Increasingly, companies are recognizing the growing value of intangible assets including patents. More than one third of the patents granted in the United States – approximately 2.5 million – have been issued in the last 20 years alone.1 The following example is telling. The USPTO granted around 84,000 patents in 1988.2 By 2008, that number was more than 185,000 patents – a 220 percent increase in just 20 years.3
In a 2005 survey addressing global patent and technology trends, The Economist noted that “ideas and innovations have become the most important resource, replacing land, energy and raw materials.”4 The same survey estimated that “[a]s much as three-quarters of the value of publicly traded companies in America comes from intangible assets [.]”5 More recent studies are in accord.6
Companies’ focus on intangible assets – especially patents – is a global trend that is gaining traction in Latin America, and in particular Argentina. While Argentina has been slow to embrace patent rights, it will soon receive a fair deal of political pressure to get in line with the rest of the world’s focus on such rights, particularly in view of the economic growth of neighboring countries like Brazil and Chile. To compete on a global scale, businesses in Argentina need to capitalize on intangible assets including patents.
While there are several forms of intangible assets, this article focuses primarily on patents. This article provides a basic overview of the patent systems in Argentina and the United States to enable a company to evaluate its next steps in developing, or enhancing, its global patent strategy in these countries.
Patent Procurement Procedures
As established in Section 17 of the Federal Constitution, patents are considered property rights under Argentine law. Patents are granted by the federal agency Instituto Nacional de la Propiedad Industrial (INPI).
In Argentina, as in the rest of the world, patent rights grant exclusionary rights that allow the owner to determine who can practice the claimed invention. Any person or company that seeks to patent a product or procedure must meet the following legal criteria: that the invention is a) novel,7 b) innovative8 and c) useful for industrial purposes.9
INPI reviews every patent application submitted. Within the initial 180-day period, INPI runs a preliminary check to ascertain whether the application was properly filed and to determine if sufficient information was disclosed that would allow INPI to assess the legal criteria for issuance.10 If the preliminary check is acceptable, it performs a preliminary technical analysis of the claims and features of the invention to determine whether they are described clearly enough for publication. As part of such analysis, INPI will also determine if the invention has been previously published, invented or patented. At this stage INPI can request that the applicant clarify terms or rectify any errors in the application. If the applicant fails to reply or meet INPI’s standards then the application is rejected.
Once the application has been published, third parties can challenge the application and provide evidence to support such challenges. The publication period generally lasts 60 days.11 If the challenges are rejected then the patent will be issued. Provided that maintenance fees are paid, an Argentine patent remains valid for 20 years from the date of issuance.12 If maintenance fees are not paid, the patent will be cancelled.
As Argentina is a member state of the Paris Convention, any person who has registered a patent in another member state country can file a separate patent application in Argentina within 12 months from the filing date of that patent application, giving the applicant the benefit of the filing date of the first application.13 Unfortunately, Argentina is not yet a member state of the Patent Cooperation Treaty (PCT), but with most of Argentina’s business partners in Latin America becoming members, it is likely that Argentina will soon follow suit. In fact, a recent article in Argentina acknowledged that foreign companies are hoping that certain aspects of the Argentine patent system will be updated to be more like the patent systems in the United States and Brazil.14
In a recent report by the United States Trade Representative, the United States noted that Argentina continues to make progress in decreasing its backlog of patent applications and commends their implementation of a patent recordation and alert system.15 However, Argentina still has lots of work to do in order to be able to provide adequate patent protection.
In the United States, as in Argentina, a patent is a property right granted by the federal government to an inventor. Any person who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent.”16 The USPTO explains that “practically everything that is made by man and the processes for making the products” may be patentable.17 In addition to falling within this subject matter, the invention must be:
- New: If the invention was known or used by others in the United States, or patented or described in a printed publication in this or any other country, before the invention thereof by the applicant for patent, a patent cannot be obtained.18
- Not Previously Sold: If the invention was patented or described in a printed publication in this or any other country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States, a patent cannot be obtained.19
- Non-Obvious: The subject matter sought to be patented must be sufficiently different from what has been used or described before such that the subject matter as a whole would not have been obvious to a person having ordinary skill in the area of technology of the invention. In other words, the invention must not be an obvious extension of what is already known in the field.20
- Useful: The invention as a whole must be useful and accomplish a practical application. That is, it must produce a “useful, concrete and tangible result.”21
After the application is filed, the USPTO examiner determines whether the proposed invention meets the legal requirements for issuance. The examiner may identify certain deficiencies in the application; for example, that the invention is not new or is obvious in view of existing prior art. The inventor then has an opportunity to respond by amending the scope of the invention or providing evidence supporting its patentability. This process generally takes several years. The USPTO receives patent applications at a rate of more than 350,000 per year and currently faces a backlog of about 740,000 applications.22 Because of this, the USPTO reported in 2008 that it takes an average of 32.2 months for a patent to be issued.23
Once the patent issues, it affords the inventor the right to exclude others from making, using, offering to sell or selling the invention in the United States or importing the invention into the United States.24 Generally, the term of a new patent is 20 years from the date on which the application was filed.
Patent owners and applicants have a variety of ways to enforce patent rights in Argentina. As mentioned above, Argentina is a member state of the Paris Convention and TRIPS. The provisions set forth by these treaties are applicable in Argentina as Argentine law. Additionally, Section 17 of the Constitution protects patent rights,25 which is a way to grant a higher degree of protection and foster patenting activity. Unlike many countries, in Argentina both patent infringement and contributory infringement are subject to Argentine Patent Law (APL), TRIPS, and civil and criminal laws.
APL, TRIPS and Civil Law Protection
Argentina case law reveals that federal courts are more inclined to issue injunctions designed to force patent infringers to cease unlawful activity.26 However, APL does not provide for punitive damages, so compensation for patent infringement will be limited to the actual economic losses the patent owner has suffered. Such damage awards could be higher if the patent owner shows the infringer knew about the patent and willfully infringed it. However, damages awards for patent infringement are generally not high. On the other hand, this makes patent litigation in Argentina less expensive than in other countries because plaintiffs can retain counsel using contingency fees.
Recently, APL has been amended to add another judicial procedure to enforce patent rights and preempt potential patent infringement. This amendment now requires the patent owner and the alleged infringer to appear before a federal court and submit their dispute to an impartial expert, who will provide the judge with an opinion and sufficient additional information to decide the infringement dispute. While the contours of this procedure continue to develop, two landmark decisions27 show that this preemptive procedure, in practice, undermines preventive patent enforcement actions, because it ties the court’s decision to an expert opinion while the alleged infringing activity is carried out without any restrictions and without issuing any temporary injunctive relief.28
Criminal Law Protection
A person who infringes a patent or contributes to the infringement can also be sentenced to up to three years in jail and related fines. However, criminal juries tend to be lenient with patent infringement crimes and are not interested in convicting patent violators. Criminal prosecutors tend to allocate their limited resources to more actively prosecuting other types of crimes, such as murder. As a matter of fact, there have thus far been no convictions for patent infringement.
While Argentina has been developing enforcement procedures, the United States has well-established procedures that accord a patent owner broad rights to protect patented inventions. Once a patent issues, the owners have a variety of options for deriving value. If the patent covers a product or process that is marketed and sold, the patent owner can enjoy the competitive safeguards a patent affords. The owner can also license the invention, which can be lucrative. Patent licensing alone has generated billions of dollars worldwide.29 In the United States, litigation involving so called non-practicing entities (NPEs) has steadily increased over the past few years. In fact, some studies estimate that 26 percent of overall patent infringement suits in 2006-2007 involved NPEs as plaintiffs.30 One reason patent owners in the United States rely on litigation to derive value is because of the relief that can be secured once infringement has been proven. Apart from injunctive relief, a patent owner may be entitled to damages for past harm, which generally includes lost profits and/or a reasonable royalty.31 The court in its discretion can also enhance damages up to three times for willful infringement.32 Also, if a case is deemed to be “exceptional,” the court has discretion to award attorneys’ fees.33
The damages that result from patent litigation can be significant. The median patent damages award from 2001 to 2007 was US$3.8 million dollars.34 This past summer alone, however, a jury issued the largest patent verdict in US history (US$1.67 billion)35 against Abbott Laboratories, as well as a US$240 million dollar judgment against Microsoft.36 In fact, in the last five years alone, there have been at least 10 patent infringement actions where the damages awards have exceeded US$100 million.37
These damages awards, coupled with the threat of injunctive relief, force infringers to take the threat of patent litigation seriously.
Similarities and Differences
The Argentine and US patent systems are similar in regards to patent procurement. There are certain novelty requirements that must be met and there is significant interaction between the issuing organization and the inventor. The two systems, however, vary significantly in the enforcement of patent rights. The US patent system has developed statutes and case law that afford patent owners significant damages if infringement is established. As noted above, recent jury awards show that damages can reach hundreds of millions of dollars. When infringement is established, US courts are willing to grant injunctive relief, when appropriate.
While the laws in Argentina afford patent owners significant protection and relief against infringement, patent case law and doctrine are still evolving. Argentine intellectual property doctrine recognizes the policy that intellectual property rights must be protected – even to the extent of imposing criminal liability for infringement. However, Argentine courts have yet to issue landmark rulings awarding patent owners significant damages to remedy infringement. Moreover, in patent enforcement, there are concerns over using independent experts to advise the court on resolving patent disputes. This may ultimately detract patent owners from seeking to enforce their patent rights.
In this day and age of fading boundaries, patent rights protection must be sought around the globe in a coordinated and consistent manner following a worldwide strategy. While the patent enforcement systems of the United States and Argentina may differ, it is clear that companies need to be aware of patents and their corresponding patent systems, because the key to success lies not only in knowing how to appropriate technology but also in being able to complement and continue such initiative with the necessary legal resources to realistically exclude others from misappropriating it.