Intellectual property is dominated by three principle forms of protection, namely Copyright, Trademarks and Patents. In addition to these forms of intellectual property, there exists several other forms of lesser known types of intellectual property namely industrial designs (or design patents as they are known in the United States), intigrated circuit topographies, and plant breed registrations (also commonly known as plant patents). In addition to these forms or intellectual property, there are contractual relationships which can arise to create property like rights, such as trade secrets and confidentially rights. Of these types of intellectual property, only patents are directed at protecting the technical or technological aspects of products and processes. For this reason, patent protection has arose as an important factor in promoting technological and industrial advancement.
It is well established that the current patent regimes in the world help to ensure the creation of new products by providing the creators of those new products with protection for their investment in developing these new products. In a recent study in October of 2023, the European Patent Office (EPO) and the European Union of Intellectual Property Office (EUIPO) it's revealed that start ups which have secured intellectual property protection in the form of patents and/or trademarks are ten (10) times more successful in securing funding. The reasons for the success of startups which invest in intellectual property protection are self evident. Intellectual property protection provides assurances to would be investors that there investment in the startup business is being secured by exigible assets such as patents. Investing in startups which lack registered (or soon to be registered) intellectual property rights is risky since competitors to the start up can introduce competing products/services at a potentially lower cost by simply copying the startup's products or services. Registered intellectual property rights give the start up a monopoly for a period of time sufficient to permit the startup to grow enough to be viable and competitive. Without the protection provided by patents, for example, a startup can face a competitive environment filled with lower cost copies which the startup cannot hope to successfully compete against.
While patents have encouraged the development of new products, there is ample reason to find faults with the current protection afforded by patents and with the process for granting patent protection. Two particular faults which come to mind are the long and expensive process for granting the protection and the scope of the protection granted by patents. The expense and complexity of patenting a product are difficult to avoid. The remaining problem lies in the scope of protection, where almost universally, patents often do not address the needs of inventors by too narrowly limiting the scope of protection. Amending existing legislation relating to the scope of patent protection and the process by which patents are granted would be a daunting undertaking, and it's doubtful that such an enterprise would meet with the political or legislative support required. Therefore, in this article, I shall explore the possibility of introducing a new form of intellectual property protection which better meets the needs of many inventors while still leaving the inventor to seek patent protection as they may wish.
Before proceeding further, let's step back and examine who needs expanded intellectual property protection for inventions, and what sort of protection is required by those persons. Let's begin our examination by considering who presently benefits from the existing patent regime. Presently, patent protection is actively sought by corporate and industrial clients as a means of protecting their significant investment in product research and development. Many companies spend literally tens of millions or even hundreds of millions dollars in expanding, maintaining and defending their patent portfolios. Companies like Kodak, Xerox, and IBM have amassed impressive portfolios of patents worth billions of dollars in terms of licensing fees. These licensing fees represent a large portion of these companies revenue, and without a doubt, it's clear that the existing patent regime is quite adequate to meet the needs of these blue chip research based companies. Large pharmaceutical companies also spend tens of millions on obtaining, maintaining and defending substantial patent portfolios. Given the enormous costs of finding, developing and certifying a new pharmaceutical product, the correspondingly large investment in patent protection for those products is justified. Likewise, large manufacturing, telecommunications, software, information and energy companies likewise invest large sums in patents, often employing inhouse patent agents and patent lawyers specifically to assist the companies in expanding, protecting and defending their patent assets. It's unlikely that large corporate entities like those discussed above would make these significant investments unless the existing patent regime was not serving their needs. Clearly, patent law as currently structured in most countries is well suited to the needs of large companies. Can we say the same for mid sized companies?
Midsized companies which invest in patents range in size from smaller companies with as few as 50 employees and up to a few hundred employees. Smaller technology companies tend to have patent budgets roughly proportional to the size of their research and development budgets. It's quite common for companies in the 50 to 500 employee range to have dozens of patents in their asset portfolios. Indeed, it's not uncommon for companies of this scale to have a few employees in charge of managing their patent assets and interacting with intellectual property firms to secure and enforce their patent assets. While smaller in scale, these companies appear to be largely satisfied with the nature of the existing patent regime given their frequent use of the regime.
Looking further down the size scale, we come to smaller companies, generally in the size of less than 50 or so employees. From personal experience, this size of company take advantage of the patent process on an ad-hoc basis. Occasionally, when a small manufacturer develops a new product they will explore seeking patent protection by consulting an appropriate patent professional. The costs of the procedure and the time it requires to secure protection often tend to dampen their enthusiasm for seeking patent protection, particularly if the new product is not central to the companies business strategy. Where the new product is successful, or appears to be potentially successful, then they will proceed with patent protection. In most cases, however, smaller companies devote relatively fewer resources to securing patent protection given the costs and time delays involved.
In the case of individual inventors and small start up companies, the failings of the existing patent regime are revealed. Certainly cost is a large consideration, particularly the costs associated with the filing the initial application and the subsequent prosecution. Beyond costs, the delays involved in preparing the application and prosecuting the application are a serious concern. The costs of the patent process are often beyond the resources of individual inventors and small start ups. Furthermore, the delays involved in the patent process are sufficiently long that the individual and start ups involved have difficulting raising the capital necessary to properly developed the new product. While the costs and time delays of patent protection are significant drawbacks, the principle problem with patent protection for individuals and small start ups is threshold requirements of novelty and inventiveness. Principally, the inventiveness threshold is often too high a barrier for individual inventors and small start ups. As a result of these limitations, relatively few individual inventors and small start ups utilize the patent system to protect their intellectual property rights. From my extensive experience with small start ups and individual inventors, the end result is that few of them can offer potential investors with assurances that the value of their investments can be adequately secured by patents. This has the tendency to discourage investment and usually results in the failure of the enterprise. In short, the existing patent regime is not serving the needs of individual investors and small start ups. Indeed, from the point of view of a patent practitioner with nearly four decades of experience, it's apparent that the patent regime is designed to meet the needs of larger entities at the expense of smaller enterprises.
The Social and Economic Costs of The Existing Patent Regime
As discussed above, the existing patent system is adequate to meet the needs of larger and many mid sized corporations. This encourages larger companies to improve their products (or services) secure in the knowledge that their research investments can be secured by portfolios of patents. Innovation is a creative process, and just like large institutional organizations are often not fertile environments for creative endeavors, large manufacturing and research companies are often not fertile environments for invention and innovation. While large companies produce the preponderance of all new products and secure a disproportionate amount of the patents, it's quite apparent that these products are almost always incremental improvements over existing product already produced by these companies. Truly innovative products are rarely introduced by larger companies. There are compelling reasons why that is. Large companies have invested hugely in existing technological infrastructures, and these investments are usually amortized over a period of many years. Developing products which disrupt those technological infrastructures is not likely to meet with the approval of the corporation's management. Furthermore, the time and money involved in the development of a technology which radically departs from the existing technological infrastructure usually cannot be justified because of the enormous risks involved. The bitter reality of innovation and invention is that new ideas are more likely to fail than to succeed. Even if an innovation is backed by sufficient money, time and resources, failure is the most likely option with any innovation. Oftentimes, development along a new path of innovation ends up meeting a dead end, where the innovation cannot surpass the barriers necessary for the practical reduction to practice of the innovation. Furthermore, even if the practical reduction to practice is achieved, the market for the product could be too small to justify the investments incurred. Finally, the new product, even if technically and financially successful, could jeopardize the existing corporate product line. For these reasons, most larger companies tend not to invest in truly revolutionary innovation and instead focus their attention on incrementally improving existing product lines. With the exception of a few "blue sky" research programs in a few large tech companies such as Alphabet (Google) and IBM, most tech companies don't invest significant resources into disruptive technology.
Yet, truly disruptive technologies and products do tend to appear from time to time. The personal computer, the lithium battery, and the web browser are relatively recent examples of disruptive technologies. In each of these cases, these products were pioneered and developed not by large companies, but by relatively small companies, government funded universities and individuals. Apple computers, for example, was literally started by two young inventors in a garage.
It's illustrative to look at the most innovative and disruptive technologies in history and the intellectual property environment they were created in. The most fruitful period of technological innovation occured in the time period between about 1880 to about 1950. During this period of time, virtually every technology we currently rely on was developed. With a few exceptions, most of these developments were created by individuals or relatively small groups of people. The automobile, photography, radio, electrical power, even the aeroplane were the result of individual innovators acting alone or with the aid of private backers. The role of the individual inventor was so significant that it's often stated that Nicola Tesla was the individual who invented the 20th century.
Looking at the intellectual property environment of that most innovative time period, we see something strikingly different from the current patent regime. Obtaining patent protection was much easier back then than it is today. The complexity of patent applications were lower, the cost was correspondingly less and the prosecution of the patent applications were also simpler and less time consuming. I've reviewed hundreds (thousands?) of patents over the years, it always impressed me that patents granted in the late 19th and early 20th centuries almost always consisted of a few pages of drawings and, at most, half a dozen pages of written description and claims. Today, it's rare to see a patent with fewer than a dozen pages of written text, with patents containing hundreds of pages of text and 50 or more pages of drawings are common. Patents have become complex, often complex beyond the understanding of people othere than a select few individuals trained in the specific area of technology and familiar with legal patent terminology. Furthermore, given the relative lack of prior art back in the time period, the inventiveness threshold was easier to achieve. The patent regime was friendlier to individual inventors and small start ups back in early 20th and late 19th centuries. It's likely this relatively easy patent regime contributed to the explosive growth of innovation in that time period.
The Needs of Small Start Up Technology Enterprises
Individual inventors and small start up companies face many difficulties in launching their products. Developing a new product is difficult and usually requires significant resources in reaching a practical reduction to practice. The ability to secure investor funding is critical, and this usually requires the start up to assure investors that the startup's innovation are sufficiently protected. An intellectual property regime which is affordable, easy to navigate and timely could meet the needs of small startups. Critically, the thresholds necessary to secure that intellectual property protection must be easily accessible to justify pursuing the protection. If the thresholds are too onerous, the chances of securing that protection will be too low and the project is more likely never to receive the funding and support necessary to succeed. It's submitted that the current threshold for securing patent protection is too onerous to sever the needs of individual inventors and small start up enterprises.
As mentioned previously, the current threshold for patent protection is defined by two principle requirements, novelty and inventiveness. These two requirements are governed by strick legal definitions which have effectively been narrowed since the early 20th century, particularly as concerns the requirement of inventiveness. While the current legal definitions of inventiveness is allegedly designed to protect the public interest by restricting the monopoly protection provided to patent holders, it's obvious that those definitions primarily meet the needs of larger corporations as opposed to individual inventors and small start ups. A patent regime which either decreases or does away with the inventiveness threshold may better serve the needs of small startups with potentially disruptive innovations.
Presently there are several forms of intellectual property protection which do not require anything like the inventiveness requirement of patents. Trademarks and copyright do require distinctiveness and originality, respectively, but neither require anything similar to inventiveness. Indeed, both registered copyright and trademark protection can be obtained for works or marks which, while sufficiently original or distinctive, respectively, are uninventive, derivative or even obvious. Industrial designs (design patents) technically do have something analogous to an inventiveness requirement, but the test for inventiveness in design patents is so low that relatively few designs fail for lack of inventiveness. While trademark, copyright and industrial design (design patent) protection are powerful in their own right, the protection afforded by them does not extend to protecting the functional designs of a product. At the present time, there is no form of registrable intellectual property protection for the utilitarian design of a product which does not require passing an inventiveness test, except for the German utility model. Let's examine the suitability of the German utility model regime as regards small startup companys and individual inventors.
German Utility Model
In Germany, utility models are a type of intellectual property independent of patents which gives the owner of the utility model a monopoly similar to patent protection but for a shorter period of up to 10 years. Similar to a patent, a German utility model protects inventions such as machines, circuits, systems, substances such as food additives or pharmaceutical products and other technical inventions, but unlike a patent, utility model protection does not extend to methods. Utility models are subject to the same requirements of inventiveness and utility as traditional patents, but the requirement of novelty is less onerous when compared to that of German patents. Unlike a German patent, a utility model application is given a grace period of up to six months after the invention has been disclosed to meet the novelty requirement, which parallels the law in other jurisdictions like the United States and Canada where the grace period is 12 months.
The utility model application is similar to a patent application and contains drawings, claims and a written description. The application is prepared and filed along with appropriate forms and fees. After filing the application is quickly reviewed to determine if the basic technical filing requirements are met. The processing of the application proceeds expeditiously since there is no substantive examination of the application to determine if the requirements of novelty and inventiveness are met. As a result, the utility model is granted unexamined, as opposed to standard patents where the examination step generally takes many months. The time period for registering the utility model ranges from 5 weeks to 6 months after the application is filed, which is extraordinarily low compared to patents which generally take at least two or so years to process after filing and often take much longer - six years or more in many cases.
Utility model applications can be "branched off" of existing patent applications which are still pending. The branched off patent application can claim a priority date of the date of the patent application which was branched from. The claims of the branched off utility model need not be identical to the claims of the prior patent application; however, the claims of the utility model must be supported by the disclosure contained in the priority patent application. This allows an original patent application to be filed disclosing a plurality of novel and inventive subject matter and a plurality of different utility model applications to be branched off the original application. This allows for a plurality of utility model applications to be quickly granted while the original patent application undergoes the full examination process. Utility model applications can also be used as a priority for patent applications.
Protection Afforded
As mentioned previously, utility models have claims in the same way that patents have claims, therefore, with the exception of method claims, utility model claims have the same scope of protection as patents. As in patents, the scope of protection offered by a utility model is defined by the claims, so if an allegedly infringing device fits within the scope of one or more claims in a utility model, the alleged device infringes the monopoly granted by the utility model. Utility models do not protect methods, so the scope of utility model claim protection does not extend to methods. German utility model protection lasts for a period of up to ten years, provided annual maintenance fees are paid. Utility model protection starts when the utility model application is filed thereby giving utility models a significant advantage over patents which grants protection on the date the patent is granted which is often years after the patent application is granted.
The registered utility model can be legally enforced against people infringing on the utility model's protection in the same way as a patent can be legally enforced in civil proceedings. Orders can be granted prohibiting the sale of infringing products, destruction of infringing products and financial damages.
As with patents, the validity of the registered utility model can be challenged by the defendant to a civil action for infringement of a utility model. If such a defence is raised, the civil proceeding will determine if the utility model registration passes the tests of utility, novelty and inventiveness. If the civil proceeding finds that the utility model registration does not pass these tests, then the utility model cannot be enforced against the defending party.
Cancellation of Utility Model Registrations
Anyone can attempt to canel a registered utility model by filing a written request with the German Patent and Trademark Office. The grounds for cancellation include the claims of the utility model do not meet the tests of industrial application (utility or usefulness), novelty and a lake of inventive step. It is also possible to challenge a utility model registration on the grounds of double patenting, namely that the protection granted by the utility patent is already provided in an existing patent or utility model. The cancellation proceedings are done in the Utility Model Division of the German Patent and Trademark Office. Appeals from the decision of the Utility Model Division are possible. It's important to note that a defendant in a civil proceeding for infringement of a registered utility model does not need to file cancellation proceedings to defend against the utility model.
Advantages and Usefulness of Registered Utility Models
Utility model protection as practiced by the German intellectual property regime has many advantages over patents, particularly from the inventor's point of view. The application itself is no more complicated than a standard patent application, but the lack of examination greatly decrease the costs of obtaining a registration. The lack of examination also significantly speeds up the processing of the application allowing the utility model to be registered in as little as 5 weeks. This allows for a utility model to be registered before the product is even launched as it often takes at least several months to develop and launch a product. Having registered intellectual protection at the time of product launch is a significant advantage and may significantly increase the likelihood of the product being successfully developed and launched. As a result of their low cost and quick processing time, utility model registrations been very popular in Germany, particularly as a means of quickly enforcing rights in cases where litigation is likely.
German utility model protection still require that the product being protect pass the test of inventiveness, so there is no theoretical advantage provided in terms of scope of protection. However, given that utility models are registered unexamined, the inventiveness requirement is less onerous because the test of inventiveness, if it ever arises, happens after the registration is granted. Until the validity of the utility model is challenged, or the utility model registration is successfully cancelled, the rights provided by the registration are maintained simply by paying the relatively modest maintenance fees.
Suitability Of German Styled Utility Model Registrations for Individual Inventors and Small Start Ups
Utility models of the form provided by German legislation permit inventors to rapidly obtain patent like protection without the need of first passing an inventive step test. The streamlining of the prosecution process to remove the examination step also has the effect of lowering the cost of securing a registration and significantly lowers the amount of time required to secure that registration. It is arguable that utility models solve the "problem" with the inventiveness requirement for individual inventors and small start ups since the registered utility design persists until such time as the utility design is either cancelled or successfully invalidated. The reality is that intellectual property litigation is relatively uncommon and most patents go unchallenged and unlitigated. The mere existence of a patent is usually sufficient to dissuade infringment. Therefore, utility model protection of the type currently available to the Germans may be all that is required to provide small start ups and individual inventors with the sort of protection they need.
The protection provided by utility model registrations would be particularly useful to small startups in legal jurisdictions where the examination of patent applications can be delayed. For example, pursuant to Canadian patent law, a patent application is not automatically subject to examination until a request for examination is filed and the examination fee is paid. There is a time period of up to four years following the filing date for the request to examine and the examination fee to be paid. If German styled utility model protection was available in Canada alongside existing patent protection, an inventor could file a patent application, delay examination of the application as required (up to four years) and file for registration of one or more utility models branching off the original patent application. The utility model applications could ostensibly be copied from the existing patent application, so their filing costs should be relatively low. The branched off utility model registrations could conceivably be granted a few months after the original patent application was filed, giving the startup ample protection at a low cost very early in the process. This regime likewise has the advantage of protecting the public from improper utility models by providing a mechanism for people to cancel utility models which cannot pass the inventiveness test.
Doing Away With The Inventiveness Requirement
From the point of view of the individual inventor and the small start up, doing away with or lowering the threshold of the inventiveness requirement may be advantageous. Doing so would provide small startups and individual entrepreneurs with the ability to protect novel products without the costs and delays of proving inventiveness. While this is an appealing idea from the point of view of the party applying for the protection, it is an idea with multiple risks to society at large. Firstly, such a regime would doubtlessly still require the novelty requirement to be met, otherwise the intellectual property landscape would be filled with harmful "nuisance" registrations. Furthermore, without the inventiveness test, it is possible for a large swathe of utility model registrations to stifle the natural incremental improvements of existing products. It may also result in large clusters of utility models filed by parties either unwilling or unable to bring those products to market. These unexploited or undeveloped utility model registrations may prevent parties who genuinely have both the intention and ability to introduce similar products. Therefore, to protect the public, any such utility model protection which is free from the inventiveness requirement must necessarily have a short lifespan of no more than a few years (say three). To provide the public with further protection, parties which are restricted from producing a product because of such a utility model registration should have the ability to either challenge the registration if the registration is not being sufficiently practiced by the owner. This would prevent owners of utility models from simply sitting on their registration for the purposes of restraining trade or extorting license fees.
Removing the inventiveness requirement for utility models is, in my opinion, too full of potential harms to justify. However, it is possible to reduce the inventiveness test such that it is not too onerous for the applicant to meet provided the life of the subsequently granted registration is sufficiently short to permit continued competition in the field. For example, the inventiveness threshold in most jurisdictions require the claimed invention to be inventive over the prior art taken from the point of view of a person skilled in the art but otherwise lacking in creativity. Up to three prior art references may be combined to determine if a utility model is sufficiently inventive to warrant registration. Simply amending the requirement to prevent the combination of different references when considering inventiveness could significantly balance the inventiveness test more favourably towards the applicant. Alternatively, multiple references might be combined in an inventiveness test if one or more of said references specifically state that the references could be combined. Currently, the inventiveness test does not require that one or more of the references specifically state that the references be combined, only that, at most, the combination of references can be conferred given the related nature of the prior art combined. This still results in a complex examination of the prior art in relation to claim language.
Is Deferring Examination Until After Registration Enough Protection?
Given the significant cost savings and speed realized by not examining utility model applications for novelty and Inventiveness, and given the possibility of branching off utility model applications from patent applications whose examination may be delayed for up to four years, it seems likely that the addition of a German styled utility model regime to the existing patent regime should meet the needs of entrepreneurs and small start ups. The German utility model legislation has been in practice for decades and has proven itself to be cost effective and popular, particularly in quickly growing fields of technology. In my opinion, the combination of a Canadian styled patent regime wherein examination of the application can be delayed for several years combined with a German styled utility model regime has the potential to provide entrepreneurs and small start ups with the intellectual property protection they require to raise funding and grow. Combining these two intellectual property regimes can provide an effective stimulus to business investment and growth at a relatively modest cost. Given the increasing trend of tariffs faced by economies like Canada, it is time to seriously explore the introduction of a German styled utility model regime to exist along side patents.