By Michael Buck
Myth No. 1. Patents aren’t worth the trouble because patent litigation is very expensive.
This is an often used, but irrational, excuse for the putting of heads in the sand when it comes to patents. It’s a bit like not wanting to buy a house because there’s a risk that a burglar could break into it. That could happen, but it’s unlikely and there are precautions that can be taken to reduce the risk of it happening. In the meantime the house can be enjoyed as an appreciating asset, lived in or be rented.
It should be noted that the vast majority of patents simply don’t become the subject of a dispute. One of the reasons for this is that over the last fifteen years more and more businesses have become aware of patents and check out the patent situation before launching a new product.
It is certainly true that patent litigation is costly but that is one of the reasons why over 95% of patent disputes settle well before the handing down of a court decision. Data collected by the government sponsored Advisory Council on Intellectual Property in 1999 suggested that only 0.03-0.04% of registered intellectual property rights are the subject of litigation in any given year. In the U.S. a study found that of 1411 patent litigation cases filed in the years 1983-1999 only 6.9% went to trial. The rest were either the subject of summary disposal by the court or settlement by the parties. (Cited in K.A. Moore “Judges, Juries and Patent Cases – An Empirical Peek Inside the Black Box” (2000) 99 Michigan Law Review 365, 383, Table 1)
A competitor may simply not be aware of the patent and when it is brought to their attention and the patentees rights are explained to them then the dispute settles. A resolution may be possible through patent licensing, which can be mutually beneficial to both parties. In any event, there’s plenty of leverage in a patent without having to go the extreme of full blown litigation.
You may be interested to know that patent litigation insurance is available in Australia for businesses that are concerned their patents are likely to be the subject of a dispute.
Myth No. 2. Patents Are Easy to Avoid
Some patents are easy to avoid and some are very difficult to avoid. Each situation has to be taken on a case by case basis. In general, if the invention that has been patented is a big improvement over what has gone before then the patent is more likely to provide a broad protection than if the invention is only an incremental improvement.
Bear in mind that there is no such thing as a “10% rule for patent infringement”. Patent infringement is arrived at by interpreting the granted patent’s claims and determining whether or not an allegedly infringing product, or method, falls within them. There’s no mathematical formula or percentage of similarity for determining patent infringement or avoidance of a patent.
Myth No. 3. Patents are Very Expensive
It typically costs $7,500 to $10,500 from scratch to the grant of a standard Australian patent in government and attorney fees. The cost is typically spread over a period of up to about four years. Innovation patents are usually at least a little less expensive but they only last for eight years as opposed to twenty for standard patents.
Myth No. 4. Australian Patents are Enforceable Overseas
Did you realize that patents are granted on a country-by-country basis? They are only enforceable in the legal jurisdiction where they issued. It follows that an Australian patent can only be used to stop the manufacture, sale, lease, use or importation of the patented product in, or into, Australia.
For the same reason, the owner of a U.S. patent for example, can’t enforce that patent in respect of acts carried out in Australia.
Myth No. 5. A Patent Provides the Owner with a Legal Monopoly
Although you will often read in the press that “a patent is a legal monopoly” that isn’t in fact true. Patents actually confer the right to stop all other Australians from performing or exploiting the invention. They don’t confer a monopoly because it is possible that a product might be covered by two or more patents owned by different patentees. In that case one, or both, of the patentees would have to license rights to the other. If the patentees aren’t prepared to cooperate then it is possible that each would effectively prevent the other from working their invention, which is pretty much the opposite of a monopoly!
Myth No. 6. Granted Innovation Patents are Enforceable
Innovation patents are granted without examination, which is a fact that has caused a great deal of confusion If someone tells you that they have a granted patent ask if it is an innovation patent or a standard patent. If they say it is an innovation patent then ask them if they’ve had it go through the certification exam. Innovation patents have to be certified, post grant, in order for them to be enforceable.
There are a substantial proportion of innovation patents which have been granted but would be likely to have difficulty passing the certification exam.
Myth No. 7. A Patent Guarantees Commercial Success
The basic reason for patenting is that the patent right is sweeping. Remember that a patent constitutes a right from the Commonwealth to the patentee to prevent twenty million other Australians from making, importing, selling or using the patented invention. It’s no wonder that successful corporations are very interested in patenting.
In fact, patents are virtually the only anti-competitive tool lawfully available for a business to gain an advantage in the marketplace. For example, under the Trade Practices Act it is illegal for businesses of the same type to form a cartel and price fix. In contrast, it’s not illegal for a patent owner to license only a select number of licensors and set the pricing for the patented product.
Of course, patents alone won’t make a business successful. Your patenting strategy must be aligned to your business plan and have a process for identifying when a new product or process that is core to your business should be considered for patent protection.
There are many myths surrounding patents. Fundamentally though, patents are a powerful business tool worth reconsidering if your business derives a competitive advantage through innovation.