December, 2010

The prime objective of granting patent is to make the new inventions and technology available to the society for its commercial use and for improvement. The inventor makes disclosure or reveals knowledge to the world and in consideration a right is granted by government for exclusive use or for licensing the technology to others. In order to achieve the above objective, the Patent Law in India and elsewhere generally provide for certain powers to the regulating authorities to obtain necessary details about the actual commercial exploitation or the working of the granted patents. In India, section 146 of the Patent Act, 1970, empowers the controller to obtain the details of actual working of the patents from the Patentee or Licensee at periodic intervals in form 27. The aforesaid objectives are also stated in section 83 of the Patent Act which inter-alia include the followings:

(a) that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay;

(b) that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article;

(c) that the protection and enforcement of patent rights contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations;

(d) that patents granted do not impede protection of public health and nutrition and should act as instrument to promote public interest specially in sectors of vital importance for socio-economic and technological development of India;

(e) that patents granted do not in any way prohibit Central Government in taking measures to protect public health;

(f) that the patent right is not abused by the patentee or person deriving title or interest on patent from the patentee, and the patentee or a person deriving title or interest on patent from the patentee does not resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology; and

(g) that patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public.

There are provisions in the Patent Act whereby the controller can either revoke or alternatively grant compulsory license for non-working of the Patent for three years or wherever it is found that the objective of granting the patent are impeded by the patentee.

One of the recent malpractice of the patent right is by virtue of purchasing the patents from the patentees in financial distress and enforcing the same against purported infringers. This device is popularly known as "Patent Troll" and is used by Non Practicing Entity (NPE) or Non Manufacturing Patentee (NMP).

A similar version of the above kind of malpractice is also adapted by 'Patent Sharks'. The firms in technology sector face great difficulties from the Patent sharks. These are the firms, who acquire various patents by means of acquisitions, licensing agreements or through R&D and these acquired patents are kept on hold and hidden from the public domain.

These patent sharks then wait for an unintentional infringement of those acquired patents from other inventors/applicants and then sue them for which they receive very lucrative compensations.

In order to remain free of the hassles imposed by these patent sharks, tech firms should maintain standardized technologies so that they can add or remove technological features in order to make them patentable and reform their R&D processes instead of relying on legal remedies, through Freedom to Operate (FTO) Analysis.

It is observed from the market that some business entities are engaged in the business of buying and selling of technologies, without any intention to practice the patent.

Intellectual Ventures Management LLC, one of the business entity engaged in patent licensing claims to hold over 30,000 patents, has earned almost USD 3 billion through licensing. It has said to have recently sued nine tech firms for their Patent Rights. It has been publicized by certain people that the lawsuits filed by Intellectual Ventures resembles patent troll like ambitions, which may not be true. NTP Inc. is another example of a Patent Troll which has won a USD 612 Million damage award against Research In Motion (RIM) which collects data on behalf of Blackberry.

It is therefore important lesson for those intending enterpreneurs who desire to enter into the business of acquiring technology from Research Institutions either by sponsoring a research project or otherwise solely for the purpose of holding the same either to bring royalty revenue or to sell the same out on opportune time without commercial exploitation at any stage by manufacturing or use of the concerned technology.

However, the restriction for grant of a patent for a software, as per the provision of section 3(k) of Indian Patent Act, 1970 provide relief from the attack of Patent Trolling to some extent.

We wish you Happy New Year 2011.

- Dr. D. R. Agarwal