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Apr 2006
09
April 09, 2006

Strategic Decision Making for International Patent Filing

Today, goods sold in the United States may be assembled in Mexico from parts made in Vietnam from a design created in Italy using software written in India. There is no simple solution for "where to file" for patent protection. The problem is further complicated by the costs of filing and maintaining the application in several countries. A systematic approach for answering the "where to file" question is needed. A helpful approach consists of creating a list of potential countries, prioritizing the list, and then, with an established budget, selecting the target countries.


STEP 1: CREATE A LIST OF POTENTIAL COUNTRIES

A list of possible locations for filing the applications is critical. By creating a list, it is possible to evaluate alternative scenarios, and then select the best of the available scenarios. "Brains, cranes and trains" is a good reminder in making this list.

Brains

The intellect or "brains" necessary to create new and innovative products rarely exists in a vacuum. Inventors often live in a large community of like-minded people. For example, automobile inventions are often created in well-known "inventive pockets" such as Detroit, Nagakute, and Stuttgart. Similar pockets of inventors and creative artisans exist at various places in the world for most technical areas.

A patent in a technology "hot spot" can impede competitors from producing similar innovations. A real competitive advantage can be realized by filing patents in countries where these innovation centers exist. The downside, which can be considerable, is that competitors could be encouraged to "design around" the patent.

Cranes

Another target for possible filings are the countries containing the "cranes." These countries are the manufacturing centers for the products.

Patent filings should be contemplated in the countries of manufacture for two purposes. First, just as there are innovation centers, there are also manufacturing centers where many companies manufacture similar goods. A patent obtained in a manufacturing country could well be applicable to several competitors. Second, in countries which are manufacturing centers, there is sometimes a problem with counterfeiting and intellectual property theft. A factory will produce goods for one customer, and then produce those same goods for the black or gray market. In such a circumstance, a patent portfolio in the country of manufacture is invaluable to assist in immediately stopping production of counterfeit goods.

Trains

Finally, the list should contain the "train" countries–the countries that deliver the goods for sale. If significant sales are anticipated in a country, then patent protection should be considered. In many circumstances, patent protection should be sought in the consumer nations of the world: Japan, United States, France, Germany, and the UK. If significant sales are anticipated in other countries, then those also should be added to the list.

STEP II: PRIORITIZE THE LIST

The list of "brain, crane and train" countries could easily consist of twenty or more candidates. Obviously, filing patent applications and maintaining the patents in each of the countries could be prohibitively costly. Thus, prioritization of the list is mandatory.

A good tool for prioritizing the list is the following matrix:

  

  Extrinsic Value of Patent in Country

 High

 Low

Intrinsic value of patent in country

 High

 Quadrant I

 Quadrant II

 Low

 Quadrant III

 Quadrant IV


The first part of the matrix is the "intrinsic value" of the patent. The intrinsic value is the value of a particular patent with respect to the product within the country. That is, the intrinsic value is a measure of the desirability of having a patent in the country regardless of whether the patent can, in fact, be enforced within that country. For example, a patent in a country where the product is manufactured and where large sales are expected would have a high intrinsic value. On the other hand, if only a small feature of a product is designed within a country and sales in that country are expected to be minimal, then the intrinsic value of the patent within the country is low.

On the other hand, the extrinsic value of a patent in the country refers to the "real" value of any patent within the country. The extrinsic value encompasses several factors, such as the ease of acquisition of the patent and the ease of enforcement of the patent in a country. This measure relates to the practical application of patent laws within the country. As most practitioners know, what is "on the books" as to the patent law in a particular country may not necessarily reflect the practical application of that law. Each country is evaluated with respect to these two criteria. Countries falling within Quadrant I have the highest priority, while countries falling within Quadrant IV have the lowest priority. Countries falling within Quadrants II and III have roughly the same priority, although depending upon the circumstances, one quadrant may be preferable to the other.

With the countries prioritized, the creation of a ranked list is fairly straightforward. Obviously, the skill of the attorney and a knowledgeable business person is paramount.

STEP III. ESTIMATING COSTS AND SETTING A BUDGET

For each country on the ranked list, an estimate of the filing fees, translation fees, prosecution fees, etc., is found. For greater precision, the maintenance fees can be estimated and the present value of future expenditures calculated. The list is thus rank ordered with an estimated filing cost for each country.

If it has not been previously set, the budget for the patent filings for the particular invention is determined. It is imperative that this be a real number. Often, someone will suggest that the company "spend as much as it takes" to protect a product. However, this comment will usually be quickly forgotten in the face of the total cost for such a project.

STEP IV. SELECTING THE COUNTRIES

With a budget and a ranked list, determining the targets is simply a matter of going through the list and selecting countries until the available budget is exhausted. Obviously, adjustment of the budget can be accomplished at any time, present or future. For example, if business conditions indicate an availability of additional funds, additional countries can be added.

CONCLUSION

By following a systematic approach to international patent acquisition, the return on the investment in patents can be increased. By "planning the plan and then executing the plan," businesses can obtain the most return possible from their patent investment.

If you have any questions, please contact your WNJ attorney or a member of our Technology and Intellectual Property Practice Group. 

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