143 8.3.3 Identifying the IP to be valued . . . . . . . . . . . . . . . . . . . . . . . . . . 144 8.3.4 Some areas where an IP valuation may be required . . . . . . . . . . . . . . . 144 8.3.5 Approaching the IP valuation . . . . . . . . . . . . . . . . . . . . . . . . . . 144 8.3.6 Methods utilised in valuing IP . . . . . . . . . . . . . . . . . . . . . . . . . . 145 8.3.7 The income-based method of evaluating IP . . . . . . . . . . . . . . . . . . . 146 8.3.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 8.4 Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 8.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 8.4.2 Types of licence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 8.4.3 Reasons for licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 8.4.4 Advantages and disadvantages of licensing . . . . . . . . . . . . . . . . . . . 151 8.4.5 Assessing the idea – the “innovation audit” . . . . . . . . . . . . . . . . . . . 153 8.4.6 Risk and reward – from the licensee’s perspective . . . . . . . . . . . . . . . . 155 8.4.7 Risk and reward – from the licensor’s perspective . . . . . . . . . . . . . . . . 155 8.4.8 Non-exclusive or exclusive? . . . . . . . . . . . . . . . . . . . . . . . . . . 155 8.4.9 Finding the right licensee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 8.4.10 Negotiations and payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 8.4.11 The licence agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 8.4.12 Limits on the patentee’s rights to impose restrictions under the Patents Act . . . . 160 8.5 Defence of IP Rights . . . . . . . . . . . . . . . . . 8.5.1 Introduction . . . . . . . . . . . . . . . . . . 8.5.2 The reality of defending IP . . . . . . . . . . . 8.5.3 Enforcement of IP rights in Australia . . . . . . . 8.5.4 Cross-claims and defences to infringement actions 8.6 IP Insurance . . . . . . . . . . . . 8.6.1 Categories of IP insurance . . 8.6.2 Obtaining IP litigation insurance
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8.7 Biotechnology IP Management and Issues Relating to Indigenous Peoples 8.7.1 Adaptability of IP laws to traditional knowledge . . . . . . . . . . . . . 8.7.2 Bioprospecting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7.3 Action to protect indigenous peoples’ IP . . . . . . . . . . . . . . . .
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9. Case Studies 9.1 9.2 9.3 9.4
Case Case Case Case
Study Study Study Study
I: The Perils of Publication . . . . . . . . . . . . . . . . II: Dtect Pty Ltd . . . . . . . . . . . . . . . . . . . . . . III: International Genomics Alliance . . . . . . . . . . . . IV: Freedom to Operate – Review of Enabling Technology
10. Appendices 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8
Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix
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11. Glossary of Acronyms and Abbreviations 12. Index
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I: Description of Microorganisms . . . . . . II: TRIPS and Biotechnology . . . . . . . . III: Manner of Manufacture . . . . . . . . . IV: A Test to Determine Obviousness . . . . V: How to Read a Patent – Interpretation . . VI: Novelty – Statutory Basis . . . . . . . . VII: Patent Questionnaire . . . . . . . . . . VIII: Statutes Relating to Commercialisation
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Figure 2-1:
Patents v. Trade Secrets
Figure 2-2:
PCT Timetable
Figure 2-3:
Australian Patent Application Procedure
Figure 2-4:
Patent Filing Costs
Figure 2-5:
Australian Patent Prosecution Costs (Standard Patents)
Figure 3-1:
Comparison of Main Search Types
Figure 3-2:
Useful IP Web Sites
Figure 5-1:
Steps in Forming an R&D Strategy
Figure 5-2:
IP Strategy – Checklist
Figure 6-1:
Laboratory Notebook – Checklist
Figure 6-2:
IP Protection Decision Tree
Figure 6-3:
Protection of Confidential Information – Checklist
Figure 7-1:
Deciding to Patent – Checklist
Figure 7-2:
Sound Management Practices in Relation to Publication
Figure 8-1:
Confidentiality – Checklist
Figure 8-2:
Confidentiality Agreements – Checklist
Figure 8-3:
Material Transfer Agreement – Checklist
Figure 8-4:
Due Diligence – Checklist
Figure 8-5:
Mutual Benefits of Licensing
Figure 8-6:
Whether to License – Checklist
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Figure 8-7:
Licence Agreement – Checklist
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1. Introduction 1.1 Outline
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1.2 How to Use this Manual .
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1.3 Why Protect and Manage Intellectual Property. . . 1.3.1 An incentive for innovation . . . . . . . . . . . . . 1.3.2 Lost opportunity . . . . . . . . . . . . . . . . . . . . 1.3.3 Freedom to operate . . . . . . . . . . . . . . . . .
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Chapter 1. Introduction 1.1 Outline The aim of this Manual is to provide a practical guide to the identification, protection and management of biotechnology – related intellectual property (IP), thereby assisting in maximising the benefits gained from investment in research. The Manual is divided into nine main chapters, which outline aspects of the IP management process from conception of an idea through to its protection and subsequent successful commercialisation. Chapter 1 (Introduction) describes the importance of IP to stakeholders in the biotechnology industry. Chapter 2 (Intellectual Property) introduces the numerous different categories of intellectual property rights. It provides an overview of the various international treaties which shape the IP system, particularly in Europe and the United States, and provides a summary of the Australian system. The chapter concludes by summarising the current position and limitations in each of these jurisdictions with respect to the patenting of biotechnology inventions. Chapter 3 (Searching) introduces the reader to the value of patents as a source of important technical information for the researcher and strategic information for the business manager. At the development stage, it is important to identify inventive subject matter. Chapter 4 (Development) provides a guide on how to do this. It also offers advice on how to understand the content and structure of a patent document. Chapter 5 (Strategic Management of IP Resources) advises the reader that the mere collection of IP rights is not an effective way of reaping the full benefits from research efforts. It outlines the steps necessary to steer R&D in such a way as to complement business objectives and capitalise on existing IP assets. Essential housekeeping issues are discussed in Chapter 6 (Research Management and Laboratory Practice) such as the keeping of laboratory notebooks, the storage of confidential information and the addressing of employee ownership issues. Chapter 7 (Decision to Patent) helps the reader avoid potential pitfalls by outlining the factors to consider when deciding if and when to file a patent application. The focus of Chapter 8 (Commercial Exploitation) is on all aspects of the commercialisation of IP assets. Conducting due diligence and IP valuation are discussed in detail and the concept of licensing is introduced. The inherent risks involved in acquiring unenforceable, invalid or infringing rights and the possible safeguards against this are discussed. Where possible, relevant examples or useful references are provided throughout. However, Chapter 9 (Case Studies) provides four case studies which aim to summarise the relevance of the information provided in the foregoing chapters. Appendices, an index and a glossary of abbreviations, key terms and acronyms which may be new to the reader are provided at the end of the Manual.
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Advice should be sought This Manual aims to provide an additional resource to be used in conjunction with existing IP management policies and practices of research institutions, companies and research funders. At all times, it is imperative that users of this Manual seek advice from their relevant IP officer, commercialisation body or patent attorney prior to taking any action that may affect IP rights.
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Further information about the management of IP is to be found in “IP Toolbox – Using Intellectual Property in Your Business”, which is a guide to understanding and using IP for small to medium-sized Australian enterprises. This guide is scheduled to be made available from IP Australia (www.ipaustralia.gov.au) from July 2001.
1.2 How to Use this Manual This Manual may be used in several ways. It may be read from the beginning to the end to provide the reader with a comprehensive introduction to the issues surrounding the management of IP. Alternatively, the Manual may be used as a reference source for specific information or as a starting point for deeper analysis on an issue of interest. Specific information may be located by using the table of contents and/or the outline in Chapter 1.1 as a guide, by reference to the index at the end of the Manual, or by referring to the following:
To find out more about . . .
Go to Chapter
Why protect and manage IP
1.3
What kinds of IP exist
2.1.1 to 2.1.7
What is the difference between a patent and a trade secret
2.1.8
What international treaties affect IP rights
2.2
What are the main features of the Australian patent system
2.3
What is a patentable invention
2.4, 7.1.9 and 7.1.10
What are the main features of the patent systems of the United States and Europe
2.5
What it costs to obtain a patent
2.6
What kinds of biotechnology inventions are patentable What information can be obtained from a patent search
2.7, 2.8 and 4.1.3 3.1, 3.2 and 3.6
The scope and limitations of a patentability search
3.3
The scope and limitations of a patent infringement search
3.4 and 5.7
The purpose of a patent validity search
3.5
Assessing current technology before commencing an R&D programme
3.6 and 5.6
Searches for information about a particular patent or patents by a particular inventor or applicant
3.7 and 5.5
Patent searching strategies and information sources
3.8 and 3.9
How to tell if an innovation involves an inventive step
4.1.1 to 4.1.4
What can be learned from reading a patent
4.2.1 and 4.2.4
What is contained in a patent specification
4.2.2 to 4.2.4 Continued overleaf
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To find out more about . . .
Go to Chapter
How IP integrates with R&D strategy
5.1, 5.2 and 5.8
The value of an audit of intellectual property assets and policies
5.3 and 5.4
Laboratory record-keeping to establish a date of invention
6.1
What constitutes inventorship
6.2.2
What constitutes ownership of an invention
6.2.2
Ownership agreements concerning IP rights
6.3
How to decide how to protect IP
6.4
How to maintain the confidentiality of information
6.5 and 7.6
How to decide whether to file a patent application
7.1
How to decide when to file a patent application
7.2
What information needs to be in a patent application
7.3
What should be done after a patent application has been filed
7.4
When R&D results can be published
7.5
Options available for commercialisation of IP Successful commercialisation of IP
8.1.1 and 8.1.6 8.1.2 to 8.1.6
What should be included in a confidentiality agreement
8.2.1
What information a potential commercial partner will require
8.2.2
A comparison of licences and assignments
8.2.3
Options for collaborative research
8.2.3
Valuation of IP rights
8.3
Types of licence
8.4.2
Benefits of licensing
8.4.3 and 8.4.4
How to approach licensing IP rights
8.4.5 to 8.4.10
What should be included in a licence agreement
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Defence of IP rights and remedies available when there is infringement
8.5
What can be done to mitigate the costs of IP litigation
8.6
IP rights of indigenous peoples
8.7
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1.3 Why Protect and Manage Intellectual Property 1.3.1 An incentive for innovation Biotechnology is often described as the “exploitation of biological processes for industrial purposes”. The last twenty years have seen phenomenal growth in this industry throughout the world, and the 21st century promises to see further advances in this field, prompting some commentators to describe biotechnology as the “New Industrial Revolution”1. However, since the cost of research is high, and the potential returns are linked to exclusivity, effective IP protection is critical to this burgeoning industry. Annual sales of biotechnology products in the United States have increased from effectively zero in 1980 to US$7 billion in 19932, and in 1999 were estimated to be about US$15 billion3. This growth in product sales is exemplified in the sale of therapeutic drugs such as Amgen’s erythropoietin (EPO) analogue, Epogen, which experienced sales of over US$200 million in 1993, and in 2000 was estimated to have grossed US$1.6 billion4. Other examples include Genentech’s diabetes mellitus drug, “Humulin”, and hepatitis B vaccine, “Engerix-B”, which in 1996 sold over US$850 million and US$560 million respectively5. Further, organisations such as E.I DuPont de Nemours & Co. describe more than US$40 billion in sales of genetically engineered products over the last 15 years6. Whilst the role of biotechnology in human health will continue to increase tremendously in the future, to date biotechnology’s main impact has been in agriculture. For instance, transgenic cotton, soybean and corn are being ever-increasingly planted in the United States, and in some instances presently represent over 50% of the total crop7. Thus, the rewards from investing in biotechnological research can be great; however, research and development in biotechnology is time-consuming and inherently costly. For instance, it has been estimated that in the United States, bringing a new drug to market may take some 10-12 years, at a cost of over US$400 million8. As evidence of this, in 1998 it was estimated that the pharmaceutical industry spent almost US$20 billion in the development of new therapeutic drugs9. Therefore, with so much investment at stake, IP protection is critical. As is immediately apparent, the biotechnology industry makes enormous financial investments in research and development; investments which would be lost without the shelter of effective protection. Conversely, without protection such investments in research and development would not be made and, accordingly, the unprecedented benefits in the quality of human life that biotechnology-related developments are expected to bring, would not occur. Consequently, the answer to the question “Why protect and manage intellectual property?” is self-evident. Intellectual property protection, and more specifically the patent system, provides an incentive for innovation, and without it industry would be unwilling to invest time and money in research and development. In addition, there is a strong argument that through the commercial incentive to invest in research and development offered by the exclusivity associated with IP protection, IP can lead to benefits to the wider community through the products developed as a result of that incentive; benefits which may not be so forthcoming without the underlying profit motivation afforded by IP protection.
1 Montague, P.E., “Biotechnology Patents and the Problem of Obviousness”, Australian Intellectual Property Journal, The Law Book Company Limited, Volume 4 Number 1, February 1993. pp 1-31 2 ibid page 19 3 Australian Biotechnology Association Submissions to the review of business taxation. In: Australian Biotechnology. Volume 9, No. 2, June 1999 4 Chemical & Engineering News: News of the Week 29 January 2001 (page 11) 5 Biotec Navigator at www.biotechnav.com/history.shtml Top 10 Biotechnology Drugs, Top 10 Biotechnology Companies (1996 dollars) 6 Kondo, L. 17 Biotechnology Law Report (Number 6 November-December 1998) page 795 7 Australian Biotechnology Association submissions to the review of business taxation, ibid. 8 Kondo, L., ibid. 9 Kondo, L., ibid.
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1.3.2 Lost opportunity It is essential that public and private sector researchers and technology managers have access to capabilities for managing IP and negotiating commercial arrangements. A long-held concern has been that Australia has not derived adequate benefit from commercialisation of its research in the past and that Australian IP has been too frequently sold or licensed for commercialisation overseas, sometimes unnecessarily. Further, in cases where overseas commercialisation is appropriate, it has been claimed that Australia has not always obtained the maximum possible benefit.
1.3.3 Freedom to operate A key issue for biotechnology IP management in Australia is for local research institutions, companies and research funders to identify where they have freedom to operate. This will help identify opportunities for research that are likely to result in key patents which will be attractive to local and foreign investment. As a result of a careful analysis of technical fields where there is freedom to operate, the commercialisation of research is less likely to be hampered by a lack of access to key patents owned by others.
Why protect and manage IP • Biotechnology – “the New Industrial Revolution” • Rewards from biotechnology research can be great – Amgen sold over US$1.6 billion worth of EPO in 2000 • Research and development in biotechnology is timeconsuming and inherently costly – it is estimated that bringing a new drug to market may take some 10-12 years, at a cost of over US$400 million • IP protection is critical to safeguard investment • To maximise commercial benefit and minimise lost opportunity
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2. Intellectual Property 2.1 Types of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 8 2.1.1 What is intellectual property? . . . . . . . . . . . . . . . . . . 8 2.1.2 Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.1.3 Trade marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.1.4 Designs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.1.5 Plant Breeder's Rights . . . . . . . . . . . . . . . . . . . . . . 12 2.1.6 Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.1.7 Trade secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.1.8 Patents v. trade secrets . . . . . . . . . . . . . . . . . . . . . . 15 2.2 International IP Law – International IP Treaties . . . . . . . . . . . . 16 2.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.2.2 Paris Convention . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.2.3 Patent Cooperation Treaty (PCT) . . . . . . . . . . . . . . . . 16 2.2.4 Budapest Treaty . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.2.5 Trade Related Aspects of Intellectual Property Rights (TRIPS) . . 20 2.3 Australian Patent Procedure . . . . . . . . . . . . . . . . . . . . . . 21 2.3.1 Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.3.2 Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.3.3 Opposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.3.4 Sealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.3.5 Re-examination . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.3.6 Compulsory licences . . . . . . . . . . . . . . . . . . . . . . . 23 2.3.7 Patentee rights . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.3.8 Infringement of patents . . . . . . . . . . . . . . . . . . . . . . 24 2.3.9 Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.3.10 Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.3.11 Patent applications concerned with microorganisms . . . . . . 25 2.3.12 Extension of term for pharmaceuticals . . . . . . . . . . . . . . 25 2.4 Invention v. Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.4.1 Patentable inventions . . . . . . . . . . . . . . . . . . . . . . . 28 2.4.2 Novelty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.4.3 Inventive step . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.4.4 Utility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.4.5 Prior secret use . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.5 Patent Procedure in the United States and Europe . . . . . . . . . 31 2.5.1 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2.5.2 Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.6 Prosecution Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.7 Patentability of Biotechnological Inventions . . . . . . . . . . . . . 38 2.7.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.7.2 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.7.3 Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 2.8 Breadth of Biotechnology Patent Claiming . . . . . . . . . . . . . . . 43 2.8.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.8.2 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2.8.3 Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 2.9 Patentability of Methods of Medical Treatment of Humans . . . . . . 49 2.9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 2.9.2 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 2.9.3 Other jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Chapter 2. Intellectual Property 2.1 Types of Intellectual Property 2.1.1 What is intellectual property? The term “intellectual property” was originally coined to refer to those rights which protected literary and artistic creations. However, in recent times, its meaning has come to embrace both industrial property and artistic creation. Essentially, intellectual property encompasses the tangible representations of intellect and creativity. This includes inventions, industrial designs, trade marks, copyright, and know-how. Patents, registered designs, trade marks and copyright are the most common ways in which the owner of IP can prevent others from using or otherwise exploiting the property without the owner’s permission. Other types of IP include circuit layout rights, plant breeder’s rights and trade secrets. The Convention which defines the scope of intellectual property is the Convention Establishing the World Intellectual Property Organisation (WIPO) of which Australia is a member. One of the objectives of WIPO is promotion of the protection of intellectual property, and in Article 2(viii) the Convention defines “intellectual property” as rights relating to: • “Literary, artistic and scientific works; • Performances of performing artists, phonograms and broadcasts; • Inventions in all fields of human endeavour; • Scientific discoveries; • Industrial designs; What is intellectual property?
• Trade marks, service marks and commercial names and designations; • Protection against unfair competition; and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.”
• Intellectual property (IP) encompasses the tangible representations of intellect and creativity, and is often represented in the form of patents, registered designs, trade marks, copyright, circuit layout rights, plant breeder’s rights and trade secrets
2.1.2 Patents A patent is a temporary monopoly in a technological innovation granted to the patentee. Patents provide the patent owner with the right to exclude others from exploiting the invention for the life of the patent, which is generally 20 years. The 20 year monopoly is provided in exchange for a detailed description of the invention claimed. Therefore, the patent system can be seen as providing commercial privilege in return for disclosure. Eighteen months after lodgment of the patent application, the description of the invention it contains becomes available for public inspection. In order to be patentable, the invention must be new at the time of lodging the patent application. Demonstrating, selling, publishing or discussing the invention in public prior to filing will preclude the inventor’s ability to gain a patent.
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Patents derive their origins from the practice of the English monarch in medieval times, exercising the Royal Prerogative, to grant monopolies to Court favourites. In the late 16th century and early 17th century, English Common Law Courts began to refuse to enforce letters patent granted by the King in respect of trading or manufacturing rights which did not involve a requisite degree of “newness”. In 1623, the Parliament passed an Act known as the Statute of Monopolies that outlawed all monopolies “for the sole buying, selling, making, working and using of any thing” subject to the important proviso in section 6: “Provided ..... that any declaration before mentioned shall not extend to any letters patent and grants of privilege for the term of fourteen years or under, hereafter to be made, of the sole working or making of any manner of new manufacture within this realm, to the true and first inventor and inventors of such manufactures, which others at the time of making such letters patent and grants shall not use, so as also they be not contrary to the law, nor mischievous to the state, by raising prices or commodities at home, or hurt of trade, or generally inconvenient.” Section 6 of the Statute of Monopolies contains a number of the elements which form part of the present patent system in Australia, for example: • grant of monopoly that is limited in terms of time
Patents • A patent is a temporary monopoly (generally 20 years – subject to possible extension for pharmaceutical substances) in a technological innovation granted to the patentee • Not more than 18 months after lodgment of the patent application, detailed description of the invention becomes available for public inspection
• concept of “invention” • concept of “manner of new manufacture”
• In order to gain a patent, the invention must be at least new and inventive at the “priority date”
• “true and first inventor” • not contrary to law, or generally inconvenient.
In 1716, a requirement for patentees to describe their invention was introduced. The disclosure of the invention to the public has come to be recognised as the quid pro quo in return for the monopoly conferred on the patentee by the patent. This is still a fundamental element of the patent system in Australia. Australian Patents Act 1990 (Cth) The Australian Patents Act 1990 (Cth) came into force on 30 April 1991, repealing the Patents Act 1952 (Cth). Patent Regulations made under the 1990 Act commenced at the same time. Under the Patents Act 1990 (Cth), the term of a standard patent is 20 years, and there is a limited right to obtain an extension of term with respect to standard patents for pharmaceutical substances (see Extension of term for pharmaceuticals, Chapter 2.3.12). Types of Australian patent/patent application Provisional application The first step in filing a patent application in Australia is often the lodgment of an application, accompanied by a provisional specification, at the Patent Office. The provisional specification describes the invention and (in most cases) its date of lodgment determines the “priority date”, on which date the invention must be new.
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Complete application (standard patent) Within 12 months of lodging the provisional application, a complete application must be lodged at the Patent Office if the application is to be continued. Where an invention is in development when a provisional specification is lodged, further provisional specifications can be lodged in the 12 month period to include additional material. All such provisional specifications can be combined in a single complete specification. A complete application can alternatively (or additionally) claim priority from one or more patent applications filed within the previous 12 months in a country which is a signatory to the Paris Convention (see Chapter 2.2.2) – known as “Convention priority”. A complete specification concludes with a series of numbered paragraphs called “claims”, which define the monopoly sought. The claims include not only the particular embodiment of the invention as described in detail in the specification, but also variations. The provisional and complete applications become open for public inspection 18 months from the priority date. Petty patent
Standard patents A standard Australian patent has the following characteristics: • Specification consists of a description and ends with one or more claims defining the monopoly conferred by the patent • Typically, claims define novel articles, parts of articles, substances, compositions, living organisms, methods of therapeutic treatment or other uses of the foregoing, and/or manufacturing processes: more than one of these claim types may be present in a single patent • Claims may be independent or dependent (ie. refer back to another claim)
• Consists of an Abstract, Patent Request and Specification. • Specification has the same description requirements but can only contain up to three claims.
• Subjected to examination for novelty, inventive step and other matters, any objections raised by the Examiner must be satisfactorily dealt with before the application can be accepted for grant
• Applications for petty patents are not necessarily subjected to detailed examination.
• Maximum term (subject to possible extension for pharmaceutical substances) is 20 years from the “effective filing date”
• Maximum term of 6 years only.
• Renewal fees are payable annually for pending applications and granted patents, from the fifth anniversary of the effective filing date of the patent application. A 6 month grace period is available for paying the renewal fee, on payment of an additional fee of $65 per month after the anniversary date
• No renewal fees are payable. • No new applications for petty patents can be lodged from 24 May 2001. Innovation patent
From 24 May 2001, a new form of patent protection in Australia became available – that is, the “innovation patent”. The innovation patent, in effect, replaces the petty patent (although existing applications for petty patents and granted petty patents will continue). The novelty test for an innovation patent is the same as for a standard patent. However, a lower “innovative step” test applies for an innovation patent than currently Innovation Patents exists in terms of obviousness for a standard patent. An Australian innovation patent has the following characteristics:
The innovation patent has a shorter term (8 years) than a standard patent (20 years). There is no extension of term available for an innovation patent. An innovation patent, unlike a petty patent, may have up to five claims. There will be no publication of an innovation patent prior to its grant, the grant being intended to occur soon after its filing.
• Consists of an Abstract, Patent Request and Specification, similar to standard patents • Specification has the same description requirements as a standard patent but can only contain a maximum of five claims; all can be independent if so desired • Applications for innovation patents are not subjected to examination. However, the patentee must request examination, and the patent must be validated by examination, before the patent is relied on in infringement proceedings • Maximum term is 8 years from the effective filing date
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Substantive examination by the Patent Office of an innovation patent will only occur after grant and then only if directed by the Commissioner or requested by the patentee or a third party. If the innovation patent meets the requirements of examination it will be “certified” and, if not, it will be revoked. Patents of addition An application for a patent of addition may be made for a single improvement in, or modification of, the main invention in an earlier patent. The improvement or modification cannot be disclosed in the main patent. The applicant for a patent of addition must be the same as the owner of the earlier patent or a person authorised by the owner. The principal advantage of a patent of addition is that it is not invalid merely because the invention claimed therein does not involve an inventive step having regard to the publication and use of the main invention before the priority date of the claims of the patent of addition. Another advantage of patents of addition is that no annuities are payable after grant although they are payable before grant. The principal disadvantages of patents of addition are that each patent of addition can only be in respect of a single improvement or modification. Multiple patents of addition are therefore required to cover multiple improvements or modifications. Further, a patent of addition expires or ceases to be in force when the main patent expires or is not renewed. Divisional applications Under the Patents Act 1990 (Cth), it is possible to file a patent application that claims the same priority date as a previously filed patent application, and that claims matter disclosed in an earlier application. Such an application is called a “divisional” application. An Australian divisional application can also disclose and claim new matter, can be based on multiple complete applications and can claim Convention priority from an earlier application filed in a Convention country within 12 months prior to the divisional filing date. A patent of addition can also be a divisional application. A divisional application must be filed prior to sealing of the parent complete application and if matter is claimed outside of the scope of the claims of the parent application, the divisional application must be filed within 3 months of advertisement of acceptance of the parent application. The maximum term of a divisional application is 20 years from the filing date of the earliest complete parent application.
2.1.3 Trade marks The Australian Trade Marks Act 1995 (Cth) defines a trade mark as a “sign” used to distinguish the goods or services of one person from those dealt with or provided by another person in the course of trade. A sign can include any letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound or scent, or any combination thereof. The trade mark must be capable of distinguishing the applicant’s goods or services from those of other traders. Geographical names, surnames and two-letter trade marks may be difficult to register for that reason, unless evidence can be provided to establish that they are already distinctive through substantial prior commercial use.
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The registration of a trade mark provides the party with the right to exclusively use, license or sell goods and services under the mark in relation to goods or services for which it is registered. There is no maximum term for which a trade mark can be registered.
Trade marks • A trade mark is a “sign” used to distinguish the goods or services of one person from those dealt with or provided by another person in the course of trade. A sign can include any letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound or scent, or any combination thereof
In order to gain a trade mark, the sign must not be one that other traders may need to use to promote their own goods or services, such as a directly descriptive term, a geographic word or common surname, and it cannot mislead the public about the nature of the goods or services. Trade marks that indicate a certification of origin, quality or membership of an organisation are also registrable.
2.1.4 Designs A design is a feature of shape, configuration, pattern or ornamentation of an article when judged by the eye. A design registration under the Designs Act 1906 (Cth) is used to protect the visual appearance of manufactured products. The registration of a design provides the party with the right to exclusively use, license or sell the design for up to a maximum of 16 years.
Designs • A design is a feature of shape, configuration, pattern or ornamentation of an article when judged by the eye • A design registration is used to protect the visual appearance of manufactured products • The registration of a design provides the party with the right to exclusively use, license or sell the design for up to a maximum of 16 years
In order to gain a design registration, the design must be new and original, and have an industrial or commercial use. Artistic works (that is, those without commercial or industrial application) cannot be registered, but may attract copyright protection. Further information and advice in relation to patent, trade mark or design protection can be obtained from: IP Australia PO Box 200 Woden ACT 2606 Phone: 1300 651 010 Fax: (02) 6282 5810 www.ipaustralia.gov.au
2.1.5 Plant Breeder’s Rights The Australian Patent Office issues patents for plants. An alternative means of protection is provided by the Plant Breeder’s Rights Act 1994 (Cth). At present, there is no bar to obtaining both forms of protection for a plant variety, provided that the requirements of both the Patents Act and the Plant Breeder’s Rights Act can be met. Plant Breeder’s Rights (PBR) protection extends not only to plant varieties, but also to reproductive material of the variety and to other varieties deemed “essentially derived” from the protected variety. Rights are of 25 years’ duration from acceptance of the application in the case of trees and vines, and 20 years in the case of any other varieties. To be eligible, a variety must be originated by a person. Selections direct from the wild or discoveries are not eligible unless they have been propagated in some way. The variety or its reproductive material must not have
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been sold in Australia for more than one year before making the application and cannot have been sold overseas for more than 6 years before making the application in the case of trees and vines, or more than 4 years in all other cases. The variety must adhere to three broad criteria: distinctiveness, uniformity and stability (DUS). Upon acceptance, the application is published and subsequently examined to ensure that it is valid. Examination can be based on growing trials in Australia or on DUS data supplied by a foreign PBR Office based on a corresponding application or registration. Valid applications proceed to grant and the holder of PBR is issued with a certificate for that variety.
Plant Breeder’s Rights • To be eligible for protection, a plant variety must adhere to three broad criteria: distinctiveness, uniformity and stability (DUS) • Commercial novelty: the variety or its reproductive material must not have been sold in Australia for more than one year before making the application and cannot have been sold overseas for more than 6 years before making the application in the case of trees and vines, or more than 4 years in all other cases
Australia is a member of the International Union for the Protection of New Varieties of Plants (UPOV). Consequently, Australian applications for PBR can claim priority from foreign applications filed not more than 12 months previously in UPOV member countries, and Australian PBR applicants can file applications in UPOV member countries within 12 months of their Australian PBR application, claiming priority from it. Further information in relation to PBR can be otained from: Plant Breeder’s Rights Australia Agriculture, Fisheries and Forestry Australia GPO Box 858 Canberra ACT 2601 Ph: (02) 6272 4228 Fax: (02) 6272 3650 www.affa.gov.au/agfor/pbr/pbr.html
2.1.6 Copyright There is no system of copyright registration in Australia. Copyright protects a range of original materials such as literary, artistic and musical works and other subject matter such as sound recordings and broadcasts. Copyright comes into existence as soon as an original work has been reduced to a material form, eg. by writing or storage in a computer memory from which it can be retrieved. Computer software is now included in the definition of “literary work”. The work may be a novel, play, drawing, statue, photograph or the like and it is not necessary for it to have artistic merit. The basic purpose of copyright is to reward creative enterprise and protect copyright owners from a loss of revenue from unauthorised copying. Copyright law in Australia is codified in the Copyright Act 1968 (Cth). Copyright law also has very important industrial and commercial ramifications. The copyright in an original drawing of an article, such as an engineering drawing, may be infringed by a three-dimensional reproduction of the drawing (no matter what its size or material of construction), provided such articles have not been manufactured and sold by the copyright owner. There is, however, an interrelationship between the Designs Act and the Copyright Act, which may remove this copyright protection once articles to which the design has been applied are made and sold or hired in Australia or elsewhere. Therefore, if protection for the shape of the article is to be maintained, it is necessary to apply for a registered design before sale takes place. Two-dimensional patterns applied to the surface of an article may retain some copyright protection notwithstanding such commercial activities.
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The term of copyright protection is generally for the life of the author plus 50 years, although lesser periods of protection may apply according to the nature of the work or other subject matter. Copyright (unlike patents and registered designs) suffers from the problem that it is necessary to establish that actual copying took place in order to prove infringement. Therefore, copyright provides no protection against subsequent independent development of the same or substantially similar works. Australia is a member of both the Berne Convention and the Universal Copyright Convention regarding copyright. Most countries of the world belong to one or both of these Conventions. The effect of this is that copyright in engineering drawings or any other work produced in Australia may be recognised in foreign countries. Similarly, copyright in works created abroad may be recognised in Australia.
Copyright • Copyright protects a range of original materials such as literary, artistic and musical works and other subject matter such as sound recordings and broadcasts • No system of copyright registration exists in Australia. Copyright comes into existence as soon as an original work has been reduced to a material form, eg. by writing or storage in a computer memory from which it can be retrieved • In order to prove copyright infringement, it is necessary to
establish that actual copying took place. Copyright provides In order to draw the attention of others to copyrights no protection against subsequent independent development (and to sue for infringement in certain overseas of the same or substantially similar works. countries), it is very desirable to mark engineering drawings, instruction brochures, computer programs and the like with the Copyright symbol © and/or the word COPYRIGHT, the name of the person or organisation who owns the copyright and the date of first publication of the work concerned.
Copyright may be assigned from the creator of the work to another, but any such assignment must be in writing. In some countries, such as the United States, it is possible to register copyright and there may be certain advantages in doing so. Further information in relation to copyright can be obtained from: The Australian Copyright Council Suite 3, 245 Chalmers Street Redfern NSW 2016 Ph: (02) 9318 1788 Fax: (02) 9698 3536 www.copyright.org.au
2.1.7 Trade secrets An alternative to the protection available under the statutory regimes, such as patents, is to keep the invention secret and rely on the common law protection of confidential information. In general terms, confidential information or “trade secret” means information such as a formula, pattern, compilation, program, data, device, method, technique or process that: a) derives independent economic value (actual or potential) from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
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There is no restriction on the nature of information which may be protected as a trade secret, provided it is not mere trivia and has been kept confidential by limited disclosure only to people who are under an obligation of confidence. Protection is available only for so long as the information remains secret. Consequently, reliance on trade secrets may be appropriate only where the marketed product of an invention cannot be reverse engineered to discover its composition or production process.
Trade secrets • A “trade secret” is information that derives independent economic value (actual or potential) from remaining secret from other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy • The law protecting confidential information provides no remedy in relation to independent invention
2.1.8 Patents v. trade secrets It is useful to compare patents and trade secrets (see Figure 2-1). Trade secrets may be most appropriate for that subject matter which is highly unlikely to be discovered by someone else. On the other hand, a generic improvement that has a good chance of being found by others is highly inappropriate as a trade secret.
Figure 2-1: Patents v. trade secrets Patents
Trade secrets
Protection against independent discovery
No protection against independent discovery or reverse engineering
20 years of protection
Protection lasts as long as secret
Scope for publication of development
No opportunity for publication
Enforcement: infringement
Enforcement: breach of confidence, breach of contract, breach of fiduciary duty
Protection can be broadened beyond specific discovery/development
Protection specific to particular secret
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2.2 International IP Law – International IP Treaties 2.2.1 General Australia is a signatory to a number of international IP treaties. Australia’s national IP legislation contains provisions implementing these treaties and incorporating the undertakings into domestic law. As far as patents are concerned, the major international treaties which affect the 1990 Act are as follows: 1. Paris Convention for the Protection of Industrial Property of 1883 (Paris Convention) 2. The Patent Cooperation Treaty 1970 (PCT) 3. Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Protection of Microorganisms for the Purposes of Patent Protection 1987 (Budapest Treaty), and 4. Agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPS)
2.2.2 Paris Convention The Paris Convention was formed in 1883 and came into effect on 7 July 1884. It is probably the single most important multi-lateral Treaty relating to intellectual property, and in particular relating to patents, trade marks, service marks, utility models, etc. Since its inception, the Paris Convention has gone through periodic revisions (1900, 1911, 1925, 1934, 1958, and 1967), the latest being the Stockholm text of 1967. Australia has been a signatory since 1925 and has been bound by the substance of the Stockholm text since 27 September 1975. At present, there are 140 signatory countries to the Paris Convention, with notable exceptions including Taiwan and Thailand. An important provision of the Convention is set out in Article 2(1), which requires member countries to accord national treatment to nationals of other member countries of the Union. That is, under the Convention, each member country must grant the same right to nationals of other Union countries as it grants to its own nationals.
Paris Convention • Paris Convention is probably the single most important multi-lateral Treaty relating to intellectual property, and in particular relating to patents, trade marks, service marks, utility models, etc • Convention priority: a patent applicant in any Convention country has a right of priority to file an application for a patent in any other Convention country within 12 months of the date of first filing
However, probably the most important provision of all is Convention Priority (Article 4A-C), wherein a “person” filing an application for a patent in any other Convention country has a right of priority to file an application for a patent in any other Convention country within 12 months of the date of first filing. Similar provisions apply to trade mark and design applications, though the applicable time periods are different.
2.2.3 Patent Cooperation Treaty (PCT) As outlined above, the main function of the Paris Convention is to provide a means of access into different countries’ patent systems. However, once lodged, a patent application must be prosecuted through each national patent system; a procedure which involves considerable duplication and expense. Therefore, the Patent Cooperation Treaty (PCT) was entered into in order to provide patent applicants with a relatively simple way of commencing patent applications in a number of countries simultaneously.
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The PCT was first signed in Washington in 1970 and came into effect on 24 January 1978. Australia has been a signatory to the PCT since 31 March 1980, and as of February 2001, there were 109 signatories to the PCT. The number of signatory countries continues to grow. The PCT consists of “Articles” and “Rules”, and the relevant text is set out in Schedules 2 and 2A to the Australian Patent Regulations 1991 (Cth). Most of Australia’s major trading partners are signatories, with exceptions including Argentina, Chile, Taiwan, Philippines, Malaysia and Thailand. South Africa, Indonesia and India are all recent additions. The PCT procedure is split into two parts. Chapter I relates to International Searching and Publication, whilst Chapter II relates to International Preliminary Examination. International Searching (Chapter I) Once a PCT application has been filed, one of the national Patent Offices (the Australian Patent Office in the case of a PCT application filed in Australia), acting as an International Searching Authority, conducts a search in order to establish the International Search Report. The International Search Report is normally established about 16 months from priority date. Prior art is searched, an International Search Report (ISR) is drawn up listing the prior written disclosures (patent & non-patent literature), and copies are forwarded to the applicant. Under Chapter I, an applicant may amend the claims (once) and file a statement (500 words maximum related to the amendments) under Article 19, but is not able to amend the description of the invention. Amendments under Article 19 must occur before the expiry of 16 months from the priority date, or 2 months from receipt of the ISR, whichever is later. International Publication (Chapter I) The International Bureau of the World Intellectual Property Organisation (WIPO) publishes the PCT application, and this generally occurs 18 months from the earliest priority date. The “National Phase” is then ready to begin, although this may be deferred until 20, 21, 30 or even 31 months from the earliest priority date. The “National Phase” refers to commencement of processing the patent application separately in each national patent office where the patent applicant ultimately desires to obtain a patent. International Preliminary Examination (Chapter II) If the applicant wishes to take advantage of International Preliminary Examination (it is optional) then it is necessary to lodge a “Demand” (equates to requesting International Preliminary Examination) before the expiry of the nineteenth month reckoned from the priority date. This incurs a fee relating to having an examination undertaken. During International Preliminary Examination, the International Preliminary Examining Authority (the Australian Patent Office in the case of PCT applications filed in Australia) formulates a preliminary and non-binding opinion (Written Opinion) on issues of novelty, inventive step and whether the invention is thought to be industrially applicable. Under Chapter II, the applicant may amend both the claims and the description, plus file an argument in response to the Written Opinion. This will be followed either by issuance of the International Preliminary Examination Report or a further opinion if there are matters still in contention. The International Preliminary Examination Report must be established by the twenty-eighth month. If the Demand form is not lodged by the required date, then it is necessary to enter the National Phase for all elected states by the twentieth month; the exceptions include Australia, New Zealand and Europe, which afford 21 months.
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Assuming the Demand has been lodged in time, the deadline for entry into the National Phase is extended to 30 months (extended to 31 months for countries such as Australia, New Zealand and Europe). Advantages of taking the PCT route to international patent filings • Deferral of the major costs of filing, including national filing fees and translation costs, where applicable. • Receipt of a search report and, optionally, a preliminary examination report: enables applicants to form a wellinformed view of the likelihood of securing patent protection ultimately, and gives the opportunity, if necessary, to amend claims and/or description, which can save considerably on national costs later. • A firm decision on the countries in which patent protection is to be sought can be deferred up to 18 months. Disadvantages of the PCT route to international patent filings • Additional costs unless recouped by more efficient national processing as a result of actions taken in response to International Search Report and/or International Preliminary Examination: cost to a client of filing a PCT application typically ranges from about A$8,000 to A$12,000. • Delay to grant by up to 18 months. • If claims are narrowed in the International Phase, they may be narrowed more than is necessary to secure a valid patent under some national laws. Timetable A simplified timetable of the stages of an international (PCT) patent application is shown in Figure 2-2. The procedural steps of an international application are determined from the earliest priority date. The priority date may be by virtue of a claim to Convention priority.
Patent Cooperation Treaty (PCT) • PCT provides for an application in a signatory country to be filed as an international application (often termed a “PCT application”) which, once filed, is the subject of an International Search Report • Also provides for a preliminary non-binding Examination, if requested • A PCT application can progress as a national application in each designated country • Signatories include most of Australia’s major trading partners; does not (yet) include Taiwan, Philippines, Malaysia Pakistan and many South American countries among others
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Time*
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Figure 2-2: PCT Timetable Action
(*months from priority date unless otherwise stated)
0
File basic application
up to 12
File PCT application with request, specification and abstract
Actions under Chapter I 1 from PCT filing date
Search fee and basic fee due
12
Designation fee due (if later than 1 month after filing date)
16
File copy of priority document
About 16
International Search Report (ISR) Issues (9 months from priority date or 3 months from receipt by the Searching Authority of the “search copy” of the application)
2 from date of ISR
Applicant may amend claims (Article 19 amendment)
18
Publication of application
19
Deadline to demand International Preliminary Examination (IPE) under Chapter II, and elect states in respect of which IPE will take place. Not all signatories to the PCT are bound by Chapter II of the PCT. Fees are payable if IPE is requested
20 or 21 (depending on the country)
Deadline for entry into the National Phase for any countries not elected under Chapter II
Actions under Chapter II About 24
Written Opinion issues if the International Preliminary Examining Authority finds defects in the application (eg. lack of novelty or inventive step, lack of clarity or lack of support from the description for the claims)
2 from date of Written Opinion
Applicant may amend claims and/or description and/or file response to Written Opinion (these actions are all optional)
Following any response filed
Further Written Opinion (if time permits before IPE Report due)
28 months
IPE Report issues
30 or 31 (depending on the country)
Deadline for entry into the National Phase for any countries elected under Chapter II
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2.2.4 Budapest Treaty The Budapest Treaty concerns inventions that are, or relate to, microorganisms, and provides a solution to the problem of sufficiency of description of inventions concerning microorganisms by permitting a “deposit” with an “International Depositary Authority” to be recognised by contracting countries for the purposes of a patent application in that country. Essentially, the Budapest Treaty consists of “Articles” and “Rules”, wherein the relevant provisions are given force in Australia by sections 6, 41 and 42 of the Australian Patents Act 1990 (Cth). The relevant text is set out in Schedules 1 and 1A to the Patent Regulations. Full description of a life-form Under Australian patent law, and as is the case for any invention, if an applicant chooses to claim a life-form type invention, then a full description of the life-form, together with the best method of performing the invention known to the applicant must be provided (s40(2)(a)). This means the full morphological, biochemical and taxonomic characteristics of the microorganism must be provided in sufficient detail to permit a person skilled in the art to identify, distinguish and repeat the invention. It is often difficult and sometimes impossible to describe an invention relating to a microorganism fully in words. Also, obtaining a life-form is sometimes not 100% repeatable. In these instances, it is more suitable to rely on a deposit of the relevant microorganism under the Budapest Treaty. The relevant statutory details are set out in Appendix I.
Budapest Treaty • Budapest Treaty concerns inventions that are, or relate to, microorganisms • Provides a solution to the problem of fully describing inventions concerning microorganisms by permitting a “deposit” with an “International Depositary Authority” to be recognised by contracting countries for the purposes of a patent application in that country
2.2.5 Trade Related Aspects of Intellectual Property Rights (TRIPS) The TRIPS Agreement came into effect on 1 January 1995 and is part of the Marrakesh Agreement establishing the World Trade Organisation (WTO). TRIPS establishes multilateral international standards for the protection of IP rights. The areas of intellectual property it covers are copyright and related rights, trade marks including service marks, geographical indications including appellations of origin, industrial designs, patents including the protection of new varieties of plants, the layout-designs of integrated circuits and undisclosed information including trade secrets. The aims of the TRIPS Agreement are to: 1. Reduce distortions and impediments to international trade, 2. Provide effective and adequate protection of intellectual property rights, and 3. Ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade. In terms of patent protection, the TRIPS Agreement requires member countries to make patents available for any inventions, whether products or processes, in all fields of technology without discrimination, subject to certain limited exclusions and to the normal tests of novelty, inventiveness (obviousness) and industrial applicability (utility or industrial application). Further details are set out in Appendix II. 20
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2.3 Australian Patent Procedure 2.3.1 Filing In general, the Australian patent application procedure from filing to issuance is summarised in the flowchart in Figure 2-3 on page 26. A patent specification must be accompanied by a “Patent Request”. The applicant, who may be any person whether related to the inventor(s) or not, and the nominated person (to whom the patent is requested to be granted, who may be the same as the applicant and who must derive title from the inventor[s]), are both named in the Patent Request. A Notice of Entitlement is also required to be lodged before the application is accepted.
2.3.2 Examination Examination of a standard patent application must be requested within 5 years of the Australian filing date of the complete specification or within 6 months of the issuance of a direction to request examination (whichever is the earlier), otherwise the application lapses. A single deferment of up to 9 months of the examination deadline specified in the direction can be obtained under specific circumstances. The 9 months’ deferment commences from the filing date of the request for deferment and not the deadline for requesting examination. An Examiner in the Patent Office then conducts a search to determine whether the invention was known before the priority date. The Examiner, in an official report, may refer to earlier published prior art, including patent specifications which fall within the scope of the claims. The claims can be amended to distinguish the earlier known information, or to remove the part which was earlier known, in order to obtain the broadest possible protection to which the applicant is entitled. Once the Examiner’s objections are overcome, the application is then “accepted” and the acceptance is advertised in the Official Journal of Patents. In addition to issuing a direction to request examination, the Commissioner can, by notice in writing, direct the applicant to advise of the results of any search carried out in a foreign country by a specified Patent Office or organisation in respect of a corresponding application filed outside Australia. If search results are not provided to the Commissioner within 2 months of the issuance by the Commissioner of a notice requiring such results, or at the time of requesting examination (whichever is the later), the application will lapse. Under the Patents Act 1990 (Cth), two types of examination are possible, namely normal examination and modified examination. Normal examination
Normal Examination
Under normal examination, a patent application is examined for form, patentability, compliance with sections 40(2) and 40(3), novelty and inventive step. These requirements are discussed elsewhere in the manual (see Chapters 2.4, 4.1.2, 4.1.4 and 7.1.9).
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• Must be requested within five years of the Australian filing date of the complete specification or within 6 months of the issuance of a direction to request examination (whichever is the earlier), otherwise the application lapses • May be deferred up to 9 months in some circumstances • Patent application is examined for form, patentability, compliance with sections 40(2) and 40(3), novelty and inventive step
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Modified examination Under modified examination, the complete specification of the Australian application is made identical to that of a corresponding granted European patent with an English language specification or a corresponding granted patent in the United Kingdom, Canada, New Zealand or the United States. The Australian Patent Office then typically accepts the Australian application without further substantial examination apart from a very limited search and examination as to matters of form. A certified copy of the corresponding granted foreign patent must accompany the modified examination request, together with a statement of proposed amendments to make the Australian complete specification is identical to the corresponding granted foreign patent specification except in certain prescribed respects. The main advantage of modified examination is that the total cost of the Australian prosecution is typically less than under normal examination. The main disadvantage of modified examination is that due to different novelty, inventive step and patentability standards between Australia and the corresponding countries, the claims of the Australian complete specification may be narrowed more than is required under Australian law.
Modified examination • Under modified examination, the complete specification of the Australian application is made identical to that of a corresponding granted European patent with an English language specification, or a corresponding granted patent in the United Kingdom, Canada, New Zealand or the United States • The total cost of the Australian prosecution is typically less than under normal examination • Due to different novelty, inventive step and patentability
standards between Australia and the corresponding Further, under modified examination, the specification is countries, the claims of the Australian complete specification not examined to determine whether it meets the fair may be narrowed more than is required under Australian law basis requirements of section 40 of the Act and consequently, patents granted under modified examination may include claims that are not fairly based and are thus invalid.
Prosecution deadlines Under normal or modified examination, the deadlines for the prosecution of the application are calculated from the date of the Examiner’s first report. The deadline for acceptance without having to pay late fees is 12 months from this date. The absolute final deadline for acceptance is 21 months from the date of the Examiner’s first report. In the final 9 months it is necessary the response to be accompanied by late fees which are determined in accordance with the number of months after 12 months from the Examiner’s first report that have elapsed when the response is lodged. The absolute final deadline for acceptance is the deadline for placing the application in a condition for allowance, not the deadline by which the response must be lodged. Any number of responses can be lodged within the 21 month period.
2.3.3 Opposition A patent application may be opposed by the Minister or any other person prior to patent grant on the following grounds: (a) that the nominated person is not entitled to the grant of a patent for the invention or is entitled to the grant of a patent for the invention but only in conjunction with some other person; (b) that the invention is not a patentable invention because it is not a manner of manufacture within the meaning of section 6 of the Statute of Monopolies, or is not novel or does not involve an inventive step;
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(c) that the specification filed in respect of the complete application does not comply with subsections 40(2) or (40)(3), which require a complete specification to describe the invention fully, including the best method known to the applicant of performing the invention and end with a claim or claims defining the invention, which claim(s) must be clear and succinct and fairly based on the matter described in the specification; (d) that the invention relates to human beings or a biological process for their generation. A Notice of Opposition may be filed by any person against an accepted patent application within a period of 3 months from the date of advertisement of acceptance of the application in the Official Journal of Patents. A Statement of Grounds and Particulars must be served on the applicant within a 3 month period from the date of filing a Notice of Opposition by the opponent. The Statement of Grounds and Particulars should include details of any documents relied upon, including a brief summary of the relevance of each document and the page and line numbers of the relevant portions of each document. At this point, the opposition can be dismissed by the Commissioner or on request by the patent applicant within one month of receiving a copy of the Statement of Grounds and Particulars. After service of a Statement of Grounds and Particulars, the opponent has 3 months (extendable) to serve Evidence in Support of the opposition on the applicant. The applicant then has 3 months (extendable) to serve Evidence in Answer on the opponent. Thereafter, the opponent will have one month to file a notice at the Patent Office indicating an intention to file Evidence in Reply. If the latter Notice is filed, the opponent will have 3 months (extendable) from service of the Evidence in Answer to serve the Evidence in Reply. The matter then proceeds to a Patent Office Hearing. An appeal to a prescribed Court from a decision of the Patent Office is possible. It is worth noting that even when an opposition is withdrawn, the Commissioner can take into account the evidence on file and conduct a bar-to-sealing action.
2.3.4 Sealing After the acceptance of an application and in the absence of a successful opposition, sealing occurs within 6 months of the date of advertisement of the acceptance of the application, and the patent is granted or issued.
2.3.5 Re-examination Re-examination is available after grant (or during pre-grant opposition proceedings) for standard patent applications filed on or after 30 April 1991. The Commissioner may voluntarily commence re-examination during opposition proceedings. The patentee or any other person in respect of a granted patent may request re-examination, and a prescribed Court may order re-examination in any proceedings in which the validity of patent is disputed. Re-examination may only be in respect of prior art documents that constitute part of the prior art base (ie. prior use is not considered during re-examination of a patent or opposed application that is re-examined). Under section 101, the Commissioner can revoke a patent after re-examination.
2.3.6 Compulsory licences Under section 133 of the Patents Act 1990 (Cth) any person may apply to the Court for the grant of a compulsory licence under a patent after 3 years have elapsed from the date of grant of the patent. If such an application is made, the applicant must show that the reasonable requirements of the public in respect of the patented invention have not been met in order to obtain grant of a compulsory licence. Biotechnology Australia
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2.3.7 Patentee rights By section 13 of the Patents Act 1990 (Cth), a patentee has the exclusive right, whilst the patent is in force, to exploit the invention throughout Australia and to authorise other persons to exploit the invention throughout Australia. “‘Exploit’, in relation to an invention, includes: (a) where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process – use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use.”
2.3.8 Infringement of patents In Australia, it is only possible to sue a third party for infringement after patent grant, although rights can extend back to the date of publication of the complete specification. By section 120(4), infringement proceedings must be started within 3 years from the day on which the relevant patent is granted or six years from the day on which the infringing act was done, whichever is later. A defendant in an infringement proceeding may counter-claim for revocation of the patent. In Australia, infringement actions are normally instituted in the Federal Court, although it is possible for such an action to be commenced in the Supreme Court of a State or Territory. The remedies available to a patentee include an injunction and either an award of damages or an account of profits. Apart from “direct” infringing activities, the Patents Act 1990 (Cth) also contemplates a form of contributory infringement or infringement by supply (s117) where, if the use of a product by a person would infringe the patent, then the supply of that product by another person may, of itself, be an infringement. There are also equitable doctrines of Infringement • In general, a patent will be infringed whenever a third party contributory infringement or inducement to infringe that exploits, in Australia, an invention falling within the scope of may be relevant in the bringing of an infringement action. the claims of the patent or authorises another to exploit the invention in Australia
Innocent infringement
By section 123, a Court may refuse to award damages or make an order for an account of profits in respect of an infringement of a patent if the defendant satisfies the Court that, at the date of the infringement, it was not aware, and had no reason to believe, that a patent for the invention existed. By section 123(2), a defendant is to be taken to have been aware of the existence of a patent unless the contrary is established.
2.3.9 Revocation Any person can apply for revocation of a patent, on the following grounds: (a) that the patentee is not entitled to the patent; (b) that the invention is not a patentable invention; (c) that the patentee has contravened a condition in the patent; (d) that the patent was obtained by fraud, false suggestion or misrepresentation; (e) that an amendment of the patent request or the complete specification was made or obtained by fraud, false suggestion or misrepresentation; (f) that the specification does not comply with subsection 40(2) or 40(3).
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2.3.10 Annuities To keep an application pending and the subsequently granted patent in force, it is necessary to pay an annual fee, termed an annuity, to the Patent Office. Annuities are payable pre grant and after grant in respect of a standard patent each year, commencing on the date falling 5 years from the filing date. For divisional applications, annuities are determined from the lodgment date of the first Australian patent application in which the subject matter of the divisional application was disclosed. Annuities are not payable after grant in respect of patents of addition. Annuities may be paid up to 12 months prior to the due date and up to 6 months after the due date with payment of extension fees determined on a monthly basis from the due date.
2.3.11 Patent applications concerned with microorganisms When the inventive subject matter of a patent specification concerns the use, modification or cultivation of a microorganism, and a person skilled in the art could not reasonably be expected to be able to perform the invention without having a sample of the microorganism and where the microorganism is not reasonably available, a deposit of the microorganism in accordance with the Budapest Treaty at an International Depositary Authority will be required (see Chapter 2.2.4). The deposit must be made prior to or on the day of filing the Australian application. Further, prior to the date the Australian specification becomes open for public inspection (18 months from the earliest priority date), the patent specification must include the name of a prescribed depositary institution from which samples of the microorganism are obtainable and the file, accession or registration number of the deposit given by the institution. The applicant for the patent may, at any time before the specification relating to the application is open for public inspection, notify the Commissioner that a sample of the deposited microorganism is only to be provided before the patent is granted on that application, or the application has lapsed or been withdrawn or refused, to a person who is a skilled addressee without an interest in the invention and nominated by the person who made the request. This procedure is analogous to the European “Expert Solution”.
2.3.12 Extension of term for pharmaceuticals Many jurisdictions have scope for extensions of term for pharmaceutical patents. In January 1999, the Australian Patents Act 1990 (Cth) was amended to provide for extensions of term of up to 5 years for pharmaceutical patents. Patents which are eligible for extension are existing and new standard (20 year) patents directed to a pharmaceutical substance which is the subject of the first registration as a therapeutic good in the Australian Register of Therapeutic Goods. Extensions will be in relation to product claims for substances and for product-by-process claims for such substances when produced by recombinant DNA technology. The length of the extension is determined by the period between the “date of the patent” and the day on which registration as a therapeutic good commenced, reduced by 5 years. The maximum period of extension is 5 years. “Springboarding” is permitted to enable producers of generic drugs to undertake activities solely for the purposes of meeting pre-marketing regulatory requirements from the date the extension is granted. Obviously, a generic drug cannot be released for sale until any extension period has passed.
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Figure 2-3: Australian Patent Application Procedure
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Provisional application
Direction to request Examination Supply search results
Convention application
Acceptance*
Advertisement of acceptance
Request modified examination, search results not required
Request deferment Examination search deadline
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Latest time for filing divisional application with broader claims
Request normal examination Supply search results
Re-examination possible
Sealing of patent
Expiry
Possible opposition proceeding^
3 months Specification published, Open to inspection
9 months
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Examiner’s first report
#
Applicant responds
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1 year
Annuity due°
Hearing before Commissioner
1 year
Annuity due°
20 year term * The acceptance deadline is 12 months plus a 9 month extension from the date of the first Examiner’s report ° 6 months extension possible
# Except in the case of an opposition ^ Seek specific advice on opposition procedures and possible outcomes
Appeal Federal Court
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2.4 Invention v. Discovery An invention as opposed to a discovery or idea is more than a mere addition to human knowledge. The difference between an invention and a discovery was described in Reynolds v Herbert Smith & Co Ltd 10 as follows: “Discovery adds to the amount of human knowledge, but it does so only ... by disclosing something ... Invention also adds to human knowledge, but not merely by disclosing something. Invention necessarily involves also the suggestion of an act to be done, and it must be an act which results in a new product, or a new result, or a new process, or a new combination for producing an old product or an old result.” Thus, a typical invention involves the practical application of a discovery or an idea so as to provide a solution to a problem or need. A mere idea or discovery is not patentable, whereas an invention which satisfies certain requirements may be patentable. Thus in Gale’s Application,11 it was stated to be: “Helpful to have in mind principles of patent law, well established before the Act, that an idea or discovery as such is not patentable. It is the practical application of an idea or discovery which leads to patentability.” In Ranks Hovis McDougall’s Application12 it was stated that: “No invention was involved in the mere discovery, or the mere identification, or the mere isolation by an unspecified method, of something that occurs in nature.” However, in the same case, it was made clear that new microorganisms are potentially patentable: “I think the situation is quite different if, in producing the variant by some man-controlled microbiological process, he has produced a new microorganism which has improved or altered useful properties. To suggest that a patent should be not granted for such an invention would in, my opinion, hardly accord with the views clearly expressed in the decision in National Research Development Corporation v Commissioner of Patents. An objection that a claim to a new microorganism, being something living, is not a manner of manufacture is based, in my opinion, on too restricted a view of the meaning of manufacture in section 6 of the Statute of Monopolies.” Invention • A typical invention involves the practical application of a discovery or an idea to provide a solution to a problem or need
10 Reynolds v Herbert Smith & Co Ltd (1903) 20 RPC 123 11 Gale’s Application [1991] RPC 305 12 Ranks Hovis McDougall’s Application (1976) 46 AOJP 3915
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2.4.1 Patentable inventions Section 18(1) of the Australian Patents Act 1990 (Cth) defines a patentable invention as an invention that is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies and when compared with the prior art base as it existed before the priority date of that claim is novel, involves an inventive step, is useful and was not secretly used in the patent area before the priority date of that claim by, or on behalf of, or with the authority of the patentee or nominated person or the patentee’s or nominated person’s predecessor in title to the invention. Section 18(2) of the Australian Patents Act 1990 (Cth) specifies that human beings and the biological processes for their generation are not patentable inventions. In addition, under section 51(1), the Commissioner has a discretion to refuse to accept a patent request and specification or to grant a patent (see Chapter 2.7.1.) The Patents Act 1990 (Cth) defines “invention” in the Schedule as: “any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies, and includes an alleged invention.”
Manner of manufacture • In Australia, any product, eg. proteins, DNA, RNA, electric circuits, chemical compounds and compositions, assays, microorganisms and plants that can be sold can generally be patented if new, inventive and commercially useful
Not only does an invention have to be novel, involve an inventive step and have utility, it must also be a “manner of manufacture” in order to be patentable. See Appendix III for more information on manner of manufacture.
2.4.2 Novelty Another requirement for patentability is that an invention is required to be novel. Under the Patents Act 1990 (Cth), a relative novelty standard applies to standard patents (ie. prior publication anywhere in the world and prior use in Australia is relevant for novelty purposes) whereas for petty patents a local novelty standard applies (ie. only prior publication and use in Australia is relevant for novelty purposes). In addition, under the Patents Act 1990 (Cth), the whole contents of an Australian patent application that has an earlier priority date than a claim of a patent application under examination can be taken into account as prior art, provided that the application with the earlier priority date has been published in Australia. A private sale or use anywhere in the world (other than Australia) would not normally defeat patentability in Australia, provided there was no written publication of the invention anywhere accompanying the sale. Further information on novelty is provided in Chapter 7.1.9 of this Manual.
Novelty • Australia operates under a relative novelty standard.That is, prior publication anywhere in the world and prior use in Australia will invalidate an Australian patent
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2.4.3 Inventive step A further requirement of patentability is that the invention must have involved an inventive step. For a standard patent, the question is whether the invention claimed would have been obvious to a non-inventive worker in the field equipped with the common general knowledge in that particular field at the priority date. More particularly, under the Australian Patents Act 1990 (Cth), an invention that is claimed in a standard patent is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious to a person skilled in the relevant art: (a) In the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, when that knowledge is considered separately; or (b) Common general knowledge together with either of the following kinds of information, each of which must be considered separately: (i) prior art information made publicly available in a single document or through doing a single act; and (ii) prior art information made publicly available in two or more related documents, or through doing two or more related acts, if the relationship between the documents or acts is such that a person skilled in the relevant art in the patent area would treat them as Inventive step a single source of that information; (i) and (ii) being information that the skilled person could, before the priority date of the relevant claim, be reasonably expected to have ascertained, understood and regarded as relevant to work in the relevant art in the patent area.
• In Australia, an invention is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious to a person skilled in the relevant art in the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, whether that knowledge is considered separately or together with a single piece of publicly available prior art information
A discussion of relevant case law relating to inventive step is set out in Appendix IV.
2.4.4 Utility An additional requirement for patentability under the Patents Act 1990 (Cth), is that an invention must be “useful”. “Useful” has not been specifically defined in the Act so common law principles apply. A test of utility was enunciated in Lane-Fox v Kensington and Knightsbridge Electric Lighting Company Ltd13 by Lindley L.J. as follows: “The utility of the alleged invention depends not on whether by following the directions in the complete specification all the results now necessary for commercial success can be obtained, but on whether by such directions the effects which the patentee professed to produce could be produced and on the practical Utility utility of those effects ... to judge the utility the • In Australia, if the “end result” of the invention can be arrived at by following the teachings of the specification, but directions in the specification must be followed, and it fails to fulfil the promise made by the patentee, then there if the result is that the object sought to be obtained will be inutility can be attained, and is practically useful at the time • The “promise” may be found in the objects of the invention, when the patent is granted, the test of utility is if any are set out in the specification, or in a “problem” with satisfied ... ‘Useful for what?’ is a question which the prior art which the specification may discuss, or otherwise must always be asked, and the answer must be useful for the purposes indicated by the patentee.”
13 Lane-Fox v Kensington and Knightsbridge Electric Lighting Company Ltd (1892) 9 RPC 413
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2.4.5 Prior secret use Another requirement for an invention to be patentable under the Australian Patents Act 1990 (Cth) is that it must not have been secretly used in Australia before the priority date of a claim by or with the authority of the patentee or the patentee’s predecessor in title (Section 18(1)(d)). Section 9 sets out certain acts which are not to be taken to be secret use of an invention in the patent area: (a) use for the purpose of reasonable trial or experiment: it appears that the case law referred to above in connection with section 24 is applicable here; (b) use occurring solely in the course of a confidential disclosure of the invention by or on behalf of or with the authority of the patentee or nominated person; (c) any other use by the patentee or nominated person for any purpose other than the purpose of trade or commerce; and (d) any use of the invention by or on behalf of the Commonwealth, a State or a Territory to which the patentee or nominated person has disclosed the invention. What does constitute “secret” use has been a matter of some controversy; however, it appears from the majority decision in Bristol-Myers (Johnson’s) Application14 that “secret” has its normal meaning of “deliberately concealed”. For further information in relation to secret use, see Chapter 7.1.10.
Prior secret use • For an invention to be patentable under the Australian Patents Act 1990 (Cth) it must not have been secretly used in Australia before the priority date of a claim • Section 9 of the Patents Act 1990 (Cth) sets out certain acts which are not to be taken to be secret use of an invention in the patent area, including: reasonable trial or experiment, use occurring solely in the course of a confidential disclosure of the invention
14 Re Bristol-Myers Co (Johnson’s) Application [1975] RPC 127
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2.5 Patent Procedure in the United States and Europe 2.5.1 United States Types of patent There are several types of patent available in the United States. Firstly, utility patents are roughly equivalent to what is simply referred to as a “patent” in Australia. Secondly, what is known as a design registration in Australia is called a design patent in the United States. In the United States, plant patents are also recognised. They are not the same as plant breeder’s rights in Australia and are obtainable by anyone who discovers and asexually reproduces a distinct and new variety of plant. Like design patents, they are subject to the same inventive step and novelty requirements as utility patents. A further kind of patent is the statutory invention registration. This has all the characteristics of a utility patent, but cannot be sued on for infringement. During the pendency of an application for a utility patent, the applicant may request that it be published as a statutory invention registration. Its purpose is defensive; that is, to guarantee that the application’s disclosure is published, so as to prevent others from obtaining a patent for the same thing. United States National Phase entry A request to enter the National Phase of an international (PCT) patent application designating the United States is due to be filed at the United States Patent & Trademark Office (USPTO) within 20 months of the priority date, unless the USPTO is an elected office under Chapter II of the PCT, in which case the deadline is 30 months from the earliest priority date. The request to enter the National Phase must be accompanied by the basic national fee. If certain required documents are not submitted simultaneously with the basic national fee, a Notice to File Missing Parts will issue and set a time limit (usually 2 months, extendable) to file the missing documents. Small entities Establishment of small entity status entitles the applicant to a 50% reduction in some fees, including filing, late response and maintenance fees. There are several categories of small entity: • Individual inventor(s) who have not assigned the invention and are not obliged to do so • Small businesses, defined as businesses employing less than 500 employees. However, associated companies (owners or owned, or co-owned) and licensees of the applicant company must be taken into account • Non-profit organisations, defined as organisations which do not pay tax under United States taxation law, or foreign organisations which would not pay tax under United States law if they were United States organisations. Small entity • Establishment of small entity status entitles the applicant to a 50% reduction in some fees, including filing, late response and maintenance fees
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Information Disclosure Statement requirements During the pendency of a United States patent application and up to the payment of the Issue Fee, there is an obligation to disclose to the USPTO any art known to the applicant or any other person associated with the application which is of relevance to the invention. Failure to comply with this obligation can render a granted patent invalid. An Information Disclosure Statement must identify the prior art and provide copies, including a translation into English where the document was in a foreign language, and a brief explanation of the relevance of the document. The explanation of relevance may be very brief. An Information Disclosure Statement must be filed within 3 months of the filing date or National Phase entry date (as the case may be) or before the date of mailing of the first Office Action, whichever date is the later. If new information comes to the attention of a person Information Disclosure Statement associated with the application after that date, 3 • There is an obligation to disclose to the USPTO any art months from the date on which the person became known to the applicant or any other person associated with aware of the reference are available in which to file a the application which is of relevance to the invention supplementary Information Disclosure Statement. Requirements for the specification The specification must contain a written description of the invention “in such full, clear, concise and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected to make and use the same”. It is also required for the specification to “set forth the best mode contemplated by the inventor of carrying out his invention”. Novelty Importantly, the United States provides the applicant with a 12 month grace period when determining novelty. That is, publication, use or sale of the invention 12 months or less before the date of filing a United States application will not invalidate a patent granted on the application. However, publication or use of an invention in the United States prior to the date of invention will invalidate a subsequently filed patent application. Further, the date at which novelty is assessed is not necessarily the priority date of the application, but is the date of invention and reduction to practice by the applicant for patent. For patent applications filed in the United States before 8 June 1995, where the inventors are not United States nationals, the priority date of the application is deemed to be the date of invention. Novelty (United States) Otherwise, it is possible for applicants to refer to • The date at which novelty is assessed is not necessarily the external evidence such as laboratory notebooks if priority date of the application, but is the date of invention maintained in an appropriate way, to provide evidence by the applicant for patent. It is possible for applicants to of a date of invention and reduction to practice before refer to external evidence such as laboratory notebooks if the relevant priority date. See Chapter 6.1 of this maintained in an appropriate way, to provide evidence of a date of invention before the relevant priority date Manual for more information about maintenance of • 12 month novelty grace period laboratory notebooks.
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Section 103 of title 35 of the United States Code sets out the non-obviousness requirements of the United States code. It reads in part: “(a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in ß 102 of this title [novelty], if 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. Patentability shall not be negatived by the manner in which the invention was made.” Under United States practice, it is permissible to combine the disclosures of references for the purposes of Section 103 if there is some suggestion to a person skilled in the art that the teachings could or should be combined, or if it would be obvious to do so.
Inventive step (United States) • Invention not obvious to a person having ordinary skill in the art • Permissible to combine references for the purposes of obviousness
Examination A first Office Action (Examiner’s report) deals with all requirements for patentability. Generally, 3 months are provided in which to respond to any Office Action, with the possibility of 3 months’ extension on the payment of fees on a sliding scale which increases fairly rapidly for the second and third months. Extensions after the initial 3 month period may be requested retrospectively. A response to a first Office Action must counter to all of the Examiner’s rejections (as must all responses filed) and may include amendment and/or argument, optionally supplemented where appropriate with evidence in the form of a Declaration. An interview with the Examiner may be conducted, either by telephone or in person. A second or further Office Action may be made “final” if the claims are rejected for a second time for the same reason. After a final Office Action, amendments which are requested may not be entered by the Examiner. The options on receipt of a Final Office action include to respond, to abandon the application and perhaps refile it, or to appeal. If a response is lodged which does not persuade the Examiner, abandonment/refiling is the only option. Interference It has been seen that to meet the novelty and inventive step requirements, the date of invention may be crucial, and it may be necessary to determine in any particular case who was the first to invent a particular invention. The procedure adopted by the United States Patent Office to reach such a determination is known as “interference”. Where two pending patent applications, or an application and a patent, claim what is considered to be the same invention, they are said to “interfere”. When an Examiner determines that a United States application is in order for allowance, he/she conducts a final search for interfering applications and if any is found, an interference may be declared. Alternatively, a patentee can “provoke” an interference with another patent by filing a request for a re-issue of his patent. If a re-issue request is filed within 2 years of the date of grant of a patent, it is possible for the claims of the patent to be broadened.
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Allowance Following the allowance of an application by the Examiner, a Notice of Allowability issues. The Issue Fee is due to be paid within 3 months of the date of this Notice. The term of a patent is: • for applications filed after 8 June 1995, 20 years from the filing date, or that of the ultimate parent, if any; • for other applications, 17 years from the date of grant, or 20 years from the filing date (or that of the ultimate parent) whichever is the longer. Extension of the term of patents claiming products (not limited to pharmaceuticals) which require regulatory approval is possible: the period of extension is up to the whole of the delay caused by gaining regulatory approval, but not more than 14 years. Maintenance fees Maintenance fees are payable only after grant, at 31/2, 71/2 and 111/2 years from the grant date. A 6 month grace period applies. Presumption of validity The statute provides that United States patents are presumed to be valid. The onus is, therefore, on a party asserting invalidity to prove the assertion. Re-examination Requests for re-examination can only be based on documentary disclosures and the re-examination itself is an ex parte procedure; the requester plays no further part and cannot appeal the decision.
2.5.2 Europe The European Patent Convention (EPC) comprises 19 contracting states: Austria, Belgium, Cyprus, Switzerland, Liechtenstein, Germany, Denmark, Spain, Finland, France, the United Kingdom, Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands, Portugal and Sweden. The EPC permits a bundle of national patents to be obtained by prosecution of a single application before the European Patent Office (EPO). Extension of a European patent to a small number of other countries is also possible. Examination and grant procedure Generally, the steps under the EPC are filing, issuing of the search report, provisional publication with search report, substantive examination, grant (or refusal/appeal) and validation or recording in the designated states. Novelty The EPC adopts an absolute novelty requirement. An invention is to be considered novel if it does not form part of the state of the art. The state of the art comprises anything made available to the public anywhere in the world before the priority date either by written or oral description or by use (or in any other way). There are savings provisions for unauthorised disclosure and disclosure at a recognised international exhibition.
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Novelty (Europe) • European Patent Convention operates under an absolute novelty requirement
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An invention shall be considered as involving an inventive step if, having regard to the state of the art, it is not obvious to a person skilled in the art. In determining obviousness, it is possible for the contents of more than one document to be combined if it would have been obvious for a person skilled in the art to combine them. Industrial applicability There are a number of exclusions to patentable subject matter. These exclusions are similar to those in Australia, except that methods for the treatment of the human or animal body by surgery or therapy are explicitly excluded from patentability.
Methods of medical treatment • Methods for the treatment of the human or animal body by surgery or therapy are explicitly excluded from patentability in Europe
Term The term of a European patent is 20 years from the filing date. Supplementary Protection Certificates are available in respect of applications claiming pharmaceutical substances and provide an extension of the term of up to 5 years. Maintenance fees “Continuation” fees are payable to the European Patent Office in advance of the third year and for subsequent years. The due date is the last day of the month in which the anniversary of filing falls. A 6 month grace period is available, subject to the payment of penalty fees. The last year in which a continuation fee is payable to the European Patent Office, as opposed to paying renewal fees in the national Patent Offices for which the European patent has been validated, is the year in which the “mention of grant” has been published in the European Patent Office Gazette. Renewal fees in respect of granted European patents are never payable to the EPO. When a continuation fee falls due or is unpaid before the proposed date of grant, the EPO informs the applicant and will delay publication of mention of grant until the due fee is paid. Infringement There are no infringement provisions under the EPC. Infringement proceedings must be instituted in individual Contracting States where the European patent is validated. Amendments Amendments must not go beyond the scope of the subject matter as at filing. It is a ground of opposition that the subject matter of a specification extends beyond the subject matter of the specification as filed. It is possible to amend the specification once (only) after receipt of the search report up to the time of the first examination report issuing. After receipt of a first communication from the Examining Division, the claims may only be amended once of the applicant’s own volition. After that, any further amendments can only be made with the approval of the Examining Division.
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Opposition
Opposition • Post-grant opposition must be filed within 9 months of the
Opposition in Europe is a post-grant procedure. An publication of mention of grant opposition must be filed within 9 months of the publication of mention of grant. The grounds available are subject matter not patentable, specification not disclosing the invention sufficiently clearly or completely for it to be carried out by a person skilled in the art, and subject matter extending beyond the scope of the application as filed (or beyond the content of the parent, in the case of a divisional application). The Opposition Division essentially re-examines the application, and invites comments as it sees fit from opponent(s) and applicants. The Opposition Division can revoke the patent, reject the opposition or maintain the patent with amendments.
2.6 Prosecution Costs The costs associated with the preparation of a provisional patent application vary considerably for a variety of reasons, such as the length of the specification and the complexity of the invention. For example, the preparation of a provisional for a simple mechanical device may cost between A$1,500-2,500. However, a complex biotechnology application typically incurs attorney charges of A$2,500-10,000. In relation to this, it is not uncommon for such biotechnology applications to cost between £3,000-5,000 if prepared in the United Kingdom, and as much as US$20,000 if drafted in the United States. Australians can obtain patents in foreign countries by lodging separate national applications in each of the countries concerned. These separate applications can be lodged under the provisions of the Paris Convention and are filed within 12 months of lodgment of a provisional specification in Australia. The cost of lodging such applications varies according to the complexity of the invention, the length of the specification and so on, but is of the order of approximately A$4,000-6,000 for an English speaking country and approximately A$7,000A$12,000 for a non-English speaking country, that is, where translations are involved. In relation to this, reference is made to the table in Figure 2-4 for examples of such costs.
Figure 2-4: Patent Filing Costs
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In addition, the cost of lodging a European regional patent application is typically approximately A$14,00020,000 (including examination), depending upon the number of countries designated, and whether examination is requested. The cost of lodging an international (PCT) patent application is typically approximately A$7,000-12,000, depending upon the number of countries designated, the length of the specification and the complexity of the invention. This cost is additional to the above-mentioned costs referred to for the national application in each country. In addition to the costs initially incurred in lodging the application, subsequent costs are normally incurred in each country as a result of requesting examination (if necessary), corresponding with Examiners and paying renewal and other official fees. These additional costs are substantial and should be considered prior to lodgment. A budget of A$1,500-A$2,500 per application per annum would be prudent. For example, once an Australian patent application has been filed, there are a number of costs associated with its prosecution through to acceptance and grant. An estimation of costs is shown in Figure 2-5.
Figure 2-5: Australian Patent Prosecution Costs (Standard Patents) Prosecution action
Estimated cost (A$)
Request examination
400-800
Forwarding Examiner’s reports with comments
120-250
Responding to Examiner’s report*
400-1,500
Processing Notice of Acceptance
150-350
Payment of annuity**
165-790 (official fee only) p.a.
* Does not include payment of late fees (A$65 per month) for a response filed after 12 months from the Examiner’s first report, but before the absolute deadline for acceptance – 21 months from the Examiner’s first report. ** Annuities fall due from fifth year filing anniversary and increase in amount each year.
The estimates above are, of course, subject to changes in attorney charges, official fees and currency fluctuations, and should be interpreted as a guide only.
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2.7 Patentability of Biotechnological Inventions 2.7.1 Australia In Australia, patent protection is available under the Australian Patents Act 1990 (Cth). In particular, section 18 thereof essentially indicates what is patentable, and states: “18. (1) Subject to subsection (2), a patentable invention is an invention that, so far as claimed in any claim: (a) is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies; and (b) when compared with the prior art base as it existed before the priority date of that claim: (i) is novel; and (ii) involves an inventive step; and (c) is useful; and (d) was not secretly used in the patent area before the priority date of that claim by, or on behalf of, or with the authority of, the patentee or nominated person or the patentee’s or nominated person’s predecessor in title to the invention. (2) Human beings, and the biological processes for their generation, are not patentable inventions.” Over the years, no universal test of “manner of manufacture” has been laid down by the Courts. In one of its leading decisions with respect to patents, the High Court of Australia, in National Research and Development Corporation v Commissioner of Patents15, (hereinafter “NRDC”), adopted a wide approach to determining the nature of “manner of manufacture”. In essence, the High Court found that to be a manner of manufacture, it was sufficient that a process “offer some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art – that its value to the country is in the field of economic endeavour”16. There is nothing in NRDC which is inconsistent with the patenting of biotechnology inventions. To date, this issue has been more specifically considered at the level of the Patent Office rather than in the Courts. For example, in Ranks Hovis McDougall Ltd’s Application17, which concerned claims directed to particular naturally occurring strains of a particular fungus, together with variants or mutants of that strain, the Assistant Commissioner stated: “An objection to a claim to a new microorganism, being something living, as not a manner of manufacture, is based, in my opinion, on too restricted a view of the meaning of manufacture in section 6 of the Statute of Monopolies.”
15 National Research and Development Corporation v Commissioner of Patents (1959) 102 CLR 252 16 ibid at 275 17 Ranks Hovis McDougall Ltd’s Application (1976) 46 AOJP 3915
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Essentially, it was found that merely the fact that the organisms were living was not a barrier to their patentability. Further, in terms of their patentability, higher life-forms were not to be treated any differently from lower life-forms, such as microorganisms. However, if the microorganisms were merely naturally occurring, there was no invention involved, only discovery, and as a consequence, patent protection would not have been Patentability of biotechnological inventions in Australia available. Similarly, in Kirin-Amgen Inc v Board of 18 • To be patentable in Australia, a biotechnology invention Regents of University of Washington , the Deputy must be a “manner of manufacture”, be novel, involve an Commissioner held that a claim to the naturally inventive step, be useful and not have been secretly used occurring DNA sequence encoding a naturally before the priority date occurring protein would only be in respect of a • A biotechnology invention must not transgress the provision of section 18(2) by being an invention directed to human discovery, although a claim to an isolated and purified beings per se or biological processes for their generation DNA sequence was considered patentable subject matter. This position consistent with that prevailing in Europe19 and the United States20. Exceptions to patentable subject matter in Australia Apart from the “mere discoveries”, those biotechnology inventions which are likely to be exceptions to patentable subject matter are those which fall within the statutory exclusions. The first exemption is provided in section 51(1) of the Australian Patents Act 1990 (Cth) outlined below: “51. (1) The Commissioner may refuse to accept a patent request and specification, or to grant a patent: (a) for an invention the use of which would be contrary to law; or (b) on the ground that the specification claims as an invention: (i) a substance which is capable of being used as food or medicine (whether for human beings or animals and whether for internal or external use) and is a mere mixture of known ingredients; or (ii) a process producing such a substance by mere admixture.” In terms of exceptions under “contrary to law”, where an invention is capable of being used for both a legal and an illegal purpose, it appears that section 51(1)(a) is not a bar to patentability21. Therefore, unless legislation specifically directed to biotechnology-type inventions is introduced, then it is somewhat unlikely that “contrary to law” will provide a major stumbling block to patent protection of biotechnology inventions. Whether patent protection will not be available due to section 51(1)(b) depends on whether the alleged invention merely constitutes a “mixture of known ingredients”. However, if the alleged invention provides an unexpected, unpredictable or synergistic effect, then it is not considered to be a “mere mixture”, and is patentable. Given the expense associated with developments in biotechnology, it can be assumed that an invention which did not display some improved result would not be pursued beyond the very first step toward commercialisation and, as a result, would be unlikely to fall foul of this exemption.
18 19 20 21
Kirin-Amgen Inc v Board of Regents of University of Washington & Anor (1995) 33 IPR 557 Directive 98/44/EC of the European Parliament on the Legal Protection of Biotechnological Inventions Article 3.2 Amgen Inc v Chugai Pharmaceutical Co Ltd USPQ 2d 1737 (1989) Pessers and Moody v Haydon (1909) 26 RPC 58
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A further exception to patentability of biotechnology inventions in Australia may possibly be afforded by the “generally inconvenient” exception outlined in section 6 of the Statute of Monopolies (see page 9 of this Manual) which, as noted above, is imported into the Australian Patents Act 1990 (Cth) through a direct reference in section 18(1)(a). However, whilst the Courts may provide a forum for considering issues of public policy which may arise via a “generally inconvenient” argument against patentability of biotechnology inventions, the approach in the Australian Patent Office to date appears to be to ignore such issues.
2.7.2 United States In the United States, the landmark case of Diamond v Chakrabarty22 in relation to an oil-eating microorganism found that man-made living organisms constituted patentable subject matter, and stated that patentable subject matter included “anything under the sun that is made by man”. This decision resulted in a flood of applications to genetically engineered life-forms being received by the USPTO. As a consequence of decisions such as Diamond v Chakrabarty, the USPTO has extended patent protection to higher life-forms, such as plants. For example, United States Patent No. 5,763,241 was granted in 1998 to Monsanto entitled “Insect Resistant Plants”, wherein the invention involved the cloning, transformation and expression in transgenic plants of genes from Bacillus thuringiensis, a bacterium which produces a protein toxic to a number of insect species. The implications of this technology are immediately apparent, especially in light of the billions of dollars expended in both the control of insect pests of plants, and the losses incurred. The USPTO has also provided patent protection for animal inventions. In 1987, United States Patent No. 4,736,866 for the so-called “Harvard Oncomouse” was issued. The oncomouse was essentially a transgenic rodent with a cancer-causing gene inserted into the germline as a fertilised oocyte, thereby ensuring that all cells of the rodent contained the oncogene sequence, which had the effect of making the animal susceptible to tumours. Claim 1 of United States Patent No. 4,736,866 reads as follows: “A transgenic non-human mammal all of whose germ cells and somatic cells contain a recombinant activated oncogene sequence introduced into said mammal, or an ancestor mammal, at an embryonic stage.”
Patentability of biotechnological inventions in the United States • Patentable subject matter includes “anything under the sun that is made by man”
22 Diamond v Chakrabarty 206 USPQ 193 (Sup. Ct. 1980)
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2.7.3 Europe In general, the scope of what is a patentable invention in Europe is outlined in Article 52 of the EPC as follows: “(1) European patents shall be granted for any inventions which are susceptible of industrial application, which are new and which involve an inventive step. (2) The following in particular shall not be regarded as inventions within the meaning of paragraph 1: (a) discoveries, scientific theories and mathematical methods; (b) aesthetic creations; (c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers; (d) presentations of information. (3) The provisions of paragraph 2 shall exclude patentability of the subject matter or activities referred to in that provision only to the extent to which a European patent application or European patent relates to such subject matter or activities as such. (4) Methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practised on the human or animal body shall not be regarded as inventions which are susceptible of industrial application within the meaning of paragraph 1. This provision shall not apply to products, in particular substances or compositions, for use in any of these methods.” Article 53 of the EPC provides a series of exceptions to patentability as follows: “European patents shall not be granted in respect of: (a) inventions the publication or exploitation of which would be contrary to “ordre public” or morality, provided that the exploitation shall not be deemed to be so contrary merely because it is prohibited by law or regulation in some of the Contracting States; (b) plant or animal varieties or essentially biological processes for the production of plants or animals; this provision does not apply to microbiological processes or the products thereof.” Patentability of plant and animal varieties The rationale for the EPC Article 53(b) is that patent protection is denied to plant varieties because monopoly in plant varieties is afforded via the UPOV Convention23 provisions. This was a specific finding in the European Ciba-Geigy Case (hereinafter Ciba-Geigy)24, which involved an invention relating to a chemical seed coating, with one of the sub-claims relating to a seed coated with the chemical specified. The EPO Appeal Board distinguished plant varieties from plants, and decided that plant varieties were not protectable as such under the EPC because the UPOV system was more suitable for them: “Plant varieties have been excluded from patent protection because specifically the achievement involved in breeding a new variety is to have its own form of protection.”
23 International Convention for the Protection of New Varieties of Plants [UPOV] 24 Ciba-Geigy/Propagating Material [1979-85] EPOR 758
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Some concern arose in Europe when Greenpeace filed an opposition to a patent granted for a method of making plants resistant to a herbicide by inserting a transgene25. The opposition was successful in that the EPO Technical Board of Appeal revoked six claims to plants and seeds, although claims to plant cells were allowed. The decision seemed to suggest that Article 53(b) of the EPC prohibited all patent claims which might “embrace” plant varieties. However, such a position seemed to conflict with what had been thought to be the settled law following Ciba-Geigy, and protests were made to the EPO. The European Enlarged Board of Appeals was asked to comment on the scope of Article 53(b), but did not directly consider the point. The patentability of plants was clarified on appeal26, wherein plants were found to constitute patentable subject matter provided the technical feasibility of the invention is not limited to a particular plant variety. A similar scenario was played out before the EPO in Patentability of biotechnological inventions in Europe relation to animals in the Harvard oncomouse case. • Patentable subject matter includes biotechnological The application was originally refused by the Examining inventions except: methods of treatment of humans or division on the basis that it claimed an animal variety, animals by surgery or therapy and diagnostic methods practised in the human or animal body, plant varieties and and was thus contrary to Article 53(b). The refusal was animal varieties per se 27 appealed , and the Board of Appeal found that Article 53(b) prevented the patenting of certain categories of animals per se, but not of animals as such, and returned the application back to the Examining division with specific instructions to consider Article 53(b), weighing up the suffering of the animal against the potential benefits to humanity. Consequently, the application was granted28. However, the grant was then opposed by a series of environmental groups, and the decision of the Opposition Division was postponed until the Biotechnology Directive (below) had been decided, and to date, is still to be determined. Directive on the Legal Protection of Biotechnological Inventions In 1998, the European Directive on the Legal Protection of Biotechnological Inventions29 (Biotech Directive) issued, after its first draft ten years before in 1988. However, it is the feeling of European patent practitioners30 that the same criteria for determining patentability will prevail before and after the Biotech Directive becomes law; that is, existing case law of the Boards of Appeal of the European Patent Office will continue to apply. Essentially, the Biotech Directive confirms that biotechnology is, indeed, patentable in Europe, and seeks to clarify and harmonise legislation on biotechnology patents throughout the European Union, at the same time achieving a balance between the commercial realities of biotechnology and the ethical concerns of the public.
25 26 27 28 29 30
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Plant Genetic Systems/Glutamine Synthetase Inhibitors [1995] EPOR 357 Decision G1/98, OJ EPO T19/90 (OJ 1990, 476) HARVARD/Transgenic Mouse Reported at OJ 1992, 588 Directive 98/44/EC of the European Parliament on the Legal Protection of Biotechnological Inventions Sheard, A.G. (1998). New Developments in Patentability in Biotechnology: Lessons for the Biotechnology Industry. In: Euroforum – Patent Protection for the Pharmaceutical and Biotech Industries, The Waldorf Meridien Hotel, 16-17 September 1998.
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Breadth of Biotechnology Patent Claiming
The following provides a comparison of claim breadth, with specific reference to biotechnology inventions in Australia, the United States and Europe.
2.8.1
Australia
Section 40 of the Australian Patents Act 1990 (Cth), and sections 40(2) and 40(3) are outlined below. “40(2) A complete specification must: (a) describe the invention fully, including the best method known to the applicant of performing the invention; and (b) where it relates to an application for a standard patent – end with a claim or claims defining the invention; and (c) where it relates to an application for a petty patent – end with a single claim, or a single independent claim and not more than two dependent claims, defining the invention. (3) The claim or claims must be clear and succinct and fairly based on the matter described in the specification.” There are two major components that arise within the concept of specification (s40), and these are the issues of fair basis and sufficiency. These two elements are related to each other but are distinct in nature. Fair basis concerns how broadly it is legitimate to claim, given what is disclosed in the specification; sufficiency concerns what the specification must disclose, given what is claimed, and insufficiency will be found where the invention is not described fully enough to allow an informed reader of reasonable skill in the trade to perform the invention. One approach for testing fair basis was stated by Gummow J in Rehm Pty. Ltd. v Websters Security Systems (International) Pty Ltd & Ors as follows31: “...the question is whether there is a real and reasonably clear disclosure in the body of the specification of what is then claimed, so that the alleged invention as claimed is broadly, that is to say in a general sense, described in the body of the specification.” Similarly, in Genetics Institute, Inc. v Kirin-Amgen, Inc.32 (hereinafter Amgen), the judgment stated at 336: “...I do not approach the case on the basis that the Amgen patent discloses any kind of super invention in the sense discussed. The question is whether the specification provided a ‘real and reasonably clear’ disclosure of the invention...” Thus, a specification must provide a real and reasonably clear disclosure of what is claimed. As to clarity, it is a statutory requirement that33: “The claim or claims shall be clear and succinct and shall be fairly based on the matter described in the specification.”
31 Rem Pty. Ltd. v Websters Security Systems (International) Pty Ltd & Ors (1988) 11 IPR 289. 32 Genetics Institute, Inc. v Kirin-Amgen, Inc. (1998) 41 IPR 325 33 Patents Act 1990 (Cth), section 40(2)
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Major considerations in assessing whether the claims in Amgen were fairly based were whether the specification provided a real and reasonably clear disclosure of the invention as claimed, and whether the claims covered ways of performing the invention which owed nothing to the teaching of the specification. The Amgen decision would appear to indicate that the disclosure of a DNA sequence is akin to the discovery of a class of compounds and thereby entitles the patentee to broad claims to other related DNA sequences, unlimited by, for instance, either species or specific structure but limited by an ability to be located (by hybridisation) to the disclosed sequence for the purposes of purification and isolation without further inventive effort or undue experimentation. Included in the Amgen decision is an extract from the decision of the Deputy Commissioner in the Opposition hearing35. This extract puts the Deputy Commissioner’s view of the breadth of the claims of the Amgen application. “The attack on fair basis is essentially that the claims should be limited to the specific sequences of tables 5 and 6, to methods for producing those sequences, and to variants of those sequences specifically referred to. Tables 5 and 6 disclose the specific DNA sequences for human and monkey erythropoietins. The specification also teaches that as a result of the invention DNA hybridization processes can be used to locate the erythropoietin gene position ‘in the human, monkey and other mammalian species[’] chromosomal map. This statement is made presumably in reliance upon the well-known substantial homology of gene sequences across species. Further, it is well known that there is a redundancy in the DNA coding for any particular amino acid; and that one can make conservative substitutions for amino acids without making significant changes in the properties of the protein. It seems to me that, properly considered, the discovery of a natural DNA sequence is tantamount to the discovery of a class of compounds – which class would be readily understood by a person skilled in the art. Accordingly I am satisfied that there is sufficient teaching to provide a fair basis to claims to erythropoietin unlimited either by species or specific structure. (And I would also observe that if it was subsequently found that a particular variation of the sequence gave rise to new and surprising results, the law of selections would apply)”. [at 334]. Although not commenting directly on all of the points of this extract, the decision of Heerey J in Amgen at trial not to find against the fair basis of most of the claims of the Amgen patent and to include the statement without disapproval appears to confirm the sentiments expressed by the Deputy Commissioner.
34 Genetics Institute, Inc v Kirin-Amgen, Inc (1998) 41 IPR 325 35 Kiren-Amgen Inc v Board of Regents of University of Washington & Anor (1995) 33 IPR 557
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To illustrate and thereby support the sentiments by the Deputy Commissioner, Heerey J provided an analogy highlighting the scope of claims within biotechnology and how biotechnological sequences can give rise to numerous broad claims. This analogy was as follows: “... [an] apt analogy in my view is that of treasure in a castle. The castle has many gates, each with a combination lock ... The combination for each lock is the same. Anyone who knows the combination can enter the castle. Finding the treasure may require some further time and trouble but this will merely be a matter of carefully searching through every room and cupboard in the castle. The critical knowledge is the combination of the locks. Without that, it is impossible to enter the castle. Once you have that, entry can be obtained through any gate. With reasonable time and effort the treasure will be discovered. I think the protein coding sequence, the essential information contained in table 6, is analogous to the combination of the castle locks.” A recent decision of a Delegate of the Commissioner of Patents provides some insight into the Patent Office interpretation of the principles of Amgen. In Synaptic Pharmaceutical Corporation and Opposition by Astra Aktiebolag36 (hereinafter Synaptic), the claims were, in part, directed to the “human 5-HT1D receptor” nucleic acid sequences and proteins. The specification provided substantive details of only two members of the sub-family, figures 3 and 4 therein providing the coding sequences of the two members. In construing the claims, the Delegate commented: “The term ‘human 5-HT1D receptor’ as defined in the specification includes these as well as any other sequences which encode a functional receptor for the neurotransmitter serotonin and which exhibit homology of 65% or higher with both figures 3 and 4 in their deduced amino acid sequences within their presumed transmembrane regions.” In applying Amgen, the Delegate noted: “...even though the human 5-HT1D receptor subfamily is a broader class of compounds than erythropoietin, I consider that the principles from Genetics Institute v Kirin-Amgen (supra) would still apply. Coding sequences can be used to design reliable probes which could then be used to isolate homologous sequences from nature. While 65% does not seem to be highly homologous to me, there is no evidence to suggest that a skilled worker would not be able to probe for and isolate sequences with that degree of homology from a given source (humans) given the coding sequences disclosed in the specification. Thus, these sequences provide a principle of general application and demonstrate a beneficial property common to the class of compounds made as per Genetics Institute v Kirin-Amgen (supra).” The Synaptic decision interpreted Amgen in holding that whilst the technical contribution of the specification at issue was to isolate and sequence two specific genes of a class, the inventive concept provided by the disclosure was the isolation and sequencing of the whole class, with the result that the applicant was entitled to claim the whole legal class.
36 Synaptic Pharmaceutical Corporation and Opposition by Astra Aktiebolag 1998 APO 49
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To date, Australia has no High Court decisions with specific reference to biotechnology. Hence, guidance as to how Australian Courts will, in the future, deal with fair basis with regard to biotechnology patents can be gained via cases such as Amgen, as well as subsequent Patent Office decisions. From these decisions, it would appear that Australia has so far adopted a somewhat more liberal approach than that taken in the United States (as outlined below) when it comes to the scope of biotechnology claims. Furthermore, the scope has expanded to the extent that it is unclear exactly how broad a class may be when issues such as homology are taken into consideration. Although Amgen provides guidance of a general nature, it appears to leave open the question of where the legal class begins and ends with respect to sequences and proteins which show a moderate degree of homology to the sequence disclosed in the specification. That is, Amgen provides no definition in terms of, for instance, the percent homology above which a sequence would be considered to be within the legal class and below which it would be outside the legal class. Neither does it give any guidance as to what standard is required in terms of an ability for a given sequence to locate another sequence.
2.8.2
United States
Section 112 of the United States Patent Statute provides that a patent specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out their invention37. To meet this enablement requirement, an inventor’s patent specification must disclose adequate information to permit one skilled in the art to make and use the claimed invention. Having regard to the enablement requirement itself, two strong themes appear to run through recent cases both at the Board and the Federal Circuit levels. Firstly, the public should not be required to carry out undue experimentation to put an invention into practice. Secondly, there must be sufficient enabling disclosure throughout the entire scope of the claim, and not disclosure of use merely in respect of one aspect of it. These specification requirements are reinforced in re Vaeck38, wherein the Federal Circuit held: “where, as here, a claimed genus represents a diverse and relatively poorly understood group of microorganisms, ... the disclosure must adequately guide the art worker to determine, without undue experimentation, which species among all those encompassed by the claimed genus possess the disclosed utility.” In re Wright39, the Court found no enablement in claims for which the patent provided general instructions for producing a live non-pathogenic vaccine for protection against pathogenic RNA viruses and provided only one example of an avian virus vaccine. The Federal Circuit determined that a scientist skilled in the art could not utilise claimed techniques to produce vaccines for other avian RNA viruses. Thus, the claim failed to satisfy the enablement requirements for a general anti-RNA virus vaccine.
37 35 § USC 112 38 Re Vaeck 947 F.2d 496 39 Re Wright 999 F.2d 1557, 1564
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In general, in biotechnology patent applications in the United States, an adequate description of a DNA requires more than a mere statement that it is part of the invention and reference to a potential method of isolating it; what is required is a description of the DNA itself40. For example, in Atlas Powder v E.I. Du Pont de Nemours & Co41, it was stated that: “if the number of inoperative combinations becomes significant, and, in effect, forces one of ordinary skill in the art to experiment unduly in order to practice the claimed invention, the claim might indeed be invalid.” Further to this, in Fiers v Sugano (1993)42, it was expressed that unless the actual DNA sequence which is the subject of the claim is disclosed in the specification, the description will be considered inadequate, with the result that the claim will be invalid. Similarly, in The Regents of the University of California v Eli Lilly and Company43, it was stated: “To fulfil the written description requirement, a patent specification must describe an invention and do so in sufficient detail that one skilled in the art can clearly conclude that the inventor invented the claimed invention.” In this case, the Federal Circuit found that even though the University of California provided an adequate description of rat cDNA, it did not provide adequate description required for other class members such as human or mammalian cDNA. The Court ruled that a generic claim reciting vertebrate DNA encoding insulin was not enabled by the one example of rat DNA, because one example of rat DNA was not representative of the entire class of vertebrate DNA. Essentially, it does not distinguish the claimed genus from others, except by function that is, it does not define any structural features commonly possessed by members of the genus that distinguish them from others. One skilled in the art, therefore; cannot, as one can do with a fully described genus, visualise or recognise the identity of the members of the genus. Further, in this case,44 it was found that: “a definition by function does not suffice to define the genus because it is only an indication of what the gene does, rather than what it is”. Hence, the court held that the isolation of a single DNA species (cDNA encoding for rat insulin) does not provide a written description adequate to claim the broad genus of vertebrate or mammalian insulin cDNA. Obviously a position very different to that provided in the Amgen decision in Australia. A further case highlighting this limiting scope is the case of Amgen v Chugai Pharmaceutical Corp45. In this case, a generic claim (covering all DNA sequences that code for an amino acid sequence having the same properties as erythropoietin) was held to lack an enabling disclosure. The Court pointed out that DNA sequences enablement: “means disclosing how to make and use enough sequences to justify the grant of the claims sought.” Furthermore, in Ex parte Maizel46, it was found that claims to a biologically functional equivalent of a DNA sequence are too broad. In relation to this, the Board of Appeals concluded that the term “biologically functional equivalent” was so broad as to encompass any protein, regardless of its structure, that is functionally equivalent to what was specifically described. Such a claim resembled so-called “single means” claims which
40 41 42 43 44 45 46
Biotechnology and United States Patent Practice http://www.ladas.com/ Atlas Powder v E.I. Du Pont de Nemours & Co 750 F.2d at 1576 Fiers v Sugano 25 USPQ2d 1601 The Regents of the University of California v Eli Lilly and Company, United States Court of Appeals for the Federal Circuit 96-1175 The Regents of the University of California v Eli Lilly and Company, United States Court of Appeals for the Federal Circuit 96-1175 page 1178 Amgen v Chugai Pharmaceutical Corp. 18 USPQ2D 1016 (Fed. Cir. 1991) Ex parte Maizel 27 USPQ2d 1662 (Bd. of Appeals 1992)
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are routinely held to be unpatentable in mechanical cases; that is, it would cover all conceivable means to achieve the stated result, even though the specification only disclosed a specific DNA to achieve such a result. Therefore, the disclosure was clearly not commensurate with the scope of the claim. Therefore, it seems apparent that in the United States, the scope of biotechnology claims is limited on the basis that the disclosure of the specification must enable the person of the art to obtain the results claimed. The United States position in terms of enablement appears consistent with their position in relation to obviousness; that is, the issue of unpredictability that renders many claims non-enabled also has the effect that even prior art which is close to the invention does not necessarily render it obvious.
2.8.3 Europe The requirements of the specification in Europe are outlined in Article 83 of the EPC under the heading “Disclosure of the Invention” as follows: “The European patent application must disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art.” In relation to this disclosure requirement, in EXXON/Fuel Oils47, in the EPO it was stated that: “the application as filed must contain sufficient information to allow a person skilled in the art, using his common general knowledge, to carry out the invention within the whole area claimed.” Further to this, where a patent discloses a principle capable of general application, the issue of how broadly the patentee may claim has been addressed at some length in several cases before the EPO. In Genentech I/Polypeptide expression (T292/85)48, the Technical Board stated: “Unless variants of components are also embraced in the claims, which are, now or later on, equally suitable to achieve the same effect in a manner which could not have been envisaged without the invention, the protection provided by the patent would be ineffectual ... The character of the invention this time is one of general methodology which is fully applicable with any starting material, and is ... also independent from the known, trivial, or inventive character of the end-products.” In approving Genentech I, Lord Hoffman, in Biogen Inc v Medeva PLC49 (hereinafter Biogen), commented at 48: “In other words, the applicants had invented a general principle for enabling plasmids to control the expression of polypeptides in bacteria and there was no reason to believe that it would not work equally well with any plasmid, bacterium or polypeptide.” and further at 48-49 stated the principle in his own words: “If the invention discloses a principle capable of general application, the claims may be in correspondingly general terms. The patentee need not show that he has proved its application in every individual instance. On the other hand, if the claims include a number of discrete methods or products, the patentee must enable the invention to be performed in respect of each of them.”
47 EXXON/Fuel Oils OJEPO 1994 48 Genentech I/Polypeptide expression (T292/85) [1989] OJEPO 275 49 Biogen Inc v Medeva PLC [1997] RPC 1
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“It is not whether the claimed invention could deliver the goods, but whether the claims cover other ways in which they might be delivered: ways which owe nothing to the teaching of the patent or any principle which it disclosed.” In Biogen, Lord Hoffmann specified that the specification must enable the invention to be performed to the full extent of the monopoly claimed. “The disclosure must be sufficient to enable the whole width of the claimed invention to be performed. What will suffice to satisfy this criterion will vary depending upon the nature of the claim that has been made. It is essential to apply the test having regard to the extent of the claim. It is not the law that the disclosure of a single embodiment will always satisfy the requirement regardless of the width of the claim.” In Biogen, the House of Lords rejected claims to any method of producing a hepatitis B vaccine on the basis that the specification of the patent in suit only demonstrated one type of antigen, and as a consequence, the patent was so restricted. On the whole, in deciding whether a claim relates to a whole class of inventions or merely to a single product, the authorities in the main look at the degree of certainty with which it can be predicted that the whole class will share the discovered results and properties or that all methods will realise the effects50.
2.9 Patentability of Methods of Medical Treatment of Humans 2.9.1 Introduction The patentability of methods of treating human beings, including second indication uses of known compounds, is the subject of variable interpretation world-wide. Australia and the United States are among the few jurisdictions in which protection of a method of treatment or diagnosis of the human body is available.
2.9.2 Australia Even in Australia, the issue of whether methods of treating human beings were patentable was not clear until recently. In 1998, a single Judge of the Federal Court51 held that claims to methods of treating human beings were “generally inconvenient” and not allowable. However, an appeal to the Full Federal Court52 was upheld. In allowing the appeal, the Full Court observed that there would be an “insurmountable problem” in allowing patentability for a product for treating the human body and denying patentability of the method of treatment, and that if public policy demanded that such methods not be patentable, then the matter should be dealt with by Parliament.
50 Kern, Micheal, “Patentability of Biotechnological Inventions in the United Kingdom; The House of Lords Charts the Course”, IIC Vol. 29, No 3, 1998 51 Bristol-Myers Squibb Co. v Faulding & Co Ltd [1998] 41 IPR 467 52 Bristol-Myers Squibb Co. v Faulding & Co Ltd [2000] 46 IPR 553
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Swiss-style (“use of”) claims In many of those jurisdictions where claims to the methods per se of treating human beings are not allowable, such as in Europe, New Zealand and Singapore, claims to the use of a compound for the manufacture of a medicament for the method are generally held to be allowable. Such claims are termed “Swiss-style”, the practice of allowing such claims having originated in Switzerland. These claims are of the type: Use of a compound [X] for the manufacture of a medicament for the treatment of a disease [Y]. Such claims are clearly more directed at the supplier of the compound, particularly if instructions are provided to use the compound for the condition covered by the claim, but it is unclear whether a practitioner carrying out any further processing of the medicament, such as Methods of medical treatment of humans dilution, would be infringing a “Swiss-style” claim. • Patentable in Australia and the United States of America • Not patentable in most other countries
2.9.3 Other jurisdictions United States Patentability of claims to methods of medical treatment of humans: Swiss-style claims:
YES NOT ALLOWABLE
Europe Patentability of claims to methods of medical treatment of humans: Swiss-style claims:
NO ALLOWABLE*
China Patentability of claims to methods of medical treatment of humans: Swiss-style claims:
NO ALLOWABLE*
Canada Patentability of claims to methods of medical treatment of humans: Swiss-style claims:
NO ALLOWABLE*
Singapore Patentability of claims to methods of medical treatment of humans: Swiss-style claims:
NO ALLOWABLE*
Indonesia Patentability of claims to methods of medical treatment of humans: Swiss-style claims:
NO ALLOWABLE*
New Zealand Patentability of claims to methods of medical treatment of humans: Swiss-style claims:
NO ALLOWABLE*
*It is the practice of the relevant Patent Office not to object to Swiss-style claims, but the validity of this style of claiming has not necessarily been scrutinised by the Courts of the respective countries.
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Chapter 3. Searching CHAPTER 3
3.1 Introduction Published patents serve as a valuable source of information. Although the particular motivations for conducting a patent search will certainly vary from case to case, an element of commonality exists in that they all seek to extract specific technological information and/or information relating to inventor or company activities in a given field. For example, unexpired granted patents can, via their claims, reveal areas of technology that are subject to a monopoly and, therefore, not freely available for use. Pending patent applications, on the other hand, can indicate the R&D direction of a competitor and show where possible future monopoly rights will lie. Despite the considerable worldwide quantity of published patent documents5, they are, by necessity, particularly amenable to searching. This necessity stems from the fact that Patent Office Examiners use patent documents to determine whether or not an application meets the principal patentability requirements of novelty and non-obviousness. All published patent documents have, therefore, been catalogued in extensive classification indexes in order to facilitate easier access to patent claims relating to specific technical features.
Searches • Patent searches can serve as a source of technical information and/or information relating to competitor activities • Patent documents are amenable to searching due to the extensive classification system used by Patent Offices • Patent searches are not infallible, although by adopting an appropriate search strategy the chances of overlooking important documents can be minimised • Searches can be as specific as is necessary depending upon the availability of time and funds and the relative importance of the subject matter
In order to extract useful and relevant information from a patent search, it is important that it is conducted in a thorough and precise manner. Although no patent database or searching method exists which can guarantee 100% accuracy, the chances of missing important documents can be minimised by adopting an appropriate search strategy suiting the particular requirements in hand. The particular strategy adopted may depend on factors such as the availability of time and money and the relative importance of the subject matter to be searched.
53 40 million worldwide: Source: Swiss Federal Institute of Intellectual Property at http://www.ige.ch/E/rechprod/r101.htm
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Before discussing the various types of patent searches in detail, it is useful first to show in a general sense how patents serve as a source of a wide range of useful information. Those involved in R&D should not dismiss patent documents as being of importance only to patent attorneys. Although their “legalese” written style often does not facilitate easy reading, all patent documents share a common structure and a lot of practical information may be contained within them. Patent documents have the advantages of: • often being the sole source of technical information • relating, by definition, to new products or processes (with the exception of abandoned applications or those found to be invalid) • presenting inventions in a way in which to facilitate reproduction of their results • serving as a stimulus for new ideas and acting to promote inventiveness rather than inhibiting through maintaining secrecy • providing valuable commercial information relating to competitors The searching of patent documents can help to answer both complex technological questions and ad hoc bibliographic questions such as when a particular competitor’s patent expires or where in the world a particular patent right exists. The more common searches can be classified according to their particular aims and these are discussed in detail in the following sections.
3.3 Patentability Search The patentability search seeks, as its name suggests, to determine whether or not an invention is patentable. To be patentable, a patent application must meet several criteria, most significantly that the invention must be new and possess an inventive step (be nonobvious). Novelty is a fundamental requirement of a patent application and only its absence, not its existence,
Patentability search • Only the absence, and not the existence, of novelty can be established • An invention is novel when it is not anticipated by the prior art
can be proved.
An invention possesses novelty if it is not anticipated by the “prior art”. In most jurisdictions, the prior art consists of the total knowledge existing prior to the filing date of a patent application and can exist in fixed tangible form (written publications, films, photographs etc.) as well as in unfixed forms (oral presentations and demonstrations). A search of the prior art should, at least, cover all directly relevant fields of technology and, depending upon the success of an initial search, possibly also peripheral analogous fields. Whilst an entirely comprehensive search would be ideal, the imperfections of databases and information retrieval methods combined with economic limitations make such an ideal scenario unachievable. Patentability searches are routinely performed by Patent Examiners in order to determine whether a patent’s claims define a novel and non-obvious invention. However, such a search need not be delayed until such a late stage and can be performed by or for the applicant prior to submission of a patent application to the Patent Office. Although entirely optional, by performing a pre-filing patentability search, an applicant can make an early informed decision on the likely success of a future patent application.
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If a patentability search is performed early enough in a research project, the direction of the research can be modified accordingly to achieve patentable outcomes over the prior art. Routine searching during the course of research may have secondary benefits, such as providing solutions to problems or stimulating new ideas for using existing technology in new areas. The existence of technologies in the prior art which carry out the same function as the researcher’s invention but have not been commercialised should prompt careful consideration of the merits and likely success of the proposed product. Even if no excessively detrimental prior art is located, the results of the patentability search will, nevertheless, be useful when drafting a patent application. Therefore, in drafting a patent application, it is helpful to start from the closest prior art in order that language can be used to clearly and accurately distinguish the invention from it. A patent application which is drafted in a way that pre-empts the objections of a Patent Examiner will proceed through the prosecution process more efficiently than one which ignores the prior art. Patentability searches can be performed by professional searchers or on a do-it-yourself basis in patent libraries54 and online databases (see Chapter 3.9). As well as conducting a search of patent records either manually or online, other potential sources should also be considered. For example, inventors themselves are often the most valuable source of information and those working in a specialised field should certainly be aware of the activities of their peers. Indeed, an inventor may have been prompted to arrive at the invention by reading prior research results in scientific journals. In conclusion, although a patentability search is optional ,it is nonetheless highly recommended. The potential benefits to be gained certainly compensate the investments in time and money, particularly if the search is performed at an early stage in the life of a research project.
Patentability search • Patentability searches can help the applicant make early informed decisions on the likely success of a patent application • Early patentability searches can help steer research projects around problematic prior art • Even if no detrimental prior art is found, the results of the patentability search will be helpful when drafting a patent application • The results of the patentability search can be used to draft a patent application which pre-empts a Patent Examiner’s likely objections
54 Searches can be performed in IP Australia’s State Offices – www.ipaustralia.gov.au/textonly/about/A_contact.html#h1.2body
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A patentability search may help in formulating a research program and aid the drafting of an effective patent application. However, such a search cannot guarantee that the subsequently granted rights can be freely exploited by their owner. A patent right is only a monopoly right to the extent that it prevents others from using the invention it protects. Newly granted patent rights often overlap with existing patent rights belonging to others and use of the former may constitute an infringement of the latter. The fact that no copying took place and that the development of the latter technology was made entirely independently cannot be used as a defence against infringement. Therefore, a specific infringement search is required to uncover potentially dominating rights. Conversely, a patent owner can equally tailor a search to detect patent rights which are dominated by his or her rights and may be infringing them. An infringement search (sometimes called a “freedom to operate” or “clearance” search) is explicitly targeted at locating in force patent documents whose claims describe the proposed new invention. The parameters of the search are not only limited in time but are also restricted to the countries in which one intends to make, use or sell the invention. Infringement searches should be repeated to avoid missing those patents that were pending and unpublished at the time of an earlier search.
Infringement search • Patentability searches cannot guarantee that future patent rights can be exploited by their owner • Use of patent rights may constitute an infringement of another party’s rights • Infringement searches are explicitly targeted at unexpired patent documents • Infringement searches are limited to particular countries
3.5 Validity Search Faced with the dominating patent rights of a competitor or, even worse, impending litigation as a result of alleged infringement, two options can be considered. Firstly, the possibility of cross-licensing can be explored. Secondly, the validity of the relevant patent can be challenged through a court action for revocation. A patent infringement lawsuit, however, even if it is won, can be a very expensive proposition and every effort should be made to avoid it. Therefore, if possible, the dominating rights holder should be approached with a view to establishing a cross-licensing agreement which would allow both parties to enjoy access to the rights of the other. If cross-licensing fails, or even before licensing negotiations commence, a validity search may be conducted with the aim of revealing damaging prior art which existed before the filing date of the dominating patent, thus rendering it invalid. The validity search is usually more comprehensive than a patentability search. For example, an investigation may be conducted to find witnesses willing to attest to oral publication of the invention Validity search before its filing date. • A validity search can be used to prove that a competitor’s rights ought not to have been granted
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3.6 State of the Art Search Searches can also be designed for general information-gathering purposes. State of the art searches are used to collect information to provide a broad overview of technological developments in a given field. Such a wideranging and exploratory search may be performed by an individual inventor seeking to establish the developmental position of the competition or in an attempt to locate potential licensees. More commonly, however, state of the art searches are used as a tool by larger companies in intelligence-gathering exercises and in making informed decisions regarding large investments on, for example, R&D projects. A thorough state of the art search can save a great deal of time and money by, for example, showing inventions that already exist in a given field, problems that have been discovered, how they have been solved and by whom. By analysing the complete chronology of advancements in a particular field, duplication, blind alleys and unnecessary effort and expenditure can be avoided. These searches are generally much more far-reaching than patentability or infringement searches and can involve the collection of vast amounts of information. Information is extracted not only from patent databases but also from sources such as scientific journals, trade magazines and by conducting market research. It is necessary to search these additional sources of information in order to find information on products whose corresponding patents have not yet been published. Whilst a state of the art search should be broad in terms of the array of sources of information it uses, its field should be limited in order to give relevant and meaningful results. Furthermore, a rapidly developing field such as biotechnology demands that the search is conducted over a long time span since earlier developments may be just as critical to decision-making as recent developments. If the quantity of search results becomes unmanageable, then the search should be limited by narrowing the definition of the field as opposed to shortening the time frame under consideration. A complete chronological history of the development of a field can be analysed in a time-segmented fashion in order to reveal past trends and to predict future ones. Identification of a low density of patenting activity in a particular field may represent an opportunity to enjoy relative market freedom by directing R&D activities State of the art search • A state of the art search is designed to give a broad accordingly. Indeed, a state of the art search can be overview of a particular technological field extremely useful before, during and after the inception • A state of the art search can involve the collection of vast of an R&D project. Before a project starts, the amounts of information from a broad range of sources information gained from such a search can help to • A state of the art search should concentrate on a narrow direct research towards profitable market niches. field in order to yield manageable results During a project, its information can be used to • The results of a state of the art search may reveal past manoeuvre research around prior art or act as a catalyst trends and help predict future ones for new ideas. After the research has been completed, • A state of the art search is useful before, during and after a research project the information may be useful in terms of detecting or avoiding infringement.
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The differences between patentability, infringement and state of the art searches are summarised in Figure 3-1 below.
Type of search
Aim of search
Time scale
Source
Patentability
Find closely related prior art
Before filing date of invention
Pending/granted patents and other sources
Infringement
Find closely related patent claims
Within last 20 years
Unexpired granted patents only
Validity
Find closely related prior art
Before filing date of invention
Pending/granted patents and other sources
State of the Art
Provide complete overview of a technological field
Unlimited time scale
Pending/granted patents and other sources
3.7 Bibliographic Searches The above searches can take a considerable amount of time to perform due to the fact that they often begin from a position of limited or no knowledge. Bibliographic searches, however, can be performed very quickly since the searcher is armed from the outset with information such as the inventor’s or applicant’s name, the filing date or even a patent reference number. Bibliographic searches can be used by companies placing a “patent watch” on the activities of their competitors. The bibliographic search is aimed at interrogating bibliographic data published in official gazettes, indices and computer databases to identify patent documents fulfilling certain criteria. For example, common bibliographic searches involve: • Identifying all patent documents within a specific patent classification • Identifying all patent documents by a certain inventor or applicant • Identifying all patent documents within the one patent family Caution should be exercised when searching solely on the basis of a company name. The same company may have a different name in different countries and patents are not always applied for by the company expected.
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Figure 3-1: Comparison of Main Search Types
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Since patents are territorial rights, the latter “family” or “equivalency” search can be very important. The extent of the monopoly awarded in Australia may not be the same as that awarded in, for example, the United States. By identifying all members of a patent family (a series of patent applications sharing the same priority filing date), any differences in the scope of their claims can be analysed. Such searches can be performed online or via various commercial databases.
Bibliographic searches • Bibliographic searches are usually performed quicker than other types since the searcher is already armed with information on which to base the search • Bibliographic searches can identify all patents by a specific inventor or company • Bibliographic searches can identify all patents within a patent family
3.8 How to Perform a Search In order to be effective, a search should be structured in such a way as to ensure that relevant information is not overlooked. Indeed, all searches should follow certain established protocols regardless of their type and involve an element of preparation. Although it is part of a Patent Examiner’s job to search for information relevant to the patentability of an invention, Examiners are in the fortunate position of having professionally drafted patent claims on which to base their search. In conducting a search in order to justify the preparation of a patent application, it is unlikely that the searcher will have that luxury. However, it is important that the parameters of the invention are anticipated in order to limit the scope of the search to such an extent that it will yield meaningful results. A useful starting point is to attempt to crystallise the invention How to perform a search into a short description focusing particularly on the • All searches require an element of preparation and follow aspects believed, or hoped, to be novel and inventive. established protocols By distilling the invention in this way, the purported • By distilling the invention into a short description, the scope invention can be more clearly understood, which is of the search can be narrowed around its purported novel particularly important if a person other than the inventor and inventive aspects is to carry out the search. Having formulated a clear search statement, the searcher must now identify the materials to be searched. It should also be determined whether or not it is necessary to search non-patent literature. In certain fields (eg. pharmaceuticals), it can be equally or even more important to search technical journals and other relevant publications. The International Patent Classification system (IPC) was devised to simplify the retrieval of patent documents by standardising the way in which technical information is catalogued by Patent Offices throughout the world. In performing a patent search, the searcher must, therefore, identify the likely IPC classification(s) relating to the crux of the invention. Although the IPC is a relatively logical subdivision of technology, the uninitiated searcher may need to approach the system by using the Catchword Index to the IPC. The Catchword Index is a list of keywords matched to one or more classification groups and helps to steer the search towards the appropriate narrow group of patent documents. In order to avoid missing any relevant groups, the searcher must think of all the possible alternative expressions for the technical keywords.
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Once the appropriate group(s) are identified, it is then possible to review the actual patent documents that fall therein. The patents may be retrieved manually or, more preferably, online and their abstracts briefly reviewed in order to determine their relevance. Once a group of patents has been filtered in this way, a more detailed International Patent Classification (IPC) system analysis of their disclosures and/or claims can be • Australia accounts for a mere 7% of worldwide published patent documents undertaken. The documents retrieved may also provide • The International Patent Classification (IPC) system was cross-references to other patents relating to a similar designed to group together similar technologies technology. The search strategy will, therefore, • The IPC simplifies the retrieval of relevant documents which constantly evolve in response to the relevance of the can then be filtered manually documents found.
3.8.1 Limitations of searching In undertaking a search, the following limitations should be borne in mind: (1) Search results are based on materials held by, and publications of, the relevant Industrial Property Organisation as well as computer databases and publications relating thereto. Therefore, a search may be limited due to deficiencies or errors in these sources. (2) Subject matter searches cannot be conducted in respect of patent applications which are not yet open for public inspection. A patent application normally becomes open for public inspection approximately 18 months after its claimed priority date. (3) The Paris Convention (see Chapter 2.2.2) enables an application to be filed in a Convention country, such as Australia, claiming an earlier date of up to 12 months based upon the filing date of an overseas application. (4) The fact that a patent search reveals no prior patent rights which may be infringed by the manufacture or marketing of a particular product does not necessarily constitute a licence to manufacture or market the product. It may also be appropriate to search the Designs register. Even a clear search of that register will not, in general, entitle the copying of a product unless that product has been marketed in quantity, by or with the authority of the product designer without the benefit of Design registration. (5) Finally, if the search indicates that a particular patent/patent application has lapsed, it is important to be aware that provisions do exist in most countries which permit the reinstatement of a patent/patent application under specific circumstances.
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3.9 IP Informatics & Information: Web Access to IP Tools and Databases At the time of its introduction, the IPC lent itself to efficient manual searching and was basically the only search tool available. However a number of advanced computerised search tools have since been developed, some of which use the IPC or hybrids thereof. These range from simple word searches in abstracts or full texts to complex deep indexing schemes or chemical structure search engines. These alternative search tools are provided by both commercial database companies and national Patent Offices. As the number of published patent documents has grown over the years, the volume of documents in each sub-division of the IPC has also grown. It is for this reason that it has become increasingly attractive to utilise computers, which can effortlessly filter such a large volume of documents according to complex search questions. Until relatively recently, there were only a few web sites which gave direct and free access to published patent documents. Since 1998, however, both the United States and European Patent Offices announced plans to publish their patents on the Internet at no cost to users, a service which is now offered by many other Patent IP informatics & information Offices. Although commercial databases provided by • Retrieval of patents from computer databases are companies such as Derwent and Questel-Orbit55 may increasingly replacing manual searching as the volume of patent documents increases allow detailed searching under more comprehensive • Online databases provide (often free) access to patent search strings, online databases are, at least, a useful documents place to start. Furthermore, it is now often possible to access databases relating to trade marks and design rights as well as patents.
55 See entries in Figure 3-2
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The table in Figure 3-2 shows a selection of useful web sites offering access to IP information, the entries of which are categorised geographically or by subject matter. Please note that the following URLs are correct at the time of writing, but may be subject to change.
Web address
Subject matter/Geographical location US, Europe, Japan & PCT
www.delphion.com http://www.ipaustralia.gov.au/patents/P_srch.htm
Australia
http://ep.espacenet.com/
Europe, PCT and Japan
http://pctgazette.wipo.int/
PCT
http://patents.uspto.gov/web/menu/search.html
US
http://gb.espacenet.com/
Britain, Europe, PCT & Japan
http://Patents1.ic.gc.ca/intro-e.html
Canada
http://www.questel.orbit.com/index.htm
Worldwide commercial database
http://www.derwent.co.uk/searchservices/index.html
Worldwide commercial database
http://www.genomic.org/
US DNA patents
http://www.nal.usda.gov/bic/Biotech_Patents/ http://www.current-patents.com/
US agricultural patents Pharmaceutical patents
http://casweb.cas.org/chempatplus/
US chemical patents
http://www.ipaustralia.gov.au/trademarks/T_srch.htm
Australian trade marks
http://strategis.ic.gc.ca/cgi-bin/sc_consu/trade-marks/search_e.pl
Canadian trade marks
http://tess.uspto.gov/bin/gate.exe?f=tess&state=8ak062.1.1 http://www.patent.gov.uk/tm/dbase/index.htm
US trade marks British trade marks
http://www.ipaustralia.gov.au/designs/D_srch.htm
Australian designs
http://www.patent.gov.uk/design/dbase/index.htm
British designs
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Figure 3-2: Useful IP Web Sites
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4. Development 4.1 Identifying Inventive Subject Matter . . . . . . . . . . . . . . . . . . . . 4.1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.2 Factors which may indicate invention . . . . . . . . . . . . . . . 4.1.3 Examples of inventive subject matter . . . . . . . . . . . . . . . 4.1.4 Factors to consider when determining inventiveness . . . . .
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4.2 How to Read a Patent Specification . . . . . . . . . . 4.2.1 Reasons for reading a patent . . . . . . . . . . . 4.2.2 Requirements of a patent specification . . . . . 4.2.3 Parts of a patent specification . . . . . . . . . . . 4.2.4 Reading a patent specification . . . . . . . . . .
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4.1.1 Introduction Biotechnology inventions, like any other inventions, are required to contain an inventive step if they are to be patentable. This requirement is intended to prevent patents being granted for trivial or obvious developments of something that has gone before. The question of inventive step or obviousness is one of the most difficult issues in patent law and dealing with recombinant DNA technology does not make the issue any easier. In the fast moving field of human gene research, what was an inventive step last year may well be an obvious technology this year.
4.1.2 Factors which may indicate invention • Invention can result from a combination of well-known features which contribute to an improved result, particularly if the combination is new and more particularly if the result is improved. • On the other hand, there can be no invention in a mere combination of features, each of which is well known and contributes no more than its well-known functions. There is no invention in altering the proportion of ingredients that were used before in combination when the proportion is not necessary to success, nor to alter the size and shape of the articles or to merely substitute materials. • Invention may exist where fresh advantages have been developed and disadvantages or technological problems overcome. • Invention may also be present as a result of a new and useful selection among members of a class of substances from which selection the inventor is able to produce new and useful results, or old results in a cheaper or better manner. • Invention may also consist in omission. There may be invention in omitting a stage in a process or, omitting an unnecessary ingredient in a composition or in omitting an unnecessary part of a machine. Indicators of invention • Invention can result from a combination of well-known features or elements which contribute to an improved result • There can be no invention in a mere combination of features, each of which is well known and contributes no more than its well-known functions • Invention may be present in a new and useful selection among members of a class of substances from which selection new and useful results are obtained • There may be invention in omitting a stage in a process or omitting an unnecessary ingredient in a composition
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4.1.3 Examples of inventive subject matter There are a number of inventive entities in biotechnology which can be the subject of patent protection, and which should be considered when examining inventive subject matter. In relation to this, reference is made to the following non-exhaustive guide to potential inventive subject matter in biotechnology.
Biotechnological entity Nucleic acid per se Peptide, polypeptide, protein, etc. (together with nucleic acid encoding peptide, polypeptide, protein etc.) Microorganism Virus Fusion cell Vector Transformed host Cell line Non-human animal Plant Seed Hybridoma Antibody Probe Vaccine Composition Article – eg. test strip Expression systems Product of process or device/apparatus
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• • • • • • • • • • • • • • • • • • •
Biotechnological Device • • • • •
Biochemical, Biochemical, Biochemical, Biochemical, Biochemical,
biophysical biophysical biophysical biophysical biophysical
or or or or or
bio-electrochemical bio-electrochemical bio-electrochemical bio-electrochemical bio-electrochemical
apparatus device appliance instrument system
Biotechnological process • • • • •
Process Process Process Process Process
of of of of of
manufacturing biochemical compound manufacturing biochemical composition selecting nucleic acid or polypeptide/peptide sequence biochemically treating materials biochemically manufacturing objects, articles, devices etc.
Biotechnological method • • • • •
Method Method Method Method Method
of of of of of
administering/applying biochemical compound, microorganism, antibody, vaccine, composition using biochemical compound, microorganism, vaccine, composition, object etc. inducing an immunological response biochemical purification purification of biochemical entities
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4.1.4 Factors to consider when determining inventiveness When considering the issue of inventive step, the Courts often look at a number of the following factors when determining its existence or absence:
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• Commercial success – practical commercial success of a new article does not necessarily demonstrate the presence of invention, but it raises a strong presumption that the invention was necessary to produce the article for the first time. In a case which is borderline, evidence of commercial success can be extremely relevant and can sufficiently tip the scale in favour of the patent. • Unexpected or surprising results – unexpected or surprising results can be a strong objective indication of non-obviousness. Such evidence must be presented in the form of factual comparative testing to the closest prior art. • Assumed unviability – if the invention achieves something previously thought to be unworkable, this may support an argument of inventiveness. • Solving previously unsolved problems – if previous attempts to solve a problem have failed then these failures may indicate that the new invention is non-obvious. • Long felt need – if it can be shown that the claimed invention satisfies a long felt need in the industry, it can be directly inferred that the invention is non-obvious. • Unrecognised problem – if the invention in question solves a previously unrecognised problem then this may add weight to a claim of non-obviousness. • Unappreciated advantage – if the invention in question has an inherent advantage which was previously not recognised then this may add weight to a claim of non-obviousness. • Omission of an element – the omission of an element that was previously thought to be essential to the working of the invention can help prove the existence of an inventive step. • Congested art – it could be argued that a seemingly small inventive leap is indeed non-obvious if the invention lies within a crowded art. • Contradictory or poor references – if it can be proven that the prior art references relied upon are inoperative, vague, conflicting or have been misunderstood or, indeed, never implemented then their impact in terms of denying inventiveness may be diminished. • Acceptance by industry – evidence of an industry’s particular reaction to a claimed invention provides some indication of where the invention fits vis-à-vis the state of the art. Statements by industry in newspapers, trade articles and advertising literature, restraint by industry from infringing or challenging the claimed invention and requests for licences by those in the industry can all be relevant. • Copying – copying is the ultimate form of industry acclaim and it has been recognised that this type of evidence can be indicative of non-obviousness.
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4.2 How to Read a Patent Specification 4.2.1 Reasons for reading a patent There are a number of reasons for reading a patent specification, namely:
Patent specifications are frequently read because they are a valuable technical information resource (see Chapter 3.2). Thus a patent might be read on this basis to gain an understanding of the state of a particular technology which is the subject of one or more patents, at a particular point in time, namely at or around the priority date of the patent(s). This would be relevant to someone who is trying to understand the deficiencies of the prior art and who is trying to develop a solution to those deficiencies. Alternatively, the patents of a competitor may be monitored and read for surveillance reasons. Patent specification as prior art Patent specifications are read to determine whether a particular patent (i) anticipates; or (ii) renders obvious either by itself or together with common general knowledge, a later invention. This scenario is the case in Australia. However, in other countries such as Europe, the United States and Japan, for example, the law relating to obviousness differs slightly since in these countries it is possible under certain circumstances to combine a patent with one or more other patents or Reasons for reading a patent publications to establish obviousness. • Patent specifications are a valuable technical information resource
Commercial exploitation Patent specifications are also read to determine whether a particular product, process or method falls within the claims of the patent, since this is relevant to decisions concerning the licensing or purchasing of the patent as well as to determining the position with respect to infringement.
• Patent specifications are read to determine whether a particular patent (i) anticipates; or (ii) renders obvious either by itself or together with common general knowledge, a later invention • Patent specifications are read to determine whether a particular product, process or method falls within the claims of a patent
4.2.2 Requirements of a patent specification The requirements of an Australian complete patent specification are set out in section 40 of the Australian Patents Act 1990 (Cth). In particular, the invention must be fully described in the specification inclusive of the best method of performing the invention which is known to the patent applicant. The specification must end with one or more claims which define the invention, are clear and succinct, and which are fairly based on the description contained in the specification. The claims should define only one invention. It is worth noting that a claim is fairly based when it does not claim subject matter beyond what has been disclosed in the specification.
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4.2.3 Parts of a patent specification
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To satisfy these requirements, a conventional patent specification is typically made up of the following parts: 1.
Abstract
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Title
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Technical field
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A description of the background art
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Object(s) of the invention
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Disclosure of the invention
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A brief description of the drawings
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A description of the best method and other methods for carrying out the invention
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Details of any microorganism deposits
10. A list of any DNA, RNA and/or protein sequences 11. Industrial applicability 12. Claims 13. Drawings
4.2.4 Reading a patent specification How the task of reading a patent specification is approached depends on the purpose for doing so. Where the main purpose is to determine what technical information a specification discloses, a reader would tend to focus on the technical content contained in the description of the best method and other methods for carrying out the invention. Additional detailed information may also be described in examples. However, where the main purpose is to determine whether something falls within the scope of a patent, such as to determine whether or not a product infringes a patent, a reader would focus on the relevant claims and determine whether or not the product includes all the features of those claims. In addition, where the main purpose is to determine whether one or more claims is valid compared with, for example, what is disclosed in a prior art publication, a reader would focus on the relevant claims and compare whether or not the prior publication contains a clear description of or clear instructions to do or make something that would infringe those claims if carried out after grant. The various parts of a patent specification and their functions are described below: • Abstract: a brief synopsis of the invention. Under Australian law, the Abstract does not form part of the description of the specification. • Title: the title of the invention should be consistent with the invention described and claimed. • Technical field: usually consists of a brief statement of the technical field to which the invention is directed. • A description of the background art: is a description of the state of the relevant background art including a description of problems or needs of that art which are addressed by the invention.
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• Object(s) of the invention: one or more paragraphs listing the aim(s) of the invention. • Disclosure of the invention: one or more statements of the invention which is/are consistent with claim 1 and any other independent claims. Such statements are often followed by a description of preferred embodiments of the invention which fall within at least one of the independent statements of the invention as well as a list of advantages of the various embodiments of the invention.
• A description of the best method and other methods for carrying out the invention: a description of the best method of performing the invention known to the patent applicant at the time of filing the complete patent application as well as other methods for carrying out the invention. Typically, at least part of such a description is written with reference to any relevant drawings. In addition, any relevant examples are either included under this heading or are provided as a section under a separate heading of “Examples”. The description as a whole should be sufficiently detailed to enable a person skilled in that art to make the invention and put the invention into practice. Under Australian law, both the claims and the drawings form part of the description of the invention. • Details of any microorganism deposits: under the Australian Patents Act 1990 (Cth), the full description requirement of a microorganism may be met by a deposit under the Budapest Treaty. In such a case, the specification is required to include the deposit number and the deposit institution of any Budapest Treaty deposits relied on (note other countries may have different requirements). • A list of any DNA, RNA and/or protein sequences: any sequence listing of any new DNA, RNA and/or protein sequences which are relevant to the invention are listed. • Industrial applicability: a brief description of how the invention can be industrially applied. • Claims: are statements that define the invention including the features thereof. Since claims define the extent of the monopoly, they are used as the basis for determining whether or not something infringes. For this reason, claims are usually considered to be the most important part of the patent specification. Each claim is written as a single sentence. Typically, the claims consist of independent and dependent claims. An independent claim is one that does not depend on any other claim. A dependent claim is one which includes a reference to one or more preceding claims and can add one or more features and/or characterise one or more features appearing in the claim(s) upon which it depends. Typically (but not necessarily), claim 1 is the broadest independent claim. On the one hand, the broader a claim is, the wider is its scope of coverage, but on the other hand, the greater the chance of finding relevant prior art that could invalidate such a claim. Thus, an ideal patent is one whose broadest claims are drafted as close to the nearest prior art as possible without being so broad as to be rendered invalid because they lack novelty or an inventive step over that prior art.
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• A brief description of the drawing(s): a brief description of any drawings of the preferred embodiment(s) of the invention and any examples.
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In order to determine whether or not there is an infringement of a patent, the claims of the patent are compared to the alleged infringement. To establish that a claim has been infringed, it has to be demonstrated that an infringer has commercially used a product or performed an act which takes each and every “essential integer” as claimed in the claim under consideration, without the patentee’s consent or authority, after the date of publication of the patent.
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Ultimately it is the Court that decides how a particular claim should be construed. In the process of doing this, the Court applies certain rules of construction. The rules of construction of claims have been set out by the Australian Federal Court in Nesbit Evans Group Australia Pty Ltd v Impro Ltd & Anor56 and are provided in Appendix V.
56 Nesbit Evans Group Australia Pty Ltd v Impro Ltd (1997) 39 IPR 56
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5. Strategic Management of IP Resources 5.1
Using IP in decision-making for R&D
5.2
Aligning IP and R&D with Business Strategy
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IP Inventory Audit .
5.4
Procedural Audit .
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Assessing the Competitive Landscape – IP Mapping .
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State of the Art Searches .
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Avoiding Infringement (Freedom to Operate)
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Strategic Approaches to R&D and Patent Filing .
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Chapter 5. Strategic Management of IP Resources 5.1 Using IP in decision-making for R&D Although the most memorable inventions are usually those that have represented giant leaps in technological advancement, the “Eureka Factor” is rarely significant and most inventions involve small incremental improvements to existing technology. This is particularly true in environments where a research strategy is formulated with the aim of achieving a specific set of goals such as building or improving upon existing products. Therefore, rather than being a chaotic and unpredictable process, innovation can be managed and Using IP in decision-making for R&D focused with predictable outcomes. • Most inventions involve small incremental improvements to CHAPTER 5
existing technology
In order to be successful, a company’s R&D operation must be directed towards commercial outcomes. A natural consequence of this is that any R&D strategy will be heavily influenced by IP issues. Commercial considerations and intellectual property issues are the complementary driving forces behind an R&D strategy and neither can be considered in isolation.
• Innovation is capable of being managed and can have predictable outcomes • A successful R&D operation will be directed towards commercial outcomes • Commercial considerations and IP are the complementary driving forces behind an R&D strategy
5.2 Aligning IP and R&D with Business Strategy A company’s R&D strategy cannot be dictated solely by scientific ambition since such a strategy would then have a largely “hit and miss” effect in the market place. The key objective in any company’s R&D strategy should lie in optimising returns from its knowledge base and the formation of such a strategy will involve input from a broader range of corporate functions such as the legal, marketing, product development and finance departments. By involving a broad cross-section of a company, the R&D strategy can be tailored to suit the overall company philosophy whilst being based on full market intelligence and financial realities. Each company has different business goals and, therefore, strategies must be structured in a way to facilitate the achievement of these goals. For example: • If the principal aim is simply to maximise profit margins then the strategy must involve the protection of the products, processes or services which are identified as being most relevant to those margins. • If the goal is to penetrate new markets then the policy may involve generating new IP to gain access to dominant players’ markets. • The intention may be merely to realise cash rewards for a significant R&D investment which can be achieved by licensing. A strategy based on knowledge, even if the knowledge is a blend of both fact and reasoned estimates, will reap greater rewards than one based on ignorance.
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The formation of any R&D strategy will involve: • Input from a broad range of corporate functions to allow it to be tailored to suit the overall company philosophy. • Identifying all pre-existing IP assets within the company by conducting an inventory audit. • Identifying and modifying existing IP policies and procedures via procedural audit. • Determining how existing or required IP assets could help achieve company goals. • Ensuring that future R&D investments support overall company goals. • Understanding how IP assets compare with the competition. • Attempting to predict future technology directions within the company’s markets.
The flow chart in Figure 5-1 illustrates the overall process of devising an R&D strategy by splitting the task into four main stages: • Stage 1 involves determining what the overall business objectives of the company are as a precursor to formulating the R&D strategy. • Stage 2 shows the internal and external auditing activities to be carried out. • Stage 3 shows the conclusions reached from the audits. • Finally, the actions arising from the preceding stages are arrived at in stage 4. The important elements of the overall process are described in further detail below.
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• Recommending how gaps in the competitive landscape can be filled.
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Figure 5-1: Steps in Forming an R&D Strategy
1
Overall business plan reflecting company philosophy
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Formulation of R&D strategy
2 IP inventory audit
Assess competitive landscape
Assess whether or not existing assets fit with business objectives
Determine what new technology is needed to fulfill business objectives
Procedural audit
3 Optimise policies and procedures and engender culture of IP awareness
4 Utilise the assets in the business
Dispose of the assets – license, sell or abandon
Develop IP via internal R&D activity
Acquire IP from external source
1 – Assessment of business goals; 2 – Auditing stage; 3 – Interpretation of audit; 4 – Actions
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5.3 IP Inventory Audit Whatever the overall philosophy of a company, the particular R&D strategy used to implement it will be shaped, at least in part, by pre-existing IP assets. Therefore, a first step in the formation of an R&D strategy should be to compile a comprehensive company-wide asset inventory and perform a sound cost/benefit analysis. A sensible way to approach such a task, which will vary in magnitude from company to company, is to divide all IP into three categories. Firstly, the IP which is currently used or will be used within the company should be identified. Secondly, from the remainder, IP which may be valuable to other companies should be distinguished. The third category will, therefore, consist of IP which is considered to be of little value. These three categories should, therefore, represent:
Listing the rights in this way will help to optimise the IP IP audit portfolio by fully utilising those rights which have been • An R&D strategy will be shaped by a company’s existing IP previously dormant and disposing of those which are assets surplus to requirements. By identifying the IP which is • A comprehensive company-wide IP asset inventory audit should be compiled essential to its continued operation and success, a • Group IP assets as core technologies, licensing opportunities company can focus its future R&D to support and and weak rights strengthen these rights. Peripheral rights which are not • Such a process will help to optimise the IP portfolio by useful to the business and may be attractive to potential providing a realistic assessment of its strengths and licensees can be a useful source of future revenue. The weaknesses remaining rights which fail the cost/benefit analysis represent an opportunity to cut costs by discontinuing maintenance fees and allowing the rights to become abandoned.
5.4 Procedural Audit An IP audit should not merely involve the listing of a company’s IP but should also include a detailed analysis of its IP policies and procedures. Indeed, the completion of the asset inventory audit may assist in identifying any shortcomings that warrant further attention. The following key policy and procedural areas should be carefully considered. Staff education It is essential to identify the key staff involved in R&D and ensure that they realise the importance of IP and patent protection in particular. A review of internal training policies should be conducted and awareness materials and induction programs should be Procedural audit – staff education provided for staff. A key element of the education • An IP audit should also include a detailed analysis of IP process should focus on avoiding inadvertent policies and procedures publication of commercially sensitive information, and • Key R&D staff should be identified and trained in practical IP the importance of confidentiality. The way in which issues inventions are captured should be investigated and a • A modus operandi for capturing inventions should be agreed modus operandi agreed in order to optimise and accelerate this essential stage in the R&D process.
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• core technologies • licensing opportunities • weak rights
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Patent filing programme
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When inventions are reported they should pass through an efficient evaluation and filtering stage. The minimum criteria for proceeding to the patent application stage should be clear and should include the invention possessing both a degree of technical merit and business value. A review of the domestic and foreign filing strategies should be conducted. For example, a cost effective and flexible approach may involve filing an Australian provisional patent application in order to establish an early priority date and thus secure a 12 month period in which to consider the merits of the invention further. Significant costs incurred when an application proceeds to the international stage mean that more stringent criteria for proceeding beyond this stage should be stipulated. There must be a policy of IP audit: patent filing programme constantly reviewing the progress of an invention and • The minimum criteria for an invention proceeding to the patent application stage should be clear assessing its value during the 12 month period from • A review of domestic and foreign filing policies should be filing the provisional application. Such a policy will avoid conducted knee-jerk reactions when the unextendable decision• Inventions should be constantly reviewed throughout the making deadline relating to foreign filing arrives. first year from filing an application Ownership One of the most important policies to adopt relates to ensuring that ownership of inventions resides with the appropriate entity. A thorough review should be conducted on all agreements to ensure that employees and consultants have assigned their IP rights. A policy of conducting interviews with incoming and outgoing employees to make them aware of their rights and obligations in relation to their IP is recommended. Ownership of IP that is licensed in from a third party should also be checked as part of a wider due diligence program. Licensing A clear licensing policy should be adopted in relation to technology which is licensed both inwardly and outwardly. Procedures should be in place to enable continuous policing of existing licence agreements thus ensuring that their terms and conditions are being met. Enforcement Policies relating to enforcement of a company’s IP should be adopted. They should focus on detecting potential infringers and ensuring that others are made aware of IP rights through clear marking procedures on all products. Similarly, a clear policy and procedure should exist in relation to responding to assertions of infringement of third party rights.
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IP audit: ownership, licensing & enforcement policies • It should be ensured that ownership of all IP resides with the company • All employee, consultancy and licence agreements should be reviewed accordingly • Clear licensing and IP enforcement policies should be adopted
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5.5 Assessing the Competitive Landscape – IP Mapping A thorough knowledge of a company’s own IP assets is, however, only half the picture. In order to adopt an appropriate R&D strategy and compete effectively with the competition, an intimate knowledge of the competition is required. An “IP Mapping” exercise can be conducted which seeks to identify the boundaries between the IP of all competitors in a given field. Such an exercise provides an overview which can help assess the density of IP in a particular area and aid comparisons of the relative strengths of each of the players. By assessing the IP map, it will also be possible to identify gaps in the competitive landscape which can be pursued through adoption of a suitable R&D strategy. Concentrating R&D efforts in these gaps or areas of lower IP density should represent the best strategic method of extracting value from a future IP portfolio.
Assessing the competitive landscape – IP Mapping • “IP Mapping” can help to identify the boundaries between the IP of all competitors in a given field • The IP map may reveal gaps in the competitive landscape that can be pursued through adoption of a focused R&D strategy • By monitoring the competition and taking appropriate action it is often possible to predict their moves, exploit their weaknesses and undermine their strengths
5.6 State of the Art Searches Intellectual property plays an important role before, during and after an R&D project. A proactive approach to risk awareness should be adopted by taking into account IP issues when new products or projects are first conceived. If such issues are ignored, then IP lawyers may have to be called in at a later stage to pick up the pieces and fight litigation. Therefore, before commencing a line of research it is sensible to conduct a “state of the art” search in the field. State of the art searches are discussed in detail in Chapter 3.6. The purpose of this search is to identify and evaluate current technology relevant to the intended research, the results of which may expose unknown problems or confirm opportunities. An avenue of research may be stopped in its tracks if evidence is located which would hinder the securing of future patent protection. Perhaps more importantly, such a search avoids “reinventing the wheel” and the consequent waste of investment. On the positive side, a state of the art search may reveal opportunities for improvements and gaps in the market. A complete analysis of the state of the art and prior State of the art searches art may reveal trends and may be used to indicate the • A proactive approach to risk awareness should involve level of activity or inactivity in a given field. The research “state of the art” searches before commencing a line of activities of existing key competitors and emerging research competitors can be monitored years before any of their • By identifying and evaluating technology relevant to the field, products reach the market. All of the information duplication and wasted investment can be avoided gleaned from this exercise will help point the R&D • “State of the art” searches may reveal hidden opportunities process in the most fruitful direction. and gaps in the market
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Keeping abreast of the competition’s IP can be critical for a number of other reasons, not least because the competitors will almost certainly also be monitoring a particular company’s own activities. By knowing the competition, it is easier to predict their next moves, exploit their weaknesses and undermine their strengths through implementation of an informed and effective R&D strategy. A competitor’s IP rights should also be monitored as a means of avoiding infringement of their rights or, indeed, detecting infringement of a company’s own rights.
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5.7 Avoiding Infringement (Freedom to Operate)
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Regular searching should be continued even after a research project has commenced. A freedom to operate search examines unexpired patents with the purpose of discovering those which dominate activities of a company’s own R&D activity (see Chapter 3.4). Such a search is, however, not infallible since patent applications are generally not published until 18 months from their priority date. It must, therefore, be realised that a freedom to operate search, like any search, cannot provide a guarantee that other patent applications have not recently been filed in the same area.
Avoiding infringement • Searching should be a continuous exercise throughout a research project • A freedom to operate search uncovers IP rights that dominate a company’s own R&D activity • A freedom to operate search is important in terms of avoiding infringement and possible litigation • A similar search can be used to detect infringement of a company’s IP rights by others
Using patent searches in this way can help prevent the infringement of third party patents that were not publicly available at the outset of an R&D project. Such a discovery can thus force its redirection or even its abandonment, and, of course, it is best that such a discovery is made at an early stage rather than shortly before a product is due to enter the market place. Similarly, the holder of IP rights can conduct a search to ensure that the competition is not infringing those IP rights. Detecting such an infringement may lead to action to put the alleged infringer on notice or to commence action in the courts. Such a search may, however, have the positive effect of opening up a new licensing opportunity.
5.8 Strategic Approaches to R&D and Patent Filing By forming an overall business plan, conducting audits of IP assets and procedures, assessing the competition and performing appropriate searches, the basic groundwork for formulating an R&D strategy is complete. The IP inventory audit helps to establish where all technologies in a portfolio “fit” within a company. Such a process also helps to avoid viewing each technology in isolation from the others in the IP portfolio and can reveal the links and inter-relationships that can affect how technologies are viewed. The mapping of technologies and those of the competition can be used as a key driver for identifying where R&D and protective effort can most effectively be applied. Invent around A minority player wishing to find a way of penetrating the lucrative market of a dominant competitor can consider a number of options. As previously discussed, an analysis of the competitor’s IP assets must first be completed in order to assess their strengths and any possible weaknesses. If, for example, an area of weakness was found where the patent rights were overly specific then it may be possible to adopt an “invent around” strategy. This enables legitimate access to the market via a different technological route that can possibly be protected by a patent. However, if the competitor’s IP is weak, this may indicate that another patent exists which prevented broad protection.
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Cross-licensing If, as is likely, the protection of the competitor’s patent is broad, then an “invent around” strategy may not be viable. An alternative is to concentrate R&D effort into numerous narrower areas which improve upon the competitor’s patent whilst still securing patent protection by virtue of the novelty and inventiveness over it. Whilst the competitor’s patent will still dominate, it is Strategic approaches to R&D and patent filing possible in this circumstance to force cross-licensing of • R&D strategies will be influenced by the relative strength rights so that both parties can enjoy the benefit of each and dominance of a company in its market other’s patents. If this proves to be impossible, then it • Dominating companies usually wish to protect their position may be beneficial to attempt to form a strategic alliance by adopting a defensive strategy whilst minority players with a competitor, such as a joint venture, in order to adopt an offensive strategy achieve what neither could do alone. • A minority player may adopt an “invent around” strategy in order to penetrate a lucrative market if sufficient weaknesses are found in a competitor’s IP • If this proves impossible, R&D effort may be focused around a competitor’s IP rights in an attempt to force a crosslicensing scenario • Alternatively, the formation of a strategic alliance or adoption of a licensing program should be considered in order to gain access to IP
Long-term projects Long-term projects seek to find entirely new areas of technology satisfying the company’s long-term business goals (7+ years). This approach will involve filing broad patent applications which protect broad concepts with a considerable degree of inventiveness. The rationale behind such a strategy is to protect ideas early in an effort to dominate competitors. Medium-term projects Medium-term R&D involves inventions of intermediate scope satisfying the medium-term business plan (3-6 years). Such R&D will focus on developing significant new advancements in existing product lines. Short-term projects Shorter-term R&D should focus on the more immediate goals of the business plan (1-2 years) and focus on incremental improvements in existing products. Such R&D will have an almost instantaneous impact in the market place. A web site that provides a useful program for the evaluation of IP and the development of an IP strategy is located at www.ipscore.dk An example of an IP Strategy Checklist in shown in Figure 5-2.
Strategic approaches to R&D and patent filing • A dominating company should anticipate the moves of an emerging competitor and focus its R&D activities on thwarting the competitor’s strategies • Short, medium and long-term projects based on the business goals should be implemented in order to protect the dominant position • Short term projects should focus on incremental improvements to existing product lines whilst long term projects will focus on next generation technology
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The R&D strategy of a dominating player should attempt to anticipate the likely moves of its competitors and should focus continued R&D on strengthening its rights in order to thwart the strategies discussed above. By implementing short, medium and long-term projects based on the business goals and existing product lines, it can further fortify its position and stay one rung ahead on the technology ladder.
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Figure 5-2: IP Strategy – Checklist Formulating an IP/R&D business strategy
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Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.1 Legally binding agreements . . . . . . . . . . . . . . . . . . . . 6.3.2 Care when entering into an agreement with an individual such as an inventor . . . . . . . . . . . . . 6.3.3 Need for caution when signing ANY agreement . . . . . . 6.3.4 Entering into other agreements concerning IP . . . . . . . 6.3.5 Examples of implementation of ownership by agreement
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What Form of IP Protection is Appropriate for Results of R&D? . . . . . . . . . . . . . . . . . . . . . . . . . 97 6.4.1 Does the innovation have commercial potential? . . . . . . . . . . 99 6.4.2 Can the innovation be discerned from the final product? . . . . 99 6.4.3 Can the innovation be kept secret essentially indefinitely? . . . . 99 6.4.4 Is the innovation inherently unpatentable? . . . . . . . . . . . . . 100 6.4.5 Publish or develop further . . . . . . . . . . . . . . . . . . . . . . . . . 100 6.4.6 File a patent application? . . . . . . . . . . . . . . . . . . . . . . . . 100
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IP Record Storage Practices . . . . . . . . . . . . . . . . . . . . . . . . 6.5.1 Personnel practices . . . . . . . . . . . . . . . . . . . . . . . . 6.5.2 Identification and protection of confidential information . 6.5.3 Review of communications . . . . . . . . . . . . . . . . . . .
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Chapter 6. Research Management and Laboratory Practice 6.1 Laboratory Notebooks The importance of carefully keeping a laboratory notebook may be paramount to the chances of obtaining a valid patent in the United States. This is because in the United States, the patent system is based on a “first to invent” rather than a “first to file” system. A “first to file” system is one where novelty and priority of an invention are determined with regard to the date on which the patent application was filed. This system is used in most countries; however, in the United States, novelty and priority of an invention can be assessed according to the date an invention was first conceived and/or reduced to practice, provided that there is corroborating documentary evidence to support this date, for example, a laboratory notebook.
6.1.1 Formulation of an invention
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Invention occurs in two steps: (1) conception (a concept, idea or vision); and (2) reduction to practice (transformation of a concept, idea or vision into an actual or constructive form). If an inventor is diligent (ie. continuously active) in proceeding from conception through to reduction to practice, the date of conception is deemed to be the relevant date for the purposes of determining priority in the United States. In a challenge between two opposing parties regarding priority right to the same invention (via United States interference proceedings), the legal date of the invention may depend on the available proof of when the invention was first conceived and reduced to practice. Laboratory notebooks are typically relied on during such proceedings as corroborating evidence. Irregularities in record-keeping may affect the validity of such evidence to the extent that the laboratory notebook may be excluded from evidence and the patent application may be accorded its filing date as the date of invention, with a consequent possible loss of patent rights. In addition, the ability to prove conception and reduction to practice before the filing date can enable a United States patent applicant to antedate the publication date of a reference cited as prior art in ex parte prosecution proceedings where the reference is less than one year prior to the United States (provisional) filing date.
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In any event, laboratory notebooks are a valuable reference and the careful keeping of laboratory notebooks insures against the loss of valuable data, provides proof of fulfilment of contracts, protects against allegations of conflict of interest or research fraud, maintains continuity when the research is conducted by more than one researcher, contains verification of compliance with United States Food & Drug Administration (USFDA) guidelines for good laboratory practice and good manufacturing procedures, and assists patent attorneys in drafting a suitable patent specification. A checklist such as that outlined in Figure 6-1 should be followed to ensure that laboratory notebook recordkeeping will be probative.
Laboratory notebooks • Laboratory notebooks are of particular importance when United States patent protection is sought due to the “first to invent” system • In the United States, novelty (and priority) of an invention can be assessed according to the date an invention was first conceived and/or reduced to practice, provided that there is trustworthy corroborating documentary evidence to support this date, for example, a laboratory notebook • Careful maintenance of laboratory notebooks insures against the loss of valuable data, provides proof of fulfilment of contracts, protects against allegations of conflict of interest or research fraud, maintains continuity when the research is conducted by more than one researcher, contains verification of compliance with USFDA guidelines for good laboratory practice and good manufacturing procedures, and assists patent attorneys in drafting a suitable patent specification
Checklist guideline for laboratory notebooks
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11. Notebooks kept for as long as the researcher wants to be able to verify the legitimacy of the work
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Figure 6-1: Laboratory Notebook – Checklist
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As amplification of the checklist the following comments are provided: 1. Bound notebook Records of a single researcher should be recorded in a permanently bound, non-acidic notebook with consecutively numbered pages so that it is clear that no pages have been altered by addition, removal or substitution (no pages should ever be torn out), and so that it is clear that the work occurred in a particular sequence. Loose-leaf records are not to be used as the dating cannot be unambiguously tied to other contemporary records. Electronic notebooks It is questionable whether electronic notebooks are legally valid as computerised records can be altered easily and no trace of the alteration or its timing is capable of being detected. If it is necessary to record information by computer then it is desirable to: (a) employ an electronic recording and storage system that cannot be altered ie. WORM (write once, read many times); (b) periodically archive the information by copying onto a disk or tape which cannot be written over and which is then held in a safe location away from magnetic fields and inaccessible to the researcher;
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(c) time stamp electronic records using a separate server having restricted access; (d) limit access to a few authorised personnel and limit distribution and use of the information stored; (e) prevent unauthorised access; for example, by using key and screen locks as well as removable lockable storage devices; (f) use electronic/digital signature or encryption hardware/software; (g) regularly change passwords and user codes and delete user codes for any personnel no longer working on the project; (h) monitor who has accessed the computer; and (i) validate the computer system regularly for accuracy, reliability and performance, and regularly update virus protection software. In any event, a hard copy of the computerised information should always be made and any revisions which should be bound or attached permanently to a notebook or cross-referenced thereto, signed, dated and witnessed and retained by a custodian who can vouch for their integrity. 2. Permanent ink Permanent ink should be used, not pencil. It is preferred that the same pen be used throughout the day as this supports the position that an entry was made that same day and not altered later. The ink used should allow for a photocopied page to be read or to be capable of being scanned and not prone to deterioration. Consequently, black is to be preferred.
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3. No blank pages or spaces No blank spaces should be present on any finished page and no pages should be skipped. Blank pages should be crossed out or a line drawn through any unwritten portions. This ensures that no entries can be added later. Skipped or blank pages create a suspicion of the notebook having been tampered with. 4. Contemporaneous notes Entries should be accurate and contemporaneous, particularly whilst experiments are being conducted. Information not recorded as soon as it is obtained diminishes in value. Each day’s work should ideally be begun on a fresh page and dated. Every entry should be signed and dated by the person who conducted the research with their full name. No entry should be backdated and no entry should be changed or added to after signature. Where the record of an experiment takes more than one page, continuity should be maintained by crossreference, such as “continued on page X”, “continued from page X”. 5. Corrections
6. Detailed and chronological observations Laboratory notebooks should show how the research evolved, as such information can provide proof of the discovery of a new concept and the reduction of that concept to practice, and can also prove that any invention was not obvious and was developed independently of a competitor’s research. All information should be recorded in detail and in chronological order as pages dated out of order can give rise to suspicion of tampering. Laboratory notebooks should state ideas and describe data clearly and completely enough so that anyone reading the notebook will understand what the author was thinking and doing on a particular date and be able to understand and replicate the information without the assistance of the person who actually made the entries. Information entered should be thorough and written in the past tense and include a record of what was performed and how (including information such as materials used including source and quality, possible alternatives, protocol used/ experimental design, raw data, yields, equipment used, calculations used and their workings, operating conditions, control conditions, time taken, characterising data, possible variations to the procedure and a definition of any abbreviations, non-standard terms, jargon, acronyms or codes used); why it was performed (ie. for what purpose or objective, including a statement as to the intended use or utility); who suggested performing it; who performed it; when it was performed; what were the results and observations, both positive and negative (failed experiments may prove the invention to be non-obvious); and what conclusions were made from the results and observations. Recording conclusions is an important step in showing success and reduction to practice. Where a standard or routine procedure is being followed, a reference to the location of a full description of the procedure should be made. In addition, information entered should include a summary of ideas and visions (for example the DNA sequence, compound structure, drawing or model etc.), the source of the ideas and visions and when and why they occurred (eg. discussions in laboratory meetings and the parties to those discussions), why a certain
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Corrections need to be dated, initialled and witnessed in order to indicate clearly that the change is separate from the original work. An indication as to why the entry required correction should be made if the reason for the correction is not obvious. No entry should be erased. Incorrect entries should be struck through with a single line. A preferred way to make a correction is to make the correction on the current day’s page citing the earlier page and indicating why the original required correction.
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experiment is planned, what material and processes will be used and what results are hoped for, when the experiment was actually conducted and the results of any library research conducted. The information should not include any opinions as to patentability, the time frame and additional effort required to complete the research or to commercialise the results of the research. Also, the information should not include negative comments on the actual research and results, or comments on questionable utility, quality or nature of the research. A suitable header should be used for each entry recording date, project number, subject, participant(s), signature(s) and witness(es). It is important to record all persons involved and their roles in the research as this provides proof of inventorship where relevant (if an inventor is omitted from a patent application this constitutes fraud). In addition to the above, in order to show diligence the notebook should record when the researcher is away or is waiting on others. 7. Cross-referenced data In some circumstances, experimental results (eg. NMR data, crystal structures, work done by another person etc.) cannot be recorded on the same day as an experiment is performed. Such data should be recorded as soon as they are received, on a separate page and cross-referenced to the page containing the earlier entry. Blank pages or spaces should not be left to insert such results.
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8. Annexes In certain circumstances, it is necessary to annex to a laboratory notebook details of equipment recording data, drawings, photographs, charts, computer print-outs, chromatographs, or electrophoresis gels, for example. Such ancillary materials should be sealed when necessary and permanently attached to the notebook (by glue, staples or sticky tape, for example) and the material should be signed and dated across both the attached material and the page of the notebook to clearly show that the material has not been added later. Where it is impossible to annex the information (such as bulky computer print-outs, samples, models or prototypes), then this material should be kept separately but should be signed, dated, witnessed and cross-referenced to the relevant page of the laboratory notebook to verify authenticity. 9. Witness entries All entries should regularly (preferably daily and at least weekly) be witnessed by an impartial party who will be able to verify the legitimacy of the information in so far as the information was corroborated and dated during the relevant period. A long delay between the signing of a page by the researcher and the witness raises questions and may impact on the date of reduction to practice or conception. Preferably two witnesses are used. The witness must have sufficient skill to understand the content of the notebook. Such a witness is ideally a colleague who understands the work but does not participate in the work and can alert the researcher to any clarity problems. The witness should not be a person likely to be a co-inventor. The witness should declare that they have read and understood the information on each page, including whether or not ancillary materials are attached, and sign and date the declaration. It is desirable that the witness be given a photocopy of the pages examined and copies of any loose data, and these should be archived in a place not accessible to the researcher. No signature of a witness should be backdated. Where an invention ensues from the research, the reduction to practice should also be either observed by a witness, or a witness should independently reproduce the results, as it may not be sufficient for proof of reduction to practice for the witness to be a person who understood the experiment and to whom the experimenter merely disclosed the experimental details.
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10. Storage form Laboratory notebooks and related ancillary materials should be stored safely in a central fireproof repository or library when not in use. Ideally, photocopies of the relevant pages should be taken when a notebook is required off-site or a record made of when the notebook is taken and returned. Each notebook relating to a particular research project or to a particular person should be consecutively numbered and indexed as to the author and subject area. An indication as to the ownership of the work contained in the notebook should be inserted on the cover where the contents are the property of a company or institution and not of the individual who made the entries. Ideally, a separate copy or a microfilm reproduction of the work should also be made and kept securely in a separate location. A notebook should be tracked from the moment of its creation – the date an author received the notebook – and the date the notebook was completed and returned should also be recorded. 11. Storage period Where a patent application is being filed, laboratory notebooks and related ancillary materials should be kept for the term of the patent (20 years) plus at least an additional 6 years.
Credibility of notebooks is the key. In United States Court proceedings, the value of a notebook is directly proportional to the specificity of the information provided and its legibility, the care taken to date and sign each entry, and whether each entry was read, signed and dated by a competent witness.
6.2 Ownership of Invention 6.2.1 Rights of ownership The owner of an invention has an exclusive right to the following: (a) use of the invention (subject to any dominating rights which may exist) (b) transfer, assign, license, donate or waive rights to the invention (subject to agreement of any co-owners of a patented invention) (c) seek to protect the exclusive rights in the invention, or obtain damages for improper use, (d) entitlement to registration (where applicable), and (e) the liability associated with ownership, such as taxation, costs associated with registration/maintenance of the invention, and any contractual obligations associated with the invention
6.2.2 Identifying ownership of invention Who is the inventor? There is a recognised basic premise in the Australian Patents Act 1990 (Cth) (s15) that inventors are entitled to the benefit of their invention. In general, an inventor is a person who has made an inventive contribution to the invention as defined in at least one of the claims of the patent application.
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12. Credibility
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It is vital that the correct inventors be named on a patent. In a worst case scenario, a patent (in particular a United States patent) may be held invalid for erroneously naming a joint inventor or for failing to name a valid inventor. The question “Who is the inventor?” has been considered by the Australian Patent Office on a number of occasions, although to date there has been no judicial review before the Australian Courts of the tests relied upon therein. The following represents some of the tests considered to date. The decision in Harris v CSIRO57 suggested that the critical question in inventorship disputes is: “whether the invention would have occurred without the involvement of the other person [ie., putative inventor], even if such involvement occurred unknowingly.” Therefore, in this instance, the test of inventorship was one of a “but for” inquiry. The more recent decision of Row Weeder v Nielsen58 also provides a very useful summary of the position on inventorship:
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“a person has entitlement to an invention if that person’s contribution, either solely or jointly with others, had a material effect on the final concept of the invention. A secondary issue is whether that person’s contribution involved a key inventive step.” In relation to the issue of inventive step, this decision held that “a person need not necessarily make the key inventive step to be classified an inventor” and again reflected a “but for” style of query by way of: “if the final concept of the invention would not have come about without that person’s involvement, then that person has entitlement to the invention.” Furthermore, the Row Weeder v Nielsen case provides some useful guidance which may be relevant to situations that arise with supervised work, wherein the contribution to the invention of another putative inventor was: “made under instructions from the named inventors in accordance with the named inventors’ vision of the final concept ... then it was necessary to consider the secondary issue of the inventiveness of [the putative inventor’s] contribution. If [the putative inventor], in carrying out the named inventors’ instructions:
Who is the inventor? • In general, an inventor is a person who has made an inventive contribution to the invention as defined in at least one of the claims of the patent application • The key question in determining inventorship: would the invention have occurred without the purported inventor’s contribution?
(a) solved a problem not recognised by the named inventors; (b) solved a recognised problem that the named inventors had been unable to solve; or (c) produced a result or advantage not contemplated by the named inventors; which led to improvement in the invention, then [the putative inventor] would have made a key inventive step contribution which would result in joint entitlement to the invention.”
57 Harris v CSIRO (1993) 26 IPR 469 58 Row Weeder v Nielsen (1997) 39 IPR 400
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Co-author v. co-inventor The determination of inventorship is undertaken on a Co-author v. co-inventor much stricter basis than authorship in the academic • Co-author does not mean co-inventor world. A co-author of a manuscript is typically anyone • Unless the co-author provided a contribution that had a who has been involved in the experiments or material effect on the final concept of a claimed aspect of the invention, the co-author is not an inventor development of the system being studied. However, as far as any resulting patent application is concerned, unless the co-author provided a contribution that had a material effect on the final concept of a claimed aspect of the invention, the co-author is not an inventor. Parties entitled to the grant of a patent – the employer The application of the basic premise that inventors are entitled to the benefit of their invention is often modified. In relation to this, section 15(1) of the Patents Act 1990 (Cth) identifies those parties eligible to be granted a patent. These include the inventor (s15(1)(a)) and a person entitled to have the patent assigned to them upon grant (s15(1)(b). “15. (1) Subject to this Act, a patent for an invention may only be granted to a person who:
(b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or (c) derives title to the invention from the inventor or a person mentioned in paragraph (b); or (d) is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c). (2) A patent may be granted to a person whether or not he or she is an Australian citizen.” Whilst the creation of the invention is certainly a starting point in determining ownership of an invention, it is often subject to claims relating to entitlement, claims often arising out of contracts of employment and other agreement forms. Therefore, by virtue of s15(1)(b), an inventor may not necessarily be entitled to the grant of that patent. In most circumstances, an employer is entitled to the benefit of an employee’s invention59. Further, it is not relevant that the employee terminated his employment before the patent application was filed. It is merely sufficient that the essence of the invention was developed during the period of employment, and in the course of employment, for the patent application/patent to belong to the employer.
59 Sterling Engineering Co Ltd v Patchett [1955] AC 534
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(a) is the inventor; or
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Potential difficulties can arise when there is confusion regarding whether the employee was employed to produce the invention. This confusion exists when there are questions whether the inventor is actually an “employee”, whether the invention was made in the course of the employee’s employment, and/or whether the contract of employment includes any specific terms which may alter the basic master-servant relationship. Is the inventor an employee? In determining an inventor’s status as an employee, the Courts will generally consider the nature of the employment, in particular examining the presence or absence of features which the Court will regard as reflecting of a person’s employment status60. For example, features such as authority for the employer to direct the employee’s work and their provision of equipment for use by the employee, as well as other factors relating to salary and leave entitlements, generally reflect an employee/employer relationship. Was the invention made in the course of the employee’s employment?
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Although a person may be an “employee”, their invention only becomes the employer’s if it was made in the course of employment61. In determining whether an invention was made “in the course of employment”, the Courts will consider the nature of the employee’s duties, and whether the invention was made whilst the employee was carrying out those duties. For instance, if a person is engaged as a scientist by a company, and as a result produces certain scientific inventions, these inventions will usually belong to the company62. However, if an employee produces an invention which is outside the scope of his normal duties, the invention may belong to him63. There is an important exception to the ownership of an invention made outside the scope of an employee’s course of employment, and that relates to higher level employees such as directors. The duties of director are usually quite general and their relationship to the company is already one of trustee, and as a result any inventions they may generate almost invariably belong to the company. Specific alterations to employment contract Ownership of invention
The laws relating to an employer’s entitlement to an employee’s invention reside in the master-servant relationship described above, and this entitlement to invention exists as an implied term in an employment contract, unless there are specific terms set out in the contract relating to this issue. Consequently, the parties to an employment contract may be in a position to draft terms which clearly define each party’s rights to an invention developed in the course of employment.
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• An inventor is generally entitled to the benefit of their invention • Law of master and servant with respect to inventions produced by employees indicates that where a person (employer) employs another to produce an invention, the benefits of that invention belong to that person (employer) • More specifically, in the absence of express terms relating to ownership of invention in a contract of employment, an invention made by an inventor (who is an employee), in the course of employment, is owned by the employer
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 60 ALJIR 194 Triplex Safety Glass Co Ltd v Scorah [1938] Ch 211 Loewy Engineering’s Application (1952) 69 RPC 3 Selz’s Application (1954) 71 RPC 158
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6.3 Agreements As indicated above, the requirement for initial ownership of IP varies depending not only upon the type of right involved, but the circumstances in which the IP was generated, the terms of any relevant contract and the effects of legislation. The legal position of initial ownership of IP can be modified by a legally binding agreement. Subject to legal and legislative constraints imposed upon unconscionable or unfair contracts or contracts which are in restraint of trade, parties are free to bind themselves as they wish to avoid potential ownership disputes and to achieve a commercially sound environment based on certainty of ownership.
6.3.1 Legally binding agreements An agreement will form a legally binding contract (“a simple contract”) if the following elements are present: Agreement
• There is an intention to be legally bound. (There is a rebuttable presumption that agreements involving commercial and business rather than family or social matters are intended to be legally binding.) • Consideration* is present. (Consideration may be absent in respect of a Deed.) Ownership agreements It is usual for ownership agreements, for example, employment contracts, to be wholly in writing in the form of a simple contract in which the employer’s expectations are clearly expressed, the consideration largely being the promise of employment and wages to the employee for his/her services. A contract does not need to be in writing unless required by statute. (Section 14 of the Patents Act 1990 (Cth), for example, provides: “An assignment of a patent must be in writing signed by or on behalf of the assignor and assignee.”) At common law, a contract can be wholly or partly oral or wholly or partly written. If a dispute arises in an entirely oral agreement, then the parties to an oral agreement will need to present oral testimony to the Courts as to the contents of the agreement. If a contract is in writing it is presumed that the writing contains all the terms of it and the party seeking to rebut a conclusion that an agreement is wholly in writing bears the burden of proving the agreement was not wholly in writing. A promise which is not given for consideration* is enforceable only if it is made under seal, that is if it is given in a Deed.
*Consideration is something for value. It means simply that the law will enforce only those informal promises which have been paid for. It will not enforce a promise which is conferred as a gift (unless that promise is contained in a Deed).
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• A valid agreement involves a meeting of the minds and is achieved by acceptance of an offer.
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Deed • A Deed is an instrument which is intended to operate as a Deed. It must be signed by the party to be bound, and attested to by a witness who is not a party to the Deed. • Legislation in most States of Australia has now replaced the former requirement to actually seal and deliver the Deed with a mere intention to seal and deliver the Deed as expressed in the Deed. Tasmania, however, continues to require the actual application of a seal. Grounds for avoiding contracts or deeds There are several grounds in relation to which a simple contract or Deed may be held to be non-binding on a party to it and may be rendered entirely ineffective and they include: • Lack of capacity. Several classes of individual may lack capacity to contract, such as minors (under 18 years old), bankrupts, foreign nationals in some circumstances and unincorporated associations.
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• Fraudulent or innocent misrepresentation. A misrepresentation is an untrue statement made by the representor which induces a representee to enter the agreement. • Unconscionability including duress, undue influence and other vitiating factors which may operate to demonstrate that the parties did not generally consent to form an agreement. (The Trade Practices Act 1974 (Cth) and the Contracts Review Act 1980 (NSW) give Courts the power to deal with situations of unfair or unconscionable agreements.) • Illegality. The Court may invalidate an agreement which it considers has unlawful or improper purpose. Alternatively, the law may declare an agreement void as against public policy. Two of the three categories of the latter include: – Agreements to oust the jurisdiction of the Court. This does not affect a term which provides for alternative dispute resolution.
Agreements • Early drafting and signing of appropriate contracts should be used to clarify ultimate ownership of IP rights
– Agreements in restraint of trade.
6.3.2 Care when entering into an agreement with an individual such as an inventor • When entering into an agreement with an individual such as an inventor, it is necessary to verify the capacity of the inventor to enter into the agreement. • Care should be taken to ensure that the agreement cannot be construed as unconscionable. • It should be ensured that the contract is not in restraint of trade. • Factors should be avoided which may operate to show that the parties did not genuinely consent to the formation of an agreement (consider inserting a term in the contract along the lines that the agreement constitutes the entire agreement and understanding between the parties concerning the subject of the agreement and supersedes all prior agreements, negotiations and understandings of the parties with respect thereto.)
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6.3.3 Need for caution when signing ANY agreement Purchasing an interest in IP • The seller must have the legal right to transfer the IP as owner or via a right in a licence agreement. • Establishing ownership can be far from straightforward – see particularly Chapter 6.2.2 for details of establishing ownership. • If the IP in which the interest is to be transferred is a patent, then the Patent Office Register should be checked for the identity of the patentee and for any registered licences and securities. The Patent Office database should also be checked to ensure that all relevant renewal fees have been paid with respect to the patent. A new agreement should not be entered into with a seller who is not registered in respect of the patent.
• Joint ownership should be treated with caution. If there is more than one owner of the IP, then the consent of the other owner(s) must be obtained for an assignment or licence to proceed. An assignment must be in writing signed by both the assignor (seller) and assignee (buyer).
Caution Legal and/or patent attorney advice should be sought before entering into an agreement to purchase or license IP just as the advice of a lawyer or conveyancer would be sought before purchasing or leasing real estate
• Finally, if after all procedures have been conducted and title in and to the invention is established, it should be ensured that the agreement is executed correctly and, if by an individual, before a witness. For example, a contract executed by a corporation in the absence of a common seal must be signed by: – Two directors; – A director and company secretary; or – The sole director in the case of a single director proprietary company. • If the agreement is in the form of a Deed, the requirements for signing and sealing a Deed in most States by a natural person are that the Deed is to be signed by the party executing it and attested to by a witness who is not party to it. Intention to seal and deliver (ie. as expressed in the Deed) is now sufficient.
6.3.4 Entering into other agreements concerning IP Before entering into commercialisation and related agreements such as confidentiality agreements with a corporation or institution, it should be ensured that the agreement is with the corporation or institution, not merely with a particular researcher or employee. For example, in the case of confidentiality agreements, a term should be included in the agreement for the corporation or institution to bind any business affiliates/associates and all employees, consultants, students etc. (listing all other relevant categories) who may have access to any of the information required to be kept confidential (and, if necessary, requiring them to sign individual confidentiality agreements).
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• If the IP is a patent application which has not yet proceeded to grant, the situation is less clear. If the Patent Office database indicates that the purported assignor or licensor is the inventor, then the inventor’s entitlement to a patent arising from the application will need to be demonstrated, the circumstances of the generation of the invention assessed and all contractual agreements such as any employment or consultancy agreements of the invention reviewed. A warranty as to the inventor’s title in and to the resulting patent could be included in the assignment or licence contract.
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6.3.5 Examples of implementation of ownership by agreement Employee generation of IP Set out below are examples of some circumstances in which potential disputes and uncertainties concerning ownership of intellectual property can be avoided by having an agreement in place before the term of employment/consultancy or the research project commences: • Team generation of IP Members of teams who belong to the same or different organisations. • Generation of IP on premises other than employer’s/institution’s premises In the absence of an agreement, there would need to be a sufficient connection between the IP generated and the employer’s/institution’s premises to justify a claim of ownership of intellectual property by the employer/ institution.
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• Generation of IP by consultants (who are not employees) In the absence of an agreement to the contrary, the ownership of intellectual property generated by a consultant belongs to the consultant. • IP generated by students Research institutions’ policies differ with regard to intellectual property generated by students. Where students make an inventive contribution to patentable intellectual property, it is essential that they be named as inventors or co-inventors on the patent application documents. At common law, since students are not employees, they may be entitled to a share of the intellectual property rights in their invention in the absence of an agreement with the research institution to the contrary. A research institution should ensure that students are aware of their rights prior to seeking assignment or other transfer of intellectual property rights from the student to the institution. The advice given to students in this regard should be unbiased; the research institution Students’ IP might in some circumstances, or as a matter of • Students are usually not employees and own rights in their inventions subject to any agreement to the contrary policy, reimburse students for the cost of obtaining • Students should obtain advice regarding their rights before independent advice on their rights and fair terms any agreement is entered into for transferring the students’ rights to the research institution. • IP generated by employees seconded for short periods to external institutions Even determining whether a scientist is an employee of an institution is often confused by variables not experienced in other areas of employment law. For instance, a research group may be funded by more than one source. Further, the research institute may provide laboratory space and the principal researcher’s salary, while granting bodies or industry provide funding for research assistants’ salaries and consumables. Of course, the situation can become even more complex in those instances where inventions are created by scientists during periods of leave or sabbatical, such as in their capacity as a visiting scientist at another institute. Under this scenario, the confusion relates to which institute is the employer, a confusion which leaves scope for competing entitlement claims. Therefore, the need for clear-cut employment agreements is imperative when dealing with inventions arising from research institutions. This is often necessary since a scientist’s employment status is often not clear, and as a result the ownership of invention(s) arising therefrom may be similarly obscure.
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Further, in view of the unpredictability of the outcome of ownership disputes before the Courts, it is crucial when initiating a research project, or, indeed, when hiring a researcher or negotiating a contract with a consultant, that policy is in place (before the project, employment Employees’ inventions or contract commences), to address the issue of • Determining whether a scientist is an employee can be ownership of inventions arising from that project, difficult in some situations employment or consultancy. A written agreement is • Clear-cut employment agreements are imperative central to such policy. Employee invention agreements A typical employee/consultant/contractor/researcher (“employee”) invention agreement may include the following employee obligations and acknowledgments: 1. Agreement to keep confidential that information which is confidential to the employer and to which, in the course of employment, the employee will be exposed from time to time. (In the case of a researcher or a consultant in a particular project, the confidential information may be in respect of that project.)
• Notwithstanding an agreement having being signed, any disclosure of confidential information to an employee/ contractor etc. should still be emphasised as having been given in confidence and any materials that are confidential or contain confidential information should be marked “confidential” and access to them restricted. • It should be stated in the agreement that the obligation of confidentiality does not apply to information that was known to the employee at the time of disclosure by the employer, or was received in good faith from a third party owing no duty of confidence to the employer, or becomes published or otherwise in the public domain other than by disclosure by the employee in breach of obligations to employer or another party owing a duty of confidence to the employer. 2. Agreement that worldwide ownership in all confidential information, inventions, copyright and all other IP made by the employer or employee generally, or, if appropriate, specifically in relation to a project, shall be the property of the employer. 3. Agreement that the employer’s ownership of all IP described in (2) above extends to improvements. 4. Agreement to inform the employer promptly and fully of invention or improvement thereof. 5. Agreement to sign any document as may be necessary to establish or confirm the employer’s ownership of the IP (including improvements) and documents. 6. Agreement to make and maintain adequate and current records of research work, which records (including notes, sketches, tables and reports, whether created electronically or in hard copy) are to remain the property of the employer. 7. Agreement to lend assistance in connection with prosecution, opposition, revocation or any infringement/revocation proceedings relating to any intellectual property rights, including patent, arising from the invention or improvement thereof. 8. Agreement not to publish directly, or indirectly, any information relating to results of research work and any intellectual property rights, including patent, arising from invention or improvement thereof, without prior permission of the employer. Biotechnology Australia
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• The categories of information which may be confidential should be described in the agreement as fully as possible. Information is more likely to be upheld by a Court as being confidential the more precisely it is described, the more restricted the access to it and the more emphatic the employer is as to its confidential nature.
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9. Agreement that upon leaving employment, the employee will promptly hand over all drawings, tables, notes, experimental results, correspondence and all other written, printed or copied material, and not to retain any such document. 10. Agreement that obligation in respect of confidential information applies both during and after employment is terminated (for whatever reason). Restraint of trade • When preparing employment agreements, care should be taken to ensure as far as possible that the agreement is not an unreasonable restraint of trade. A contract that is in restraint of trade is not enforceable. The onus is on the employer to show the restraint imposed is reasonable in the circumstances because it is no more than is reasonably necessary for the proper protection of the employer and its business. • A term which requires an employee to assign to his or her employer any inventions made in the future will almost certainly be unreasonable because it may prevent the employee from undertaking skilled work elsewhere. An employer purporting to prevent an employee from disclosing or using information other than confidential information, merely because it is in some way associated with a research project, may also be unreasonable.
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IP ownership/employee agreement guidelines In general, a research institute should consider the following points to ensure that the ownership of their IP is clear. •
Require employees and consultants to execute an invention, copyright and trade secret assignment agreement.
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The research institute should draft the employment contract in a manner which clearly outlines who has ownership of any intellectual property developed, but, in doing so, the institute should be careful to avoid including terms that could be considered as a restraint of trade.
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Constantly advise employees and consultants that the information they acquire or create is confidential and proprietary and is to be treated as such.
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Scientists, and for that matter their research organisations, should always inquire as to their terms of employment at any other research organisation which a scientist may visit. It can be a relatively simple matter to make the relevant enquiries prior to commencing research activities, so that any potential ownership of invention problems can be avoided.
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Require that all employees execute an agreement preventing them from “raiding” other employees or competing unfairly after leaving the employ of the research institution.
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Take steps to ensure that a new employee does not use his or her prior employer’s trade secrets while in the employment of the research institution.
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Conduct termination interviews with departing employees concerning inventions and trade secrets.
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Further information is contained in: Australian Vice-Chancellors’ Committee (1995). Ownership of Intellectual Property in Universities – A Discussion Paper. NHMRC: Intellectual Property Management for Health and Medical Research (Interim Guidelines 2001) (see www.nhmrc.gov.au)
6.4 What Form of IP Protection is Appropriate for Results of R&D? The following concentrates on patents and trade secrets as two available modes of protecting IP deriving from biotechnology innovation. These modes are mutually exclusive, but are not exclusive of other forms of IP protection such as copyright, trade marks or registered designs.
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The decision tree in Figure 6-2 provides a framework for deciding between protection by patenting and by preserving trade secrets.
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Figure 6-2: IP Protection Decision Tree
Does the innovation have commercial potential?
Publish or develop further
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Is the innovation discernible from the final product?
Yes
No
Is the innovation inherently unpatentable?
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No Can the innovation be kept secret essentially indefinitely?
No
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File a patent application?
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Yes Protect as trade secret
File a patent application
The following discusses each branch of the decision tree in more detail.
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6.4.1 Does the innovation have commercial potential? Most innovations have some conceivable commercial potential. At this stage, the inquiry is not into the amount of commercial potential that the innovation may have. The developer of the innovation may not have the technical, financial or commercial wherewithal to exploit the innovation commercially itself, and there may be no immediately identifiable licensees or purchasers of the innovation, but this does not necessarily mean that it has no commercial potential. However, if no conceivable commercial potential for the innovation is apparent, there is no reason why it should not be published. It should be stressed, however, that the decision to publish should always be taken after very careful assessment of the possible consequences to IP rights by persons who are in a position to take an overview of the situation. See Chapter 7.6 for further discussion of publication review.
Assessing commercial potential • Most innovations have some commercial potential • Commercial potential can arise in various ways, some of which may not be self-evident • If no conceivable commercial potential for an innovation is apparent, it can probably be published safely
An innovation that has commercial potential will result in some form of product reaching the market. If the product cannot be “reverse engineered” – if the innovation that it embodies cannot be discerned from it – protection as a trade secret may be possible. It should be remembered that protection of information as a trade secret only provides protection against that information falling into the hands of a competitor. It is no protection against a competitor arriving independently at the same innovation. If this is perceived to be significantly likely, trade secret protection is probably inappropriate. In that case, or if reverse engineering of the product embodying an innovation is possible, patent protection should be considered. Most, if not all, product innovations in biotechnology – those which result in entirely new products being placed on the market – will be capable of reverse engineering, so that “product” innovations will seldom be capable of protection as trade secrets. On the other hand, innovations which are new ways of Reverse engineering and independent discovery manufacturing (such as more efficient processes • If a product cannot be “reverse engineered”, protection as a trade secret may be possible for making known substances) may not be capable • Protection of an innovation as a trade secret is no of being discovered from an analysis of the product protection against a competitor arriving independently at and are more likely to be capable of protection as the same innovation trade secrets.
6.4.3 Can the innovation be kept secret essentially indefinitely? For many organisations, this can be a difficult task. It is especially so where personnel from outside the organisation are or will be involved in commercialising the innovation, such as research collaborators, contractors or licensees. Whether or not an innovation is to be kept secret essentially indefinitely or for a much shorter time (as will in all likelihood be necessary if a patent is to be sought), the organisation will require an established system to ensure (as far as possible) that information needing to be kept confidential remains so. Some guidelines for protecting confidential information are set out in Chapter 6.5.2.
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6.4.2 Can the innovation be discerned from the final product?
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An organisation must make a realistic assessment of its ability to do this, and of the associated costs, for although trade secrets cost essentially nothing to establish, they can be expensive to maintain. Their maintenance may require special personnel, special training of employees, special facilities for records storage, segregation of plant or equipment and so forth.
Can the innovation be kept secret? • For IP rights in an innovation to be protected as trade secrets, strict confidentiality will need to be maintained for the foreseeable commercial life of the innovation • Trade secrets cost essentially nothing to establish, but they can be expensive to maintain • Once a decision has been taken to keep an innovation secret, and it is then commercialised, patenting may no longer be an option
It must also be noted that once a decision has been taken to keep an innovation secret, and it is then commercialised, there may be no going back. A valid patent cannot be obtained (at least in Australia) once an invention has been exploited commercially, even if the invention cannot be discerned from the commercial product. This will be considered more fully below. See Chapter 7.1.10.
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6.4.4 Is the innovation inherently unpatentable? As discussed elsewhere, some innovations concern subjects which are inherently unpatentable. Where an innovation concerns such a subject and is not capable of protection as a trade secret, there will be little reason why it should not be published. As noted elsewhere in this Manual, however, what can be patented differs to some extent from country to country.
Is the innovation unpatentable? • Some innovations concern subjects which are inherently unpatentable • If an unpatentable innovation is not capable of protection as a trade secret, there will be little reason why it should not be published
6.4.5 Publish or develop further Before any publication, the effect of the publication on the commercial value of possible future developments should be assessed. An innovation which has no commercial potential at the time it is developed may acquire considerable commercial value from further innovations which may be on the way. Only if there can be Publication confidence that publication will not adversely affect the • Before any publication, the effect of the publication on the commercial potential of planned future developments commercial value of possible future developments should be assessed should publication take place.
6.4.6 File a patent application? If the decision tree leads to the conclusion that patent protection, rather than protection as a trade secret, is the available option, it does not necessarily follow that a patent application should be prepared and filed. The issues relevant to the decision of whether or not to file a patent application are considered in Chapter 7. If it is decided that no patent application should be filed, it may be decided to publish details of the innovation, or to keep them secret for the time being, pending the results of further research.
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6.5 IP Record Storage Practices Preservation of the confidentiality of information is an integral part of sound IP management, whether the information pertains to trade secrets, R&D that is or will be the subject of a patent application, or other commercially sensitive matters. It is essential for the preservation of confidentiality that appropriate practices are established and adhered to. Central to this is fostering a culture within the workplace in which the value of information is recognised, preserved and enhanced. Components of an effective system for storage of IP records are sound personnel practices, systems for the identification of, and limiting access to, confidential information and systems to screen internal and external communications.
Recognising the value of information • Central to preservation of confidential information is fostering a culture within the workplace in which the value of information is recognised, preserved and enhanced
Management should determine and document what its policies and practices are in this regard. From established policies stems employee education as to the importance of preserving confidentiality of information and as to what constitutes disclosure. Employees should receive training in these matters on their induction and should receive regular reinforcement by a variety of means such as signs, circulars, seminars and workshops. Other persons who are not direct employees such as collaborators, contractors, licensees etc., should be included in the organisation’s training programmes also, as required. Employment contracts and exit interviews Employment contracts should include terms specifying in as precise a way as practicable what information the employee will be required to keep confidential. If an employee leaves the organisation, exit interviews should be conducted to reinforce with the employee his or her continuing obligation to the former employer. At this interview, the kinds of information which the employee will be required not to divulge should be made clear and agreed upon. All materials in the person’s possession that contain confidential information should be returned. A written record of the interview should be keep and placed on the employee’s personnel file.
Personnel practices • Employees should be trained at their induction on the importance of preserving confidentiality of information and as to what constitutes disclosure, and should receive regular reinforcement of this • Employment contracts should include terms specifying in as precise a way as practicable what information the employee will be required to keep confidential • Exit interviews should be conducted to reinforce with a departing employee his or her continuing obligation to the former employer • Persons who are not employees of the organisation must enter into written undertakings of confidentiality prior to confidential documents being made available to them
Confidentiality agreements Prior to confidential documents being made available to persons who are not employees of the organisation, they must be provided with and enter into written undertakings of confidentiality, the undertakings specifying in as precise terms as possible the information concerned. Management should establish and enforce a policy for dealing with breaches of confidentiality, if they occur. Confidentiality agreements should be reviewed periodically and updated as necessary.
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6.5.1 Personnel practices
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6.5.2 Identification and protection of confidential information An organisation should also have policies and practices for the identification of confidential information and for limiting access to it. The following outlines some examples: • Documents that are confidential should be clearly and prominently marked so. • If more than one copy exists, the copies should be numbered. Information that is confidential should be segregated from information that is not, as far as possible. A system should be established for recording what documents or classes of documents exist that are confidential, and for reassessing the confidentiality of information periodically. • Documents that are no longer confidential should be removed from areas where confidential documents are stored, and documents that are no longer required should be destroyed. Merely discarding a confidential document that is no longer required is inappropriate.
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• Access to confidential information must be limited. The measures taken to limit access may depend on the nature of the information and its sensitivity. In any event, however, access to information should be limited to those persons who need it. • The location of confidential documents should be recorded, including the location of copies, if they exist. The number of copies, however, should be kept as small as possible. Further copying of documents should be restricted, for example, by preventing removal of the most sensitive documents from a segregated area and not permitting copying in that area. Employee education has an important part to play in the restriction of proliferation of documents containing confidential information. A system for secure storage of confidential information by those who possess it should be established. Examples of storage practices include: Retaining confidential information in locked drawers or cabinets, keeping confidential documents in separate areas with restricted access, ensuring that areas which contain confidential information are securely closed at night and so forth. • Information which is maintained on a computer may be protected by password access and/or by encryption and, in any event, access to confidential files should be restricted by the system administrator to only those who need it. • In some cases, where a process having several steps is involved, it may be possible to separate personnel working on each step, so that the number of people that have knowledge of the whole process is as few as possible. • In some situations, it may be appropriate to appoint a person in each discrete work area whose responsibility it is to supervise the security arrangements governing confidential information, to ensure that proper practices are followed and to provide training as necessary.
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Protecting confidential information • Documents that are confidential should be clearly and prominently marked so • A system should be established for recording what documents or classes of documents exist that are confidential, and for reassessing the confidentiality of information periodically • Documents that are no longer required should be destroyed • Access to information should be limited to those persons who need it • A system should be established for secure storage of confidential information by those who possess it
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6.5.3 Review of communications A system for reviewing and approving drafts of all communications to pass outside the organisation (or outside the part of the organisation which holds the confidential information) should be established and followed. Such communications can include: technical publications correspondence e-mails technical information brochures press announcements internal memoranda and internal seminars noticeboard signs
Communications that contain secret information should be clearly marked “Confidential”. It should be noted, however, that merely marking a document so is not enough for its contents to be treated and regarded as confidential. The recipient must have agreed in advance that he/she will keep the information secret.
Review of communications • Merely marking a document “Confidential” is not enough to ensure its contents will be treated and regarded as confidential
From the foregoing discussion, some of the features of a sound system for IP records so as to preserve secrecy may be summarised in the following checklist (Figure 6-3).
Figure 6-3: Protection of Confidential Information – Checklist Protecting confidential information
Yes
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• • • • • • •
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Protecting confidential information
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7. Decision to Patent 7.1
Should a Patent Application be Filed? . . . . . . . . . . . . . . . . . 7.1.1 Have the prospects of obtaining a valid patent been assessed? . . . . . . . . . . . . . . . . . 7.1.2 How much protection will the patent give? . . . . . . . . . 7.1.3 How easily could infringement of the patent be detected? 7.1.4 Is there relevant competitor activity? . . . . . . . . . . . . . 7.1.5 Has the relationship of the patent with other IP been assessed? . . . . . . . . . . . . . . . . . 7.1.6 Does the commercial potential or return justify patenting? 7.1.7 Has the likely effect on competitors been assessed? . . 7.1.8 Does the organisation have the capability and intention to commercialise the invention itself? If not, do possible licensing opportunities exist? . . . . . . . . . . . . . . . . . . 7.1.9 Has the invention been published? . . . . . . . . . . . . . . 7.1.10 Has the invention been used commercially? . . . . . . . .
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Chapter 7. Decision to Patent 7.1 Should a Patent Application be Filed? If an innovation is not inherently unpatentable and cannot be protected as a trade secret, yet has potential commercial value, the appropriate form of protection will be by patenting. However, it does not follow that all innovations that are best protected by patenting should Should a patent application be filed? be protected that way. There are many considerations • Not all innovations best protected by patenting should be that bear on the decision of whether or not to file a protected by patenting patent application – see checklist in Figure 7-1.
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Figure 7-1: Deciding to Patent – Checklist The decision to patent
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Have the prospects of obtaining a valid patent been assessed?
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Has a novelty search been conducted?
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Have budgets been prepared?
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7.1.1 Have the prospects of obtaining a valid patent been assessed? There will usually be no point in applying for a patent if there is no prospect of obtaining a valid patent. Although in some circumstances strategic issues may justify an exception to this generalisation, it remains true that at least a preliminary assessment of the prospects of being granted a valid patent needs to be made at an early stage of a research programme. If possible, the advice of a patent attorney should be obtained on the patentability of the work and the appropriate patenting Prospects of obtaining a valid patent strategy. The result of the assessment of patentability • At least a preliminary assessment of the prospects of getting will be material (though not necessarily decisive) to the a valid patent should be made at an early stage of a research decision of whether or not to pursue the research programme programme, and how its results are to be treated. Once • A reassessment of the patentability of the research should a decision is made to follow a particular line of research, be made regularly a reassessment of the patentability of the research • Seek the advice of a patent attorney should be made regularly. Indeed, that aspect of the • A thorough search may be required before a conclusion on programme should be constantly in the researchers’ potential patentability can be reached minds and in the forefront of research managers’ thinking.
7.1.2 How much protection will the patent give? The scope of protection given by a patent is defined by its claims. A valid claim cannot include within its boundaries anything in the prior art or anything that does not involve an inventive step in the light of the relevant prior art. It is often possible to draft claims that are narrow and strong, but they may be easy for competitors to circumvent. On the other hand, claims that are too wide will be invalid and, therefore, unenforceable. The objective in drafting the claims of a patent application is always to pursue the broadest protection that can validly be claimed, in view of the information about the invention and the state of the prior art that is available at the time of drafting the claims. The researchers’ knowledge of the published information in the relevant field, and in most cases the results of a novelty search, can, therefore, be valuable in assessing the probable scope of any patent that may be obtainable for the proposed research. If the prior art is How much protection will the patent give? very close, it is likely that the scope of protection that • Claims that are narrow and strong may be easy for can be claimed will be very limited. Again, it is probable competitors to circumvent that “cutting edge” research will be capable of much • Claims that are too wide will be invalid and, therefore, broader protection than incremental developments. It unenforceable should be remembered that what can be validly claimed • If the prior art is very close, it is likely that the scope of may differ from jurisdiction to jurisdiction because of the protection that can be claimed will be very limited differing ways in which prior art is defined and the • Decision-makers must weigh whether the protection a differing standards of inventive step. patent will provide justifies the disclosure of the invention to competitors and the costs associated with patenting
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At an early stage of the research programme, the assessment may be based on relatively limited information. Typically, at this stage, it will be based on the researchers’ knowledge of what has been published in the field and their expectation of what the outcome of the research will be. In some cases, while the researchers may believe the proposed work is novel and inventive, if the research field is one in which small advances tend to be the norm, a thorough search of published patent applications and the scientific literature may be required before an informed conclusion on potential patentability can be reached.
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The assessment of how much protection a patent will give is related to the prospects of obtaining a valid patent. Usually, unless an invention has been completely disclosed in a previous publication, it will be possible to draft claims that provide some patent protection. Whether that protection justifies the disclosure of the invention to competitors and the costs associated with patenting is a question that must be weighed by IP managers or other decision-makers prior to deciding whether or not to file.
7.1.3 How easily could infringement of the patent be detected? The full value of a patent can only be realised if the patent can be enforced. While for most, if not all, claims directed to products or compositions it will be possible to detect whether a given product or formulation is encompassed by a given claim, this may not necessarily be so for claims which are directed to processes or to new uses of known substances or formulations. In some jurisdictions, provisions exist for each party to patent infringement proceedings to obtain discovery of any documents relevant to the issues involved that are in the possession of the other party or parties. Obtaining such documents can help to relieve some of the burden of proving infringement, but it may still be necessary for the patentee/plaintiff to satisfy the Court that there is a strong presumption of infringement, before an order for discovery will be made. The detectability of infringement in overseas countries can play a large part in deciding whether or not to patent there. The patentee will, in many cases, be depending Detection of infringement on the vigilance and determination of a distributor or • If it is not possible to tell whether a competitor is infringing agent who may not necessarily have as strong an a patent, the patent is of much reduced value, if any at all interest in enforcing the patent as does the patentee itself.
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7.1.4 Is there relevant competitor activity? If it is known that competitors are working in a similar area of research, or are preparing for a new product that would apparently involve an exploitation of the research, this can be a powerful reason for filing a patent application as soon as possible.
7.1.5 Has the relationship of the patent with other IP been assessed? A patent should not be considered in isolation from other IP, either pre-existing or proposed. The value of a patent may be greatly enhanced by an appropriate trade mark portfolio; for example, by enhancing the way in which a new product (or product of a new process) is identified and regarded by the marketplace. Additionally, the value of a patent may be enhanced by the existence of other supporting patents. For example, a patent directed to a new product may be enhanced by subsequent patents to new or improved processes for preparing it, new or improved ways of formulating it, new uses of it and so forth. The decision of when to make a patent application is ideally made within the context of a broader IP plan in which the impact of other IP, some of which may be already owned by the organisation, or some or all of which may not yet exist, is a key factor. In this IP plan, the role of acquisition of IP owned by others should be given due consideration. It must also be realised that the publication of a particular piece of research, whether by virtue of the publication of a patent or patent application disclosing it or otherwise, can have a severe adverse impact on the patentability of research work which is to follow. Depending on the circumstances, this can be either beneficial or detrimental to an organisation. If the publication of a patent application will have the effect of rendering obvious a much more commercially valuable innovation which the same organisation has in prospect, then delaying filing the patent application or not filing it at all may be advisable. On the other hand, the publication
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of a patent application can have the effect of preventing competitors from obtaining protection for obvious variations to the claimed invention. Thus, filing a patent application may be part of an appropriate strategy if, for example, the patenting organisation Relationship with other IP decides to devote no more resources to a particular line • A patent should not be considered in isolation from of research. other IP
Some organisations use this strategy in a defensive manner by filing a patent application that may have little prospect of being granted, but which discloses a preferred commercial form of, say, a product together with a range of variations which could be made to it.
• The decision of when to make a patent application is ideally made within the context of a broader IP plan • The publication of a piece of research can have a severe adverse impact on the patentability of research work which is to follow
7.1.6 Does the commercial potential or return justify patenting?
It is expensive to enforce a patent through the Courts. Commercial return Though a Court may award costs to a successful party, • Commercial return for a patent may arise in many ways, typically an award of costs will only cover a fraction of some direct and some indirect the actual costs incurred, which may run to hundreds of • The expected duration of useful patent protection must be thousands of dollars. Ultimately, of course, a successful taken into consideration patentee can expect to receive damages or other • The existence of a patent, or a pending patent application, may be a strong deterrent to competitive activity financial compensation for infringement of its patent, • Patents are expensive to enforce in the Courts assuming that the infringer has the capacity to pay, but the damages will not necessarily cover the enforcement costs. Thus, the cost of enforcement is an important consideration in the decision of whether or not to file a patent application. This does not mean that all patents must necessarily generate revenues in excess of several hundred thousand dollars to be justified. The existence of a patent, or a pending patent application, may be a strong deterrent to competitive activity. Most commercial organisations will not deliberately infringe a patent they believe may be valid. The expected duration of useful patent protection must also be considered. This will be linked to the rate at which technology in the relevant field becomes obsolete. It takes time (typically several years) to obtain a patent. If the relevant technology is obsolescent by the time patents are granted, their value is diminished.
7.1.7 Has the likely effect on competitors been assessed? The existence of a patent, especially in a key technology area, can be a very effective barrier to the entry of competitors into the same field. However, the publication of a patent or patent application provides information to competitors. The likely effect on competitors of filing a patent application should be assessed prior to filing a patent application. If it is considered that competitive activity will be stepped up, or redirected to an area which is felt may be damaging to the organisation, then deferral of the patent filing, at least until a stronger IP strategy has been developed, may be appropriate.
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Direct commercial return for R&D expended on an invention can arise from exploitation of the invention by its developer, or through licensing revenues or a combination of the two. Indirect commercial return can arise from the impact of the patent on competitors’ activities, enhancement of the patent owner’s status in its marketplace and with its other stakeholders, returns from associated commercial activities such as the provision of related services and so forth. Whatever the anticipated source(s) of commercial returns, it is essential that as realistic assessments as possible be made (and regularly reviewed) of their magnitude so that budgets can be prepared setting out both the expected revenues and costs.
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7.1.8 Does the organisation have the capability and intention to commercialise the invention itself? If not, do possible licensing opportunities exist? Although there are some notable exceptions, few organisations in Australia have the necessary capabilities – financial and technical – to take a biotechnology innovation all the way to commercialisation, especially as the main markets for products of biotechnology tend to be overseas. In many situations, therefore, an organisation in Australia that owns IP rights to a biotechnology invention will need one or more commercial partners. In such situations, the IP owner should be satisfied that potential licensing opportunities exist, and if none is readily identifiable, there may be no point in seeking patent protection for the innovation.
7.1.9 Has the invention been published? Despite the best of intentions, publication of inventions, or other public disclosure, can sometimes occur before a patent application has been filed. Although this will usually prevent a valid patent being obtained in Australia (at least for the features of the invention that have been disclosed), the same does not necessarily hold in other countries. Further, other aspects of the invention that have not been published might still be patentable. The organisation should seek the advice of a patent attorney as soon as possible, if it becomes aware that inadvertent disclosure has occurred. What is “publication”?
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In a given situation, there may be doubt about whether an invention has been publicly disclosed or not. In order to develop an understanding of how inventors may unintentionally disclose an invention, it will be appropriate to consider first the broader issue of patent novelty. In Australia, section 7(1) of the Patents Act 1990 (Cth) is central to an understanding of what constitutes novelty, and is set out in Appendix VI. In summary, if something that is claimed in a patent had appeared in a document made publicly available anywhere in the world before the priority date of the claim, or if it had been publicly used in Australia before the priority date, it is not possible to obtain a valid patent for it in Australia.
Priority date The issue of priority date is critical to the concept of novelty. The priority date of a claim is, in most cases, the date on which the first patent application describing the invention is filed by the applicant. For Australian patent applicants, it is commonly the date of filing a provisional patent application in Australia. The priority date is vitally important because novelty is considered with reference to the prior art base as it existed before that date.
Prior publication Publicly available A first kind of information which may render an invention not novel is that which is made publicly available in a single document. “Publicly available” means available in a document accessible to the public anywhere in the world.
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It has long been established by the relevant case law that making available or communicating information of the type contemplated by the Patents Act to even one member of the public who is not under an obligation of confidentiality with respect to that information is sufficient to constitute publication. This line of reasoning has also been followed in Australia where it was held in a case before the High Court that “it was immaterial whether or not it has become known to many people or to a few people.” (Sunbeam Corporation v Morphy-Richards64). It Publicly available is not even necessary for a “publicly available” document • Making available or communicating information to even one member of the public who is not under an obligation of actually to have been seen by any member of the general confidentiality with respect to that information is sufficient public at all, provided it was capable of being read by at to constitute publication least one person who was not under any obligation to • It is not necessary for a “publicly available” document keep its contents confidential. Thus, an item of information actually to have been seen by any member of the public in a library that is open to the public is “publicly available” even if no-one has ever accessed or seen the information. The word “document” as used in the definition of “prior art base” is important and is defined in section 25 of the Acts Interpretation Act 1901(Cth) as including: “(a) any paper or other material on which there is writing; (b) any paper or other material on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them; and
This is important in a commercial and research setting Document since it makes clear that the word “document” • A “document” may be a tape recording, CD, floppy disk, encompasses not only the printed or written papers computer data-bank, photograph, overhead transparency and the like which most people would understand to be “documents”, but also such things as tape recordings, CDs, floppy disks, computer data-banks, photographs, overhead transparencies and the like. It follows from this that any “document” (having the broad meaning conferred by the Acts Interpretation Act 1901[Cth]) which is given by one person to another without any obligation of confidentiality imposed by the donor and accepted by the recipient, or available to be consulted by persons who are not obliged to keep the contents of the document confidential, is “published”.
Prior use A second kind of prior art information consists of information made publicly available by the doing of a single act with the proviso that for the purposes of Australian novelty, the act must be done within the patent area (which is, effectively, Australia and its external territories). It should be noted that in some jurisdictions, a more stringent set of prohibitions is applied and as well as publication anywhere in the world, public use anywhere in the world before the priority date will anticipate an invention. This is known as absolute novelty. The only circumstance when public use of an invention Prior use does not anticipate a patent whose priority date is after • Information made publicly available by the doing of an act the date on which the public use occurred is when the may also be prior art public use was for the purposes of reasonable experiment or trial. However, this only applies if it was reasonably necessary for the use to be in public because of the nature of the invention. 64 Sunbeam Corporation v Morphy-Richards (1961) 180 CLR 98
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(c) any article or material from which sounds, images or writings are capable of being reproduced with or without the aid of any other article or device.”
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“Whole of contents” anticipation The third kind of prior art information may be particularly relevant in a rapidly developing field such as biotechnology and that is prior art information associated with “whole of contents” anticipation. In essence, while the earlier definitions of prior art information encompass documents or acts which make information available to the public before the priority date of a claim, this third category of information is quite different. It is the type of information which is included in an Australian patent application that has an earlier priority date than the claim under question, but which had not been published before the priority date of that claim. The relevance of this third category of information to biotechnology is that, in general, a patent application is not published until about 18 months after its priority date. It is not uncommon that separate research Whole of contents groups working independently and on the same or • Unpublished information in a patent application having an similar projects achieve the same results well within the earlier priority date may also be prior art horizon of 18 months. Level of disclosure needed to anticipate an invention It has been held in many patent cases that in order for a prior art disclosure to deprive a later claim of novelty in Australia, it must contain clear and unmistakable directions to use or practise the claimed invention. The test which is applied in this country as to whether a claim has been anticipated is known as the “reverse infringement test”. For this test to be satisfied and, therefore, for a claim to be deprived of novelty, the following conditions must be satisfied: CHAPTER 7
(a) if a publication provides a clear and unmistakable disclosure of all the features of a claim, the claim will lack novelty; (b) however, if the publication does not disclose all the features of a claim the claim will still lack novelty provided the publication discloses all the essential features of the claim; (c) however, if an essential feature is not disclosed in the publication, the claim is novel. In Australia, the disclosures of a combination of two or more related documents or two or more related acts can anticipate a claimed invention “if the relationship between the documents or acts is such that a person skilled in the relevant art in the patent area would treat them as a single source of that information”.
Disclosure needed to anticipate an invention • In Australia, in order for a prior art disclosure to anticipate a later claim it must contain clear and unmistakable directions to use or practise the claimed invention
Particular examples Some examples of circumstances that have been considered by the Courts are summarised below. A number of the cases are decisions of English Courts, but they are relevant to the law in Australia. These cases do not necessarily illustrate the law in other countries, however. • A single copy of a non-confidential document held by an employee of a large company (not the patentee), which was not available to be consulted by people who were not employees of the company, was nevertheless held to be “made available to the public”65.
65 Bristol-Myer’s Co.’s Application; [1969] RPC 146
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• At most four copies of a ballpoint pen including a certain mechanism that was the subject of a later filed patent application were given to three members of the public without any requirement that the pen be kept confidential. There was no evidence that the pens had been disassembled by any of these people to see how they worked. Nevertheless, there was held to be a prior use of the invention.66 • A patent claimed a certain steel alloy, containing up to 15% of cobalt. Before the relevant priority date, a company unrelated to the patentee had manufactured and sold a high speed steel containing about 1% cobalt, but had not disclosed its composition. It was held that there had been a prior use of the claimed steel because any person who bought the steel could have found out by analysis what the composition was.67 Disclosures which do not adversely affect the novelty of an invention – the “grace period” The Australian Patents Act 1990 (Cth) makes provision in section 24 to exclude prior publication at a “recognised exhibition” or before a “learned society” from adversely affecting the novelty of an invention, in some circumstances. A “recognised exhibition” is defined in the Patents Regulations, and is very limited in its scope. On the other hand, what is meant by a “learned society” is less certain, since the term is not defined in the legislation and there is very little case law to clarify what the term means. Nevertheless, the point is that if disclosures are made through either of these avenues, it may be possible under certain circumstances subsequently to file an application and obtain a valid patent (at least in Australia) provided stipulated time limits for filing are complied with.
A few other countries have more generous provisions governing when a patent application may be filed following publication, without loss of novelty. In these countries (of which Canada and Japan are examples), provided a patent application is made within a specified time (usually 6 or 12 months) after publication of the invention by the inventor(s) (whether before a “learned society” or not), the invention is deemed not to have been anticipated by the publication. In addition, under the United States system, a period of grace of 12 months from publication (by anyone – the invento[r]) or any other person[s]) is allowed before filing a patent application. The existence of these “grace periods” can have important ramifications if an inventor has inadvertently prior published the invention in Australia, since it may be possible to obtain protection in at least the United States.
Grace periods • If a disclosure is made at a recognised exhibition or before a learned society, it may be possible subsequently to file an application and obtain a valid patent in Australia, but not necessarily elsewhere • A few countries have provisions allowing a patent application to be filed following publication, without loss of novelty
Conversely, the provisions in sSection 24 (ie. the recognised exhibition and learned society provisions) of the Australian Patents Act 1990 (Cth), which save patents in this country from invalidity, do not have effect in all countries. The Australian Federal Government is reported to be considering introducing a grace period into the Australian Patents Act.
66 Fomento v Mentmore [1956] RPC 87 67 Stahlwerk Becker AG’s Patent (1918) 36 RPC 13
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In addition, if the subject matter of a claim is disclosed before the priority date without consent of the patentee, it is possible to invoke section 24(1)(b) of the Patents Act for that information to be disregarded, provided again a patent application is made within the stipulated time limit.
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7.1.10 Has the invention been used commercially? Just as disclosure of an invention prior to filing a patent application can render the patent invalid, so also use of the invention “in secret” by the patentee (even if there is no public disclosure thereby) may also render a subsequent patent invalid, at least in Australia, and reference is made to Chapter 2.4.5 above in this regard. The rationale behind the adverse impact of secret use on validity of a patent is that a secret use in effect prolongs the monopoly enjoyed by the patentee. In the absence of the provision of section 18(1)(d), it would be theoretically possible, for example, for a person to produce a composition having certain utility under certain conditions and to use that composition profitably for years, before applying for patent protection and enjoying the rights conferred on a patentee to prevent others from producing the composition for up to a further 20 years. The Act and Regulations do not define “secret use”, but rather section 9 provides for certain acts which are not to be taken to be secret use of an invention in the patent area and these are also outlined in Chapter 2.4.5 above.
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Thus, a use which is for “the purpose of trade or commerce” and is not for reasonable trial or experiment may be a “secret use”. Several expressions above need further explanation. The expression “for the purpose of reasonable trial or experiment” may be summarised to the effect that the trial must be for the purpose of improving or evaluating the invention rather than for a commercial purpose. Therefore, generally, if the patent applicant derives commercial benefit from the trial this will be fatal to the validity of any application which follows it. Particular note should also be taken of the expression relating to “any other use... for any purpose other than for the purpose of trade or commerce”. The relevance here is that if a patent applicant is planning to commercialise an invention, it is imperative that the application be filed before disclosure to any person or entity from whom the applicant will gain a commercial advantage. There are two qualifications to this general statement. Firstly, it has been held in England that the sale of a product which, unbeknown to anyone at the time, contained a certain patented substance was not a “secret use” of the substance, but rather was a prior public use of it68. Secondly, there is Australian case law to the effect that obtaining an agreement from a third party, prior to filing a patent application, for an input of capital to allow a prototype to be made and a patent to be filed was not a “use” of the invention69. It is a common misconception that a confidentiality agreement between the applicant and such a person is sufficient to excuse disclosure for commercial purposes. This is not the case and its relevance is that this again emphasises the need to file a provisional application prior to entering into any commercial agreement which will benefit the applicant.
Prior commercial use • Commercial use of an invention by the patentee (even if there is no public disclosure thereby) may render a patent subsequently filed by the patentee invalid • A use which is for “the purpose of trade or commerce” and is not for reasonable trial or experiment may be a “secret use” • A confidentiality agreement between the inventor or
An example of what may be a rather extreme case patentee and a person to whom an invention is shown for commercial purposes does not necessarily avoid “secret use” is, nevertheless, illustrative of the consequences of 70 prior use. In Wheatley’s Application , an invention was disclosed by the applicant to an employee of the English National Coal Board under condition of confidentiality and, before a patent application was made, the Coal Board placed an order for articles covered by the claims. The articles were manufactured, but not delivered until after a patent had been applied for. Nevertheless, it was held by the English Court of Appeal that the applicant had dealt commercially with the invention before making the patent application. 68 Bristol-Myer’s Co. (Johnson’s) Application [1975] RPC 127 69 Innovative Agriculture v Cranshaw (1996) 35 IPR 643 70 Re Wheatley’s Patent Application (1983) 2 IPR 450
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7.2 When to File a Patent Application Given that it has been decided that a patent application is to be filed, the timing of the filing needs to be considered carefully. Generally, it will be appropriate to file a patent application as early as possible to minimise the possibility of others publishing the invention first, or publishing research which might render the invention obvious, or (perhaps more likely) filing a patent application that will have an earlier priority date.
This does not necessarily mean, however, that every detail of an invention must have been worked out and every possible application of the invention investigated before a patent application is filed. A certain amount of prediction is part of most patent applications. Typically, an invention centres on a relatively specific discovery, but the patent applicant seeks to protect all possible applications of the discovery and all obvious variations of it that will achieve the same result. Otherwise, the protection obtained would be too narrow to be commercially worthwhile. If a patentee were limited to claiming only a single application of the specific discovery a competitor could too easily devise a variant of it that would avoid infringing the claims. For example, where an inventor discovers the sequence of a gene encoding a new physiologically significant protein and seeks to protect the use of the gene for exogenous expression of the protein, a claim to a DNA sequence having the same sequence as the gene will be of very limited value. It will be more usual, and more valuable, to claim all sequences that encode the protein – even though only one of them may have actually been isolated. Similarly, if the invention stems from the discovery that a certain additive gives rise to a significantly superior yield from a previously known process, the applicant will wish to obtain protection for the use of all additives that give rise to the same effect. The inventor(s) will usually have tested some, but not all, of the likely substitutes for the “magic ingredient” additive. The questions then arise of how much testing needs to be done before a patent application can be filed that will provide valid broad protection, and conversely, how far it is possible for an applicant to predict or extrapolate, from the results that have been obtained. The answers to these questions are not easy to set out in general terms. However, it is entirely legitimate (and, indeed, very commonplace) for patents to claim more broadly than the inventor has shown will work. The test has been said to be whether a sound prediction can be made, based on the specific examples that have been tried and shown to exhibit a certain property, that all the range claimed will exhibit the same property. Thus, one answer to the question of when a patent application should be filed is as soon as possible after the inventors are satisfied that they are able to make a sound prediction of how far the boundaries of the invention stretch. There is nothing wrong with some speculation in this regard at the stage of filing the first patent application: the 12 months that follow the first application filing can be used to explore the boundaries of the invention more fully, so that they can be more confidently established by the time the complete application is filed. If, in the light of experiments done during these 12 months, the first application described the invention too broadly, its scope can be reduced appropriately in the subsequent application. If the provisional patent application has been drafted skilfully, this need not result in a loss of the priority date.
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As noted elsewhere, it is a requirement for a valid patent that the specification provide enough information to describe the invention and enable a person of ordinary skill in the relevant technical field to carry out the invention. The amount of information needed to meet this requirement is related to the scope of protection to be provided by the patent: in general terms, the narrower the scope of the claims, the less information tends to be required to support them. It is self-evident, therefore, that if not enough experimental work has been completed to enable the invention to be adequately described, it must be too soon to file a patent application.
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A further reason for filing a patent application as early as possible stems from the requirement in Australia (and the United States) that a patent specification describe the best method of carrying out the invention known to the applicant. In the United States this is known as the “best mode” requirement. The requirement is not an ongoing one. It is satisfied by the patent applicant disclosing the best mode known to it as at the filing date of the complete application. Any improvement made later does not have to be disclosed. Thus, a patent application filed at a relatively early stage in an R&D programme may disclose less information of commercial value to competitors than one filed later in the same programme.
When to file a patent application • Generally, a patent application should be filed as early as possible • If not enough experimental work has been completed to enable the invention to be adequately described, it is too soon to file a patent application • A patent application should be filed as soon as possible after the inventors are satisfied that they are able to make a sound prediction of how far the boundaries of the invention stretch • A patent application filed at a relatively early stage in an R&D programme may disclose less information of commercial value to competitors than one filed later in the same program
Once a patent application has been filed, the results of any further optimisation work, which might hold the key to significant commercial success with the invention, can be retained by the patentee as trade secrets.
7.3 Preparation of a Patent Specification Preparing a patent specification which provides adequate coverage for an invention is a difficult task, particularly in the biotechnology area, and a number of issues should always be examined.
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Inventorship Inventorship is an important issue to be addressed at the outset and must not be overlooked. Each and every inventor should be listed on the Patent Request since, in the worst case, failure to do so can result in revocation of a granted patent. In order to ascertain inventorship, a patent attorney must identify those responsible for making an inventive contribution to the invention. The nature of what constitutes an inventive contribution is discussed elsewhere in this Manual (see Chapter 6.2). However, the practical task of identifying inventors typically involves the purported inventor(s) describing their respective contributions to the invention to the patent attorney. An equitable agreement can usually be arrived at following such discussions. Patent specification – description A patent specification is required to fully describe an invention and specify its best method of execution in sufficient detail so as to enable a skilled person to repeat it. It is, therefore, important that a patent attorney drafting a patent specification is provided with sufficient details of how the invention is performed, including the best method of performing it known to the inventor(s) at the time of filing. In order to sufficiently describe how an invention is performed, a patent attorney will need to be supplied with a description of the nature of the invention. (For example, is it a new or improved composition, product, device or process, a known composition or product obtained by a new process, a method of therapeutic treatment, a microorganism, a nucleic acid or polypeptide sequence?) Where the invention pertains to isolation of a novel gene, a description of how it was isolated and characterised and the degree to which it has been characterised, eg. whether the complete gene has been isolated and sequenced, whether the encoded polypeptide expressed
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and characterised, over expression studies or deletion/substitution studies carried out, the DNA sequence(s) and the polypeptide sequence(s) will be required. Where the invention involves a method of medical treatment, a description of any in vitro or in vivo studies that have been performed, eg. experiments in animal model systems will be required. Details of any isolated microorganisms or genetically engineered microorganisms, including their characteristics and how they can be obtained, will also be required. Details of any deposited microorganisms, including the name and address of the institution where they are deposited, whether they are reasonably available from the institution, whether they had been deposited under the Budapest Treaty and their accession numbers, are also required where the microorganism(s) are relevant to the performance of the invention. Any other details of the invention which are necessary to enable others in the art to make and use the invention are also required. Such a description usually includes a description of key or relevant experiments that have been conducted by the inventors or their assistants in arriving at and using the invention. Patent specification – claims
In order to define the boundaries of an invention, a patent attorney will find it helpful to inspect any prior search results. These may include state of the art searches (indicating any problem or disadvantages to be overcome) and patentability searches (which together with a Information required by patent attorney to aid description of the features of the invention will help to preparation of patent specification: distinguish it and its principal advantages over the • A description of the contributions of each purported background art). The patent attorney should also be inventor advised of details of any public disclosures in relation to • A description of the invention which is sufficiently detailed the invention including the date and nature thereof. to allow others to reproduce the invention To assist in the task of formulating a patent specification it is usual for a patent attorney to send a questionnaire to the inventors for completion. A sample questionnaire is provided in Appendix VII.
• A detailed description of all experiments performed and results obtained • Full details of any searches • Full details of any public disclosures relating to the invention
7.4 How to Use the Year After the First Filing Date For an Australian patent applicant, the first step is often filing an Australian provisional patent application. It should be noted, however, that the decision of how and where to file a first patent application should only be taken after appropriate consideration. It may be preferable to file a complete patent application in the first instance, or to file in a country other than Australia, especially if patent protection is required quickly in that country. A patent attorney should be consulted for advice on this issue. In whichever way it is filed, the filing of the first patent application (provided it occurs in a country which is a signatory to the Paris Convention) establishes a priority date for the subject matter disclosed in the patent application. The patent applicant then has 12 months in which to file an associated complete application (if the first application was an Australian provisional) and/or any corresponding overseas applications. It is these
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The patent specification must delineate the boundaries of an invention and must, therefore, include one or more claims which define the invention. Ideally, an invention should be claimed sufficiently narrowly so as to be novel and have an inventive step over the nearest prior art and sufficiently broadly so as to adequately protect the invention from infringement by third parties. It is, therefore, important that a patent attorney drafting claims has a clear understanding of the nature of the invention and, in particular, its advantages over the prior art.
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applications which are eventually subjected to examination and, with or without amendment, may go to grant and may be the basis of asserting infringement. While a provisional patent application may be filed with less information than is ultimately needed to support the claims of a subsequent complete application, only 12 months are available from filing the provisional application for all the necessary information to be generated to fully describe the invention. It must also be constantly borne in mind that claims which are supported by (that is, based on) information added after the first provisional application will probably not be entitled to the filing date of the provisional for their priority date but instead will have a priority date which is the date of filing the application containing the added information. It follows that research developments must be monitored closely during the 12 month period after filing the first patent application. It is appropriate for IP managers to work closely with scientists and patent attorneys in managing the period of time immediately before and during the 12 months after a first patent application is filed. In particular, it is important to ensure that adequate and realistic research plans are in place over this critical period of time.
How to use the priority year • Carrying out further experiments to further exemplify the invention and establish a sound basis for the scope of protection sought • Filing further provisional patent applications to establish the earliest possible priority date for any new information that comes to light after filing the original application • Seeking potential commercialisation partners • Exploring marketing and/or licensing opportunities so as better to define the commercial opportunity
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7.5 When to Publish From the description of the requirements for novelty discussed in Chapter 7.1.9 above, it should be clear that it is of great importance, before any publication of an invention takes place, that a patent application be filed to ensure that the eventually granted patent is not fatally harmed by prior publication of its subject matter. Of course, it is always possible that the subject matter of the patent application is not novel when compared to the prior art base. However, it is a terrible irony when otherwise novel subject matter is disqualified from patentability by that subject matter having been prior published in a scientific journal or otherwise by the inventors themselves. As noted in the previous sections, once a patent application for an invention has been filed, if there are developments with that invention it is possible (and, indeed, advisable) to file further applications which will establish the earliest possible priority dates for the new matter. Because any publication of the invention or public use of the invention can adversely affect the patentability of claims having a later priority date (on the ground of lack of inventive step, if not lack of novelty) publication of an invention in the open literature or by public use is not advisable in the 12 months after the first patent application is filed. Even after 12 months have elapsed from the first patent application’s filing date, if it is anticipated that there will be further developments with the invention, publication of the subject matter of the invention should be deferred, if possible, until any patent application(s) describing the developments have been filed, to ensure the developments cannot be challenged for obviousness in the light of the original invention. An organisation has a technological edge over its competitors while it alone has the knowledge of an invention. While it enjoys that technological edge, the organisation can build its commercial advantage. Any
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When to publish • Before any publication of an invention takes place, a patent application should be filed • If there are developments with an invention it is advisable to file further applications which will establish the earliest possible priority dates for the new matter • Publication of an invention in the open literature or by public use is not advisable in the 12 months after the first patent application is filed • If it is anticipated that there will be further developments with an invention, publication of the subject matter of the invention should be deferred, if possible, until any patent application(s) describing the developments have been filed
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publication of the invention makes it known to competitors and (at least potentially) curtails the commercial advantage. The subject matter of a patent application is published approximately 18 months after the earliest priority date (unless it is withdrawn beforehand) which means that it is usually published approximately 6 months after a complete application is filed. Once a patent application has been published, there is, of course, no further reason to delay publication of the research in the technical literature, provided at least that the technical publication discloses no more than is disclosed in the patent specification. Many scientists find this length of delay in publishing their results difficult to accept, especially in environments where remuneration and promotion are strongly based on the number of publications a scientist has made. There is a strong need, therefore, for organisations to find alternatives to relying heavily on this criterion for career advancement because it can be inconsistent with sound IP management practices.
7.6 Review of Publications
A publication review system is only effective, however, if the scientists understand its purpose and importance, so that they see the need actually to use it. Education and training of scientists in these matters is, therefore, essential. Scientists may feel that scrutiny of their work prior to its publication, especially if the scrutiny is, at least in part, carried out by actual or potential commercial partners outside the scientists’ research institution, unreasonably infringes on their rights to recognition of their work by the broader scientific community. It is, therefore, important to ensure that such scrutiny does not cause delay in publication beyond what is unavoidable or commercially imperative in the circumstances.
Review of publications • A suitably qualified committee should review all proposed publications in the light of their possible impact on an organisation’s wider objectives • Those involved in research must be made aware of the purpose and importance of such a system if it is to be a success • Such a system should seek to minimise any delay in publication beyond what is unavoidable or justifiable in the circumstances
Research theses and grant proposals can present special problems. Research theses Frequently, research theses are deposited in a research institution’s library and are then available for general inspection. Many universities adopt a system where the publication of theses in this way is deferred for some specified period of time. It is essential that such systems be implemented strictly so that all access to embargoed documents, except by specified authorised persons, is prevented.
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The important features of a sound system for keeping information secret have been discussed in Chapter 6.5. Reviewing publications forms part of such a system. A specific person or, more usually, a small committee should be appointed whose responsibility it is to consider and approve (or embargo) drafts of publications before they are submitted. The members of the review committee should be suitably qualified in that they should have sufficient knowledge of the organisation’s research plans and commercialisation options. Such a committee will be able to review the proposed publications in the light of their possible impact on the organisation’s wider objectives.
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Grant proposals Grant applications obviously need to be made before research has been carried out and must include a description of the proposed work. It should not be assumed that a copy of a grant application cannot be obtained by competitors or other scientists, especially if the application is made to a funding body outside Australia. For example, in the United States, grant applications may be available after funding has been approved, under that country’s Freedom of Information legislation. Where funding agency practices permit, grant applications should, therefore, be clearly and prominently marked “Confidential” or “Commercial-in-confidence” or the like and should contain only the minimum written description of the proposed work that is necessary to complete the application requirements imposed by the funding body.
Figure 7-2: Sound Management Practices in Relation to Publication Publication-related management practices • Education of scientists on the consequences to the value of IP rights of premature publication of R&D results • Education of relevant employees on what constitutes “publication”
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• Establishment of procedures whereby proposed publications (including presentations at conferences, poster sessions, web pages and the like) are considered and approved prior to their submission for publication • Placing at least as much importance on inventorship as authorship of scientific publications in assessing scientists’ performance • Providing inventors with a share of the financial returns received by the organisation as a result of commercialisation of a patented invention • Fostering a culture within the organisation that places high importance on the development, maintenance and advancement of the organisation’s IP rights
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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.1 How to commercialise . . . . . . . . . . . . . . . . . . . . . . 8.1.2 How to commercialise IP successfully . . . . . . . . . . . . 8.1.3 Using others’ IP as a commercial tool . . . . . . . . . . . . 8.1.4 Using IP in business strategy . . . . . . . . . . . . . . . . . . 8.1.5 Successfully commercialising IP through licensing . . . . 8.1.6 Going it alone – start-ups . . . . . . . . . . . . . . . . . . . .
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A Collaborative Approach to Commercialising IP . . . . . . . . 8.2.1 Agreements and contracts . . . . . . . . . . . . . . . . . . . 8.2.2 Due dilligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.3 Licensing v assignment . . . . . . . . . . . . . . . . . . . . .
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IP Valuation: How Venture Capitalists and Independent Valuers Value IP . . . . . . . . . . . . . . . . . . . . . . . . . 143 8.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 8.3.2 How does a valuer view IP? . . . . . . . . . . . . . . . . . . . . . . 143 8.3.3 Identifying the IP to be valued . . . . . . . . . . . . . . . . . . . . . . 144 8.3.4 Some areas where an IP valuation may be required . . . . . . . . 144 8.3.5 Approaching the IP valuation . . . . . . . . . . . . . . . . . . . . . . . 144 8.3.6 Methods utilised in valuing IP . . . . . . . . . . . . . . . . . . . . . . . 145 8.3.7 The income-based method of evaluating IP . . . . . . . . . . . . . 146 8.3.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
8.4
Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 8.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 8.4.2 Types of licence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 8.4.3 Reasons for licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 8.4.4 Advantages and disadvantages of licensing . . . . . . . . . . . . . 151 8.4.5 Assessing the idea – the “innovation audit” . . . . . . . . . . . . 153 8.4.6 Risk and reward – from the licensee’s perspective . . . . . . . . . 155 8.4.7 Risk and reward – from the licensor’s perspective . . . . . . . . . 155 8.4.8 Non-exclusive or exclusive? . . . . . . . . . . . . . . . . . . . . . . 155 8.4.9 Finding the right licensee . . . . . . . . . . . . . . . . . . . . . . . . . 156 8.4.10 Negotiations and payment . . . . . . . . . . . . . . . . . . . . . . . . 156 8.4.11 The licence agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 8.4.12 Limits on the patentee’s rights to impose restrictions under the Patents Act . . . . . . . . . . . . . . 160
8.5
Defence of IP Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 8.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 8.5.2 The reality of defending IP . . . . . . . . . . . . . . . . . . . . . . . . . 160 8.5.3 Enforcement of IP rights in Australia . . . . . . . . . . . . . . . . . . 161 8.5.4 Cross-claims and defences to infringement actions . . . . . . . . .163
8.6
IP Insurance . . . . . . . . . . . . . . . . . . . 8.6.1 Categories of IP insurance . . . 8.6.2 Obtaining IP litigation insurance
8.7
Biotechnology IP Management and Issues Relating to Indigenous People . . . . . . . . . . . . . 8.7.1 Adaptability of IP laws to traditional knowledge . . . . . . 8.7.2 Bioprospecting . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7.3 Action to protect indigenous peoples’ IP . . . . . . . . . .
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Chapter 8. Commercial Exploitation 8.1 Introduction The IP of an entity, whether it be patents, designs, trade marks or other forms of IP, typically represents a large investment from which the entity and its stakeholders expect a return – particularly in the biotechnology area, given the high cost of development and testing of genetically engineered drugs and processes. Consequently, a crucial stage in the innovation process can be seen as the transforming of an invention into a marketable product in order that it begins to generate revenue and, eventually, profits. The value of IP is contingent upon the mode and efficacy of its utilisation/commercialisation. Adopting a systematic approach to the effective use and commercialisation of IP will ensure good returns on the investment in the IP assets. From the viewpoint of the IP owner, there may be any number of reasons for wanting to commercialise IP but the underlying objective is to make money. Once quality R&D has been undertaken and IP has resulted therefrom, then the IP owner is in a position to realise its benefits. However, this final commercialisation step is often not easy. For example, although an organisation may possess IP, it may not wish or, indeed, have the resources to exploit the IP itself. Research institutions usually fall into this category. Alternatively, commercialisation of IP may require additional R&D, product developments, clinical trials and/or development of techniques to scale-up production prior to taking the results of research to market.
8.1.1 How to commercialise Commercialisation options There are several possible ways for an IP owner to commercialise IP:
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• to manufacture and market the one or more commercial embodiments of the invention itself, often as a start-up company created for that purpose, • to undertake a joint venture/co-operative arrangement/other contract activity, • to license the IP rights, • to cross-license IP in specific research areas, or • to sell (assign) the IP. The IP owner may select any one or more of these for the commercialisation of their IP. Legislative provisions relating to exploitation Sections 13, 14, 16 and 145 of the Australian Patents Act 1990 (Cth) set out the rights of the patentee in respect of an invention and are provided in Appendix VIII. Determining which commercialisation route to take Which route to follow is generally dependent on the income estimated to be generated by each of these routes. Each situation should be analysed taking into account the nature of the IP, the market conditions, the financial position of the IP owner and its resources. The ability of the inventors to assist further in the commercialisation
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of the IP should also be assessed. Specific factors such as speed of market entry, the degree of control required and the potential for growth are considered important in selecting the appropriate commercialisation vehicle. To obtain commercial returns from IP, certain conditions must exist. These include: 1. The existence of a customer or the ability to create customers, and 2. An entity controlling the manufacture and sale of the resulting products. Usually, commercialisation will begin on a local scale, assuming that there is a local market for the IP. With biotechnology-based IP, the main markets may more likely be foreign. It is also unlikely that an Australian biotechnology company will obtain long-term growth or profitability based solely on activities in the domestic market. It is important to bear in mind, however, that legal protection provided by biotechnology patents is a Factors which should assist in focusing an organisation on commercialising their IP/innovations include: relatively new area of law and the scope of protection • A technological development should always be assessed in afforded by biotechnology patents varies significantly terms of the market or its commercial merit around the world. Having assessed the market, a reasonable assessment of possible strategies for entering the market needs to be made. Part of this assessment involves consideration of the levels of investment that will be required, and over what time period, for successful commercialisation of the IP. At this point, an entity can form a tentative view of whether it may be feasible to commercialise the IP itself, or whether possible licensees or potential purchasers of the IP should be identified and approached.
• It should be ensured that there is a person in the organisation who is managing the IP portfolio and its commercialisation and that person is the right person to do so: they are trained to assess target markets, competition within those markets etc. • Concentration on IP creation and protection should be balanced by a similar concentration on commercialisation of the IP • Innovation and technological R&D should not be undertaken in isolation from the commercial market realities.Therefore, market considerations should be introduced very early in the IP commercialisation strategy
Intellectual Property is an integral part of any commercial and industrial strategy. Often, it is only at the stage when IP protection has been secured that an organisation confronts the task of commercialisation. This belated, often superficial, market awareness is one of the main pitfalls to avoid as an IP owner. Technological and commercial merit of IP must be assessed at a very early stage in order that successful commercialisation can occur.
8.1.3 Using others’ IP as a commercial tool The patent system is a valuable source of information which is a commercial tool in itself. The information available can provide inventors with ideas for improvements or modifications which are themselves inventive and patentable. Alternatively, the information can simply be used as a monitor of the technological activities of competitors and (by assessing the countries in which patents have been applied for) the marketing strategies of competitors. A state of the art search (discussed at Chapter 3.6) can also identify newly developing areas of technology in which R&D activity should be watched. An organisation’s own IP strategy can therefore, in effect, be planned around information obtained from the IP of its competitors.
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8.1.4 Using IP in business strategy Intellectual Property is one of the elements in a company’s overall business strategy. Ideally, a company should develop a patenting strategy to obtain a commercially and strategically relevant strong IP portfolio. A company’s IP strategy will be, in part, shaped by that company’s markets, customers, competitors, the nature of the technology and its relationships with research institutions, government departments and other organisations.
8.1.5 Successfully commercialising IP through licensing Collaborative R&D and licensing offer the prospect of resource and information sharing and also the speedy translation of the R&D into high quality products. Further, licensing arrangements can offer the ability to share skills and technology and to enter markets which would be otherwise inaccessible. Licensing is, therefore, an important component of business strategy. The value of IP can be increased through its assimilation or use as part of a broad business relationship where the licensor Advantages of licensing wishes to play a significant role in the marketing of the • Cost effective return on R&D expenditure in markets the technology. Similarly, licensing as a component of a IP owner may not be able to access itself technology transfer arrangement is attractive where the • Can establish new relationships, perhaps leading to R&D venture is viewed in the context of a long-term collaborations relationship between the parties. Licensing IP is discussed further below in Chapter 8.4.
• Licensing as opposed to assignment or royalty-free access to IP provides a means of control and ongoing access to the development of the technology
8.1.6 Going it alone – start-ups An alternative to licensing or selling IP rights is commercialisation through the vehicle of a new start-up or spinoff company. This option has proven to be attractive to a number of Australian research institutions.
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Why start-up? • By retaining control of commercialisation of the IP through the spin-off company, a research institution can have greater influence over how its commercialisation is managed and will aim to receive greater financial return in the longer term. • Depending on the nature of the IP rights concerned, it may not be possible to secure licences on acceptable terms. • Spin-off entities may provide employment opportunities for students or other scientists of the research institution. • Successful spin-offs can enhance the prestige of the research institution. • Spin-offs can provide a convenient vehicle for inventors to retain partial ownership of, and return for, IP rights arising from their inventions. This can have a positive effect on innovation and entrepreneurship generally within the research institution.
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Funding is usually a critical issue for start-up businesses. Start-ups in the biotechnology sector are no exception in this regard. Although a research institution that has spawned a start-up business may provide funding and facilities, at least to some extent, eventually external sources of funds are likely to be required. Possible sources of funds include: • Licensees of some or all of the technology. • Product sales revenues. • Loans. • Private investors, including the inventors themselves. • Venture capital investors. • Grants and other forms of assistance from governments or charitable institutions. In commercialisation of biotechnology innovation, lead times between commencement of commercialisation activities and generation of significant revenues tend to be long. For this reason, product sales revenues are unlikely to provide a significant source of funds in the short term. Similarly, financial institutions may be reluctant to provide loans to new entities that cannot anticipate significant sales revenues within what is perceived to be a reasonable time, especially when the risk of commercial failure may be perceived to be high. Principal sources of funds for start-up companies, if they are not to be derived from the originating research institution, will, therefore, typically be venture capital, private investors or government assistance. Venture capital
A number of Commonwealth and State Government programmes exist to facilitate access to venture capital by start-up companies. Contact details of some of these are as follows: Pooled Development Funds Programme (Commonwealth Department of Industry, Science & Resources, administered through AusIndustry) Telephone AusIndustry Hotline: 13 28 46 www.ausindustry.gov.au Innovation Investment Fund Programme (Commonwealth Department of Industry, Science & Resources, administered through AusIndustry) Telephone AusIndustry Hotline: 13 28 46 www.ausindustry.gov.au Technology Commercialisation Programme (Victorian Department of State & Regional Development) Science, Technology and Innovation Division, Department of State & Regional Development GPO Box 4509RR Melbourne VIC 3001 Email:
[email protected] www.innovation.vic.gov.au
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Access to venture capital implies sale of some equity in the start-up company by the originating research institution and/or inventors, as venture capital providers require an equity stake (which may be a substantial one) in the company in return for their investment. Furthermore, at early stages of the commercialisation of IP rights, where seed funding (for example, to build pilot plant facilities) or start-up capital are required, venture capital providers may be reluctant to invest.
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Other information about venture capital in Australia is available from Australian Venture Capital Association Limited, www.avcal.com.au. Additionally, the Australian Venture Capital Guide 2001 is a publication of Pollitecon Publications that provides a guide to sources of venture capital in Australia and New Zealand. Details are available at www.vcjournal.com.au. Grants and other forms of assistance The Commonwealth and State Governments have initiated a variety of programmes targeted at small businesses seeking to commercialise technological innovation. The forms of assistance provided by these programmes include financial assistance, tax concessions, provision of advice and training, and provision of access to private sector resources. The Commonwealth Government has recently announced a doubling of funding for the Biotechnology Innovation Fund, which was established to help enterprises bridge the gap between the research stage and the stage of the commercialisation of an innovation at which private sector investment can be attracted. Contact details for the Biotechnology Innovation Fund and other programmes relevant to biotechnology commercialisation are given below. The list is not exhaustive: a comprehensive summary of programmes supporting innovation in Australia is compiled by the Department of Industry, Science & Resources and it is available to be downloaded at: www.isr.gov.au/industry/innovation/programs.pdf Further information about Government programs can be obtained at: www.innovation.gov.au/iap/Implementation/index.html or by calling the AusIndustry Hotline: 13 28 46
Biotechnology Innovation Fund (Commonwealth Department of Industry, Science & Resources)
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Telephone AusIndustry Hotline: 13 28 46 www.ausindustry.gov.au Biotechnology Australia Telephone: 02 6213 6367
Competitive Pre-Seed Fund for Universities and Public Sector Research Agencies (Commonwealth Department of Industry, Science & Resources) Telephone AusIndustry Hotline: 13 28 46 www.ausindustry.gov.au Innovation Policy Branch Telephone: 02 6213 7444
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New Industries Development Programme (Commonwealth Department of Agriculture, Fisheries & Forestry Australia) Contact: John Sainsbury General Manager Food Business Group Telephone: 02 6272 5373 Fax: 02 6272 5043
Commercialising Emerging Technologies (COMET) (Commonwealth Department of Industry, Science & Resources, administered through AusIndustry) Telephone AusIndustry Hotline: 13 28 46 Email:
[email protected] www.ausindustry.gov.au
Feasibility Study Fund (Commonwealth Department of Industry, Science & Resources, administered through Invest Australia) Telephone: 02 6213 7560 Fax: 02 6213 7843 Email:
[email protected] Telephone AusIndustry Hotline: 13 28 46
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Telephone AusIndustry Hotline: 13 28 46 www.ausindustry.gov.au
R&D Tax Concession (Commonwealth Department of Industry, Science & Resources, administered through AusIndustry) Telephone AusIndustry Hotline: 13 28 46 www.ausindustry.gov.au
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8.2 A Collaborative Approach to Commercialising IP 8.2.1 Agreements and contracts Introduction A number of factors have contributed to the increasing need and desire for cooperation within industry and between industry and publicly funded research institutions. Collaboration in some shape or form is often adopted in order to realise benefits such as a reduced time to market, a reduced R&D expenditure and elimination of the risks involved in travelling down R&D “cul-de-sacs”. Instead of “going it alone”, companies recognise that collaborations such as joint ventures, licensing and sponsored research will result in more value to the participants than separate investments of resources. The resulting complementary forces of “technology Collaborations push” and “market pull” have allowed collaborations • Collaborations between organisations can result in more such as licensing arrangements, consortium value to the participants than investment of separate arrangements or joint ventures, for example, to be resources potentially beneficial to each party. However, in order to • Contractual agreements are used to govern the conditions of collaborations such as licences, consortia and joint ensure that such arrangements remain fair and ventures equitable, the obligations of each party should be agreed in advance. Contractual agreements should, therefore, be fully utilised in order to protect all parties involved in any IP transaction. Confidentiality agreements
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Before committing to any form of collaboration, it is reasonable to expect that each party will wish to justify its intentions by first exchanging information relevant to the proposed agreement. For example, a potential licensee may begin by seeking from a licensor a non-confidential summary of a technology in addition to reviewing any publicly available information. Although such information may serve to whet the appetite, in order to evaluate a technology properly, access to additional confidential information will inevitably be required. Protection of confidential information or know, how can be based on obligations where the confidant is under an equitable duty to keep the information confidential. If information is of an inherently confidential nature and the circumstances in which it is imparted imply it is confidential, an obligation of confidence will attach to it. Accordingly, information will be regarded as a trade secret if it can be characterised as information which attracts the obligation of confidence. Confidential information is any information owned by one party which it wishes to be regarded as confidential or secret. Therefore, any exchange of confidential information must be managed by each party to protect the following:
Confidential information • Before committing to a collaboration which the respective parties may wish to exchange confidential information • Confidential information is any information owned by one party it wishes to be treated as confidential or secret
• Information created by them • Information disclosed to them The principle of confidentiality forms the cornerstone of the patent system and the leaking of any confidential information into the public domain can adversely affect the securing of future patents. It is, therefore, vitally important that confidentiality is maintained until adequate protection is in place. The precautions outlined in the checklist in Figure 8-1 should be followed.
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Figure 8-1: Confidentiality – Checklist
Yes
No
N/A
What to do when receiving confidential information
Have you been asked to sign a confidentiality agreement?
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Have you checked that it is only a confidentiality restriction and not a transfer of Intellectual Property Rights (IPR) in addition?
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Has express confirmation from the discloser been sought to confirm that the information is not confidential before disclosing anything?
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Has a written record been kept of what was disclosed and by whom?
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Has a copy been kept of what was disclosed, and a record of when and to whom?
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Have oral disclosures been confirmed in writing to confirm the confidentiality of what was disclosed?
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Have confidentiality agreements been executed in advance of disclosures?
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Are there any existing obligations of confidentiality which will prevent the release of the information, ie. from funding terms and conditions?
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Is the confidentiality agreement mutual?
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What to do when giving out confidential information
What to do when exchanging confidential information
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Handling confidential information
When disclosing confidential information, it is only possible to create an obligation of confidentiality by ensuring all parties are aware of and agree to the obligation. It is for this reason that execution of a written Confidentiality or Non-Disclosure Agreement (NDA) is of paramount importance. As well as being stand-alone documents utilised at the beginning of a relationship between two parties, obligations of confidentiality will usually also be embedded in wider downstream agreements, such as research contracts and licence agreements. As with any agreement, each confidentiality agreement will need to be customised to the specific requirements of each situation and the checklist in Figure 8-2 is, therefore, merely a guide to the structure and main elements to be included. It is also essential to ensure that, as with all agreements, a confidentiality agreement is executed by an authorised representative of each party. The issue of confidentiality is addressed differently depending upon the IP policies of a particular party. Indeed, universities are a special case due to the intrinsic responsibility of their academics to publish the results of their own research. Although the motivations and goals of industry and academia appear at first sight to render collaborations difficult, they are feasible if each party exercises a degree of sensitivity to the needs of the other.
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For example, universities will usually allow limited time restrictions on publications to allow an industrial partner to review research results and possibly arrange for patent protection. It is important to realise that universities will usually only undertake to use their “best efforts” to maintain the confidentiality of information transferred to them from industry. As non-profit making institutions, universities need to limit their liabilities and obligations in this area as much as possible. It is important to stress that while a confidentiality agreement can clarify what has been agreed and reduce the risk of misunderstandings arising between the parties, it should not, however, be viewed as providing absolute protection to the supplier of the confidential information. Such an agreement should be used with caution and be appropriately drafted and modified to suit each specific situation. Some less-than-scrupulous recipients of confidential information may attempt to work around the information provided in order to develop a related rival invention. Therefore, if at all possible, rather than relying solely on a confidentiality agreement, a provisional patent application should be filed in advance of any discussions with a third party. This is particularly Confidentiality agreements advisable when the invention is considered to be of • It is only possible to create an obligation of confidentiality by ensuring that all parties are aware of and agree to the major importance. obligation
Equally, a recipient of confidential information should assess its contents to ensure that it is not similar to other information already in the recipient’s possession. Such an initial assessment will help to avoid any later need to prove inventorship or ownership.
• Written confidentiality agreements should be executed in advance of any exchange of confidential information • Although universities have a responsibility to publish the results of their own research, agreements can usually be made which accommodate their needs and those of an industrial partner
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Figure 8-2: Confidentiality Agreements – Checklist
Structure and content of confidentiality agreements
Yes
No
N/A
Identification of the parties
Are the disclosing and receiving parties to the agreement clearly identifiable?
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Subject of the agreement
Have the intentions and expectations of the parties been briefly indicated to ensure that the context of the agreement is understood?
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Is all terminology defined in order to avoid any ambiguity in the agreement’s interpretation?
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Are the definitions sufficiently clear to enable a determination of what the parties understood by each term in the event of a dispute?
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Undertaking of the recipient
Are the obligations imposed on the recipient clearly and unambiguously communicated?
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Disclosed information
Is the information or know-how which is the subject of the confidentiality agreement clearly identifiable? For example, is a pending patent application annexed to the agreement?
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Definitions
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Yes
No
N/A
Has the scope of the agreement been limited by explicitly stating which information is excluded? For example, information entering the public domain through no fault of the recipient or information already known by the recipient may be excluded.
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Have the allowable use(s) of the revealed information been defined? For example, use only for “research purposes” or confined to “technical or commercial assessment of the invention”.
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Are further clauses required to deal with, for example, security measures and payments?
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Has indemnification been sought for any claims, actions, damages, losses, expenses etc. resulting from use of the information?
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Has the owner of the confidential information renounced liability for any damages suffered by the recipient resulting from its use?
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Is it clear that no IPRs are conferred to the recipient upon conclusion of the confidentiality agreement?
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Have ownership issues in relation to any downstream IP generated through use of the confidential information been addressed up-front?
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Term of the agreement Has the term of the agreement been agreed? (This may extend beyond the end date of, for example, a related collaborative project.)
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Governing law
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Exceptions
Use of information
Optional provisions
Indemnities and disclaimers
Intellectual Property Rights
Is it clear which law will govern the agreement?
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Structure and content of confidentiality agreements
Material Transfer Agreements The exchange of confidential information in the biotechnology industry will, by its very nature, frequently involve the transfer of biological materials. In transferring tangible rather than intangible information, a different set of restrictions and obligations may need to be imposed on the recipient and, therefore, a different contractual situation applies. Material Transfer Agreements (MTAs) are used to administer the transfer of biological materials such as experimental drugs, cell lines, vectors, microbiological agents, toxins etc. They define the proprietary positions of the provider and recipient in relation to the transferred material, in addition to any improvements or derivatives
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thereof. Such agreements are of critical importance and seek to control use of materials, ownership of research results, confidentiality, publication and liabilities of the parties. They should be executed when materials are both sent and received as outlined in Figure 8-3 below. The MTA, as with all agreements, should be tailored to the specific requirements of the situation. For example, materials may be sought from a research institution merely as a matter of convenience even if they are already publicly available. An MTA governing such a transfer will obviously require to be drafted differently from a transfer involving confidential materials available only from a unique source.
Material transfer agreements • The exchange of confidential information in the biotechnology industry will, by its very nature, frequently involve the transfer of biological materials • Material Transfer Agreements (MTAs) are used to control the use of such materials, the ownership of research results, confidentiality, publication and the liabilities of the parties
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Figure 8-3: Material Transfer Agreement – Checklist
Considerations for recipients of materials
Yes
No
N/A
Are there any restrictions on how the materials can be used, eg. for research purposes only?
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Is the provider seeking ownership of derivatives of the material? Is this acceptable?
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Will the provider forgo ownership in exchange for first right of refusal?
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Is the recipient free to file patent applications on results generated through use of the materials?
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Are there any restrictions or delays on publication?
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Is publication prevented by a confidentiality clause?
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Is the indemnity clause fair and reasonable?
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Considerations for providers of materials
Yes
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N/A
Is the material to be provided only for the purpose of evaluation or is the recipient free to use the material?
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Can the recipient modify the material in any way?
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Should arrangements be made to manage ownership of any future derivatives?
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Should arrangements be made to manage ownership of any future IPRs?
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8.2.2 Due diligence What is due diligence? Due diligence is a process via which a buyer (or potential licensee or assignee) seeks to identify and gather information relating to the business and assets of a seller (or potential licensor or assignor) in order to allow a reasonable estimate of the viability, the risk and the future profitability of the transaction in question. Such an exercise aims to enhance understanding of what exactly is being acquired and to enable the parties to place a meaningful value on the assets to be transferred with the benefit of legal opinion. The due diligence effort should, therefore, be conducted at an early stage since its conclusions will, undoubtedly, have a significant impact on negotiations leading to the structure and completion of the transaction. It is important to recognise that due diligence, especially in the United States, works on the basis of “caveat emptor” (let the buyer beware). In other words, the burden is on the buyer to seek information rather than on the seller to provide it.
Due diligence • Acquisition of new technology via mergers, joint ventures, licensing etc. involves the transfer of IP • Due diligence is an information gathering exercise which tests the viability, risks and future profitability of the transaction in question
Due diligence and IP
In a worst case scenario, a new assignee of patent rights may immediately find itself the subject of expensive litigation or learn that newly acquired patent rights are dominated by those of a competitor or even the seller. In order to avoid acquiring such liabilities, the due Due diligence and IP diligence process needs to comprise a thorough audit • A due diligence exercise relating to IP assets represents a of the seller’s IP assets. An audit should seek to analyse different challenge to an analysis of a company’s physical the adequacy of the current rights, consider any assets possible exposures and identify future opportunities for • A due diligence exercise should comprise a thorough audit strengthening the IP position. Key points are outlined in of the seller’s IP assets the checklist in Figure 8-4. Identification of the rights Due diligence should start by identifying all rights involved in a transaction. For example, these may include a mixture of registered or registrable rights such as pending or granted patents and trade marks existing in numerous territories and unregistered rights such as copyright, know-how and trade secrets. Although the cooperation of the seller is usually essential in order to identify “invisible” unregistered rights, a thorough search of all Patent Office Registers and databases will help to identify registered rights and complement the searching of the seller’s internal IP files. Such a search of official Patent Offices, records can also verify that a licensor or seller is not withholding any rights that the licensee or purchaser would expect to be included in the transaction. For example, care should be taken to ensure that trade marks relating to a patented technology are included in a transaction. This is something that Volkswagen learned to its cost when it acquired Rolls-Royce Motor Cars for US$712m without securing rights to the corresponding trade mark which was bought by rival firm BMW71. 71 International Herald Tribune at www.iht.com/IHT/TB/98/tb072998.html
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Although due diligence traditionally involves analysis of a company’s physical assets, the key transactions in our knowledge-driven economy involve the transfer of intangible assets such as the sale, licensing or other exploitation of rights. A due diligence exercise focusing on IP assets may, therefore, represent different challenges, especially in relation to IP ownership and the lack of guarantees in relation to the validity of rights.
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Once registered rights such as patents have been identified and their current status and expiry dates checked, it should be verified that all due fees have been paid. Official records should reveal the history of a patent in terms of any changes in ownership or granting of licences. Rights are often pledged as security and it is, therefore, also important to extend the search to security interests. It is not enough, however, merely to consider the rights in isolation. In order to make informed decisions, it is also necessary to consider how the rights relate to the main products and services of the seller. There is little point in acquiring a “peripheral” right which does not properly Identification of IP rights protect the products or services that the purchaser of • All registered and unregistered rights should be identified the rights hopes to sell upon completion of the licence and their current status, expiry dates and fee payment agreement or merger. Similarly, in the absence of any histories checked right for a product or service, thought should be given • It should be verified that the rights to be acquired correlate to whether any such protection can still be attained. with the main products and services of the seller Ownership or title of rights
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Once an accurate summary of the IP portfolio Ownership of rights has been completed, the buyer must be satisfied that • A buyer of IP assets must satisfy itself that the seller has the the seller has the legal right to transfer the property in legal right to transfer the property in question, for example, question, either as owner or via another right such as a as owner or via sub-licensing rights right to sub-license granted by a third party. It is at this • The downstream consequences of wrongly assuming that a seller has legal right to transfer the property are potentially stage in the due diligence process that most problems disastrous are encountered owing to the myriad potential pitfalls • Ownership of an IP asset can change hands many times which make ownership of intangible assets far from throughout its lifetime and it is, therefore, important to straightforward. It is possible to mistakenly assume that establish its historical chain of title ownership lies solely with the seller when this is not, in • Special care should be exercised when employees were previously employed by a competitor fact, the case. The downstream consequences of such an assumption are potentially disastrous. For example, an employee or contractor who did not assign his rights to the seller may subsequently legally license or assign them to a competitor, thereby destroying a whole market of the unwary buyer. In establishing ownership or chain of title, it is necessary to assess the history of the development of the technology from conception to the present day. Consideration must be given to the circumstances in which the technology was invented. If, for example, an employee was responsible, it is necessary to determine whether the invention was made in the course of their normal duties and whether an appropriate employment agreement allows for assignment of rights to the employer. Special care should be exercised when the inventor was previously employed by a competitor and in such circumstances it may also be necessary to scrutinise previous employment agreements. Research notes and signed laboratory notebooks can provide useful evidence when seeking to determine where and when a technology was created.
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Figure 8-4: Due Diligence – Checklist Comments
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Key considerations
Continued overleaf
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Have all relevant prior art publications, evidence of prior use, results of prior art and infringement searches, reports and opinions that the seller possesses concerning the validity and enforcement of its patents or patent applications been checked?
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Ownership – students A key consideration when dealing with research institutions is to ensure that any students who are named as inventors have assigned their right and title to the invention to the research institution. Students are not considered to be employees and so it cannot automatically be assumed that ownership is vested in the research institution. Ownership – funding bodies Funding of the research leading to an IP right may have come from numerous sources and may affect ownership. It is common in universities, for example, for research to be funded through one or a combination of industrial, charitable and government grants. The terms of such funding should be examined to confirm that the seller has unfettered right to transfer the right and to determine whether any of the funders retain any rights or have placed any restrictions on their use. Joint ownership of intellectual property should be avoided if Ownership of rights possible, since it allows one party to exploit the • It should be ensured that appropriate assignment agreements exist in relation to any works carried out by invention without obligation to the other(s), but does not consultants or contractors allow any co-owner to assign or license its rights • When dealing with research institutions, it should be verified without agreement of the other co-owners. that students have assigned their IP
In order to unravel the often complicated web of ownership issues, a patent ownership opinion letter should be sought from a patent attorney.
• It should be ensured that the research institution has unfettered rights to transfer IP relating to externally funded research and that there are no restrictions on its use • Joint ownership of IP should be avoided
Validity of rights
As well as attempting to anticipate future actions in relation to validity, copies of any previous decisions and relevant documentation should be reviewed in relation to past opposition, re-examination or revocation proceedings. Even if such proceedings were unsuccessful they will be a useful source of information on where the competition lies and from where future such actions can be expected. Finally, it should be confirmed that the seller has maintained confidentiality with third parties through proper use of Non-Disclosure Agreements in order to confirm that existing, pending and future patent applications will not be jeopardised through prior disclosure.
Validity of rights • The patent system is self policing to the extent that third parties can seek to have incorrectly granted patents rescinded • To reduce the risk of acquiring an invalid patent, it is wise to perform a validity search and review any past search opinions and relevant documentation • The consistent use of Non-Disclosure Agreements should be verified in order to confirm that possible future patent applications will not be jeopardised
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Although the award of a registered right brings with it a presumption of validity (at least in some countries), it should be remembered that the patent system is self policing. That is to say, Patent Offices are not infallible and third parties are free to seek to have a patent revoked if they believe it to have been incorrectly awarded. In the case of a patent, it may, therefore, be prudent to “wear the hat” of a competitor temporarily and investigate the patent’s validity by performing appropriate searches (see Chapter 3). The seller may be able to contribute past search reports or opinions conducted in relation to patentability and infringement.
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Scope and strength of the rights Although a patent is a monopoly right, it should be borne in mind that ownership of a patent is not a guarantee of eliminating the competition. The protection afforded by a patent is limited by the scope of its claims. The claims are, therefore, the most important part of the patent and should serve as a useful indicator in relation to the scope and strength of protection. However, although a pending patent application may be drafted with broad claims it should be remembered that these can be narrowed considerably during prosecution through the Patent Office. A patent’s description or the claims of a pending patent application may, therefore, give a false impression as to what it actually encompasses. A “weak” patent is of little use as it may be susceptible to being “invented Scope and strength of rights around” by competitors. • Patent claims serve as a useful indicator to the scope and strength of protection
When unregistered confidential information and know-how are the rights to be transferred, special care should be taken to establish whether such information was kept sufficiently secure. Inadvertent leaking or publication of such information may destroy any competitive advantage and render it useless.
• The descriptive section of a patent or the claims of a pending patent application may give a false impression of what scope the granted patent will have • The security of supposed confidential information should be checked
Enforcement of rights and third party infringement
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Whilst a more broadly drafted patent may appear to be stronger and have greater value, such a patent is more likely to overlap and thus infringe upon the rights of other patents, especially in an intensely active area such as biotechnology. A balance must be achieved in drafting patent claims narrowly enough to define the parameters Enforceable rights of the invention but broadly enough so as to cover what • Broadly drafted patents are more likely to overlap and infringe upon the rights of other patents is legitimately the property of the inventor. It is important to investigate whether or not the patent rights are or have been the subject of infringement proceedings. Conversely, it is equally important to determine whether third parties have been accused of infringement of the patent rights to be acquired. If, in the latter case, such actions were commenced but not pursued, then this indicates that the rights may be difficult to enforce.
• Acquisition of such patents may lead to a greater litigation risk • If the seller has unsuccessfully accused third parties of infringement in the past then this may indicate that the patent is weak and unenforceable • If unsuccessful attempts have been made to challenge the seller’s patent in the past this may indicate that the patent is robust
Licences The transfer of patent rights which are the subject of a seller’s existing licence agreement warrants careful consideration in any due diligence exercise. The terms of such agreements will need to be examined carefully for any obligations or restrictions they may impose on the buyer. The transferability of licences is dictated solely by the terms of the licence agreement in question. For example, in a worse case scenario, it may be that the terms expressly forbid assignment of the licence and effectively terminate it upon completion of a deal between the buyer and seller.
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Assuming that transfer of the licence may be allowable, the extent of the rights granted by it are also vitally important. For example, there is far more benefit in obtaining an exclusive, worldwide, perpetual licence as compared to a non-exclusive, restricted territory, limited Licences term licence. Cross-licences (in which the licensor and • Patents which are the subject of a seller’s “in” or “out” a competitor exchange licences in order to gain access licences warrant careful consideration in terms of any to each other’s technology) warrant special consideration restrictions and obligations imposed on the buyer in terms of the possible breach of legislation which • The transferability of licensed rights are dictated solely by restricts anti-competitive agreements. The limitations of the terms of the particular licence in question a licence may, therefore, not be immediately apparent • The rights imparted by the licence may be limited in scope but will have a profound impact on the value of the and may have a profound impact on the value of the transaction in question transaction in question. Considering the competition Assuming that the due diligence process thus far has not uncovered anything overly detrimental, there is yet another important factor not to be overlooked – the competition. It is all well and good securing what is believed to be a strong patent portfolio, but the due diligence process is incomplete without having considered the Considering the competition relative strength of the competition. For example, it is • The due diligence process should focus not only on the rights to be acquired but also on those of the competition possible to have a perfectly valid patent and not be free • By analysing the competition, dominating rights or gaps in to use it because a competitor has a dominating patent. the market can be identified, all of which will affect the value Conversely, such an analysis may help identify gaps in of the transaction in question the market which can be further exploited. Warranties
• The due diligence process can never hope to give 100% peace of mind and therefore warranties should be sought By evaluating confidential information and/or materials from the seller in relation to the most contentious issues belonging to another party, a reasoned decision can be made on whether or not to develop a relationship further. Assuming it has been decided to proceed, the first step will be to conduct a due diligence search.
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The due diligence process, however thorough, cannot be a foolproof process. Technology transfer agreements, therefore, usually include warranties which deal with the most contentious issues and act as “insurance” for the buyer. The seller should, at least, be willing to provide warranties confirming ownership, confirming it has registered and maintained all registerable rights and confirming that no third party rights are knowingly infringed. By agreeing to these warranties, the seller is aware that Warranties it can be sued if any of the warranties are false.
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8.2.3 Licensing v. assignment Licensing Licensing agreements are arrangements whereby the right to use a technology is formalised contractually. They are discussed in detail in Chapter 8.4. Such agreements should clearly reflect the understanding of each party in terms of their rights and obligations. Licences can impart differing degrees of monopoly by granting exclusive or non-exclusive rights in return for royalty and/or other payments to their owner. The important point to be remembered is that the execution of a licence does not transfer ownership of the intellectual property rights involved. In retaining ownership of the rights, the Licensing proprietor will usually want to place limitations • Licence agreements are arrangements whereby the right to and obligations on the licensee, such as controlling the use a technology is formalised contractually field of use, geographical extent, royalty payments, • A licence does not transfer ownership of the intellectual performance requirements, confidentiality and property rights involved and the proprietor may wish to indemnities to name but a few. Formalising these place limitations and obligations on the licensee numerous obligations can result in a somewhat complex agreement. Assignment
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Conversely, when rights are assigned, a recipient or assignee acquires all rights which previously belonged to the assignor. Assignments may arise during the outright purchase of IP or as part of the acquisition of a whole company. Although the party seeking access to the IP will usually prefer to gain the unfettered access enjoyed by taking an assignment rather than the limited access of a licence, there are situations when this may also be favoured by the proprietor. The movement of employees who take their expertise from one company or research institution to another can sometimes mean that redundant IP is best assigned to the new employer. Perhaps the need for an immediate windfall of cash rather than the “drip” effect of royalties will motivate a company to choose assignment over licensing. Assignments of IP should also be formalised by way of a written agreement. Such agreements lack the detailed restrictions on use, performance standards and termination provisions that are usually found in licensing agreements and so are usually far less complex. Some assignment agreements may, however, go further than merely confirming the transfer of rights and include representations relating to, for example, warranties and payment. The difference in complexity between assignments and licences can be attributed to the fact that licences represent long-term arrangements whereas assignments are one-off transactions. As well as representing a business transaction between two entities, assignments are also used on an internal level. They may form part of employment agreements in order to confirm or extend the employer’s ownership rights under common law or as bestowed by statute. When a company commissions work from outside consultants or contractors, assignments are used to ensure that ownership of the resultant IP is retained. It follows, therefore, that IP can be assigned while it is yet incomplete.
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Assignment • When rights are assigned (other than partially), the recipient or assignee acquires ownership of all rights which previously belonged to the assignor • Licences represent long-term arrangements whereas assignments are one-off transactions • As well as representing a business transaction between two parties, assignments are also used on an internal level and form part of employment agreements and agreements with consultants or contractors
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Advantages of assigning compared to licensing (i)
The assignee assumes risk: After an outright sale of IP rights the assignor receives an immediate reward with no further risk or involvement or obligation to maintain the patent.
(ii)
The assignor only has to deal with a one-off transaction: The assignor will not have the burden of following up to make certain that proper royalty payments are made.
(iii)
The assignor does not have to monitor the assignee’s exploitation endeavours: The assignor will not have to determine whether or not the assignee is adequately exploiting the invention. In contrast, a licensor may be required to verify that a licensee is exploiting the invention in accordance with the licence agreement.
(iv)
Circumstances may dictate assignment rather than licensing: Assignment rather than licensing may be appropriate if a patented product has been brought to market and it is doing very well but may have a relatively short remaining commercial life. Similarly, assignment may be appropriate if a customer wants a patented product to round out a line of its own products and portfolio of patents.
(v)
Negotiations are only with one party: One advantage of an assignment is that one typically negotiations are only with one party.
(vi)
The assignor may be able to negotiate a larger up-front fee for an outright sale as compared with the up-front fee for granting a licence.
(i)
It is difficult to negotiate a sale amount: Since an assignment usually involves an outright sale of IP rights for a fixed amount of money, it can be difficult to negotiate the terms of the sale.
(ii)
Assignment does not provide an opportunity to partake in additional profits if the invention turns out to be more valuable then anticipated: Once the transfer of rights is complete, the assignor will not profit further if the invention turns out to be more valuable than anticipated. An assignor must be prepared to accept the fact that the purchaser of its patent may make a substantially higher return than the sum the assignor received for the sale.
(iii)
The assignor will be unlikely to be given the opportunity to help exploit the invention: In that case, the assigned patent may never be properly exploited or may not be successful in the marketplace. However, if the assignor did want subsequently to use the invention the subject of the assignment it could try to negotiate a licence at or after the time of assignment of the IP rights.
(iv)
Part assignment: The assignee must be aware that joint ownership holds many pitfalls. A joint owner, regardless of the size of its interest, has full use of the patent. The joint owner may use or sell the patented invention for its own profit without concern or consultation with any other owner[s]. It may also sell its interest to any other party – but only with the agreement of the other owner[s].
(v)
If an assignment involves the sale of a business then government duties may apply to the sale.
(vi)
Sale may affect existing licence agreements: Sale may have to include conditions guaranteeing maintenance of existing licence agreements.
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Disadvantages of assigning
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Sponsored, collaborative and consortium research agreements Execution of a licence agreement is an appropriate means of gaining immediate access to an existing technology. However, many companies have adopted more far-reaching strategies by entering into longer term collaborations with universities and other external R&D sources. The benefits of such collaborations are evidenced by statistics in the United States which show that direct industry sponsorship of research at universities had risen from US$236 million in 1980 to more than US$1.3 billion in 199272. Three main models which are commonly adopted are described in more detail below. Sponsored research is probably the most frequent form of industry-research institution collaboration. This usually involves specific research goals and the agreement of set deliverables aimed at solving a particular problem identified by industry. Sponsored research agreements should be formal documents in order to avoid unforeseen problems and disagreements resulting from the differing priorities of the parties.
Research sponsorship • Licensing can be viewed as a way of gaining immediate access to existing technology; however companies are increasingly adopting more far-reaching collaborations • Sponsorship of research by industry involves the achievement of specific deliverables aimed at solving particular industry problems and should be formalised via a sponsored research agreement
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A collaborative research project is very similar to sponsored research in many respects but the difference lies in the fact that the research institution is not solely responsible for the contribution of ideas, technologies and creativity. In such a joint venture, both the industrial party and the research institution will fully participate, resulting in the need for different management of the inputs, deliverables and respective responsibilities of each party. A joint approach to research further reinforces the Collaboration research necessity for a written formal agreement. The terms of • A collaborative research project is an extension of such an agreement will be similar to those listed above sponsored research; however, the difference lies in that in relation to sponsored research; however, they should both the research institution and industrial party contribute to the attainment of specified goals. Such an arrangement be tailored carefully to define the respective demands different management of the inputs, deliverables responsibilities of each party. In particular, the IP and respective responsibilities of each party contributions, the ownership of and access to new IP and the ownership of any enhancements or derivatives need to be clarified at the outset. The terms may be stipulated by the government if public funds are involved or may be left to be freely negotiated between the parties. An extension of sponsored research and collaborative research is a research institution-based consortium which allows multiple participating entities to join forces and contribute resources in support of research into an area of common interest. This interactive research enables participating members to maximise the effect of their investments and enjoy cost-effective access to generic, pre-competitive research projects.
Consortium agreement • A research institution-based consortium allows multiple participating entities to join forces and contribute resources in support of research into an area of common interest. It enables participating members to maximise the effect of their investments • A consortium agreement governs the rights and obligations of the multiple parties who are combining their resources in support of research into an area of common interest
72 National Science Foundation, Academic Science and Engineering: R&D Expenditures Fiscal Year 1992 (Washington, D.C.: National Science Foundation, 1994) page 23
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Agreements governing such consortia can become quite complex in order to accommodate the demands of each party. Typically, consortium members have an equal right to negotiate a non-exclusive commercial licence to the results of the research conducted by the consortium. Ensuring signatories have power to execute agreements When executing any kind of agreement, it is of Caution paramount importance to ensure that the designated • Before signing any agreement, it is important to ensure that signatories of each party have the authority to sign on the designated signatories of each party have the authority to sign on behalf of their company or research institution behalf of their company or research institution. The signatories to an agreement bear the responsibility for ensuring that the terms of the agreement are met. Failure to comply with the provisions of an agreement may create serious liabilities and it is for this reason that a researcher, for example, should not sign any agreement on behalf of his research institution.
8.3 IP Valuation: How Venture Capitalists and Independent Valuers Value IP When scientific research has been transformed into IP, how is a value placed on it and in what circumstances is such valuation necessary?
A patent gives the patentee the right to control the use of patented technology and prevents or restricts other parties from entering the market. In the biotechnology area, the majority of profits are derived from IP protected products and services. However, many small biotechnology companies, while possessing a valuable portfolio of IP assets, will not have the financial, personnel or marketing resources to develop a drug through the clinical trial phase and then bring it to market. Such companies will, therefore, often seek to form licence arrangements or other legal relationships with other, larger companies. In such new ventures as mergers, buyouts and licences, the role of IP portfolios is crucial as it is increasingly recognised that control over new technology, products and processes provides the cutting edge. Accordingly, situations frequently arise when the value of IP, particularly a patent portfolio, is required and it is, therefore, important that the methodologies for evaluating IP are understood, at least on a basic level. Historically, there has been a reluctance to include IP as an asset on a company balance sheet, but now it is increasingly accepted that IP is an asset which can be valued, just as tangible assets are. The valuation techniques for IP are, consequently, evolving to meet growing demands.
8.3.2 How does a valuer view IP? Traditionally, IP was included on a balance sheet in the category of goodwill, the latter being seen to represent future economic benefit of unidentifiable assets. However, more recently, IP has been viewed as separable from goodwill and thus included as a separate asset on the balance sheet. This certainly makes sense as IP such as patents and trade marks can be identified and sold separately without disposing of the business as a whole and will generate future economic benefits.
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8.3.1 Introduction
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Accordingly, as it is clear that IP is a distinct asset, then it must be able to be attributed a value reliably. While the view of IP varies across jurisdictions, as do accounting rules, it is generally accepted that the first question which must be asked when facing a question of valuation of IP is “What constitutes the IP?” and the second question is “For what reason is the valuation required?” The purpose of the valuation will serve as an indication to the valuer of what is required of the valuation process.
8.3.3 Identifying the IP to be valued A patent attorney or other IP/legal advisers can identify the IP to be valued including patents, trade marks, designs, copyright and know-how. Domain names, business names and other intangible assets can also be included. A due diligence search may also assist in identifying relevant IP (see Chapter 8.2.2).
8.3.4 Some areas where an IP valuation may be required When considering exploitation of IP Patent owners may not want to exploit their IP commercially themselves. An assessment of both the current and potential value of its IP may assist the IP owner in deciding which exploitation route to follow. The valuation may also help determine the royalty rate at which the IP should be licensed. When considering “licensing in” technology In the biotechnology area, “licensing in” technology is not uncommon as it reduces development time of a particular product/service. An assessment of others’ IP is, therefore, required in determining whether or not to “license in” the technology.
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When seeking to raise investment finance The rapid growth in the biotechnology area of highly specialised technology-based companies has resulted in many of these companies seeking investment from either single investors or larger enterprises. Generally, the only key asset of these small companies is their patent portfolio, the value of which must be assessed as a prerequisite to investment by third parties. Other areas Other situations where the need for valuation of IP may occur are in respect of mergers/acquisitions, external and internal reporting (eg. to shareholders) and transfer pricing and purchaser price allocation.
8.3.5 Approaching the IP valuation Prior to an IP valuation, any prospective valuer must understand the purpose and nature of the valuation in order to determine the basis of the valuation and identify the most appropriate valuation method. Firstly and most importantly, it is the market that determines the value of IP: its valuation simply reflects or estimates that value determined by the marketplace. Different factors, however, can affect IP evaluation: The date of valuation Any valuation reflects the value of the IP at a certain time. No appraised value represents the eternal value of the IP.
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The strength of the IP The validity of the IP must be determined. Further, whether or not the IP right[s] protect the required object[s] and whether or not competitors can invent around the IP must also be assessed. Preferably, there exists a wellplanned patent strategy, comprising strong patents of good scope, which limits the possibility for a competitor to avoid the patents and thereby decrease the value of the IP. The purpose of valuation Intellectual Property valuation will vary according to the purpose for which it is being valued. When the valuation is undertaken for a commercial purpose which is generally part of an economic transaction, eg. transfer or licensing, the greater the demand by third parties to license a particular piece of IP, the greater the value of the IP and the greater the royalty on any licence. The mode of valuation Intellectual Property valuation is conducted on the basis of analysis of the market, various calculating models and estimated parameters. Thus, the IP valuation is really only a reasonable conclusion based on a determination of various indices and parameters. Identification of an infringing action The valuation of IP is affected by the existence of an infringing action. Clearly, if an occurring infringement is not stopped, the value of the IP is reduced. Often there is difficulty even identifying an infringing action. Negotiation As IP valuation is almost always part of an IP commercial transaction, the appraised value can represent the base value around which the buyer/purchaser or licensor/licensee negotiate. The appraised value is not the final trading price, as this is determined by negotiation between the parties.
The value of IP, particularly a patent, depends on the predicted future cash flow to be derived through the exploitation of that patent. This, therefore, entails the determination of the cost or value contributed by the IP and is often assessed by determining the volume of the product sold and the margin on that product to obtain the total profit made. It is important to note, however, that it may not be possible to reduce the value of IP to a simple equation and in assessing the value of IP, particularly patents, each case must be reviewed on its own merits.
Valuation methodologies Methodologies usual for valuation of IP: • Market-based methodology • Cost-based methodology • Economic or income-based methodology
Three available methodologies for valuing IP are reviewed below. The valuer will generally choose between them depending on the circumstances and the available information. The market-based methodology This method uses other recent similar market transactions as a reference to obtain the comparable market value of the IP. This method is not commonly used as, generally speaking, one commercial transaction is quite distinct from another, particularly where IP is involved. Further, the number of comparable IP transactions is very limited due to the unique nature of IP and, generally, information concerning such transactions is very limited.
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The cost-based methodology One cost-based method attempts to determine the value of the IP by way of determining the actual historical cost of generating the IP. This is rarely used as it is difficult to apportion R&D expenditure strictly relating to the specific IP and there is simply no way in which the amount spent on creating IP will equate to its value at any point in the future. As stated above, it is the market conditions which determine the value of a patent or other IP. Another cost-based methodology is termed the “replacement cost” method and entails estimating the cost of replacing the IP. Like the historical cost-based method above, this method is rarely used because it is difficult to calculate and determine the scope of cost in re-creating the IP and is, therefore, highly subjective. The economic or income-based methodologies These determine the value of the IP by estimating future profits attributable to the IP and discounting such a revenue stream to a present net value. Where it is not possible to give specific value to the commercialisation of an invention, this method is, of course, not useful. There are two main income-based methodologies which are used to value IP, particularly patents, on an economic value basis. These are the net cash flow method and the royalty method. The net cash flow method entails the estimation or projected cash flow to be obtained over the term of the patent which is then discounted in proportion with the risk attached to the projection. The royalty method values IP by capitalising the estimated annual royalty payable for the use of the IP under a licensing arrangement. Both these economic-based methods are discussed further below.
8.3.7 The income-based method of evaluating IP Net cash flow method This method utilises three factors: a discount rate, a profit amount and a profit term.
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1. Determining the discount rate This is dependent on the users of the IP, conditions of use of the IP and the purpose of the use. The determination of the rate involves an assessment of the risk to be taken by potential investors/purchasers. Such risk includes the market risk and it is important to note that the risk taken by investors in IP is higher than in respect of tangible assets; accordingly, the discount rate for IP is higher. The discount rate will, therefore, take into account pricing and regulatory issues, the stability of cash flows resulting from the IP and the possibility of competing technology being developed. Another factor which must be considered is the risk of the IP actually proceeding to a commercial product and the costs which must be borne by the licensee or investors to ensure that a commercial product does result. Clearly, a high discount rate will apply to patents which are at a very early stage commercially, eg. pre-clinical trials, whereas an established patent with a commercialised product will have a smaller discount rate and, therefore, an increased value. 2. Determining the profit amount (patents) Profit amount is the predicted future profit produced by the patented invention(s). The prediction of profits must take into account such conditions as the raising of capital, production scale, personnel and management quality, ability to apply and develop technology etc. For example, a very valuable patent may not produce the expected
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profit if it is transferred to a commercial enterprise with small capital and limited technology commercialisation ability. Further, the income resulting from a patented invention is generally tied to the total income of a particular entity and determining the contribution of the patented invention to the total profit is, therefore, often difficult. 3. Determining the profit term (patents) In determining the predicted profit term of a patented invention, the longest patent term legislatively available is recognised not to be the effective patent term, but may be the longest term stipulated in existing licence/contractual agreements as this represents the time during which profit should be produced for the IP holder. It is clear that the economic term of a patented invention will usually be less than the legal term of 20 years. Reasons for this include the rapid development in the biotechnology area which affects the life cycle of the patented product. Additionally, other competitors may have designed around the patented technology or used equivalent technology and the patented technology is then not able to realise large profits and its value decreases. 4. Determining the profit amount and profit term (trade marks) Trade marks or brands are easier to value than patents. As a trade mark, particularly a famous trade mark, is seen to provide a higher price and increase of market share to the product bearing the trade mark in comparison to similar products, the amount of profit is relatively easy to calculate. A famous trade mark is the reflection of an enormous amount of profit. Valuers, therefore, generally predict the future profit of a trade mark on the basis of actual profit of the trade mark over previous years. This prediction is based on the assumption that the future use of the trade mark will be as it has been to date and that the product associated with the trade mark will not become of inferior quality. Of course, if a trade mark has not been used, its value will be much more difficult to determine.
This method values patents by assessing the turnover attributable to a patent and using this as the royalty base. The turnover is basically estimated as outlined above. The royalty rate is assessed by examining either previous or current licences relating to the patent, as this gives the market value of the patent (assuming the previous licence is comparable to the current situation, for example, in duration, territorial limitations, exclusivity or otherwise). If no previous licence is available, an industry standard rate can be taken and adjusted up or down. Alternatively, the royalty rate may be assessed by allocating economic benefits deriving from the licensee’s use of the patent. This involves the projection of the turnover/profit margins by also considering working capital, marketing and anything else contributing to the exploitation of the IP. This method analyses the risks borne by the licensee and licensor and they are reflected in the royalty rate. The appropriate royalty rate is derived by finding a rate which yields a royalty stream over time which is equivalent, when discounted back to the present day, to a net present value which is the anticipated capital value of the licence.
8.3.8 Conclusion IP valuation is more than creative accounting. However, there are a number of methods of valuation of IP and each represents an available option. Inclusion of IP as an asset in its accounts reflects a company’s true and fair financial position. Valuation of IP is an important management tool which provides the directors and managers with a means of monitoring performance and ultimately increasing returns to shareholders.
IP valuation • IP assets valuation is a complex and highly specialised area and not a straightforward exercise. Experts should be engaged in IP valuation
• A website that provides a useful program for the valuation of IP is located at www.autm.net/members/profDevelopment/valuate/manual.html
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8.4 Licensing 8.4.1 Introduction Direct exploitation of IP rights such as patents by their proprietors may not always be possible and, therefore, will not bring the financial rewards that an invention merits. Accordingly, in order to exploit the financial potential of an invention fully, a proprietor of IP who is not able to exploit the IP itself generally considers licensing the IP. The significance of licensing IP is suitably exemplified by the assertion that the global technology transfer market is estimated to be worth US$100 billion73 annually. Of that, the United States alone is said to be responsible for some US$30 billion per year and if this figure were to be grossed up on the basis of an average 4-5% royalty rate, then the value of the knowledge-based economy is similar to that for tangible goods. Several factors are contributing to this global increase in licensing. For example, larger companies are finding that shortening product life cycles and a reduction in in-house R&D investment makes it difficult to keep up with the new breed of agile competitors. In revising their business strategies, they have found that licensing represents the best solution to these new challenges. Although licensing is a two-way process and can involve any type of IP, the following concentrates principally on licensing of patent rights from the perspective of the licensor. It should also be read bearing in mind that terms and conditions for licensing agreements are usually negotiated on a case by case basis. While the Patents Act 1990 (Cth) does not provide for licensing IP such as “know-how”, know-how is often included in a licence agreement to facilitate the licensee to practise the invention.
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Technical information such as formulae, techniques and operating procedures, commercial information such as customer lists and sales data, marketing, professional and management procedures and, indeed, any technical, trade, commercial or other information, process or device occurring or utilised in a business activity may be capable of being the subject of protection.
Licensing • A licence involves the owner of an invention (the licensor) granting rights to another (the licensee), thus enabling them to legally exploit and use the invention, usually in exchange for various undertakings and payment • Ownership of the IP remains with the licensor just as a leaser retains ownership when letting physical property. If a suitable licensee is found and the terms of the licence agreement are properly drafted, such an arrangement can represent a secure source of income whilst minimising outgoings and risk
73 UK Government White Paper on Competitiveness 1998 at www.dti.gov.uk/comp/competitive/an–ch3.htm
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8.4.2 Types of licence Definition The term “licence” is defined under Schedule 1 of the Patents Act 1990 (Cth) as meaning “a licence to exploit or to authorise the exploitation of a patented invention”. When a licence is granted over a patent, the effect is to give to the licensee a right to do what he/she would otherwise be prohibited from doing, ie. a licence makes lawful what otherwise would be unlawful. Formalities There are no requirements under the Patents Act (as there are for assignments) that a licence to a patent needs to be in writing. It is, however, most advisable to have a written agreement setting out the scope of the licence granted. The licence may be in the form of an agreement or a deed (in the event that consideration may be an issue). A licence may be exclusive, sole or non-exclusive.
Types of licences • A licence may be exclusive, sole or non-exclusive
Exclusive licence
• An exclusive licence permits only the licensee and persons authorised by the licensee to exploit the invention
An exclusive licence permits only the licensee and persons authorised by the licensee to exploit the invention and therefore excludes all other persons from doing so, including the patentee. (See definition of “exclusive licensee” in Schedule 1 of the Patents Act.)
• A sole licence permits the patentee to work the patent but prevents the grant of additional licences • A non-exclusive licence allows the patentee to retain the right to exploit the licensed property as well as the right to grant additional licences to third parties
An exclusive licensee has the right to start infringement proceedings (Section 120(2)). Further reference to an exclusive licensee is made when dealing with government use of inventions (Section 161).
A sole licence permits the patentee to work the patent but prevents the grant of additional licences as opposed to an exclusive licence which excludes the patentee from exploiting the patented invention. Non-exclusive licence A non-exclusive licence allows the patentee to retain the right to exploit the licensed property as well as the right to grant additional licences to third parties.
8.4.3 Reasons for licensing A particularly attractive feature of a licence agreement is its flexibility, which allows the respective parties to construct an agreement that is uniquely adapted to their particular circumstances. For example, the licensor may wish to transfer the IP rights as a whole or may, instead, divide them into several discrete rights and thereby retain some or distribute them amongst several licensees. In doing so, the licensor may retain an element of control by offering one or more licensees the right to use, manufacture and sell or sub-license, perhaps in restricted countries or market sectors. Licensing is a two-way process and can offer mutual benefits to be enjoyed by both the licensee and licensor from financial, marketing and strategic perspectives (see Figure 8-5).
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Figure 8-5: Mutual Benefits of Licensing
Benefits to licensee
Benefits to licensor
Savings on R&D investment
Creates new revenue streams by realising full potential of the technology
Eliminates risks associated with in-house R&D
Expands customer awareness
Reduces time to market
Helps overcome the challenge of establishing the technology in foreign countries – lower costs and risk
Ensures that products are leading edge
Savings on distribution and marketing expenses
Adds new product lines to a portfolio
A means of avoiding litigation
Strategic partnerships can be formed
Strategic partnerships can be formed
From a licensee’s point of view, licensing can achieve the following: • help a company make financial savings in R&D and effectively eliminate the risk of spending valuable resources going down an R&D “cul-de-sac”, • ensure that a company’s product range remains at the leading edge, which is particularly important in an environment where product life cycles are short and there is a danger of being left behind by the competition, • help keep a company’s product range up to date, and
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• help a company to quickly expand without the R&D effort and inevitable time-lag associated with going it alone. A fruitful licensing arrangement may also act as a catalyst for the formation of a longer-term strategic partnership between licensor and licensee. From the point of view of the licensor, licensing can be a source of much-needed revenue helping a company to continue developing, manufacturing and selling new products. In terms of marketing, licensing IP can expand customer awareness by entering new countries and markets. From a strategic point of view, licensing enables a company to take a product to market without the associated expenditure in terms of facilities and distribution networks that would otherwise be required. Licensing overseas helps to overcome the barriers involved in negotiating local government regulations and allows those who are familiar with local markets to maximise returns from the licensed product. Licensing can have the advantage of shaping future strategic relationships between the licensor and licensee which may lead to future licensing deals or partnerships. Finally, licensing can be a means of avoiding litigation in the event that one or both parties infringe the rights of the other. A one-time fearsome competitor can become a willing partner overnight when a sharing of mutual benefits is enjoyed.
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8.4.4 Advantages and disadvantages of licensing
(i)
A licence (exclusive or non-exclusive) may ultimately deliver more money than an assignment: If the product’s value increases with the success of the licence and with inflation, a licence income can grow over a 20 year period to many times what would have been the sale value at the time of entering into the licence.
(ii)
The licensor can regain the patent easily by not renewing the licence (exclusive or non-exclusive) at the end of the licence term.
(iii)
Infringement/revocation proceedings are avoided, especially where a potential licensee is already selling a possibly infringing product: Another instance where a (non-exclusive) licence may be desirable is where a company is already making and selling a product which is or arguably is an infringement of a patent. In this situation, the company may be interested in obtaining a non-exclusive licence under the patent to remove the possibility of infringement action. This may be advantageous to the patent owner, since even a relatively small royalty may be preferable to the expense of a lawsuit and the risk of the patent being found invalid and/or non-infringed.
(iv)
The patentee can obtain ownership or licence to any improvements made by the licensee if a suitable right to improvements can be negotiated by the patentee in the licence.
(v)
The licence terms (both exclusive and non-exclusive) can be flexible so as to suit one and/or the other party: A licence can be limited territorially or only for certain types of products covered by the patent. An exclusive licensee could be required to maintain the patent and to be directly responsible for invalidity and infringement issues.
(vi)
If it is a non-sole licence, any number of non-exclusive licences may be granted and the patentee can also continue to exploit: A patent owner has the right to grant any number of non-exclusive licences. The patentee can also continue to exploit the patent. Several non-exclusive licences may permit more rapid nationwide marketing of the invention.
(vii)
The amendment of a patent does not require a non-exclusive licensee’s consent.
(viii)
A non-exclusive licensee is not regarded as equivalent to the patentee in cases of Crown use and so is not entitled to compensation.
Additional advantages of exclusive licence (i)
Negotiations are only with one party: The main advantage of an exclusive licence is that negotiations only occur with one party, who then has full responsibility to exploit the invention.
(ii)
The up-front payment and/or royalty rate is usually higher for an exclusive than a non-exclusive licence: An exclusive licence is more valuable than a non-exclusive licence because it means that others, including the patent owner, do not have the right to exploit the patented invention.
(iii)
In an exclusive licence, the performance of only one party has to be monitored: A common performance clause in a licence agreement simply states that the licensee will use its “best efforts” to develop or market the licensed products. Although the standard of “best efforts” is a very high legal standard, it is not something easily defined or demonstrated, and a clear case for terminating or
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modifying the licence often cannot be made if a licensor tries to challenge the licensee’s performance. When a party commits to a best efforts standard, it is legally committed to use all of its resources to accomplish the task. When there are multiple non-exclusive licensees, the licensor will have the burden of monitoring the performance of each one.
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Disadvantages of licensing (i)
If an exclusive licence is in place, the patentee cannot grant licences to other parties and the patentee cannot exploit the invention (unless the patentee obtains a licence from the exclusive licensee): The drawback is that if the chosen licensee does not effectively promote or sell the invention, the patentee cannot then do so, nor can the patentee grant further licences to others. Therefore, in negotiating an exclusive licence, it is very important to be sure that the licence agreement sets forth clearly the efforts that the licensee will have to expend, as well as minimum acceptable levels of sales and/or income to the patentee.
(ii)
Unknown factors have to be taken into account when drafting a licence (both exclusive and non-exclusive) agreement: In drafting a licence agreement, one must take into account many conceivable events and influences that can affect the subject matter of the licence so as to minimise future problems, costs and litigation. In writing the licence agreement, it is important that, as far as possible, all eventualities be anticipated and clearly defined, including both positive and negative changes over the course of the agreement’s term. For example, if the sales volume is either greater or less than anticipated, what options do the licensee and licensor have to react to the circumstances? In the event that the licensee becomes insolvent, does the licence automatically terminate at the option of the licensor?
(iii)
The performance of a licensee (exclusive and non-exclusive) may be difficult to monitor: Licences (exclusive and non-exclusive) require constant attention and may be upstaged by other new developments. The performance of the licensee may be difficult to describe or monitor, but will need to be monitored by the licensor. It may be difficult for a licensor to satisfy a Court (if need be) that a licensee has not met a performance standard agreed to in the licence.
(iv)
Ultimately a patentee may end up negotiating with more than one party: A patentee may have to negotiate licence agreements with more than one party, each of whom then has responsibility to exploit the patentee’s invention.
(v)
The up-front payment and royalty rate for a non-exclusive licence is not as valuable as an exclusive licence and up-front payment not as much as for an assignment: The up-front payment and royalty rate for a non-exclusive licence is usually not as great as for an exclusive licence because others may also have the right to exploit the patented invention. For similar reasons, the up-front payment for an exclusive licence is usually not as much as for an assignment.
(vi)
Non-exclusive licensees cannot start infringement proceedings (unlike patentees and exclusive licensees): Therefore, in the case of a non-exclusive licence where there is an infringing third party, the patentee would normally be responsible for commencing an infringement action.
Additional disadvantages of exclusive licence (i)
The amendment of a patent is not allowable if there is an exclusive licensee or mortgagee and the consent of the exclusive licensee or mortgagee has not been given for the amendment, unless consent for the amendment has been unreasonably refused: s.103 Australian Patents Act 1990 (Cth).
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(ii)
When an exclusive licensee sues for infringement, the patentee must be joined to the proceedings: Infringement proceedings can be started by the patentee or by an exclusive licensee. If an exclusive licensee starts infringement proceedings, the patentee will normally be joined as a plaintiff, but must be joined as a defendant otherwise.
(iii)
The patentee is joined with the exclusive licensee in a non-infringement declaration application: Under s125 of the Australian Patents Act 1990 (Cth), a person can apply to a prescribed Court for a declaration that a proposed action would not infringe a claim of a particular specification. The applicant, under s125, must join the patentee/exclusive licensee as respondent. The court cannot make the declaration applied for unless the applicant (a) has asked the patentee/exclusive licensee for an admission that the proposed action would not infringe the patent, (b) given full particulars of the action, and (c) undertaken to pay a reasonable sum for the patentee’s expenses in obtaining advice about whether or not the action would infringe; and the patentee has refused to make the admission asked for.
8.4.5 Assessing the idea – the “innovation audit” Before entering into licensing negotiations, and especially for the prospective licensee, it is important to have a clear idea of what exactly is to be licensed, why it is to be licensed and also to take an objective view of the invention, the strength of its protection and its potential value. Such an “innovation audit” will help to confirm that licensing is, indeed, the best vehicle for commercialising the invention and, if so, also help to identify the most appropriate licensee. The issues shown in Figure 8-6 will need to be taken into consideration. Three of the most important conclusions to be made from this assessment relate to the strength, relevance and enforceability of the IP. Strength
Relevance The technology to be licensed must be relevant and provide a significant advantage in the marketplace. Furthermore, the type of IP right must be appropriate for the nature of the invention. For example, a manufacturing process may be best protected by keeping it confidential rather than securing patent protection. Enforcement Finally, consideration must be given to whether it would be possible to detect infringement of the rights by a third party. If such infringement is likely to be difficult to detect then the rights are largely unenforceable and may have a lower perceived value to a licensee.
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To determine the strength of the IP to be licensed, one must consider more closely which IP rights are in force and whether they exist in the major market countries. More fundamentally, it needs to be ensured that the rights are owned by the licensor and that in the case of a patent, it is novel, non-obvious and relates to patentable subject matter.
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Figure 8-6: Whether to License – Checklist Key considerations
Comments
Yes
No
N/A
IP owner’s goals
Should the rights be sold outright for an immediate large return?
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Should the rights be licensed for a longer-term income stream?
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The stage of Is it still at an embryonic stage? development of the idea Has it been exemplified in any way?
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Demonstration of the idea Is there a prototype?
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Transfer of invention to the licensee
Can transfer be achieved solely by reference to a patent?
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Are there any additional requirements such as technical support?
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Is the invention protected by a patent or other IPR?
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Is there an overlapping portfolio of patents?
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Are the rights strong and enforceable?
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Are any third party rights infringed?
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What territories are covered?
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Level of investment required
Is significant investment required to take the invention to market?
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Value to licensee
Will the invention give the licensee a market lead?
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Has the marketplace in which the product/service will sell been thoroughly analysed?
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Is there strong competition?
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Is it a new market?
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Defining the IP to be licensed
Analysis of the potential market
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8.4.6 Risk and reward – from the licensee’s perspective A potential licensee will be most attracted to a licensing deal where the risks are perceived to be minimal and the rewards are potentially high. The perception of risk will always be greater when a technology is at an early stage. In such circumstances, it may be wise to hold off commencement of licensing the technology until it has been proven and is closer to being a marketable product. Another strategy is to try to predict the negative responses that may be received from potential licensees and, if possible, dispel any misconceptions at the outset. This can be done by consulting experts in the field and listening to their concerns and comments in relation to the technology. It will, hopefully, then be possible to prepare appropriate countering arguments in advance. Possessing some form of registered IP protection will obviously play a large role in prima facie demonstrating a reduced risk. As well as demonstrating the low risk, it is equally important to increase the perception of the size of the possible rewards that may be reaped from the technology to be licensed. This may require evidence such as market analysis, customer research and surveys. It is possible that a potential licensee may need time to evaluate an invention before making any firm commitment. This is especially true when the invention is still in an early stage of development. In such a circumstance, an option agreement can be executed which gives the interested party a defined period of time to evaluate the invention, usually in return for paying an option fee and perhaps contributing funding for continued research. It is a good idea to attach draft terms to the option agreement at this stage so that both parties are clear as to the likely shape of any future deal.
8.4.7 Risk and reward – from the licensor’s perspective
The terms and conditions of a licence agreement will be determined largely by the nature of the technology to be licensed and the nature of the industry into which it is being introduced. For example, if the technology is generic and can be used in numerous fields, then it may be more profitable to license to separate licensees in each of the fields. To do so requires careful wording so as to avoid any ambiguity and potential overlap between fields of use. Another way to divide the rights is to license to different manufacturers or distributors in different territories.
8.4.8 Non-exclusive or exclusive? The outcome of the above considerations will dictate whether to license on a non-exclusive or an exclusive basis. A non-exclusive licence allows the licensor to execute an unlimited number of licences and, therefore, the licensees may find themselves in competition with others and possibly also with the licensor. A nonexclusive licence may be appropriate where, for example, there are many small players in a fragmented market and the product has been fully developed. An exclusive licence ensures that the licensee is subject to no competition, even from the licensor. Exclusivity is often the only option when a licensee is committed to substantial expenditure, effort and risk in attempting to develop and exploit the licence effectively, as is the case in the pharmaceutical industry. Such exclusivity can, however, be restricted to certain fields of use or geographical areas. For example, a licensor may grant separate exclusive licences to licensees in Europe and the United States.
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Before finding a licensing partner, it is worth giving some thought to the likely structuring of the licensing deal and how this can be done to balance the risk and reward concept from the licensor’s perspective. The key to this is the terms and conditions of the licence agreement, which should be considered very carefully. They are likely to be negotiated at length by both the licensor and licensee as each party attempts to tip the risk/reward balance in their favour and so prior preparatory effort in this area will not be wasted.
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8.4.9 Finding the right licensee Whatever the conclusions of the “innovation audit” and risk/reward assessments, it is unlikely that licensees will beat a path to the licensor’s door and some sort of marketing will inevitably be required. A marketing strategy should be developed which reflects the type of licensee being sought. The right licensing partner is one who needs what the licensor has and has what the licensor needs. Licensees will probably need to possess development funds, relevant production skills, particular technological know-how and access to overseas markets. Once a list of possible candidates has been compiled, each one should be assessed in more detail for suitability. It is a good idea to contact each potential licensee “in confidence” to gauge their interest in the invention and assess the technology’s potential value. The best licensee will probably have a direct strategic fit with the technology. Care should be taken when licensing to holders of competing technology since their interest may be driven by a desire to hold back the technology to be licensed thus ensuring the continuing success of their own. A licensee who seems to have complementary rather than competing technology and is looking to expand its product range is likely to be a more suitable partner. Golden rules of negotiation • Everything is negotiable
8.4.10 Negotiations and payment
• Agreed points should be recorded • Difficult questions are not to be avoided
The key to successful licence negotiation is thorough • Any impatience and anger should be controlled preparation. By knowing one’s own goals and • Flexibility is paramount understanding, as far as possible, where the other party is coming from, a win-win resolution can usually be found. Once a suitable partner has been found and the invention disclosed to it, the process of arriving at an agreement commences. The cornerstone of the negotiation will focus on financial compensation or “consideration” due for the grant of a licence and will typically include the following: • Licence initiation fees or up-front fees. CHAPTER 8
• Running royalties based on gross revenues received by the licensee through the exploitation of the invention. • Minimum royalties, milestone payments, or other resource commitments by licensees to the commercialisation of the invention. It is important to keep in mind that if both parties cannot benefit from the licence then it will probably fail, so a licensee should be reasonable when seeking a share of the revenue associated with the sales of the technology. Specific payment amounts and royalty rates will be determined by factors such as the nature of the invention, its value, the strength of its protection, its market and its cost of manufacture. However, as a rule of thumb, a low selling price and high volume product equates to a lower royalty rate and a high selling price and low volume product equates to a high royalty.
8.4.11 The licence agreement Licensing negotiations will cover a wide range of important issues which should be formalised in a written licence agreement. Each agreement will be different although several standard terms and provisions are usually common to all. These are highlighted in the checklist (Figure 8-7) and discussed in detail below.
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Drafting a licence agreement While the licence agreement will usually be drafted by the research institution or other body licensing its invention, the fundamental principle when drafting an agreement is to be alert to the commercial objectives each party wishes to achieve from the relationship. With this in mind, the licence agreement, by which a licensor will grant a licence for a term in a particular territory on an exclusive, sole or non-exclusive basis, will include both the licensor’s and the licensee’s obligations and a number of terms and conditions. A licensing agreement would typically include the following definitions and terms: Parties • Identities of the parties to the agreement, including names and addresses of registered offices and principal places of business of the parties. Licensed property • Licensed property may include: patent(s) (usually contained in a schedule to the licence); invention(s) which are the subject of application(s) (also identified in a schedule, in regard to which thought should be given to including standard patent(s), innovation patent(s), patent(s) of addition and further additional patent(s) which may be granted thereon – such a list can be adapted to meet the requirements of other jurisdictions if appropriate); know-how, confidential information etc. Type of licence • Exclusive, sole or non-exclusive. If exclusive, whether sub-licensing is permitted and on what terms. Licensed territory • Whether one, some or all countries in which a licensor has obtained rights.
• Should know-how be included in the licence, then whether a provision including an acknowledgment by the licensee for the agreement to continue notwithstanding the lapsing of patent applications/patents is to be included in the licence. Improvements • In many fields, particularly in the field of biotechnology, where possibly one or both the licensor and licensee are engaged in ongoing research and development, it is conceivable that improvements will be made to the invention during the term of the licence agreement. Consideration should be given to whether improvements made by each of the licensor and licensee should be cross-licensed to the other party (subject to the payment of royalties or on a royalty-free basis for the term of the agreement) and whether the improvements (and any ensuing IP) of the licensee are to be the property of the licensor (subject to restrictive trade practices considerations) or licensee. Royalties • Royalties represent the main consideration received by the licensor from the licensee for the grant of the licence. • A licence agreement should specify how royalties are to be calculated, for example, by fixed sum payment, by a percentage of the licensee’s profit arising from the use of the licensed property, a fixed sum per unit or a percentage of the selling price produced by the licensee using the licensed property.
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Term of licence agreement • Whether the term ends on expiry of relevant patent rights (including any extended term) or whether a shorter (for example, 3 to 5 year) term to be renewed automatically for similar successive periods in the absence of notice given by either party.
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• Consideration should be given to whether the royalty will include an up-front payment and/or whether in the early stages of the term, the rate of royalties is to be lower or royalties are to be deferred altogether. (It may be best to be realistic about early payment in the biotechnology area, particularly where it may be a number of years before significant returns on an invention are realised.) • The currency in which the royalty is paid should be stipulated in the agreement and provision should be made in the agreement for the licensor to have access to the accounts, records and documents of the licensee in respect of dealings with the licensed product. • Particularly with regard to an exclusive licence, minimum guaranteed royalties should be provided in the licence agreement and whether, in the absence of obtaining these royalties, the licence should be terminated or whether the licensee is given the option of paying the difference to the licensor or converting the licence into a non-exclusive licence. Termination • Usually for: unremedied breach of agreement by either party, licensee ceasing to carry on business, going into liquidation (if a corporation), becoming bankrupt (if an individual) or if substantial change of ownership or control in licensee occurs. • Obligations of a licensee on termination should include requiring the licensee to cease exploiting the licensed product and to return any documents, technical information and copies thereof and all other materials provided by the licensor during the course of the licence. In biotechnological innovations, reproducible organisms including cell lines, gene constructs, organisms and/or expression vectors may be involved. As the licensee may, on termination, retain possession of the means of production, the licensee’s obligations with respect to these organisms must be specifically dealt with in the licence agreement. Governing law • Whether where the licensor’s principal office is located (for the convenience of the licensor) or at the place where the licensee is located (the place where any dispute usually needs to be resolved). Obligations of licensor • Provisions often include technical assistance or know-how to be provided by the licensor and the basis for reimbursement of travel expenses and professional time.
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• Payment of patent renewal fees (safer than leaving to licensee) to be reimbursed by the licensee is required. Obligations of licensee • Royalty payments. • Improvements. • Best endeavours to manufacture, promote and sell the licensed product. • Accounting and reporting. • Protection of IP rights. Whether the licensee is expected to identify and prosecute patent infringements. • Responsibility for government charges and taxes. • Confidentiality and preservation of confidentiality. • Marking all promotion and advertising material referring or relating to the licensed product and/or licensed products to indicate that the products are made under licence from the licensor. Product liability • Usually the licensee is to accept full responsibility under product liability legislation and indemnify the licensor against all claims and to maintain a policy of product liability insurance to a specified value. IP expenses • Typically, the licensee is expected to pay for obtaining patent protection in countries in which the licensee is licensed to exploit the product.
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Figure 8-7: Licence Agreement – Checklist
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Drafting a licence agreement
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Product liability • Does the licence agreement provide for product liability including product liability insurance?
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8.4.12 Limits on the patentee’s rights to impose restrictions under the Patents Act Section 144 of the Australia Patents Act 1990 (Cth) is essentially an anti- “tie-in” provision directed at conditions in contracts aimed at forcing a licensee or buyer of patented goods to buy other goods or services from the patentee, or preventing the licensee or buyer from using a product or process supplied or owned by a person other than the patentee. With some exemptions such conditions are void. More information on licensing can be obtained from: Licensing Executive Society of Australia and New Zealand (LES) PO Box 842 Mulgrave VIC 3170 Ph: (03) 9574 9651 Fax: (03) 9574 8066
8.5 Defence of IP Rights
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8.5.1 Introduction If an IP protected product or process is a leading product or process in a specialised field, or is a “base” product or process, which means it is required to be used by the relevant industry as part of their standard practices, then almost inevitably some competitor will seek either to exploit the IP rights without the IP owner’s permission or alternatively seek to avoid them. Accordingly, a crucial part of managing an IP portfolio includes forcefully pursuing infringers of the IP and also protecting one’s own organisation against infringement claims by other IP holders. To obtain a competitive advantage from IP, access to it by competitors must be prevented.
8.5.2 The reality of defending IP Defending IP can be complex, expensive and very time-consuming. According to one technology broker, in 1999, the median estimated cost of a patent infringement action in the United States through trial and appeal was in the order of US$1.5 million. In Australia, the cost to a patent owner of litigating a patent infringement action at first instance (usually before a single judge of the Federal Court) may extend to A$750,000 and beyond.
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Pursuit of infringers is extremely important as competitive advantage may be lost if even one infringer is allowed to continue unchecked, and such pursuit is often required to be effected by small entities, particularly in the situation where the IP rights infringed relate to a leading product or process in a small specialised area.
8.5.3 Enforcement of IP rights in Australia Civil and criminal remedies In Australia, civil remedies are generally available for enforcement of all types of IP rights. Criminal remedies are available to enforce certain IP laws. In a civil trial, a determination is made in accordance with a “balance of probability” standard. The onus of proof required to meet this latter standard is less onerous than that required in a criminal trial, where a determination is made in accordance with a “beyond reasonable doubt” standard. Sequence of events following an infringement of an IP right Where an infringement of an intellectual property right is purported to have occurred, the defence of the IP may, for example, take the following sequence of events: (a) Alleged infringing act(s). (b) Cease and desist letter. (c) Commencement of proceedings by Application and Statement of Claim. (d) Defence and any cross-claim. (e) Reply. (f)
Discovery of documents and, in limited circumstances, administration of interrogatories.
(g) Affidavit evidence in support of the claim and any cross-claim. (h) Affidavits in response. (i)
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(k) Appeal to the High Court only with special leave. Assessment of damages or an account of profits.
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Interlocutory orders In addition to a final injunction restraining infringement, a patentee may, in some circumstances, seek a temporary injunction on an urgent basis, pending a final trial, if it is suffering unquantifiable damage and acts without delay. If an interlocutory injunction is sought there will be an interlocutory hearing shortly after proceedings are commenced, prior to completion of formal pleadings and usually prior to discovery; however, both parties will file affidavit evidence in relation to the claim for urgent relief. The Court may also make what is known as an Anton Piller order74 which: “... enables the plaintiff to enter onto the premises first, to seize the infringing material, and secondly, to obtain information as to the persons from whom the defendant obtained the supplies of the infringing material and the persons to whom the defendant in turn has supplied the infringing material.”
74 Anton Piller K.G. v Manufacturing Processes Ltd [1976] 1 Ch. 55
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Generally, an interlocutory injunction or an Anton Piller order will only be granted on the plaintiff providing an undertaking is made to pay compensatory damages as determined by the Court to allow for the circumstance where the plaintiff fails to make out its case at the final hearing. The Court may grant an interlocutory injunction known as a Mareva injunction which, in effect, freezes the defendant’s assets, thus preventing them from being removed from the jurisdiction or from being used up prior to the full trial. After full trial, a successful plaintiff may be granted, at the Court’s discretion, a final injunction, which the defendant may later apply to have put aside in the event of appropriate changes of events. In the event the defendant disobeys the injunction, the Court may confiscate property of the defendant, fine and/or imprison the defendant. Other remedies available to the IP owner in IP litigation Damages When assessing damages, the Court is concerned with compensating the wronged party for the damage suffered and the amount of damages awarded is “to be, so far as possible, that sum of money which will put the injured party in the same position as he would have been if he had not sustained the wrong” 75. Hence, if a patentee is a manufacturer of products under a patent, damages in a successful infringement action would be assessed having regard to the profit that would have been made by the patentee had the patentee made and sold the equivalent of the infringing products. On the other hand, if a patentee was licensing its patented technology and receiving royalties therefrom, damages in a successful infringement action would be assessed having regard to the royalties that the infringer would have been required to pay to the patentee had the infringer been under a licence from the patentee.
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Account of profits When assessing an account of profits, the Court is concerned with requiring the infringer to provide “his illgotten gains to the party whose rights he has infringed”76. Guidance was provided to a Court assessing an account of profits as follows: “What has the plaintiff (sic) expended on manufacturing these goods? What is the price which he has received on their sale? And the difference is the profit”77. If the defendant establishes that infringement was innocent then damages or an account of profits will not generally be awarded (except for copyright infringement where an account of profits may be awarded even when innocent infringement is established). The Court may also order delivery-up and/or destruction of infringing articles. The Court may award costs to the successful party.
75 General Tire & Rubber Co. v Firestone Tyre & Rubber Co. [1976] R.P.C. 197 76 Colbeam Palmer Pty Ltd v Stock Affiliates Pty Ltd (1968) 42 A.L.J.R. 209 77 Peter Pan Manufacturing Corp. v Corsets Silhouette Ltd (1963) All E.R. 402
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8.5.4 Cross-claims and defences to infringement actions An infringement action will proceed to trial if the defendant alleges that its acts, products or apparatus are not covered by the claims of the patent and/or the defendant cross-claims for an order that the patent is invalid on any one or more of the grounds available under the Patents Act 1990 (Cth), namely: • that the patentee is not entitled to the patent, • the invention is not a patentable invention, • the patentee has contravened a condition in the patent, • the patent was obtained by fraud, false suggestion or misrepresentation, • an amendment of the patent request or the complete specification was made or obtained by fraud, false suggestion or misrepresentation, or • the specification does not comply with subsection 40(2) or 40(3). The defendant can also allege: • estoppel, if by its acts or words the IP owner led the infringer to believe that the IP would not be enforced and the infringer acted on that understanding to its detriment, • delay or acquiescence, which is unlikely to avoid an injunction restraining infringement, but may substantially reduce or even nullify the damages awarded.
8.6 IP Insurance
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Often, a young biotechnology company has most of its significant assets in the form of IP, particularly patents. Given that the frequency of patent litigation is increasing and that the average cost of funding a patent litigation case at first instance may be in the order of A$750,000-$1 million, depending on the jurisdiction and degree of complexity of the technology, then it is quite clear that patent proprietors need some form of insurance coverage to provide some protection against such a level of costs.
8.6.1 Categories of IP insurance IP insurance is available from a select number of professional liability insurers and can cover patent, trade mark and copyright enforcement litigation. This can be broken down into the following categories: Patent insurance This is insurance which protects a patent holder against loss due to infringement of a patent. This also includes liability insurance which protects the insured against infringement claims by a patent holder. Patent enforcement litigation insurance This is insurance for a holder of a patent against infringement of the patent by a third party. Alternatively known as “offensive insurance” or “patent pursuit insurance” or “infringement abatement insurance”, the coverage of this type of policy usually includes the cost (or a good portion thereof) of legal costs to enforce the patent. Often, such policies include a co-payment provision and exclude liability for compensatory or consequential damages, fines, punitive damages, exemplary damages and multiple damages. Effectively, an insured company is using the insurance company’s funds to pursue an infringer.
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Patent infringement liability insurance This is a form of professional liability insurance for manufacturers, vendors and other entities accused of infringing a patent holder’s rights. Otherwise known as “defensive insurance”, the coverage of this type of insurance policy is generally provided for defence and indemnity and can include a portion of the legal defence expenses, damages or both. Such policies can, therefore, cover profits and royalties that must be turned over to the holder of the patent, ie. the IP owner.
8.6.2 Obtaining IP litigation insurance Many insurance companies offer both offensive and defensive patent insurance policies. These are generally underwritten by a major insurer and made available to insurance retail agents. In respect of offensive insurance policies, which take effect when someone else infringes any one of the insured’s patents, the underwriter may provide, as an example, A$2 million coverage for legal costs with a 25% co-payment. Such a policy may cost a company A$50,000. However, the most common policies cover 75% of the enforcement costs up to a fixed amount, which is usually in the order of A$500,000, with annual premiums being about A$4000 for this coverage. The insurance underwriter, of course, assesses the validity of the patent portfolio to be insured prior to agreeing to issue a policy, and may limit the coverage to specific patents which may be of economic value and also valid on the initial assessment. The insurance underwriter may also require some or all of the following details from the patent owner: • licensing of the patent[s], • other attempts to enforce the patent, • scope and validity of the patent claims, • competitors and possible competing products, • other key patents in the field,
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• a validity and infringement opinion from a patent attorney. Immediately the insured becomes aware of any infringing activity, the underwriter must be notified in writing and must also be provided with an infringement opinion relating to the relevant patent[s] from an independent patent attorney. Such “offensive” insurance policies can even be taken out after a patent owner has discovered the existence of an infringer, but the policy will, of course, cost more for such a retrospective coverage. In respect of defensive insurance policies, these may cover both damages and defence costs within agreed limits. Some policies may only cover any defence costs. Again, the insurer will assess the company’s procedures which are in place to avoid or protect against patent infringement. As an example in respect of such a defensive insurance policy, the coverage may be about A$1.5 million, with the premium in the order of A$75,000. Co-payments will also generally be included in such a policy and may range from 20% to 25%. More extensive policies can cover up to A$20 million in damages, plus defence costs, with the annual premiums of such policies being in the order of A$300,000-800,000.
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Considerations when purchasing patent insurance A review of the company’s needs should be undertaken when considering purchasing either offensive or defensive patent insurance. Such a review should include a realistic assessment of the value of the patent portfolio and the probability that the company’s actions will infringe another party’s patents or that the company’s patents will be infringed by another. It may be that the potential patent insurance money would be better directed to research and development. Considering whether or not to purchase any form of patent insurance is an essential step in the IP management process of any company. Patent insurance can materially increase a company’s net IP capital worth. Advantages of patent insurance The main advantage of taking out a patent insurance policy is, quite simply, that it assists if a patent owner needs to prevent someone from infringing any one or more of their patents. Additionally, it enables smaller or start-up companies to defend their patents against larger companies without having to settle or license. Further, having an insured patent portfolio often attracts investors. Additionally, possessing offensive patent insurance strengthens a patent owner’s ability to license its patents to corporate entities who want to commercialise certain aspects of the patented technology. Possessing defensive patent insurance reduces the concern of needing to settle a patent litigation matter to avoid escalating costs. Disadvantages of patent insurance Apart from the most obvious disadvantage of the cost of obtaining and maintaining patent insurance, another disadvantage is that such patent insurance policies are only relatively new in the marketplace and have not yet been fully tested in their effectiveness. Some observers have expressed concerns at the wording of insurance policies, warning that they could lead to litigation between the insurer and the insured company. A further disadvantage is that insurance may actually encourage litigation where negotiation and settlement may, in fact, be more commercially appropriate.
• Before purchasing any form of patent insurance, an institution’s needs should be carefully reviewed. Such a review includes analysing the patent portfolio, and assessing its value and the likelihood any one or more of the patents will be infringed. The review should also consider whether any other insurance coverage already exists and its extent (if any). • An assessment whether or not to spend money on R&D instead of insurance should also be made carefully, considering whether the company has enough available funds to defend or prosecute patent litigation. • Defensive patent insurance should not be taken out unless there is reason to believe that an infringement suit is likely, OR that a patent litigation matter could result in serious damage to the company or institution. • Offensive patent insurance makes sense for small to medium-size companies, but is less appropriate for large companies.
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8.7 Biotechnology IP Management and Issues Relating to Indigenous Peoples Increasing value is being placed on the traditional medical knowledge of indigenous peoples and with that growing commercial value come the issues of whether the indigenous people have any equity in the commercial product and are entitled to be compensated accordingly, and also whether or not they are entitled to ownership of any IP which may result from their traditional knowledge. Traditional medical knowledge and IP ownership In the past, the identification and isolation of active pharmaceutical agents in some cases has been guided by indigenous peoples’ knowledge of the medicinal and other properties of naturally occurring biological material. Such increasing reliance on traditional medical knowledge is demonstrated by the fact that, in 1995, the estimated worldwide market value of pharmaceutical derivatives based on indigenous peoples’ medical knowledge was US$43 billion per year78. Accordingly, an important concern of indigenous peoples is that their traditional knowledge of natural resources is being exploited by pharmaceutical companies, scientists, medical researchers and others for commercial gain, without any benefits or compensation being gained by the indigenous people. Compensation of the indigenous people for the exploitation of their traditional knowledge has, to date, been very haphazard. One often-quoted positive example79 is the agreement between Merck and a Costa Rican non-profit organisation INBio, in which Merck has been supplied with 10,000 plant samples together with information concerning their traditional uses. Merck has reputedly paid US$1.35 million for these samples and a royalty of between 2% and 3% on the sales of any resulting pharmaceutical product.
8.7.1 Adaptability of IP laws to traditional knowledge Prior publication of traditional knowledge
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Historically, it has been the practice of ethnobotanists and others to publish the various uses of plants and other resources by indigenous peoples. In some instances, this may affect the novelty of an “invention”. Inherent difficulties of patent law It is noted that indigenous peoples’ traditional medical knowledge would generally be viewed as merely observing a useful property or effect in which there lies no inventive concept. The invention lies in isolating and purifying the active ingredients from a plant (for example) and, therefore, the indigenous people have no claim to inventorship in a final pharmaceutical product. Disclosing information about traditional uses of a plant does not give a pharmaceutical company a product. The company then has to conduct research and extensive testing to isolate any possible active ingredient and the product may ultimately never go to market.
78 Indigenous people, Biodiversity and Health COURTS Canada IPBN Factsheet Nov 1995 79 ibid
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Joint ownership/joint inventors A claim of joint inventorship to an invention requires that all of the inventors have contributed to the inventive concept. In situations where traditional knowledge is the basis of an invention, since such knowledge is usually very old and the subject of folk-lore, the standard conditions for listing inventors are simply not applicable. The contribution of traditional medicinal knowledge from which a pharmaceutical product can be developed is not a contribution which international patent law regards as enabling indigenous peoples to be listed as joint inventors. However, in situations where indigenous people have collaborated with investigators to identify medicinal plants and the conditions under which they are used for therapeutic purposes, an essential contribution to the inventive concept may have been made. Cost of patenting too prohibitive for indigenous peoples Obtaining and enforcing IP rights are very expensive. The costs and complexities involved are often beyond the immediate means of indigenous peoples.
8.7.2 Bioprospecting Bioprospectors are entities who wish to have access to certain biological resources such as living organisms, flora, other natural resources and traditional medicines. Indigenous peoples have had many concerns about the fact that access to the land and its resources by bioprospectors has, in some instances, led to its abuse. Some governments have even denied indigenous peoples their rights to traditional lands while licensing such rights to bioprospectors.
A frequently quoted example81 of the commercialisation of traditional knowledge in which the indigenous people have been left unrewarded is the traditional use by the Australian aborigines of “Smoke-bush” for its therapeutic properties. It was subsequently discovered that this plant contains the active compound Conocurovone which destroys the HIV virus in small quantities. Under the Conservation and Land Management Act 1984 (WA) and the National Parks and Wildlife Act (WA), the WA Minister for Environment has the power to grant exclusive rights to WA flora and forest species for research purposes. The WA government granted rights to Smoke-bush and related species to the Australian pharmaceutical manufacturer AMRAD which aimed to develop an anti-HIV drug. The Centre for Indigenous History and Arts (WA) issued a statement saying, “The legislation disregards any potential IP rights that indigenous peoples in WA have in flora on their lands. Indigenous peoples in WA now face the possibility of being prevented from using any of the flora which is the subject of an exclusive agreement.”
80 See Act at http://SCALEplus.law.gov.au/html/comact/10/6006/top.html 81 Blakeney, M.: ‘The Protection of Traditional knowledge under IP law’ (2000) EIPR 251
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The Australian Government recently passed the Environment Protection and Biodiversity Conservation Act 1999(Cth)80 which recognises the role of indigenous peoples in the conservation and ecologically sustainable use of Australia’s biodiversity and promotes the use of indigenous peoples’ knowledge of biodiversity.
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8.7.3 Action to protect indigenous peoples’ IP It is clear that the current application of both international and national IP statutes and other IP instruments do not meet the needs of indigenous peoples with respect to regulating the protection and exploitation of biological resources. There is still much work being done in the area to develop standards for protecting the IP of indigenous peoples. Numerous discussions, committees and international conferences have commented and reported in detail on the rights of indigenous peoples with regard to the protection of their traditional knowledge. A selection of such reports is outlined below. Draft Declaration on the Rights of Indigenous Peoples Article 29 recognises the entitlement to “full ownership, control and protection of their cultural and intellectual property”. The “Mataatua Declaration on the Cultural and Intellectual Property Rights of Indigenous Peoples” Article 1.8 recommends that an appropriate body should be established with appropriate mechanisms to preserve and monitor the commercialism or otherwise of indigenous cultural properties in the public domain. International Consultation on IP rights and Biodiversity organised by the Coordinating Body of Indigenous Peoples of the Amazon Basin (COICA) held in Bolivia, 1994 Article 14 proposes the design of a system which “will prevent appropriation of our resources and knowledge” including “appropriate mechanism[s] for maintaining and ensuring rights of indigenous peoples to deny indiscriminate access to the resources of our communities or peoples and making it possible to contest patents or other exclusive rights to what is essentially indigenous”. Julayinbul Statement on Indigenous IP Rights (1993) This Australian paper calls on the State and Federal Governments to review existing legislation and nonstatutory policies which do not recognise indigenous IP rights. A more recent paper can be found at http://www.icip.lawnet.com.au
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Further reading • Our Culture, Our Future: Proposals for the recognition and protection of Indigenous Cultural and Intellectual Property (http://www.icip.com.au) • Study on the Protection of the Cultural and Intellectual Property of Indigenous Peoples, by Daes, E.I. presented to 45th session of UN sub-commission on the Prevention of Discrimination and Protection of Minorities, Geneva, 1993. • Blakeney, M.: “The Protection of Traditional knowledge under IP law” (2000) EIPR 251. • WIPO Magazine – February 2001 page 6. • WAI-262: New Zealand’s Indigenous Flora and Fauna Claim (May 1998) NZIPJ at page 303.
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Case Study I: The Perils of Publication
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Chapter 9. Case Studies 9.1 Case Study I: The Perils of Publication The following case study is fictitious but is based on a case which was litigated in England. The facts of that case have been altered to some extent for the purpose of more clearly illustrating the perils of publication. In the late 1970s, a team of scientists had been working hard to find a way of obtaining exogenous expression of an antigen of a certain pathogen (“pathogen X”) that was a major health problem worldwide. Little was known about the molecular biology of the pathogen, but the team had access to a high-titre source of the infectious agent and, after painstaking work, succeeded in isolating DNA particles that gave rise to infection when administered to chimpanzees. The team chose not to sequence the DNA at that time because it was felt that sequencing would be too time-consuming. It was not known whether the DNA contained introns or not. However, the team adopted the approach of cutting the DNA into relatively large fragments using a limited number of restriction enzymes, splicing the fragments into a known vector and introducing this into bacterial cells. Using screening techniques that had been published during the previous 12 months, the transformed bacterial cultures were screened to detect antigen specificity. To the team’s great delight, one of the bacterial cultures tested positive. A patent specification was quickly prepared and filed. It described the technique adopted in full detail. One month after the patent application was filed, the team leader presented the results of the team’s findings as described in the patent specification at an international conference held in London. The results were received with great interest. The presentation consisted of a lecture using overhead transparencies and slides, but no summary or other information was handed out at the conference. The proceedings of the conference were not published until more than one year later.
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Shortly after this conference, the research team identified another positive bacterial culture and showed that the two cultures contained different fragments of DNA. The team showed that these fragments were nonoverlapping and encoded different antigens. The first one, present in the original bacterial cultures, was named “antigen A” and the one found later was named “antigen B”. The team then set to work on sequencing the two DNA fragments it had obtained, and soon after the work was completed (11 months after the first application was filed), patent applications were filed in numerous countries including Australia, the United States and in the European Patent Office, claiming priority from the patent application which had been filed about 11 months earlier. These patent applications disclosed the sequences of the two DNA fragments and the deduced sequences of the encoded polypeptides. Claim 1 of the patent application claimed “A recombinant DNA molecule comprising a sequence encoding a polypeptide or fragment thereof displaying [pathogen X] antigen specificity, together with at least one expression control sequence, said DNA molecule being capable of expressing said polypeptide when transformed into a suitable host cell.” There were also claims to polypeptides or fragments thereof, exhibiting [pathogen X] antigen specificity, encoded by a DNA molecule as claimed in claim 1.
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Over the ensuing several years, the patent applications proceeded to grant in each country. The team of scientists had by that time assigned a majority share of the patent rights to a United States biotechnology company which had recently been established. The assignment had been duly recorded in each of the relevant countries. In the mid 1980s, a multinational pharmaceutical company commenced marketing a vaccine for immunising people against pathogen X. The vaccine included antigen B. The United States company which owned rights to the patent commenced infringement proceedings in Australia, the United States and England. The multinational pharmaceutical company counter-claimed for revocation of the patents. In England, the case was heard at first instance by the Patents County Court, and on appeal by the Court of Appeal and, ultimately, the House of Lords. The House of Lords, whose judgment was handed down in 1996, accepted that one of the antigens described and claimed in the patent was contained in the allegedly infringing vaccine. However, the Court considered that the claims were not entitled to claim priority from the first application for two reasons. First, the House of Lords considered that the patent claimed the recombinant DNA molecules without limitation as to how they were prepared, but a general method was not described in the specification until the second patent application had been filed, because it was not until then that the sequences of the DNA molecules and encoded polypeptides had been disclosed. Second, antigen B had not been disclosed in the first application filed. The claims, therefore, were held not to be entitled to the priority date. Since there had been a disclosure before the second patent application was filed (at the conference in London) of how to obtain the antigens, the House of Lords found that obtaining antigen B and the sequences of the isolated antigens was a matter of routine at the filing date of the European patent application, in the light of what had been disclosed. The House of Lords, therefore, concluded that the claims lacked an inventive step at the actual priority date (the date of filing the second patent application.) The House accordingly ordered that the patent be revoked. In Australia, the Courts also held that the claims were not entitled to a priority date earlier than the date of filing the second patent application. However, there was no evidence of any publication of the invention in a document, or any prior use in Australia before the relevant priority date, and the patent was held to be valid and infringed. Damages were awarded to the patentee.
Discussion Points
It might have been thought that the disclosure in London of the existence of antigen A and how to obtain it was “safe” as a patent application had already been filed. However, at least in England, this disclosure was fatal to the patentability of further work that was completed within the year thereafter. In the circumstances, disclosure at the London conference should not have occurred or it should have been very carefully structured (if possible) so as to avoid disclosing information that would render obvious the future results that were expected. 2. The outcomes of patent litigation in different jurisdictions can differ very significantly. It should be noted that, in England, the patent was held to be invalid but, in Australia, a patent for the same invention was held to be valid. This kind of disparity of outcomes is not an uncommon experience when patents for a single invention are litigated in different jurisdictions. However, the outcome in Australia might have been altered significantly if there had been papers distributed at the conference in London that included information about the methodology used.
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1. Care must be taken with any disclosure of information contained in a patent application before the publication date of that application.
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3. Patent litigation takes time, especially if multiple appeal stages are involved. In the present case, it was about 18 years from the initial discovery before the patentee knew that it had an invalid patent in England. It may be that during this time the patentee enjoyed significant commercial advantage as a result of the existence of its patent, notwithstanding that it was ultimately held to be invalid.
9.2 Case Study II: Dtect Pty Ltd Dtect Pty Ltd is a small Australian company which was established in 1994 to develop diagnostic kits for pathogenic microorganisms of agricultural importance, with a particular focus on respiratory diseases of cattle. One of Dtect’s target diseases is McIlroy’s Disease, an infectious, fatal disease of cattle which is estimated to cost the cattle industry worldwide approximately A$100 million annually. Afflicted animals are infectious for approximately 2 weeks prior to the onset of visible symptoms, whereafter they become highly infectious through to death approximately 4 weeks after symptoms appear. There is no treatment for McIlroy’s Disease and outbreaks are dealt with by slaughter of all animals in any herd which has even a single symptomatic animal. As a consequence, it has long been suspected that uninfected animals are being sacrificed. Under the guidance of its Director of Research, Doctor Koff, Dtect has developed a rapid diagnostic test for Micrococcus neirbo, the causative agent of McIlroy’s Disease. The diagnostic test involves the use of the polymerase chain reaction (PCR) and detects the organism by detection of characteristic DNA sequences. The test is to be marketed as a kit, CowKoff™, which can be used sufficiently early in an outbreak to enable infected animals to be isolated, thereby removing the need for sacrifice of uninfected animals. By 1996, Dtect had obtained patents for the diagnostic test in Australia, the United States and various countries in Europe. Dtect had also registered the trade mark CowKoff™.
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Realising that its expertise lay in the development of the test and not in its marketing, Dtect entered into an agreement with Sliksel International, an Australian company with extensive experience in sales and marketing of diagnostic test kits. Under the terms of the agreement, Sliksel was to obtain regulatory approval (where necessary) for the test and was responsible for worldwide sales and marketing of CowKoff™. In return, Sliksel would annually pay royalties to Dtect on 31 December, each payment being equal to 6% of worldwide sales of CowKoff™ for the previous 12 months. Dr Koff had long suspected that there may be non-lethal strains of M. neirbo and made the isolation of such a strain one of the on-going priorities at Dtect. In January 1997, Dr Koff attended the International Conference of Bovine Research where he was to present a seminar describing his research on McIlroy’s Disease, with a particular focus on the development of CowKoff™. On the morning of his seminar, he received an excited telephone call from one of his colleagues at Dtect, informing him that they had identified a non-lethal strain of M. neirbo. His colleague explained that animals infected with this strain appeared to be completely asymptomatic. Dr Koff was unable to contain his excitement and revealed this information in his seminar, stating that he expected that Dtect would now develop a test that would distinguish the two strains of M. neirbo. Dr Koff indicated that this would permit animals infected with the non-lethal strain to be spared sacrifice, thereby providing further savings for the cattle industry.
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During 1997, Dtect expended considerable resources on research and development of the second generation diagnostic kit. Although Dr Koff had predicted that development of the test would be a routine extension of the CowKoff™ technology, it proved to be unexpectedly difficult with frequent surprising results causing Dr Koff and his colleagues to re-think their strategy at nearly every stage of the research. Eventually, by September 1997 and after abandoning the detection methods used in the CowKoff™ test, Dtect had developed a prototype second generation diagnostic, which they envisaged would be marketed as a kit called CowSafe™. As Dtect had not yet received any payment of royalties from Sliksel, however, they were unable to progress the development through to production of the CowSafe™ kit. That same month, Dr Koff became aware of an outbreak of McIlroy’s Disease on Waterloo Downs, a large cattle property in the Northern Territory. Identifying this as a possible way out of the cash crisis faced by Dtect, Dr Koff contacted the owners of Waterloo Downs and negotiated a contract under which Dtect would be guaranteed payment on delivery of 10,000 CowSafe™ kits, provided they were delivered within the month. Immediately prior to delivery of the kits, Dtect instructed their patent attorneys to file a patent application for the CowSafe™ kits and the technology which the test employs. In late 1997, an agreement was reached with Sliksel International whereby Sliksel was responsible for worldwide sales and marketing of the CowSafe™ kits. By early 2000, Dtect had obtained patents covering the CowSafe™ kits in Australia, the United States and various countries in Europe and Dtect was enjoying significant royalty income. Later that year, Dtect became aware of a product called TestEasy which was marketed in Australia as a test kit for the diagnosis of McIlroy’s Disease. Dtect purchased one of the TestEasy kits and established that it contained the same ingredients as the CowSafe™ kit and employed the same technology. Investigations on behalf of Dtect established that the TestEasy kit was also being marketed in Europe, the United States and Brazil.
Discussion Points 1. Does Dtect require a licence to include other proprietary components in its kit or to instruct the use of a proprietary method as part of the test? PCR is the subject of valid patents owned by Gelfel Corporation in many countries, including Australia, Europe and the United States. The Dtect patent includes claims which encompass the diagnostic kit and the method of testing for the presence of the infective organism. Even though the PCR is an essential step of the test method, the existence of such PCR patents is unlikely to be a bar to Dtect obtaining its patent. As the diagnostic kit will require the user to employ PCR, however, it would be advisable for Dtect to negotiate a licence agreement with Gelfel Corporation to permit the sale of the kit with instructions for the use of PCR in the diagnosis. In this way, the Dtect kit may be sold with a licence to perform PCR as required for the diagnosis.
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Dtect contacted the marketers of the TestEasy kit, Robin Steele International, providing them with a copy of the relevant Dtect patent, informing them that Dtect was of the opinion that the TestEasy kit infringed the claims of the patent and advising that they would commence legal proceedings for infringement if the TestEasy product was not withdrawn from sale. The product was not withdrawn and Dtect commenced legal proceedings in Australia, United States and the United Kingdom. Robin Steele International counter-claimed in each jurisdiction for invalidity of the CowSafe™ patents.
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This issue arises also in terms of the components of the diagnostic kit: if any components of the kits are encompassed within claims of a valid patent (eg. polymerase, detectable ligand), Dtect will need to obtain a licence before marketing such kits. 2. Awareness of the value in all forms of intellectual property rights. Dtect has wisely protected their intellectual property rights in the name by which their diagnostic kit and test is identified. This will provide them with an added form of protection for their intellectual property and provide enforceable rights should a competitor attempt to trade off the name and reputation which Dtect envisages will become associated with the CowKoff™ name. Furthermore, given that a trade mark registration may (in many cases) be renewed for many years beyond the term of the patent, there may be residual value in Dtect continuing to have a statutory enforceable right, namely the registered trade mark, after the term of the patent has expired. For example, if the attractiveness of the product to the market outlasts the patent term, customers may still prefer to purchase the Dtect kit, identified as reliable by being marketed under the registered trade mark, rather than purchase an unknown generic kit (which, due to the expiration of the patent term, would be legitimately on the market) marketed by one of Dtect’s competitors. 3. Other possibilities for payment of royalties that Dtect might have included in the agreement. It is not unusual that a biotechnology company may be small or a recent spin-off and so have limited cash reserves. In negotiating agreements such as that which Dtect has entered into, it may be prudent to consider those arrangements which would lead to an improved cash flow position. For example, Dtect may have negotiated an initial payment on signing of the agreement, possibly in return for a lower royalty percentage; the agreement may have included milestone payments such as set amounts to be paid upon obtaining regulatory approval and/or upon first sales; the agreement may have been for advance royalty payments rather than payments in arrears. 4. Are there any ramifications of Dr Koff’s statements at the conference concerning the identification of the non-lethal strain and the potential for development of a discriminatory diagnostic test?
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Ideally, Dr Koff would have contained his excitement and said nothing of the new development at the conference. Although we can provide one interpretation of the facts presented in the case study and conclude that his disclosure is unlikely to be problematic for patentability of the invention, a competitor seeking to have the patent revoked would present an alternative view and it would ultimately rest with the Court to rule on the matter. On the facts presented in the case study, however, his disclosure at the conference is unlikely to invalidate a patent for the second diagnostic test. In order to anticipate the claims of a patent, the disclosure must reveal all features of the claimed invention and must do so in clear, unequivocal and unmistakable terms. The disclosure must enable an addressee at once to perceive and understand and be able practically to apply the discovery without the necessity of making further experiments. This appears not to have been the case for the CowSafe™ test, as the facts indicate that the development was “unexpectedly difficult” and only succeeded when Dtect abandoned the apparently logical approach of modifying the methods of the first kit. For the same reason, it is unlikely that the claims of the CowSafe™ test patent would be held to lack inventive step (ie. be obvious) in the light of the CowKoff™ test.
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5. Are there any ramifications of Dtect entering into a commercial agreement to supply the CowSafe™ kits prior to filing the patent application or during prosecution of the patent application (ie. prior to grant of a patent)? The facts of the case study do not indicate that Dtect provided any literature disclosing the test to the owners of Waterloo Station. Nor do they indicate that Dtect provided them with a sample of the kit or with a demonstration of the test prior to filing the patent application. Nevertheless, “use” of the invention in public may also constitute an anticipation even if the invention is not actually “used” in the usual meaning of the word. Such “use” will occur if, in advance of obtaining patent protection, the patentee enters into an enforceable contract of sale or has engaged in the commercial promotion of an embodiment of the invention by offering it for sale. As presented in the case study, it appears that Dtect has engaged in such “use” and thereby potentially fatally compromised the validity of their patent. The facts, however, also indicate that Dtect successfully obtained patents for the very test which they publicly used prior to filing the patent application. How can this be so? During Examination of the patent application, it is unlikely that the Australian Patent Office would be aware of the enforceable contract between Dtect and Waterloo Downs. That being the case, the patent application is likely to be accepted and proceed to grant. Grant of the patent, however, does not guarantee the validity of the patent; it is always open to being challenged. Evidence of the prior use of the invention could be presented in a subsequent action for revocation of the patent and, on the facts presented in the case study, it is likely that a Court would find the patent invalid. A similar situation is likely to apply to the patents granted under European laws. In the United States, however, provided that the use did not occur more than one year prior to the date of the application for patent, the validity of the subsequent patent is unlikely to be compromised. 6. Is Dtect able to do anything about Robin Steele International’s sales of the TestEasy kit in Brazil? Dtect did not apply for a patent in Brazil and so has no enforceable rights in that country. Furthermore, it is now too late for Dtect to apply for a patent in Brazil (or any other country in which an application or patent is not already pending). It is imperative that an applicant for patent consider all possible markets for the “product” and ensure that patent protection is obtained in each of those markets.
Arguments concerning the invalidity of the Dtect patents centre on the commercial agreement which Dtect entered into prior to filing the patent application. As discussed at Point 5 above, the enforceable commercial agreement that Dtect entered into with Waterloo Downs prior to filing the patent application is likely to invalidate the relevant patent in Australia and in the various European countries where the patent has been granted. That being the case, Dtect will have no enforceable patent rights in any of those countries and Robin Steele International will be free to continue their activities.
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7. What might be the likely outcomes of the legal proceedings?
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As discussed above, in the simple scenario presented in this case study, Dtect’s activities prior to filing the patent application are unlikely to have compromised the validity of the United States patent provided that patent application was filed within 12 months of Dr Koff’s disclosure at the conference. Again assuming the simplest scenario (in which the TestEasy kit and method are identical to the CowSafe™ kit and method and are clearly within the claims of the United States patent), it is likely that a court would find that Robin Steele International’s activities constituted an infringement of the financial remedy in favour of Dtect.
Summary The experiences of Dtect indicate that obtaining protection for intellectual property should not be an after-thought which is considered only after all the research, development and marketing have been attended to. Intellectual property protection should be at the forefront of a company’s agenda. A wise approach is to obtain the professional advice of a patent attorney prior to disclosing any new development or commencing discussions with outside parties concerning intellectual property.
claims of the Dtect patent and make an order for
9.3 Case Study III: International Genomics Alliance By 1999, SupaWeat Pty Ltd had established itself as a leader in integrating genes into superior wheat varieties. Abiotic stress tolerance was one of SupaWeat’s main targets for wheat improvement as this is a major problem in Australia with frost, drought and salt all affecting cropping yields. For a number of years, a Belgian company, EuroGenomics, has been working on elucidating genes that control plant responses to stress and has grown to be one of the largest genomics companies in Europe with a team of more than 50 scientists. In 1998, the company raised 4.5 million in first round financing and in August 2000, a second round of equity financing was completed, raising 25.7 million. SupaWeat spoke to EuroGenomics about the potential to work together and executed a standard two-way confidentiality agreement. This agreement was designed to protect the IP of both parties, allowing more detailed discussions concerning the opportunities for collaboration between the two companies.
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SupaWeat then met with several key EuroGenomics executives in Australia and demonstrated its capacity in wheat biotechnology and wheat breeding through meetings and a tour of SupaWeat’s laboratories and glasshouses. The EuroGenomics executives were impressed and a follow-up meeting in Belgium was arranged. After a review of EuroGenomics’ advanced operations in Belgium, a series of negotiation and planning meetings took place in which a Letter of Intent to enter an exclusive alliance agreement was drafted. While in Belgium, SupaWeat’s representatives, Ms Law (Licensing Director) and Dr Boss (CEO), reviewed the scope of EuroGenomics’ scientific team and resources (technical due diligence). Ms Law and Dr Boss also looked into the strength and uniqueness of the EuroGenomics patent portfolio, current and pending (IP due diligence). Finally, they also looked at the management, business structure and financial position of EuroGenomics (commercial due diligence). Ms Law and Dr Boss concluded that EuroGenomics excelled in all of these areas with an internationally recognised team of biotech managers and scientists on staff. Upon the return of Ms Law and Dr Boss to Australia, the draft Letter of Intent was checked by SupaWeat’s lawyers and was finalised and signed shortly after. The Letter of Intent formed the basic framework for the Alliance Agreement, which was drafted by lawyers representing each company. This draft agreement was finalised through email correspondence and several teleconference calls. The Alliance Agreement was very thorough and included all of the major activities and expected milestones for the research. Both parties put a great deal of thought into this agreement to ensure the success of the alliance.
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The negotiated Alliance Agreement gives SupaWeat exclusive rights in Australia to EuroGenomics’ yield enhancement technologies (such as genes and gene regulators), while retaining to EuroGenomics all rights to their technologies outside Australia. Under the terms of the agreement, both parties share the research and development costs and, eventually, income from the wheat varieties created through SupaWeat’s biotech and breeding programs using the EuroGenomics technology. In addition, SupaWeat will participate in shared royalties internationally when the technology is licensed to third parties for wheat varieties developed by SupaWeat. The finer points of the agreement were finalised by email correspondence and teleconferences with a joint international press release issued in November 2000 announcing the successful alliance. This received strong business press coverage in Europe but minimal coverage in Australia, possibly reflecting the relative maturity of commercial biotech in Europe compared to Australia. The alliance has progressed very well with the research programs well underway and on schedule as per the initially agreed timelines and costs. Regular correspondence and meetings ensure that both parties are always abreast of activities and goodwill is maintained. Regular face-to-face meetings are held in Belgium and Australia (alternating), where alliance activities and new opportunities are discussed. The next meeting is in June in Belgium. This alliance demonstrates that Australian businesses can access the latest international technologies and apply these to improving traditional products such as wheat.
Discussion Points 1. Confidentiality agreement Prior to commencing any detailed discussions in which confidential material may be revealed, it is critical that a confidentiality agreement be drawn up and executed by all parties to the discussions. Such an agreement protects the parties both in an immediate commercial perspective (eg. where public disclosure by one party may compromise the ability of the other party to negotiate on equal terms) and from an intellectual property perspective (non-confidential disclosure of potentially patentable subject matter prior to filing a patent application may constitute anticipation). Whilst there may be situations in which the circumstances of the discussions themselves impart a legally binding obligation of confidentiality, it would be imprudent to undertake such discussions without a written agreement.
The alliance agreement between SupaWeat and EuroGenomics provides the basis for a long-term relationship between the two companies and, to a certain extent, ties the fortunes of each company to those of the other. It is imperative, therefore, that extensive due diligence of all aspects of the potential partner(s) be performed before the final alliance is executed. According to the facts of the case study, the Licensing Director and the CEO of SupaWeat performed the due diligence on EuroGenomics. An alternative that may be appropriate under different circumstances would be to contract an outside consultant to perform the due diligence. 3. Making the agreement comprehensive The final document executed by the parties should set out all terms of the agreement and should clearly state all the rights and responsibilities of the respective parties, including all expected activities, targets, milestones and royalties or division of profit. If necessary (as in the case of the SupaWeat/EuroGenomics agreement), the agreement may be drafted by lawyers representing each of the parties, rather than in-house.
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2. “Know your partner(s)”
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Where appropriate, it should be ensured that the agreement adequately addresses the possibility that one party may develop an improvement to that for which they have a licence under the terms of the agreement. For example, under the terms of the agreement, SupaWeat has exclusive rights in Australia to EuroGenomics’ gene regulators. If SupaWeat, in the course of exercising its rights under the agreement, were to develop an Summary improved version of one of EuroGenomics’ gene The experience of SupaWeat illustrates that with careful regulators, who would own the IP in that improved planning and negotiation, detailed due diligence and a willingness to look beyond one’s expertise, Australian entities, regulator? A comprehensive agreement should make regardless of size, can access the proprietary developments of provision for such a situation, thereby resolving what international organisations to mutual benefit. Critical in might otherwise have been a contentious issue making any such collaboration workable is that all parties between the parties. clearly understand their rights and responsibilities. As it is the If issues subsequently arise which are not adequately covered by the terms of the agreement, the parties should consider whether a supplementary agreement is necessary.
executed agreement which sets out those rights and responsibilities, it is imperative that the terms of the agreement be drafted with all due care and professionalism
9.4 Case Study IV: Freedom to Operate – Review of Enabling Technology The patent field surrounding biotechnology is large and complex. Many patents overlap one another and some of the older patents cover very broad claims. This case study demonstrates the importance of reviewing freedom to operate (FTO) issues surrounding each project. SupaWeat Pty Ltd (see Case Study III) have an alliance with a European University to develop wheat varieties with resistance to BYDV, the major viral disease in wheat. To introduce these genes into wheat SupaWeat needed to do the following: • Assemble the genes in a section of DNA with a marker gene to select for plant cells that have taken up the DNA and a suitable promoter to drive the genes. • Transfer this DNA section into cells of an elite wheat variety using the efficient transformation system SupaWeat had developed in its labs. • Select for wheat cells that contain the introduced DNA.
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• Grow these up into whole wheat plants. • Select for the best wheat lines and test these for BYDV resistance. • Breed these into new BYDV-resistant wheat varieties for Australian and European markets. This overall process required SupaWeat to look at every section that may infringe patents or Plant Breeder’s Rights (PBR) and design the project around these constraints or seek licences from the technology owners.
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Through this process, SupaWeat found that they had to do the following to gain commercial FTO for the project: • Seek a commercial licence to use the chosen marker gene for the project. • Use a promoter that was in the public domain (ie. published and not patented). • Modify the in-house transformation system to avoid infringing several third party patents. • Breed the BYDV resistance gene into SupaWeat proprietary wheat varieties through various crosses so as to not infringe PBR ownership. This process required a great deal of company resources including in-house staff time, combined with a strong use of patent attorney time for activities such as: – Patent searches and current patent status checks. – Literature searches (to determine “public-domain” status on non-patented technology/IP). – Attorney “validity and infringement” opinions on several key identified patents. – Negotiations with third parties that owned key technology and drafting licence agreements. – Review of Material Transfer Agreements (MTA) relating to any material used in the project. – Scientifically designing around several patents. The FTO process had to be internationally focused as SupaWeat aimed to produce wheat varieties for both Australia and Europe but to also export the grain from these varieties to all of the other countries with which Australia/Europe currently trade. The grain has to be covered by the FTO since it is a direct product from the wheat varieties.
Discussion Point FTO review must be comprehensive
Any oversights or inadequacy in performing FTO reviews may lead to infringement of the IP rights of another, thereby leaving a company open to litigation which may have dire consequences not only for the particular project being undertaken but also for the continued viability of the company. Whilst SupaWeat is expert in the scientific aspects of their technical field, it has wisely relied heavily upon the expertise of its patent attorneys for professional advice in all patent matters.
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As can be seen in this case study, not only did SupaWeat have to ensure FTO for the gene of interest (the BYDV resistance gene) but also for all of the processes and technologies that were required to introduce this gene into wheat to make the end products (BYDV-resistant wheat varieties).
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10.6 Appendix VI: Novelty – Statutory Basis 10.7 Appendix VII: Patent Questionnaire .
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Chapter 10. Appendices 10.1 Appendix I: Description of Microorganisms Full description of a microorganism by satisfying Budapest Treaty deposit requirements Section 41(1) of the Australian Patent Act 1990 (Cth) provides that s40(2)(a) can be satisfied by depositing a sample of the microorganism in a recognised depositary institution, as per: “41. (1) To the extent that an invention is a microorganism, the complete specification is to be taken to comply with paragraph 40(2)(a), so far as it requires a description of the microorganism, if the deposit requirements are satisfied in relation to the microorganism.” Section 41(2) provides that: a) if the invention involves the use, modification or cultivation of a microorganism and not the microorganism per se; and b) a person skilled in the relevant art could not reasonably expect to be able to perform the invention without first having a sample of the microorganism, and c) the microorganism is not reasonably available to a person skilled in the relevant art in Australia; then the applicant can satisfy the section 40(2)(a) requirement if, and only if, the deposit requirements specified in section 6 have been satisfied. Therefore, the deposit of a microorganism will only be recognised for the purposes of s41 if the deposit has been made as prescribed in s6.
Deposit requirements “6.For the purposes of this Act, the deposit requirements are to be taken to be satisfied in relation to a micro-organism to which a specification relates if, and only if: (a) the microorganism was, on or before the date of filing of the specification, deposited with a prescribed depositary institution in accordance with the rules relating to microorganisms; and (b) the specification includes, at that date, such relevant information on the characteristics of the microorganism as is known to the applicant; and (c) at all times since the end of the prescribed period, the specification has included: (i) the name of a prescribed depositary institution from which samples of the microorganism are obtainable as provided by the rules relating to microorganisms; and (ii) [repealed] CHAPTER 10
(iii) the file, accession or registration number of the deposit given by the institution; and (d) at all times since the date of filing of the specification, samples of the microorganism have been obtainable from a prescribed depositary institution as provided by those rules.” Reasonably available It is Australian Patent Office practice to regard a microorganism as being reasonably available if the specification discloses the method by which the public can have access to a sample of the deposit. For example, if the applicant identifies in the specification a commercial source through which a sample of the microorganism can be obtained, or if a sample is freely available from any source, the applicant must name a source from which the public can obtain a sample of the microorganism. 182
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10.2 Appendix II: TRIPS and Biotechnology Main features of TRIPS Standards TRIPS sets out the standard of protection to be provided for each of the main areas of IP, such as the scope of subject matter that is to be protected, the rights to be conferred, exceptions to those rights, and the minimum duration of protection of those rights. Enforcement TRIPS sets out domestic procedures and remedies for the enforcement of intellectual property rights. Dispute settlement TRIPS makes disputes between WTO Members about the respect of the TRIPS obligation subject to the WTO’s dispute settlement procedures. Patentability As far as the patentability of an invention relating to biotechnology is concerned, a crucial TRIPS provision is provided in article 27 outlined below. “27.1 Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced [emphasis added]. 2. Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law [emphasis added]. 3. Members may also exclude from patentability: (a) diagnostic, therapeutic and surgical methods for the treatment of humans or animals;
Whilst the TRIPS agreement provides a minimum standard that has to be incorporated and enforced by each member country, each member country is free to determine the appropriate method of implementing the provisions of the agreement within their own legal system and practice. Hence, even though member countries may implement the same standard of protection, the application of this standard within their legal system has created differing practices and procedures. TRIPS provides member countries with the option to exclude from patentability: diagnostic, therapeutic and surgical methods for the treatment of humans or animals; plants and animals other than microorganisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes.
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(b) plants and animals other than microorganisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO Agreement.”
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10.3 Appendix III: Manner of Manufacture The Statute of Monopolies is a 1623 British Statute that formed the foundation of patent law in Britain and other countries that adopted British law. According to this statute, true and first inventors were granted letters patent for: “The sole working or making of any manner of new manufacture within this realm to be the true and first inventor and inventors of such manufacture which others at the time of making such letters patent and grants shall not use, so as also they be not contrary to the law or mischievous to the state, by raising prices or commodities at home, or hurt of trade, or generally inconvenient.” The need for a patentable invention to be a “manner of manufacture” was introduced federally into Australia’s first federal Patents Act 1907, and has been, in essence, the basic requirement for patentable subject matter since its adoption. The judicial interpretation of these words has developed over the years and, as a result, the Australian patent system has been able to cope with technological change. However, it is worth noting that the Australian Courts have not set out a specific test to determine what constitutes a “manner of manufacture”. Each case is decided on its facts. Originally, in the United Kingdom, the words were interpreted as referring to articles and not processes but through the nineteenth century, the United Kingdom Courts gradually accepted that processes could be “manners of new manufacture” and thus patentable. Fifty years ago, the United Kingdom Courts applied a “vendible product” test to processes to assess their patentability 82. According to this test, a process is patentable if it: (a) produces a vendible product; (b) restores a vendible product to its former condition; or (c) prevents deterioration of a vendible product. This test was, at that time, followed by the Australian Patent Office to determine patentability. However, as the test is no longer followed, any failure of a process to pass this test does not necessarily exclude it from patentability. In 1959, the Australian High Court in National Research Development Corporation v Commissioner of Patents83 (hereinafter NRDC) held that: “The right question is: ‘Is this a proper subject of letters patent according to the principles which have been developed for the application of section 6 of the Statute of Monopolies?’” The High Court then went on to state:
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“The truth is that any attempt to state the ambit of s6 of the Statute of Monopolies by precisely defining ‘manufacture’ is bound to fail. The purpose of s6, it must be remembered, was to allow the use of the prerogative to encourage national development in a field which already, in 1623, was seen to be excitingly unpredictable. To attempt to place upon the idea the fetters of an exact verbal formula could never have been sound. It would be unsound to the point of folly to attempt to do so now, when science has made such advances that the concrete applications of the notion which were familiar in 1623 can be seen to provide only the more obvious, not to say the more primitive, illustrations of the broad sweep of the concept.”
82 GEC’s Application (1942) 50 RPC 1 83 National Research Development Corporation v Commissioner of Patents (1952) 102 CLR 252
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The High Court in summary then stated: “...a process, to fall within the limits of patentability ... must be one that offers some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art ... – that its value to the country is in the field of economic endeavour.” In 199584, the High Court held that the question of whether or not a claimed invention is a manner of manufacture involves a “threshold” question of inventiveness over and above that posed by s18(1)(b)(i). However, the Court added the qualification: “That does not mean that the threshold requirement of ‘an alleged invention’ corresponds with or renders otiose the more specific requirements of novelty and inventive step (when compared with the prior art base) contained in s18(1)(b). It simply means that, if it is apparent on the face of the specification that the quality of inventiveness necessary for there to be a proper subject of letters patent under the Statute of Monopolies is absent, one need go no further.” The NRDC approach to patentability was applied in International Business Machines Corporation v Smith, Commissioner of Patents85 with the result that the Australian Patent Office adopted the following test when determining the patentability of computer software-related inventions: “Does the invention claimed involve the production of some commercially useful effect?” In the light of NRDC, this test would appear to be not only applicable to determining the patentability of computer software but also to other areas of technology, although there will inevitably be some areas which, from a public policy point of view, will not be afforded patent protection (eg. a surgical technique may fall into this category). It follows that, in Australia, any product, eg. proteins, DNA, RNA, electric circuits, chemical compounds and compositions, assays, microorganisms and plants that can be sold can generally be patented if new, inventive and commercially useful. Similarly, processes of manufacturing such products and new methods of using them can all generally be patented in Australia. Genetically altered, non-human life-forms and methods of therapeutic treatment that have a commercial utility are also generally patentable in Australia. Current Australian Patent Office practice on the patentability of living organisms stems from the Ranks Hovis McDougall’s Ltd’s Application 86 decision as follows: “(i) a method of producing new variants or strains is patentable if the method gives reproducible results; (ii) the variants produced must have improved or altered useful properties and not merely have changed morphological characteristics; (iii) no objection can be taken to a claim to a new organism on the ground that it is something living;
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(iv) naturally occurring organisms per se are not patentable, as they represent a discovery and not an invention.”
84 Philips v Mirabella (1995) 32 IPR 449 85 International Business Machines Corporation v Smith, Commissioner of Patents (1992) A.I.P.C. 90-853 86 Ranks Hovis McDougall’s Ltd’s Application (1976) 40 A.O.J.P. 3915
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With respect to point (iv) above, the position would be different if such an organism were claimed as a pure culture in the presence of some specified ingredients. While it is not a claim to the organism per se, it would give almost the same protection as a per se claim, and such a claim could be acceptable, but would of, course, have to be considered on its merits. The above principles regarding patentability apply to “(non-human) higher life-forms and to processes to alter the characteristics of such, as well as to microorganisms.” (Australian Patent Office Manual of Practice and Procedure, 1984, 35.76.)
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The main areas of difficulty are plans or working directions, such as directions on how to operate a known machine or device to carry out a particular known function to produce an improved result, and the discovery of new scientific concepts, principles or theories without applying that discovery to a useful result.
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10.4 Appendix IV: A Test to Determine Obviousness A test for determining whether a claimed invention would have been obvious to a non-inventive worker in the field equipped with the common general knowledge in the relevant field at the priority date as stated by Aicken J87 is as follows: “The test is whether the hypothetical addressee faced with the same problem would have taken as a matter of routine whatever steps might have led from the prior art to the invention, whether they be the steps of the inventor or not.” The test for obviousness as stated by Aicken J in Wellcome v V.R. Laboratories was formulated as a “would have been likely to” test in Aktiebolaget Hassle v Alphapharm Pty Limited88 as follows: “... the issue is whether, assuming there was such a [skilled] person, he or she would have been likely to prove successful. The skilled worker is assumed to exist, and to have the opportunity to attempt to replicate the result of the patent. This assumption is essential to the test. The point at issue is one of objective fact: whether the so-called invention involves an inventive step. A so-called invention does not involve an inventive step if a skilled worker would have been likely to have replicated the result [emphasis added].” Common general knowledge has been described in the following terms89: “The notion of common general knowledge of itself involves the use of that which is known or used by those in the relevant trade. It forms the background knowledge and experience which is available to all in the trade in considering the making of new products, or the making of improvements in old, and it must be treated as being used by an individual as a general body of knowledge.” Subject to confirmation by reference to a skilled person in the relevant field in Australia at the priority date, indicators of what may constitute common general knowledge are entries in such publications as the following: standard texts and handbooks, most dictionaries of standard English, relevant technical dictionaries, concession in the patent specification under question, magazines or other publications specific to the art. The determination of “invention” or “non-obviousness” is a difficult task to perform. Invention is some immeasurable advance over the prior art. The difficulty of this task was eloquently expressed by Tomlin J90 when he said:
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“Nobody, however, has told me, and I don’t suppose anybody ever will tell me, what is the precise characteristic or quality the presence of which distinguishes invention from a workshop improvement. Day is day, and night is night, but who shall tell me where day ends or night begins?”
87 88 89 90
The Wellcome Foundation Limited v V.R. Laboratories (Aust.) Proprietary Limited (1981) 148 CLR 262 Aktiebolaget Hassle v Alphapharm Pty Limited (2000) FCA 1303 Minnesota Mining and Manufacturing Co. v Beiersdorf (Australia) Ltd (1980) 144 CLR 253 Samuel Parkes & Co. Ltd. v Croker Brothers Ltd (1929) 46 RPC
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10.5 Appendix V: How to Read a Patent – Interpretation General principles of construction The issue of the correct approach to the construction of patent claims has often been discussed. In Decor Corporation Pty Ltd v Dart Industries Inc,91 Sheppard J distilled ten “rules of construction” : “(1) The claims define the invention which is the subject of the patent. These must be construed according to their terms upon ordinary principles. Any purely verbal or grammatical question that can be answered according to ordinary rules for the construction of written documents is to be resolved accordingly. (2) It is not legitimate to confine the scope of the claims by reference to limitations which may be found in the body of the specification but are not expressly or by proper inference reproduced in the claims themselves. To put it another way, it is not legitimate to narrow or expand the boundaries of monopoly as fixed by the words of a claim by adding to those words glosses drawn from other parts of the specification. (3) Nevertheless, in approaching the task of construction, one must read the specification as a whole. (4) In some cases the meaning of the words used in the claims may be qualified or defined by what is said in the body of the specification. (5) If a claim be clear, it is not to be made obscure because obscurities can be found in particular sentences in other parts of the document. But if an expression is not clear or is ambiguous, it is permissible to resort to the body of the specification to define or clarify the meaning of words used in the claim. (6) A patent specification should be given a purposive construction rather than a purely literal one. (7) In construing the specification, the Court is not construing a written instrument operating inter partes, but a public instrument which must define a monopoly in such a way that it is not reasonably capable of being misunderstood. (8) The body, apart from the preamble, is there to instruct those skilled in the art concerned in the carrying out of the invention; provided it is comprehensible to, and does not mislead, a skilled reader, the language used is seldom of importance. (9) Nevertheless, the claims, since they define the monopoly, will be scrutinised with as much care as is used in construing other documents defining a legal right. (10) If it is impossible to ascertain what the invention is from a fair reading of the specification as a whole, it will be invalid. But the specification must be construed in the light of the common knowledge in the art before the priority date.”
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There is a danger in considering the integers of a claim individually and in isolation: the approach can easily yield a literal rather than a purposive construction. In Catnic Components Ltd v Hill & Smith Ltd,92 Lord Diplock said, in an oft-cited passage (at 243):
91 Decor Corporation Pty Ltd v Dart Industries Inc (1988) 13 IPR 385 (FCA/FC) 92 Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183
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“A patent specification should be given a purposive construction rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge. The question in each case is: whether persons with practical knowledge and experience of the kind of work in which the invention was intended to be used would understand that strict compliance with a particular descriptive word or phrase appearing in a claim was intended by the patentee to be an essential requirement of the invention so that any variant would fall outside the monopoly claimed, even though it could have no material effect upon the way the invention worked.” The comments of Dixon J in Radiation Ltd v Galliers & Klaerr Pty Ltd93 are also pertinent: “But, on a question of infringement, the issue is not whether the words of the claim can be applied with verbal accuracy or felicity to the article or device alleged to infringe. It is whether the substantial idea disclosed by the specification and made the subject of a definite claim has been taken and embodied in the infringing thing.” These authorities have been understood as directing the Court to “[avoid] too technical or narrow a construction of claims”94. In Improver Corp v Remington Consumer Products Ltd,95 Hoffman J formulated three questions posed for a Court which had been identified by Lord Diplock in Catnic Components. “(1) Does the variant have a material effect upon the way the invention works? If yes, the variant is outside the claim. If no – (2) Would this (ie. that the variant had no material effect) have been obvious at the date of publication of the patent to a reader skilled in the art. If no, the variant is outside the claim. If yes – (3) Would the reader skilled in the art nevertheless have understood from the language of the claim that the patentee intended that strict compliance with the primary meaning was an essential requirement of the invention [?] If yes, the variant is outside the claim. On the other hand, a negative answer to the last question would lead to the conclusion that the patentee was intending the word or phrase to have not a literal but a figurative meaning (the figure being a form of synechdoche or metonymy) denoting a class of things which included the variant and the literal meaning, the latter being perhaps the most perfect, best-known or striking example of the class.” In Kastner v Rizla Ltd96, the English Court of Appeal approved the purposive approach to construction enunciated by Lord Diplock in Catnic Components, and the three questions intended to give effect to it formulated by Hoffman J in Improver.
A further principle is that a construction according to which the invention will work is to be preferred to one according to which it may not do so99. 93 94 95 96 97
Radiation Ltd v Galliers & Klaerr Pty Ltd (1938) 60 CLR 36 at 51 Winner v Morey Haigh & Associates (A’asia) Pty Ltd (1996) 33 IPR 215 at 221; Populin v HB Nominees Pty Ltd (1982) 41 ALR 471 at 457 Improver Corp v Remington Consumer Products Ltd [1990] FSR 181 at 189 Kastner v Rizla Ltd [1995] RPC 585 Martin v Scribal Pty Ltd (1954) 92 CLR 17 at 97; 95 CLR 213; Glaverbel SA v British Coal Corp [1994] RPC 443 at 485-6; Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 at 485-6 98 Interlego AG v Toltoys Pty Ltd (1973) 130 CLR 461 at 478-9 99 Martin v Scribal Pty Ltd, supra, at 97; Welch Perrin & Co Pty Ltd v Worrel (1961) 106 CLR 588 at 601-2; Freeman v T.J. and F.L. Pohlner Pty Ltd, supra, at 381)
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Another relevant “rule of construction” is that it is not permissible to confine the scope of a claim by reference to limitations found in the body of the specification, unless they are expressly or by necessary implication picked up in the claim97. Where an expression in a claim is unclear, however, resort may be had to the body of the specification to ascertain its meaning98.
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10.6 Appendix VI: Novelty – Statutory Basis Section 7(1) is as follows: “7. Novelty and inventive step (1) For the purposes of this Act, an invention is to be taken to be novel when compared with the prior art base unless it is not novel in the light of any one of the following kinds of information, each of which must be considered separately: (a) prior art information (other than that mentioned in paragraph (c)) made publicly available in a single document or through doing a single act; (b) prior art information (other than that mentioned in paragraph (c)) made publicly available in 2 or more related documents, or through doing 2 or more related acts, if the relationship between the documents or acts is such that a person skilled in the relevant art in the patent area would treat them as a single source of that information; (c) prior art information contained in a single specification of the kind mentioned in subparagraph (b)(ii) of the definition of “prior art base” in Schedule 1.” According to Schedule 1 to the Patents Act 1990 (Cth), “prior art information” means, for the purposes of assessing novelty, information that is part of the “prior art base”. The definition of prior art base is also found in Schedule 1 of the Patents Act 1990 (Cth) and again, focusing on novelty, reads as follows: ‘prior art base’ means: (a) [in relation to deciding whether an invention does or does not involve an inventive step:] (i) information in a document, being a document publicly available anywhere in the patent area; and (ii) information made publicly available through doing an act anywhere in the patent area; and (iii) where the invention is the subject of a standard patent or an application for a standard patent – information in a document publicly available outside the patent area; and (b) in relation to deciding whether an invention is or is not novel: (i) information of a kind mentioned in paragraph (a); and (ii) information contained in a published specification filed in respect of a complete application where:
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(A) if the information is, or were to be, the subject of a claim of the specification, the claim has, or would have, a priority date earlier than that of the claim under consideration; and (B) the specification was published after the priority date of the claim under consideration; and (C) the information was contained in the specification on its filing date and when it was published.”
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10.7 Appendix VII: Patent Questionnaire PATENT QUESTIONNAIRE 1. Provide the full name, home address and nationality for each of the actual inventors: Surname:________________________________________Given Name: __________________________________ Home Address:_________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ Nationality:_____________________________________________________________________________________
Surname:________________________________________Given Name: __________________________________ Home Address:_________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ Nationality:_____________________________________________________________________________________
Surname:________________________________________Given Name: __________________________________ Home Address:_________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ Nationality:_____________________________________________________________________________________
2. Ownership Details:
Address: _________________________________________________________ A.C.N. _______________________
3. Title of Invention (Brief): ______________________________________________________________________________________________ ______________________________________________________________________________________________
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Name: ___________________________________________________________ A.B.N. _______________________
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4. Is the invention: i)
A new composition, product, device or process?
ii)
An improvement to, or a new use for, a known composition, product, device or process?
iii) A known composition or product obtained by a new process? iv) A method of medical treatment? v)
A microorganism: naturally occurring or genetically engineered?
vi) A nucleic acid or polypeptide sequence? vii) Other? (Give brief details) ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
5. What steps have you taken to ascertain that this invention is novel? ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
6. Have you carried out a literature search?
■
Yes
■
No
If yes, please give particulars of the search undertaken and briefly describe the results. ______________________________________________________________________________________________ ______________________________________________________________________________________________
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7. If the invention relates to a nucleotide sequence or polypeptide, have you carried out a database search, eg. Genbank or EMBL-SwissProt? If yes, please give particulars of the search, briefly describe the results and attach copies of the sequence comparisons having the highest homology. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
8. Broadly describe the present state of the background art and its main problem(s) or disadvantage(s). ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
9. Are any specific examples of related background art known to the inventor (eg. known devices, publications, patents)? Attach copies of publications and patents you believe to be most relevant, if available. a) __________________________________________________________________________________________ ____________________________________________________________________________________________ b) __________________________________________________________________________________________ ____________________________________________________________________________________________ c) __________________________________________________________________________________________ ____________________________________________________________________________________________
10. Describe the main differences between your invention and the background art which provide the principal advantage. In other words, does the background art have disadvantages or difficulties that are overcome by the present invention?
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11. If the invention pertains to isolation of a novel gene, please describe the degree to which it has been characterised, eg. complete gene isolated and sequenced, encoded polypeptide expressed and characterised, overexpression studies, deletion/substitution studies. Attach any relevant nucleotide and polypeptide sequences (preferably on a floppy disk). ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
12. If the invention involves a method of medical treatment, please describe any in vitro or in vivo studies that have been performed, eg. experiments in animal model systems. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
13. Have you publicly disclosed your invention? If so, give details including date of disclosure and the nature of the disclosure, (eg. lecture at scientific meeting, technical journal, theses, reports, submission of sequence to publicly available database, provision of plasmid to collaborator or other scientist, etc.). Please provide copies of any publications made by the inventors in the field of the invention, including seminars or presentations conducted. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
14. Does the invention involve any materials or components not readily available to the public? For example, is the invention an isolated microorganism or genetically engineered microorganism or does the performance of the invention require access to such a microorganism or other biological material not readily available?
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■
Yes
■
No
If yes, give details of these materials or components. Provide details of any microorganism deposits including whether or not they have been made under the Budapest Treaty, the deposit institution and the accession numbers. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
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15. Are you aware of other significant research being undertaken in this area?
■
Yes
■
No
If yes, please give details of the research. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
16. Provide a detailed description of the invention. It is necessary to describe the invention in sufficient detail to allow others to make and/or operate the invention. To ensure the broadest possible protection of your invention it is necessary to identify its prime features. Attach a detailed description, if available. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
17. What is the principal application or use for your invention? List other subsidiary and potential applications or uses. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
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18. Describe any examples that illustrate your invention, eg. if a therapeutic use is envisaged, please describe any in vitro or in vivo animal model studies that have been conducted.
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19. Please attach here any relevant diagrams or photographs.
20. List as many advantages of your invention as you can. While doing so, compare it with existing background art and with existing products and services. (i) ________________________________________________________________________________________ ________________________________________________________________________________________ (ii) ________________________________________________________________________________________ ________________________________________________________________________________________ (iii) ________________________________________________________________________________________
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________________________________________________________________________________________ (iv) ________________________________________________________________________________________ ________________________________________________________________________________________ (v) ________________________________________________________________________________________ ________________________________________________________________________________________
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21. List any disadvantages or limitations of your invention when compared to existing background art or existing products and services. Describe if and how these limitations can be overcome. ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________
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10.8 Appendix VIII: Statutes Relating to Commercialisation Exclusive rights given by patent – Patents Act 1990 (Cth), s13 “13. (1) Subject to this Act, a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. (2) The exclusive rights are personal property and are capable of assignment and of devolution by law. (3) A patent has effect throughout the patent area.” Assignment of patent – Patents Act 1990 (Cth), s 14 “14. (1) An assignment of a patent must be in writing signed by or on behalf of the assignor and assignee. (2) A patent may be assigned for a place in, or part of, the patent area.” “Exploit” in relation to an invention is defined under Schedule 1 of the Patents Act 1990 (Cth) to include the following: “(a) where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process – use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use;” Under the Patents Act, a patentee may, therefore, assign or license all of his or her rights to the invention and the assignment may be in respect of part only of the area or part only of the rights vested in the patentee. If there are co-owners of the invention, ie. two or more patentees, section 16(1) of the Act sets out their rights as follows: “16. (1)Subject to any agreement to the contrary, where there are two or more patentees: (a) each of them is entitled to an equal undivided share in the patent; and (b) each of them is entitled to exercise the exclusive rights given by the patent for his or her own benefit without accounting to the others; and (c) none of them can grant a licence under the patent, or assign an interest in it, without the consent of the others.” This means that should co-owners require any other arrangement, each co-owner having the right to: (i) exploit the invention without any need to account to each other; and (ii) be entitled to equal shares in the patent, then the assignment or other ownership agreement will need to include the relevant terms.
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Particulars of assignments, licences or mortgages of a patent must be registered in the Register of Patents. The importance of registration is seen from sections 189 and 196 of the Patents Act 1990 (Cth), from which it appears that a bona fide assignee could enforce rights even against an exclusive licensee if the particulars of the exclusive licensee were not registered. Termination of licences Section 145 of the Patents Act 1990 (Cth) provides the mechanism for a licence contract to be terminated after the patent ceases to be in force. Section 145 is as follows: “145. (1) A contract relating to the lease of, or a licence to exploit, a patented invention may be terminated by either party, on giving 3 months’ notice in writing to the other party, at any time after the patent, or all the patents, by which the invention was protected at the time the contract was made, have ceased to be in force. (2) Subsection (1) applies despite anything to the contrary in that contract or in any other contract.” 198
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Chapter 11. Glossary of Acronyms and Abbreviations
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Biotech Directive European Directive on the Legal Protection of Biotechnological Inventions CRCs
Co-operative Research Centres
DUS
Distinctiveness, Uniformity and Stability (with reference to Plant Breeder’s Rights)
EPC
European Patent Convention
EPO
European Patent Office
GATT
General Agreement on Tariffs and Trade
GMOs
genetically modified organisms
IP
Intellectual Property
IPC
International Patent Classification
IPER
International Preliminary Examination Report
IPR
Intellectual Property Rights
ISR
International Search Report
MTA
Material Transfer Agreement
NCC
National Competition Council
NDA
Non-Disclosure Agreement (or Confidentiality Agreement)
PCT
Patent Cooperation Treaty
PBR
Plant Breeder’s Rights
R&D
Research and Development
TPA
Trade Practices Act 1974 (Cth)
TRIPS
Trade Related Aspects of Intellectual Property Rights
UPOV
International Union for the Protection of New Varieties of Plants
USPTO
United States Patent & Trademark Office
USFDA
United States Food & Drug Administration
WIPO
World Intellectual Property Organisation
WTO
World Trade Organisation
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Chapter 12. Index A
E
allowance 22, 33, 34 amendments 17, 22, 33, 35, 36 annuities 11, 25, 37 assignee 91, 93, 133, 140, 141, 198 assignment 14, 91, 93, 94, 96, 134, 135, 137, 138 140, 141, 149, 151, 152, 198 audit 73-76, 78, 133, 153, 156 Australian patent system 9, 184 Australian Patents Act 1990(Cth) 9, 20, 25, 28 29, 30, 38, 39, 40, 67, 69, 87, 152, 153
employment agreements
95-97, 129 130, 140 employment contracts 101, 104 Europe 17, 18, 31, 34-36, 41, 42 48-50, 67,155, 173, 177, 179 exclusive 24, 87, 97, 140, 143, 149-153 155, 157, 158, 167, 168, 177, 178, 198 extension of term 9, 10, 25, 32, 34, 35
G governing law grace period
B best mode bibliographic searches Budapest Treaty
32, 116 57, 58 20, 25, 69, 117, 182
C circuit layout rights classification indexes collaborative research commercialisation
8 52 142 6, 39, 93, 110 118-120, 122-126 146, 147, 156, 167, 198 competitor activity 108 compulsory licences 23 confidentiality 75, 94, 95, 101-104, 111, 114 132, 135-140, 158, 177 consortia 143 consultants 76, 93, 94, 96, 140 contractors 95, 99, 101, 132, 140 copyright 8, 12, 13, 14, 20, 95-97, 133 144, 162, 163
158, 159 10, 32, 34, 35, 113
I improvements
11, 72, 77, 79, 95, 123 131, 151, 157, 158, 159, 187 industrial applicability 20, 35, 68, 69 information disclosure statement 32 infringement 14, 15, 24, 31, 35, 55-57, 59, 70 76, 77, 78, 80, 95, 108, 109, 112, 117 136-138, 145, 149, 151-153, 158, 160-163 165, 171, 174, 176, 179, 189 infringement search 55, 56 innovation patent 10, 11, 157 intellectual property insurance 163-165 interference 33 international IP treaties 16 inventive step 10, 11, 17, 19, 21, 22, 28, 29, 31 33, 35, 38, 39, 41, 53, 64, 66, 69, 88 89, 107, 117, 118, 171, 174, 183, 185, 187, 190 investment finance 144 IP strategy 79, 80, 109, 123, 124 IP valuation 2, 143-147 IPC 58, 60, 61, 200
D
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deposit requirements 182 design patent 31 designs 8, 12, 13, 14, 20, 61, 97, 122, 144 discovery 27, 39, 78, 85, 108, 115, 161 172, 175, 185, 186 divisional application 11, 25, 36 due diligence 2, 76, 133-136, 138, 139 144, 176, 177
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J
P
joint ventures
79, 122, 128, 142
L licensing
litigation
55, 67, 72, 75, 76, 78, 79, 109, 110 118, 124, 127, 128, 134-136, 138-141 144-159, 162, 164, 167 55, 77, 78, 152, 160-165 171
M maintenance fees 34, 35, 75 marketing strategy 156 Material Transfer Agreements 131, 132, 179 methods of medical treatment 35, 49, 50 modified examination 21, 22 monopoly 8-10, 41, 52, 55, 58, 69, 114 133, 140, 155, 188, 189 MTAs See Material Transfer Agreements
N non-exclusive
139, 149, 151 152, 155, 157, 158 normal examination 21, 22 novelty 10, 17, 19-22, 28, 31-34, 52, 53 69, 79, 82, 106, 107, 110-113 118, 166, 185, 190
Paris Convention patent attorney
10, 16, 36, 59, 117 107, 110, 116, 117, 132, 144 164, 179 Patent Cooperation Treaty 16-19 patent of addition 11 patent portfolio 134, 143, 144, 164, 165 patentability search 53, 54 patentee 8, 9, 11, 23, 24, 28-30, 38 70, 93, 108, 112-114, 122, 143, 149, 151-153 160-163, 171, 172, 189, 198 petty patent 10 Plant Breeder’s Rights 8, 12, 13, 31, 178, 179 plant patents 31 prior art 17, 21, 23, 28, 29, 32, 33, 38 53, 54, 66-69, 82, 107, 110-112 117, 118, 185, 187, 190 priority date 9-11, 17-19, 21, 25, 28-32 34, 38, 67, 76, 78, 110-113, 115, 117-119 171, 187, 188, 190 provisional specification 9, 10, 36 publication 10, 11, 14, 17, 24, 28, 32, 34-36 41, 53, 68, 70, 75, 82, 99, 100, 108-113 118-120, 132, 166, 170, 171
R re-examination registered designs revocation royalties
O opposition option fee
22, 23, 36, 42, 95, 136 155
23, 34 See designs 24, 55, 95, 151, 171 140, 147, 151, 156-159, 162 164, 172, 174, 177
S
Biotechnology Australia
NHMRC
DETYA
203
CHAPTER 12
sealing 11, 23, 93 shareholders 144, 147 signatories 17, 143 small entities 31, 161 sponsored research 134, 142 standard patent 9, 10, 23, 25, 157, 190 state of the art search 56, 57, 77, 123 statutory invention registration 31 storage of IP records 101 Swiss-style claims 50
12. Index
Biotechnology IP Management Manual
T termination of licences 198 terms and conditions 76, 148, 155, 157 trade mark 8, 11, 12, 16, 20, 31, 133, 147 173-175 trade secrets 8, 14, 15, 20, 97, 99-101, 128 TRIPS 16, 20, 183, 200
U USPTO utility patents
31, 32, 40, 200 31
V validity search
55
W
CHAPTER 12
warranties web sites
204
DETYA
140 58, 60, 61
NHMRC
Biotechnology Australia
