Patent Law Insights : Software Patent Lawyer & Attorney : Perkins Coie Law Firm : Intellectual Property & Technology Law

There are several ways to increase the value of a patent portfolio.  One is to ensure that patented claims cover  the evolutionary path of the relevant technology.  A second is to be sure to file patent applications (after receiving foreign filing licenses) in jurisdictions where the technology could have competitors or markets.

One market that is seen as being increasingly important is India.  A billion people live there and an increasing number of them are entering the middle class.  The inevitable off-shoring trend, though painful to many in the U.S. and Europe, has been a boon to people there.  They are demanding products and services they could not previously afford and, because of the popularity of American media, their demand for foreign brands is seemingly insatiable.

Although foreign companies have seen India as a source of cheap labor and a potential future market for several years, they have limited their direct investments because of India's rules that restricted royalty payments without prior government approval and lax enforcement of intellectual property rights.  The government of India on Wednesday announced a liberalization of the royalty payment rules. 

With this announcement along with improved enforceability of intellectual property, India is setting itself up for a bright future on the world stage.

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I've previously written about reducing risks when preparing patent applications abroad.  What happens when inventors are located abroad?  Such occurrences are happening increasingly frequently as research and development (R&D) transcends national boundaries.  Many multinational corporations (or even just U.S. corporations with overseas R&D facilities) have teams that span two or more countries.  When an invention was invented by inventors in multiple countries, employers need to be even more cautious about where and when to file patent applications.

In most cases, the law in each country needs to be considered.  For example, India can impose stiff penalties (including fines and jail time) if a patent application is first filed in any country other than India when even one of the inventors was an Indian resident when the invention was made.  It matters not if the other five inventors are American.  The Indian law specifically says "resident."  A U.S. citizen who is on temporary assignment to India and has lived and worked there for more than 6 months could be a resident.  Unlike similar laws in some other countries, the law does not specify the content of patent applications that is subject to this restriction.  However, my experience is that like other countries, India is concerned about the export of military and other sensitive technology.  An alternative to filing a patent application in India (and waiting six weeks before filing the application in other countries) would be to request a foreign filing license, which is typically granted in a month or less.

Many other countries have requirements that vary slightly, including China, France, Russia, the UK, and others.  It is generally best to seek the advice of patent attorneys in each of those countries (or an attorney experienced in both jurisdictions) before blindly filing an application in the U.S. or elsewhere when inventors are resident in different countries.

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I was a co-chair of a convention for attorneys that recently concluded.  Some panels at the convention related to intellectual property issues, and several legal process outsourcing vendors attended.  I asked one of the vendors what effect the guidance the USPTO published last year on the scope of foreign filing licenses had on the vendor's business. She informed me that while the USPTO's guidance confused some of her clients, her outsourcing business continues to flourish.

In these trying economic times, it is likely that many companies and their counsel are trying to reduce costs wherever possible, including by outsourcing some services to service providers with foreign operations. However, sending information overseas for preparing a patent application that is to be filed in the United States (or for other reasons) is not without risk.

In general, U.S. applicants must first receive a "foreign filing license" from the USPTO before filing a patent application outside the U.S. Sometimes, the applicant is ordered not to file the patent application abroad (this can occur, e.g., when the applicant's technology relates to military use.) When a patent application is filed abroad despite an order not to do so, the applicant can be barred from receiving a patent. (35 U.S.C. §§ 182 and 185.) Moreover, the applicant and anyone involved can be fined and/or imprisoned. (35 U.S.C. § 186.)

As a corollary, it is possible that a patent that issues from an application prepared abroad based on information sent by a U.S.-based applicant without first receiving permission from the Department of Commerce could similarly be invalid, and may even subject the patent applicant and anyone involved to fines and imprisonment. (Because offshoring patent work is a relatively recent activity, there is scant authoritative information on point.)

Some applicants may nevertheless feel that rewards deriving from the use of foreign labor are worthwhile. One way to mitigate the concomitant risks may be to first request and receive permission from the Department of Commerce before transmitting information overseas, as the USPTO's guidance suggests.

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