Every United States patent contains a grant to the owner of the right to exclude others from making, using, offering for sale, or selling the subject invention in the United States or importing the invention into the United States. However, many businesses, especially small business and micro-entities, are unaware of the need and/or are unfamiliar with the procedures to extend patent rights outside the United States. This article describes some business factors one may consider when making the important decision to file for patent protection in foreign countries.
An owner of rights to an invention in the United States may consider whether she can profitably exploit that invention in foreign marketplaces, either actively or passively.
Active participation in a given market may mean selling a product to foreign customers. Before filing for patent protection in a given country, the owner may consider whether the potential for substantial sales of the product exists in a target market within that country. Demographics of a prospective consumer base may come into play, such as population size, wealth distribution, cultural norms, geographical distribution, and technological development. The owner also may consider whether strong competitors already are serving the target market, or are conducting manufacturing, assembly, or research in the same (or different) foreign country for sale to that target market. If the owner’s business does not have a realistic opportunity to win market share, even with the advantage of a right to exclude competitors from manufacturing and/or from selling copies of the invention, then the cost of foreign patent prosecution may not be worth the investment. However, holding a foreign patent may be worthwhile if doing so enables the business owner to expand market share in a target market, to demand higher prices for the protected product (both abroad and at home), and/or to enhance the competitive position of the business.
Passive participation in a given market may mean internationalizing ones business through another foreign or multinational company, rather than operating in that market directly. Internationalization may be in the form of licensing, franchising, exporting, and/or foreign direct investment. For example, the owner’s business may use foreign patent protection as the basis for generating revenue by licensing to others the right to sell or manufacture the business’s products abroad. Without patent protection to restrain competitors operating in the country of filing, the value of the line of business to potential foreign collaborators may be negatively impacted. The same holds true for foreign investors: a business seeking financing or possibly an acquisition may be able to increase its value through foreign patent protection of its products.
More next time on legal factors to consider when deciding to file for foreign patent protection.