IP Strategy: where to file your first patent application?

We often find ourselves helping companies reconsider their IP strategy in view of the way that their company evolves. We are often finding that there is no IP strategy at all or that the company has not been thinking things through.

One of the most important decisions when designing an IP strategy is where should a company file its first patent application.

This important issue is often dictated by coincidenceshistorical reasons, rather than strategic considerations.

The US bias of US patent attorneys

For example, almost every small company with a strong presence in the United States or with US-based patent attorneys, tends to file its first application with the US Patent and Trademark Office (USPTO), sometimes as a provisional application.

Filing the first application in the US is rarely the best strategy for companies based out of the US (more on this below). However, the DNA of US-based patent attorneys is to recommend filing the first application in the US and applicants rarely second-guess their patent attorneys.

To understand why US patent attorneys almost always recommend their foreign clients to file their first application in the US, we need to understand a number of things:

  1. A legal requirement of most of their clients – most of IP owners in the US are US companies that tend to invent in the US. When an invention is invented in the US, there is a legal requirement in US law that the first patent is filed in the US (there is an alternative, but it is extremely cumbersome). The requirement is called a foreign filing license requirement and it doesn’t exist in most countries. US attorneys are therefore used to filing the first application in the US and don’t always pick-up on the fact that they have a foreign client in front of them who is not a subject to a similar requirement.
  2. It is easier for US attorneys to file in the US – US attorneys are trained and are familiar with US practice which is often very different to other patent practices. It is easier for them to advise on US law. They can operate in the US without the help of foreign counsel.
  3. Most US attorneys are focused on US law – The US is still the largest and most important market in the world for innovative products (with China breathing in its neck). It is also the birthplace of an incredible amount of innovative products. Almost every US company focuses on the domestic market first before venturing out of the US. This is not the case in other countries. As a result, US practitioners tend to very very well-versed with US law but have varying levels of knowledge on foreign law. This is rarely the case in other countries. Most non-US practitioners are not experts of US law but have at least some experience dealing with US law and US attorneys and would be able to provide some guidance or at least identify the best point of time to contact a US practitioner.
  4. The false myth of provisional applications – provisional applications have been introduced by the USPTO to provide a low-fee, low-requirements mechanism for inventors to submit applications in order to encourage inventors not to rely on the first-to-invent rule (applicable only in the US and only in the past). The result has been that many IP owners are convinced up until today that they can avoid making a proper disclosure by filing a provisional application and so get the same protection for less money.

The dominance of US practice can create anomalies. Many companies engage US patent attorneys even when they are not based in the US. This is particularly true for UK-based companies that often engage a local office of a US firm or have R&D activity in the US. It is even more true for Israeli companies – the Israeli patent profession was created by US practitioners and many active attorneys in Israel hold a US license. Israel is strongly connected to the US politically and ideologically and so the presence of US practitioners remains very strong. The Israeli patent law, however, is based on British law and has no foreign filing license requirement (apart from security-related inventions), a fact that is (un)conveniently ignored by the profession.

 

Why is filing the first application in the US rarely the best strategy for non-US companies?

Most companies have very good reasons to avoid filing the first application in the US if they don’t have to.

Here are a few:

  1. Different drafting practice leads to future problems in other countries – US examiners focus on the claims. They rarely look for support for the claims in the specification. Some US case law led US attorneys to recommend against including prior art in the background. Most other countries take the opposite stance. European, Japanese or Chinese examiners would look for strong literal support for all the claims within the specification. They would also want to understand how the invention differs from the prior art.

    This different approach leads to problems when the application is eventually filed in other countries. Sadly, problems with support or lack of background typically cannot be fixed at a later stage.

    In other words, it is often possible to turn an application drafted based on a European standard into an application that would be compatible with what US examiners are looking for, but it is rarely possible to do the opposite.

  2. Slow, arguably low quality, search – the USPTO made a lot of progress reducing the backlog and examining applications quicker but it still takes about 2 years, on average, to get the first office action (examination report). This is drastically slower than the typical 6 months in the UK or Europe. Having a quick and high quality search that arrives ahead of the PCT filing deadline can be a great benefit as it allows the applicant to focus the application, improve it or in extreme scenarios where the search finds an identical invention, drop the patent and avoid spending unnecessary money to prosecute an invention that isn’t new, thus diverting funds to better inventions with better chances of obtaining protection.
  3. Expect bad news – US examiners are incentivised to not rush to grant applications. In 80% of the cases, they will come back with a first fully negative examination report, telling the applicant that none of the claims are allowed. Whilst applicants don’t need to get overly excited about it and they rarely do, an ongoing repetitive process of responding to office actions is just the way things are done in the US. It is great to have the option to argue but for a truly innovative invention, it is even greater to have an examiner telling you that your application deserves a patent, straight away, without taking you through an iterative process. For good inventions, European or UK examiners will more often just come back saying “yes, you can have a patent”. This is something encouraging to tell investors and also feels quite good. Young companies need good news, and filing out of the US is a good way to get some.
  4. Loss of opportunities to make use of corresponding cases – good news in Europe are not just relevant to Europe. They are relevant to other countries including the US. An early grant in Europe opens the door for an accelerated examination process in the US, with a higher chance of grant in the US. This option is not available when going directly to the US.
  5. Disclosure requirements – having a pending application in the US for a long time means that every time something comes up in a different country it needs to be disclosed to the USPTO. It means more forms, more money and more delays.
  6. A desired delay can be achieved better in different ways – many IP owners are sympathetic to the argument that a quick process generates good news but feel that this does not apply to them due to their need to manage their cash flow. The argument goes “I don’t actually want my patents to be granted quickly. I want examination reports to come as late as possible”. Cash is the bloodline of any company so this is a fair argument. In such circumstances, the route provisional – > PCT -> national phase would indeed slow down the process significantly. However, the same result can be achieved by, for example, submitting a patent application in the UK without paying for search or examination, or submitting a patent application in, say, Canada. The primary difference is that if the company’s situation changes, it have more flexibility to rush things forward if needed.

    Another important point is that having an early indication of patentability does not mean that the applicant HAS to rush the examination forward. It just means that the applicant has a better idea, earlier on, what is the likelihood of the application being granted.

 

So when would it be a good strategy to file the first application in the US? 

  1. Business method / software patents – The US used to be the go-to destination for software patents as it used to be more willing to allow these type of patents. Although this is no longer the case, there are still incidents where a software patent would clearly not be allowable in other countries and might be allowable in the US. This could be a good reason to start in the US, and potentially stick to the US.
  2. Low quality patents – when the innovative value of patents is questionable and there are good chances they will never be granted, a slow-moving, claims-focused application in the US could be the answer. Most countries look at the patent as a whole and would throw out a bad invention. The US examiners look at the claims and may allow a claim to go through even if the invention isn’t very much, well, an invention. And if not, the US would at least allow an endless examination process creating some uncertainty for competitors – surely a positive thing!

 

So where should you file the first application if it doesn’t fall into the categories above?

This depends on where you are based. We were historically bullish about the UK as a filing destination for both UK and Israeli companies in view of the quick, high-quality search, the low cost and the opportunities to amend or withdraw as needed.

Other countries have different arrangements. For example, the Italian patent office would pay the European search costs for applicants. There are similar beneficial arrangements for other applicants in Europe so it is always important to check all the options.

The bottom line is that applicants should decide where to file based on their business interests and what they look to achieve. To do that, they should obtain comprehensive advice from experts on global portfolio management and not fall into the trap of doing what everybody else does!

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Zeev Fisher

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