When other people's patents get in your way...

Date: 2013-11-01
Author: Carol Burnton

Have you ever said to yourself, “my product isn’t new so I don’t need to worry about patents” or “the success of my business depends on product quality and developing customer loyalty. Patents don’t generate profits so I don’t bother with them”? I am sure these and similar questions have occurred to many of you. 

While the sentiment behind these thoughts may be justified, the conclusions are a little risky. Yes, there are many cosmetic and personal care products that are not new and will not be patentable. There are also occasions where the expense of protecting your invention will not be justified. However, if you make the, hopefully well informed, decision not to pursue patent protection for your new product, you are not yet done with the patent world. 

The next issue is other people’s patents. 

A patent owner has the right to stop anyone else using their invention

The patents “out there” are commonly referred to as the patent landscape. Each Australian patent gives the patent owner or “patentee”, the exclusive right to exclude others from making or using the patented invention in Australia. The patentee also has the exclusive right to exclude others from selling, in Australia, products that are the invention or are made from the invention. There are other rights in the Patents Act 1990 but you get the idea. The summary is that if you are using their invention in Australia, the owner of an Australian patent has the right to stop you from doing so and sue you for either damages they suffered or the profits you have made. 

If the patent landscape were an actual landscape, there would be protected areas with “no trespassing” signs and areas where people are free to roam. You want your business to stay in the free public areas. If you really want to go into a protected area, you will need permission ie a patent licence. 

Sometimes people become concerned that with the large number of patents being filed all the landscape will eventually be taken. To some extend this is true. However, it is useful to remember that patents are only enforceable for a maximum of 20 years (or 25 years for pharmaceuticals). Also, because the patent renewal fees for the final years of patent term are fairly expensive, patentees only keep their patents in force as long as those patents are more valuable than the renewal fees. So there is some balancing in the creation and ceasing of rights as the landscape evolves.

What if you accidentally trespass in protected area?

If you receive what is commonly called a “letter of demand” advising you that you may be infringing a patent, go straight to your attorney for advice. It is possible that the person who sent the letter does not have all the facts and you don’t even infringe. If that is the case, a letter explaining why you do not infringe the patent may be enough to resolve the problem. If there is a more significant problem your attorney, sometimes in collaboration with a patent lawyer, will help you find the best solution.

Protecting yourself from a pesky patent infringement problem

A letter of demand advising you that your recently launched cosmetic infringes someone’s patent can be frightening and, potentially, devastating to your business. So how do you minimise the risk of being forced to cease product sales?

Generally, forewarned is forearmed. You can significantly minimise the risk of patent infringement by having your patent attorney conduct a search for relevant patents before you commence sale of your product. These searches are generally called “freedom to operate” searches. Your attorney will identify relevant patents and give you an opinion on whether you are free to sell.

Patent infringement is not always clear cut. If your attorney identifies a patent risk, they will then help you understand the significance of the risk so you can then make an informed decision to launch your product at risk or adjust your product to minimise the risk. There is nothing inherently wrong with taking on risk. It is just better if you realise that is what you are doing. There is nothing stoping you launching you product blind, without conducting any search. However, this option only makes sense if your business can survive pulling a product. If the choice was mine, there is no way that I would launch without doing some sort of risk assessment. That is because I know the outcome could be much worse than being forced to pull my product. I could be liable for significant formal costs in damages or accounting profits but, in addition, pulling a product could make me liable for breach of a contract to supply the final product or breach of a contract to buy goods from my raw material supplier. Finally, while unlikely, I could be liable for wilful damages of up to three times the amount of ordinary damages if I am found to have wilfully infringed a patent.

The key is to find the option you are most comfortable with by balancing the expense of the search and the damage that could be done to your business if you launch a product and are sued. Another option, particularly if you are importing a pre-formulated product from overseas, is to seek indemnity for patent infringement from your supplier. Your attorney will help you understand each risk as it applies to your situation but, in the end, the choice is yours.

What is the best timing for conducting a search?

If you have decided a freedom to operate search is a good idea, the next thing to consider is the best timing for the search. Do you want to do the search immediately before commencing sale, before you enter into supply contracts or before you complete your formulation? Do you want to conduct the search at the product concept stage and then do a search update just before commencing supply?

There are benefits to knowing the patents that are “out there” before completing product development. For example, if you find your proposed new formulation may infringe a patent, there may be a way for you to tweak the formulation so that you avoid infringement. You could also avoid significant re-formulation costs by knowing the patent landscape before commencing product development. You can specifically design a product to avoid all relevant patents. 

On the other hand, you don’t want to pay for a patent search and then find the search related to a non-viable product design, which cannot be sold for regulatory, functional or aesthetic reasons. Again, it is your decision as to how you want to approach your product design and your attorney is there to help you understand the benefits and risks of each decision.

Conclusion

Navigating the patent landscape can be a tricky business. However, awareness of the patents in your technology area can help you to:

  • avoid patent infringement,
  • save significant costs in redesigning your product,
  • avoid being forced to breach your supply contracts; and
  • even potentially avoid the cost of patent litigation. 

If there is one thing to take from this article, it is for you to include the possibility of a freedom to operate patent search as one of the many factors considered during your product development. That way, if you launch at risk, at least you made the conscious decision to do so.

 

This article has been published in: The Science of Beauty, October 2013, volume 3, number 2.