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.

Intellectual Property for SMEs: 6 common errors

Having their own business is a yearning for many employees tired of a working life that does not fill anything else than their bank account. They endure frustrations and abuses for a not always decent salary, and feed their dream with the massive DIY-tools that the Internet provides.

More than a few are eventually convinced by the siren calls of tempting opportunities offered by the digital world to exploit an idea in a profitable way with no (or less) tangible means and leap into the void without a second thought.

In order to prevent your savings, hair and other valuable resources to be wiped out by a temporary insanity, we are listing some of the most common Intellectual Property (IP) – related mistakes Start-Ups make too often and that you must avoid if you want to succeed.

1. Poor knowledge of the sector

Working at Disneyland is not the same as visiting it. Likewise, being a (more or less specialized) consumer does not give you a complete picture of the sector. It’s key to know the internal mechanisms.

Given that experience is the best teacher, during the initial stages you’d overcome this deficiency with a deeper prior analysis and better planning.

However, many start-ups embrace adventure without being aware of the frequency or speed of technological developments in the sector, where to find new opportunities for growth or licensed-technology, or what patents are relevant to their products.

In other words, they do not know what Intellectual Property Rights (IPR) are needed to operate and its availability.

In regard to the first, sectorial guides (i.e. Machinery and IP in Mercosur and Chile) may help you to identify the relevant IPR to your case and understand why and when should them be protected (i.e. a graphic designer would need to know more about copyrights and trademarks, and pay less or no attention to patents).

In regard to the second, “Out of sight, out of mind” is not a good IP policy, since not knowing the law does not allow you not to obey it. Other’s IPR infringement may take place though you did not want to. You’d better check the trademarks, patents or copyrights owned by your competitors to avoid it.

Thanks to that, you’d not only escape a costly legal proceeding, but you’d have a deeper knowledge on how innovative you are and be able to adapt your commercial strategy.

Performing a prior search is hence indispensable. Unfortunately, you cannot always access comprehensive, reliable, free-of-charge databases that can be easily handled by the average user.

The solution calls for expert advice.

2. Fail to identify IPR and deficient valuation

The idea that inspires a different business’ birth tends to be unique to the father’s eyes.

Nonetheless, just a few know exactly what part can be protected (i.e. technical feature, aesthetical aspect, name, information itself, etc.) and how is it given material form. No, the answer is not always “patent”.

You can also find utility models, designs, trademarks, trade secrets or copyrights, among others. Generally speaking, commercialization of a new product involves many IPR simultaneously. For example, the technology used by Goretex (registered trademark) was patented and the shoes appearing on the catalogues and brochures (protected by copyright) have been previously registered as designs.

Though, if you think that IP is only for technology-based or big companies, you are wrong. Any company has some potential (or current) IPR.

In fact, all companies daily work with intangibles that could be protected as IPR –and, thus, be exploited-, but have no clue about it.

Your company or product name can be registered as a trademark and reach an incredible value. If you don’t believe me, you’d better check Forbes’ rank of the 10 most valuable trademarks.

If you are not aware of what you have in your hands, you can hardly assess its value properly and protect it accordingly. This error can cost you dear if we bear in mind that for most Start-Ups, IPR often represent the most important asset of the company.

3. Bad timing

Sadly, IP protection is way too common done as an after-thought or be left for a later stage.

Thus, many entrepreneurs figure out that the innovative product on which the business project is based cannot be patented anymore, either because:

  • Since they began to develop it until they finally were ready to launch it, it has been too long and in the meantime other company applied for similar patents (first-to-file wins, remember?); or
  • They disclosed it (via online or at a trade fair) and it is not new anymore. Many Latin-American countries do provide a grace period for patents, but you need to know which and its requirements.

Those of them who’d rather release the product and protect it depending on its success can be committing IP offenses unknowingly. At best, the product was really innovative and they could face any of the mentioned scenarios.

The same situation may be seen as respect to the trademark. Before naming your company or product, be sure that it is available in your countries of interest (think internationally!). Otherwise, you’d have to choose a new name or be forced to negotiate with the right holder (i.e. the “iphone” trademark dispute between Gradiente and Apple that took place in Brazil was a good example).

Usually, the first to apply for its registration gets the exclusive right (first-to-file principle). But some Latin-American countries have a different regulation. Hence, it is recommended to be assisted by specialized professionals from the beginning and have a case-by-case approach.

On the other hand, there are some opportunities that apparently cannot be missed. However, a trade fair or a meeting with a promising client can be a double-edge sword. You’d better calm down and perform a good search and design -supported by an IP expert preferably- involving all the relevant parts (e.g. designers and marketing team).

4. Ownership: absence of clarity and awareness

Creative processes tend to be convulsed and it’s hard to distinguish who created what and in which proportion (particularly, when ideas arise from brain storming or daily work).

Moreover, when you deal with external providers or a team, many of them do not know who is the real owner of the work. The assignment rules are usually contained in the IP regulation and the employment or project contract. This is why you must pay attention to its content and try to clarify rights and obligations of each part and adapt them to your needs before your start working.

In this regard, many disputes arise when the employee thinks that everything he/she creates belongs to him/her (while it tends to be the other way around).

For this purpose, a well-drafted contract is crucial. Be as much specific as possible and try to think on the most -and less, but harmful- likely scenarios and include a clause for that.

Start-Ups rarely avoid application of knowledge gained from the company they previously worked for or achieved the final result without using its means (although it was during their leisure time).

This is of central importance when you are looking for funding or partnership (ascertaining the correct IPR assignment is one of the key points of any due diligence conducted by investors to give the green light) or when license agreements are signed.

At internal level, it is equally important that the rest of the company members know the scope of the IPR they work with (i.e. what countries are covered, can it be modified for an online campaign, is there a limit to the number of licenses, what happens with any improvement on it). For-profit use of open source technology or under for personal use only license; inclusion of copyright-protected works without permission in catalogues or social networks; or utilization of patented technology without realizing it, are some of the most common errors and can be prevented with an active IP awareness policy by trainings like those provided by the Latin America IPR SME Helpdesk.

5. Lack of (or improvised) protection strategy

The absence of a clear short/medium term IP strategy is a serious handicap to the business project’s success –or event survival-. It’s impossible to identify the needed tools to achieve the objectives if they are not well defined.

Moreover, many entrepreneurs underestimate the importance of own and other’s IPR or overrate the power of a registered IPR (patents to not enforce themselves automatically: you have to negotiate with infringers or start legal actions). Additionally, some businessmen forget that IPR also entail certain obligations (i.e. trademarks’ obligation use was set to avoid defensive registrations in many Latin-American countries).

As a result, they find themselves:

  • with weak IPR to save money in legal assistance
  • with IPR that they don’t use; or
  • forced to request lawyer’s support to solve a non-registration related problem

Notwithstanding, the vast majority of the mentioned mistakes so far can be prevented with correct planning.

Or, to put in other way, you have to invest in IP and avoid relying upon improvisation.

Do not forget that the IP strategy must be aligned with the business strategy (and not vice versa). Short, medium and long term must be taken into account, too; and plans must be regularly updated and suited to change.

6. Who needs a lawyer?

You can find many infinite templates, examples and tutorials on how to elaborate your own agreements across the Internet. As a matter of fact, it is really tempting to take four of them and adapt them to your case –at high risk of copy-paste abuse-.

The so termed Frankenstein effect is one of the most frequent errors, given the high cost of legal assistance and low awareness of the importance of a well-drafted contract (in particular when no problem arose).

It must be however noted that IP is a very complex matter, that varies a lot from country to country, and that an in-house lawyer (if the company has one) -that already deals with tax or sales legal issues- can hardly ensure a high level of efficiency.

Although most of the entrepreneurs are used to do it all by themselves, they must know their limits, be wise and delegate to experts (when needed).

Do not forget that if you trust a lawyer from the beginning, you can save a lot of money (fixing the mess created can be two or three times more expensive).

Indeed, the Latin America IPR SME Helpdesk was created in response to all those EU SMEs that want (and must) to know more about IP and how to use it as a profitable business tool, in particular when they operate in Latin America –or are intending to do it-.

Moreover, some of the mentioned trainings (and much more) are explained in depth in the training sessions they organize (i.e. Start-Ups in Latin America: Most Common IP errors).

Nonetheless, when the problem you have is beyond your knowledge –gained thanks to the E-learning documents and trainings offered by the Helpdesk-, you could always use the Helpline. All any of its services, it is free-of-charge and totally confidential.

Furthermore, it is available in 5 different languages (English, Spanish, French, German and Portuguese) and the experts provide first-line assistance within 3 working days.

For further information, you can check their website www.latinamerica-ipr-helpdesk.eu.

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.