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Patents and trade secrets
Any of the important secret and confidential information in the organisation for business or deals which provide a competitive edge as compared to other competitors is called as trade secret. The substance of trade secret is broader and includes different methods of sale, purchase, distribution etc. Any unfair practice for confidential information results to breach of contract and confidence.
Patent is called as the exclusive right, granted by state to the inventor of some invention for a restricted period of time in return to detail disclosure. Patent are the important form of intellectual property rights. A patent has many claims and every claim defines specific right of property. The patent of an invention is granted on the basis of its utility and non obviousness. This right prevents other to invent, sell or use same invention without the permission of patentee.
Conceptual difference between patent and trade secrets
1.Patents are the exclusive right that helps to facilitates increase in capital and motivate the employees for new inventions and exclusive work as compared to trade secrets.
2.Patents to the invention promote open communication skills in comparison to trade secrets as they restrain communication.
3.The licence process is easy and generates revenue for patents and trade secrets are difficult in licensing.
4.Patent are called as the strong and excusive right with less risk of similarity as compare to trade secret, with high risk of parallel invention and innovation.
5.The scope of trade secret is broad in sells, buying and distribution etc as compared to patent with a narrow subject matter.
6.Patent requires disclosure of the invention to the public and trade secrets do not require detail disclosure but includes law full disclosure.
7.The cost of the patents is high as compared to trade secret with low cost of licensing.
8.Infringement of the trade secret is harder to prove with comparison to patents with clearly disclosing the invention to public.
9.Trade secrets do not have long time backlog in offices as compared to patents with long backlog in patent offices.
10.The time period for protection is longer than 20 years in trade secrets in comparison to patents with only 20 years of limited time period of expiry.
Increase revenue and capital
No effect on capital
Limited time(20 years)
Unlimited time (Forever)
Infringement is easy to prove
Infringement is harder to prove
No long backlogs
Scope of subject matter is narrow
Scope of subject matter is broad
Less risk in resemblance
More risk in resemblance
Advantages of patents and trade secrets
Advantages of trade secrets
The trade secrets are secrets that protect access to the product or invention. The trade secrets prove the idea of everything is possible and every invention do not require technicality. This confidential information does not require to be disclosed to maintain the secrecy. The trade secrets have no time boundation with the information to keep it a secret and require lower cost of expenses to maintain the secret. The grating procedure in not length and time taking. Do not have any back logs in offices and risk of invalidation. The ideas of trade secret are very abstract ad not technical. If the invention is lack of source codes and algorithms then it can be protected by a trade secret. A technical invention is also eligible for paten if it qualifies for trade secret protection. The trade secret last forever without any limitation of time for example: Coke has its own trade secret which is not disclosed to the world and KFC Chicken batter has its own trade secret known to very few individual. The recipe of Bush Baked Beans has a family secret recipe, this promotion double the shares of market by creating aura of mystique. The trade secret provides benefit in the countries or boundaries with dysfunctional courts in the world.
The effect of trade secret is immediate and on the spot with lack of lengthy procedure and non disclosure of confidential information to government authority.
Advantages of patent
The patent provides the exclusive right to use technical invention by protecting them for a limited term. The patents are for limited time period of 20 years with proper examination of application. They are available everywhere without and bounding boundaries of globe. The examination process makes the patent more reliable and correctly assess. With the low grating rate patents are highly preferable. The enforcement of patent makes the litigation easy and any breach of patent can be sued easily. Patent is a kind of right to the person to not to use or copy the invention done by a person or team without inventor permission and the invention can be use be the person itself. The licensing of the patent is also provided to give right to other person to use it or sell it with the property. This right provide revenue for business by increase in the capital of a person and even some of the organisation generates royalty from the patent. The trade secret is difficult to enforce in the organisation as compared to patents. The secret is made public and anyone can use the secret because of public accessibility. The patents are strong exclusive right which motivates innovation of employees. And promote the image in public of more innovativeness and more innovation in the world.
Patent and trade secret both are very similar but different from each other both protect inventions and provide exclusive rights but both have different process and benefits. The trade secret protection and intellectual property protection are so expertly mixed by IP holders that the trade secrecy helps at the situation where enforcement of patent is difficult and IP protection helps where the secrecy in the trade cannot be sustainable maintained. The trade secret are divided into two type one with invention and other with manufacturing process. The time period of patent is limited and trade secret is unlimited.
Clauses of licensing agreement
The general clauses of the agreement are that the agreement should be written with the background of the parties to the agreement. Each of the word of the agreement should be clear and unambiguous so that the person not presenting at the time of negotiations can understand the essence of the contract and proceed further for solution such as judges or arbitrator. While drafting an agreement clause for the Thai holder of the Australian trademark licensing it to the Nepalese licensee following are the most importance clauses to be part of the draft.
1.Laws and formalities of the country
The law of contract is similar in generally all the countries but different in its jurisdiction. To govern the agreement of licensing of trademark it is necessary to decide on one law that is earthier Thai or Nepal laws should be considered in the agreement for any conflict and one forum between the contracts to resolve the disputes between the parties to the contract. The parties of the agreement can also agree on the terms of resolving disputes through arbitration tribunal. The arbitration tribunal provides easy solving of dispute through a arbitrator. The process of arbitration is faster and less costly and do not take much time of the parties.
Both the parties have right to decide arbitrator. Generally the party to the agreement agrees for arbitration only due to its advantages of resolving disputes timely and conveniently. Both of the countries to the decide laws of one country and mention the clause in the agreement.
In case of disagreement or non acceptance of the terms of the agreement concerned parties on their wish takes the help of arbitration. The arbitration clause can be continuing with various ways and it is simple to specify in the agreement of licensing, the ethics and rules followed by the arbitrator. The agreement also considers the termination clause as per laws of the country. It specifies the rules and laws of the countries to follow and if such rules are not followed then the agreement can be terminated. The agreement also includes the right of the parties as per the legislation on which the agreement can stand void. The agreement should clearly specify the laws of the countries to be followed by the parties, the law suit hear by the which court and clearly specify to where the suit should be filed and on what circumstances. The clause of jurisdiction is mentioned in the contract, the clause can be overlooked but the application of such clause is fundamentally important for enforceability at the time of breach of the agreement. At the time of conflict this clause specify that where the litigation should occur.
The clause of laws and formalities into the agreement is necessary because of following reasons:
1.The parties of the agreement are from different countries
2.One or more that parties entering into the agreement have various types of laws which may create conflicts.
3.Where the agreement requires some kind of activity or performance in other country
4.The parties to the agreement have various asset and property in two or more different countries.
2.Estimate the royalty according to different countries
The clause of royalty is sometimes sub clause with high variability. The language is divergent with standard clause of the other elements. The royalty calculation is different in different countries and hence the clause of royalty is very important to be mention in drafting agreement. The agreement should clearly mention the details of calculation and method of calculation of royalty to be adopted.
The parties to the agreement are free to discuss the compensation and negotiate on the amount of payment pay to licensor by licensee. Generally, the rules of royalty calculation are to allocate the one third amount of licensee profit the licensor. The problems faced by the parties are the method of calculation. Generally the method of calculation is easy as the raw data is easier for collection and less issues for disagreement than processed data.
For the allocation of part of licensee profit raw data should be used for example turnover, revenue etc. The conflict can occur if all the details of the cost and expenditures are included. The conflict can leave the chance of interpretation or requires elaborated and detailed rules for calculation.
Generally the licensors have lump sum payment at the time of beginning of the license agreement. And some of the time only consideration is paid by the parties to the contract. If the payment mode in royalty is continuing it is called as initial license fee. The amount of royalty can be fixed or variable. The agreements between the parties also have ability to recoup the ability to license fee by any delay in the payment. If the amount of the royalty is fixed then the agreement may results to increase in the annual fee depending on inflation such as the price index of the countries. The variability in the license fee binds the sale value sold by licensee that actually incorporates the licensors intellectual property rights. The royalty has also dependability on the sale of product and know how royalty is fraction of the trademark royalty.
The factors that influence for determining the reasonable royalty rate are as follows:
1.Prevailing rate in the country as per the laws
2.Research and development cost if any
3.Capital cost for implementation
4.Cost, risk and delay in the process of litigation.
5.Market penetration and market volumes
6.The method and mode of payment of royalty.
This clause is important for the licensing agreement because this clause contains the standard elements for payment of the agreement by set schedule with the motive to audit records and reporting. The royalties are highly depended on the real and fair formation of the agreement.
The clauses of the contract are similar to the formation of contract including clarification in thoughts, written, signed etc and clauses also include clause of royalty and choice of forums and law for considering in future. Nepal follows the TRIPS which states that member of the party can determine the circumstances of the licensing agreement but compulsory licensing is not permitted. It also states that the person owning the trade mark have right to give the trade mark with or without transferring the business of owner. Thailand also allows licensing the trademark to other party to receive the royalty. Thai trademark act states that the trademark agreement must be compulsorily registered otherwise the agreement will be held void.
The parties to the contract have to follow the laws of the country and follow the rules of transfer according to the laws mentioned in the previous agreement. Here in the scenario the trade mark is registered in Australia so the generally the laws of Australia will be followed by the owner of trademark with the laws and forums of Nepal and Nepal trademark act. However, the laws of Nepal states that the registration is not necessary but are advisable.
The public of UK voted to leave EU on the date 23 June 2016. The PM served the notice for withdrawal under Article 50 of the treaty of EU. However Supreme Court has decided that for withdrawal from treaty parliament approval will be required. The approval is expected to grant but actual date of Brexit (British exit) is before 2019 after serving of notice period.
However the fate of exit is completely dependent on negotiation, the implication of Brexit might have following effects in UK on intellectual property rights.
Effects of Brexit on IP law in UK
The European patent office is the centre for registration and grant of patent under European patent convention (EPC). EPC is not the part of European Union. Therefore, the Brexit will not have any effect on patent system in UK and the preservation of patent will be done by same authority. The application by UK can be made to EPO and the applicants can secure the grant of patent in the various nations as per choice. Existing UK patent will also be in force post Brexit.
On the other hand, participants of UK in Unitary patent scheme are still in question. EU will further decide the status of UPS through negotiation. The patent scheme will be weak due to exit of major European economies. The cases of European patent will be litigated in UK court and not in the Unified patent court.
It is also assumed that Italy will replace UK and one of the division court will be in London but it is improbable that the same will remain in UK capital now.
Until unless the declaration of exit is not given by negotiation the copyright law will not be changed. The copyright designs are least harmonised intellectual property rights in EU. UK will make the changes needed in copyright law but the important aspects will be present in copyright law along with its legislation method.
The trademark and grant of trademark is under the authority of EU legislation and provide security of trademarks to all the member countries of EU. Post Brexit will have effects to trademark of UK and the country will lose the protection. The present members have to file a fresh application in the intellectual property office of UK.
To obtain registration in the country transitional provisional will be executed. The trademarks, which was protected by EU on the basis of use will now be week and can be revocable on the ground on no use until they are put into use by member countries. After Brexit just use of trademark in UK will not be sufficient ground for registration in European Union. The agreement of licensing of trademark will be affected by this exit. The agreement will be considered according to EU and UK jurisdiction.
It is assumed that UK will adopt the Norway model approach through which UK will be member of European Economic Area (EEA) and European Free Trade Association (EFTA).
It is not clear that European trademarks which are registered in EU, which are not in present use will be continue to use or not.
And one more issue can be faced by UK that if the country is not registered under EFA, the trade between UK and EFA members will be restricted as there will not be existence of intellectual property rights. If UK does not join EFA then IP portfolios of the brand owners will change providing them difficulty for trade.
The exit of UK from European Union will not greatly influence license agreement and will consider the political and geographical changes due to UK leaving EU. While drafting the licensing agreement there is need to protect UK national IP rights along with arrangements. The license agreement with no appropriate severability will not be negotiated again.
Intellectual property litigation
The post Brexit situation is not completely analysed and the comment on these issues are pure assumption. However, non infringement of patent will not have any affect as the grant of patent is not on the base of EU rules. The jurisdiction will be broader in UK due to cross border defendants who seek to enforce the judgment in UK court. Post Brexit, UK will not have benefit of Brussels Regulation dealing with allocation, and enforcement of jurisdiction on IP and other matters.
Effect on market
Post Brexit, the market of the country has to plan its transition for secure decision of the courts, which is respected and appreciated beyond the borders. This is possible by membership of other conventions to achieve desired results. The owners of brand have to devote their time and large amount money on their registered IP portfolio.
There is need to check commercial arrangements to ensure that licensing agreement includes all the rights which are related to EU rights. But it is important to note that there will not be much change in the future after exit of UK. There will be difference of opinion of case law since the decision of the European court will be considered by the UK court but will not be binding and will become less influential.
The separation of the country with EU is not an easy task the guidelines are so interconnected and related to the laws of UK that separating one from other is a difficult task. Though the exit of UK from EU can be beneficial for UK, as it will provide the opportunity to the laws of UK to separate from EU guidelines. It can be a successful step in certain areas but does notseem to be bright in IP law because the protection of IP will be narrow down.
After the separation, UK will not have any influence by EU policies which eventually reduce the prosperity of intellectual property of the brand holders and owners of UK companies. The period of 2 years is provided before the implementation of Brexit, it is advisable that the affected people should start planning for the potential changes to deal with them.
Way of granting patent
Filling of application
The first and foremost process for patent of invention is filing an application. The request for patent is filled in article 78(2) of European patent office. The fee is paid with the application which is decided according to the invention. The application is consist of request to grant patent, details of the patent, claims if any, drawings if in case.
Generally the services of the professionals are necessary provided if the applicants reside outside Europe. The invitation need to disclose the invention in clear and complete manner by the person skilled in the art according to article 83 of European patent convention. The invention should be disclosed with general knowledge, and technically.
Examination of formalities
The other step is formally examine the invention according to Article 90 of EPC. This type of examination and check whether the information provided is necessary or not for the filing date. If the claims are filled against it then need to be sought or if no claims then to be submitted within 2 months.
Publication of search report
The report of search is published with in the 18 months after filling of application. The report after search and examination is published after considering the claims if any according to Article 92 of EPC. At the time of publication the person asking examination will also be allowed to confirm that the application can be proceed or not. At the same time the applicant pay the fee of design. According to the law of country translation file of the claim is necessary submitted in patent office to solve the question that this translation is published.
The grant of patent
If the application is passed from examination department, it is decided by the department that the patent can be granted. The grant of patent is mentioned on the European Patent Bulletin after the translation of the claims made, fee is paid and publication is done. The date of publication is considered as the date of grant of patent. The publication of the grant on the bulletin is according to the Art 97 of EPC.
Validation of patent
Once the grant of patent is published, it has to validate in each of the area or boundary with the specific time to maintain is protective effects and be valid till that time. Some of the national law states that the fee for application is to be paid till a certain date.
Once the patent is granted to the patentee, the other party can oppose the grant of patent (usually is the competitor). The ground of opposition is generally on the basis of lack of originality or do not have any new and innovative step in the innovation. The notice of the opposition is filled with in the period of 9 months of the month of patent being granted and same is mentioned on the European Patent Bulletin.
Revoke or limitation of patent
The patents can also be revoked and have limitation formalities by the owner of patent itself. The owner of patent had the right to revoke the grant of patent and decision of the revocation takes place from the day of publishing on the European Patent Bulletin.
Appeal for the refusal
If the grant of patent is refused by the European Patent office then an application of appeal can be filled. The decision is in the hands of boar of appeals. In certain cases the person has right to file the petition of review by board of appeals.
Process of trademark registration
The trade mark in Europe can be registered in 3 ways, that is:
1.By the process of national trademark registration
2.By the process of international registration called WIPO with European community designation.
3.By the process of direct community trademark registration, with validity around 28 counties in Europe.
Application of trademark
The party interested in obtaining the trademark will file an application form with the prescribed fee.
Examination of application
After the filling of application the receiving division will check whether the application of trademark satisfies all the requirement of documents and fee of application has been paid.
The examination of application will be done within one month. If all the conditions are fulfilled, the application will be considered final and complete. The number of application and date of filling will be recorded.
Publication of application
The application after recording within one month will be published in industrial property gazette, volume A of NOIP. The information of publication includes number and date of publication.
Examination for refusal
After the publication, application will be examined for any ground of refusal within 9 months from publication date to verify that there exists any ground of refusal on the basis of trademark registrability criteria.
Recording and publication of trademark
The trademark will be registered after the issue of notification and payment of fee and certificate of trademark registration will be issue to applicant.
The third party may file if any opposition after publication but before grant of trademark with the valid ground of opposition.
Applicant has right to appeal against the decision of the authority. The first appeal is to Director General and second appeal is submitted to Minister of Science and Technology.
Regisration of trademark is for a period of 10 years and can be renewed for a period of 10 years.
The trademark is registered to protect the name, word or symbol etc of the business to distinguish it from other brand whereas patents registered to protect the exclusive right of the person and prevent the invention from using or selling without permission. According to the European law patent is for a period of 20 years and trademark is registered for a period of 10 years and renewed for further 10 years. European patent law cover the range of legislation together with national patent law and European patent convention.
Patents are granted with the validity period and examiner of patent is not generally aware of the facts and situation that may occur on the basis of invalidity after grant such as the owner of patent can use it somewhere else throughout the world. Therefore the validity of the patent is challengeable, for example on the basis of its innovation.
In general the challenges do not come out of the world and is usually a reaction of action taken by the owner of patent. Once the patent is granted it cannot be cancelled by any of the authority either completely or partially. However, it can be cancelled or revoked on the matter of substance. The availability of judges and authority is also a crucial issue and plays a important part in the quality of procedure.
The issue of invalidity of patent is taken up in SPLT (Substantive Patent law Treaty). The primary aim of SPLT is to achieve the harmony in the substantive law and keep check on the patentability requirement. For instance Article 14 of SPLT, states the basis on which the patent can be revoked or invalidated. The term of invalidity and patent is necessary to understood so as to compare the partial invalidity and patent claim.
Reason for criticizing the validity of patent
A competitor keeps eye on the owner of patent and monitors his innovation as is possible that same technology might be developed by him in future or it may be possible that competitor may already have the same technology but will apply for similar invention. The reason is clear and that the competitor is interested to destroy the property.
In the first process of examination proceedings, in which the innovation related fact is submitted to the examiner of competitor application. The second chance is given at the time of opposition and appeal procedure, eve second appeal is also granted to the competitor to prove his grounds. Some of the time litigation covers a lot of companies and problem arises. The court also allows counter claim for invalidity for instance some of the countries where invalidity cannot be invoked in case of infringement suits has to deal with separate before different court.
Effectivity in mechanism
Effective here means that effectively complies with speed (here means quality) and not less in affordability. Speed or quality is essential and it is clear that everyone should be given chance for hearing within reasonable time impartially. To increase legal certainty, the mechanism should have authorities based on clear and substantive matters. As the litigation proceedings bought against the owner of patent, the mechanism of affordability is supreme without considering the value of patent. Due to this invalidity in patent the value of patent can be decreased.
The mechanism can be found at different levels that is:
1.International convention and treaties
2.National law of the member countries
International convention and agreement
EPC has result to synchronize with the laws of member countries and also the substantive matters. The post opposition proceedings will take the effect for all the member of the countries and also the centralised limitation proceedings on rectification of EPC. Any person has the right to give notice for opposition for grant of European patent. This right of opposition is to all the member states in which the patents have effect.
The procedure of patent opposition involves a brief and oral hearing with the right to appeal. The opposition not only affects the country but also to national level. For instance, a country’s invalidity actions will stay until unless the opposition proceedings are not terminated. The court has right to assess any of the invalid issue on his own and take help of the experts from the patent office.
National laws of the member countries
In the similar way the opposition party may bring against international convention, it also can be bought to national patent office. The mechanism is provided only if the examiners in the national patent office are present. The process of opposition is similar as it was in the EPO, with right to appeal. The court has right to raise the legal and substantive issues. The only problem faces by opposition and appeal is that the final decision takes a long period of time specially in EPO, due to the complex process which allows the party to bring new arguments till the end of proceedings.
The only way to challenge the patent after the expiry of post grant opposition is national invalidity proceedings. The effectiveness depends on the law of the nation of an individual which are not some of the times coherent. Cross border method are not involved in validity disputes and judges of the country are not bounded by foreign judges.
It is important that the owner of patent has similar right to be heard and chance to put his opinion forward. The owner of patent has right to amend the patent, however in some of the country such as Germany, the invalidity actions are not be bought when an opposition is pending before EPO.
Counter claims in invalidity
This idea is still not provided in thejurisdiction in the present but it is an important way of challenging a patent at the time of proceedings. The main idea to deal with validity and infringement of patent is one and similar. If the owner not the part of the counter claim and it is brought in legal action then the owner shall be informed to join and the decision will b e interparty only.
The validity of patent is challenged by the opposition party and effective mechanism is needed for challenging the validity of patent. Patens can be challenged completely or partially according to the time of grant. The proceedings can be challenged on the basis of requirements of patentability and its entitlement. If any action is invalid then the owner of the patent must have right to amend the patent. In the court of patents, hearing of invalidity claim and invalidity counter claim should be provided. The patent system fundamentally is not complicated but it is lack of few basics and rely on few basis such as innovation, novelty etc. Industrial applicability plays a very small role and can be easily replaced.
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