Big Blue proposes new type of patent right – the EIP

There’s an interesting article in this months edition of iam-magazine in which Joff Wild interviews David Kappos (VP IP law at IBM) about a proposed new type of patent right which he says Europe should adopt.

The right, called the European Interoperability Patent (EIP) would be an EU-wide patent granted by the EPO.  It would not be possible to obtain injunctions for infringement of EIPs, but instead, any person can obtain a license of right (in return for a reasonable royalty).  Infringement and royalty disputes would be determined by the courts.  The EIP would not replace current patents, but sit alongside them as another option.

David claims that the EIP would significantly reduce costs and be a boon to many types of company.  In Europe, there would not be such a pressing need to get translations for each country, and prosecution and enforcement could be done centrally.  

The Community Patent, in a slightly watered down form…

Some problems highlighted by Joff:

  • Companies in the life sciences sector would not be happy with this right.
  • How can SMEs grow when bigger rivals always have the opportunity to take a license of right to their inventions (under the EIP)?

David’s responses to both are basically that it wouldn’t replace any existing right.

David also points out that companies which did not use the EIP, but still played in open standards and interoperability would have some explaining to do (ie they would be seen as free-riding off everyone else’s innovation).

Some brief thoughts:

  • Joff made the point that the EIP would very neatly fit IBM’s strategy of having an enormous outlicensing program.  (It seems to me to also benefit large companies that can generate a lot of inventions for EIP protection.)
  • David and IBM are to be congratulated for thinking about this issue and coming up with a first suggestion for discussion.
  • I think that it is inevitable that open source and interoperability will only increase in importance over time.  Companies with strategies which integrate these approaches will do much better over the long term.
  • The suggestion also hits at what has been termed ‘the myth of exclusivity’ – that in most industries patents rarely confer an absolute monopoly – there’s always another technical solution.  So, it is better to get your solution widely adopted and early.
  • I wonder whether an EIP-type right would eventually effect the value of ‘reasonable royalties’ being paid.  If you’re going to have to license it anyway, then there’s little argument about the price you can command (you’ve lost exclusivity as an economic driver).  Perhaps this can be remedied by reference to royalties commanded elsewhere (until the whole world as EIP equivalents…)
  • Faced with the choice, though, you can see that many companies would not relinquish there (normal) patent rights in favour of an EIP or similar right.  
  • Maybe it would operate as a credibility chip to allow companies to ‘play’ in the open source space, but still, I’m sceptical, I must admit.

Still, an important discussion which needs to continue.  What do you think?

7 Comments on “Big Blue proposes new type of patent right – the EIP

  1. This sounds like another manner by which companies with deep pockets can add to their battery of protection and further use their financial power to deter competition from SMEs and generics.  I cannot see how this would work alongside corresponding EP and national patents which may also be filed.
    Our patent systems are open to abuse and the more patenting options we add to the mix, the easier it is for abuse to occur – one only has to look at the Australian Innovation patent system to see that big companies have taken advantage of a right intended for SMEs. 
    The EIP as proposed appears to be another such system.  Instead of filling the courts with expert witnesses in validity hearings, the EIP will seeminlgy replace them with accountants for licence fee hearings.
    The principle of a patent system that does not offer an absolute monopoly is not a bad one, but whilst it runs alongside current patent systems instead of replacing them, I believe ithe EIP will only cause more problems for the SMEs that it is said to advantage.

  2. Hi LeightonThanks for your great comments.An alternative would be to replace the current system with something like the EIP.  Mmm – this is of course ignoring the enormous (insurmountable?) political problems of this approach (read – Europe still can’t agree on a common patent or a single forum for litigation).Of course, companies that are usually challenging patents (such as generic pharmaceutical companies) would be happy – no injunctions, and an automaric license, with the retained possibility of invalidity (and arguably a potential cap on damages at the reasonable royalty rate).Patentees, however, would say that the incentive of exclusivity (and hence higher prices) would be taken away.  The argument (which we’ve all heard time and again) would then be that the incentive to innovate would be seriously undermined.What do you think?

  3. I agree with the benefits to generic companies if the system were to replace existing patent systems with the caveat that  there would still likely be a lengthy and possibly expensive delay whilst licencing fees are decided in court, the outcome of which may determine whether or not the generic entry is financially feasible.
    If the licencing fees attributable to an invention are based on the relative ‘leap’ in the state of the art (such as the basis for the Australian pharmaceutical reference pricing system) then big pharma companies would have incentive to innovate in a more substantial manner (to earn higher licencing fees), rather than focussing on ‘me-too’ drugs or incremental improvements on existing ones. This would also provide reasonably high price maintainence for generics, but offers opportunities for them to serve markets that the innovator has no interest in. Same goes for non-pharma patenting too.
    This innovation argument goes on forever, but these are just my thoughts, based on my everyday dealings with ‘incremental’ patents that waste valuable time and money that the patient ultimately pays for.  Unfortunately, big pharma are objecting to the legislation introduced by the only country taking the lead on this issue – India

  4. Thanks LeightonOn the topic of alternative (non-patent) economic incentives for pharmaceutical R&D, readers may listen to the podcast of a presentation by James Love (Director of Knowledge Ecology International) – A New Trade Framework for Global Healthcare Research and Development’James discusses the concept of ‘prizes’ for pharmaceutical research (but not prizes in the normal sense of the word – he’s an economist).  Before you ridicule the concept, listen to the podcast and I think you’ll agree that it is extremely well thought out.Though, I suspect it has some way to go to become a truly practical alternative.

  5. Pl explain in detail in a simple language regarding new type of
    patent right,so that i can put my own opinion in this regard.

  6. Hi NarayanThanks very much.As far as I understand it, the only differences from current patents would be that:any third party can come and obtain a license under the patent (the patentee has no choice about this);the patentee can not obtain an injunction under the patent. Instead, the patentee can still sue for infringement, but only recover damages or loss profits – which would amount to the sum that would have been paid under the automatic license above;I expect that disagreements over the proper royalty rate (under the automatic license) would be common – and hence would need to be determined by the courts.However, IBM’s proposal is to leave current patents intact.  Consequently the above procedure would only work in those situations where the patentee obtained this new EIP patent and does not have a normal patent.Does that help?

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