Patently missing the point

John Collins, partner at Marks & Clerk Patent and Trade Mark Attorneys, explains how the latest proposed changes to the UK patent system could leave some companies worse off

Always keen to keep on the right side of the business lobby, the UK Government likes to be seen to foster enterprise and innovation in industry.So it is surprising that the Patents Act Bill currently under consideration and due to come into effect in January 2005, which is intended to help SMEs make the most of their innovations, could leave some firms worse off.

The main problem facing innovators is not obtaining patents so much as enforcing them. Law suits in the field of intellectual property are difficult and expensive to prosecute, so many smaller firms balk at the prospect of litigation.

Crippling legal bills prevent the patent system from being a cost-effective way to protect a company's intellectual property.

non-binding arbitration

A key feature of the current Patent Act is the proposed non-binding arbitration for patent infringement disputes. This would will allow a patent holder to bring arguments before The Patent Office rather than the courts, obviating the need for costly litigation in settling a dispute between companies. But this hope is optimistic at best.

The reality is that if two companies are in dispute over rights to an invention and want to go to arbitration they can do so already through the private sector. Some even enter binding

arbitration to preclude the outlay and disruption of going to court.

The non-binding arbitration propounded by the Act differs in that the consent of both parties is not necessary. However, it is hard to see precisely where this will be useful unless the opinion is persuasive. If a company will not negotiate and refuses to go to arbitration, there is little likelihood of it having a change of heart on hearing a non-binding view that goes against it.

Herein lies the danger in the new legislation. Suppose I ran a small chemical engineering firm and I believed that some large corporation was taking advantage of my patented innovations without my permission. I would certainly be keen to resolve the dispute before going to court, so if the offending company were being uncooperative The Patent Office's arbitration service would seem an attractive option.

But if the arbitrator finds in my favour a year down the line, what is my situation? I have lost another year of revenue from licensing my invention, I have expended a lot of time, effort and money making my case, and I have a bit of paper suggesting that if my rival is so inclined he ought to pay me license fees.

If he refuses, I will still have to run the gauntlet of the UK courts, which don't give any weight to the views of arbitrators. And here's the rub. Even an inventor who survives negotiation, arbitration and court proceedings to come out on the winning side of the argument faces a legal system that is prejudiced against him.

prejudiced system

While artists enjoy enthusiastic legal protection that can award punitive damages against pirates, the most an inventor can hope for is an award covering legal costs and damages to cover the lost license fees. Whereas copyright thieves can be locked up for their crimes, the worst a patent thief can expect is to be asked to pay for the goods! In the end, even this penalty is only rarely awarded in practice because of the legal hurdles.

In an interview with the Financial Times, the chief executive of The Patent Office suggested that as only 20 patent infringement cases are brought in the UK each year, the problem must be overblown.

This misses the point. The reality is that two thirds of the SMEs with US patents have suffered at the hands of those unwilling to pay to use their inventions and most are put off resorting to the courts by the cost of patent litigation.

Technical arbitration may provide an attractive solution to costly litigation, but in its current whimsical form it is not going to be useful in the hard cases that matter.

protection through secrecy

Until the cost of enforcement is addressed, companies will increasingly find secrecy the most appealing way to protect their ideas.

This would be the ultimate failure of the patent system because when good ideas are kept hidden away, not only is the inventor less able to profit from his labours, but industry and society as a whole will be worse off.