By Dan Harris
At least once a week one of our international manufacturing lawyers will get an email that starts with something like the following:
We just wrapped up the patent on our newest product and we are now ready to start shopping around for getting it manufactured overseas. Is there anything else I need to protect that product from being copied?
Because what’s done is done, we virtually never tell the company that the huge sums it has already spent on its patent may have been completely wasted or at least could have been far better spent elsewhere, because what’s the point in trying to get someone to cry over spilled milk? But guess what? In most cases it probably was.
There is a massive and unfounded love for patents by American companies. I see this as an historical remnant from when the U.S. economy was far more domestic and far more focused on industrial as opposed to consumer goods. Those days are over and so people need to just stop it with their OTT patent love. Just to be perfectly clear, I am NOT saying patents never make sense, because they obviously do. What I am saying is that they are being bought and paid for far too often by companies on the international stage and these expenditures often actually weaken IP protection.
How can getting a patent weaken IP protection?
Let me explain…..
Patents are expensive. I know I keep saying that but that is because it is important to realize that. If you are a big company that can afford to spend for every single thing you need to protect your IP, you can stop reading now. This post is intended for the 99% of companies that need to make budget choices even on how they will protect their IP. Truth is there are countless things a company can do to protect its IP, including the following:
- Patents. In every country in which it might have its product manufactured or sold.
- Copyrights. In every country in which it might have its product manufactured or sold.
- Trademarks. In every country in which it might have its product manufactured or sold.
- NNN Agreements, with every person or company to which you might reveal confidential information.
- Mold and Tooling Ownership and usage agreements, with every company that will be making your product.
- Product Development Agreements, with every company with whom you work on developing or even refining your product.
- Manufacturing Agreements with those companies that will be manufacturing your product.
- Non Compete Agreements with your employees, your suppliers, your vendors, and others.
- Trade Secret Agreements with your employees, your suppliers, your vendors, and others.
- Constant Monitoring of the Internet and the physical world for counterfeit or infringing products. See Getting Counterfeits off Alibaba: Anger is NOT a Strategy.
- Take down letters and cease and desist letters to stop the selling of counterfeit or infringing products.
- Raids against counterfeiters. We will be writing more about these in the next few weeks.
- Administrative actions.
- Police assistance.
I could go on and on. The whole point of the above is that there are countless possible weapons in an IP protection arsenal and the best ones for your business are the best ones for your business. See How NOT to Lose Your Shirt When Having Your Product Made Overseas, Part 3: What Makes Sense for you is What Makes Sense for YOU. What this really means is that the last thing you should do is focus on one thing (like a U.S. patent) and only after you get that go out seeking expert advice for what you need to protect your IP.
Why then with the multitude of choices am I being so tough on patents? Two reasons. One, they are really expensive to get. Figure around $15,000. But hey, you are probably thinking that this might be worth it to get the gold standard in IP protection and you might be right in some cases. But here’s the other dirty little secret about patents: They usually cost a small fortune to enforce. There are truly few things more expensive than patent litigation. In 2017, the median overall cost for a patent infringement case with $1 million to $10 million at stake was $1.7 million, according to the American Intellectual Property Law Association’s “2017 Report of the Economic Survey.” People, that’s the median for what are relatively small patent litigation matters. When you spent $15,000 on your patent, did anyone tell you that enforcing it would likely easily cost you more than a million dollars? Would you have paid for that patent had you known that? Did anyone tell you that patent protection essentially ends at the Canadian and Mexican borders? Would you have spent $15,000 on your patent had you known this? Again, I am not saying patents do not have their time and their place but I am saying that people need to stop viewing them as IP panaceas.
But wait, you may be saying, I got this patent not to sue those who violate it but to be able to get any product that infringes on my patent removed from the online marketplace on which it is being sold. In China and Worldwide: Trademarks Good, Patents Bad we explained why the “lowly” and inexpensive trademark can be so much better than a patent, especially when it comes to online marketplaces:
Let me further explain, first with patents:
- Securing a patent (other than a design patent) typically costs three to four times what a trademark costs. This is true in China, the United States, Europe, Canada, Mexico, wherever.
- If you believe someone is violating your patent and you send them a cease and desist letter to get them to stop doing so, there is a pretty good chance they will claim there is no violation. And after you explain to them why there is a violation, there is still a pretty good chance they will explain to you why you are wrong. If their orthopedic device is exactly like yours but for some relatively unimportant button somewhere, they will claim that relatively unimportant button is actually important and it means they are not violating your patent.
- If you go to the e-commerce sites on which they are selling the orthopedic device that almost certainly does violate your patent and you ask that e-commerce site to take down the infringing product, the odds are good that site will tell you that they are not patent lawyers and you will need a court order or a judgment for them to take it down. This is generally true of tall the leading e-commerce sites around the world.
- The above means that if you want to stop your competitor from selling what you see as the infringing orthopedic device you must sue and you likely will need to hire an expensive expert to prove the infringement. Few things in life cost more than patent litigation, and since my law firm does patent litigation, I know whereof I speak on this.
But trademarks are much simpler and much cheaper:
- Securing a trademark typically costs 1/3 to 1/4 less to secure than a patent. This is true pretty much everywhere.
- If you believe someone is violating your trademark and you send them a cease and desist letter to get them to stop doing so, there is a decent chance they will stop, especially if they are not in the counterfeiting business. If I brand my orthopedic devices “The Harris Special Orthopedic Device” and secure trademarks for that name and someone else uses that very same name, they are going to have a tough time claiming they are not violating my trademarks — assuming I have the registered trademark in the relevant countries.
- If you go to the e-commerce sites and request that the product that is violating your trademark be taken down (and it is in fact violating your registered trademark), there is a very good chance it will be taken down. This is generally true of the leading e-commerce sites around the world. Take the “Harris Special Orthopedic Device” as the example. It does NOT take a lawyer to know that if I have the registered trademark in China and the United States for “Harris Special Orthopedic Device” (in the right class), anyone else selling “Harris Special Orthopedic Device” in China or the United States (that did not come from me) is violating my trademark. My law firm’s success rate in taking down offending trademarks is really really high.
- And should you choose to sue for a trademark violation, proving the trademark violation is oftentimes relatively easy.
Oh, and one more thing. To grossly generalize. patent protection in China courts tends not to be as strong as in either the United States or Europe. Whereas China trademark protection tends to be surprisingly strong.
Bottom Line: Do not on your own or with the help of the Internet decide what IP protection makes sense for your international business and then pay for something. Anything. Your better course of action is work with a qualified IP professional with international expertise to map out a protection plan that makes sense for you based on your needs and your short and long term budget.
Dan Harris is founder of the Harris Bricken law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes ChinaLawBlog.com as a source of China legal and business information.