Time: a competitiveness factor on patented innovation

Vicente Zafrilla Diaz-Marta
Intellectual Property expert at the Latin America IPR SME Helpdesk

Why should some Latin American IPOs improve their patent granting procedure?

According to OECD´s Oslo Manual innovation is defined as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations”.

Therefore a country´s ability to innovate does not exclusively rely on how much research is developed in a country but on how much of this research reaches the market, directly or indirectly.

Despite a certain degree of debate concerning patents as boosters of innovation, it is true that there is a relevant percentage of innovation that reaches the market by means of patents.

Delays in registration are traditionally perceived as barriers for the entrance of foreign innovators and companies. However, this is only a partial view, since such deficiencies also entail a negative impact on their national innovation and entrepreneurship environment.

Effect on the Industrial Application analysis: the priority period

Since Paris Convention patent applicants in any of the member countries of the convention, enjoy a 12-month priority period to file their patent in any other member countries, while keeping its first application date as the priority date.

In terms of market entrance, 12 months is a very short period of time to assess whether the market accepts a product or not, especially if it is an innovative one. Therefore, only those companies that are very sure of the success of the product and/or have the means to predict such a success will invest their resources in seeking patent protection.

In such a scenario, only few SMEs and inventors would decide to invest their time and money to protect their inventions abroad and/or, once decided, would limit the number of international filings.

Fortunately, the Patent Cooperation Treaty extends the priority period. Once the PCT filing fee has been paid (around €1200) applicants can decide in which countries they want to protect their patent within approximately 30 months (depending on the country). Under this timeframe, even SMEs can assess if they want to enter certain countries.

Therefore, Latin American countries that are not members of the PCT (Argentina, Bolivia, Paraguay, Uruguay and Venezuela) are not only discouraging foreign IP applicants to protect their inventions, but also limiting the access of their own nationals’ patents to international protection.

This barrier has a stronger deterrent effect for foreign SMEs and inventors rather than big companies, which file their applications regardless of there being a PCT or not.

Effect on Application: Search and Examination Report

All those IP offices that are able to provide the Search and Examination Report within a short period of time are giving their applicants a competitive advantage.

If the IP office is able to issue the Preliminary Search Report and/or the Examination Report in a short timeframe, the IP applicants will be able to save money by:

  • Withdrawing the application and/or not filing the PCT if the patent is not new or inventive or;
  • Limiting or erasing claims that lack novelty or inventiveness to prevent facing delays related to other IPOs’ objections.

Thus, Latin American IPR Offices that cannot issue the PSR and/or the ER in twelve months from the priority/filing date are forcing their nationals to face the International Phase of the PCT or the filing in third countries without information concerning the strength of their patents or at least an overview of the expectations of succeeding in the granting of the patent; this is a scenario that may lead to losing all the amounts invested in the application, translations and any other administrative costs.

In recent years some Latin American IP Offices seemed to notice this negative impact and have started to take measures to improve their performance at internal level; by improving their internal practices, and thanks to international cooperation both at interregional level (e.g. the PPH agreements signed with EPO, Spanish IP Office and USPTO) and at intraregional level, with tools like the Prosur PPH or CADOPAT. 

Effect on Exploitation and Enforcement: Granting

Delays in granting the patent also have direct consequences in the use and defence of the patent. Despite the “standard” 20-year term of a patent, a patent’s lifecycle in certain sectors, such as smartphones, tends to be shorter. In some cases, a patent granted five or six years from the filing date have no or very reduced economic interest.

In addition, and generally speaking, pending patent right holders benefit from very little or any rights concerning enforcement until the patent is granted. Such a circumstance prevents them from bringing actions against infringers, which does not only harm their interests, but also their licensees’, including local companies.

Furthermore, long granting periods also harm competitors. A pending patent operates as a “warning” advice for competitors, who are very likely to avoid incurring in acts that may be prohibited by the patent owner once the patent is granted. Hence, a patent office that incurs in delays in rejecting a null patent creates uncertainty to its nationals about whether or not they are able to use the invention.

For instance, in the case were the same patent is rejected by National IP Offices, if country A rejected it in year 2 from filing date and country B rejected it in year 5, country A competitors would enjoy three additional years when they can freely use and exploit the invention in the country, whereas country B competitors will be subject to uncertainty until the patent is rejected.

To conclude, time is a key factor for the patent system. Although inefficiencies in patent registration procedures may harm foreign companies and innovators’ interests, the harm caused to its own national innovation system is even worse. Moreover, very long and formal procedures lead to a negative perception over the patent system in general, and discourage national innovators from protecting their inventions both nationally and abroad, which directly affects the country´s ability to compete in a knowledge-based economy.

Future of Globalization: No Time to Waste

Juan Antonio Enciso
Director, MBA in Global Business & Strategy, EGADE Business School, Instituto Tecnológico de Monterrey

On April 20, in a session at the Global Network for Advanced Management Fifth Anniversary Symposium, a panel of experts, including former U.S. Secretary of State John Kerry, will lead a discussion of the future of globalization and the implications for business and management education. Watch the discussion live.

Globalization encouraged companies to design and implement their business strategies to take advantage of the competitiveness of each region, configuring and adapting the value of their supply chains in manufacturing, investment, and trade. It’s clear that the global value chains took years to configure, with the flexibility to respond quickly to changes in technology and consumer trends, and regulations and financial cycles, among many other global economic factors.

However, this status seems to be facing challenges, mostly from political events and apparent anti-globalization postures in several countries, including the U.S., the U.K., and many others around the world. The question that arises is how these politically led movements and governments will impact the competitiveness of the current global value configuration? In practice, what does it mean in terms of changes to regulations and benefits of trade and direct-investment agreements, double-taxation treaties, property-rights protection, environmental regulations, and quality standards, among many other economic factors that define the feasibility of both production and consumption?

The impact of the future of globalization or anti-globalization depends on several factors. Some of these factors are the political and economic views of the new generation of leaders and governments on how profound and deep the changes in trade and foreign-direct investment regulations will be, new tax configurations, changes in rules of origin within trade agreements, environmental and logistics regulations, and the non-trade-related issues that governments would probably like to tie to trade, such as immigration, security, border crossings, and democratic processes, among other issues.

How will this new status quo impact a trade-dependent country like Mexico? It depends on how fast governments and companies come to understand their current situation and potential changes, the effectiveness of their capacity to change their global value chains to maintain their competitiveness, and their capacity to negotiate or renegotiate trade regulations with potential partners. We need to remember that changes in a global supply do not come about from one day to the next; it might take years before a company can reconfigure its sourcing, manufacturing process, logistics planning, and so on.

There is no time to waste. The business leaders of multinational and domestic companies must be prepared to understand and evaluate the business environment, to foresee the possible changes, to evaluate challenges and economic impact; they must be able to reconfigure management and organizations, be assertive negotiators with governments as well as with suppliers and customers, and to evaluate and design new processes, products, and customer-service management.

CIBEPYME – The platform to support SMEs in their processes of internationalization to Latin America

INPI
Instituto Nacional da Propriedade Industrial

Created in the scope of the Ibero-American Program of Intellectual Property, the platform CIBEPYME is available to SMEs since 28th of October 2015.

This platform aims to support SMEs who intend to internationalize their products and services in the countries of Latin America.

The main objective of this platform is to enhance the use of intellectual property and to promote the effective management of intangible assets by SMEs, providing information, services and free assistance (through the inquiry form).

The CIBEPYME also allows the sharing of best practices, awareness campaigns, as well as case studies of companies that bet in the registration system, and also the dissemination of news and activities in each country.

At the moment, the information is only available to the countries belonging to the Latin American Program of Industrial Property (IBEPI http://www.ibepi.org): Argentina, Brazil, Colombia, Costa Rica, Ecuador, Spain, Mexico, Paraguay, Peru, Portugal, Republic Dominican Republic and Uruguay.

The content of this website is in Spanish (in Portuguese only for Portugal and Brazil micro sites). The information will also be available in English soon.

Intellectual Property is an intangible with significant economic potential

“Chile has built a balanced property system that seeks to protect the interests of creators and innovators, as well as users and society as a whole,” says Martin Correa, Head of the Intellectual Property Department of the General Directorate of International Economic Relations (Direcon) of the Ministry of Foreign Affairs. The Department coordinates and conveys Chile’s position on international negotiations before the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO).

Intellectual Property is precisely the focus of the Latin America Intellectual Property SME Helpdesk project, which belongs to the Directorate General for Research and Innovation (COSME Program) of the European Union. The Eurochile Foundation is a partner of this project.

The subject is highly relevant, since a wider knowledge and respect for intellectual property rights leads to improved opportunities for Chilean companies.

“Today, IP has been gaining importance, since it has been proven that it may be an intangible with a significant economic potential not only for consolidated and larger companies, but also for small and medium enterprises. In this sense, knowing the value of IP enables SMEs to value their trademarks and generate spin-offs when granting licenses,” states Correa.

“Additionally, having an invention patent, for example, can be a plus when applying for loans to continue the development of an SME or even for expanding. Finally, IP can encourage the sale of traditional niche products by granting geographical indications. They create communities among small producers of the same product by recognizing its added value. As you can see, being aware and knowing the economic potential of IP can allow SMEs to make better business decisions and to benefit from the profits IP can generate,” he adds.

– What is the state of Intellectual Property protection in Chile?

“The country has made great strides in recent years, introducing major changes to the intellectual property system, such as the enactment of Law 17,336 on Intellectual Property, the reform of Law 19,039 on Industrial Property and the creation of the National Industrial Property Institute (Inapi, in Spanish). There has also been progress in creating tools to bring people closer to IP through programs such as the origin seal and Inapi Proyecta, as well as in boosting the role of the intellectual rights keeper belonging to the Chilean Libraries, Archives and Museums Board (Dibam, in Spanish).”

– What are the pending issues in this regard?

“Chile has a strong intellectual property system with clear and strict rules, comparable to the standards of major international institutions that cover these issues, such as the WTO and the WIPO. Nevertheless, it is important to recognize that new technologies and recent innovations in the digital environment pose new challenges not only for Chile, but for the international community. It should address the interaction between IP and these new developments.”

– What is Chile’s level of compliance regarding international agreements and obligations on this matter?

“Chile has fulfilled its international obligations on intellectual property. In this sense, the current institutional framework in Chile reflects the standards described in our free trade agreements (FTA). It even went beyond what was agreed on the FTAs. However, there are still some issues to be addressed internally, derived mainly from the FTA with the US. One example is complying with technological protection measures linked to copyright, which has not been addressed yet. Therefore, Direcon’s efforts have been instrumental in coordinating thematic working tables to address this issue internally in the near future.”

– What are the most common problems for a foreign company wishing to do business with Chile, in terms of IP?

“Even though the rules on intellectual property in Chile are relatively similar to those in most developed countries, there are some differences that must be taken into consideration when doing business. They have to do with the territorial nature of IP. In this regard, it is important to be aware of certain basics, such as the civilian origin of Chile’s legal tradition and the balance of our system when pondering the interests of creators and innovators, and the interests of users and society as a whole. They differ in each country. Therefore, it is indispensable to learn about the system as a whole in order to enjoy the economic benefits of IP in all its dimensions.”