How can a party use hedging to prepare for the risk of infringing?
( China IP )

The following answers are provided by Yu Gang, patent agent of Beijing Kangxin Intellectual Property Counse.

Q1: How can a party use hedging to prepare for the risk of infringing? A1: Patent retrieval is necessary during R&D, in order not to infringe upon others' patents. We have to know both ourselves and our competitors so as not to improperly take another piece of the pie. In the second place, regularly tracking your rivals is important to keeping up with how the market is moving. Once torts are found, they must be barred immediately. Risks are everywhere but hide nowhere. Some potential losses can be avoided or deduced through scientific precautions and hedging measures. The IP early warning analysis is centered on providing notice of infringement risks.

Q2: Protected as a patent or a technical know-how, which one is better? A2: In essence, patents applicants must exchange a degree of confidentiality by providing a "techniques disclosure" in return for a "techniques monopoly". The patent owners acquire exclusive rights according to the law, while the owner of technical know-how obtains similar exclusive rights through confidential means of their own. Either of them cuts both ways, hence the final choice between the two depends on innovators'specific needs. In principle, applicants must evaluate the possibilities of reverse engineering. For those inventions whose technical know-how can be easily obtained through reverse engineering, preemptive patent applications should be filed. On the other hand, the Coca-cola Formula is widely seen as a typical example of the technical know-how protection.

Generally speaking, applications for product patents and process patents are handled differently depending on the difficulty of collecting evidence when infringements occur. In addition, those who anticipate their innovations may be transferred or licensed are best advised to obtain patents to protect themselves from others who may attempt to file preemptive registrations.

Q3: Is it possible that secrets may be divulged during the patent application? Is it possible that modifying an existing patent will constitute infringement? A3: Patent applications will not result in secret divulgement of any kind. In the first place the patent agent and the client sign a confidentiality agreement to guarantee no secret are leaked during the commission contract period. Moreover, not all technical features will be disclosed in the patent application. Patent applicants only seek for protections covered as much as possible by the claim of rights in the application, for example, through a formula.

Modifications on an existing patent fall under innovation, and patents for modifications thereby can be obtained. However, directly using these modified patents still constitute infringements for prior arts are involved. Therefore, certain comprise settlement needs to be reached between the modifier and the prior patent owners to get the patents through cross-licensing or transferring. Simple imitations, or cheap copies, are typical torts.

Q4: What are the classifications of patent licensing? Could you describe the difference between licensing and transferring a patent? A4: All patent licenses fall under the following three categories:

1. Sole licensing contracts The sole licensing contracts allow a licensee to enjoy the exclusive access of the patented technology within the scope of the contract.

2. Exclusive licensing contracts Under an exclusive licensing contract, a licensee is approved to produce and sell products using the patented technology within the territorial scope, time span or methods stated in the contract.

3. Ordinary licensing contracts Ordinary licensing contracts are the most common. The licensor permits the licensee to apply the patented technology within the scope of the contract while reserving the right that he/she and any third-party may have the access to the patent.

The biggest difference between licensing and transferring lies in the ownership of patent right. With a license, the prior owner still holds the patent right in hand. When a patent is transferred, the patent right is legally transferred to another party. One point worth mentioning is that the patent licensing must be registered with the Intellectual Property Office. With a patent transfer the transaction needs to be recorded.

(Translated by Athena Hou)

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