Monday, November 26, 2012

An adjustment for Patent Term Adjustment

Tape Measure-at-244-by-G.E.SattlerI recently came across an interesting alert from the Honigman firm regarding patent term adjustment. On 1 November 20120 the Eastern District of Virginia issued the first court decision involving the United States Patent and Trademark Office (USPTO) calculation of patent term adjustment.

Patent term adjustment

A patent cannot be enforced until it is issued. The usual term of a United States patent is 20 years from the filing date rather than the issue date. So if there is any delay in the examination process the patentee ends up with less than 20 years within which to enforce a patent.

By way of compromise, the USPTO is obliged to issue US patents within three years of filing. If the patent does not issue within this timeframe then the patentee is entitled to a patent term adjustment as a remedy.

There are three types of patent examination delays. These are:
  • "A Delays" where USPTO fails to comply with various statutory deadlines
  • "B Delays" where USPTO fails to grant a patent within three years of the patent application filing date
  • "C Delays" arising from administrative actions such as interferences, secrecy orders and appeals.
Patent term adjustment is calculated by adding the number of days for A delays, B delays and C delays. Deductions are made for overlaps and for applicant delay.

The effect of filing an RCE

In Exelixis, Inc v Kappos the patentee sought review and correction of patent term adjustment granted by the USPTO. Exelixis filed a national phase entry application on 15 January 2008. They received a final Office Action and filed a Request for Continued Examination (RCE) on 11 April 2011.

The USPTO issued a patent with a PTA award of 368 days. This was made up of 344 days of A Delays plus 85 days of B Delay minus 61 days of applicant delay. The USPTO reckoned that accrual of B Delay terminated upon the filing of the RCE. So they awarded the applicant 85 days of B Delay instead of 199 days.

Exelixis argued that if an RCE is filed after the three-year period commenced on the application filing date, the UPSTO should extend the patent term one day for each day of delay until the patent issues.

The Court found for Exelixis and awarded the patentee the patent term adjustment they were asking for. In a nutshell this means that an RCE will have no impact on patent term adjustment after the three year deadline has passed. We are still within the appeal period. It will be interesting to see whether the USPTO challenges this one.

Photo courtesy of author G & A Sattler under Creative Commons licence.

Sunday, November 25, 2012

Callaghan Innovation takes another step

Science and Innovation Minister Steven Joyce recently announced that Callaghan Innovation will be the name of the new Advanced Technology Institute. The ATI is being set up by the Government to help firms in the high-tech manufacturing and services sectors. The new organisation will have operations in the Auckland, Wellington (including Hutt Valley) and Canterbury regions.

The legislation that will establish Callaghan Innovation is passing through the legislative process at the speed of light. It's only been a couple of months since the First Reading. It is clearly high on the Government's agenda. I wonder how we can get similar treatment for the New Zealand Patents Bill?

Select Committee report

The Education and Science Committee recently reported back on the Advanced Technology Institute Bill. The committee had the Bill referred to it on 13 September 2012. The closing date for submissions was 1 October 2012. They received and considered 23 submissions from interested groups and individuals. Seven of these submitters presented oral submissions.


There is a change recommended to the operating principles. Clause 14(1)(b) now requires Callaghan Innovation to "proactively engage and collaborate with businesses, other [Research Science & Technology] providers, and other persons that ATI considers relevant to the performance of its functions". This amendment is to ensure that Callaghan Innovation works cooperatively with existing research facilities in order to avoid unnecessary duplication.

One of the functions of Callaghan Innovation is to provide services to businesses that contribute to its main objective. Clause 13(3)(a) is amended to include RS&T providers. An example of the way in which Callaghan Innovation can provide services to businesses now includes "undertaking research and development in collaboration with, or on behalf of, businesses or RS&T providers (or both).

Net benefit

Clause 14(1)(a) requires that Callaghan Innovation "aim to ensure that any activities it undertakes are for the net benefit of New Zealand". The word "net" is being taken out so that Callaghan Innovation is aligned with other entities such as Crown Research Institutes.

The term "benefit" is understood to be wide enough to include a range of benefits, such as economic, environmental, social, and cultural.

Conflict of interest

Clause 13(1)(f) states that one of the functions of Callaghan Innovation is to allocate and administer RS&T funding. Some submitters raised the potential conflict of Callaghan Innovation being both a funder and service provider.

Clause 14(2) is believed to address this issue. When allocating and administering RS&T funding, Callaghan Innovation must—
  • act fairly and transparently
  • implement systems and procedures to enable it to give effect to this principle
  • make information about those systems and procedures available on its Internet site
  • include in its annual report a report on its implementation of those systems and procedures.

Stakeholder advisory group

Clause 10 requires that, as far as practicable, the stakeholder advisory group's membership is broadly representative of the manufacturing sector, services sector, and RS&T providers. Furthermore, the members collectively should have sufficient experience and knowledge of the manufacturing sector, services sector, and as RS&T providers to give appropriate advice to the board.

One of the minority views is that clause 10 should make more explicit the need for strong industry representation on the stakeholder advisory group, and empower industry groups to have a say in their representation on this group. It was felt that union representation should be added to the clause.

However, this suggested change is not reflected in the Bill as reported back to the House.

The Second Reading

The Bill had a Second Reading on 8 November 2012. From the Hansard record the debate looks like a rehash of the views expressed in the Select Committee report discussed above.

One of the minor parties wants to see a further amendment to the clause dealing with operating principles. Clause 14(1)(b) as already amended by the Committee requires Callaghan Innovation to "proactively engage and collaborate with businesses, other [Research Science & Technology] providers, and other persons that ATI considers relevant to the performance of its functions".

The further amendment would require Callaghan Innovation to "proactively identify, engage, and collaborate". The idea behind this amendment would be to ensure that one of the things Callaghan Innovation must do is first of all find out who is in the market, so that it can then go and engage and collaborate.

This amendment is now formally tabled in Supplementary Order Paper No 149. Its author sees the role of Callaghan Innovation as 80 percent relationship building between business and research entities and 20 percent funding facilitation of research. There should be a requirement, according to the author, for Callaghan Innovation to know who is providing this service while not necessarily engaging with them in an attempt to address inadvertent duplication or competition.

Next steps

Now that the Second Reading is over it is time for the Committee of the whole House to consider the Bill part by part. It is high on the latest Order Paper. I think we can expect the legislation to be through the Parliamentary process before the Christmas break. That way all the legislation will be in place ready for a proposed launch date of 1 February 2013.

Friday, November 16, 2012

The Deemed Export - keeping a secret

Shhh...Can you keep a secret?The AIPLA annual meeting this year included a fascinating panel session on emerging IP issues in emerging markets. There were tips and tricks from lawyers on the ground in Israel, Brazil, South Africa and Russia. There was a session on Corporate Strategies for Foreign Filing. But the presenter that fielded all the questions was Roszel C Thomsen II from Thomsen and Burke LLP. He talked about Export Control Issues.

He hit a nerve, as one of my Antipodean colleagues put it. There seemed to be a few law firms in the audience who either hire foreign nationals, or have clients who do.

What is a deemed export?

Release of technology within the United States to a "foreign national" is a "deemed export". In general, exporting from the United States is a privilege and not a protected Constitutional right. It is subject to export control laws and regulations. A licence is required for exports in the same way as you need a licence to drive a car or own a gun.

The laws and regulations are there to stop bad stuff getting into the hands of bad people that can then use the information or technology to do bad things to the United States or her citizens.

A "foreign national" is a person who is not a United States Citizen or a "protected individual". A Green Card holder is a protected individual under the Immigration and Naturalization Act. Anybody with any type of temporary visa is a "foreign national".

Some practical examples

It all depends on how the technology or computer program source code is classified for export. There are a whole bunch of Export Control Classification Numbers (ECCNs) specifying ten categories of hardware, software and technology that are subject to controls.

Encryption is technology for the development, production or use of information security hardware and software. Commonly assigned ECCNs are 5E002 and 5E992. An export licence is required for foreign national employees from Cuba, Iran, North Korea, Sudan and Syria.

A biotech example involves technology for the development or production of the Japanese encephalitis virus. The ECCN is 1E001. No licence is required for foreign national employees from Canada. A Licence Exception is available for a foreign national employee from India. An Export Licence is required for a foreign employee from Russia.

What's the big deal?

Some of the penalties under the Export Administration Act of 1979 and Export Administration Regulations (EAR) are eye-watering. They are certainly a lot more serious than the export controls placed on New Zealand nationals. I talk about these controls in The darker side of patent protection.

In November 2008 Maxim was stung with a civil penalty of US$192,000. The Commerce Department's Bureau of Industry and Security (BIS) accused Maxim of unlawfully exporting integrated circuits and related components to China, Estonia, Russia and the Ukraine. They were also alleged to have released related technical data to Iranian and Chinese foreign national employees within the United States. Maxim had applied for a licence but didn't restrict access before the licence was issued.

In September 2004 Lattice Semiconductor Corporation was pinged for US$560,000 as a civil penalty. BIS alleged that they unlawfully exported certain semi-conductor microchips and related technical data to China and to Chinese national employees in the United States.

There was even a criminal conviction in July 2005. SunTek Microwave pleaded guilty to violating the EAR. There was a criminal penalty of US$339,000. The former president of the company was sentenced to 12 months and one day imprisonment and two years' supervised release.

Photo courtesy of author Jαγ under Creative Commons licence.

Thursday, November 15, 2012

New Zealand set to join Madrid Protocol

Madrid _Gran Vía-Montera
New Zealand is about to align its trade mark system with that of our major trading partners Australia, United Kingdom, China, United States, Japan and the Republic of Korea.

How it works

The Madrid Protocol system will come into force in New Zealand on 10 December 2012. We expect it will benefit New Zealand businesses with a strong export focus.

At the moment Kiwi businesses wanting to protect a trade mark internationally have to file separate national trade mark applications for each country or territory of interest. They must also comply with each country's specific requirements, which include appointing agents in each country, filing in foreign languages and dealing with local trade mark offices.

Under the Madrid Protocol system, trade mark owners will be able to file a single international trade mark application in English, through the Intellectual Property Office of New Zealand (IPONZ), and select the countries they want trade mark protection in, as long as those countries are also members of the Madrid system.

If no objections are raised by the trade mark offices of the countries in which protection is sought, there will be no need to appoint local agents. After a specific period of time, the trade mark will simply be deemed registered in these countries.

At this stage 87 countries have signed up to the Madrid Protocol. Several new countries are expected to join over the next 12-18 months, opening up even further possibilities for New Zealand exporters.

Tidying up the register

The new system will establish a conversion process for old trade mark registrations not classified under the Nice Classification system. Under this process the Commissioner will be able to initiate conversion of these registrations to the current edition of the Nice Classification system.

The conversion process will commence with the Commissioner writing to the owners of the registrations informing them of an intention to convert and the proposed form of conversion. The Commissioner's letter will set a deadline for response of one month from the date of the letter.

The owner of the registration will then have the option of accepting the conversion or proposing an alternative form of conversion. If there is no response from the owner, the registration will be converted as proposed. If the owner proposes an alternative form, the commissioner will determine the form of conversion. If the owner disagrees with the form of conversion, they will have the option of requesting a hearing.

The online angle

In almost all circumstances communication with IPONZ is going to be made electronically through their online case management facility. However, the regulations also allow a mechanism for the Commissioner to approve alternative filing methods in certain exceptional situations. IPONZ has indicated they intend to publish a practice note which will give further guidance on the situations this might cover.

It's good to see that there will be exceptions in some circumstances. Stakeholders will not always be able to use the online case management facility. There will be times when the IPONZ system is not available and so it is important to have a manual process as a fallback position.

Photo courtesy of author ferlomu under Creative Commons licence.

Sunday, November 11, 2012

Out of Africa

Congo RiverNext week there is a meeting of science and technology ministers of the African Union. One of the items on the table in Brazzaville, Democratic Republic of Congo is a Pan-African Intellectual Property Organization (PAIPO).

Existing systems

There are already two regional intellectual property offices in Africa. These are the African Regional Intellectual Property Organization (ARIPO) and the Organisation Africaine de la Propriété Intellectuelle (OAPI).

Many of us downunder don't have a lot of professional dealings with either of these organisations. We tend to learn about them for our patent attorney qualification exams. Then we quietly forget about ARIPO and OAPI until it is our turn to tutor exam candidates.

Last year I did actually have some business dealings with Kenya which is a member state of ARIPO. Mrs PatentBuff was detained at one of the Kenyan regional airports as a suspected drug mule. I guess it is not really an IP matter. But it is definitely a good story.

The case for PAIPO

The draft text for PAIPO is available here. In 2007 the heads of state gave the African Union Scientific, Technical and Research Commission the task of coming up with a draft legal instrument. The Commission apparently consulted with African Union member states, existing regional IP offices and collective management organisations.

I say 'apparently' because on the other hand there is criticism in some quarters of a lack of consultation and transparency in the process leading up to the production of the Draft Statute.

The stated objectives of PAIPO are set out in Article 5 as follows:

  • promotion of harmonisation of intellectual property laws of its [African Union] member states;
  • common administration and management services of intellectual property; and
  • vehicle for addressing political issues and developing African common positions relating to intellectual property matters.

The case against PAIPO

Every new proposal has its critics. Public interest observers are concerned that the PAIPO initiative seeks to adopt "first-world" standards of protection. It appears to pander to the demands of foreign intellectual property rights holders. It fails to appreciate or address the needs of the least-developed countries in Africa.

There is a petition circulating that urges the delay of the PAIPO proposal. It seeks a more open discussion and wants to see the proposal, if it goes ahead at all, to be more tailored to local African needs. At the time of writing this blog there are less than 400 signatures. This doesn't sound like a lot of signatures to me. The petition does not even appear to originate from within Africa.

The main question is whether or not this system is needed at all. It will require a lot of resources to set up an African centralized registration system. Wouldn't those resources be better spent on improving the existing systems of ARIPO and OAPI? Or assisting individual member states with accession to the PCT treaty?

Watch this space

I really don't have a strong view on PAIPO. There doesn't seem to be a lot of support for the establishment of the new system. There also doesn't seem to be a lot of local opposition to it either. It should be an interesting meeting.

Photo courtesy of author CIFOR under Creative Commons licence.

Tuesday, November 6, 2012

In which countries should I file my patents?

galvanized bucketsI spend a lot of my time working with clients building strategic patent portfolios. I think of patents as business tools. If they are created and used strategically they can help a patent owner achieve strategic and tactical business objectives. This of course means that the patent portfolio needs to be aligned with global business objectives.

Tough choices

It is not cost-effective to patent every invention in every country. We need to make tough decisions in order to allocate available resources. Some people compare these decisions to drowning puppies. Hard to do at the time, but a necessary thing to do long term.

There are tough decisions to be made all the time. Should you file a patent application at all for that new invention? In which countries should you file patent applications? Which patent applications should you abandon? Which issued patents should you maintain?

What we are trying to do here is simple. We want to put in place the right patents in the right places. Getting there is the tricky part.

Three buckets

One way of developing a good patenting strategy is to think like a global business leader thinks. Patents in a global portfolio are a series of CAPEX investments in countries where patent rights are pursued, obtained and maintained. The goal is to maximize the return on those investments in terms of value to the business.

Country selections can be viewed as a set of buckets that are grouped to define the different business approaches to the countries in each bucket.

The first bucket typically includes developed countries and regions such as the United States, the EPO and Japan. The business strategy here might be to drive innovation.

Next there are the BRIC countries. BRIC refers to Brazil, Russia, India and China. They are all thought to be at a similar stage of newly-advanced economic development. The expectation is that business interests in these countries are likely to expand during the patent term. The business strategy here is to accelerate penetration and localization.

The third bucket includes developing countries with high growth potential. Here the business strategy might be to build strength. There are a few ways to identify these countries. Some people refer to the Next Eleven (N-11) countries - Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam. Others prefer to think of Global Growth Generators (3G) countries - Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam.

A targeted approach

It's one thing to work out which countries you are going to include in each of your buckets. It's quite a another to work out which inventions to cover where.

I recently attended the AIPLA annual meeting at which the Chief Intellectual Property Counsel of a multinational outlined a possible patenting strategy for each bucket.

The strategy of innovation in the 'developed countries' bucket may require targeted filings of patents on fundamental technology in those countries. This might mean less coverage of product-based applications of those technologies in developed countries, in order to save resources better deployed in one of the other two country buckets.

For the 'BRIC' bucket it may be prudent to seek more targeted, narrow, product-focused patent claims to protect the products customised for local markets in the BRIC countries. There may be an emphasis on obtaining quick issuance of “picture claims” directed to your products. You may also have a portfolio of utility models to bolster the strategy of product-focused intellectual property protection.

The 'developing countries' bucket may require a different approach again. Business in those countries may still be a way off, so widespread attempts to obtain patents in those countries would be premature. There may be some countries within the bucket where it is time to begin a modest effort at patent portfolio building with an eye to future, longer-term business protection or enforcement opportunities.


There is no holy grail. There is no secret sauce. The main point is that the patent portfolio must remain aligned with the business strategy. Only then can it serve as an effective and valued tool that materially supports and advances business objectives in the markets of interest.

Photo courtesy of author Maker Mama under Creative Commons licence.

Monday, November 5, 2012

A copyright tale of RIANZ and Rihanna

Rihanna Loud TourWhat do Rihanna, Taio Cruz and Muse have in common? Their music is popular. Apparently. Their music costs NZ$2.39 per track if you buy it on iTunes. And NZ$215.10 in lost sales if you download it illegally.

Calculation of damages

There's quite a lot of difference between $2.39 and $215.10 when you are talking about a single music track. In my earlier blog post Three Strikes and Not Out I talk about a student who was in the gun for unlawful downloading carried out by her or her flatmates. The Recording Industry Association of New Zealand (RIANZ) produced evidence suggesting that each copied music track meant $215.50 in lost sales.

The folks at TechLiberty have very kindly published the submission that RIANZ prepared for its appearance before the Copyright Tribunal. You can download a copy here.

The Uploading problem

An award of $2.39 per track might be appropriate where a sound recording has been downloaded once by the account holder. The reasonable cost of purchasing the work is what the account holder would have paid if he or she had purchased the work legally.

But uploading is an entirely different story. Uploading, said RIANZ, is more harmful as it enables multiple potential unauthorised downloads by third parties. There probably needs to be some sort of downward adjustment to reflect the reality that not every illegal download represents an actual lost sale. But uploading is still bad.

The empirical data

The problem is that RIANZ doesn't know how many illegal downloads of Dynamite or Only Girl (In the World) were made from the music uploaded by the account holder or her flatmates. Current internet detection services don't provide this information to RIANZ. So it was time for an educated guess.

RIANZ says that in late 2007 the International Federation of the Phonographic Industry (IFPI) commissioned a report from UK Internet intelligence agency Envisional Limited. IFPI wanted to know how many copies of an album would be made from a single installed client on the BitTorrent network by other persons on the same network during a one month period.

A total of 17 albums were chosen to model a typical uploader. The content was balanced between recent releases, current and classical albums.

The research showed that, on average, each album was downloaded the equivalent of 90 times in a month. In a real life situation this figure may be even higher. Those 90 downloads may each seed a further 90 downloads.

The conclusion

RIANZ detected the unlawful activities of the account holder over successive monthly periods. It was therefore reasonable, argued RIANZ, for the Copyright Tribunal to adopt a baseline figure of 90 downloads for each infringement identified. In other words, each uploaded track.

As I have said before, RIANZ withdrew the case. It didn't make it to the Copyright Tribunal so this calculation of damages was never tested. It was a great outcome for the account holder. Not so great for RIANZ. And not so great for those of us left wondering whether this calculation of damages is fair and reasonable.

Photo courtesy of author Lauren Fritts under Creative Commons licence.
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