Schneider Electric, a provider of power and control solutions headquartered in France, just settled a three-year patent litigation suit with Chint, one of the largest manufacturers of low- voltage devices in China. The settlement amount of CNY 157.5 million (about USD 23 million) paid by Schneider is believed to be the largest for a patent litigation settlement in China. The settlement highlights the changing patent landscape in China.

The Chinese patent office grants three types of patents:

  1. invention patents or 20-year patents, which are similar to utility patents in the US and cover new technical solutions that relate to a product, a process or an improvement thereof;
  2. design patents;
  3. utility models or 10-year patents. The utility models are granted for ‘new technical solutions that relate to a product’s shape or structure, or a combination of the two, and are also fit for practical use’ and do not undergo a substantive examination and are granted rather quickly, typically within a year from the filing date. Evidently, utility models or 10-year patents are a cheaper and quicker way of obtaining patent protection.

Chint originally paid CNY 500 (about USD 70) in 1997 in filing fees for the utility model application at the State Intellectual Property Office (SIPO) of China. The utility model was granted in a little over 15 months without undergoing any substantive examination.

In 2007, the Wenzhou Intermediate People’s Court ordered Schneider to pay over CNY 330 million (about USD 45 million) and to stop the manufacture and sale of five of its products that allegedly infringe Chint’s utility model.

Schneider Electric tried to get the Chinese Patent Re-examination Board to invalidate the utility model by providing evidence to prove that the technology covered in Chint’s utility model was not novel and hence not legally enforceable. The Board disagreed and the Beijing Higher People’s Court upheld the validity of Chint’s utility model in March 2009.

The settlement is noteworthy in China but should not be taken that the courts will rule only pro- Chinese, as a number of non-Chinese companies have been successful in defending their intellectual property rights within the country. For example, Philips Electron Corp., Ltd., was able to invalidate utility models granted to a Chinese patentee, Yang Weijiang, relating to its shaver technology. In 2007, Yamaha Corporation of Japan was awarded over USD one million for trademark infringement by three Chinese companies: Zhejiang Huatian Industrial Co. Ltd., Taizhou Jiaji Motorcycle Distribution Co. Ltd. and Taizhou Huatian Motorcycle Distribution Co. Ltd.

Currently, more than 99% of utility models are filed by Chinese domestic companies indicating a general lack of use by companies in other countries. This decision means that companies should take utility models seriously and should track utility models filed by their competitors, include these in their prior art studies and licensing analysis, and consider leveraging this form of intellectual property (IP) protection for their own Chinese patent portfolio.

The above is from the article, “Patently Speaking: Failure to Heed IP in China Can be Costly,” and is used by permission.  The article is authored by Ram Deshpande, Assistant Vice President with the Intellectual Property division of Evalueserve China, and Dr. Alok Aggarwal, the Co-founder and Chairman of Evalueserve.

Evalueserve provides knowledge services to a global client base of Fortune 5000 companies, including Investment, Commercial and Retail Banks; Insurance Companies; Private Equity Firms; Corporates; Consulting and Research Firms; Law Firms and Intellectual Property Firms. Evalueserve’s expertise covers areas such as Financial and Investment Research, Business Research, Market Research, Intellectual Property, Data Analytics and Knowledge Technology Services.  The sole owner of copyright is Evalueserve and use of the protected material is by permission only.

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The Houston Business and Tax Law Journal (HBTLJ) is looking for a few good intellectual property articles for publication.

HBTLJ is a scholarly journal published by students at the University of Houston Law Center.   The Journal is a medium for academic discussion and practical application insight in business, commerce, taxation, and intellectual property. The Journal is currently ranked #10 in the Washington & Lee Tax Journal rankings.

If you are interested in submitting a peice, please forward articles for consideration to Any questions may be directed to Andrew Doud, submissions editor, at

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The Japanese Government’s IP Strategic Headquarters announced plans to revise the patent examination standards for medical inventions of known drug compounds. The new standard will grant patent protection for new and inventive dosage regimens and modes of administration as a “product-related invention” provided the claimed medicament has remarkable effects beyond that which is expected by a person skilled in the art. The new examination standard will go into effect as early as the end of this year.

Since 2005, Japan has allowed new medicinal use claims of a known pharmaceutical ingredient to be a patentable subject matter. However, this will be the first time novelty is conferred on optimization of  known medicines. Talks are also underway for methods for medical treatment claims (claims pertaining to surgery and other therapeutic treatment of the human body) to be patentable. Those in the pharmaceutical industry should see this change as a very positive step towards other changes to come relating to patents for medical inventions.

The Japan IP Strategic Headquarter’s report entitled “The Current State of Patent Protection in Advanced Medicine” is here.  (via Keisen Associates)

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The Innovation Alliance announced the release of a new study that details what it says is the negative impact on the U.S. economy that would result from enactment of currently considered patent legislation.

The new study: “Problems to be Expected from Expanded Administrative Challenges to U.S. Patents,” is authored by Scott Shane, Ph.D., Professor of Economics at Case Western Reserve University and was commissioned by the Manufacturing Alliance on Patent Policy.

According to Dr. Shane’s analysis, expanding the ability for administrative challenges by adopting a “litigation-like mechanism for third party-initiated post grant review and expand the existing inter partes reexamination process,” would likely have several adverse effects, including:

  1. Increasing the length of patent pendency
  2. Creating uncertainty about patent validity
  3. Decreasing the disclosure of knowledge necessary for innovation
  4. Increasing the costs of achieving patent validation
  5. Reducing investment in R&D
  6. Hindering efforts of U.S. universities to transfer their inventions to the private sector
  7. Increasing strategic patenting behavior by large, established firms

Moreover, the proposed legislation will not have many of the beneficial effects the proponents of the “Patent Reform Act” claim it will have. In particular, the proposed legislation:

  • Will not improve patent quality
  • Will not reduce the cost of patent litigation
  • Will not speed the determination of patent validity

To draw your own conclusions, get a copy of the study here.  But, maybe it’s time to just start acting.

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While I wait for the buzz of local activity and excitement that comes with Spring, what could be better fun that partaking in the blawgosphere carnival, the Blawg Review? It’s perfect for my predicament. A fun celebration, globally shared in a space where it feels like it is always Spring.  ~IP Think Tank

Blawg Review #222 is out at Duncan Bucknell’s IP Think Tank blog.  This is from a blog site that practically provides an entire blawg review weekly in its fantastic IP updates.

In this week’s version, Blawg Review is replete with interesting law bites.  Obviously, the top item is the “Gates-gate” fiasco circulating among the legal community as Fresno Criminal Defense writes about the connection between bigotry, prejudice, tolerance.   Simple Justice asks if:

“[W]hat happened to Henry Louis Gates is the outgrowth of the conflict between law and order, order represented by police who have been empowered, in our post 9/11 age, to believe that their every command is the law, that our blind obedience is mandatory.  Other than a few old-timers on the Supreme Court who live in a fantasy world where ordinary people can assert their rights and refuse to comply with the command of a police officer with impunity, this encounter between a distinguished scholar, within his own home, and a police sergeant who believes that his command is sufficient to create the divide between citizen and criminal, may offer the chance to question who commands whom in our society.”

Obama PosterIn IP-related issues, we enjoyed reading about the PrawfsBlawg discusses the copyright dispute between Associated Press and Shepard Fairey, who based his “Hope” poster of Obama on a photo taken for the A.P. by freelance photographer Mannie Garcia. (Garcia has now joined the lawsuit, contesting the A.P.’s original claim that they own the copyright in the photo pursuant to the work made for hire doctrine.)

Since Fairey did not seek or receive permission to use the photo in making his poster, the question is whether Fairey’s taking is defensible under the fair use doctrine, looking at the vague four-part statutory balancing test. Looking mainly at the fourth fair use factor, which requires judges to consider “the effect of the use upon the potential market for or value of the copyrighted work” in evaluating a fair use defense, the discussion focuses on whether an artist who creatively appropriates a news photograph needs to pay for a license to do so since Garcia has said that he would have given Fairey permission to use the photo if Fairey had simply asked him about it beforehand.

“I think this counterfactual characterization of a smoothly functioning licensing market suffers from hindsight bias in a couple of respects. For one thing, even if it were true that Garcia would have given Fairey permission to use the photo, his grant of permission may not have been sufficient. The A.P. claims that it is the copyright owner, so a good-faith effort by Fairey to clear the rights could still have landed him in trouble (copyright is a strict liability offense, so an innocent state of mind would not be a defense). And corporations have a track record of not extending as much generosity to potential licensees as individual owners might. (In any event, I’m not so convinced that Garcia would have been so generous. If he really was so indifferent to Fairey’s—or anyone’s—profiting off of his photo, why would he now be joining the lawsuit and seeking to claim ownership of the work?) Finally, markets in creative work don’t function as seamlessly as markets in stocks or commodities, where actors regard the goods in trade as largely fungible. Rather, copyright cases are full of instances where owners reject a lucrative licensing offer for personal or idiosyncratic reasons (e.g., Campbell v. Acuff-Rose; Fisher v. Dees).”

For our own addition this week, we’d like to submit Free Range Kids’ article on Haverford, PA, cops preventing a massive terrorist plot to raise money by going door to door selling lemonade. The group, known as the “Haverford Seven” and made up of seven children including a set of 5-year-old triplets,  were busted after ever-vigilant neighbor William Nickerson recognized the evil plot to distribute uncontrolled substances without a permit and dutifully ratted out the group.  There is no word on whether the Obama administration had considered deploying active military troops to arrest the group.

More on living in a police state:

  • The terrorist haven known as the City of Lancaster, CA (pop. 145,000), wants a 24-hour spy plane to patrol the city for a cool $1.5M  a year.
  • Alabama (pop. 4,600,000) has banned Cycles Gladiator wine, produced by Hahn Family Wines in Soledad, Calif., for showing a vintage 1895 advertising poster for Cycles Gladiator bicycles on the label.  The wine label — showing the known terrorist coded message of a nude nymph flying beside a winged bicycle — was just too much for Alabama’s liquor control agency.
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Now, provisional exclusive and/or non-exclusive licenses can be registered at the Japan Patent Office based on a license agreement effective before an application is granted a patent. The new recordation system will provide protection for the licensee regarding the pending patent application against any third party who subsequently acquires the right to the license to the pending patent application or granted patent with respect to either the provisional non-exclusive or provisional exclusive license.

Therefore, even if the licensor (applicant or patentee) goes bankrupt, the bankruptcy trustee will not be permitted to terminate or change the license agreement once it is registered with the Patent Office.

  1. There are two types of provisional licenses, “provisional exclusive license” and “provisional non-exclusive license”. A provisional license can be granted within the scope of the disclosure of the originally filed patent application.
  2. A provisional exclusive license goes into effect upon registration thereof at the JPO. Once a provisional non-exclusive license is registered at the JPO, it shall be effective against any assignee of the patent application.
  3. A registered provisional exclusive and/or non-exclusive license remains effective even after amending the application. Furthermore, when a divisional application is filed from a parent application under which a provisional exclusive and/or non-exclusive license has been registered, a provisional exclusive and/or non-exclusive license is deemed granted under the divisional application as well.
  4. Where a provisional exclusive or non-exclusive license is registered under a patent application, the applicant may withdraw the patent application only with the consent of the registered licensee. (Article 38bis)
  5. When a patent is granted for the patent application, the provisional exclusive license and/or provisional non-exclusive license loses its provisional status and matures into an exclusive license and/or a non-exclusive license respectively.
  6. When a patent application is finally rejected or abandoned, the provisional exclusive license and/or provisional non-exclusive license lose its effect.

In order to preserve the confidentiality of the content of the agreement, the licensee’s name, the license’s scope of claims, and the name of the bankruptcy trustee will not be made public for non-exclusive licenses. (via Keisen Associates)

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The U.S. Patent and Trademark Office has acknowledges that it might have been miscalculating patent term adjustment (PTA) for patents issued from 35 U.S.C. 371 national stage filings.

Fish & Richardson and their pharmaceutical client Japan Tobacco Inc. (JT) discovered a significant error in the manner by which the U.S. Patent and Trademark Office (PTO) calculates the amount of patent term adjustment to which a patent is entitled under 35 U.S.C. 154(b).  This error is different than the one found in the Wyeth v. Dudas case (580 F. Supp. 2d 138), which concerned the PTO’s method of calculating overlap between “A Delay” (resulting from the PTO’s failure to issue actions within specified time frames) and “B Delay”(resulting from application pendency that exceeds three years).

Here, the error concerned how the PTO calculates the length of B Delay for patents granted from most 35 U.S.C. 371 national stage filings. The PTO’s practice has been to award B Delay beginning three years after completion of the requirements under 371(c) (e.g., submission of inventor’s oath or declaration).

However, the statute and regulations require that this period begin three years after the national stage has “commenced” under 35 U.S.C. 371(b) or (f). This commencement is often, though not always, prior to completion of the requirements under 371(c). As a result, PTA resulting from B Delay is often longer than that provided by the PTO’s practice. This difference can be many months or even more than a year.

The time at which the three year “B Delay” clock starts for a 371 national stage filing depends upon whether the national stage commences under 35 U.S.C. 371(b) or 35 U.S.C. 371(f).

35 U.S.C. 371(b)

The U.S. national stage commences under 35 U.S.C. 371(b) on the date that is 30 months from the priority date of a PCT application unless the applicant files an express request for early processing and completes the requirements of 371(c) prior to the 30 month date.

If an application is filed at the PTO without one or more of the items required by 371(c) (e.g., an inventor’s oath or declaration), the PTO issues a Notification of Missing Requirements. The PTO practice has been to start the B Delay clock three years after completion of the 371(c) requirements. However, the B Delay clock should have started three years after commencement. Here, months of potential PTA is lost by misapplication of the rule.

35 U.S.C. 371(f)

The B Delay clock can be started three years after a date that is before the 30 month date if the national stage is commenced under 371(f). This requires that that the applicant file an express request for early processing and complete the requirements of 371(c) prior to the 30 month date. If either one of these requirements is not met, then the national stage (and the reference date the B Delay clock) will commence on the date that is 30 months from the priority date of the PCT application.

For biotech and pharma patents in particular, these additional days of patent term can be of significant value since every day represents significant sales.  There are currently over 100 “blockbuster” drugs — those drugs with $1 billion annual sales or more.  That works out to over $2.7 million in sales per day.

Fish & Richardson challenged the PTO’s practice on behalf of one of JT’s patents and has recently received a favorable Decision from the Office of Petitions.  The USPTO intends to eventually change its internal system to apply the correct PTA calculation method going forward.

However, you should confirm the PTA term for all patents derived from 371 national stage filings.

Fish & Richardson now has a page explaining how to correctly measure this B delay.

(via Fish & Richardson)

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Strategy is a solution that takes you from your current situation “A” to a new situation “B.” ~ Robert Cantrell

outpacingcoverOutpacing the Competition: Patent-Based Business Strategy, by Robert L. Cantrell (Wiley, John & Sons, Inc., 343pp), is a book written for business-people and attorneys who are charged with developing business opportunities using practical patent strategies.

Patents on their own are just pieces of paper (with a fancy seal).  What really matters, is how you make use of patent rights.  Here, the author has provided a practical guide to the use of patents as effective business tools. This book is not an introduction to patent law but is a thorough discussion of key approaches to make intellectual property serve a company’s business plan and goals.

In Outpacing the Competition, Robert Cantrell sets out that a patent strategy is composed of decision cycles that include:

  1. Access (understand the situation);
  2. Decide (choose a course of action); and
  3. Act (execute the decision)

Cantrell describe the situation as this:

Decision cycles are not one-pass-through events. They are continuous cycles of assess, decide, and act, whereupon each action leads to new assessments, new decisions, and new actions, the complexity of which increases proportionally to the ambiguity of the objective.

The main body of the book then describes using the decision cycle as the primary guideline for how an organization should plan its patent strategy and organize its intellectual property.  Whether your organization is IP driven or not (and it probably is even if you don’t know it), there are lots of lessons here.

With the changing business landscape, assessing the situation requires understanding that all successful enterprises have a central idea that defines the company, its centers of excellence. As a model example, Cantrell shows how Federal Express set one of the best descriptions of a central idea set out in its tag line, “When it absolutely, positively has to be there overnight.®

Federal Express patents are oriented around fulfilling the promise of this idea. A review of Federal Express patents will show that they describe packaging, labeling, and logistic methods oriented toward getting packages from point A to point B proficiently and at high (i.e., overnight) speed. It’s entire intellectual property suite — the brand name, the trademarked tag line, the patents, plus trade secrets … — are all oriented toward delivering that promise.

Can you say the same for your business?

Drawing heavily from Sun Tzu’s The Art of War, a Chinese military treatise written in the 6th century BC, Cantrell shows how to use patents to your advantage. In one example, asymmetry is used as a strategic tool to take actions that line up a companies strengths against a competitors weaknesses, the idea being to engage a competitor on your own terms.

We highly recommend that you read Outpacing the Competition. You are sure to walk away with insights into business action that go well beyond just intellectual property strategies.

Robert L. Cantrell is a professional strategist and Director of Consulting at Landon IP, Inc. He has managed multiple consulting and analytical engagements across a wide range of technology sectors that include the communications, electronics, medical devices, pharmaceuticals, energy, and consumer goods fields.  He is on the faculty of Patent Resources Group (PRG).

Outpacing the Competition: Patent-Based Business Strategy, by Robert L. Cantrell, is available from Amazon.

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