Patently obvious

Saturday 1st December 2001

You want to tell the world about the crash-hot product you've invented. If it's not patented, that's your first mistake. Here's what you should be doing.

It has taken two-and-a-half years, nearly �2 million, the patent has expired and it is still not over. UK inventor James Dyson recently won a Court of Appeal case against appliance giant Hoover for infringing a key patent on the bagless vacuum cleaner he spent 15 years developing. Victory was sweet. That is until Hoover told Dyson it plans to appeal directly to the House of Lords.

Dyson's Dual Cyclone is the only vacuum cleaner that can claim it won't lose suction. He took out several patents to ensure no other machines operate the same way. One of the ironies of the court case was that Hoover had earlier rejected an opportunity to develop the Dyson patent itself.

"I have spent my life developing new technology. Patenting this technology is expensive and time consuming. If we did not fight to protect these patents there would be no point inventing new products," Dyson says. The problem is most small companies, individual engineers and inventors can't afford the big legal fees to fight a patent infringement. Five to 10 years ago Dyson wouldn't have been able to, -either. It will be October next year before he is awarded damages; he says the norm in these cases is 70% of costs.

On his last visit to New Zealand, Dyson urged Kiwi inventors and businesses to take out patents. Your intellectual property - no matter how great the product idea - is not worth much unless you own it. And the only way to do so is through the patent system. Moreover, if you're trying to attract investors and don't have intellectual property (IP) protection, you're sunk. It is the first question overseas venture capitalists ask.

While some New Zealand companies are very clued up about patents - Fisher & Paykel has 20 patents covering its SmartDrive washing machine technology alone - Auckland lawyer Mark Copeland says many business people still don't have a clear understanding, let alone up-to-date records, of IP they own and use, despite it being a major business asset. Certainly, IP protection here is nowhere as high as in countries like Israel and Japan. Heck, even the plant tongkat ali (reputed to boost sex drive), is covered by two patents, with three more pending.

Before you rush down to the Intellectual Property Office, here's the Unlimited 10-step guide to making patenting work.

1. Is it worth it?

You need to make sure your idea is really novel and has the potential to earn money. Do a business plan on the likely market, what market share you may achieve and potential production costs. If it stacks up, you're not wasting your money by patenting it. "If your product has a shelf life of over Christmas, patent protection is not worth considering. If it is long- to medium-term and you don't have IP in place before you start commercialising, the chance is lost," says Michael Hawkins, a patent lawyer with Baldwin Shelston Waters.

2. Am I first?

The biggest worry at this point is whether someone else has got in before you. Patent lawyers will carry out a search for you for around $600 or you can attempt to do it yourself - www.delphion.com is one good website. Striking the right key words in the search can be tough, though. Patent law firm AJ Park estimates 20% of its clients think they have something completely new and then find it is only an improvement on what already exists, which is obviously worth less.

3. Should I tell?

One of the big killers of patent applications is an idea already being in the public domain. This is a headache for universities and crown research institutes where people get promoted on the basis of what they publish about their research, says Terry Fullerton, head of Canterbury University's commercial arm, Canterprise.

You can apply for a 12-month provisional New Zealand patent for around $2000, which still allows you to keep details of the invention secret. A provisional patent gives you a priority date to protect the invention and a year to refine the idea and build a working prototype before you have to prove it really works for a full patent (at which stage the details are published).

4. What is it?

The wording on your patent is crucial, says AJ Park patent lawyer Anton Blijevens. Terminology needs to be very generic. "You have to define the invention in one paragraph. That paragraph can't define the invention so broadly it covers things that are not novel, and can't be so narrow that it allows competitors to invent something around it." For instance, you would call a nail a fastening device so a competitor couldn't change the nail to a screw and get around the patent. The words "fastening device" encompass all the possible variations.

5. Can someone challenge me?

After you've lodged a full patent application (costing around $4000 to $5000 including the provisional patent), the Intellectual Property Office does its own search and assessment. Once approved, there is a three-month window where competitors can read the published details of how the invention works and challenge the patent. Grounds for a challenge may be that the invention was obvious or that it infringes someone else's broad overseas patent. Patent lawyers say the number of challenges is on the rise, but then so are the number of patent applications (see table).

Take the legal row between Dunedin-based biotech researcher A2 Corporation and the Dairy Board regarding patent rights to research linking milk with the onset of diabetes. When A2 wanted to commercialise its product, the Board challenged its patents, saying there was an overlap with the patents it took out in 1997 with the Child Health Research Foundation. The board also disputed the $8 million sale of the foundation's half-share of the patent rights to A2. Most challenges are resolved out of court and this was no exception.

6. What about overseas?

When you go for your full New Zealand patent you should also identify your key overseas markets and then apply in each of these countries as well. But you have to choose wisely - it is expensive and time consuming (between $10,000 and $15,000 for a US patent alone) and renewal fees will also be charged to keep the 20-year patents alive.

An alternative route is a Patent Co-operation Treaty (PCT) application, at a cost of between $8000 and $12,000. Just one PCT patent application filed online from New Zealand to Geneva can cover all 114 member countries for 18 months. On top of the provisional patent, it gives the inventor 30 months to generate cash flow from the patent and weigh up the costs of patents versus returns in each export market.

7. How do I stop copycats?

As the Dyson case showed, gaining a patent is one thing, protecting it is another. You need to have enough money left to defend yourself against patent infringements or align yourself with a licensee with the grunt to do so. If you're serious about protecting your IP you need to monitor the marketplace, your competitors and others with access to your IP, and possibly your own computer system. Most IP theft goes undetected.

8. Should I fight?

Litigation, particularly internationally, is hugely expensive, so be sensible about who you take on. But don't be frightened of a David and Goliath scenario. Take the case of New Zealand-born developer Juliette Harrington, who last year accused portal giant Yahoo of infringing her patent for online shopping software. Harrington's software for the universal shopping cart system was patented in the US in April 1999, one of the first of the so-called "business method" patents now swamping the US Patent Office (it is now 18 months to two years behind processing software patents). Court documents show the two parties reached an undisclosed settlement earlier this year. The claim was filed by US-based patent marketing firm SBH, which Harrington worked with to market the product. "They banked on the fact that we wouldn't sue them and that wasn't the case," claimed SBH president Steven Schuver when filing the claim on Harrington's behalf.

9. What if my staff nick ideas?

IP protection also needs to be internal, say Auckland lawyers Copeland and Mark Lowndes. Your human resource policies need to include restraint of trade and confidentiality provisions and have clear rules on the copying of IP, particularly for remote workers. You have to be realistic about the amount of intellectual capital stored in your employees' and colleagues' heads. As soon as they leave for the night, a good part of the business' IP leaves with them. What are the chances of that knowledge being used elsewhere?

10. Has someone got a better idea?

You may have your patent protection in place, but that's not to say yours is the only relevant idea out there. Researching existing patents before launching into the development of your new technology or product can save a lot of money and heartache later on.

What is a patent?

A temporary monopoly granted by governments to encourage investment in innovation.
A right to exclude others from using an invention that is a new product or manufacturing process, or improvement to an existing one.
It has to be novel, inventive, industrially applicable and non-obvious.
It gives the owner the exclusive right to make, use or sell the invention for up to 20 years, with renewals required after four, seven, 10 and 13 years in New Zealand.
New Zealand's 50-year-old Patents Act is being revised to deal with patenting of life forms, medical procedures and business methods, with a discussion paper due out early next year.

Fiona Rotherham
fiona@unlimited.net.nz

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