Educationist in Patenting

Educationist in Patenting

Literature Review

Patenting in the recent times has not been associated as a managerial expense. It rather suffices to the rationale of getting a competitive edge against your competitors in an industry.

Knowledge economy proliferate the value addition by guarded information, tactics and novel processes. The rising patent awarded point enhances the power of patents in the competitive world. In the United State of America an anticipated 17,500 software patent rights were declared in 1998, and almost 22,500 in 1999. Companies as The NEC, Canon Co., Sony Co., IBM Inc., Samsung , Toshiba , Lucent Technologies Inc, Motorola Company, Fujitsu and Mitsubishi were among top ten listing of the private-sector patent recipient in the year 1999 (Quan, 2000).We can profoundly relate the significance of patent by the top most technology firms in US. Patents are not just to protect the secrets of invention rather the bottom-line is it enhances your sales and ultimately profits.IBM technology firm itself declared a licensing profit of fifth of the revenues.

Patents that are given in a country restrict the make, use or sell other then the inventor himself. The duration that restricts is about 20 years. The other types of Intellectual Property protection afforded by international accords and national regulations include, trademarks, copyrights, industrial designs geographical representation, layout models of integrated circuits, and trade secrets. However, patents are by far the strongest form in Intellectual Property protection (Hicks and Holbein, 1997).Identical characteristic in patents and other forms of IP protection is its very nature of exclusive rights to inventor.

In every form of Intellectual Property protection is a collective method that governs the tenure of protection, the procedural aspect of protection and legality information in case of infringement of eligible IPs.

Another type of IP security is trade secret that concerns protected and unrevealed information with marketable worth. Trade secret shield, which can last for an indefinite time, tends to be extensive and include contents such as Coca-Cola, formula for its materials, related information, programs, process of manufacturing, business related knowledge, and financial knowledge. The privileges of a trade secret proprietor will be limited because the proprietor does not include the complete power to stop others from specific action apart from restricting the unlawful attainment of the guarded secret by the infringe of confidence, violation of contract, or industrial spying (Hicks and Holbein, 1997). So, trade secret safety is useful only if confidentiality is maintained which means the innovation must be complex to reverse-engineer and has less probability of someone discovering or developing the invention. (Pooley and Bratic, 1999).

In an ideal world, Intellectual Property rights ought to be global property. Nevertheless, the security contracted is generally restricted to the right of the country that grants such privileges (Hicks and Holbein, 1997). Furthermore, there are nationalized distinction concerning first-to-invent against first-to-file, and the additional time. In United States of America, for instance, when two of the parties contest for a patent, the patent is awarded to a first inventor. In most of other countries, a first-to-file claim gets the grant. Yet again, in United States of America and in Canada, a time of one year's additional time is specified to inventors to apply for a patent from the period it goes open as a novelty by shipping goods or alternatively by disclosing the knowledge as a scientific written paper or in a trade show appearance. In dissimilarity, the Europe and in Japan, once an innovation or invention is declared as public, it is not at all a unique invention and thus applications of such patenting would be abandoned (Roberts, 2000).

Intellectual Property proprietor must preferably be able to execute their privileges of patent possession across territorial borders. The considerable number of global organization in this view is the World Trade Organization that is at present working to encourage global synchronization of Intellectual Property rights. The World Trade Intellectual Property Organization that harmonizes the World Trade Organization's current progress though it does not contain the latter's authority to control non-compliant affiliate states. Besides of World Trade Organization, the United States Patent and Trademark Office inexplicably manipulate international development in electronic-commerce patenting. Because most countries have their own distinct domestic legislation overriding Intellectual Property, numerous regional trade agreements contain requirements for the adroitness of nationwide patenting methods and implementation. In Table 1 the multiple organizations which go beyond regulatory have failed to notice, such as the World Trade Organization, World Intellectual Property Organization as well as the regional agreements, and, as of the United States of America.

Global organization

World Trade Organization. A World Trade Organization-negotiated agreement has lead in a new age of global security of Intellectual Property rights.

The accord of Trade related Intellectual Property Rights (TRIPS) enacted in 1995. The TRIPS accord, relatively dissimilar as of other global treaties prior to it endorse larger coordination of Intellectual Property security by inviting member nations to modify their substantive laws pertaining to various kind of Intellectual Property protection and meet up for regulating in procedural standards of relating to search and seizure. TRIPS covers a wide-ranging array of Intellectual Property i.e. the copyright laws and relevant rights, the trademarks and geographical indications, Industrial models, patent, outline model for incorporated circuit, security of unrevealed information, and power of anti-competitive practice in contractual permits/license. It offers principles connecting to preclusion, reparation, administrative measures, interim and ultimate remedy, unlawful penalty, and boundary regulations (Hicks and Holbein, 1997 & Roberts and McCoy, 2000.

The TRIPS accord is established on two fundamental principles, that is, the doctrine of nation conduct and the preferred nation conduct. The earlier requires country to offer public of other countries with conduct no less encouraging than that approved to it's possess national. The second requires affiliate people to grant categorically to residents of other countries any opportunity or protection linking to the security of Intellectual Property that is approved to the residents of all other affiliate nations. Of significance to the Electronic-commerce is TRIPS condition for affiliate state to defend computer programs as legendary workings in the Berne Convention. The copyright bearer of computer related programs has an authority to avoid unlawful saleable fee of genuine or mere copies of their mechanism. However, copyright safety is particular only to language and not to thoughts, measures, technique of process, or mathematical model.

The biggest concern for the World Trade Organization in the upcoming years is to determine to what level it will put into effect TRIPS, although, if the subsequent case is something to set off, it shows potential. In the year 1997, the United States of America kick off a World Trade Organization for a clash asserting that the Swedish regulations have not provided the ex parte searches which means legal proceeding brought by one person in the absence of and without representation or notification of other parties. It is also used more loosely to refer to improper unilateral contacts with a court, arbitrator or represented party without notice to the other party or counsel for that party as obligatory under the Article 50 (TRIPS).

Soon after, the charges were released because of the Sweden revise its regulation in 1998 to conform to Article 50. In the interim, World Trade Organization agents are checking for similar charges next to Finland, Philippines, and Czech Republic.

TRIPS took the implementation in special segments in order to offer time for a few affiliate states in order to modify their local Intellectual Property regulation to that as prescribed by the WTO. Since TRIPS is not enacted completely, protecting patents in diverse countries still requires special measures and principles. Shielding Intellectual Property globally is an intricate process, while regulation is yet another challenge. For instance, Japan does not have a major legal action system in case of the patent infringement, hence violation law suit would be extensive in its court of law than as it would be in the United States of America. World Intellectual Property Organization it can appear as astonishment so as to the internationalization for the patent rights began in the year 1884, the Paris Convention for the Protection of Industrial Property(PCPIP), that is the first chief global accord that was awarded as an industrialized asset privileges such as the patents, the trademarks, and the industrial design.

This was followed shortly by the Berne Convention for the Protection of Literary and Artistic Works in 1886. Both conventions set up separate international bureaus to carry out their respective administrative tasks. In 1893, these two secretariats were brought together to form BIRPI, the French acronym for the United International Bureaux for the Protection of Intellectual

Property. In 1967, as a result of the Stockholm Convention, BIRPI became the WIPO whose main objective is to promote the global protection of IP through closer cooperation among member states.As a specialized agency of the United Nations, the WIPO administers 11

international treaties related to IP norms and standards, among them the Patent Cooperation Treaty (PCT). The PCT was signed in 1970 and allows for a single international patent application to be valid in all member states designated by the applicant. This drastically reduces the burden of meeting different administrative procedures and costs. Upon receipt of a PCT patent application, one of the PCT-designated international searching authorities executes an international search to ascertain if a similar invention has already been patented.

A search report is generated for the applicant who must then decide whether to withdraw the application or continue prosecution by requesting for preliminary examinations which can be performed by one of the internationally designated examination centers. Patent offices of member states have the discretion to accept or reject the examination results of the PCT examining centers. They may accept PCT examination results as the basis for granting patents without local technical examination, or, they may elect to conduct their own technical examination. (The European Patent Office and the national patent offices of Australia, Austria, China, Japan, the Russian Federation, Spain, Sweden, and the USA are PCT-designated search authorities). WIPO is still in the process of developing a global information network to facilitate the storage and exchange of IP information (WIPO, 2000). By generating an ongoing diplomatic forum, the developing of a search report process may lead to the eventual formalization of more widespread obligations in binding treaty law and their implementation into national law and practice.

Regional institutions

Because there is no comprehensive international IP regime yet, many countries still find it necessary to include IP rights provisions in their regional trade agreements. These allow the reciprocal treatment of IP rights across national borders which mean that the benefits of patent and trademark filings in any participating country are extended to all member countries.

NAFTA. The North American Free Trade Agreement (NAFTA) is a free trade agreement between Canada, Mexico, and the USA. Computer programs

are expressly protected under the NAFTA as literary works under the terms of the Berne Convention. A patentable invention is defined as any invention, whether a product or a process, in all fields of technology, provided such an invention is new, results from inventive steps, and is capable of industrial application. Member nations are expected to enforce these rules through individual domestic legislation.

European Union.

The 1957 Treaty of Rome created the European Community, providing a safeguard for IP rights and a legal foundation for the European Commission to formulate proposals to harmonize IP laws within the

European Community (now the European Union). The European Patent

Convention was drafted in 1973 this was followed by the establishment of the European Patent Office (EPO) that was given the authority to examine patent claims for various member states of the European Union and to grant patents.

However, patents granted by the EPO will only take effect in each designated country stated in the patent application after the patentee has registered the European patent in each pertinent national patent office (Loos, 1997).

Today, most EU patents are issued by the Munich-based EPO for the 15 member states of the EU plus Monaco, Liechtenstein, Switzerland, and Cyprus.

The EPO vets applications, conducts patent searches, and decides whether a patent should be granted. But, the headache is not over yet. For the patent to be made legally valid, it must to be translated into the language of a country where the patent applies. That means, to obtain pan-EU protection, a company must translate its patent into 15 different languages, bear the financial burden of 15 different legal fees, and engage the services of different sets of lawyers

with expertise in different national patent laws. As a result, the costs of a patent exceed way above those in the US and Japan. So, the EU may represent a single market for many business transactions, but when dealing with the patenting of inventions, there is a patchwork of national regulations and languages. There is no harmonization in place at all; each national jurisdiction makes its own decisions and patent decisions in one EU country have no legal bearing on another. The fragmented system results in higher costs and makes the EU a less attractive place to apply for patents than the USA or Japan.

The European Commission will soon adopt rules designed to make it easier and cheaper for inventors ± be it big companies or small garage tinkerers ± to obtain patents and defend them in court. The Commission proposed in July 2000 to create a single ``community patent'' to be issued by the EPO. These patents will be legally binding throughout the EU and will not require tedious translation beyond the three official languages of the EPO ± English, French, and German. National patents will continue to be issued by individual country, but inventors are given the choice to choose between the two options (Shishkin,2000a).

Although Europe has traditionally conferred copyright protection to software, the European Patent Convention declares, however that programs for computers are excluded from protection under European patent law.''(Shishkin, 2000; The Economist, 2000). This confusion has resulted in many European companies going to the US to obtain their patents although this could change as the EPO is working on an amendment. According to Gert Kolle, the EPO's director of international legal affairs, software may be patented if they meet certain technical requirements. (Shishkin, 2000b). The EPO has already granted about 20,000 patents for software-related inventions. For example,

International Business Machines (IBM) has received hundreds of software patents in EU countries.But the EPO has not embraced the US trend in patenting MDB. Generally, the European patent system is perceived to be tough and restrictive in approach. For example, in the European system, the competition has a statutory right to oppose and overturn the issuance of a patent. This practice may be effective in weeding out bad patents since the award of a patent is not wholly dependent on the knowledge of the patent examiners.MERCOSUR. In an effort to integrate the economies of the four nations into a common market, Argentina, Brazil, Paraguay, and Uruguay signed the

Treaty of Asuncion in 1991. This Treaty does not establish a framework for IP protection. It only requires the harmonization of IP legislation in the member nations. These four countries, however, have adopted the Paris Convention, the Berne Convention, and the TRIPS agreement.

National institutions

The USA. About three-quarters of the world's e-commerce and 90 per cent of commercial Web sites are found in the USA (Peet, 2000). Being ground zero for dramatic technology shifts, the USA has been the rich ground for creative legislative development governing e-commerce. Of greatest interest is the recent patenting of software and of methods-of-doing-business (MDB) that the Supreme Court has declined to overturn.

The right to patent is enshrined in the US Constitution that empowers Congress ``to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.'' The US patent law, officially known as

Title 35 of the US Code (USC), states specifically that ``whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement.'' Subject matter, novelty, non-obviousness, and utility are the fundamental criteria for the awarding of patent protection in the US, in essence, new and useful things made by man (Ford, 1999).

With regard to patenting, the key institutions in the USA are the Federal Circuit and the USPTO. The Federal Circuit is the appeals court set up by the Congress in 1982 to handle all patent appeals in order to reduce inconsistencies in decisions. In contrast, the USPTO, which comes under the Department of Commerce, is headed by the Commissioner of Patents, a presidential appointee.

The Commissioner receives patent applications and grants or rejects patents in accordance with existing patent laws.

Patents can be made invalid if evidence of prior art can be adduced. The search for prior art, a necessary step to confirm the novelty of an idea, has been greatly hampered by the lack of a comprehensive computerized database and this has made it difficult for patent examiners to determine the first occurrence of an invention. So a patent may be challenged as in the case involving Compton's New Media which was awarded a patent for the process and concept of retrieval technology in multimedia databases. However, all its 41 claims were rejected upon a re-examination of the patent with new evidence that was not previously available (Shulman, 2000). In a recent case, Broadvision Inc. collected a $15 million patent-infringement settlement from Art Technology Group (Mullaney, 2000). But a patent owner who brings an infringement suit against anyone who uses the invention without permission cannot be assured of a win. The court may decide to uphold the patent, order an injunction preventing the infringer from any further use or sale of the infringing device, award damages to the patent owner, or arrange a royalty agreement between the two parties. The standards to be applied and the role of such patents will become clearer with future legislation or the outcome of litigation challenging the scope of business methods. Currently, contentions revolve around the issues of the breadth of coverage, the duration of protection, and even the notion of MDB patenting itself. First, patents are said to be too broad therefore they discourage competition. For example, was awarded an excessively broad patent that would have permitted it to monopolize the sales of digital audio or video recording over the Internet. Or, Priceline's ``name-your-own-price'' patent would have excluded others from using the business method that allows buyers to propose a price for a product or service, and for sellers to decide whether to accept the price (Grusd, 1999). Even though a defense strategy against infringement suits from such broad patents is to hunt for pre-existing claims to undermine the viability of such a patent, such a course of action could be expensive.

Second, the Internet-pace of innovation is so unlike that of traditional scientific and technical innovations. So, a 20-year patent could well be excessive since business models may appear and disappear at a much faster rate. This sentiment is underscored by Jeff Bezos, the CEO of, in his open letter posted on the online retailer's Web site calling for a shortening of business methods and software patent to three to five years.

Third, the very idea of MDB patenting itself is questionable. The award of an MDB patent is analogous to the patenting of the idea of catching a mouse or toasting a bread. Could the inventor of a new mousetrap be awarded a patent for creating a new method of catching mice? Or, an inventor of a toaster a patent for the use of coiled wire for toasting bread? Seen in this light, MDB patents may have a negative impact instead of stimulating more inventions and innovations.

Specific developments in the USA

Software patents. Software patent developments in the USA are the bellwether of global trends. In the USA, software was considered unpatentable until the early 1980s for three main reasons, namely: software recites mathematical algorithms; software does not have physical aspects or does not perform physical transformations; or, software falls within the business methods exception, that is, business methods were considered not patentable subject matter (Saladi, 1999).

Until very recently, the US legal system treated instruction sets as a form of expression protected by copyright law but not patents. A copyright protects the whole work but not individual parts. For example, a music composer may copyright a symphony but not the musical notes, phrasings, and motifs. These belong in the public domain. Similarly, it was held that basic software algorithms should not be protected but be made available freely to all programmers (Shulman, 2000). As a result, it was a common practice for programmers to either copyright their programs or keep them as trade secrets.

However, this mode of thinking was challenged in the 1981 case, Diamond vs Diehr, when the Supreme Court upheld a patent on a rubber-making machine controlled by software. This was regarded as a patentable invention since it had transformed the functions of the machine. In effect, the case unleashed software patenting (Carson and Nelson, 1999). Subsequently, the awarding of software patents increased tremendously, from 1,300 in 1990 to nearly 12,000 in 1997 (Judge, 1998).

Method-of-doing-business patents. The newest category of patentable inventions, MDB patents may include investment systems, insurance schemes, e-commerce systems, information systems, and training methods (Berkowitz, 2000). Prior to 1996, business methods were considered unpatentable according to practice codified in the USPTO's Manual of Patent Examining Procedure.

For example Seagram, an alcoholic beverage manufacturer, sought a patent on blind testing consumer beverage preferences as a way to determine what blends would be likely to be the best. The USPTO denied a patent on the ground that methods-of-doing-business were unpatentable. The court of appeals affirmed the decision stating that such a patent would restrain advances in science and industry (Stern, 1999).

The floodgate for software patenting, however, was opened in 1998, following the award of a business method patent involving California-based Signature Financial Group and Boston's State Street Bank. Signature claimed a patent for its computer accounting system called the ``hub and spoke method, which allowed the management of pooled individual mutual funds so that income taxation occurs only once. In the initial decision, the district court ruled that MDB are abstract ideas and hence did not deserve patent protection. On appeal, however, the Court of Appeals for the Federal Circuit affirmed that MDB are proper subject matter for patenting and upheld Signature's claims.

This event signaled the beginning of patenting for software-enabled business practices (Shulman, 2000; Grusd, 1999; Sandburg, 1999; Gabay, 1999).

Since the State Street Bank decision, the USPTO has been issuing patents to protect business methods, including methods of doing business over the Internet. An estimated 600 business method patents and 3,000 Internet-related patents were issued in 1999 covering a broad range of processes and methodsincluding brokerage systems, electronic shopping cart systems, ``reverse auctions'', downloading of audio and video recordings, linking to online stores, and payments by credit card. A selection is given in Table II. Business method patents confer several advantages. As an offensive business tool, business method patents can help generate revenues through licensing. As a defensive tool, the ownership of business method patents can help deter infringement by competitors and deter competitors from bringing patent infringement against oneself because of the possibility of a counter suit for infringement of patents owned (Kirkland and Ellis, 2000).

Moreover, the ownership of business method patents may provide the leverage needed in negotiation especially in situations involving a crosslicense between firms. In view of the proliferation of Internet business method patents, e-commerce businesses need to be ready to implement a patent strategy regardless of one's conviction whether business method patents are philosophically ethical or unethical. Even a business that has no desire to enforce a business method patent against an infringer should still seek patent protection for its business methods or processes that are patentable.

Many business method patents are being challenged in some high profile litigation. They may or may not hold up at the Supreme Court level. One high profile case involves that is suing for infringing its one-click shopping patent.

The one-click feature allows customers to purchase selected items conveniently by storing billing and shipping information so that returning customers do not have to re-enter or re-confirm the information, but only have to click their mouse once to complete the purchase order. was forced to remove that feature from its Web-based Express Lane by a court injunction issued at the end of 1999.

In another case, is suing Microsoft and its Expedia subsidiary for infringing its ``name-your-own-price'' patent. Also the Intouch group is suing, Liquid Audio,, Entertaindom LLC of Time Warner, and for infringing two of its patents involving its proprietary method of delivering music ``samples'', that is pre-recorded portions of music, through in-store kiosks and via the Internet (PR Newswire, 2000; Stern, 1999). claimed that it holds a patent covering the sales of

any digital audio or video recording over the Internet. It is suing CDNow for infringement and has demanded royalties. The public concern at this time is whether a company should be allowed to monopolize the exchange of digital music over the Internet (Grusd, 1999). The outcomes of these legal tussles will set important precedents as to the patenting of e-commerce software.

Meanwhile, the granting of two patents for affiliate programs to created an uproar in the Internet community. The affiliate programs facilitate customer referral in e-commerce and enable the payment of a percentage of total sales to the Web site from which a customer establishes the link. Perhaps, in the physical world, this is equivalent to a patent of the very idea of franchising as a mode of doing business. Such litigation is not without risks. Even though it was still uncertain whether would enforce its patent against its rivals, the has called for a boycott of Amazon's site.


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