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The importance of IP in the Chemical Industry

The importance of IP in the Chemical Industry

Optimising a process, developing a new formulation, finding a new use for a compound, upgrading a reactor – chemists and chemical engineers are constantly innovating.  This innovation can generate Intellectual Property (IP) – intangible assets that can be used by an enterprise to create value.

A variety of legal means are available to protect IP. A registered trade mark can protect a product name or a logo. A registered design can protect the appearance of a product. Copyright, an unregistered IP right, subsists in a variety of works such as images, written articles and software, and legal action can be taken to prevent unauthorised copying. Confidential information, including trade secrets, can be protected by the use of appropriate contracts when sharing the information outside of an enterprise.

Patents are a form of IP that are granted for technical developments. They are particularly valuable in the chemical industry and provide a 20-year monopoly to the innovator. Patents are granted on a national or regional basis by Intellectual Property Offices around the world and maintenance fees are paid throughout the term of the patent to retain the monopoly right.

A patent protects an invention, which may relate to a product, a process, or the use of a product. The scope of the monopoly right is expressed by one or more claims in the patent, describing the features of the invention. The patent owner can exclude competitors from operating within the scope of the claims, preventing activities such as making or selling a patented product or using a patented process.

But what can I do with my patents?

Many enterprises obtain a patent, or indeed a vast patent portfolio, relating to their technology but then struggle to extract value from their patent rights. Obtaining patents can be costly, particularly if protection is acquired for multiple products or processes across a broad range of territories. Enterprises must consider their patent strategy if they want to ensure a suitable return on their investment.

Of course, many patent owners create value from their patents by launching their own products onto the market and enforcing their patent rights to prevent competitors from launching copycat products. In order for this strategy to be successful, the patents must have appropriate scope, covering not only the product that has been launched but also close variants thereof. Often a patent owner will seek to defend an exclusive position by having a patent that protects the key features of its product, together with additional patents which relate to similar products which “ring-fence” the key patent.

Licensing or sale of patents can create value for the patent owner. Having a patent portfolio in a particular technology area may allow a business to enter into cross-licensing, whereby an enterprise gains access to the technology of others by offering its own technology in return. Without its own patent rights, a business may find that it is excluded from a market because it has nothing to bring to the negotiating table. Historically, cross-licensing has been very important and visible in the electronics and telecommunications industries, particularly where industry standards are adopted. However, it can also be important in the chemical industry, particularly for complex technologies that rely upon the interaction of multiple elements, e.g. a chemical formulation containing a number of components or a chemical process having multiple steps.

A valuable function of a patent or patent portfolio is to act as an advertisement for an enterprise’s technology. This can be important for large businesses, who can point to the number of patents they have in a particular technology area as proof of their technological leadership. This can also be important for start-ups seeking investment, as patent rights will signal to investors that the start-up has technology that no other firm can offer.

Once I have a patent, can I launch my product?

It is a common misconception that once you have a patent then you will not encounter any legal difficulties when launching your product. A patent is an exclusive right, allowing the patent holder to prevent others from operating within the scope of the patent. However, it does not guarantee that your activities will not fall within the scope of a competitor’s IP rights. It is very common for the patent rights of different companies to overlap such that a new product embodying Company A’s patented technology could also be reliant upon licensing in patented technology from Company B.

The IP rights of competitors present substantial risks that must be managed. The term “freedom to operate” is used in the IP world to describe an assessment of whether the IP rights of competitors could prevent an enterprise from carrying out its desired commercial operations. In any IP strategy, ensuring freedom to operate is critical. A single competitor patent could prevent the launch of a new product or the start-up of a new plant. Indeed, enforcement of a competitor patent could mean the recall and destruction of all stocks of a new product, or could mean that a vast chemical complex has to shut down.

Managing the risks posed by competitor patents is a difficult task given the large numbers of patent applications filed each year. In 2017, over 165,000 new patent applications were filed at the European Patent Office. Of these, around 40,000 related to chemical technology. Staying aware of competitor patents is clearly a challenge.

Various tools are available to monitor competitor IP rights. Searches and alerts can be used to identify patents in a particular technology area. Targeted freedom to operate studies can be carried out before launching a new product or process to ensure that the new product or process is not within the scope of any competitor rights. Global trade mark searches can be carried out to assess whether a brand name is already protected by a competitor.

Awareness of competitor IP rights is likely to have value beyond ensuring freedom to operate. Patents are a valuable source of technical information. According to the Chemical Abstracts Service, more than 70% of new substances added to the CAS registry come from patents rather than journal articles. Using advanced searching techniques and visualisation techniques such as patent landscaping can provide detailed technical information and can offer valuable information about trends in innovation.

What next?

Once an enterprise has obtained patent protection and has ensured that it does not infringe the rights of competitors, it may be tempting to sit back and wait for the profits to roll in. However, without careful management, the costs of an IP portfolio can increase substantially.

IP Offices around the world typically structure patent maintenance fees such that they increase substantially towards the end of the 20-year period. The public policy reason for this is to encourage right holders to relinquish their monopolies if they are no longer exploiting the technology, thereby releasing the technology into the public domain. It is essential to carry out regular maintenance reviews of a patent portfolio, deciding where rights can be dropped, to avoid substantial increases in costs.

IP audits and IP valuation studies are useful tools that can be used to ensure that a business has an IP strategy that is fit-for-purpose and an IP portfolio that can create value from innovation.

Who can help?

Patent Attorneys are experts in IP law and can assist with all aspects of obtaining and assessing patents. Most Patent Attorneys based in the UK are qualified both as Chartered Patent Attorneys and European Patent Attorneys, having legal training in IP law and a degree in science or engineering.

This article was written on behalf of the Chartered Institute of Patent Attorneys by Maeve O’Flynn, Associate and Patent Attorney and Stuart Raynor, Partner and Patent Attorney at J A Kemp. 

www.jakemp.com