Patents and intellectual property rights seem to have dominated our thoughts at MMS in the last few weeks. We have recently been in the Court of the European Patent Office in Munich to successfully defend a submission by a competitor to cancel our granted Imhoflot pneumatic flotation patent on the grounds of prior art.
Then, to our good fortune, the current British government coalition confirmed plans in the budget last week to introduce a preferential regime for profits arising from patents. To be known as a “Patent Box” the intention is to introduce a 10% corporation tax rate on profits arising from patents from 1 April 2013. It is hoped that the Patent Box will encourage international companies to locate high value jobs and activities associated with the development and exploitation of patents to the UK. Next year’s UK corporation tax rates will be 26% for companies with profits above £300k and 20% on amounts below that figure. There are already a few countries that offer a similar system of domiciled companies – The Nederland’s and Spain are two examples. As just about all MMS’s revenue and profits can be attributed to our patents this is very welcome news for us.
So, assuming it does work out and we are still profitable, we will finally see a tangible return on all our efforts. This will be good, because the money we spend on developing, applying for and maintaining patents is quite a considerable amount of our non operating expenses. After so many years of maintaining patents you do question their value.
On a purely self satisfaction basis the 17th March 2011 will go down as one of the better days for MMS. We had been summoned to the Opposition Court of the European Patent Office in Munich to defend our granted Imhoflot pneumatic flotation patent against a claim of prior art by our competitor, KHD Humboldt Wedag. MMS won a glorious victory! The court found in favour of MMS and the Imhoflot patent and declared all our patent Claims both novel and inventive. The court dismissed all allegations of prior art by KHD. Each Claim for both points of novel and then inventive where attacked by the opposition patent attorneys and expert witnesses and then defended by our attorney with expert witness coming from the inventor, Dr Rainer Imhof. There was simultaneous translation of English and German. We then all had to leave the room for each decision for the court to deliberate (chairman, technical patent examiners and legal counsel). The chairman then read out the verdict and we moved on to the next Claim for deliberation. Actually waiting for the verdict was as nerve racking as I would have thought it was like at a murder trial; guilty – not guilty! When all the decisions started going in our favour the opposition attorneys then tried a few legal tricks. The best way I can describe it is as entrapment, where they got us to verbally declare something, then claimed to the court non disclosure of method. Luckily the court was having none of it. Apparently these sort of challenges to granted patents are rare. However going through the process has certainly given us the best experience in knowing how to frame future patent applications. I have to say that the opposition attorneys did themselves no favours by “challenging” the decisions of the court when they were going against them. For those who remember, think of John McEnroe in his early days at the tennis – “you cannot be serious!” Thanks must go to our excellent patent attorney, Michael Spencer of Bromhead Johnson in London. Michael has been our patent legal advisor since the start of MMS. We celebrated with sausages, sauerkraut and beer! The Court was open to the public and all the proceedings and outcome will be published by the EPO.
Why have patents? There are people who say that all patents can be got around. Certainly I can see that in the approval stage, with bottomless pits of funding, big organisations can outspend smaller ones to deny patents, unless they truly are unique, inventive and novel, there is no prior art and you’ve done all the right legal things to get there. MMS started with patents initially to protect ourselves when we started up. It’s one of those quirks of German patent law that if the owning company decides not to maintain a patent, by law they have to offer it back to the inventor. This is what happened to us. A number of Dr Imhof’s previous patents were given up by the owning company and he took them over. This allowed us to enter the flotation market without fear of challenge of our technology. Since then MMS has come up with quite a range of new ideas and processes and where we have applied for patent protection it has always been granted.
The European Patent Office estimated that an average cost of obtaining a European patent and maintaining the patent for a 10 year term was around €32,000. So it is not a cheap route to go down simply for the kudos. In addition, the costs of International Patent Cooperation Treaty (PCT) applications and then validation in each and every country you require the patent, possibly including full translation, adds considerably to the initial and annual costs.
The idea of a patent is that it is a legal barrier to others to do the same for a set period of time. However, we can see that if some big company with the resources and deep pockets wanted to do the same or get around them they probably would. We see them more as a marketing tool to demonstrate our inventiveness and cleverness, and therefore by default, that our equipment or process is improving on existing technology in terms of performance, capital and operating cost. Whilst corporately all companies will be wary of infringing patents it does not stop individuals in such companies giving it a go. We have come across quite a few instances with our and other technology where individuals in companies think they can do it better or cheaper than the patented technology. The desire to do this I think probably comes out of boredom in their job requirements and their need to utilise their abilities, or it may be just the belief that they can save their company money. These “reverse engineering” projects on our technology, which almost certainly are not know by corporate management, have come to our attention always because they have failed badly and then been attributed to us i.e. your process doesn’t work! This is a situation that gives damage to reputations and is difficult to control.
One area where patents do help is that competitor companies become wary of infringement or the perception by customers of infringement which does help the original inventing company in getting the product into the market by differentiation of product. A study in the USA showed that the average legal cost of a patent infringement case that comes to trial is over $1million. So if you are the patent owner you need to be really sure that you will win an accusation of infringement and get your costs awarded against the infringer, or the patents could become even more costly!
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