9. Obtaining and Protecting Patents in the United States, Europe, and Japan
Deepak Somaya
In the 1970s, ACME, a highly innovative U.S. chemical firm, pioneered a technology involving an inert polymeric substance that subsequently found wide application in products around the world. ACME sought to obtain patent protection for this pioneering innovation, as well as for related follow-on innovations, in the United States and elsewhere, sometimes with very different results. This chapter describes ACME's experiences obtaining and enforcing patents in the United States, Europe, and Japan, analyzes the cross-national differences in legal regimes for granting and protecting intellectual property rights, and provides some insight into the resulting economic consequences.
I. INTRODUCTION
In an era of increasing global trade and information flows, innovative companies are increasingly sensitive to cross-national differences in patent protection. This is because an invention, once disclosed, ostensibly becomes freely available to everyone, including firms in a country that does not protect the invention adequately. A CEO of a U.S. company that invents and manufactures products for the semiconductor industry wrote: “To be valid, a patent must describe how to make the invention, complete with recipes. A U.S. patent is therefore a free ‘how to’ book for every potential offshore competitor. For a modern software or manufacturing enterprise, a U.S.-only patent can be worse than no patent.”[1] Multinational companies, therefore, are acutely sensitive to the differences in international patent systems that determine the extent of protection accorded to their innovations in each market.
This chapter has three primary objectives. First, it documents significant
The research shows that in Europe and Japan, as well as in the United States, ACME encountered adversarial legal opposition to its patent claims, resulting in costly delays and uncertainties. In both Europe and Japan, legal conflict occurred primarily in administrative forums and was related to the initial governmental decision to grant a patent. In the United States, the most serious legal challenges occurred later, through litigation in the federal courts. Overall, the U.S. system granted ACME broader protection for its innovation. The lesser (or less consistent) patent protection in Europe and Japan set back ACME's marketing efforts to some extent; nevertheless, its innovative products eventually achieved considerable commercial success in all its markets.
As a consequence of lobbying by multinational companies, crossnational differences in patent regimes have been subject to strong pressures toward convergence, particularly through international forums such as the General Agreement on Tariffs and Trade (GATT) and the World Intellectual Property Organization (WIPO). Bilateral trade negotiations, especially those between the United States and its trade partners, have been another important force for convergence. In Japan and the United States, and to a lesser extent in Europe, important changes are being implemented in the patent systems as a result of the GATT Trade Related Intellectual Property Rights (TRIPS) agreement, and Intellectual Property Rights (IPR) agreements under the U.S.-Japan Framework talks. It will be some time before the full impact of these changes can be objectively assessed. However, this case study (together with other research) suggests that nonstatutory cross-jurisdictional differences persist at the national patent office level and, more important, that patent enforcement processes, which are vested with the courts, are likely to remain an enduring source of differences between national patent regimes for some time.
II. RESEARCH METHOD
After collecting detailed information about the differences among national patent regimes from secondary sources, I sought a more nuanced understanding of them through interviews with experts and patent law professors
III. GENERAL DIFFERENCES AMONG PATENT REGIMES
The patent law regimes of the United States, Japan, and Europe all reflect a basic consensus concerning the importance of intellectual property rights in developed economies. Patent grants have two purposes. On the one hand, patents provide economic incentives for the creation of valuable innovations by conferring upon the inventor a limited monopoly in the new technology. On the other hand, the patent system facilitates the diffusion of these inventions in industry by mandating public disclosure of innovations. In interpreting and applying patent law, national patent offices and judges who hear patent cases strike a somewhat different balance between the competing goals of providing incentives and diffusing technology.
Among practitioners, the United States is generally regarded as being particularly supportive of patentees and their exclusive property rights over inventions. The Japanese patent system, in contrast, emphasizes the rapid dissemination of innovations in industry and encourages the sharing of technology, rather than providing broad exclusive rights to patentees.[2] In the words of one scholar, “[T] he Japanese view inventions more as a public, and less as a private, good,” and they thus view patents “more as a means to reward inventions and less a right to exclude others from use than in the United States.”[3]
European national systems are often described as somewhere between the United States and Japan, with the United Kingdom leaning more toward the U.S. pole and Germany somewhat more toward the Japanese. The
Apart from core ideological differences, there are institutional and procedural differences between the jurisdictions as well, often reflecting the historical development of their national patent systems and the character of their political and legal institutions. Unlike the United States, patent offices in Japan and Europe provide administrative “opposition” systems for adversarial contestation of a patent at the time it is issued. In Japan, prospective foreign patent holders, and U.S. firms in particular, have long complained that they are disadvantaged by the costs and delays of the patent system (including the “pre-grant” opposition process), which favor the strategic patenting practices of their rival Japanese firms. In the United States, courts are less deferential to administrative authority than Japanese or European courts, and they often second-guess the patent office's assessment of the validity of patents. At the same time, U.S. courts provide the most powerful legal weapons against infringers, including preliminary injunctions, far-reaching pretrial discovery, and large pecuniary damages. But these adversarial measures are very costly for litigants and, combined with the high level of uncertainty in the U.S. courts, can be used strategically to hold competitors at bay. In Europe a different type of uncertainty and variation results from the autonomy retained by national patent systems and courts, despite efforts to provide a “common European patent” through the EPO.
The following description lays out some of the main differences between patent regimes as they existed in 1993, before the latest burst of harmonization.[5] For the purposes of understanding ACME's experiences in patenting, this 1993 “snapshot in time” is probably more relevant than the current, evolving scenario, which I shall discuss in a later section in this chapter.
A. Differences in Patent Prosecution
In all economically developed countries, obtaining a patent, or patent “prosecution,” as it is called, begins with filing an application at a national patent office or, for Europe-wide coverage, in the EPO.[6] In the patent office, a patent examiner, who is an expert in the relevant technology, evaluates the claimed innovation using such criteria as “novelty,” “nonobviousness,”
1. PRIORITY
The United States is the only country except the Philippines to grant patents on a first-to-invent, rather than first-to-file, basis. Consequently, the U.S. Patent and Trademark Office (USPTO) provides for an adversarial proceeding, called an “interference,” to resolve disputes over inventive priority. The first-to-invent provision presumably benefits small inventors, who may have more difficulty in writing up the invention, comparing it with prior art, and rushing the application to the patent office. However, interference proceedings are costly.[8] Only about two hundred interferences are filed each year (out of roughly two hundred thousand applications), and only a fraction of these have resulted in a patent award to the second (or later) firm to file.[9] The costs involved, some observers contend, raise “doubts as to whether independent or small inventors … really fare better under the first-to-invent system.”[10] Irrespective of its actual impact on the ground, the logic of a first-to-invent system pervades the USPTO and is a unique feature that sets it apart from its foreign counterparts.
2. LANGUAGE
The USPTO allows patent applications to be written in any language. English translations are required within two months, but the original language remains the source document in the event of future litigation. In contrast, the JPO permits filing only in Japanese and, much to the distress of U.S. firms surveyed in an earlier study, does not permit corrections if they would change the gist of the claims (even for errors in translation).[11] In the EPO, applications can be filed in any member-state language, followed by a translation in English, French, or German, the official languages of the proceedings. Subsequent translations are required when registering the patent in any of the member states. Although language alone might not be a major
3. PATENT TERM, PUBLICATION, AND EXAMINATION
In the United States, patents are awarded for seventeen years from the date of grant. Patent applications are not published unless and until the patent is granted, enabling applicants to continue to use the invention as a trade secret if they are not successful in obtaining a patent. Patent applications, once filed, are automatically examined in the USPTO. However, some applicants find ways to delay examination of their patents through manipulative tactics, giving rise to “submarine patents.” These patents, still unpublished, lurk in the system while unsuspecting firms “reinvent” the same technologies and build substantial market stakes in them. When the submarine patent eventually issues, the patentee can sue and collect large royalties from the surprised “second” inventors. Since the patent term is from the date of grant, patentees could still enjoy the entire seventeen-year life of the patent, no matter how long the application is delayed in the system.
In Japan and the EPO, applications are published eighteen months after filing. Submarine patents are nearly impossible in systems that require timebound publication, irrespective of the patent term, because the publication puts potential infringers “on notice” and enables them to avoid making sunk investments in a technology that will be covered by another's patents in the future. Mandatory publication also means that every patent application is freely available to one's competitors within a fixed time from the application date. This not only leaves the applicant without recourse if the patent is refused but also facilitates strategic practices on the part of competitors such as “patent flooding.” In the EPO, patents are granted for twenty years from the date of application, but patent applicants can choose to delay examination for up to six months after the eighteen-month publication. In Japan, patents were awarded for fifteen years from the date of provisional grant (i.e., before opposition) or twenty years from application, whichever is less. Applicants are required to request examination within seven years of their application date, or their application lapses. Thus, both the EPO and the JPO allow the applicant to defer examination of the patent application for some length of time. Besides lowering the overall workload of the patent office, deferral is also useful for applicants because it enables them to delay legal costs while assessing the commercial value of their innovation.
4. ADVERSARIAL PROCEEDINGS
In the past, the USPTO permitted competing inventors or firms to challenge a patent and request a “reexamination” by submission of “prior art which raises a substantial new question of patentability,” a standard that was considered too demanding.[12] The EPO and the JPO, on the other hand, invite intervention from third parties more directly by early publication of the application and by providing formal “opposition” procedures. This sometimes leads to contentious and lengthy skirmishes between prospective patentees and their competitors. But opposition proceedings probably also discourage later litigation, resolving in a quasi-administrative forum certain issues that would otherwise be raised by nonpatentees in postgrant lawsuits. In jurisdictions such as Japan and Germany, courts do not delve into issues of “validity” in patent suits (i.e., whether the patent should have been granted) but instead defer to the Patent Office. By contrast, in the United States, with its initial secrecy, limited ability to challenge a patent at the Patent Office level, and substantial court powers, challenges to validity are more likely to arise later and be decided by the courts.
In Japan, opposition proceedings are notorious for lasting very long— from three to five years. Unlike the EPO, the JPO's opposition is a pregrant process, with the applicant enjoying only a provisional, legally unenforceable patent grant during the opposition. Further, each opposing party's claim is contested in a separate proceeding. Thus, the opposition process can impose significant costs and delays on the applicant, thereby encouraging technology-sharing settlements with its competitors.
5. PATENT STANDARDS AND SCOPE
Patent practitioners generally agree that the USPTO, in judging the patentability and scope of inventions, is inclined to favor inventors. At the other extreme, the JPO has interpreted similar principles rather strictly, against the applicant.[13] For example, the JPO requires that claims be narrowly specified and supported by working examples. Further, its examination policies also narrow the breadth of a patent by lenient interpretation of the novelty criterion as applied to subsequent improvement innovations made by other firms.[14] ACME's patent attorneys felt that, in the past, Japanese patent policy has been geared more toward incremental “engineering” innovations and technology sharing than toward encouraging and protecting sweeping “pioneer” inventions. The literature supports this view.[15] ACME lawyers said that in Japan, it is “assumed that patents are to be shared and cross-licensed,” but they also acknowledged that the Japanese “do not have a pirating mentality.”
Despite some harmonization through the EPO, the standards applied to patent applications in Europe are quite varied. At the national level, some countries (e.g., France, Italy) grant patents readily, based on a
6. STRATEGIC PATENTING PRACTICES
Japan's patent procedures and standards, it is argued, are particularly conducive to strategic use of the system by Japanese firms, particularly against foreign patent applicants. One common strategy is known as “patent flooding.”[17] When a company files an application for a significant patent, its potential competitors file numerous related patent applications claiming “improvement” patents for new uses or slight variants of the technology. These patents, if granted, “surround” the original patent, thus preventing the patentee from using the technology freely in the market and forcing the patentee to license its technology. In addition, Japanese firms have often vigorously contested important patents in the JPO, keeping applications tied up in lengthy opposition proceedings.[18] Foreign firms, less capable of dealing with these tactics in Japan, have frequently succumbed to the pressure to license their technology.
In one infamous case, a start-up U.S. firm (Fusion Systems) that manufactured (and patented) innovative ultraviolet lamps encountered difficulties when Mitsubishi Electric apparently reverse-engineered the product, flooded the JPO with improvement patents, and used them to badger Fusion Systems into licensing its patents at near-giveaway rates. Eventually, the intervention of the United States trade representative relieved the pressure on Fusion Systems.[19] Allegations of unfairness toward foreign applicants in Japan have gained credibility because the JPO is under the direct administrative control of the Ministry of International Trade and Industry (MITI), Japan's chief trade policy agency, and the JPO's director general is appointed by MITI and returns to it after his two-year tenure.[20] MITI has a reputation, particularly in the United States, for orchestrating Japanese trade policy in a strategic and nationalistic manner.
Other patent regimes are also subject to strategic patenting practices, as illustrated by the use of “submarine patents” in the United States. A great deal of strategic gaming also occurs in U.S. patent litigation, which is generally considered very costly and uncertain. European jurisdictions appear to be comparatively less amenable to strategic gaming because of their less adversarial civil law tradition.[21]
7. DELAYS AND COSTS
The JPO is notorious for delays in the patent examination process. These delays (and the accompanying costs) greatly exacerbate the problems faced by foreign firms in protecting their innovations in Japan. In part, these delays are engendered by the large numbers of patent applications filed in the JPO. In the late 1980s and early 1990s, the JPO averaged more than five hundred thousand patent and utility model applications per year, compared with roughly two hundred thousand in the United States. Even though only about two-thirds of Japanese patent applications are actually examined,[22] the number is still about 1.5 times that in the United States. Among the causes commonly cited for this flood of applications are the patenting practices of Japanese firms,[23] the focused single-claim nature of Japanese patent applications,[24] and the large number of utility model applications (over two hundred thousand applications per year in the early 1990s).[25] Yet, in 1991 the JPO had only 955 examiners, as compared with 1,890 in the USPTO. In the late 1980s and early 1990s, the JPO's average time for processing examination requests was around thirty months from the date of request for examination, compared with eighteen to nineteen months[26] in the USPTO (from the date of application) and twenty-four months in the EPO (from the date of application).[27]
Obtaining a patent in Japan is not only time-consuming but also quite expensive (approximately $30,000 in 1993 for a typical twenty-page, tenclaim, two-drawing application), primarily because of high JPO examination fees and costly patent agent services.[28] But comparable costs for Europe-wide patent coverage are even higher (approximately $120,000 for registration and maintenance in 8.3 countries)[29] because in addition to the costs incurred in the EPO, additional fees and translation costs are incurred for each member state in which the patent is registered.[30] In the United States, a foreign filer would have had to spend only about $13,000 for a similar patent.[31]
B. Differences in Enforcing Patent Rights
The worth of a patent, once granted, depends in significant measure on the powers, attitudes, and efficiency with which national court systems enforce patent rights against these alleged infringers. The three major aspects of court-based enforcement are reassessment of validity, determination of infringement, and the strength of legal enforcement. The strength of legal enforcement depends primarily on the powers to collect evidence, the availability of injunctions against alleged infringers, and the availability of punitive damages. According to the chief patent counsel of a large U.S.-based multinational chemical company whom we interviewed, “Enforcement in
1. THE UNITED STATES (AND THE UNITED KINGDOM)
Litigation costs are very high in the United States and the United Kingdom, with their lawyer-dominated (rather than judge-dominated) modes of litigation, but the courts also offer the strongest enforcement mechanisms. Both jurisdictions allow parties to demand pretrial discovery; although, as one lawyer has put it, the U.K. version is a “gentle domesticated animal” compared with the “ravenous beast of the jungle” that one sees in the aggressively adversarial U.S. litigation system.[32] In addition, injunctions (including preliminary injunctions pending trial) are widely used in both the United States and the United Kingdom. In cases of willful malfeasance, treble damages may be awarded in the United States, and in recent years the use of this punitive remedy has sharply accelerated. Treble damages are not available in Japan or in Europe, although broader damages (beyond lost profits or reasonable royalties) are available in the United Kingdom.
In patent cases, as elsewhere, U.S.-style litigation is extremely expensive. Each party typically hires its own expert witnesses.[33] Discovery is timeconsuming and costly. The American Intellectual Property Law Association (AIPLA) estimated that, in 1995, the median litigation cost through pretrial discovery alone ranged from $190,000 (in cases in which the amount at risk was under $1 million) to $1,983,000 (in cases greater than $100 million), and from $301,000 to $2,975,000 through trial.[34]
In addition to costs, U.S. patent litigation is also subject to a disturbing level of legal uncertainty, at least at the district court level. Probably because patents cannot be adequately challenged by competitors during prosecution, infringement suits often become a forum for contesting validity issues as well. Unlike in Europe and Japan, the courts determine both infringement and the patent's validity in the United States and the United Kingdom. To the dismay of Japanese and European patentees who are used to having specialized benches hear patent cases, in the United States, such cases are decided not by experts but by lay jurors or technically untrained district court judges, who may be influenced by the adversarial manipulations of competing lawyers and partisan expert witnesses.[35] To address the problem of legal uncertainty, the United States in 1982 established the Court of Appeals of the Federal Circuit (CAFC), which handles all patent appeals nationwide, and this has increased uniformity in the lower courts.[36]
In most respects, enforcement in the United Kingdom is a paler image of the American system. There, too, courts wield substantial powers. The
2. JAPAN
In patent enforcement, as in many other areas of civil litigation,[40] courts in Japan are expensive, understaffed, and slow, which is often interpreted as part of a deliberate policy of discouraging litigation and encouraging compromise.[41] When a patentee sues an alleged infringer in a Japanese district court, judicial proceedings—an experienced patent lawyer writes—are intermittent, slow, and costly.[42] The small, guildlike patent bar charges high counsel fees,[43] which the winning party cannot recoup from the loser. Defendants may impose additional delays on a patentee in an infringement case by requesting a redetermination of the patent's validity by the Trial Board of the JPO. Pending redetermination of validity by the Trial Board, the court suspends its hearings on infringement, further delaying any relief to the patentee. Japanese courts rarely issue preliminary injunctions pending determination of infringement charges.[44] Nor do the courts offer pretrial discovery, which makes it very difficult to prove violations of process patents. They also interpret patent claims narrowly and literally, and eschew such principles of equity as the doctrine of equivalents,[45] construing even minor improvements on the technology by the defendant to be grounds for noninfringement. Thus, the predominant effect of the Japanese court system in patent enforcement, as in other areas of commercial dispute, appears to be to mediate a settlement between the parties rather than to determine the just allocation of property rights.[46]
3. CONTINENTAL EUROPE
In Europe, litigation costs in patent enforcement are lower than in the United States, the United Kingdom, and Japan. Fact-finding and legal argumentation are controlled by judges rather than by the parties' lawyers. In France and Italy, proceedings are based almost entirely on written documentation and testimony. In Germany there are two oral hearings, but they are far shorter and less elaborate than U.S. (or even British) trials,
| Prosecution Features | United States | Japan | Europe (EPO) |
|---|---|---|---|
| Basis of deciding patent priority | First to Invent∗ | First to File | First to File |
| Native language filing permitted? | Any language (English translation for record) | Japanese (but canfile in English, with translation to follow)∗ | Any EPC member language, with English, French or German translation; translations required for each country designated |
| Patent term | 17 years from grant∗ | Lesser of 15 years from grant and 20 years from filing∗ | 20 years fromfiling |
| Publication of patent | No∗ | Yes, 18 months fromfiling | Yes, 18 months fromfiling |
| Examination deferral | No | Yes, 7 years fromfiling | Yes, 6 months from publication |
| Third-party contestation of patent | Limited reexamination∗ and interferences∗ | Pre-grant oppositions∗ | Post-grant oppositions |
| Patentability standards | Least unfavorable to applicants (1 year grace period for prior publication) | Strict standards—claims need working examples, very limited grace period∗ | Moderate standards; some variation by nationality, limited grace period |
| Breadth of claims awarded | Very broad | Narrow | Broad |
― 287 ― | |||
| Time taken | 18–24 months | −36 months + oppositions (3–5 years)∗ | −30 months + opposition (expeditious) |
| Overall comparable costs | $13,000 | $30,000 | $120,000 |
| Enforcement Features | United States and United Kingdom | Japan | Continental Europe |
| Jurisdiction over validity of patent | With Courts, and often exercised | With Patent Office Appeals Board | Varies by national court system |
| Strength of Enforcement: | Very strong | Weak | Medium (varies) |
| Discovery and depositions | Widely used (“rampant” in U.S.) | Not available | No, but alternatives exist in some countries |
| Preliminary injunctions | Yes | Not available in practice | Yes, but sometimes difficult (e.g. Germany) |
| Interpretation of claims | Literal interpretation, propatentee court systems, equivalents applied | Narrow interpretation linking back to specifications, equivalents not applied | Interpreted less literally; equivalents applied, but under different principles |
| Prior user rights available? | No | Yes | Yes |
| Judicial style | Adversarial court trials, jury trials often seen | Brief intermittent hearings with judge, written testimony is widely used | Largely by written testimony, some oral hearings, court experts used |
| Uncertainty in outcomes | High, due to lay judges (in District Courts) and juries. Not in U.K. | High, especially due to delays, and pressure to settle out of court | Relatively low in all jurisdictions |
and in the words of one ACME attorney, they tend to offer “rough and ready justice.” European courts are much less open to hired expert testimony; the judges consult their own experts or technical publications when necessary. In Germany (as in Japan, but unlike the United States), invalidity proceedings must be brought separately in the patent court, but unlike Japan, infringement actions usually will not be stayed while a validity suit is pending. For all these reasons, European court proceedings, in a crossnational perspective, are expeditious and not costly for the parties. One author describes European patent litigation costs as less than those in the United States even if enforcement actions are pursued in several nations simultaneously.[47] In Europe, however, aggrieved patent holders do not have access to the potent and extremely effective legal weapons afforded by U.S. and U.K. law. Party-directed pretrial discovery is limited, although French and Italian courts provide some investigative assistance.[48] In terms of remedies, treble damages are not assessed. Injunctions are available, but preliminary injunctions are employed infrequently, and not at all in Germany.[49]
In most spheres of law, European courts, with their judge-dominated procedures, emphasis on legal uniformity, and highly professional bureaucratically supervised judiciaries, are regarded as more predictable than U.S. courts. But for a company seeking cross-national protection of patent rights, European courts entail a different kind of uncertainty, stemming from the different interpretive standards applied by different national judiciaries to the centrally granted EPO patent.[50] In the absence of a common European Appeals Court, firms have no recourse against the ruling of a national court on a patent obtained even through the EPO. Nonetheless, many lawyers we spoke to were positively disposed toward European enforcement because it afforded effective justice at reasonable costs and risks.
The overall differences between the patent systems of the United States, Japan, and Europe, circa 1993, are summarized in Table 9.1. Laws or practices that have changed, or are in the process of being changed, are marked with asterisks.[51]
IV. ACME'S PATENT EXPERIENCES
Although ACME has ultimately been very successful in commercializing its innovative polymeric products, it has not had an easy time with patent regimes in the United States, Europe, or Japan. Everywhere, its efforts to obtain and protect patents have encountered some delays, legal uncertainty, and inconsistency. In general, Japan and Germany were somewhat less favorable to ACME than the United States. This section provides a narrative of ACME's experience in each regime, first for its basic invention, and then for several follow-on innovations.
A. ACME's Basic Invention
In the late 1960s, ACME's scientists discovered a process to modify a polymeric substance, making it tremendously useful in an array of new areas. In 1970, ACME applied to the USPTO for a patent on this innovation, with claims that covered both the process and the product(s) made by it. One year later, it filed similar applications in Japan (only for the process)[52] and in several Western European countries.
1. UNITED STATES
The USPTO examiner issued office actions challenging ACME's application and rejecting some of the claims therein. ACME's counsel felt that the examiner had misunderstood the character of the innovation, noting that compared with the best patent offices abroad, the USPTO is characterized by a high level of personnel turnover, and hence significant variation in the quality of examiners.[53] ACME responded to the office action, making additional arguments and recharacterizing its claims, but again met with objections and eventual rejection. ACME appealed to the USPTO's Board of Appeals but then learned of a patent on a similar process held by ZCO, a Japanese company. Although ZCO's patent had not played a role in the USPTO's rejections of ACME's application, ACME was compelled by U.S. law to disclose such prior art. ACME therefore amended its application in mid-1973 and refiled,[54] carefully distinguishing its process from ZCO's patent. A new examiner, however, apparently failed to see the difference between the two patents. The examiner also asked ACME to elect to prosecute either its process or its product claims first.[55] ACME decided to begin with the process claims. But as ACME was waiting for an interview it had requested with the examiner, it discovered another patent on a similar process from the USSR, and refiled once again. On this third application, the assigned USPTO examiner recognized the distinctiveness of ACME's process, and in 1976, six years after the initial application, the patent was granted. ACME reactivated its application for the product patent in 1977. At first it was rejected by the examiner in an office action, but eventually it was allowed in mid-1979.
ACME also had to resort to the U.S. courts to enforce its rights under the patent, and its experience in that arena conforms to the general description of U.S. litigation as cumbersome, costly, and unpredictable. In 1979, after the product patent was allowed, ACME sued a large U.S. corporation for infringement of both its product and process patents. After a costly pretrial litigation phase, a five-week trial ensued. The bitterly contested case involved more than two years of pretrial discovery, the testimony of thirty-five witnesses, and over three hundred exhibits.[56] The defendant challenged the validity of ACME's patents as a defense against the infringement
In 1984 ACME filed suit in a U.S. District Court in another state against a different company that was allegedly infringing its patents. Again, true to U.S.-style litigation, the ten-week trial in 1986 involved fifty-four witnesses, the evidence from twenty-five depositions, and nearly four hundred exhibits. The trial judge held that ACME had failed to prove infringement and, despite the earlier CAFC ruling, that a number of claims in the patents were invalid. ACME appealed, but it experienced long delays at the CAFC, and with less than two years to go on the seventeen-year patent term (in 1991), ACME decided to settle the case with the defendant.
In sum, in the U.S., legal uncertainty plagued ACME from the very start. Yet, the potent legal remedies, high litigation costs, and large monetary penalties associated with U.S. patent litigation also may have worked in the company's favor by deterring potential infringers. ACME successfully served notice to two firms to stop infringing its patent.[57] So while ACME's U.S. patent faced difficulties in prosecution and uncertainties in enforcement, ACME appears to have used it to effectively protect its technological turf from infringers.
2. JAPAN
Even before making its basic pioneering invention, ACME had formed a joint venture with a Japanese company to manufacture a different range of products. Recognizing its partner's complementary technological skills in process engineering, the company decided to form another joint venture with it for the new technology in 1974. ACME licensed its basic process to the venture royalty-free in return for future licenses to technological improvements that its Japanese partner might develop.
ACME's Japanese partnership did not, however, smooth the way for JPO approval of its basic patent. After filing in May 1971, ACME requested immediate examination from the JPO. Following several office actions requesting clarifications, the application was rejected. One of ACME's lawyers complained about dealing with JPO examiners because it was “difficult to understand what their concerns really are.” ACME appealed this original rejection to the JPO appeals board, which in late 1975 agreed with ACME's position. The patent was published for opposition, and challenges were subsequently filed by the aforementioned ZCO, a member of a major Japanese kieretsu (interlocked business group), and three other Japanese companies. The JPO upheld the opposition and invalidated ACME's patent.
Predictably, the Japanese courts were slow and costly; ACME's legal fees amounted to several hundred thousand dollars. Meanwhile, after ACME's patent application was published, ZCO filed for and obtained some related patents, which enabled it to get a toehold in the technology. As soon as ACME obtained the favorable decision from the JPO Appeals Board, it brought an infringement action against ZCO, but the court suspended proceedings until the validity of the patent had been determined in ZCO's appeal to the Tokyo High Court.
Throughout the prosecution phase, ACME and its Japanese partner used the technology to make and market products that had considerable commercial success in Japan. As soon as there was uncertainty about the status of ACME's patent, however, competitors moved vigorously into the market the joint venture had developed. Just as the joint venture was beginning to reap the rewards of its market development efforts, it suffered huge losses of revenue, and its market share declined to about a tenth of its original level.
ACME's frustrating experience with the Japanese patent system is not unique, especially for pioneer inventions. Texas Instruments' patent on the integrated circuit (the “Kilby” patent) was holed up in the Japanese system from 1960 to 1989.[58] Corning Inc.'s pioneering optical fiber innovations, which were promptly awarded patent protection in the United States, were stuck in the JPO for ten years, and when issued were practically worthless.[59] Allied-Signal officials suspect that the JPO colluded with its Japanese rivals in delaying the patent for Allied's breakthrough amorphous metal technology “Metglas.”[60]
3. EUROPE
When ACME sought to protect its basic innovation in Western Europe, the EPO had not yet been established, and ACME applied for patents in various national patent offices. In France, Belgium, and Italy, the patents issued automatically upon registration, without administrative examination. In the United Kingdom, the examiner initially objected to the application but, upon clarification and resubmission, approved it in 1973.[61] In West Germany, a jurisdiction regarded as applying stringent standards for patentability, the examiner strongly objected to ACME's application, citing lack of novelty. ACME's attorneys generally respect the expertise of German
As in Japan, the German system encourages opposition at the administrative stage, rather than leaving validity issues for the courts to decide in later enforcement actions. Oppositions to ACME's German patent were filed by ZCO, a second Japanese firm, and a Dutch company.[62] The requisite hearing before the German Patent Court was not held until 1981. After a daylong hearing, ACME's German patent was invalidated by the court, which, with characteristic European emphasis on documentary evidence, allowed ACME only a truncated physical demonstration of why its process was not obvious. ACME's appeal to a higher court, which employs a limited standard of review, was unsuccessful. In the Netherlands, oppositions were filed by the same parties making the same arguments, but there the tribunal upheld ACME's patent claims.
B. ACME's Subsequent Patents
ACME continued to develop new products and processes related to its basic polymeric patent. In the different jurisdictions, ACME's subsequent patent applications have often met with disparate treatment, as described below.
1. MEDICAL DEVICES
Using the basic polymeric form that it invented, ACME developed a new type of material that proved to be extremely useful in a number of medical devices. In late 1982 it filed for a patent in the USPTO. An office action initially rejected a number of claims in the application, but following ACME's response the U.S. patent was granted in 1984. ACME filed in Japan in 1983 but deferred examination for the full seven years, until 1990. The JPO examiner then granted the patent (provisionally). An opposition was filed by ZCO, which had a commercial interest in the market for these products, too, but ACME's patent was upheld in 1992.
In 1983, ACME filed for a patent from the EPO. There, too, after the examiner granted the patent, ZCO filed an opposition. The EPO Opposition Board held against ACME in 1990, in what ACME's attorneys felt was a “bizarre” decision. The opposition panel, relying only on the court's own experts, rejected affidavits from ACME's engineers as “not trustworthy,” although such evidence would have been usually permitted in the United States. ACME persisted, however, in appealing the patent rejection, and four years later the EPO Appeals Board reversed the decision and upheld ACME's patent.
2. COATING POLYMER
This innovation had particular promise as a weatherproof coating for ACME's polymer-fabric products, but it had other applications as well. ACME's primary innovation involved a completely solid monomer from which to manufacture the coating, which reduced the pollution hazard associated with the coating process considerably. ACME filed its patent application in the USPTO in 1984. The examiner's office action stated that the innovation failed the nonobviousness criterion. The examiner accepted ACME's request for an interview to argue its case, and was persuaded about the merit of the patent. The patent issued in 1985, twelve months after filing.
The EPO process, initiated in 1985, was more difficult. The examiner, a German and a former employee of a major chemical firm, was very knowledgeable about prior art but was also skeptical about whether the product truly had an “inventive step” (the European version of nonobviousness). His office action, issued in 1987, criticized the vagueness of language in the application and cited the existence of similar prior art. When three written responses (in 1988, 1989, and 1990) failed to convince the examiner, ACME arranged an interview between the inventor and the examiner. After the interview, the examiner again criticized the application, this time on new grounds. After yet another negative office action and an ACME response, a second interview was arranged in October 1992, this time between the examiner and ACME's attorney. In 1993 the EPO patent finally issued. ACME lawyers said they would have appealed a rejection. This time, competitors did not file oppositions.
In Japan, ACME filed in 1984 but deferred examination until 1991. The examination went smoothly, and a provisional patent was granted within fifteen months. A Japanese firm filed an opposition, citing seven Japanese articles as proof that the innovation was not novel. ACME officials estimated that the patent, once issued, would be good for only ten more years, three or four of which would be spent fighting the opposition. This battle would entail considerable legal costs and would take up the time of ACME's lawyers and the inventor. Moreover, ACME's experience in other countries suggested that imitation of this invention was not a great threat commercially. Hence, ACME abandoned its Japanese patent application. In this case the deferral process appears to have delivered the desired result— ACME was able to avoid some of the costs associated with obtaining the patent because it was able to evaluate its commercial position better during the time afforded by deferral.
3. LAMINATION TECHNOLOGY
This ACME innovation helped produce a more uniform laminate (primarily on fabrics) using a polymeric support. ACME sought to patent both the
ACME filed in the EPO in 1988. The examiner's office action raised objections similar to those of the USPTO, and ACME responded with the same arguments that had prevailed in the United States. The EPO responded quickly and favorably, awarding the patent in mid-1992. The process had taken a mere six months from the time the first office action was issued, which was unusually fast, according to ACME's lawyers. A major European chemical company then filed an opposition. In March 1995 an EPO panel upheld ACME's patent, after a hearing that was unusually informal, and allowed ACME's inventor considerable opportunity to present his case orally. The European objector decided not to appeal, partly on the basis of ACME's reassurances that the patent would not threaten certain processes already in use by that company's customers.
In Japan, ACME filed in 1988, requested examination in 1991, and was granted the patent in 1993. Office actions were dealt with quickly, and no opposition was filed. The final patent issued in 1994, with less trouble than in either the United States or Europe.
4. LAMINATED INDUSTRIAL FILTER
ACME has been active in the industrial filter business since the 1970s. The laminated filter was a new, more resilient product, constituting another application of ACME's basic technology. The U.S. application, filed in 1989, was granted in twenty-one months after one office action. In the EPO, virtually the same scenario occurred; the European patent, filed in 1990, was issued in two and a half years, and no opposition was filed.
In Japan, however, ACME requested examination in September 1993 and received a very negative office action eighteen months later. The examiner cited three earlier patents, which ACME's lawyers did not initially recognize as being technologically similar to its submission. Unsure about how to proceed, ACME asked its Japanese affiliate to discuss the case with its Japanese attorneys. On learning that the objections might have some merit, ACME narrowed its claims, and the patent issued in 1996.
C. Conclusions from ACME's Patent Experience
As noted earlier, patent systems in the United States, Europe, and Japan are marked by significant ideological differences concerning the relative
In every jurisdiction ACME encountered frustrating delays, costs, and uncertainties, albeit in different stages of the process, and stemming from different sources. In Japan, ACME experienced extremely costly delays, and eventually its patent was struck down in the Japanese Supreme Court. In the United States, the company managed to obtain patents for its pioneering invention after a six-year-long process. Subsequently, when ACME sought to enforce its patent against infringers, two different U.S. District Courts sought to nullify the patent, only to be reversed by the CAFC in one instance. In Europe, ACME met with inconsistent treatment among nations, and among panels in the EPO. ACME's pioneering patent, approved in other countries in Europe, faced opposition and eventual invalidation in the German Patent Office.
ACME's recent patenting experience with its four follow-on innovations suggests that such variation persists. ACME's follow-on patents were obtained relatively quickly in the United States. But in the EPO and Japan, the same patents on some occasions encountered delays and opposition proceedings. In the EPO, two patents faced major delays, as the result of a “surprising” opposition verdict in one case and a long-drawn-out process of convincing the examiner in the other. But the opposition proceeding for another patent was dealt with very expeditiously by the EPO panel. In one instance, ACME abandoned its patent application in Japan, rather than pursue costly opposition proceedings and get a patent that was soon to expire. Yet, in another case, the JPO granted ACME's application more smoothly than either the USPTO or the EPO.
Table 9.2 attempts to summarize ACME's legal experience in the United States, Japan, and Europe. For each patent application in each jurisdiction, the table includes a somewhat subjective score for ACME's “degree of procedural difficulty,” based on the number and expense of the procedural hurdles encountered. Although the pattern may reflect the different types of inventions being patented (pioneering versus follow-on), and the number of cases is very small, the procedural difficulty score has tended to be lower and more similar across jurisdictions in the later patent applications,
| U.S. | Japan | Europe | |
|---|---|---|---|
| Coding scheme for degree of procedural difficulty (maximum possible score = 8; but realistic range = 0 to 6). The sum of Office actions (one or less = 0 to 1; two or more leq 1 to 2); opposition/reexamination procedure encountered = 1 to 2; patent revoked in opposition, and appealed = 1 to 2; uncertainty in court outcomes = 1to3. | |||
| Basic process | Granted in 1976 (6-year delay); district court(s) invalidate patent during enforcement | Denied after opposition and all levels of appeal | Granted in some countries; denied in Germany after opposition and appeal; Limited enforcement obtained in the U.K. |
| (5) | (6) | (2) to (6) | |
| Medical devices | Granted in 1984 | Deferred examination; granted after opposition in 1992 | Granted 1987; “surprising” reversal in opposition; granted on appeal: 1994 (11-year delay) |
| (0) | (1) | (3) | |
| Coating product | Granted in 1985 | Deferred examination; abandoned when opposed | Granted after many office actions in 1993 |
| (1) | (1) | (2) | |
| Lamination product | Granted in 1991 | Granted in 1994; very quick | Granted in 1992; upheld after opposition in 1995 |
| (1) | (0) | (1) | |
| Industrial filter | Granted in 1991 | Granted in 1993 | Granted in 1993 after a strong office action |
| (0) | (0) | (1) | |
suggesting perhaps that pressures for harmonization may be having some effect. But this may also reflect the fact that these later patents were for less important follow-on inventions and did not require enforcement actions anywhere.
ACME's officials have difficulty estimating the financial impact on the firm of the different procedural obstacles and delays in each jurisdiction. But it is clear, at least in some cases, that they are quite significant. For example, after its basic patent was struck down in Japan, ACME's market share fell by a factor of ten, after it had spent several years developing a market for its product. However, in other cases the impact has been marginal at best. In Germany, even though its patent was overturned in opposition, ACME faced no competition from imitation products in the market. Moreover, it appears that the patent on the company's pioneering innovation offered broad protection for subsequent related innovations, most notably in the United States and the United Kingdom. In the United States, the pro-patentee bias of the system and the power of the courts have enabled ACME to obtain satisfactory protection of its technological turf. In Japan and in some parts of Europe, ACME appears to stand on weaker legal ground but has nevertheless been economically successful, apparently as a result of its innovative products and the strength of its brand name.
D. Evaluating the Different Patent Regimes
Do ACME's experiences suggest any normative conclusions for patent policy? Clearly, the costs and hassles of obtaining and enforcing patents vary substantially across jurisdictions. The different patent jurisdictions, because of their ideological biases, also elicit different strategic responses from firms trying to get inventions patented. In the United States, overall, ACME received strong protection for its innovations and was eventually successful in preventing competitors from copying it. This strong exclusive protection, it can be argued, encourages important pioneering innovations in the United States. ACME, as we have seen, was responsible for making and commercializing important innovations relating to fabrics, medical products, and industrial filters, which were of considerable social value and generated revenues for the company. In Japan, however, as a result of weak patent protection for its basic innovation, ACME's competitors were able to benefit from knowledge spillovers, arising (presumably) from ACME's innovations, without paying royalties. As a consequence, ACME's ability to appropriate returns for its innovation in Japan was severely hampered.
However, ACME's experiences reflect the trials and tribulations of an innovator trying to obtain patent protection in various patent systems, not the experience of innovative firms that are compelled to defend themselves against patent claims. A system that arguably “overprotects” patentees may
Furthermore, the U.S. system encourages strategic gaming between patent adversaries mainly in the courts, rather than in the administrative forum of the Patent Office. This “late stage” adversarial contestation is very costly and involves high stakes. This feature is also present to a lesser degree in the United Kingdom, the other common law country in this study. By contrast, the civil law traditions of Japan and continental Europe provide incentives for earlier interfirm competition in the less expensive administrative forum of the Patent Office. This makes patent prosecution more cumbersome but reduces post-grant uncertainty and risk. In the civil law systems, courts generally defer to the Patent Office for determination of validity, and thus play a more limited role. Despite the lengthy prosecution for its basic patent, ACME's real challenge in the United States was enforcement through the courts, a process so costly and cumbersome that the company's lawyers could only pursue one such action at a time. In contrast, almost all of ACME's expenditures of time and resources in Japan, Germany, and the EPO stemmed from opposition proceedings in the respective patent offices, where competitors vigorously contested its patents.
Despite the cost and delays of litigation in the United States, American courts also make a very strong enforcement apparatus available to patentees. Admittedly, this apparatus is extremely costly and unpredictable, but for a firm such as ACME, seeking to commercialize an important innovation, it can provide an important means of survival and growth. Yet this powerful and uncertain apparatus can also stymie innovation. One patent lawyer I spoke to offered examples of software start-ups threatened with lawsuits by large, resource-rich, patent-wielding firms—threats made possible by the very broad claims allowed for recent software patents in the USPTO. Another lawyer, practicing in the biotech field, voiced similar concerns about biotech patent decisions by the U.S. Patent Office. Without the resources to survive protracted legal battles, small but innovative firms often give in, at the social cost of reduced competition in the creation of
What does all this tell us about which type of patent system is better, or offers superior overall social benefits? Answering this question is problematic. If one believes that broad pioneering innovations (as compared with follow-on innovations) are made “available” by the progress of the general “science,” innovative firms require fewer legal protections. If, however, one believes that these innovations will be produced and successfully commercialized only if the inventors are well rewarded, then those legal incentives are critically important. Which belief is more “true” is a difficult conundrum, inextricably related to the stage and pattern of development of a country; to the structure of its economy, markets, and industries; to its institutions of scientific pursuit and education; and to the extent it benefits from external worldwide advances in technology. Moreover, multinational firms increasingly plan their research efforts with a global market in mind and may not be as sensitive to the individual national levels of protection they receive as compared with the cumulative global level (as appears to be the case with ACME). In sum, ACME's experiences enable us to frame and address important questions about the social welfare consequences of the differences in patent systems, but our answers to these questions must remain somewhat inconclusive.
V. HARMONIZATION
ACME's struggles, as recounted earlier, took place over nearly two decades ending in the early 1990s. But the world's patent regimes are changing. Waves of harmonization have been sweeping international patent regulation in recent years, changing opportunities for firms trying to obtain patents in major developed countries. A country's patent system can be used to advantage domestic industry by providing weaker protection to the kinds of innovations that foreign firms are good at, thus compelling them to license their technologies to local firms under favorable conditions. It is no surprise, therefore, that international firms have demanded greater cross-national uniformity in patent regimes, and regimes of protection for all intellectual property rights. At a global level, harmonization has been pursued in two forums—the Uruguay round of GATT negotiations (resulting in the TRIPS agreement) and the less successful initiatives (primarily the Patent Harmonization Treaty—PHT) being undertaken by the WIPO.[64] Within Europe, multilateral efforts are under way through the EPO and the European Commission. Changes in the Japanese and U.S. systems have been engendered through bilateral trade negotiations, especially the Structural Impediments Initiative (SII).[65] Many of the differences
All the jurisdictions discussed in this chapter, including the United States, now have a uniform twenty-year patent term from the date of application.[66] Further, under the TRIPS agreement, signatory nations have accepted common “minimum” guidelines on such broad issues as the types of innovation that can be patented, uniformity of treatment irrespective of nationality,[67] and the granting of compulsory licenses. In the recent past, only minor changes have been made in the European patent system. The establishment of a “community patent” still appears a distant goal.[68] Through its bilateral and TRIPS commitments, the United States has undertaken to provide for mandatory eighteen-month publication, removal of compulsory licensing provisions, and a fixed patent term of twenty years from grant. The scope of reexamination in the USPTO has also been broadened to allow for more third-party participation—although how it will be applied in practice remains to be seen. Further, in a recent ruling, the U.S. Supreme Court empowered lower federal court judges to play an important role in determining the construction of patent claims, thus decreasing the role of juries in jury trials.[69]
The biggest changes have occurred in Japan. Responding to the strong international criticism about delays, the JPO has taken several steps to remedy its application process. These include phasing out the examination of utility models, hiring additional staff, computerization, issuing “administrative guidance” to major Japanese firms to control their patent applications in the JPO, and instituting special fast-track examination procedures for key patents. The JPO has also issued guidelines to its examiners to permit much broader claims,[70] apply stricter novelty criteria for improvement patents, be more clear in their office actions, and be more generous in awarding interviews. In its bilateral agreements with the United States, Japan has undertaken to end its pre-grant opposition system, further accelerate examination, permit initial filing in English, allow for the correction of translation errors, and restrict the power to grant compulsory licenses. The Japanese courts appear to have been undergoing changes as well, with some recent verdicts awarding fairly large damages to foreign litigants against Japanese firms.[71]
The main shifts (completed and prospective) toward patent harmonization among these jurisdictions are listed in Table 9.3. Many features of the patent systems of the major developed countries appear to be converging. Some differences made obvious by their impact on ACME appear to be disappearing. However, this may be deceptive. The forces of convergence operate predominantly at the level of the laws and standards embodied in the patent statutes. Even at this level, certain national features, such as the American “first-to-invent” system, live on. Convergence in
| Major Shift in (Country) | Nature of Change | Source of Change | Remarks |
|---|---|---|---|
| COMPLETED CHANGES: | |||
| United States | Patent term changed to 20 years from the date of filling | TRIPS (minimum 20 years) and U.S.-Japan Agreement (abolition of the 17-years-from-issue option) | Lobbying efforts are under way to restore the 17-year (from issue) option |
| United States | Ability to introduce inventive acts in foreign countries as evidence for claiming patent priority under first-to-invent | National treatment provision under TRIPS | The U.S. is not fully in compliance with the national treatment provisions in TRIPS |
| United States | Broader reexamination provision | USPTO reform | Impact of the porvision is still unclear |
| United States | Judges given more power (versus juries) in patent cases | Supreme Court decision | Court opinion states that judges are better suited to interpret some technical patent issues |
| Japan | Changed patent term to 20 years from date of filing | TRIPS accord | |
| Japan | Filing in English, and permit corrections in translation | U.S.-Japan Agreement | |
― 302 ― | |||
| Japan | Move to postgrant opposition system | U.S.-Japan Agreement | |
| Japan | Restrict powers to grant compulsory | U.S.-Japan Agreement | |
| Japan | Patent Office procedures to grant broader claims | U.S.-Japan Agreement | A U.S. patent counsel felt that these had yet to have an effect |
| Japan | Accelerated examiniation procedures | U.S.-Japan Agreement | It remains to be seen how effective the JPO is in achieving faster rates of examination |
| PROSPECTIVE CHANGES: | |||
| United States | 18-month publication | U.S.-Japan Agreement | Bill stalled in Congress |
| United States | Restriction of compulsory licensing provisions | U.S.-Japan Agreement | Bill stalled in Congress |
| Japan/ EPO | Grace period | WIPO-PHT | Still being negotiated |
| United States | Prior user rights | WIPO-PHT | Still being negotiated |
patent prosecution, which is amenable to change through changes in laws, appears to be proceeding at a reasonable pace. However, here, too, substantial national differences persist in the attitudes and values of each nation's patent examiners and in office-level procedural biases.[72]
The process of enforcing patents through the courts, which are subject to unique national legal traditions, appears much more resistant to the forces of convergence. The adversarial, expensive, and powerful nature of the U.S. litigation system, the diversity of European national judicial systems, and the slow, consensus-driven approach of the Japanese trial system will be persisting features of these nations' patent regimes. As one expert remarked, “[I] n ten years, there will be no arguments about standards; the arguments will be exclusively over enforcement, because that is such a nebulous process.”[73] Forcing countries to adopt similarly worded patent laws is one thing; obtaining similarly enforceable patent rights is quite another.
That said, there is pressure to harmonize enforcement systems as well. The GATT TRIPS accord contains sections that appear to address several areas in “enforcement.”[74] However, the language of these provisions is loose, and developed countries may not need to make any changes to conform to them. In Japan the Osaka High Court has recently made a decision that appears to apply the doctrine of equivalents,[75] suggesting that political pressure applied by Japan's major trading partners may affect the courts, too. Overall, however, full-scale cross-national convergence is likely to remain elusive in the medium term—partly because of differences in applying similarly worded standards, but primarily because of the entrenched legal traditions of court-based patent enforcement systems.
VI. CONCLUSION
ACME's experiences of divergent treatment in the United States, Japan, and Europe are generally consistent with the literature on cross-national differences in patent regimes. Of course, ACME's experiences may be distinctive in some respects. They are concentrated in a specific area of technology (polymer chemistry), in which ACME has had particular success innovating and marketing new products. While we did speak to legal practitioners about different areas of technology, and relied on their input in interpreting our findings, other research suggests that in many areas of technology patents are not very important in appropriating returns to innovations.[76]
ACME's experience does highlight the particular strengths and weaknesses of the U.S. system of patent protection. Although the USPTO does not always appear to provide the highest level of technical proficiency compared with some foreign offices, it continues to be comparatively friendly to inventors. And because the U.S. system does not encourage adversarial
At the same time, U.S. courts, with their reliance on juries, unspecialized trial court judges, sweeping powers to reassess validity, and very high costs, appear to be a more risky proposition than their civil law–based counterparts in Japan and continental Europe. The combination of high litigation costs, high penalties, and legal uncertainty means that the parties' relative financial capacity to endure the expense, delay, and risk of litigation, rather than the technical merits, may often have a significant effect on outcomes. ACME appears to have both suffered and gained from these characteristics of U.S. adversarial legalism.
These conclusions do not resolve the debate about which methods of patent protection best serve the public good or best balance the goals of stimulating and diffusing innovation. But they do indicate that the impact of different patent regimes cannot be deduced merely from the law on the books, which has been the focus of most recent attempts at patent harmonization, but only by reference to the character of national legal regimes and to informal differences in interpretation and procedures. Further, they temper our expectations about the impact of patent harmonization in the short term.
NOTES
The author gratefully acknowledges help, advice, and feedback from Rosemarie Ham, Robert Merges, David Mowery, Pamela Samuelson, David Teece, and participants in a seminar at Berkeley, as well as the invaluable counsel and support of the editors of this volume. Thanks are also due to ACME's lawyers and many attorneys and patent professionals, too numerous to list here, but without whose help this chapter would not have been possible. Responsibility for all errors however, are strictly the author's.
1. Bill Budinger, “Modernizing Patent Law,” Inventor's Digest, September/October 1995, 35.
2. Samson Helfgott characterizes the U.S. system as one whose emphasis is “to protect the patentee,” whereas the Japanese system seeks “to teach industry new innovations.” Samson Helfgott, “Cultural Differences between the U.S. and Japanese Patent Systems,” Journal of the Patent and Trademark Office Society 72 (1990): 231–38.
3. Arthur Wineberg, “The Japanese Patent System: A Non-tariff Barrier to Foreign Businesses?” Journal of World Trade 22 (1988): 12.
4. This also means that there is no unified body of case law that feeds back into the prosecution of patents at the EPO.
5. See, in particular, the “U.S. General Accounting Office Study on Intellectual Property Rights: U.S. Companies' Patent Experiences in Japan” (Washington, D.C.: GAO, 1993) (henceforth GAO Study); and Michael Helfand, “How Valid Are U.S. Criticisms of the Japanese Patent System?” Stanford Law School (unpublished ms., on file with author, 1991).
6. Except in some European countries, which have a simple registration system.
7. For example, in the United States, an administrative reexamination process is available, whereas in other jurisdictions adversarial “opposition” proceedings can be initiated.
8. In 1990 it was estimated that the average interference lasted a year at a cost of about $7,000 per month for each side in attorneys' fees. Further, they often spilled over into lawsuits on appeal, which sharply raised the costs. Andrew H. Thorson and John A. Fortkort, “An Analysis of Patent Protection in Japan and the U.S.,” Journal of the Patent and Trademark Office Society 77 (1995): 310–12.
9. Some observers aver that this is mainly because the firms usually agree on a settlement involving a royalty-free license to the second firm. To the extent that this is true, it alleviates some of the problems associated with the absence of prior user rights in the United States.
10. Thorson and Fortkort, “An Analysis of Patent Protection in Japan and the U.S.,” 311.
11. GAO Study, 54. Language, according to the report, was one of the biggest hurdles faced by U.S. industry in effectively using the Japanese patent system, which (according to many Japanese lawyers) was often compounded by hasty translation of the application under time pressures.
12. N. Thane Bauz, “Reanimating U.S. Patent Reexamination: Recommendations for Change Based upon a Comparative Study of German Law,” Creighton Law Review 27 (1994): 951.
13. For example, in Japan, prior publication of an innovation anywhere in the world leads to rejection of an application's claim to novelty, whereas in the United States applicants have a grace period of one year after publication within which to file an application.
14. For example, a version of a patented component with slightly improved features may be deemed patentable in the JPO but not in the USPTO. Further, broad “means plus function” type claims, which may be used in the United States, are rarely allowed in Japan. See Helfand, “How Valid Are U.S. Criticisms of the Japanese Patent System?” 9.
15. Helfgott, “Cultural Differences between the U.S. and Japanese Patent Systems,” 234.
16. Simply put, a standard of “patentability” implies a bar that the innovation must clear to be actually considered one by the patent office (e.g., it should be sufficiently novel, or sufficiently nonobvious to persons who are skilled in the relevant art).
17. Jinzo Fujino, “Understanding the Flood of Japanese Patent Applications,” Patent World, July–August 1990, 30–31.
18. The GAO Study indicates that, in 1991, 6.5 percent of all applications were opposed, and each opposed application had an average of 1.8 opponents.
19. Donald M. Spero, “Patent Protection or Piracy—A CEO Views Japan,” Harvard Business Review 68, no. 5 (September–October 1990): 60–67.
20. Robert Girouard, “The Japanese Patent System: Trade and Industrial Policy Implications” (master's thesis, University of California at Berkeley, 1995).
21. Nonetheless, one lawyer we spoke to cautioned us that in biotech patents, some stalling practices are used in Europe, especially by appealing to “Green” political interests.
22. As we have seen, JPO procedures require an applicant to specifically request examination (in seven years), and some applicants choose not to do so based on their commercial assessment of the patent.
23. Employee incentives within Japanese firms, and organization-level incentives to obtain cross-licenses encourage rampant patenting in Japan.
24. Despite changes in the rules of the JPO in 1988 permitting inclusion of multiple claims in a single application, Japanese firms predominantly continue to use their earlier practice of including only a single claim per application. What this means is that to cover the same innovations or set of innovations, more patents are filed in Japan as compared with the United States.
25. Utility models are lesser patents awarded by the patent office; they are subject to a lower standard of patentability and have a shorter duration. Procedurally, however, the utility models were subject to the same type of examination. Recently, the JPO has discontinued examination of utility models and supplanted it with a registration process, with examination being invoked in the event of litigation over infringement.
26. This figure excludes the time taken on parent applications that were “continued” in the successful application. A patent lawyer we spoke to believed that this mismeasurement could be fairly significant in some areas, such as biotechnology.
27. GAO Study. The figure for the JPO was estimated by dividing the number of patents that were pending to be examined in 1991 by the number of patents that were examined in that year. The time taken was less when no oppositions were filed twenty-one to twenty-four months), but commercially important innovations are usually opposed.
28. Samson Helfgott, “Why Must Filing in Europe Be So Costly?” Journal of the Patent and Trademark Office Society 76 (October 1994): 787–92. Helfgott cites results of a recent study conducted by the FICPI (International Federation of Intellectual Property Attorneys) at 788. A large fraction of the costs in Japan can be delayed by deferring examination, since the costs of merely filing an application are quite low.
29. Ibid., 789; 8.3 countries represents the approximate equivalent U.S. market size in Europe.
30. A survey of European patenting costs by the American Intellectual Property Law Association in 1995 (“Position Paper on the Costs of European Patent Prosecution,” October) found that costs in Europe split roughly evenly between official fees, translation costs, and attorney fees.
31. Helfgott, “Why Must Filing in Europe Be So Costly?” 789. Such estimates provided by other authors vary somewhat but are in roughly the same range. For example, see Budinger, “Modernizing Patent Law,” 35: “[I] t costs about $10K to
32. Michael J. Pantuliano, “The U.S. View of European Patent Litigation,” European Intellectual Property Review, no. 9 (1993): 307. For a more detailed analysis of the same topic by the author, see “A U.S. House Counsel's Comparative View of European and Japanese Patent Litigation,” International Patent Litigation (1994 supplement), edited by Michael N. Meller (Washington D.C.: BNA Books, 1994), 1–21.
33. James Maxeiner, “The Expert in U.S. and German Patent Litigation,” IIC: International Review of Industrial Property and Copyright Laws 22 (1991): 595–605.
34. Report of Economic Survey 1995, by the American Intellectual Property Law Association, Fretzer-Kraus Inc.: Washington D.C. (henceforth AIPLA Report), 69–70. One patent attorney warned patent owners that U.S. litigation could take from six months to ten years (with two to five years being common), and out-of-pocket costs could range from $100,000 to $1 million (with an average of about $350,000). John D. Vandenburg, “The Truth about Patent Litigation for Patent Owners Contemplating Suit,” Journal of Patent and Trademark Office Society 73 (1991): 301–8.
35. For example, the Tokyo and Osaka courts in Japan, and the Düsseldorf court in Germany, all have specialized patent divisions and judges with considerable experience in patent cases. In the United Kingdom, the Patents Court (which is the court of the first instance) has had specialized judges for a long time. But only recently was a former patent barrister appointed to the High Court. In the United States, only the Court of Appeals of the Federal Circuit is specialized in patent cases.
36. The CAFC, it is widely believed, has also engendered a stronger pro-patent bias in the U.S. legal system. A 1986 Fortune magazine article declared, “Thanks mostly to a new appeals court, patent holders are winning many more suits against infringers. Damage awards have driven some defendants close to bankruptcy”; quoted in Ronald D. Hantman, “Patent Infringement,” Journal of the Patent and Trademark Office Society 72 (1990): 454–518.
37. In part, legal uncertainty in the United Kingdom is lower because the Patents Court in the Chancellery Division, which is the court of first instance, has traditionally had specialist judges who deal with patent cases.
38. A patent lawyer we spoke to felt that this “English Rule” curbed the incidence of rogue lawsuits filed by lawyers working for clients on a contingency fee basis. However, another lawyer felt that the rule also undermined the fairness of the system by raising the stakes in litigation, and thus making it more risky in marginal cases, especially for small, resource-strapped firms. For a discussion, see Curtis E. A. Karnow, Daily Journal, July 27, 1997, 4.
39. For example, Joshua Lerner, “Patenting in the Shadow of Competitors,” Journal of Law and Economics 38 (1995): 463–95; Edmund Kitch (“The Nature and Function of the Patent System,” Journal of Law and Economics 20 [1977]: 265–90), however, has argued that such protection of technological “prospects” may be the main explanation of how the patent system operates.
40. John Haley, “The Myth of the Reluctant Litigant,” Journal of Japanese Studies 9 (1978): 359; Takao Tanase, “The Management of Disputes: Automobile Accident
41. Wineberg, “The Japanese Patent System,” 18.
42. Mark F. Wachter, “Patent Enforcement in Japan—An American Perspective for Success,” AIPLA Quarterly Journal 19, no. 24 (1991): 59–85.
43. In particular, fees are high because Japanese patent lawyers charge a fraction of the amount at stake in the case, which they keep even if the case is settled favorably very early.
44. Helfand, “How Valid Are U.S. Criticisms of the Japanese Patent System?” 39. See also Osamu Takura, “Practical Aspects of Patent Litigation in Japan” (mimeo, on file with author, 1993), 478. However, in 1992 the Tokyo District Court granted a petition for preliminary injunction against seven Japanese manufacturers of the drug Tagamet.
45. Thorson and Fortkort, “An Analysis of Patent Protection in Japan and the U.S.,” 306–9. In patent law, courts apply the doctrine of equivalents to enlarge the scope of the claims if the allegedly infringing device works on essentially the same principles. In the past, Japanese district courts have applied the doctrine, but were struck down by the appeals courts.
46. Wineberg, “The Japanese Patent System,” 18. Asamura Guidelines: Patent and Utility Models in Japan (Tokyo: Asamura Patent Office, 1991), 22–23. One lawyer we interviewed told us that around 80 percent of patent suits in the United States did not go to trial either, reflecting the high costs of U.S. litigation. However, it is very likely that these suits are settled on much more favorable terms to patent holders than in Japan.
47. Pantuliano, “The U.S. View of European Patent Litigation,” 308.
48. Pantuliano, “A U.S. House Counsel's Comparative View of European and Japanese Patent Litigation,” 11–12.
49. Ibid., 9.
50. Stephen M. Bodenheimer Jr. and John Beton, “Infringement by Equivalents in the United States and Europe: A Comparative Analysis,” European Intellectual Property Review, no. 3 (1993): 83–90. See also Pantuliano, “A U.S. House Counsel's Comparative View of European and Japanese Patent Litigation,” 13.
51. See Table 9.3 and the associated section on patent harmonization for an explication of these changes. Nor are these the only differences between the patent regimes in these countries. Numerous other differences of varying importance abound, but we have covered adequate ground to understand and appreciate ACME's experiences.
52. At the time, product patents (which protect the product from imitation, irrespective of small differences in the method used to manufacture it) were not available in Japan, but this changed in the late 1970s.
53. It is not unusual, however, to receive an office action on an application. One ACME attorney believed that if an application was accepted without any office actions, the “quality” of the application was probably poor, because it did not stretch the limits of the claims that could have been allowed.
54. Since the refiling was done as a “continuation,” ACME did not lose its priority on the invention.
55. This apparently is a normal action when process and product patents covering the same invention are filed simultaneously.
56. Court opinion. (Full citation withheld to protect confidentiality of the company.)
57. Court opinion.
58. “Dimmer of Great Ideas,” Business Tokyo, May 1990, 30–35.
59. Statement of Dr. David A. Duke, Corning Incorporated, before the Senate Subcommittee on Trade of the Committee on Finance, July 1993 (copy available from the Director of Public Policy, Corning Inc., Washington, D.C.). Corning's pioneering innovations in the area of optical fiber received prompt patent protection in the United States in 1971 and 1972. In Japan, however, the patent took five years to issue and five more years to address all the oppositions. In the meantime, a number of licenses were also being negotiated, and exclusion of nonlicensees was a pressing problem. By the time the oppositions were completed, a number of firms had invented around the Corning process, and since only the process patent had been granted, the company had no recourse against them.
60. GAO Study, 30–31. The composition patent issued after seven years of examination and opposition, whereas the process patent took almost ten years.
61. ACME's British patent, enforceable in the effective British courts, proved somewhat useful, for in 1981 the company brought a suit against a British importer of infringing products. Even though some of the claims in the patent were held invalid on a technicality (and had to be modified), ACME negotiated a reasonable settlement with the U.K. firm.
62. Interestingly, ACME faced no direct competition for its products in Germany through “infringement” of its rejected patent. In light of the strong opposition from its competitors, this is an unsolved puzzle for ACME's attorneys.
63. A particularly surprising case was Germany, where ACME had no patent protection for its basic innovation.
64. The Patent Harmonization Treaty (PHT) is focused on the more limited set of countries in the developed world and is more ambitious than TRIPS. But these negotiations have been plagued with problems and were set back severely in January 1994, when the United States announced that it would not seek to resume WIPO negotiations.
65. Two agreements were concluded relating to intellectual property, on January 20 and August 16, 1994.
66. However, there are concerted efforts being made in the United States to reinstate the option of the old “seventeen years from grant” patent term, which would constitute a reversal of U.S. commitments under the U.S.-Japan Framework Agreement(s).
67. This has substantially affected the USPTO, forcing it to accept evidence of inventive acts outside the United States in order to establish priority in its first-to-invent system. Some scholars, however, have argued that the changes in the United States have not gone far enough to honor its “national treatment” treaty commitments under the TRIPS accord. Harold C. Wegner, “TRIPS Boomerang—Obligations for Domestic Reform,” Vanderbilt Journal of Transnational Law 29 (1996): 535–58.
68. As one commentator put it, “[T] he EC's explicit policy objective of achieving
69. Markman v. Westview Instruments, Inc., 116 S.Ct. 1384 38 USPQ2d 1461 1463 (1996), stating that “judges, not juries, are the better suited to find the acquired meaning of patent terms” (at 1470).
70. Specifically, they have been instructed to allow claims unless they are circumscribed by the prior art.
71. Relentless trade pressure—primarily from the United States—appears to be affecting court decisions. And the issuance of some important patents to foreign firms has put pressure on Japanese firms to protect themselves from lawsuits by agreeing to substantial settlements. “When Copying Gets Costly,” The Economist, May 9, 1992, 91.
72. These relate to how examiners approach patent applications and what ideological and procedural biases they continue to hold. Often, supporting institutions and the government machinery are also reluctant to change. One U.S. patent counsel, with recent experience in Japan, was unhappy with the compliance by patent examiners there with the new guidelines and laws.
73. Michael Kirk, former deputy director of the USPTO and former U.S. trade negotiator, at a seminar on “Globalization and the Political Economy,” at the University of California at Berkeley, in spring 1996. Firms are also recognizing this, leading some authors to comment that “meaningful enforcement, in contrast with statutory protection, is emerging as a major issue for the rest of this decade.” Herbert F. Schwartz and Vincent N. Paladino, “Key Shifts in Patent Protection,” Man<aging Intellectual Property, Patent and Design Yearbook (1994), at 8.
74. For example in “discovery” (Article 43), injunctions (Article 44), and damages (Article 45).
75. Shusaku Yamamoto and John Tessensohn, “Doctrine of Equivalents Breakthrough in Japan,” Managing Intellectual Property, July/August 1996, 12–15. The decision (Genentech Inc. v. Sumitomo Pharmaceutical Co. Ltd., H-6 [ne] No. 3292), was dated March 29, 1996, and overturns a first instance ruling in Sumitomo's favor. This is the first time a Japanese appeals court has handed down a decision applying the doctrine of equivalents, although courts of first instance have occasionally done it in the past.
76. In particular the “Yale Study,” which found that patents were important only in the ethical drug industry, and (to a lesser extent in) the chemical industry. See Richard Levin, Alvin Klevorick, Richard Nelson, and Sidney Winker, “Appropriating the Returns from Industrial Research and Development,” Brookings Papers on Economic Activity, no. 3 (1987): 783–831.