Strategic Use of Priority Filings for SMES Expanding Internationally

Introduction : In general, companies with a well-defined internationalization strategy do not usually have to worry about obtaining patent protection in other countries. Due to the lack of funds to obtain patent protection (especially if the company’s customer base is not yet known) and the uncertainty of how successful the company’s products will be in international markets; the new prototype may not be completed. Fortunately for SMEs, patent law does not require that they have all the answers before filing their patent application at home. The company gives itself a one-year window to consider potential future patents in other countries by obtaining a priority date under either the Paris Convention for the Protection of Industrial Property or the Patent Cooperation Treaty (PCT).

Unfortunately, this one-year window is frequently underutilized by SMEs because many are new to the patenting process and don’t realise it was intended to give them time to review their plans and choose the best countries in which to file their patent applications. In this post we will discuss how the priority date operates in India and internationally, what an SME can accomplish within the one year, and the pros and cons of filing directly for a patent versus filing under the PCT based on a hypothetical example.

Legal Provisions and Issues

According to Paris Convention for the Protection of Industrial Property (1883) Article 4 each patent applicant entitled and has the right to apply for patents in countries other than their country of origin, therefore India has enacted section 135 of the Patents Act, 1970 which gives those applicants the right to claim this priority as long as their convention application(s) is filed within 12 months from date of original (basic) filing. Additionally, organizations that have filed their first application in India may use that filing date to apply in any of the convention countries (outside of India) as long as they do so within 12 months. Section 137 allows an applicant to combine disclosures from multiple priority applications to obtain priority for a combination of the disclosed matter, and by comparing all disclosures from multiple priority documents to determine if the claimed priority items were disclosed in at least one of the priority documents. The patent office has certain rules governing the process for filing the Paris Convention and its applications. These rules, the Patents (Rules) 2003, provide that when a priority document is in a language other than English, an English translation must be submitted to the office prior to receiving the patent grant. This requirement is particularly important for small and medium enterprises (SMEs) who file standard applications using their own priority documents.

For those seeking alternative, but additional, options for securing patent protection in multiple countries without being required to file for patent protection within 12 months of the priority date in each country, the Patent Cooperation Treaty (PCT) is an option. Under Article 4 of the PCT, an applicant can file an international application no later than 12 months after the priority date in any of the PCT member states in which the applicant wishes to have the patent granted, by listing those PCT member states in the application. Per Article 22 of the PCT, the period within which an applicant may enter a national phase before the national patent office of the PCT member states is 30 months from the priority date; in India, the national phase will be entered (the application filed with the patent office) no later than 31 months from the priority date pursuant to Section 138 of the Patents Act, 1970. It is this twelfth-month period under the Paris Convention and the thirty-to thirty-one-month period for entering into the national phase under PCT by virtue of Article 23 that is the crux of this blog.

There could be an objection raised against your patent application because it was not filed within the specified twelve-month time frame as a result of failed submission of an application to the Paris Convention and based on a claim that the invention does not qualify for a patent for lack of novelty because the invention may have already been publicly available through somebody else or the applicant within those twelve months by way of either the inventor having worked the invention commercially during this period, or by another third party having worked the invention commercially before the filing of the standard United States patent application. This would therefore make the patent office’s determination throughout that time that the invention qualified as novel.

Legal Analysis

When considering the importance of the priority period, it is important not to think of it merely as wasted time between the filing of a patent and its examination for grant, but rather as a structured opportunity for small and medium enterprises (SMEs) to align their intellectual property strategies with their commercially viable and financially sound solutions. The importance of this stage for SMEs is compounded by three factors, making it a uniquely valuable opportunity.

Securing Position Without Premature Commitment

The applicant’s priority date puts the “first-to-file” race on hold so that it will be next in line but does not require that it commit to the high expense of prosecuting internationally. The applicant’s next filings, whether by itself or by the actual inventor in another country, will all suffer the disadvantage of a later filing date than if made during the 12 months. The applicant can, therefore, secure its position for 12 months, in each PCT and Paris Convention country, with no obligation to proceed with obtaining protection through multi-jurisdictional applications.

Assessing Funding, Traction and Target Markets

The 12-month period allows the applicant enough time to assess its potential for financing, including whether a particular round of financing is likely to close, and the overall acceptance of the market for its products or services in specific export markets, before committing to the high costs of filing in multiple jurisdictions for international protection. The costs to file internationally are substantial, as costs from translation, local counsel, and official fees will add up once the patent application has been filed in the participating countries. An SME that files first and watches the market for a few months before translating its first-filer advantage into a patent in a given jurisdiction is far more likely to make a wise business decision about whether to continue investing in that jurisdiction.

Strengthening the Application Before Replication Overseas

The one-year priority period allows applicants to enhance their claims in a foreign patent application which will ultimately be filed in another country. It is common for applicants to have very broad claim language or to have filed a preliminary patent application without having fully researched competing interests until after the original application was filed and/or the applicant receives guidance from an attorney in the foreign country regarding the breadth of allowable claims for a foreign application. Any broadening of a claim based on a subsequent filing of a patent will need to be based on the disclosures made in the original patent application. On the other hand, applicants may narrow their claims or otherwise modify them to comply with local patent laws in the foreign country (e.g. India has fairly strict standards for patentability).

AstraZeneca AB & Anr. v. Intas Pharmaceuticals Ltd. is one example of the way that Indian courts have approached those aspects of priority date and disclosure that need to be considered in order to make a determination regarding patentability. During their review of AstraZeneca’s patent claims, the Delhi High Court examined instances of those citations where the test only considered how claim correlation would apply with respect to a prior claim objection (the second application would have had to be read against the prior claim application) under S. 10 (4), regarding the date of registration, and S. 10 (5), regarding the completeness of the specification). The instances reviewed by the Delhi High Court give the impression that when making an assessment as to whether disclosure between a first application claiming priority and a second is satisfied with respect to patentability, the claims in the second application will be assessed as if they were read against the specification of the first application. Hence, in assessing the claims of the second application as against the claims in the first application (the “priority application” claims), the scope of that assessment would be made based on the claims of the first application. A priority claim can be understood as a claim against the subsequent applications of a previously-filed patent. This conclusion can be further elucidated by the fact that patentees are likely to cite both of the referenced (later-filed) patents in an effort to establish a defense to any resulting infringement claims against them that result from the assertion of the newly created claims of the former as having validity.

The relevance of a disclosure requirement to the determination of novelty can be seen from the grounds upon which a patent may be challenged on account of an application for a patent not complying with the requirements of section 10(5) of the Act as set out in section 25(1) of the Act; that is the basis for pre-grant opposition to a patent. If there is no filing of an application for a patent within 12 months of the filing of the original patent application, and if there are any details in the application that have not been disclosed to the Applicant since the original patent application was filed, then the patent would also be susceptible to challenge by way of pre-grant opposition on the basis of lack of novelty. As a whole, case law shows that the priority date and the effect that it would have on the entire application, including on the claims, are not just formal matters. Courts have held that applications must be closely examined and verified to ensure that the application as filed on the priority date can support the full content of the application, especially with regard to the claims contained therein when the application is based on a priority application.

A Worked Example of Direct Filing vs the PCT Route

An Indian small and medium enterprise (SME) with a compact water purification cartridge has filed its patent application in India in order to obtain a priority date which will give it time to assess how to proceed in developing its international expansion. The SME has raised funding and received export orders from the United States and Kenya within six months of filing its application while negotiating with a European distributor but still has no contract. The SME must now determine if it will pursue direct filings in its target countries or file through the Patent Cooperation Treaty (PCT). If the Indian small and medium-sized enterprise (SMEs) is relatively sure that the invention will be commercially viable, they should consider making direct applications to reduce costs. By making direct applications, the Indian SME can concentrate its efforts on filing its applications in those countries where it believes it has the highest potential of obtaining patents. As well as reducing costs associated with obtaining patents through the filing of PCT applications, such as translation and other costs, filing directly allows Indian SMEs to engage local patent attorneys to file their patent applications more effectively. While direct application to the patent filing of the application has a higher risk than using PCT filings, when the SME knows where they want to file, the application should be made directly to the patent office.

PCT filings are more appropriate for SMEs looking to commercialise their inventions internationally. Specifically, PCT filings create a long-term commitment by the SME to the patent offices and will provide them up to 30 or 31 additional months to make a decision on whether to proceed with patenting in each country based upon the determination of whether the invention will be commercially viable in those countries. In addition, using a PCT filing will allow the SME to retain the priority date for their patent application as long as the application is filed in the Indian Patent Office.

Thus, by utilizing the PCT application, SMEs can conserve their resources by avoiding expenses on obsolete technologies. As stated above, if an Indian SME chooses to pursue direct filings or a PCT application, they should take full advantage of the time period (12 months) from receipt of their priority date to the expiration of the 12 months to update their claims, create appropriate documentation for translation, and establish budgets tailored to specific countries for their filings. The 12-month period should be strategically planned to ensure that patents are only sought in the most desirable countries rather than simply trying to meet the filing deadlines associated with the PCT or direct filers.

Conclusion

International patents often serve as a valuable commercial advantage for SMEs that have limited resources. One key component of utilizing patents internationally comes from how the priority period is taken advantage of. There is growing evidence to show that the intended international strategy of an SME is becoming more relevant than the local nature of their patent filings. Patent agents can provide SMEs with the assistance needed to present revised claims, create document translations, and prepare a realistic budget, which show possible strategies to the potential investors and/or licensees in regard to their negotiations for licences, distribution or to develop other types of commercial relationships in a foreign market.

Author:- Aaradhya Soni, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or   IP & Legal Filing.

Endnotes

1. Paris Convention for the Protection of Industrial Property 1883, art 4.
2. Patents Act 1970, s 135 (India).
3. Patents Act 1970, s 137 (India).
4. Patents Rules 2003, r 21 (India).
5. Patent Cooperation Treaty 1970, arts 4,8,22,23.
6. Patents Act 1970, s 138 (India).
7. Patents Act 1970, s (25)(i) (India).
8. Astrazeneca AB & Anr v Intas Pharmaceuticals Ltd, FAO (OS) (Comm) 9/2020 (Delhi High Court, 11 November 2020).
9. Patents Act 1970, ss 10(4), 10(5) (India).