2 December 2008

U.S. Looks At ´Gold-Plating´ To Enhance Patents

In the recent U.S. presidential campaign, Senator Barack Obama proposed giving inventors the option of gold-plating their patents - subjecting them to a more rigorous review at the patent office in exchange for an enhanced presumption of validity.
United States Intellectual Property
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Originally published in The Lawyers Weekly.

In the recent U.S. presidential campaign, Senator Barack Obama proposed giving inventors the option of "gold-plating" their patents — subjecting them to a more rigorous review at the patent office in exchange for an enhanced presumption of validity.

This was a striking proposal for two reasons. First, politicians don't usually campaign on technical legal issues. Second, U.S. patents already enjoy a strong presumption of validity. This standard can only be rebutted by "clear and convincing evidence." In stark contrast, Canadian patents have virtually no presumption of validity — Canadian and U.S. law are far apart on this issue.

The Canadian Patent Act provides that a patent shall be valid "in the absence of any evidence to the contrary." Courts have held that this "weakly worded" presumption evaporates quickly. If an attacking party presents any evidence that is capable of disproving the validity of the patent, the presumption is spent.

It is difficult to imagine any circumstances in which the Canadian presumption of validity carries any practical effect. To make matters worse, when pharmaceutical patents are alleged to be invalid in proceedings brought under the Patented Medicines (Notice of Compliance) Regulations, it is the patentee that bears the burden of disproving the invalidity allegation (see Abbott Laboratories v. Canada (Minister of Health), [2007] F.C.J. No. 543). Strictly speaking, proceedings under the regulations do not result in declarations of patent invalidity, but they do cause judicial comments that may effectively dispose of patents on which innovative companies have relied after making considerable investments.

Simply put, the statutory presumption of patent validity plays no role in Canada.

Recent public opinion on U.S. patents has been shaped in large part by the proliferation of highly publicized lawsuits brought by socalled patent trolls. These lawsuits have fuelled the view that the patent system is clogged with frivolous patents.

Some of these "paper patents" will be asserted years from now by organizations that never developed the technologies but will nonetheless rely on the strong presumption of validity attaching to U.S. patents. These organizations will assert them against successful companies that brought allegedly infringing, innovative products to the market.

Given the uncertainties relating to patent infringement actions, particularly before the juries that make factual determinations in the U.S., innovative companies often feel they have little choice but to settle such claims. This problem is most significant in industries whose products often combine numerous technologies and inventions (electronics, for example) or in industries marked by fast-paced progress (e-commerce, for example).

Many reforms have been suggested to fix the U.S. patent system. A proposal by Professor Mark Lemley, a leading patent scholar, has drawn considerable attention (Professor Lemley is reportedly advising Senator Obama on innovation and technology issues).

One aspect of his proposal is to allow inventors to subject their applications to enhanced scrutiny in the patent off ice in exchange for an enhanced presumption of validity. Courts would not be allowed to second-guess the patent off ice's view on prior art it reviewed during prosecution.

This gold-plating of patents, as it is casually described, would be accompanied by a weakened presumption of validity attaching to non-gold-plated patents — from a "clear and convincing evidence" to a "preponderance of evidence" standard.

Under this system, the patentee can decide which standard it wishes to obtain, and patent examiners would know which applications to focus on. This is the proposal that Senator Obama presented in his presidential platform.

The gold-plating of patents is but one aspect of a more extensive proposal to address a certain type of litigation largely confined to the U.S., to restore some balance. There would be no need for any "plating" of Canadian patents.

Yet Canadian law has not reached the correct balance either. The absence in Canada of any meaningful presumption of patent validity is unsatisfactory. The Canadian Intellectual Property Office (CIPO) examines over 28,000 patent applications annually.

For the 2006/2007 financial year, CIPO's expenditures amounted to almost $130 million, 78 percent of which related to patents.

Canada has more than 580 certified patent agents, a large proportion of whom spend much of their time prosecuting Canadian patent applications. Prosecuting a single application takes years and often costs more than $10,000 in professional services.

If Canadian courts give no deference to the prosecution and CIPO's allowance of patent applications, why spend such sizable resources on patent prosecution? Canada may not need gold-plated patents, but some plating would be reasonable.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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