Report From IP Business Conference 2009

Today, IAM kicked off the IP Business Congress at the Four Seasons Hotel in Chicago. This morning’s sessions were quite packed, with an estimated 370+ people from various sectors of technology gathering to talk about IP valuation, prosecution and enforcement.

One of the plenary sessions involved the “state of play” in global IP. Specifically, the session covered 5 key jurisdictions (China, EU, India, Japan and the U.S.) to see what the “IP climate” was, and what resultant opportunities/obstacles existed. The following briefly summarizes the presenters and their views:

China – Speaker: Ian Harvey, Chairman, Intellectual Property Institute. According to Ian, Chinese IP laws continue to develop and are becoming among the best in the world. The quality of patents were described as “particularly good,” even for applications filed by foreign firms. CIPO recognizes that more examiners are needed, and is in the process of instituting a massive training program to get examiners specialized in examining patents in their technical fields. Costs for prosecution is reasonable, but not cheap. Currently, China is aiming to become one of the top 5 patentees in the world by 2015.

On the enforcement side, very sophisticated judgments have emerged from Chinese courts, but most judges do not have significant training in IP. Again, the Chinese government is stepping in to help judges with more training. Litigation is quick – most cases last between 12-14 months, and costs around $120-150K. While outsiders do not view China as a litigation powerhouse, Ian stressed that there is more patent litigation in China than anywhere else in the world, including the United States. So far, most of the litigation is between Chinese firms. Even more surprising was Ian’s assertion that the current level of patentee litigation success in China is 2 ½ times higher than in the U.S. (37%).

EU – Speaker: Ciarán McGinley, Head of the Controlling Office, EPO. Ciarán’s presentation focused mostly on application pendency. Ciarán pointed out that the pending stock of applications in the trilateral offices is nearing 2 million applications. Currently, there are more pending applications than there are actively maintained patents. Ciarán hypothesized that one of the primary reasons for this is the was patent offices are financed – currently, they are run like “a pyramid scheme.”

Typically patent office cash reserves comprise of prepaid fees for work that has not been performed yet. Of course, these reserves quickly become very vulnerable to government “diversion” which has led to financial shortfalls. While there are numerous ways that patent offices can deal with fee diversion, the bottom line is that a patent system funded by low upfront fees (e.g., filing, examination, etc.) set off by large back end fees (e.g., issue, maintenance fees) “is not workable.” According to Ciarán, this situation creates “perverse” incentives for the patent office – as you increase quality and work faster, the office earns less. At the same time, applicants keep pushing more and more work on the offices that they themselves don’t want to do.

India – Speaker: Shamnad Basheer, Professor, National University of Judicial Sciences. After taking advantage of weak IP laws for 30 years, efforts to enforce IP in India has been met with great resistance. The current political culture is not supportive of IP rights. Pre-grant opposition, post-grant opposition and invalidation provisions provide many areas for challenging patents, and people are not shy to use any and all mechanisms to dispose of threatening patents. Coupled with compulsory licensing, the IP regime in India is weaker than it should be. Local working law also suggests that if you don’t manufacture in India, you subject yourself to compulsory license laws.

Japan – Speaker: Philip Parker, President & CEO PJ parker & Co. Domestic patent system very insular – only about 10% of issued patents are granted to non-resident applicants. Japan has started to develop a very active technology transfer programs, mostly in early stage R&D. Currently, there is almost no trading/selling of IP between Japanese companies except in a M&A situation. Due to an intense competitive environment, selling IP to competitors is seen as giving an unwarranted advantage. While licensing is common, only specific technologies get licenced, and it is rare to see extensive cross-licenses.

Hi-tech and auto industry dominate foreign filing; not a single pharma company or material science company ever appears as a “top patent filer.” Interest in selling IP has risen sharply, but interest in buying is much more limited. No Japanese auto manufacturer or major supplier will sell patents at this time.

United States – Speaker: Todd Dickinson, Executive Director AIPLA. Broadly praised Kappos nomination, and discussed issues related to patent reform (opposition, damages apportionment, etc.). Despite legislative efforts, lots of reform has already come from the courts, and many of the previous issues are no longer as pressing. Getting through the backlog with be the greatest challenge for the USPTO; reviewing the “count” system for examiners may be necessary. Lots of polarization exists between stakeholders and PTO, and working through differences will be important for the future. Again, PTO work-sharing will be key – other offices (JPO) have already identified this issue as a top priority. End the potential for fee diversion. While it doesn’t get much attention, the Intellectual Property “Czar” position will be significant. Health care and “Green” technologies may receive special attention from the USPTO. While programs like the “peer-to-patent” program received some positive feedback, the PTO has no plans on renewing the program in the near future.