Supplementary protection certificate

In European Union member countries, a supplementary protection certificate (SPC) is a unique (sui generis) intellectual property (IP) right that extends the duration of the exclusive right. It enters into force after expiry of a patent upon which it is based. This type of right is available for various regulated, biologically active agents, namely human or veterinary medicaments and plant protection products (e.g. insecticides, and herbicides). Supplementary protection certificates were introduced to encourage innovation by compensating for the long time needed to obtain regulatory approval of these products (i.e. authorisation to put these products on the market).^[1]
A supplementary protection certificate comes into force only after the corresponding general patent expires. It normally has a maximum lifetime of 5 years. The duration of the SPC can, however, be extended to 5.5 years when the SPC relates to a human medicinal product for which data from clinical trials conducted in accordance with an agreed Paediatric Investigation Plan (PIP) have been submitted (as set out in Article 36 of Regulation (EC) No 1901/2006^[2]).
The total combined duration of market exclusivity of a general patent and SPC cannot normally exceed 15 years. However, the reward of a 6-month SPC extension for the submission of data from an agreed PIP can extend this combined duration to 15.5 years.
SPCs extend the monopoly period for a "product" (active ingredient or a combination of active ingredients) that is protected by a patent. For many SPC applications, there is no controversy about the definition of the "product" or whether it is protected by the patent upon which the SPC application was based. However, there are other SPC applications (particularly for medicinal products containing multiple active ingredients) where there may not be clear answers to questions such as what is a permissible definition of a "product", and what test should be applied for determining whether a patent protects that "product".
Supplementary protection certificates in the European Union are based primarily upon two regulations. Although all countries in the EU are required to provide supplementary protection certificates, no unified cross-recognition exist. Applications must be filed and approved on a country-by-country basis

Scope of the law

ECJ cases C-195/09 and C-427/09 effectively ruled that SPCs for medicaments (human or veterinary) are only available for those "products" that:
(a) are protected by a patent;
(b) have been subject to an administrative authorisation procedure; and
(c) have not been placed on the market anywhere in the EEA as a medicinal product prior to being subject to safety and efficacy testing and a regulatory review.
Until recently, decisions C-195/09 and C-427/09 could have been interpreted as ruling out the possibility of SPC protection for all "products" previously included in medicinal products that were marketed prior to the date(s) of the Marketing Authorisation(s) (MA(s)) specified in the SPC application. This is because the ECJ's rulings in C-195/09 and C-427/09 were based in part upon a desire to ensure that national patent offices are not required to assess whether an earlier MA was compliant with the standards for testing of safety and efficacy that were introduced in the 1970s (meaning that all prior MAs, whether or not compliant with those standards, should be treated equally under the SPC legislation).
However, the decision in Neurim Pharmaceuticals (C-130/11) has cast doubt upon this interpretation. In C-130/11, the ECJ held that an SPC can be granted regardless of the prior marketing of earlier (veterinary) medicinal products containing the "product" in question. Thus, cases C-195/09 and C-427/09 (which, in common with C-130/11, related to SPC applications based upon newly patented uses for old "products") could perhaps now be viewed as being of relevance only to those "products" that were marketed before being subject to a regulatory review. However, this might necessitate patent offices making a determination of whether prior MAs are compliant with current standards (i.e. whether the "product" had been subject to safety and efficacy testing prior to being granted an MA). As this is precisely the kind of determination that the ECJ had previously been keen for patent offices to avoid, further references to the ECJ may be necessary to clarify precisely which "products" fall within the scope of the SPC legislation and which do not.
With respect to (a) above, the question of how to determine whether a "product" is protected by a patent is the subject of ongoing controversy. Cases such as C-322/10 and C-422/10 have indicated that the "product" needs to be "specified [or identified] in the wording of the claims". However, the precise meaning of this test is yet to be clarified.
Further, although the SPC legislation mentions only Directives 2001/83/EC and 2001/82/EC as the "administrative authorisation procedure" for human or veterinary medicaments, SPCs are known to have been granted when MAs have not been obtained via those procedures (but instead via procedures that involve a similar level of safety and efficacy testing)[1].

Determination of term

The term of an SPC depends on the date of issuance of the first MA within the EEA and can be determined by the equation:

                 Term = date of 1st MA in the EEA − date of filing of corresponding patent − 5 years

Under normal circumstances, this means the following.

• No SPC term is available if less than 5 years have elapsed between the date of filing of the corresponding patent and the date of issuance of the first MA in the EEA.
• If the first MA is issued more than five years but less than ten years after the filing date of the corresponding patent, an SPC is granted for a term corresponding to the period elapsed between the five-year point and the MA issuance date.
• If the first MA is issued more than ten years after the filing date of the corresponding patent, an SPC is granted for a five-year term.

There have been very few cases where there was any controversy over the precise date of the 1st MA in the EEA. The Hässle AB case (ECJ case C-127/00^[3]) was one of that small number. In that case, the ECJ ruled that the decisive date for SPC purposes is the date of an authorisation from a regulatory body tasked with assessing safety and efficacy, and not the date of a subsequent authorisation that may be required under national pricing or reimbursement provisions.
So-called "centralised" (European Medicines Agency / European Commission) MAs were introduced by Regulation 2309/93^[4] and became available in January 1995 (i.e. some 2 years after the introduction of the original SPC legislation for medicinal products). The introduction of these authorisations added a new layer of complexity to the issue of determination of the date of a MA. This is because there are two dates associated with "centralised" authorisations, namely: (1) the date of the European Commission's decision to issue an authorisation; and (2) the date of notification of that decision to the MA applicant. Date (2) is usually a few days (e.g. 2 to 4 days) later than date (1). Although the standard practice of many national patent offices seems to be to calculate SPC term based upon date (1), an October 2011 article in Scrip Regulatory Affairs by Mike Snodin^[5] argues that this standard practice is incorrect and that date (2) should be used instead (with the result that some products may be entitled to a slightly longer SPC term than previously thought). Paramount amongst the reasons for preferring date (2) to date (1) is that a "centralised" authorisation does not become effective until it is notified to the MA applicant.
It is still too early to tell whether these arguments will prompt any of the above-mentioned national patent offices to change their standard practice. However, inspection of Belgian SPC certificates for products authorised via the "centralised" procedure reveals that at least the patent office in Belgium already appears to base calculations of SPC term upon date (2). For this reason, it seems that there are divergent practices across different territories within Europe with regard to the selection of a date for a "centralised" MA. If the issue were ever to be debated in a national court, this fact that there are divergent practices across different territories could provide basis for such a court to seek an authoratitive ruling from the ECJ in relation to which of dates (1) and (2) should be used for SPCs. This is because, as European Commission legislation, the Regulations governing SPCs should be interpreted consistently across all member states of the EU.
A MA in Switzerland was also considered as being a first MA for the calculation of the SPC duration, even though Switzerland is not part of the European Economic Area (EEA). This is because such a MA was automatically effective in Liechtenstein, which is a member of the EEA (since 1 May 1995). This was decided by the European Court of Justice (ECJ) in joined cases Novartis et al. v. Comptroller-General and Ministère de l'Economie v. Millennium Pharmaceuticals.^[6][7] However, as answer to the decision of the ECJ the contract between Switzerland and Liechtenstein was amended. Since 1 July 2005 the automatic effect of a Swiss MA in Liechtenstein is abolished. The recognition is now delayed by a time period, which is normally 12 months.

Paediatric extension

Article 36 of Regulation 1901/2006 provides for a 6-month extension to SPC term. The extension is available only under certain conditions, the most notable being the requirement for the submission of a new MA application containing data from all trials conducted in accordance with an agreed Paediatric Investigation Plan (PIP).
Consequences of the 6-month SPC extension include:

• the maximum term of an SPC can now be up to 5.5 years; and
• the maximum duration of market exclusivity (patent + SPC) can now be up to at least 15.5 years.

An extension of an SPC can only be awarded if there is an SPC to extend. As an unextended SPC only has a positive term if more than 5 years have elapsed between patent filing and MA issuance, this leads to the following two questions.
(1) Is an SPC available if less than 5 years and 1 day have elapsed between filing of the corresponding patent and issuance of the first MA in the EEA?
(2) If the answer to (1) is yes, what term should be awarded to the (unextended) SPC?
A July 2007 paper by Snodin and Miles,^[8] put forward three possible answers to this combination of two questions.
If the answer to question (1) is no, then it is not relevant to consider question (2). This corresponds to "Model B" of the 2007 Snodin and Miles paper, and produces a curious situation where longer marketing exclusivity can be obtained if the issuance of the first MA in the EEA is delayed (to at least 5 years and 1-day from filing of the corresponding patent).
If the answer to question (1) is yes, then question (2) becomes relevant. This question can be answered in two ways, corresponding to either "Model A" or "Model C" of the 2007 Snodin and Miles paper.
Model A assumes that SPC term can validly be either zero or negative if 5 years or less have elapsed from filing of the corresponding patent to issuance of the first MA in the EEA. In this event, a positive (and non-zero) SPC term is obtained (after extension) if the time from patent filing to MA issuance is more than 4.5 years.
Model C assumes that all term calculations that provide a negative answer are 'rounded up' to zero. This has the consequence of providing a minimum of 6 months of SPC term, irrespective of how little time has elapsed from patent filing to MA issuance.
Subsequent to the publication of the Snodin and Miles article, Merck & Co. filed SPC applications for the product sitagliptin. For example, from mid-August to mid-September 2007, Merck & Co. filed SPC applications in various countries, including the UK,^[9] Ireland,^[10] the Netherlands^[11] and Italy.^[12] These SPC applications provided an early opportunity for Models A to C to be tested in practice. Curiously, the patent offices of various EU member states did not reach any consensus on which model is correct. For example, the Netherlands^[13] and the UK^[14] favoured Model A, Germany,^[15] Portugal and Slovenia favoured Model B and Greece^[16] favoured Model C.
In connection with an appeal against refusal of the SPC application in Germany, and in view of the different stances taken by different national patent offices, the German Federal Court of Justice (Bundesgerichtshof) sought clarification of the law from the Court of Justice of the EU (in case C-125/10).
The decision of the Court of Justice, delivered on 8 December 2011,^[17] essentially agreed with Model A of the 2007 Snodin and Miles paper. Thus, useful (extended) supplementary protection can now be obtained so long as at least 4 years, 6 months and one day has elapsed from the date of patent filing to the date of the first MA for the product in the EEA.

Scope

According to Article 4 of Council Regulation (EEC) No 1768/92, the scope of an SPC extends "only to the product covered by the authorization to place the corresponding medicinal product on the market and for any use of the product as a medicinal product that has been authorized before the expiry of the certificate".
The European Court of Justice has decided, however, that the scope of an SPC is sometimes capable of encompassing more than just the single form of the active ingredient that is included in the medicinal product authorised for sale. Thus, in case C-392/97,^[18] the European Court of Justice held that: "where an active ingredient in the form of a salt is referred to in the marketing authorisation concerned and is protected by a basic patent in force, the certificate is capable of covering the active ingredient as such and also its various derived forms such as salts and esters, as medicinal products, in so far as they are covered by the protection of the basic patent".

Legal basis

Supplementary protection certificates in the European Union were based primarily upon two regulations:

• Council Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protection certificate for medicinal products^[19] which entered into force on 2 January 1993. This has been cancelled by the below specified recodified regulation no. 469/2009 with effect from May 2009
• Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products^[20] which entered into force on 8 February 1997

The above Regulations have now been codified under the following regulation:

• Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products (Codified version)^[21]

Supplementary protection certificates may come into life at the expiry of a national or European patent. However, the European Patent Convention (EPC) needed to be modified to allow such "extension" of the term of European patent. Article 63 of the EPC was modified on 17 December 1991 to specify to, although European patents have a term of 20 years as from the date of filing of the application (Art. 63(1)),

" nothing (...) shall limit the right of a Contracting State to extend the term of a European patent, or to grant corresponding protection which follows immediately on expiry of the term of the patent, under the same conditions as those applying to national patents: (...)

(b) if the subject-matter of the European patent is a product or a process of manufacturing a product or a use of a product which has to undergo an administrative authorisation procedure required by law before it can be put on the market in that State. " ^[22]

This constituted the first revision of the European Patent Convention since its signature in 1973.
The paediatric extension is based primarily upon:

• Regulation 1901/2006 of 12 December 2006 on medicinal products for paediatric use and amending Regulation 1768/92, Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004 ^[23]
• Regulation 1902/2006 of 20 December 2006 amending Regulation 1901/2006 on medicinal products for paediatric use^[24]

Statistics

According to research, more than 8,000 SPCs for medicinal and plant protection products have been filed in Europe between 1991 and 2003.^[25]

Evergreening

Evergreening refers to a variety of legal and business strategies by which technology producers with patents over products that are about to expire retain royalties from them, by either taking out new patents (for example over associated delivery systems, or new pharmaceutical mixtures), or by buying out or frustrating competitors, for longer periods of time than would normally be permissible under the law.^[1] Evergreening is not a formal concept of patent law; it is best understood as a social idea used to refer to the myriad ways in which pharmaceutical patent owners use the law and related regulatory processes to extend their high rent-earning intellectual property rights, otherwise known as intellectual monopoly privileges,^[2] particularly over highly profitable (either in total sales volume or price per unit) "blockbuster" drugs. Thus, while the courts are an instrument frequently used by pharmaceutical brand name manufacturers to prolong their patent royalties, evergreening is rarely mentioned explicitly by judges in patent protection cases. The term usually refers to threats made to competitors about a brand-name manufacturer's tactical use of pharmaceutical patents (including over uses, delivery systems and even packaging), not to extension of any particular patent over an active product ingredient.

Controversy about evergreening

The evergreening process has caused some controversy in the pharmaceutical industry. In this context, evergreening may be used by manufacturers of a particular drug to restrict or prevent competition from manufacturers of generic equivalents to that drug.^[4] In 2002, an extensive and lengthy inquiry by the US Federal Trade Commission (FTC), found that the Hatch-Waxman legislation or Drug Price Competition and Patent Term Restoration Act (which was instrumental in establishing the US generic pharmaceuticals industry) had resulted in as many as 75% of new drug applications by generic drug manufacturers experiencing legal actions under patent laws by the original brand name patent owner. These were driving up US drug costs by keeping the cheaper generic versions off the market. The FTC recommended only one evergreening injunction against a potential generic market entrant be permitted per product, and an expedited process of resolving such claims.^[5][6]

Linkage evergreening and international trade law

The process of evergreening may involve specific aspects of patent law and international trade law. Linkage evergreening refers to the process whereby pharmaceutical safety, quality and efficacy regulators are required to 'link' their normal evaluation with an assessment of whether an impending generic product may breach an existing patent. In 1993, under the NAFTA-induced Canadian Notice Of Compliance (NOC) regulations, drug safety, quality and efficacy regulators at Health Canada were prevented from issuing an authorization for market entry, until all of the relevant patents on a brand name product had been proven to have expired. As a result, when a Canadian generic company (such as Apotex) submits its application to get a product approved, it also sends a Notice of Allegation (NOA) to the patent holder claiming that no patents are being infringed. The patent holder then has 45 days in which to initiate an application in the Federal Court of Canada, seeking an order to prohibit the relevant Minister from issuing a Notice of Compliance to the generic manufacturer for a period of 24 months, or upon resolution of the court application, whichever is sooner. The problems with this were analysed in the Royal Commission on the Future of Health Care in Canada or Romanow Report ^[7] Australia's legislatively fulfilling the article 17.10.4 linkage obligation was a requirement of entry into force of the AUSFTA, and Australia had to enact consequent amendments to the Therapeutic Goods Act 1989 (Cth). The amendments inserted a new section 26B which required applicants for marketing approval to certify their product would not infringe a valid patent claim, or that the patent holder has been notified of the application. In response, the Australian government passed antievergreening amendments in Sections 26C and 26D of the Therapeutic Goods Act 1989 (Cth) designed to prevent patent holders from manipulating the court system to lengthen the term of the patent and delay the entry of generic pharmaceuticals into the market. They are a strong statement of Australia's legitimate expectations of benefit (that is of freedom from pharmaceutical price rises due to evergreening) in this area. The Chief Australian negotiator of this aspect of the AUSFTA stated

• "We are not importing the Hatch-Waxman legislation into Australian law as a result of the free trade agreement...[Article 17.10.4] will not extend the time of the marketing approval process, and it does not add or provide any additional rights to the patent holders in that process...there is no injunction that can be applied under this article...it will be clear in the legislation tomorrow....we are establishing a measure in the marketing approval process that will fully meet the commitments under this article." ^[8]

The US, nevertheless, has expressly signalled their disapproval of Australia's implementation of article 17.10.4 in an exchange of letters between the Australian Minister for Trade and the US Trade Representative on the implementation of the AUSFTA, in which the USTR stated:

• "If Australia's law is not sufficient to prevent the marketing of a product, or a product for an approved use, where the produce or use is covered by a patent, Australia will have acted inconsistently with the Agreement. We will be monitoring the matter closely, and reserve all rights and remedies as discussed below. We also remain concerned about recent amendments to sections 26B(1)(a), 26C and 26D of the Therapeutic Goods Act of 1989. Under these amendments, pharmaceutical patents owners risk incurring significant penalties when they seek to enforce their patent rights. These provisions impose a potentially significant, unjustifiable, and discrimintory burden on the enjoyment of patent rights, specifically on owners of pharmaceutical patents. I urge the Australian Government to review this matter, particularly in light of Australia's international legal obligations. The United States reserves its rights to challenge the consistency of these amendments with such obligations." ^[9]

The capacity of the US to make such threats is arguably facilitated by the linkage of article 17.10.4 of the AUSFTA to a non-violation nullification of benefits provision. The US has achieved a similar provision to article 17.10.4 of the AUSFTA in article 18.9.4 of the Republic of Korea-United States Free Trade Agreement (KORUSFTA).^[10] Such provisions are sometimes referred to as TRIPS-plus meaning that they are in addition to the patent requirements of the World Trade Organisation multilateral Agreement on Trade-Related Aspects of Intellectual Property Rights agreement.^[11] Some academics prefer to refer to them as TRIPS-minus due to their potential, but controversial and still largely unproven, deleterious impact on public health.^[12][13]

Regulation against evergreening

The main arguments in favor of governments regulating against evergreening are that rapid entry of multiple generic competitors after patent expiry is likely to lower prices and facilitate competition, and that eventual loss of monopoly was part of the trade-off for the initial award of patent (or intellectual monopoly privilege) protection in the first place.^[13]
In Canada, the Office of Patented Medicines and Liaison under Health Canada has become an important regulatory mechanism for policing "linkage" evergreening. No attempt has been made to create a similar multidisciplinary regulatory agency in Australia. Yet, it appears that article 18.9.4 of the Republic of Korea-United States Free Trade Agreement (KORUSFTA) has been specifically drafted to permit the establishment of such a pharmaceutical patent "anti-evergreening" oversight agency.
The Office of Patented Medicines and Liaison is located in the Therapeutic Products Directorate, Health Products and Foods Branch, Health Canada.^[14] The Notice of Compliance Regulations it administers require the Minister of Health to maintain a Patent Register.^[15] This consists of patent lists submitted in respect of eligible NOC-issued drugs. The Minister responsible for Health Canada may refuse to add, or may delete, information from this Patent Register. Each patent list is audited (for example as to whether potential inclusions are mere 'evergreening' attempts) by the Office of Patented Medicines and Liaison. Reports produced by that body outline statistics relating to the maintenance of the Patent Register, including the number of patents filed, the number of patents accepted and rejected, and litigation resulting from the acceptance or rejection of patents for listing on the Patent Register. In October 2006, the Canadian federal government recognized that some brand-name companies had been abusing the NOC Regulations. It limited their use of 'evergreening' follow-on patents by promulgating regulations that prevented any new patents they filed after a generic company had submitted an application for approval of its product from being considered in the NOC Regulations process. Moreover the new regulations made it clear that patents covering areas without direct therapeutic application, such as processes or intermediates, could not be used to delay generic approval.^[16]
In Australia, anti-evergreening amendments to the Therapeutic Goods Act 1983 (Cth)were part of the package of legislation required to be passed by the Australian Government as a precondition to entry into force of the Australia-United States Free Trade Agreement (AUSFTA). They provide that where a certificate has been given under s26B by a generic manufacturer and the patent holder wishes to claim a patent and institute infringement proceedings, he or she must first certify that the proceedings are being commenced in good faith, have reasonable prospects of success (as defined in s26C(4)) and will be conducted without unreasonable delay. If the certificate is found to be false or midleading, fines of up to $10 million apply and the Cth Attorney General is permitted to join the action to recoup losses to the PBS. Section 26D provides that a patent holder who seek an interlocutory injunction to prevent the marketing of the generic pharmaceutical must obtain leave from the government to do.^[17]

Regulations against evergreening and TRIPs

Both the International Federation of Pharmaceutical Manufacturing Associations (IFPMA) and the US PhRMA have stated that the Australian anti-evergreening provisions are inconsistent with obligations under the World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights TRIPs article 27 which prohibits discrimination in an area of technology (in this case pharmaceuticals).^[18] The argument is that the Australian anti-"linkage evergreening" legislation affects only pharmaceutical patents and is therefore discriminatory under TRIPs.
On the other hand, international trade law recognises that where a unique problem arises specifically referable only to a particular field of technology, a solution applying sui generis only to that field of technology cannot be said to be discriminatory according to the ordinary meaning and purpose of the TRIPs agreement or the AUSFTA as required by article AUSFTA 21.9.2 (incorporating articles 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT). The decision of the World Trade Organisation Dispute Resolution panel in Canada – Patent Protection of Pharmaceutical Products case, for example, accepted that it was not inconsistent with TRIPs to provide for distinct patent rules that responded to practical consequences of differences between fields of technology.^[19] Almost all nations including the United States now have anti-evergreening legislation as part of their public health policy and none of this legislation (which is clearly targeted at a problem particular to the pharmaceutical industry) has been argued to be contrary to TRIPs. Further, there are a number of obligations imposed by the AUSFTA that relate to the enjoyment of patent rights for pharmaceuticals alone, including extension of the terms of a pharmaceutical patent to compensate the patent owner for unreasonable curtailment of the effective patent term as a result of the marketing approval process(17.9.8(b)). This is clearly not discriminatory because the issue of delays in enjoyment of patent rights due to the marketing approval process arises only in the context of pharmaceutical patents.

Future: supragenerics, nanogenerics, data exclusivity, pharmacogenomics

In terms of future evergreening strategies, patent holders may:

1. seek to make incremental patentable innovations to existing products with soon-to-expire patents through the generic arm of their own company and launch early to secure market share (supragenerics),
2. attempt to make separately patentable nanotechnology or biologic versions of such pharmaceuticals through the generic arm of their own company and launch early to secure market share,
3. seek to exclude generic companies from the safety, quality and efficacy data they need to prepare for springboarding (early market launch after patent expiry) using TRIPs-plus data exclusivity protections and
4. seek to extend exclusivity on a soon-to-patent-expire-pharmaceutical by patenting a genetic test to establish potential toxicity or efficacy (pharmacogenomics

Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members.^[2] It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.
The TRIPS agreement introduced intellectual property law into the international trading system for the first time and remains the most comprehensive international agreement on intellectual property to date. In 2001, developing countries, concerned that developed countries were insisting on an overly narrow reading of TRIPS, initiated a round of talks that resulted in the Doha Declaration. The Doha declaration is a WTO statement that clarifies the scope of TRIPS, stating for example that TRIPS can and should be interpreted in light of the goal "to promote access to medicines for all."
Specifically, TRIPS requires WTO members to provide copyright rights, covering content producers including performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; new plant varieties; trademarks; trade dress; and undisclosed or confidential information. TRIPS also specifies enforcement procedures, remedies, and dispute resolution procedures. Protection and enforcement of all intellectual property rights shall meet the objectives to contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

Background and history

TRIPS was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. Its inclusion was the culmination of a program of intense lobbying by the United States, supported by the European Union, Japan and other developed nations. Campaigns of unilateral economic encouragement under the Generalized System of Preferences and coercion under Section 301 of the Trade Act played an important role in defeating competing policy positions that were favored by developing countries, most notably Korea and Brazil, but also including Thailand, India and Caribbean Basin states. In turn, the United States strategy of linking trade policy to intellectual property standards can be traced back to the entrepreneurship of senior management at Pfizer in the early 1980s, who mobilized corporations in the United States and made maximizing intellectual property privileges the number one priority of trade policy in the United States (Braithwaite and Drahos, 2000, Chapter 7).
After the Uruguay round, the GATT became the basis for the establishment of the World Trade Organization. Because ratification of TRIPS is a compulsory requirement of World Trade Organization membership, any country seeking to obtain easy access to the numerous international markets opened by the World Trade Organization must enact the strict intellectual property laws mandated by TRIPS. For this reason, TRIPS is the most important multilateral instrument for the globalization of intellectual property laws. States like Russia and China that were very unlikely to join the Berne Convention have found the prospect of WTO membership a powerful enticement.
Furthermore, unlike other agreements on intellectual property, TRIPS has a powerful enforcement mechanism. States can be disciplined through the WTO's dispute settlement mechanism.

The requirements of TRIPS

TRIPS requires member states to provide strong protection for intellectual property rights. For example, under TRIPS:

• Copyright terms must extend at least 50 years, unless based on the life of the author. (Art. 12 and 14)^{[3][not in citation given]}
• Copyright must be granted automatically, and not based upon any "formality," such as registrations, as specified in the Berne Convention. (Art. 9)
• Computer programs must be regarded as "literary works" under copyright law and receive the same terms of protection.
• National exceptions to copyright (such as "fair use" in the United States) are constrained by the Berne three-step test
• Patents must be granted for "inventions" in all "fields of technology" provided they meet all other patentability requirements (although exceptions for certain public interests are allowed (Art. 27.2 and 27.3)^[4] and must be enforceable for at least 20 years (Art 33).
• Exceptions to exclusive rights must be limited, provided that a normal exploitation of the work (Art. 13) and normal exploitation of the patent (Art 30) is not in conflict.
• No unreasonable prejudice to the legitimate interests of the right holders of computer programs and patents is allowed.
• Legitimate interests of third parties have to be taken into account by patent rights (Art 30).
• In each state, intellectual property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPS signatories under the principle of national treatment (with certain limited exceptions, Art. 3 and 5).^[5] TRIPS also has a most favored nation clause.

Many of the TRIPS provisions on copyright were copied from the Berne Convention for the Protection of Literary and Artistic Works and many of its trademark and patent provisions were modeled on the Paris Convention for the Protection of Industrial Property.

Access to essential medicines

The most visible conflict has been over AIDS drugs in Africa. Despite the role that patents have played in maintaining higher drug costs for public health programs across Africa, this controversy has not led to a revision of TRIPs. Instead, an interpretive statement, the Doha Declaration, was issued in November 2001, which indicated that TRIPs should not prevent states from dealing with public health crises. After Doha, PhRMA, the United States and to a lesser extent other developed nations began working to minimize the effect of the declaration.^{[citation needed]}
A 2003 agreement loosened the domestic market requirement, and allows developing countries to export to other countries where there is a national health problem as long as drugs exported are not part of a commercial or industrial policy.^[6] Drugs exported under such a regime may be packaged or colored differently to prevent them from prejudicing markets in the developed world.
In 2003, the Bush administration also changed its position, concluding that generic treatments might in fact be a component of an effective strategy to combat HIV. Bush created the PEPFAR program, which received $15 billion from 2003–2007, and was reauthorized in 2008 for $48 billion over the next five years. Despite wavering on the issue of compulsory licensing, PEPFAR began to distribute generic drugs in 2004-5.

Software and business method patents

Main article: Software patents under TRIPs Agreement

Another controversy has been over the TRIPS Article 27 requirements for patentability "in all fields of technology", and whether or not this necessitates the granting of software and business method patents.

Implementation in developing countries

The obligations under TRIPS apply equally to all member states, however developing countries were allowed extra time to implement the applicable changes to their national laws, in two tiers of transition according to their level of development. The transition period for developing countries expired in 2005. The transition period for least developed countries to implement TRIPS was extended to 2013, and until 1 January 2016 for pharmaceutical patents, with the possibility of further extension.^[7]
It has therefore been argued that the TRIPS standard of requiring all countries to create strict intellectual property systems will be detrimental to poorer countries' development.^[8] Many argue^[who?] that it is, prima facie, in the strategic interest of most if not all underdeveloped nations to use any flexibility available in TRIPS to legislate the weakest IP laws possible.^[who?]
This has not happened in most cases. A 2005 report by the WHO found that many developing countries have not incorporated TRIPS flexibilities (compulsory licensing, parallel importation, limits on data protection, use of broad research and other exceptions to patentability, etc.) into their legislation to the extent authorized under Doha.^[9]
This is likely caused by the lack of legal and technical expertise needed to draft legislation that implements flexibilities, which has often led to developing countries directly copying developed country IP legislation,^[10] or relying on technical assistance from the World Intellectual Property Organization (WIPO), which, according to critics such as Cory Doctorow, encourages them to implement stronger intellectual property monopolies.

Post-TRIPS expansion

The neutrality of this article is disputed. Relevant discussion may be found on the talk page. Please do not remove this message until the dispute is resolved. (May 2011)

The requirements of TRIPS are, from a policy perspective, extremely stringent. Despite this, lobbyists for the industries that benefit from various intellectual property laws have continued since 1994 to campaign to strengthen existing forms of intellectual property and to create new kinds:

• The creation of anti-circumvention laws to protect Digital Rights Management systems. This was achieved through the 1996 World Intellectual Property Organization Copyright Treaty (WIPO Treaty) and the WIPO Performances and Phonograms Treaty.
• The desire to further restrict the possibility of compulsory licenses for patents has led to provisions in recent bilateral US trade agreements.
• It is one thing for states to have intellectual property laws on their statutes, and another for governments to enforce them aggressively. This distinction has led to provisions in bilateral agreements, as well as proposals for WIPO and European Union rules on intellectual property enforcement. The 2001 EU Copyright Directive was to implement the 1996 WIPO Copyright Treaty.
• The wording of TRIPS Art 27 of non-discrimination is used to justify an extension of the patent system.
• The campaign for the creation of a WIPO Broadcasting Treaty that would give broadcasters (and possibly webcasters) exclusive rights over the copies of works they have distributed.

Panel reports

According to WTO 10th Anniversary, Highlights of the first decade, Annual Report 2005 page 142,^[11] in the first ten years, 25 complaints have been lodged leading to the panel reports and appellate body reports on TRIPS listed below.
The WTO website has a gateway to all TRIPS disputes (including those that did not lead to panel reports) here [1].

• 2005 Panel Report:^[12]
  • European Communities - Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs.
• 2000 Panel Report:^[13] Part 2^[14] and 2000 Appellate Body Report^[15]
  • Canada - Term of Patent Protection.
• 2000 Panel Report, Part 1:^[16] and Part 2^[17]
  • United States - Section 110(5) of the US Copyright Act.
• 2000 Panel Report:^[18]
  • Canada - Patent Protection of Pharmaceutical Products.
• 2001 Panel Report:^[19] and 2002 Appellate Body Report^[20]
  • United States - Section 211 Omnibus Appropriations Act of 1998.
• 1998 Panel Report:^[21]
  • India - Patent Protection for Pharmaceutical and Agricultural Chemical Products.
• 1998 Panel Report:^[22]
  • Indonesia - Certain Measures Affecting the Automobile Industry.

Criticism

Since TRIPS came into force it has received a growing level of criticism from developing countries, academics, and non-governmental organizations. Some of this criticism is against the WTO as a whole, but many advocates of trade liberalization also regard TRIPS as bad policy (see, for example, Jagdish Bhagwati's In Defense of Globalization for a discussion on the detrimental effect of TRIPS on access to medicines in developing countries). TRIPS's wealth redistribution effects (moving money from people in developing countries to copyright and patent owners in developed countries) and its imposition of artificial scarcity on the citizens of countries that would otherwise have had weaker intellectual property laws, are common bases for such criticisms.
Peter Drahos writes that "It was an accepted part of international commercial morality that states would design domestic intellectual property law to suit their own economic circumstances. States made sure that existing international intellectual property agreements gave them plenty of latitude to do so."^[23]
Daniele Archibugi and Andrea Filippetti^[24] argue that the importance of TRIPS in the process of generation and diffusion of knowledge and innovation has been overestimated by both their supporters and their detractors. Claude Henry and Joseph E. Stiglitz^[25] argue that the current intellectual property global regime may impede both innovation and dissemination, and suggest reforms to foster the global dissemination of innovation and sustainable development.

 

Compulsory license

A compulsory license, also known as statutory license or mandatory collective management, provides that the owner of a patent or copyright licenses the use of their rights against payment either set by law or determined through some form of arbitration. In essence, under a compulsory license, an individual or company seeking to use another's intellectual property can do so without seeking the rights holder's consent, and pays the rights holder a set fee for the license.

Copyright law

The examples and perspective in this section deal primarily with the United States and do not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page. (July 2009)

In a number of countries copyright law provides for compulsory licenses of copyrighted works for specific uses. In many cases the remuneration or royalties received for a copyrighted work under compulsory license are specified by local law, but may also be subject to negotiation. Compulsory licensing may be established through negotiating licenses that provide terms within the parameters of the compulsory license.^[1] Essentially compulsory licensing provide that copyright owners may only exercise the exclusive rights granted to them under copyright law in a certain way and through a certain system.^[2]

Berne Convention

Article 11bis(2) and Article 13(1) of the Berne Convention for the Protection of Literary and Artistic Works provide the legal basis for compulsory licensing at international level. They specify under which conditions members to the Berne Convention may determine or impose conditions under which exclusive rights may be exercised, for example through compulsory licensing. The Berne Convention states that member states are free to determine the conditions under which certain exclusive rights may be exercised in their national laws. They also provide for the minimum requirements to be set when compulsory licenses are applied, such as that they must not prejudice the author's right to fair compensation.^[3][4]
Article 11bis(2)states that:

"It shall be a matter for legislation in the country of the Union to determine the conditions under which the rights mentioned in the preceding paragraph may be exercised, but these conditions shall apply only in the countries where they have been prescribed. They shall not in any circumstances be prejudicial to the moral rights of the author, nor to his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority."^[2]

The "preceding article" mentioned in Article 11bis(2) is Article 11bis(1), which establishes that:

"Authors of literary and artistic works shall enjoy the exclusive right of authorising: (i) the broadcasting of their works or the communication thereof to the public by any other means of wireless diffusion of signs, sounds or images; (ii) any communication to the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organisation other than the original one; (iii) the public communication by loudspeaker or any other analogous instrument transmitting, by signs, sounds or images, the broadcast of the work."^[2]

Article 13(1) states that:

Each country of the Union may impose for itself reservations and conditions on the exclusive right granted to the author of a music work and to the author of any words, the recording of which together with the music work has already been authorised by the latter, to authorise the sound recording of that musical work, together with such words, if any; but all such reservations and conditions shall apply only in the countries which have imposed them and shall not, in any circumstances, be prejudicial to the rights of these authors to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority."^[2]

In addition to the exclusive rights mentioned in Article 11bis(1) and 13(1) the Berne Convention also provides that members may determine or impose such conditions for the exercise of exclusive rights in cases where an exclusive right is not provided as remuneration right and not as an exclusive right of authorisation, for example in the case of the resale right, or droit de suite (Article 14ter), and the so-called "Article 12 rights" of performers and producers of phonograms. Members to the Berne Convention may also determine or impose such conditions where the restriction of an exclusive right to the mere right to remuneration is allowed, for example the right to reproduction (Article 9(2)), and in the case of "residual rights", that is, a right to remuneration, usually for authors or performers, that survives the transfer of certain exclusive rights.^[5]

United States

There are several different compulsory license provisions in United States copyright law, including for non-dramatic musical compositions,^[6] public broadcasting,^[7] retransmission by cable systems,^[8] subscription digital audio transmission,^[9] and non-subscription digital audio transmission such as Internet radio.^[10] The compulsory license for non-dramatic musical compositions under Section 115 of the Copyright Act of 1976^[11] allows a person to distribute a new sound recording of a musical work, if that has been previously distributed to the public, by or under the authority of the copyright owner.^[12] There is no requirement that the new recording be identical to the previous work, as the compulsory license includes the privilege of rearranging the work to conform it to the recording artist's interpretation. This does not allow the artist to change the basic melody or fundamental character of the work.^[13] In order to take advantage of this compulsory license the recording artist must provide notice and pay a royalty. The notice must be sent to the copyright owner, or if unable to determine the copyright owner, to the Copyright Office, within thirty days of making the recording, but before distributing physical copies. Failure to provide this notice would constitute copyright infringement.^[14] In addition to the notice to the copyright owner, the recording artist must pay a royalty to the copyright owner. This royalty is set by three copyright royalty judges.^[15] Though the compulsory license allows one to make and distribute physical copies of a song for a set royalty, the owner of the copyright in the underlying musical composition can still control public performance of the work or transmission over the radio.^[16] If the underlying musical work is well known, the work can be licensed for public performance through a performance rights organization such as ASCAP, BMI, or SESAC.
According to Register of Copyrights Marybeth Peters, use of the section 115 license prior to the 1995 enactment of the Digital Performance Right in Sound Recordings Act was extremely rare, with the U.S. Copyright Office receiving fewer than 20 notices of such licenses per year.^[17] By 2003, that number had risen to 214, which, while higher, was not considered by the Register to be significant.^[17]

Patents

Licensing of patents
Overviews
Licensing Royalties
Types
Compulsory licensing Cross-licensing Defensive Patent License Defensive termination Fair, reasonable, and non-discriminatory (FRAND, RAND) Shop right
Strategies
Catch and release Defensive patent aggregation Patentleft Patent monetization Patent pool Stick licensing
Clauses in patent licenses
Field-of-use limitation
v t e

Many patent law systems provide for the granting of compulsory licenses in a variety of situations. The Paris Convention of 1883 provides that each contracting State may take legislative measures for the grant of compulsory licenses. Article 5A.(2) of the Paris Convention reads:

"Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work." ^[18] (See also Article 5A.(3) to (5) of the Paris Convention.)

According to historian Adrian Johns, the idea of compulsory licensing "seems to have originated as a serious proposition in the 1830s, although predecessors can be traced back into the eighteenth century," and it was popular in the British anti-patent movement of the 1850s and 1860s.^[19] More recently an area of fierce debate has been that of drugs for treating serious diseases such as malaria, HIV and AIDS. Such drugs are widely available in the western world and would help to manage the epidemic of these diseases in developing countries. However, such drugs are too expensive for developing countries and generally protected by patents.

United States

In the United States, the U.S. Government and its contractors can infringe patents, the only remedy available to patent holders being a lawsuit in the Court of Federal Claims.^[20] It is the policy of the U.S. Department of Defense to allow contractors to infringe patents and to defend the contractor against patent infringement claims at Government expense.^[21] Use of this provision by agencies other than DoD is rare.

India

In March 2012, India granted its first compulsory license ever. The license was granted to Indian generic drug manufacturer Natco Pharma Ltd for Sorafenib tosylate, a cancer drug patented by Bayer. Non-governmental groups reportedly welcomed the decision.^[22]

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) also sets out specific provisions that shall be followed if a compulsory license is issued, and the requirements of such licenses. All significant patent systems comply with the requirements of TRIPs. The principal requirement for the issue of a compulsory license is that attempts to obtain a license under reasonable commercial terms must have failed over a reasonable period of time. Specific situations in which compulsory licenses may be issued are set out in the legislation of each patent system and vary between systems. Some examples of situations in which a compulsory license may be granted include lack of working over an extended period in the territory of the patent, inventions funded by the government, failure or inability of a patentee to meet a demand for a patented product and where the refusal to grant a license leads to the inability to exploit an important technological advance, or to exploit a further patent. TRIPs also provides that the requirements for a compulsory license may be waived in certain situations, in particular cases of national emergency or extreme urgency or in cases of public non-commercial use.^[23] Article 31.f of TRIPS requires that compulsory licenses be used "predominantly" for local markets, a requirement that complicates the ability of countries to import drugs manufactured overseas.

Doha Declaration

This issue of compulsory licensing of drugs treating serious diseases was addressed by the Doha Declaration which recognized the problem and required the TRIPs council to find a solution. On 17 May 2006 the European Commission's official journal published Regulation 816/2006,^[24] which brings into force the provisions of the Doha Declaration.^[25] This means that the declaration now has legal effect in the European Union, and also in Canada who implemented it in 2005. The declaration allows compulsory licenses to be issued in developed countries for the manufacture of patented drugs, provided they are exported to certain countries (principally, those on the UN's list of least-developed countries and certain other countries having per-capita incomes of less than US$745 a year).

PATENT

A patent (/ˈpætənt/ or /ˈpeɪtənt/) is a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time, in exchange for the public disclosure of the invention. An invention is a solution to a specific technological problem, and may be a product or a process.^[1]:17 Patents are a form of intellectual property.
The procedure for granting patents, requirements placed on the patentee, and the extent of the exclusive rights vary widely between countries according to national laws and international agreements. Typically, however, a patent application must include one or more claims that define the invention. These claims must meet relevant patentability requirements, such as novelty and non-obviousness. The exclusive right granted to a patentee in most countries is the right to prevent others from making, using, selling, or distributing the patented invention without permission.^[2]
Under the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights, patents should be available in WTO member states for any invention, in all fields of technology,^[3] and the term of protection available should be a minimum of twenty years.^[4] Nevertheless, there are variations on what is patentable subject matter from country to country.

Definition

The word patent originates from the Latin patere, which means "to lay open" (i.e., to make available for public inspection). More directly, it is a shortened version of the term letters patent, which was a royal decree granting exclusive rights to a person, predating the modern patent system. Similar grants included land patents, which were land grants by early state governments in the USA, and printing patents, a precursor of modern copyright.
In modern usage, the term patent usually refers to the right granted to anyone who invents any new, useful, and non-obvious process, machine, article of manufacture, or composition of matter. Some other types of intellectual

History

Main article: History of patent law

U.S. patents granted, 1790–2010.^[5]

Patents in force in 2000

In 500 BC, in the Greek city of Sybaris (in what is now southern Italy), "Encouragement was held out to all who should discover any new refinement in luxury, the profits arising from which were secured to the inventor by patent for the space of a year."^[6]
The Florentine architect Filippo Brunelleschi received a three-year patent for a barge with hoisting gear, that carried marble along the Arno River in 1421.^[7] In 1449, King Henry VI granted the first English patent with a license of 20 years to John of Utynam for introducing the making of colored glass to England.^[8]
Patents in the modern sense originated in 1474, when the Republic of Venice enacted a decree that new and inventive devices, once put into practice, had to be communicated to the Republic to obtain the right to prevent others from using them.^[9]
England followed with the Statute of Monopolies in 1624, under King James I, which declared that patents could only be granted for "...projects of new invention." During the reign of Queen Anne (1702–14), lawyers of the English Court developed the requirement that a written description of the invention must be submitted.^[10] The patent systems in many other countries, including Australia, are based on British law and can be traced back to the Statute of Monopolies.^[11]
In 1641, Samuel Winslow was granted the first patent in North America by the Massachusetts General Court for a new process for making salt.^[12]
In France, patents were granted by the monarchy and by other institutions like the "Maison du Roi".^[13] The Academy examined novelty.^[14] Examinations were generally done in secret with no requirement to publish a description of the invention. Actual use of the invention was deemed adequate disclosure to the public.^[15] The modern French patent system was created during the Revolution in 1791. Patents were granted without examination since inventor's right was considered as a natural one^[16]
In the United States, during the colonial period and Articles of Confederation years (1778–89), several states adopted their own patent systems. The U.S. Constitution authorizes the American patent system in Article One, Section 8(8) which states:

The Congress shall have power...To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries...

The first Congress adopted a Patent Act in 1790, and the first patent was issued under this Act on July 31, 1790 (to Samuel Hopkins of Vermont for a potash production technique).

Law

Intellectual property law
Primary rights
Copyright Patent Trademark Trade secret Authors' rights Related rights Moral rights Utility model Geographical indication
Sui generis rights
Database right Indigenous intellectual property Industrial design right Mask work Plant breeders' rights Supplementary protection certificate
Related topics
Societal views Orphan works Public domain Traditional safety valves Outline of intellectual property
v t e

Effects

A patent is not a right to practise or use the invention.^[17] Rather, a patent provides the right to exclude others^[17] from making, using, selling, offering for sale, or importing the patented invention for the term of the patent, which is usually 20 years from the filing date^[4] subject to the payment of maintenance fees. A patent is a limited property right the government gives inventors in exchange for their agreement to share details of their inventions with the public. Like any other property right, it may be sold, licensed, mortgaged, assigned or transferred, given away, or simply abandoned.
A patent, being an exclusionary right, does not necessarily give the patent owner the right to exploit the patent. For example, many inventions are improvements of prior inventions that may still be covered by someone else's patent.^[17] If an inventor obtains a patent on improvements to an existing invention which is still under patent, they can only legally use the improved invention if the patent holder of the original invention gives permission, which they may refuse.
Some countries have "working provisions" that require the invention be exploited in the jurisdiction it covers. Consequences of not working an invention vary from one country to another, ranging from revocation of the patent rights to the awarding of a compulsory license awarded by the courts to a party wishing to exploit a patented invention. The patentee has the opportunity to challenge the revocation or license, but is usually required to provide evidence that the reasonable requirements of the public have been met by the working of invention.

Enforcement

Patents can generally only be enforced through civil lawsuits (for example, for a U.S. patent, by an action for patent infringement in a United States federal court), although some countries (such as France and Austria) have criminal penalties for wanton infringement.^[18] Typically, the patent owner seeks monetary compensation for past infringement, and seeks an injunction that prohibits the defendant from engaging in future acts of infringement. To prove infringement, the patent owner must establish that the accused infringer practises all the requirements of at least one of the claims of the patent. (In many jurisdictions the scope of the patent may not be limited to what is literally stated in the claims, for example due to the doctrine of equivalents).
An accused infringer has the right to challenge the validity of the patent allegedly being infringed in a countersuit. A patent can be found invalid on grounds described in the relevant patent laws, which vary between countries. Often, the grounds are a subset of requirements for patentability in the relevant country. Although an infringer is generally free to rely on any available ground of invalidity (such as a prior publication, for example), some countries have sanctions to prevent the same validity questions being relitigated. An example is the UK Certificate of contested validity.
Patent licensing agreements are contracts in which the patent owner (the licensor) agrees to grant the licensee the right to make, use, sell, and/or import the claimed invention, usually in return for a royalty or other compensation. It is common for companies engaged in complex technical fields to enter into multiple license agreements associated with the production of a single product. Moreover, it is equally common for competitors in such fields to license patents to each other under cross-licensing agreements in order to share the benefits of using each other's patented inventions.

Ownership

In most countries, both natural persons and corporate entities may apply for a patent. In the United States, however, only the inventor(s) may apply for a patent although it may be assigned to a corporate entity subsequently^[19] and inventors may be required to assign inventions to their employers under an employment contract. In most European countries, ownership of an invention may pass from the inventor to their employer by rule of law if the invention was made in the course of the inventor's normal or specifically assigned employment duties, where an invention might reasonably be expected to result from carrying out those duties, or if the inventor had a special obligation to further the interests of the employer's company.^[20]

The plate of the Martin ejector seat of a military aircraft, stating that the design is covered by multiple patents in Britain, South Africa, Canada and "others". Dübendorf Museum of Military Aviation.

The inventors, their successors or their assignees become the proprietors of the patent when and if it is granted. If a patent is granted to more than one proprietor, the laws of the country in question and any agreement between the proprietors may affect the extent to which each proprietor can exploit the patent. For example, in some countries, each proprietor may freely license or assign their rights in the patent to another person while the law in other countries prohibits such actions without the permission of the other proprietor(s).
The ability to assign ownership rights increases the liquidity of a patent as property. Inventors can obtain patents and then sell them to third parties.^[21] The third parties then own the patents and have the same rights to prevent others from exploiting the claimed inventions, as if they had originally made the inventions themselves.

Governing laws

See also: Patent law by countries and regions

The grant and enforcement of patents are governed by national laws, and also by international treaties, where those treaties have been given effect in national laws. Patents are granted by national or regional patent offices.^[22] A given patent is therefore only useful for protecting an invention in the country in which that patent is granted. In other words, patent law is territorial in nature. When a patent application is published, the invention disclosed in the application becomes prior art and enters the public domain (if not protected by other patents) in countries where a patent applicant does not seek protection, the application thus generally becoming prior art against anyone (including the applicant) who might seek patent protection for the invention in those countries.
Commonly, a nation forms a patent office with responsibility for operating that nation's patent system, within the relevant patent laws. The patent office generally has responsibility for the grant of patents, with infringement being the remit of national courts.
The authority for patent statutes in different countries varies. In the UK, substantive patent law is contained in the Patents Act 1977 as amended.^[23] In the United States, the Constitution empowers Congress to make laws to "promote the Progress of Science and useful Arts..." The laws Congress passed are codified in Title 35 of the United States Code and created the United States Patent and Trademark Office.
There is a trend towards global harmonization of patent laws, with the World Trade Organization (WTO) being particularly active in this area. The TRIPs Agreement has been largely successful in providing a forum for nations to agree on an aligned set of patent laws. Conformity with the TRIPs agreement is a requirement of admission to the WTO and so compliance is seen by many nations as important. This has also led to many developing nations, which may historically have developed different laws to aid their development, enforcing patents laws in line with global practice.
In addition, there are international treaty procedures, such as the procedures under the European Patent Convention (EPC) [constituting the European Patent Organisation (EPOrg)], that centralize some portion of the filing and examination procedure. Similar arrangements exist among the member states of ARIPO and OAPI, the analogous treaties among African countries, and the nine CIS member states that have formed the Eurasian Patent Organization. A key international convention relating to patents is the Paris Convention for the Protection of Industrial Property, initially signed in 1883. The Paris Convention sets out a range of basic rules relating to patents, and although the convention does not have direct legal effect in all national jurisdictions, the principles of the convention are incorporated into all notable current patent systems. The most significant aspect of the convention is the provision of the right to claim priority: filing an application in any one member state of the Paris Convention preserves the right for one year to file in any other member state, and receive the benefit of the original filing date. Another key treaty is the Patent Cooperation Treaty (PCT), administered by WIPO and covering more than 140 countries.

Application and prosecution

Main articles: Patent application and Patent prosecution

A patent is requested by filing a written application at the relevant patent office. The person or company filing the application is referred to as "the applicant". The applicant may be the inventor or its assignee. The application contains a description of how to make and use the invention that must provide sufficient detail for a person skilled in the art (i.e., the relevant area of technology) to make and use the invention. In some countries there are requirements for providing specific information such as the usefulness of the invention, the best mode of performing the invention known to the inventor, or the technical problem or problems solved by the invention. Drawings illustrating the invention may also be provided.
The application also includes one or more claims that define what a patent covers or the "scope of protection".
After filing, an application is often referred to as "patent pending". While this term does not confer legal protection, and a patent cannot be enforced until granted, it serves to provide warning to potential infringers that if the patent is issued, they may be liable for damages.^[24][25][26]
Once filed, a patent application is "prosecuted". A patent examiner reviews the patent application to determine if it meets the patentability requirements of that country. If the application does not comply, objections are communicated to the applicant or their patent agent or attorney through an Office action, to which the applicant may respond. The number of Office actions and responses that may occur vary from country to country, but eventually a final rejection is sent by the patent office, or the patent application is granted, which after the payment of additional fees, leads to an issued, enforceable patent. In some jurisdictions, there are opportunities for third parties to bring an opposition proceeding between grant and issuance, or post-issuance.
Once granted the patent is subject in most countries to renewal fees to keep the patent in force. These fees are generally payable on a yearly basis. Some countries or regional patent offices (e.g. the European Patent Office) also require annual renewal fees to be paid for a patent application before it is granted.

Costs

The costs of preparing and filing a patent application, prosecuting it until grant and maintaining the patent vary from one jurisdiction to another, and may also be dependent upon the type and complexity of the invention, and on the type of patent.
The European Patent Office estimated in 2005 that the average cost of obtaining a European patent (via a Euro-direct application, i.e. not based on a PCT application) and maintaining the patent for a 10 year term was around €32,000.^[27] Since the London Agreement entered into force on May 1, 2008, this estimation is however no longer up-to-date, since fewer translations are required.
In the United States, in 2000 cost of obtaining patent (patent prosecution) was estimated from $10,000 to $30,000 per patent.^[28] When patent litigation is involved (which in year 1999 happened in about 1,600 cases compared to 153,000 patents issued in the same year^[28]), costs increase significantly: while 95% of patent litigation cases are settled out of court,^[29] but when the case reaches the court, direct legal costs of patent litigation are on average in the order of a million dollars per case, not including associated business costs.^[30]

Alternatives to applying for a patent

A defensive publication is the act of publishing a detailed description of a new invention without patenting it, so as to establish prior art and public identification as the creator/originator of an invention, although a defensive publication can also be anonymous. A defensive publication prevents others from later being able to patent the invention.
A trade secret is the act of not disclosing the methods by which a complex invention works or how a chemical is formulated. Trade secrets are protected by nondisclosure agreements and employment law that prevents reverse engineering and information leaks such as breaches of confidentiality and corporate espionage. Compared to patents, the advantages of trade secrets are that a trade secret is not limited in time (it "continues indefinitely as long as the secret is not revealed to the public",^[31] whereas a patent is only in force for a specified time, after which others may freely copy the invention), a trade secret does not imply any registration costs,^[31] has an immediate effect,^[31] does not require compliance with any formalities,^[31] and does not imply any disclosure of the invention to the public.^[31] The disadvantages of trade secrets include that "others may be able to legally discover the secret and be thereafter entitled to use it",^[32] "others may obtain patent protection for legally discovered secrets",^[32] and a trade secret is more difficult to enforce than a patent.^[32]

Economics

For more details on this topic, see Economics and patents.

Rationale

Primary incentives embodied in the patent system include incentives to invent in the first place; to disclose the invention once made; to invest the sums necessary to experiment, produce and market the invention; and to design around and improve upon earlier patents.^[33]

1. Patents provide incentives for economically efficient research and development (R&D). A study conducted annually by the IPTS shows that the 2,000 largest global companies invested more than 430 billion euros in 2008^[34] in their R&D departments. If the investments can be considered as inputs of R&D, real products and patents are the outputs. Based on these groups, a project named Corporate Invention Board, had measured and analyzed the patent portfolios to produce an original picture^[35] of their technological profiles. Supporters of patents argue that without patent protection, R&D spending would be significantly less or eliminated altogether, limiting the possibility of technological advances or breakthroughs.^{[citation needed]}Corporations would be much more conservative about the R&D investments they made, as third parties would be free to exploit any developments. This second justification is closely related to the basic ideas underlying traditional property rights.^{[33][specify]}
2. In accordance with the original definition of the term "patent," patents facilitate and encourage disclosure of innovations into the public domain for the common good. If inventors did not have the legal protection of patents, in many cases, they would prefer or tend to keep their inventions secret^{[citation needed]}. Awarding patents generally makes the details of new technology publicly available, for exploitation by anyone after the patent expires, or for further improvement by other inventors. Furthermore, when a patent's term has expired, the public record ensures that the patentee's invention is not lost to humanity.^{[33][specify]}
3. In many industries (especially those with high fixed costs and either low marginal costs or low reverse engineering costs — computer processors, and pharmaceuticals for example), once an invention exists, the cost of commercialization (testing, tooling up a factory, developing a market, etc.) is far more than the initial conception cost. (For example, the internal "rule of thumb" at several computer companies in the 1980s was that post-R&D costs were 7-to-1). Unless there is some way to prevent copies from competing at the marginal cost of production, companies don't invest in making the invention a product.^{[33][not in citation given]}

One effect of modern patent usage is that a small-time inventor can use the exclusive right status to become a licensor. This allows the inventor to accumulate capital from licensing the invention and may allow innovation to occur because he or she may choose not to manage a manufacturing buildup for the invention. Thus the inventor's time and energy can be spent on pure innovation, allowing others to concentrate on manufacturability.^[36]
Another effect of modern patent usage is to both enable and incentivize competitors to design around (or to "invent around" according to R S Praveen Raj) the patented invention.^[37] This may promote healthy competition among manufacturers, resulting in gradual improvements of the technology base.^[38] This may help augment national economies and confer better living standards to the citizens. The 1970 Indian Patent Act allowed the Indian pharmaceutical industry to develop local technological capabilities in this industry. This act transformed India from a bulk importer of pharmaceutical drugs to a leading exporter. The rapid evolution of Indian pharmaceutical industry since the mid-1970s highlights the fact that the design of the patent act was instrumental in building local capabilities even in a poor country like India.^[39]

Criticism

Main articles: Societal views on patents and Criticism of intellectual property

As state-granted monopolies, patents have been criticized as inconsistent with free trade. On that basis, in 1869 the Netherlands abolished patents, and did not reintroduce them until 1912.^[40]
Patents have also been criticized for being granted on already-known inventions, with some complaining in the United States that the USPTO fails "to do a serious job of examining patents, thus allowing bad patents to slip through the system."^[28] On the other hand, some argue that because of low number of patents going into litigation, increasing quality of patents at patent prosecution stage increases overall legal costs associated with patents, and that current USPTO policy is a reasonable compromise between full trial on examination stage on one hand, and pure registration without examination, on the other hand.^[28]
Enforcement of patents - especially patents perceived as being overly broad - by patent trolls, has brought criticism of the patent system,^[41][42] though some commentators suggest that patent trolls are not bad for the patent system at all but instead realign market participant incentives, make patents more liquid, and clear the patent market.^[43]
Some have raised ethical objections specifically with respect to pharmaceutical patents and the high prices for medication that they enable their proprietors to charge, which poor people in the developed world, and developing world, cannot afford.^[44][45] Critics also question the rationale that exclusive patent rights and the resulting high prices are required for pharmaceutical companies to recoup the large investments needed for research and development.^[44] One study concluded that marketing expenditures for new drugs often doubled the amount that was allocated for research and development.^[46] Other critics claim that patents reward and abet misplaced pharmaceutical R&D priorities, which they describe as being directed to creating incremental improved treatments for diseases prevalent in wealthy countries and away from diseases that cause devastation in the developing world.^[47]
In response to these criticisms, one review concluded that less than 5 percent of medicines on the World Health Organization's list of essential drugs are under patent.^[48] Also, the pharmaceutical industry has contributed US$2 billion for healthcare in developing countries, providing HIV/AIDS drugs at lower cost or even free of charge in certain countries, and has used differential pricing and parallel imports to provide medication to the poor.^[48] Other groups are investigating how social inclusion and equitable distribution of research and development findings can be obtained within the existing intellectual property framework, although these efforts have received less exposure.^[48]
Some public campaigns for improving access to medicines and genetically modified food have expressed a concern for "preventing the over-reach" of IP protection including patent protection, and "to retain a public balance in property rights".^[49][50] Some economists^[51] and scientists^[52] and law professors^[53] have raised concerns that patents retard technical progress and innovation. Others claim that patents have had no effect on research, based on surveys of scientists.^[54][55]
According to James Bessen, the costs of patent litigation exceed their investment value in all industries except chemistry and pharmaceuticals. For example, in the software industry, litigation costs are twice the investment value.^[56]

Proposed alternatives to the patent system

Alternatives have been discussed to address the issue of financial incentivization to replace patents. Mostly, they are related to some form of direct or indirect government funding. One example is the idea of providing "prize money" (from a "prize fund" sponsored by the government) as a substitute for the lost profits associated with abstaining from the monopoly given by a patent.^[57] Another approach is to remove the issue of financing development from the private sphere altogether, and to cover the costs with direct government funding.^[58]
property rights are also called patents in some jurisdictions: industrial design rights are called design patents in the US, plant breeders' rights are sometimes called plant patents, and utility models and Gebrauchsmuster are sometimes called petty patents or innovation patents.
The additional qualification utility patent is sometimes used (primarily in the US) to distinguish the primary meaning from these other types of patents. Particular species of patents for inventions include biological patents, business method patents, chemical patents and software patents.