Negotiating Patent Licenses and Disputes (I)

Patent protection system is especially unique in that it has world-wide treaties on patent protection, such as Paris Convention, Trade-Related Aspects of Intellectual Property Rights (TRIPS), and Patent Cooperation Treaty (PCT), while patent rights are protected nationwide, i.e., a patent right obtained in U.S. could not be excised in other countries, unless the right owner obtains such patent right on his invention in other countries. Different countries have different cultural backgrounds, and thus even if two countries have signed the same treaties, a same invention that is granted patent protection may be rejected in the other country. For example, U.S. and China both signed the three treaties mentioned above, however, a gambling device may obtain patent right in U.S.[1], while in China such device would certainly be rejected since it “is contrary to the laws or social morality.”[2]  

Furthermore, even if a patent owner has patent rights in multiple countries, he may find it difficult in exercising the rights in different countries. Typically a patent owner has two approaches in exercising patent rights: first, to license his rights to a third party, even his competitor, to collect royalty fees; and second, to sue a competitor for patent infringement and claim for compensation for damages. There is no specific boundary between these two approaches, and a patent owner may threaten to sue his competitor for patent infringement in order to force the competitor to sit at the negotiation table to sign a license agreement. When the patent owner exercises his patent rights in a foreign country, negotiating with foreigners, hiring foreign attorneys in a foreign jurisdiction, both the patent owner and the opposite party may face difficulties because of the specific characteristics in patent dispute, which could impede smooth communication. First of all, the value of a patent right, unlike such mass-produced goods as shoes or clothes the market value of which are easily determined, is very difficult to be evaluated. Secondly, royalty rates are always difficult to determine, partly because there is no public reference for license fee since the terms negotiated between the patent owner and other competitors are generally confidential trade secrets. Thirdly, sometimes it is difficult for a competitor to guess whether the patent owner who is threatening to sue has the purpose to collect royalty fee or to clear the competitor out of the technical market where the patents involved dominate. Fourthly, patent rights, even after they are granted, may be challenged through many approaches, and thus the stability of the patent rights, which obviously influence the terms under negotiation, is uncertain. Fifth, international patent dispute and cross culture negotiation are prevalent in patent dispute, and negotiators may have different culture backgrounds, influencing the efficiency and outcome of the negotiation.

作者:王博远,美国加州律师和美国专利代理师,中国律师和专利代理师,获得浙江大学工学学士和美国圣路易斯华盛顿大学电子工程硕士学位,以及美国西北大学法学硕士和圣路易斯华盛顿大学法律博士学位。

Author: Boyuan Wang, a U.S. IP attorney. He registered as California attorney in 2019 and is a U.S. patent agent (limited recognition as a foreigner); he is also a Chinese attorney and Chinese patent agent.

Education:

  • J.D., Washington University School of Law,
  • M.Sc., Electrical Engineering, Dean’s List, Washington University School of Engineering,
  • LL.M., Northwestern University School of Law,
  • B.Sc., Mechanical Engineering, Zhejiang University.

[1] See In re Murphy, 200 U.S.P.Q. (BNA) 801 (PTO Bd. App. 1977).

[2] Under Chinese Patent Law, Article 5, Section 1, “No patent right shall be granted for any invention-creation that is contrary to the laws or social morality, or that is detrimental to public interest.”

作者: 王博远

王博远,美国加州律师、美国专利代理师;中国律师、中国专利代理师。先后获得浙江大学工学学士、美国圣路易斯华盛顿大学电子工程硕士、美国西北大学法学硕士和美国圣路易斯华盛顿大学法律博士。

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