The appeal of patents

With the increasing worldwide protection of intellectual property - witness the demise of Napster and the introduction of new laws in China - we could be excused for thinking patents are the friend of both technologists and business.

With the increasing worldwide protection of intellectual property — witness the demise of Napster and the introduction of new laws in China — we could be excused for thinking patents are the friend of both technologists and business.

Patents affect us all in some way. For technologists, the software patent has been championed as the protector of innovation and yet, at the other end of the spectrum, for the worlds’ poor, patents, particularly those covering life-saving drugs, have been decried as the instruments of exploitation of western society.

But in June this argument is likely to take a new and highly controversial twist, when the US Supreme Court hears an appeal from the federal appeals court on the decision in Festo v SMC.

Festo is about the age-old doctrine referred to as the “doctrine of equivalents”, which was established by the courts to protect patented inventions. The courts use the doctrine of equivalents when copycats attempt to steal the value of the market monopoly of a patented invention by making a minor change to the invention then attempting to obtain a patent. The doctrine allows the courts to find infringement if the elements of the invention are “substantially the same” as those disclosed in the patent.

The Festo decision allows a patent to be registered so long as it is not identical to an existing patent. It concerns the extent of the worldwide monopoly rights of production that is the “payback” offered by society for innovation.

If Festo, which basically concerns two patents involving magnetic rodless cylinders, stands on appeal it could retrospectively diminish the value of millions of unexpired US patents. Given the value and key role of the US market, effectively this means that the value of patents worldwide will be greatly diminished.

To illustrate, take the hypothetical case of a New Zealand scientist who patents new agricultural biometric technology based on thermal imaging that can detect whether a cow should not be milked. Everyone agrees her patent has great practical potential. The US Patent and Trademark Office rejects the patent because it’s too broad. So she adds an amendment to make the patent more specific. For example, the invention could combine thermal imaging with ultrasound. The patent is granted and then a competitor applies for and obtains a patent that uses the same principles but instead of thermal imaging and ultrasound uses another combination of non-invasive techniques.

Festo supporters would argue that the competitor has invented something that is basically the same as, or equivalent to, the original patent. However, if supporters of the other party to the Festo case, SMC, get their way, the competitor would be allowed to continue because the new combination was not included in the original patent.

In its decision the appeals court reasoned that getting rid of the doctrine of equivalents would force a new level of clarity in patents.

As the arguments rage the normally invisible patent industry is now being forced to publicly take sides. Robert Bork, counsel for Festo, argues that “what’s at stake here is how much you want to bore into innovation. Nobody’s going to spend millions of dollars to bring a product into the market if someone can easily copy it.”

However, a positive ruling could boost the patent system by making claims clearer in an area that is currently fraught with litigation. Patent owners may benefit by knowing more certainly what they own and third parties will be more aware of what others own.

But many US patent attorneys have said that devising legal language to protect a patent that prevents copying will be very difficult. They believe that the software area will be particularly troublesome because software inventions are constantly being updated with new versions and extra lines of code.

One thing is for certain: if Festo stands the landscape for patents will never be the same. The real problem is that the return on invention will be dramatically restricted and the time and trouble to register a patent will become even more problematic than it is today. While new strategies, probably based on maintaining secrecy, will evolve, the orderly world of patents may suffer such a blow as to render them a thing of the past.

If you have valuable intellectual property, think about not waiting for Festo and about institutionalising secrecy now. That may be your smartest innovation.

Horrocks is a partner and Walton a solicitor in Clendon Feeney’s technology law team. This article, together with further background comments and links to other websites, can be downloaded from Clendon's website. Questions and comments are welcome to Tech Law.

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