Trends and developments
The limits of the monopoly nature of patent rights
During the long journey from the “Statute of Anne” and early French patents to the strong patent systems for the hi-tech inventions of today, at various times, humankind has been faced with the problem of striking a proper balance between the scope of intellectual property rights and the need to sustain scientific and technological progress.
It is no secret that a patent portfolio is a unique business asset enabling intellectual property protection and profit. Though the recent transfer of all corporate patents by the US-based Tesla Motors to public use has somewhat undermined the established stereotype of patent value for industry, the benefit of intellectual property commercialisation is an undisputable fact proven by historical developments.
The intended purpose of the patent owner’s exclusive right is not limited to private interest alone since instead of providing free use of intellectual property to any and all, the institute of exclusive rights offers market relations-based innovative growth.
Current law enforcement practices demonstrate that despite harmonised IP legislation globally, the issue of a uniform understanding of the legal limitations on a patent owner’s exclusive rights (patent monopoly) triggers numerous discussions.
Owners of patents on inventions, utility models and industrial designs possess exclusive rights. One can consider these exclusive rights as granting a patent owner the right to use the relevant intellectual property. Under Article 464(1) of the Civil Code of Ukraine, an entity owner has an exclusive right to authorise the use of an invention, utility model or industrial design (to issue a licence) and to prevent improper use, including by prohibiting such use.
Vague limitations lines of patent monopoly rights
To further development of science and technology, this monopoly is usually limited by the relevant laws and regulations. Exceptions are set out in Articles 470, 489, 500 of the Civil Code of Ukraine, Article 31 of the Law of Ukraine “On the protection of rights to inventions and utility models”, and Article 22 of the Law of Ukraine “On the protection of rights to industrial designs”.
The first level of limitations is universally applicable to all exclusive rights and includes limitations on their use period and territory. If compared to exclusive rights over other results of intellectual activity, patent rights have a very limited use period: 20 years for inventions, ten years for utility models, and 15 years for industrial designs. A patent obtained in Ukraine grants legal protection to intellectual property in Ukraine. Laws of various countries provide for the same protection under Article 4bis of the Paris Convention for the Protection of Industrial Property, to which Ukraine is a party.
The next level limitations is related to actions that do not qualify as patent right infringement:
“The laws are like spiderwebs: they catch the weak and poor, but the rich can rip right through them”, said Anarcharsis. He was right; numerous legal proceedings and controversial opinions regarding the appropriateness of their interpretation are related to the above-mentioned limitations on patent monopoly.
In this connection, it is worth considering in more detail such patent monopoly limitations as the right of prior use and use of a patented item for scientific purposes or experiment in order to unravel this tangled legislative “spiders web.”
Prior use rights limitations
Granting the right of prior use is an important limitation in patent law and stems from the possibility of a parallel invention; hence, there is a compromise since the novelty criterion is not present in this case. Results of legal analysis of Article 31(1) of the Law of Ukraine “On the protection of rights to inventions and utility models” suggest that the right of prior use arises where the following conditions are met simultaneously:
However, the scope of exclusive rights granted to a prior user is narrower than the scope of rights granted to the patent owner.
This happens because, firstly, the law limits the prior user’s right to the scope of use of the article identical to the claimed invention that was in effect as of the date of the patent application. Secondly, contrary to a patent owner, a patent user cannot prohibit third parties from using identical intellectual property. And, thirdly, due to the limited freedom of use of the intellectual property right, since paragraph 3 of Part 1 of Article 31 of the Law of Ukraine “On the protection of rights to inventions and utility models” establishes that the right of prior use may only be transferred or assigned to another person together with an enterprise or its business practices or a part of an enterprise or its business practices where the solution identical to the claimed invention (utility model) was used, or where substantial and serious actions to prepare for such use have been taken.
In addition, neither the Civil Code of Ukraine nor the relevant subject-specific legislation regulates relations between a prior user and a patent owner; the parties are free to determine the methods and framework for using their rights based on the general principles of contract law. At the same time, a substantial extension of the prior user’s patent right would provide for entering into a licence agreement with the patent owner. However, the law does not grant the prior user the pre-emptive right to enter into such an agreement, nor does it prohibit the patent owner from refusing to enter into it.
The regulator has not established the manner or the document to be used to confirm the prior user’s right to patent use. In Ukraine, the issue of whether such rights are available arises during a court dispute regarding the infringement of the patent owner’s exclusive rights.
At the same time, laws and regulations of numerous European countries provide for a specific mechanism confirming the prior user’s right. For example, paragraph 4 of Section 23 of the Austrian Patent Act 1970 provides for the patentee’s issue of a special certificate to the prior user. However, as already mentioned, based on national realities, the right of first use can only be confirmed by court decision, including where it covers a settlement agreement between a patentee and a prior user. This adds a degree of importance to the attorney’s role in such legal proceedings since the success of a dispute between a prior user and a patentee depends on the choice of proper litigation strategy and the ability to substantiate all material circumstances.
Patent rights restrictions for the development of science
Another disputable issue in the practices of limiting the patent owner’s right is the usability of a patented invention (utility model) for scientific purposes or for experimental use (Article 31(2(4)) of the Law of Ukraine “On the protection of rights to inventions and utility models”). In this case, a major problem is proving the scientific credibility of the purpose of use of the invention and the relevant entity’s capability to conduct the scientific activity.
The content of the “use for scientific purpose” category can be articulated by analysing the provisions of the subject-specific laws and regulations that govern scientific and scientific-and-technical activities. Any activity involving the use of a patented invention would qualify as an activity carried out for scientific purposes within the meaning of the Law of Ukraine “On the protection of rights to inventions and utility models” and its close connection with the Law of Ukraine “On scientific and scientific-and-technical activities” when the following three basic conditions are met simultaneously:
Due to the completeness of the legal definition of “scientific activity”, which is understood as creative intellectual activity aimed at obtaining new knowledge and/or finding new applications, with fundamental and applied scientific research as the main types, in court practice a question arises over whether the regulator allows for the possibility of legal use of a patented article in applied scientific research.
With regard to distinguishing between fundamental research and applied research, we would note that under the Frascati Manual, the difference is illustrated by two phrases: for basic research – “without any particular… use in view”; for applied research – “directed… towards a specific practical aim…”
In that context, attention should be focused on the difference between scientific research or experiments on a shared or unprotected object and a patented invention (for evaluation of efficiency, for scientific purpose, etc). When it comes to a patented invention, the results of scientific-and-technical development would be the target of research rather than a tool for research. The above view is set out in the Comments to Patent Exceptions and Limitations based on the results of surveying five clusters, which are posted on the website of the World Intellectual Property Organization:
In the authors’ opinion, the type of scientific research (fundamental or applied) is decisive in determining the proper qualification of actions of a person intending to use a patented invention without obtaining the right-holder’s permit. Fundamental studies of a technical solution may be treated as permitted use of a patented article. However, applying a patented article during applied research, where the goal differs from obtaining new knowledge, would qualify as an infringement of exclusive rights. Where the exclusive patents rights have a shorter term than the right to other intellectual property, expanded interpretation of legal provisions establishing limitations on the patent owners’ rights should not be treated as justified.
In addition, the law cannot be properly applied without a prior in-depth analysis of the prerequisites for paving the legal way (including in international legislation) to the provisions limiting patent protection.
Patent limitations in the pharma industry
The issue of using limitations on a patent monopoly as a tool to promote competition in the pharmaceutical industry arose for the first time as far back as the early 1980s in the United States. In 1984, when considering the high-profile Roche Products, Inc. v Bolar Pharmaceutical Co. Case, the US Court of Appeal for the Federal Circuit held: “Bolar’s intended “experimental” use [of the patented invention] is solely for business reasons and not for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry. The deliberate use of the patented invention by Bolar is for business purposes only, not for self-entertainment, fun or curiosity, or for fundamental research… We cannot construe the experimental use rule so broadly as to allow a violation of the patent laws in the guise of “scientific inquiry”, when the inquiry has definite, cognisable, and not insubstantial commercial use.”
That decision catalysed the approval by the US Congress of amendments to the law during that same year. These amendments enshrined the provisions permitting the use of a patented original pharmaceutical until the expiration of the relevant patent lifetime, where such actions are taken for purposes essentially related to the pharmaceutical development and obtaining information in accordance with federal law (through compulsory licensing).
Currently, some countries still do not support the idea of compulsory licensing. However, there are countries that – in addition to having recognised the Declaration on the TRIPS Agreement and Public Health, which grants each WTO member the right to issue a compulsory licence on pharmaceuticals and the freedom to determine the reasons for granting them – have successfully exercised such a right in practice (eg, India in 2011).
Typically, such countries associate the potential limitation of the patent owner’s rights with the presence of public interest. In this connection, the approach of the German Federal Supreme Court to defining the concept of “public interest” in the Polyferon case is of interest: “Public interest could have technical, economic, social, and medical aspects, but, as a comprehensive legal concept, could not be defined in general. Evaluation of the so-called interrelation between the patentee’s interest and public interest may differ depending on particular circumstances. The latter would be a decisive factor in decision-making.”
Consequently, the existence of statutory limitations on the patent owners’ rights put the obligation to fully and comprehensively clarify the circumstances of a particular case on the national law enforcement authorities.
Arguing that the public interest prevails, the Ukrainian Parliament has quite recently amended the current legislation to include the Bolar exemption. However, the wording of these changes is controversial, and innovative pharmaceutical companies are continuing numerous lawsuits against generic companies. Moreover, the Supreme Court has not yet established the final practice, so practicing lawyers have ample scope for discussion in patent disputes.
The above herein considerations suggest the conclusion that limitations on the patent owner’s exclusive rights should be sufficiently clear and based on the principles of proportionality and reasonableness, thus providing an adequate balance between the interests of participants in legal relations and the public interest.