Archive | 2011, September | (4) posts

Patent Prosecution Highway – Sweden and NPI entering the PPH-network

As I mentioned in my blog entry of 19 september, the number of PPH-agreements has increased, introducing new possibilities for accelerated prosecution.

Sweden’s Patent- och Registreringsverket and Nordic Patent Institute entering the PPH-network

Three new patent offices have entered the PPH-network. The three new offices are PRV (Sweden, PCT-PPH with JPO and USPTO), The Nordic Patent Institute (PCT PPH with USPTO) and ILPO (Israel, national PPH with USPTO). Also, a number of new PPH agreements between existing PPH participators have been launched, particularly relating to the use of PCT work products for requesting accelerated prosecution under the PPH (so called PCT-PPH agreements).

The complete overview of existing and working PPH agreements at the time of writing can be seen on the graphic below, courtesy of the PPH web-page compiled by the Japanese Patent Office, JPO:

PPH map

Link to the PPH-web page:

Troels Peter Rørdam, European Patent Attorney, Awapatent

Explore the benefits of a first national filing

The filing of a patent application is associated with numerous considerations. Should it be firstly filed as an international PCT application? Would it perhaps be better to directly enter one or more regional phases in combination with some selected countries of interest? Alternatively, should the application firstly be filed nationally before deciding how to proceed?

 Obviously, there is no default answer to these questions. Instead, the patent application filing strategy must be decided on a case-to-case basis by considering factors such as geographical locations of clients, competitors, manufacturer sites, possible future markets etc., as well as the applicant’s financial allocation for the application. It is the duty of the patent attorney to analyze these factors and to protect the interests of the applicant, based on the conditions at hand, when deciding where and how to file.

By firstly filing a patent application nationally, the applicant may start the patent journey cautiously and avoid relatively high costs at an early stage. Seen from a local perspective, a patent application may be filed nationally with the Swedish Patent Office (PRV). A filing with the PRV is beneficial in that the filing fee is relatively inexpensive and that the search/opinion regarding the patentability of the application is issued relatively fast. These aspects may be of special interest for applicants desiring to keep initial costs low and/or being unfamiliar with the prior art in the field of the application. Furthermore, a relatively quick patent application procedure gives the applicant a further insight regarding the possibility of obtaining a Swedish patent and/or an indication when contemplating a PCT-route wherein priority is claimed from the Swedish application. In some cases, it is even possible to obtain a national Intention to Grant Communication (“slutföreläggande”) within the priority year, which may even further contribute to the evaluation of a possible PCT filing.

A national patent application may be filed with the PRV in English, followed by a later translation into Swedish. A first filing in English is advantageous in that a continuation into the international PCT phase may thereby be prepared. Furthermore, in a recent press release from 30 June 2011, issued by the Swedish Ministry for Industry, Employment and Communications, it was announced that the Swedish government has decided to investigate the possibility of abolishing Swedish translations of national patent applications filed in English. It will also be investigated if national patents could be granted in English similarly to the validation of European patents in Sweden. The mentioned measures, if put into practice, will lead to further procedural simplifications and translation cost savings for the applicant, and will moreover, as related to this context, influence the step of where/how to file the application.

 To conclude, the above highlights several beneficial aspects of a first national filing. On the other hand, it should be noted that directly filing an international or regional patent application could be preferred, dependent on the case at hand. Although the way of filing a patent application hereby seems rather complex, the content of this text may, as a final remark, be summarized in one sentence: a sound patent application filing strategy, whether international, regional and/or national, is based on the interests of the applicant and the expertise of the patent attorney, aiming to protect these interests.

Love Koci, Patent Attorney, Awapatent

Patent Prosecution Highway – MOTTAINAI: Ease of requirements

During the summer of 2011 the first steps in the process of simplifying requesting accelerated prosecution of patent applications using the Patent Prosecution Highway (PPH) have been taken. Likewise, the number of PPH-agreements has increased, introducing new possibilities for accelerated prosecution, some of which are particularly relevant to our Scandinavian clients.

 New Patent Prosecution Highway MOTTAINAI-agreement

 Effective 15 July 2011 eight of the countries participating in the PPH concept agreed on easing the requirements for prosecution under the PPH when using any one of their mutual agreements. The new, simpler PPH-agreement is called the PPH MOTTAINAI, and has been signed by JPO (Japan), USPTO (USA), UK-IPO (UK), CIPO (Canada), IP Australia (Australia), NBPR (Finland), ROSPATENT (Russia) and SPTO (Spain).

 With the PPH MOTTAINAI program, two previously strict requirements have been removed. Firstly, the original priority application, from which a patent family stems, may now originate from any country. Secondly, within one patent family, it is now possible to use a decision to grant originating from any of the participating offices to request prosecution under the PPH at any other one of the participating offices, provided a mutual PPH-agreement actually exists and remaining requirements are met.

Troels Peter Rørdam, European Patent Attorney, Awapatent

The global IPR transactions market

The global IPR transactions market


Recent comments in Swedish business press point at the lack of a functioning marketplace for IPR and the need for governmental and industrial intervention in the process of commercialization of innovations and intellectual property. However, I feel there is a clear need to increase the general understanding of how a ”capital market” functions and the fundamental demands that must be met for a market to exist and fulfill both buyers and sellers and therefore serve its purpose.

IPR are no uniform “goods” on a traditional “market”
A ”market” arises first when both a buyer and a seller exist for a ”good” which can be defined in a clear and exact manner. Beyond that, the ”good” must be transferable and the right of ownership must be able to established and recorded. The price for the ”good” must be decided by joint agreement between buyer and seller and both parties based on their own perceived value of the “good”.

A fundamental demand for a functioning market is that the ”good” is clearly defined and that units of the ”good” are as uniform as possible. A class B share of Volvo is the same as all other B shares in Volvo. A barrel of crude oil contains the same amount of oil in Chicago or London or Amsterdam. In addition, a well functioning market shall have a good measure of transparency and frequency of transaction/turnover in order to allow all parties to realize a gain or reverse a position if they desire to do so. Under such conditions both the seller and the buyer can be confident in what they are trading and the ”good” is easy to set a price for since there is transparency and one can observe similar transactions.

Intellectual assets (IPR = granted patents, trademarks, designs and even domain names) are by their very nature not uniform. They do not function well as a ”good” used for quick deals on a traditional market. To call after help and strong measures from Swedish politicians and industrial owners to establish a ”marketplace” for IPR is naive and can easily lead to confusion and mistaken counterproductive initiatives.

Nortel’s patents sold in a box
If we focus on granted patents as a subject for this discussion, it is clear that they have different strengths depending on, among other things, their age, how often they are cited by other patents, their area of technical innovation, how well they cover a method or a product and if they generated a revenue flow through a license. In other words, all IPR are not of the same quality. They fail the test for uniformity or fungibility. It is not correct that all of Nortel’s patents were equally good or that the price per patent sold was 2.4 MSEK. On the contrary, a few nuggets of gold were blended with many patents of lower caliber. But all were sold in a box to the party that bid highest at the auction. In that case it was the consortium led by Apple that bid higher than Google and several other companies. Now that the Nortel portfolio has been sold, the majority of the patents will most likely not come out on the public market again for strategic reasons. The consortium is now more or less married to their purchase. Here the process fails the test of frequency of transactions and pricing transparency.

The history of an IPR transactions market
A bit of background on the IPR transactions market can be instructional. Patents have traded hands since the beginning of patents themselves; often secretively and without a trace in the public view. This was very inefficient as a market and served both buyers and sellers badly. Patent auctions for high quality assets were created to improve market functions and have existed for several years with Ocean Tomo’s Live Auctions as the guiding star in the market until the finance crash of 2009, when a lack of liquidity undermined the market and the auction team was disbanded and sold to a ”money and commodities broker” in London.

For several years there have been initiatives to start an IPR market with the intent of listing all granted patents on a ”marketplace” (preferably web-based) and let interested buyers find and bid on chosen patents. Several web-marketplaces exist with enormous lists of IPR that is for sale. Conceptually this may be attractive but in practice it has not worked out. The reason is simple. Professional buyers of IPR (industrial users and financial investors) have certain demands for information concerning the legal aspects of IPR. For instance, who is the actual owner of the patent and if there is a clear ”chain of title” without any unfulfilled covenants or missing payments. Since many companies may not want to reveal, for strategic reasons, who they have licensed a technology to or from, it is often difficult to verify license revenue flows from a patent. That makes it difficult to use the DCF method (Discounted Cash Flow) to estimate an IPR ’s value. Buyers don’t have the time to waste searching for this type of information. Such markets fail to meet the needs of both buyers and sellers and have not been successful.

Fulfilling the price transparency requirement for a functioning market as it is traditionally meant, places to high a demand on IPR as a tradable ”good” that is neither uniform nor fungible. Not to mention that correct information about possible patent infringement from products is enormously important for price development and value perceptions. It is not easy to establish these ”facts”, and they are often not clear until after a legal process and judgment, which can itself take several years and cost a fortune. It costs time and money to analyze an IPR portfolio. The ”due diligence” processes that Nortel’s and Motorola’s portfolios went through took months to complete. It takes a long time to analyze if a patent matches a potential buyer’s business, product and legal strategies. Thereafter, the management must also request and allocate funding from the corporate budget. So, in a traditional sense the market for IPR cannot be compared to other markets like those for commodities or commercial property. Trying to create a market for IPR or “innovation” by political force will only lead to a dysfunctional market that is ignored and will be perceived as a destructive invasion of the state into the private sector.

IPR are part of the international stock markets …
In fact a liquid market for IPR assets exists already today. That is shown clearly by the few deals that have been seen in the media recently. The ”IPR market” is actually part of the well-established international stock markets where one can buy and sell shares in companies like Motorola, Nortel and Interdigital. It is today an accepted fact that during the last three decades a shift in the relative weights of assets on balance sheets has occurred in the majority of technology driven companies. From a weighting of 20 % IPR–80 % hard assets before the 1980’s it is now common with an 80 % IPR – 20 % hard assets weighting. (Source: Ned Davis Research among others).

If you want to buy an attractive IPR portfolio held by a competitor today, you can put a bid on the entire company where these IPR assets are found undervalued and then ”strip the assets”. That is precisely what the Motorola deal was about, and it is not unusual today that corporate raiders and M&A deals are based on IPR. To yearn for political initiatives to create markets and tax breaks to promote IPR based deals to promote innovation can easily lead to a ”Pandora’s Box” experience and twist markets with very unexpected results.

… and the IP Broker market
Today there is also a well functioning ”IP Broker” market that takes care of many IPR portfolios continuously. These portfolios can be made up of one or several hundred IPR, but they must go through the same process steps that the Motorola deal did, even if they do not have the same dignity or size.

Low prices for patent applications
The market that does not function well today is the market for patent applications. It is unfortunately true that a patent application is just that – an application. It has no legal standing and can not be enforced until it reaches granted status. For any number of reasons they can be shot down by the relevant patent office or remain bound up in long challenge actions initiated by competitors. Selling a patent application is merely transferring the financial risk of the application process from the seller to the buyer. Few buyers are willing to pay much for high-risk assets that also require payments to maintain them until they are granted. Therefore, prices are usually very low for applications. Other paths for monetization are necessary to help or clients with applications.

Licensing portfolios and new industries
Even if I agree that there is a need in Sweden for politicians, industry, universities and even the law to promote research, innovation and patenting in order to secure the nation’s future welfare and growth, there is no direct link between the number of patent applications and their quality or likelihood of reaching granted patent status. It is only truly good innovation and discoveries that lead to strong patents which lead to strong revenues and high values. And we don’t necessarily need to sell our ”precious metals” for short-term financial gains. A concerted strategy for building licensing portfolios and new industries is what is important – the market can and will take care of itself.

Matt Miskimin, Intellectual Asset Manager