International Patent Protection: Key Lessons for U.S. Investors

WHAT YOU NEED TO KNOW:

• It’s impossible to receive a single “worldwide patent,” but the international patent system makes it possible to file in multiple countries at once.
• Each country has its unique rules for approving and enforcing patents. Investors need a specific strategy for each target market.
• Companies must be judicious about how and when they register IP in other nations

For eight years, Michael Jordan endured a legal battle in China over the trademark rights to “Qiaodan,” the Chinese transliteration of his name.

Jordan eventually prevailed, but it took more than 80 lawsuits and counter lawsuits before the Supreme People’s Court of China said that Qiaodan Sports – a business wholly unaffiliated with Jordan – displayed “malicious intent” by registering trademarks for Jordan’s Chinese name.

For venture capital and angel investors, it’s a powerful example of the problems that can ensue when organizations they invest in fail to protect their IP worldwide proactively. 

International patents can safeguard your portfolio companies’ innovations globally. But the process of securing (and defending) them can get complicated quickly.

To succeed on a global scale, investors must understand the international patent landscape. Start with these five critical lessons:

One: The Patent Cooperation Treaty (PCT) is Not a Global Patent

The Patent Cooperation Treaty lets patent seekers file in multiple countries through a single application. But it doesn’t grant a “worldwide patent.” There’s no such thing. Individual countries and regions still hold the authority to accept or reject an application according to their own laws.

There are still a lot of benefits to using PCT. For example, there’s only one initial application, so an inventor or company doesn’t have to commit too many resources upfront.

As part of the application, one of the treaty’s international searching authorities (ISAs) checks if there is any prior art and whether it could affect the application. The authority also issues a nonbinding written opinion on whether the invention can be patented. In the United States, the ISA is the U.S. Patent and Trademark Office. 

Next, the process moves to the national or regional phase. Applicants must file additional paperwork and pay fees specific to every country where they want to register their IP. 

Because of the international search early on, applicants get a much better idea of their chances. They can save time and money by applying only if it makes sense. 

Two: Patent Laws Can Vary Significantly By Country

The Patent Cooperation Treaty and other international programs make it easier to protect innovations in multiple countries. But there are differences in each nation’s rules and how they’re enforced. They can significantly impact how patent holders protect and commercialize their IP — or whether they enter a particular market at all. 

For example, some countries issue “compulsory licenses” that, in some cases, allow others to use intellectual property without the patent owner’s consent.

But the differences can create opportunities, too. Many companies seek injunctions in Brazil because it’s easier to get relief there. Plus, the court system offers a relatively level playing field for foreign companies. After implementing reforms, China has become another popular place for enforcement actions. Research has found that foreign patent holders are often very successful in pursuing infringement claims.

Three: Timing of Patent Filings is Crucial

The first person to create a technology or process isn’t guaranteed to win a patent for that innovation. Generally speaking, the international system uses a “first to file” system for awarding patents. 

The United States used to operate under a “first to invent” policy, but it switched to “first inventor to file” in 2013 to harmonize its law more closely with that of other countries. Under the old rules, an inventor could challenge someone else’s application if the inventor could prove they developed the innovation first. 

Today, it’s critical to be the first applicant. Patent seekers must have a plan for filing and execute it as soon as an innovation can be patented. 

But that can be challenging because, in many countries, an invention can’t be patented if it has been published or made public. As they prepare to file, many applicants are also talking to investors, distributors, and other potential partners. It can be hard to avoid an accidental disclosure. 

It’s why the U.S. patent system offers a “grace period” when a public disclosure won’t disqualify an application. However, there are many other countries that do not allow for grace periods before filing, and the ones that do often have different limitations than the U.S. grace period. For example, China may offer a grace period only if the disclosure happened at an international exhibition sponsored or recognized by its government.

Timing is a factor here, too, because different countries have different grace periods. In the U.S. and Canada, disclosure is allowed within a year or 12 months before the application date. The United Kingdom, China, and other countries offer a six-month grace period. 

As a result, companies should carefully consider where and when they apply for patents.

Four: Costs Can Vary Widely – and So Can Value

Seeking international registration is an investment. And it is often an expensive one.

Beyond filing fees, there are attorney bills, translation expenses, and other costs. Most countries, including the United States, charge maintenance fees that are due periodically (annually or every few years). And if someone infringes on a patent, the owners must pay for lawsuits to stop the offenders. 

So it’s important for applicants to consider the potential value of a patent before they spend time and money on filing. Some IP might not be worth the expense involved in registration and maintenance. Seeking protection in some countries might not be a good idea because of the applicants’ business model or target sectors. 

Five: International Patent Strategy Can Influence Investment Attractiveness

For some investors — especially international and strategic investors — holding patents in multiple countries can significantly enhance a company’s value. 

A study from the European Union found that EU startups with intellectual property protections were about 10 times more likely to receive early-stage funding than companies that don’t. 

There’s obviously the matter of exclusivity. Patent status gives new inventions more power to establish themselves. Being registered in multiple countries makes IP even more valuable when a company licenses its patents to others or considers an acquisition offer, especially if a potential buyer operates in multiple nations. 

A World of Opportunity

Because there isn’t a “global patent,” investors and their portfolio companies must understand the IP laws of multiple countries. Whether it’s choosing the right nation for enforcement litigation or getting the full benefit of grace periods, you’ll need expert advice.

Contact AEON Law today for a consultation on the best way to build and execute a strategy for IP investments across global markets. The firm’s attorneys possess deep insights into the nuances of different nations’ IP laws. And it maintains an international network of trusted, in-country legal partners. It’s the expertise that you and your portfolio require to succeed.