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Before going global, protect your IP

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Pick up a current business or trade publication and chances are you'll find at least one article dedicated to global outsourcing. Global outsourcing has been heralded by industry leaders as the latest and greatest way to cut costs, leverage your resources and gain competitive advantage. While the financial market was quick to jump into global outsourcing, the biotech and pharmaceutical industry has been slowly testing the waters.

Dale Rieger

The world pharmaceutical market is huge and is estimated to range between $330 billion to $480 billion, with the United States having about 51 percent of the market. The other major players include Europe with 25 percent, Japan with 17 percent and Latin America with 4 percent. It's hard to gauge the impact of biotech and pharmaceutical outsourcing by U.S. companies, particularly in California where one-half of all of the nation's biotech jobs can be found.

While San Diego and other cities throughout the United States hang their hopes on pharmaceuticals and biotech to keep the economy rolling, no comprehensive study has yet to pinpoint how outsourcing might actually affect us domestically.

Despite what outsourcing may or may not do within our country, companies will continue to outsource throughout the world because it is an effective strategic business practice. Specific intellectual property issues must be strategically addressed when entertaining or actually entering an outsourcing deal to ensure that a company's valuable IP is not compromised.

Protecting your invention internationally

Signed in 1887 and including more than 100 countries, the Paris Convention continues to protect inventions in the international arena. The convention provides for a claim of priority for up to one year to a prior application filed in another convention country. A claim of priority allows the current application to have an effective filing date that is the filing date of the prior application. The convention is currently in effect in 110 countries.

The Patent Cooperation Treaty (PCT) lets an inventor enter into the patenting process in 125 countries at one time in an efficient and cost-effective manner. At 30 months from the priority date (18 months from the PCT filing date), the applicant chooses the PCT countries in which they wish to obtain patent protection. The PCT allows for Paris Convention claims of priority, thereby delaying major costs associated with patent prosecution in individual countries for an additional year.

The European Patent Convention (EPC) allows one patent to cover several major European countries. This, again, is a cost-saving technique, allowing the patent applicant to delay the costs associated with obtaining protection in the individual EPC countries. A typical timeline is shown below.

Foreign filing licenses

One issue in global outsourcing of research and development activities is the need, in certain countries, for foreign filing licenses prior to filing a patent application outside the country in which the invention was made (i.e., the country in which conception of the invention occurred).

Countries that have such a requirement include the United States, China, France, New Zealand, Poland, Russia and the UK. Notable among this list are China and Russia, two countries that have a large potential for outsourcing.

In these countries, if the invention is made in that country, a foreign filing license is required prior to filing a patent application outside that country. For example, if an invention is made in China, a foreign filing license would be required from the Chinese PTO prior to filing a patent application in the United States.

A difficult issue is when there is an international collaboration resulting in an invention, such that it is difficult to state in which country the invention was made, or the facts may indicate that the invention was made in both countries simultaneously. Generally, it is thought that filing should first be performed in the country where most of the inventive activities occurred, or in the market where loss of patent protection would be the most costly.

Selecting countries for patent protection

Unfortunately there is no one global patent that ensures protection worldwide. Instead, companies must strategically choose where they want their IP protected. Patent protection should be sought in:

* Countries where the pharmaceutical is to be marketed

* Countries where the pharmaceutical will be produced

* Countries where the pharmaceutical can be produced

The largest pharmaceutical producers are the United States, Japan, Germany, France, China, the United Kingdom, Italy and Switzerland. With the exception of China (discussed below), all offer strong patent enforcement. It is advisable to obtain protection in at least these countries.

Canada, Mexico, Hungary, Israel, Australia, India, Sweden, South Korea, Belgium, Indonesia, Brazil and Argentina also have pharmaceutical production capabilities. However, many of these countries provide uneven patent enforcement.

Notable here is India, which is a main location for outsourcing. India changed its laws on Jan. 1, 2005 to, for the first time, allow for patenting of compositions of matter for pharmaceuticals. As with any new system, there is a degree of uncertainty as to its effectiveness in practice. Therefore, a conservative approach would be to wait a few years before outsourcing inventive activities to India. In many instances, however, outsourcing to India is already a reality.

When and how to file

Each county has different requirements regarding when you must file your patent application. The U.S.'s policy is the most liberal -- one-year grace period from first disclosure while Europe's and Japan's policies are more stringent with no grace period and making an invention not patentable if public disclosure is made prior to patent application. Canada allows for one year after public disclosure, with a nominal late fee.

Due to the requirements in Europe and Japan for absolute novelty (i.e., filing a patent application prior to any public disclosure) and the global nature of the pharmaceutical industry, filing a patent application prior to public disclosure is the recommended strategy.

Generally, initial filing of a U.S. provisional application will afford the longest patent term, since patent term is measured as 20 years from filing date of a later filed utility application that claims priority to the provisional application. Since priority may be claimed up to one year (under the Paris Convention), the result is that the patent will expire 21 years from the filing date of the provisional application.


A patent is only as good as the enforcement of the country in which the patent was filed. While China is an attractive outsourcing partner, IP laws are still evolving and subject to local (not national) rules and regulations. A Chinese patent does not provide an invention as much protection as in other countries. Case in point: The Chinese government revoked the patent for Viagra, taking the side of Chinese generic drug manufacturers. Observers saw it as a blow to IP in that country and making future IP enforcement unpredictable. Pfizer (NYSE: PFE), the maker of Viagra, claims that the grounds for revocation were a requirement that was not in place at the time the patent was granted. Pfizer has filed an appeal in this case, which will be closely watched.

When going global, it's important to strategically address how to protect your IP. Working with a patent prosecution team that has international experience is vital. With proper planning and execution, your valuable IP can be safe and your outsourcing a success.

Rieger, JD, PhD, is a principal of with the San Diego office of Fish & Richardson P.C.

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