On the Value of Defensive Patent Filings in China

Mark Perkiss, writing for the Trenton Times on December 18, 2005 details the problems faced by Fiber Optic Designs when they contracted with Chinese manufacturers, under confidentiality agreements, to make their Forever Bright lights:

The company's dealings with Chinese manufacturing firms began well. As U.S. and Canadian sales of the LED lights grew, Fiber Optic Designs contracted with a second Chinese manufacturing company and then a third to increase production. That third company, which Allen and Bruno refuse to name, liked Allen's design. In fact, it liked the design so much that in 2003 it filed an application for a Chinese patent on the lantern design of the covering of the LED lights [after FOD had filed its own patent application in the U.S.].

. . . To demonstrate prior invention of the lantern design, the company tried to submit a copy of The Times from December 2001, which carried a story detailing the design in question. "The problem is, you cannot just submit the newspaper. They do not accept that as evidence," Bruno said. "You have to get a notary to attest that it is a genuine newspaper from the date in question," he said. "Then, you need to get a state judge to certify that the notary is a licensed professional in good standing. Then, you need to get a state agency to certify that the judge you used is, in fact, a judge. Then, you need to get the U.S. State Department to certify that the certifying state agency is legitimate. Then, you need to get the State Department to present the document to the Chinese embassy in Washington and you need to have the Chinese embassy certify that it received the document from a state department official that it recognizes as legitimate.

Allen said the company spent about $50,000 to successfully overturn the patent granted to the Chinese manufacturer.

Most patent attorneys would agree that Fiber Optics could have avoided the problem by filing for patent protection in China. However,

"The problem is that's a lengthy and costly process," said Sabrina Safrin,
of the Rutgers-Newark School of Law. "This company took a risk,
which many companies do, in not getting a patent in every jurisdiction. In their
defense, however, you would not expect someone to patent your invention in the
country where your invention is being manufactured."

In fact, it generally costs about $6,000 for a U.S. company to obtain a patent in China, with another $14,000 in maintance fee costs paid over the 20-year life of the patent. Although it can still be quite difficult to enforce a Chinese patent, the patent will serve as defensive prior (preventing a Chinese supplier from getting the same patent) even if the maintenance fees go unpaid and the patent is no longer enforceable.

As noted by Lawrence Ebert in his IPBiz Blog, "the first lesson is that non-disclosure agreements are not of great value, certainly not in China, and not even especially valuable in the US. The second lesson is that getting a patent application on file is what counts."