ANALYTICAL PAPER

With globalization and the corresponding increase in business competition, the patent system takes on greater importance. The patent system is an effective means to recoup R&D expenditure and provide incentives for technological development. This is evidenced by the fact that the total demand for patent rights worldwide rose from 2,306,840 in 1994, to 5,806,570 in 1998.  

Internationalization of Patent Protection  

The number of first filings in 1997 was 634,230. One year later, in 1998, 5,141,337 subsequent filings were registered. Thus, on average, 8.1 subsequent filings per first filings were sought (see the simple calculation below).    

5,141,337 / 634,230 = 8.106  

(Source: Trilateral Cooperation)

Japanese Technology Trade Deficit  

In spite of this trend, however, Japanese companies on the whole tend to focus exclusively on the domestic market in terms of their patent strategy. The ratio of overseas applications to domestic applications in Japan is extremely low compared with that of US.

Japan ’s trade and current account surpluses are the largest in the world. Japan ’s trade surplus grew slightly in 1999 to $123 billion, up from $122 billion in 1998 according to US Embassy calculations based on official yen-based data. Even though the current account surplus decreased $14 billion, Japan still had a $107 billion surplus in 1999.[1] Despite having the largest overall trade surplus, Japan faces a deficit in technology trade, which consists of international transactions of R&D results, such as patent rights and know-how, through the transfer of rights or licensing. Both imports and exports in the technology trade are expanding each year on a global basis. However, in terms of the balance of the technology trade, Japan is running a deficit of 32.9 billion dollars, while the US is in an overwhelmingly strong position with a surplus of 147.1 dollars.[61]  

Cost to be paid for Interference Proceeding

When two or more applications are filed by different inventors claiming the same patentable invention, or there is a conflict between an application and a patent already issued, an interference proceeding is instituted by USPTO to determine who is the first inventor and entitled to the patent. According to USPTO, about 1% of the applications filed become involved in an interference proceeding. Followings are the costs to be paid for interference proceedings.  

Section 1.17, regarding patent application processing fees, says that  

(a)  Filing a notice of appeal from the examiner to the Board of Patent Appeals and Interferences costs $155.00 for a small entity and $310.00 by other than a small entity.  

(b)  In addition to the fee from filing a notice of appeal, a brief in support of an appeal costs $155.00 for a small entity and $310.00 by other than a small entity.  

(c)  Filing a request for an oral hearing before the Board of Patent Appeals and Interference in an appeal under 35 USC 134 costs $135.00 for a small entity and $270.00 for other than a small entity.

(d)   Requesting continued examination pursuant costs $355.00 for a small entity and $710.00 for other than a small entity.  

There are many possible side effects of interference proceeding. According to the survey conducted by JPO, 23% out of 152 Japanese companies that had filed 100 or more applications in the US, are affected by the “first-to-invent” principle. Their experienced affections of the first-to-invent are shown below.  
   

Note: Surveyed 79 companies that answered to have been affected by the first-to-invent principle (Source: Japan Patent Office)  

According to a speech made by the then USPTO Director Dickinson at the annual meeting of the American Intellectual Property Law Association (APILA) in October 2000, 400 interferences were declared out of 300,000 patent applications in 1999. In 100 cases out of 400 (25 percent), the junior party (the second to file) proved to be the “first-to-invent.” This means that only 0.03% (100/300,000 cases) of total patent applications merit from interference proceedings. Applicants, especially the first-to-file and first-to-invent who defended themselves through the interference process, wasted tremendous money and time.  

Since 100 out of 400 interference cases ruled in favor of junior parties, money spent for the other 300 cases was in vain. Given that interference cases cost a maximum of $500,000 to $1,000,000, total loss generated by interference proceeding can be estimated by the following calculation.  

(400 – 100) x $500,000 = $150,000,000  
(400 – 100) x $1,000,000 = $300,000,000  

Hence, at the maximum, from $150,000,000 to $300,000,000 was wasted for interference proceedings in 1999.  

Interference proceeding is a unique system employed only by the United States. Since Japan and other countries employ a “first-to-file” system, there is no such cost generated to define who is entitled to a patent.    

Title 35 Conditions for Patentability

According to Title 35 USC 102, a person shall be entitled to a patent unless,

a)      The invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, (or)

b)      The invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States.

As stated above, the applicant is not eligible to acquire a patent when the claimed invention was, for instance, described in a printed publication “before the date of its invention.” Thus patents are distributed on “first-to-invent” principle. As for b), the grace period during which applicants can file is one year from the time the claimed invention was patented or described.[63]  

Application from the US to overseas

The discrepancy between the US patent system and the otherwise universal patent system causes problems for those seeking protection under both systems, and is a particular nuisance for American applicants seeking protections overseas. USC Section 184 prohibits applicants from filing patent applications overseas for 6 months from the date of first filing in the US.[64]  

USC Title 35, Section 184 states,

“Except when authorized by a license obtained from the Commissioner a person shall not file or cause or authorize to be filed in any foreign country prior to six months after filing in the United States an application for patent or for the registration of a utility model, industrial design, or model in respect of an invention made in this country.”[65]  

Hence, even though the Paris Convention guarantees that applicants can claim priority over inventions one year from the filing date, US applicants have only 6 months to file international application keeping that priority date.  

Disadvantage for US patent applicants to pursue international application  

US applicants one year from first filing

                              0--------------------------------------------------------6 months------®1 year                                                                                         

Others one year from first filing

                                             0--------------------------------------------------------------®1 year

(In gray area US applicants cannot file a patent application abroad.)

The Paris Convention does not recognize the US type of grace period because absolute novelty is required in “first-to-file” countries. This is why the Paris Convention protects the priority right when the invention is published after the date of filing in the US, but not when the publication was made before the date of filing.[66] In other words, American applicants cannot acquire patents overseas when applications are filed at US patent offices after the publication. In this respect, US companies who seek patent protection overseas cannot enjoy the merit of the “first-to-invent” system under which they can delay filing in order to assure the inventions’ patentability.[67] Accordingly, many US multinationals pursue their patent applications based on the “first-to-file” principle. This is part of the reason why even in the US, some large US companies do not oppose shifting the US patent system to “first-to-file.”  

Interference Proceeding  

How carefully a party keeps its record of the invention can change the result of interference proceedings. Proper records should be maintained in ink, preferably in a bound notebook. The records need signatures and dates written by the inventor with the words “witnessed and understood” provided beneath the inventor’s signature. Two or more individuals who understand what is written in the notebook should also sign and date it as witnesses. Such records can serve to prove the date of “conception of the invention.” They also can serve to prove “reduction to practice.” The essential part of such proof in interference is that the inventor’s evidence has to be corroborated by a third party. Again, failure to keep proper records could result in the party who first actually created the claimed invention losing the interference and being subject to the patent rights of the party awarded priority.[68]

Defective Definition of Invention

The terms “conception of the invention” and “reduction to practice” pertain to priority questions. Conception of the invention implies that the means to accomplish the intended results of the invention have been devised. “Reduction to practice” refers to the actual construction of the invention in physical form: in the case of a machine it includes the building of the machine, in the case of an article or composition it includes the making of the article or composition. Actual operation, demonstration, or testing for the intended use is usually necessary. The filing of a regular application for patent that completely discloses the invention is treated as equivalent to reduction to practice. The inventor who proves to be the first to conceive the invention and reduce it to practice is considered the prior inventor, though further complexities, addressed below, exist.  

According to USC 102 (g), “In determining priority of invention there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.” This basically means that what matters is being first to reduce to practice. However, if one party conducts reasonable diligence prior to the others, the first to conceive has a priority to invention. In other words, when first to conceive keeps reasonable diligence, he or she is supposed to be the first inventor even if he or she is last to reduce to practice. What “reasonable diligence” means is unclear from this article. In practice, it is satisfied by both diligence to reduce practice and diligence to prepare for application. Some people say that any excuse for not being diligent is acceptable. Others say that “diligence” is mere jargon.  As a result, reasonable diligence is accepted in many cases, that is, determination is often made based on conception.[69]  

USC 102 (g) is an imperfect document for determining the first inventor. Consider the following case, which is in a three-cornered deadlock.[70]  

Assume there are three applicants, A, B and C, and each of their invention processes are performed as described below. Time flows from left to right.

Between A and B, reasonable diligence does not affect who is the inventor. Since A conceived the invention and reduced to practice earlier, it has priority.  

Between B and C, B will prevail. B initiated reasonable diligence earlier than C’s conception, even though B performed reduction to practice later than C.

Since A precedes B and B precedes C, there is no problem if A precedes C. However, A does not precede C.

C’s reduction to practice precedes that of A, and A’s reasonable diligence is performed later than C’s conception. Hence, C, who performed reduction to practice, precedes A.

In this way, when three applicants are involved, it is impossible to determine who is the true inventor under the current US patent law.

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