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IP Cases & Commentary – Details

25 March 2010

Exploiting a Patented Invention

Patents are national rights which have a direct effect only in their own jurisdiction. While many of the issues discussed below will be relevant to the exploitation of patents in a number of jurisdictions, some aspects of patent law and commercial practice may differ across jurisdictions, and the following information is provided only in relation to the exploitation of a UK patent.

Your UK patent gives you the legal right to stop others from making, using, selling or importing the patented invention in the UK, even if those others conceived of the patented invention independently. You can utilise this right to keep your competitors out of the UK market for the patented product, giving yourself a monopoly position in the market defined by the scope of the claims of the patent. Those competitors would need either to withdraw from the market entirely, or perhaps offer an inferior product or process, either way gaining you a competitive edge. This use of a patent is beneficial if for example you wish to manufacture a patented product yourself, or you wish to subcontract the manufacture to a third party and take the income from selling the product yourself. Alternatively you could use your patent to enter into a joint venture with the third party manufacturer in which you would contribute the patent right and they would contribute the manufacturing facility and expertise.

Your patented product and any related commercial literature should be marked with the patent number to make third parties aware of your patent. Sometimes, the very existence of your patent may be enough to dissuade would-be competitors, and in other cases some degree of negotiation or mediation may be required to preserve your monopoly. In the worst case, it might be necessary to take legal action against the competitor through the courts, or in some cases the UK Intellectual Property Office (UKIPO).

If your infringement action is successful, the courts are able to force the infringer to pay compensation for the infringement of the patent, usually running from the date of publication of the application which matured into the patent, to issue an injunction to prevent further infringement, and to award you a proportion of your costs. Where significant and unrecoverable damage to your business is likely as a result of the infringement, an injunction before trial can be obtained under some circumstances, although this is uncommon. Various other minor legal remedies may also be available. Where infringing articles are being imported into the UK, then it is useful to note that customs officers are able on request to confiscate goods which it appears may infringe a patent.

Formal legal action is always very much a last resort, and most patent disputes are settled well before they reach the courtroom. This is at least partly because the cost of patent litigation is substantial, and outside the reach of many companies. In any case, a patent owner who believes his patent is being infringed should not aggressively pursue the alleged infringer without first seeking legal advice from a patent attorney, because they may find themselves being sued for making threats against the infringer, and the validity of their patent being challenged. Before approaching the infringer, the patent attorney would consider the possible infringement, and in particular would make an assessment of whether any of the claims of the patent are infringed, and of whether any infringed claims appear to be valid. An appropriate strategy for approaching the infringer can then be formulated.

An alternative way of exploiting a patent is to encourage other parties to use the patented invention – for a price. You can offer licences to other parties in return for royalties, to allow them to use the patented invention. Two main types of licence may be offered, an exclusive licence and a non-exclusive licence. An exclusive licence provides the licensee with a monopoly for the patented invention – excluding even you as the patent holder. You may wish to offer this type of licence if you do not wish to work the patent yourself, and if maximum profit would be derived by offering exclusivity to a single company. In contrast, a non-exclusive licence opens up the market for the patented invention to several companies, including you as the patent owner. This approach enables you to fully capitalise on a large market which you would not be able to fully exploit yourself.

A licence may be limited by, for example, geographical area, field of use and duration, and may include the right to sub-license. In this way you are able to limit each licensee to the scope of right they actually require and maintain overall control of exploitation of your patent. The amount of revenue derivable from the patent will depend on numerous factors, including the nature and value of the patented product or process, the strength of the patent, the breadth of the monopoly provided by the patent, the scope of the acts permitted by the licence, and whether it is exclusive or non-exclusive.

A patent is a form of property, and has a value dependent on its strength and the commercial significance of the monopoly it provides. The commercial significance may be judged on the basis of the benefit derived by having a monopoly position, or the amount of licensing income actually or potentially derived from the patent. The patent may therefore form an important asset of a company, which can be realised by way of sale of the patent (either on its own or along with the company) in return for a one-time payment, by way of a mortgage of the patent to raise capital, or by way of attracting investment in the company. A patent can also be used as leverage in commercial negotiations.

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