By Carlos M. Correa
GENEVA, Feb 3 2015 (IPS)

Industry’s demands and political pressures exerted by developed countries to expand and strengthen patent protection worldwide have been based on the argument that patents promote innovation and thereby contribute to achieve social, political and economic well-being, independently of the level of development of the country where they are granted and enforced.

This view ignores the fact that patents do not have the same impact in countries with different industrial bases, research and development (R&D) capabilities and availability of capital to finance innovation, among others.

Carlos M. Correa

Significantly, there is a growing body of academic studies challenging the belief that patents are essential to incentivise innovation, even in advanced countries, or to enhance economic growth.

While many scholars call for a substantial reform of the patent system, others go as far as suggesting its abolition.

In a working paper entitled The case against patents, Michele Boldrin and David K. Levine have argued that “in spite of the enormous increase in the number of patents and in the strength of their legal protection we have neither seen a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development (R&D) expenditure. There is strong evidence, instead, that patents have many negative consequences.”

“Both of these observations are consistent with theories of innovation that emphasise competition and first-mover advantage as the main drivers of innovation and directly contradict theories postulating that government-granted monopolies are crucial in order to provide incentives for innovation.”

The role of the patent system is thus controversial, particularly in developing countries.“Patents do not have the same impact in countries with different industrial bases, research and development (R&D) capabilities and availability of capital to finance innovation, among others”

In the last 25 years, much emphasis has been put on the concept of intellectual property as ‘truly property’. Different variants of natural rights-based approaches have been articulated to justify developed countries’ relentless efforts to increase the scope and levels of intellectual property protection, notably for patents.

The idea that patents are a piece of property has provided ideological support for an expansion of the protectable subject matter, the extension of the term of protection, the reinforcement of the exclusive rights, and the strengthening of enforcement measures.

Patents confer exclusive rights. They limit the use of knowledge – a public good by its very nature – and competition, which promotes consumer well-being and innovation.

Nobody can produce or commercialise the protected invention during the lifetime of the patent, unless authorised by the patent holder or under compulsory licences, which are rarely granted. Given the exclusionary effects of patents, they have often been characterised as ‘monopolies’.

Yet, the rights conferred by patents are based on partial and often imperfect factual determinations. The examination process does not allow patent offices to reach definitive
judgments on patentability.

There is also uncertainty regarding the validity of patents in the boundaries of what is protected under individual patents. The patent claims are in many cases ambiguous and it is unclear what the actually protected subject matter is. Australian academic Peter Drahos asserts that “patents, unlike blocks of land, do not come with settled boundaries.”

Thus, it is fuzziness rather than definitiveness that characterises patent grants. This is not accidental, but deliberately sought by patent applicants to discourage competitors.

In addition to imprecise disclosures of what is deemed to be the invention, courts interpret patent claims with different theories and methodologies that lead to diverse outcomes with regard to what is deemed protected and eventually infringed.

Another fundamental problem with the patent regime is that it operates on the basis of a limited capacity to examine the patentability of claimed inventions and on a number of legal fictions created by legislators, patent offices or courts.

Such legal fictions are often dogmatically applied, without a critical assessment of their justification and implications.

A patent is granted in most countries after a substantive examination is conducted to determine whether it meets the patentability standard established by national laws which generally require novelty, inventive step (or non-obviousness) and industrial applicability (or utility).

However, some countries (such as Luxembourg and South Africa) confer patents without such a substantive examination or without assessing inventive step (for example, Switzerland and France).

While patent offices in developing countries (except China) receive a number of patent applications much lower than developed countries, some (such as Argentina, India and Thailand) have introduced legislative or other regulatory changes to tighten the application of the patentability requirements and reduce, through a rigorous examination, the proliferation of patents, particularly in the pharmaceutical field.

The intervention of patent offices through substantive examination in the process of creating patent rights gives them an appearance of validity. However, such intervention offers no guarantee in this respect and the public and uninformed business actors may be grossly misled.

The case of South Africa, where no substantive examination is currently made, is illustrative.

Thousands of patents have been registered in South Africa to cover minor or trivial developments that can block local production or importation of lower-priced generic medicines. However, the government of South Africa recently announced its intention to introduce a system of substantive examination, at least for pharmaceutical patents.

This proposal raised stiff opposition from pharmaceutical multinational companies, which were eventually found to finance a covered lobbying operation aimed at derailing the government’s initiative.

On the one hand, it is to be expected that the introduction of such a system would discourage patent applications that may not survive a serious substantive analysis; hence, the number of applications will presumably diminish over time, especially if fees are established at a level that discourages speculative patenting.

On the other, the available information on patent offices in other developing countries suggests that the number of examiners required to review pharmaceutical patent applications is manageable for South Africa even if it opted to rely on internal examiners only.

Unfortunately, many patent offices have tended to work under the assumption that their role is to grant as many patents as possible, and to decide in favour of the applicant in case of doubt. Applicants are often treated as ‘clients’.

As noted by Dominique Foray, patent offices have become extremely pro-patent since the early 1980s. The applicant, formerly considered with suspicion, has become a ‘client’ whose needs must be satisfied by quick, cheap procedures. The result is a total deterioration of examination procedures.

The patent office should function as a steward of the public interest, not as a servant of patent applicants and must protect the public against the issuance of invalid patents that add unnecessary costs and may confer market power. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* This column is based on South Centre Research Paper No 58 of December 2014. A full version of the paper is available here.

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By Carlos M. Correa
GENEVA, Sep 29 2014 (IPS)

The steady increase in patent applications and grants that is taking place in developed and some developing countries (notably in China) is sometimes hailed as evidence of the strength of global innovation and of the role of the patent system in encouraging it. 

Carlos M. Correa

However, such an increase does not correspond to a genuine rise in innovation. It points instead to a major deviation of the patent system away from its intended objective: to reward those who contribute to technological progress by creating new and inventive products and processes.

The increase in the number of patents reflects, to a large extent, the low requirements of patentability applied by patent offices and courts. Patents granted despite the absence of a genuine invention detract knowledge from the public domain and can unduly restrain legitimate competition.

Low standards of patentability encourage a large number of applications that would not otherwise be made, leading to a world backlog estimated at over 10 million unexaminedpatents.

This problem affects various sectors. For instance, Nokia is reported to hold around 30,000 patents relating to mobile phones, a large part of which are likely to be invalid, while Samsung holds more than 31,000 patent families. A study covering various fields of clean energy technologies, including solar photovoltaic, geothermal, wind and carbon capture, found nearly 400,000 patent documents.“The steady increase in patent applications and grants … does not correspond to a genuine rise in innovation. It points instead to a major deviation of the patent system away from its intended objective: to reward those who contribute to technological progress by creating new and inventive products and processes”

The proliferation of patents is particularly high and problematic in the pharmaceutical sector, where large companies actively seek to acquire broad portfolios of patents in order to extend patent protection beyond the expiry of the original patents on new compounds. These ever-greening strategies allow them to keep generic producers out of the market and charge prices higher than those that would otherwise exist in a competitive scenario.

For example, the basic patent for paroxetine, an antidepressant, expired in the late 1990s, whereas ‘secondary’ patents will extend up to 2018.

Ever-greening strategies by one company often force others to follow the same pattern as a defensive approach.  The proliferation of ‘secondary’ or ‘spurious’ patents can impose significant costs on patients and public health systems.

Several measures can be applied at the national level to avoid the proliferation of patents on trivial developments in full consistency with the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), because they fall within the policy space that World Trade Organisation (WTO) members have retained to design and apply their patent laws.

The most important policy that governments may implement is the rigorous application of the requirements of patentability, based on a thorough examination of patent applications. The TRIPS agreement neither defines the concept of ‘invention’ nor how such requirements need to be interpreted.

Thus, national laws may differentiate inventions and discoveries, and require that the former result from an inventive activity, thereby excluding pre-existing subject matter that is merely found, such as natural substances.

While some patent offices grant patents on the basis of legal fictions on novelty, there is no reason to follow such practices in other jurisdictions.

An example of this practice by some patent offices is to admit what are known as ‘selection patents’, whereby one of more items that were previously disclosed are independently claimed. This type of patents provide an effective means of ever-greening, because protection can be extended for the full length of a new patent, i.e. normally twenty additional years, despite the fact that novelty was actually lost when such items were first disclosed.

While some large patent offices, such as the U.S. Patent and Trademark Office, the European Patent Office and the Chinese Patent Office, seem to apply a lax inventive step standard thereby allowing for the granting of a large number of ‘low quality’ patents, there are strong public interest arguments to follow a different approach, particularly in developing countries.

A strict application of the industrial applicability/usefulness requirement, when provided for by the national law, may also contribute to prevent the grant of unwarranted patent rights.

This is the case, in particular, for claims on new medical uses, which are equivalent to claims over methods of treatment that have no industrial application or technical effect. The lack of industrial applicability may be a sufficient ground to reject such claims.

Given the policy space left by the TRIPS agreement to adopt their own definitions of the patentability standards, and to do so consistently with their legal systems and practices, governments can follow different methods to ensure that patents are granted only when there are sufficient merits under the applicable law.

Governments may introduce specific standards in the patent laws themselves. A notable case is the Indian Patent Act, as amended in 2005, which incorporated in section 3(d) specific standards to assess patent applications in the field of chemicals and pharmaceuticals.

In a case brought by Novartis (a Swiss pharmaceutical company) against the rejection of its patent application relating to a beta crystalline form of imatinib mesylate, the Indian Supreme Court held that the claimed invention failed in both the tests of invention and patentability.

The definition of the standards of patentability can also be made through regulations, including patent offices’ guidelines. A good example is provided by the guidelines on the patentability of pharmaceutical products and processes adopted by the Argentine government in 2012 to limit the ever-greening of pharmaceutical patents.

Finally, it is worth noting that in applying patentability standards, patent offices can differentiate, in line with the TRIPS agreement, among fields of technology in order to take into account particular features of specific sectors and public policies objectives, for instance in relation to the promotion of generic drugs.

Measures to accommodate these differences constitute a necessary response to the diversity of technologies and, consequently, a condition sine qua non for an intrinsically balanced system of protection that remains neutral in its effects on competition. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

This column is taken from the author’s research paper on ‘Tackling the Proliferation of Patents: How to Avoid Undue Limitations to Competition and the Public Domain’, published by the South Centre (http://www.southcentre.int/research-paper-52-august-2014/).

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