MEMORANDUM. by Mark A. Tidwell, Jackson Walker L.L.P. FOREIGN PATENT PROTECTION. Critical Dates for Filing, Novelty, Procedures and Estimated Costs

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1 MEMORANDUM by Mark A. Tidwell, Jackson Walker L.L.P. July 2006 v2 FOREIGN PATENT PROTECTION Critical Dates for Filing, Novelty, Procedures and Estimated Costs A summary of the following sections relating to foreign patent filing can be found in Section X of this Memorandum, while a more detailed discussion is provided in Sections I - IX. Section I describes considerations when making a determination whether to foreign file. Sections II and III describe overarching issues governing any patent application filing, particularly when considering foreign filing. I. CONSIDERATIONS FOR FOREIGN FILING While each applicant must make a determination as to whether to pursue foreign patent protection in a country or region based on the applicant s individual circumstances, various factors may be taken into consideration, including: the expense of filing and prosecuting a foreign application; the expense in maintaining a foreign patent (maintenance fees); the willingness to monitor and enforce, i.e., litigate, patent rights in a foreign country; the strength of the foreign country s patent laws and enforcement mechanism; the current market for the invention; the anticipated markets of expansion of the invention; the location of competitors; the location where the invention may be manufactured; the location where the invention may be used or practiced; and the application publication requirements that could disclose potential trade secrets. II. PRIORITY DATES Generally, foreign patent applications must be filed within one (1) year following the Priority Filing Date in order to claim priority to the Priority Filing Date. The Priority Filing Date is the earliest date on which a patent application, whether standard or provisional, was filed in any country. Typically, this date is the date on which the U.S. patent application was filed (or on the date the provisional U.S. patent application was filed in the case of a provisional filing). III. ABSOLUTE NOVELTY Most foreign countries require absolute novelty when filing a patent application. In the case of a foreign patent application which claims priority to another country application, absolute novelty requires that the original priority patent application (usually the U.S. application) must have been filed before the invention was made known publicly anywhere and in any manner, whether in writing or verbally. Most notable among these absolute novelty countries are Canada, Germany, France, Japan and the United Kingdom. In the case of a foreign patent application which does not claim priority to another country application, absolute novelty requires that the foreign application be filed before the invention is made known publicly anywhere and in any manner, which would include public disclosure of the original patent application (usually through publication or issue). This is in contrast to the generous one-year grace period under U.S. law which allows filing within one (1) year following public disclosure. Some countries require absolute novelty but do not have a priority

2 filing procedure. In these countries, patent applications should be filed immediately after filing the original patent application since publication of the original parent application could be a bar under absolute novelty requirements. IV. PROCEDURE A. Generally Foreign patent applications may be filed directly in individually selected countries, or, alternatively, under the auspices of the Patent Cooperation Treaty (PCT), an international treaty intended to simplify and streamline multiple foreign patent applications. It is important to understand that while a PCT Application may be referred to as an international application, (i) international patent protection does not exist, (ii) a PCT Application will not yield an international patent and (iii) a PCT application does not replace the need for (or expenses associated with) individual patents in each country. Typically, we recommend filing under the PCT if there is an interest in foreign patent protection. To further streamline the patent process in some countries, organizations of regionally related countries have been formed wherein a single patent application may be filed with a Regional Patent Office that encompass the member countries of a particular regional organization. Among these regional organizations are the European Patent Organization (EPO), the African Regional Industrial Property Organization (ARIPO), the Eurasian Patent Organization (EAPO) and the African Intellectual Property Organization (OAPI). However, whether a patent application is filed directly in a foreign country, in a regional office, or under the PCT, the application should be filed within one (1) year of the Priority Filing Date in order to obtain priority and to avoid absolute novelty issues. Most developed countries are now members of the PCT. Typically member countries and regions must be designated at the time of filing the original PCT application. A regional patent office such as the EPO, ARIPO, EAPO or the OAPI may initially be designated as a single unit with only one designation fee covering all contracting countries within the region. B. PCT Application PCT filing permits a single international patent application to be filed in any receiving Office designated by the PCT, which includes the U.S. Patent and Trademark Office (USPTO). The PCT facilitates obtaining patent protection in foreign countries/regions who are members of the PCT (See Appendix A) by permitting the initial filing of a single patent application under the PCT instead of filing separate applications in the countries/regions of interest. The PCT does not eliminate the necessity to later prosecute the applications in each individual country or pay the individual country fees, but it does facilitate such prosecution by virtue of the procedures carried out first in the receiving Offices. Specifically, a receiving Office will conduct a formality check, produce an international search report and, optionally, conduct international preliminary examination of the application. A PCT application consists of two main phases, namely the international phase and the national phase. The international phase typically addresses the procedural aspects of an application and ensures that an application is in order before entering the national phase. The national phase is the second of the two main phases of the PCT procedure. It follows the international phase and consists of substantive review of patentaibility criteria, i.e., novelty and obviousness, by each patent office of each country that has been designated in the international application.

3 The cost for preparing and filing a PCT Application is generally about $4000 on average. The costs for entering the national phase by filing applications in individual countries can range from $1000 to more than $9000 depending on the length of the application, the number of claims, the number of drawings, and the scope of protection sought. Regional patent applications will typically be at the upper end of this range because they extend to groups of countries. One advantage in filing a single international patent application under the PCT is that many of the expenses which would be incurred by filing directly in the patent offices of foreign countries/regions of interest are avoided or at least delayed, such as attorney prosecution fees in those countries. While, there are various attorneys fees and filing fees associated with filing a PCT Application, and these expenses do not replace the need to pay certain expenses once an application moves to individual countries. However, the cumulative expenses of processing an application through the PCT process are typically lower than filing directly in individual countries. Another advantage of filing under the PCT is deferral of filing and prosecution in the individual foreign countries. Although countries or regional offices in which the applicant wishes to file must be initially designated at the time of the PCT filing, a final election, i.e., filing and prosecution, of PCT contracting countries or regions may be deferred for a period of either 20 months or 30 months (in some cases, even 31 months), depending on the procedural options elected by the applicant during PCT prosecution. Typically we recommend that all PCT member countries be initially designated at the time of filing the PCT application. Specific countries in which to continue prosecution can be determined at a later time. There are several benefits to deferring filing/prosecution of foreign patent applications. First, deferral allows applicants to delay filing of foreign applications beyond the usual one (1) year filing deadline until after they have had an opportunity to complete a study of potential foreign markets, and after they have received at least one Office Action from the U.S. Patent Examiner (in the case of a U.S. Priority Filing Date). Second, deferral delays the payment of relatively large filing fees and other expenses (such as local attorney s fees and translation expenses) in each foreign country through payment of a relatively nominal administrative filing cost via the Patent Cooperation Treaty. Because PCT proceedings are conducted in English and may be prosecuted by U.S. attorneys, these typical fees associated with direct filings in foreign countries are deferred. Local agents and/or attorneys typically do not have to be hired until after the 20 or 30 month deferment period has expired. C. Independent Patent System Some states, such as Hong Kong, have quasi-patent systems that operate in conjunction with or under the auspices of another state, country or region. Thus, while a PCT application may include all of the contracting states at the time of the application, it is important to identify as early as possible all potential countries, particularly non-pct countries (See Appendix B), in which patent coverage may be desired in order to evaluate the particularities of the patent system of interest. In some cases, due to absolute novelty rules or other rules unique to a particular country, it is important to directly file a patent application in these non-pct countries as soon as possible after filing the original priority application. V. DEFERMENT UNDER PCT PROCEDURES Typically, entry into the national stage of most PCT countries is delayed for a period of up to 30 months (and in some cases, 31 months) from the original priority filing date. In several limited cases, the national stage of certain countries, must be entered within 20 months

4 of the priority date. In each of these cases, however, the countries are part of a regional patent office that operates under the 30 or 31 month time period. VI. DEMAND UNDER PCT PROCEDURES An applicant can make a request called a Chapter II Demand during the international stage of the PCT Application process for an optional procedure called an International Preliminary Examination. An International Preliminary Examination is preliminary (since a final opinion will be formulated only in the national phase by the national or regional Patent Office) and non-binding (on anyone, including elected Offices) on whether the claimed invention appears (i) to be novel, (ii) to involve an inventive step (to be non-obvious), and (iii) to be industrially applicable. While there is not a fully uniform approach to these criteria in national laws, their application under the PCT during the International Preliminary Examination procedure is such that the international preliminary report on patentability gives a good idea of the likely results in the national phase. The results of the examination are provided in a written opinion issued by the requested Office to the Applicant. The preliminary examination is typically used to evaluate the strength of the patent application and identify potential problems which could arise during prosecution in individual countries, i.e., the national phase. VII. EUROPEAN PATENTS (EPO) Providing the invention meets all of the EPO s requirements for patentability, the EPO issues a single European patent. The European Patent is then filed in the patent offices of the EPO member countries which will then issue individual patent certificates based on the EPO patent. Typically, these individual patent certificates are direct translations of the European patent and no further prosecution is required in these countries. Therefore, upon issuance of the European patent, the applicant must then make a final election of one or more of the EPO member countries. Individual patents usually require separate translations and also require separate national filing and maintenance fees. However, as with the patent application process under the PCT, acquisition of an EPO patent reduces expenses which are incurred in the finally elected EPO countries. A. EPO Prosecution - The EPO examines the application separately from the U.S. examination and often rejects the initial filing for reasons other than those argued by the U.S. examiner. This practice is not unusual, but it does present additional professional service fees from both the U.S. and foreign practitioners. Even though the EPO prosecution may be in the English language, the EPO requires representation to be by a local (European) agent. B. Fees - In addition to an Issuance Fee paid upon the issuance of the EPO patent, the EPO requires payment of an Annual Maintenance/Renewal Fee beginning on the 3 rd year counted from the international filing date. These fees progressively increase and plateau at the 10 th year. C. National Fees (filing fees, annuity/maintenance fees, translation fees and attorney s fees) vary greatly from country to country, but generally these fees in any individual EPO member country may be deferred until allowance of European Patent Certificate. Note that while national fees do still exist, by utilizing the regional patent office to handle much of the application process, many of the fees that would have been incurred by filing directly in a country covered by a regional patent office are mitigated.

5 VIII. ADDITIONAL PCT NATIONAL STAGE EXPENSES National Fees. Upon entry into a national stage, patent prosecution fees that can be expected include filing fees, annuity/maintenance fees, translation fees, issue fees and attorney s fees). These fees vary greatly from country to country. For example, some countries require only a maintenance fee at various times during the life of an issued patent (such as at 5, 10 and 15 years) while other countries require an annuity during the life of the patent as well as during the pendency of the application. IX. ADDITIONAL EXPENSES: NON-PCT MEMBER COUNTRIES Most of the industrialized countries are PCT members. See Appendix A. However, certain other countries may be of importance, particularly if significant commercialization of the invention is anticipated in these countries. Patent applications must be filed directly in foreign countries who are not members of the PCT. See Appendix B. X. SUMMARY Provided that priority filing complies with absolute novelty and other specific filing requirements, patent applications generally may be filed in individual countries and regional offices within one (1) year of the original U.S. filing date. An alternative to the need to initially file patent applications in individual foreign countries is to file an international application under the PCT, an international treatyintended to simplify and streamline multiple foreign patent applications. It is important to understand that while a PCT Application may be referred to as an international application, (i) international patent protection does not exist, (ii) a PCT Application will not yield an international patent and (iii) a PCT application does not replace the need for (or expenses associated with) individual patents in each country. While, a PCT application does not eliminate the need to eventually pay various attorneys fees and filing fees in individual countries, and such expenses are in addition to the expenses associated with the PCT application, the cumulative expenses of processing an application through the PCT process are typically lower than filing directly in individual countries. A PCT application consists of two main phases, namely the international phase and the national phase. The international phase typically addresses the procedural aspects of an application and ensures that an application is in order before entering the national phase, while the national phase addresses the substantive questions of patentability, i.e., novelty and obviousness, by the patent office of each designated country. Typically, entry into the national stage of most PCT countries is delayed for a period of up to 30 months (and in some cases, 31 months) from the original priority filing date. If patent applications in individual countries (and non-pct countries) are filed separately, generally they must be filed within one year of U.S. filing. A PCT application must also be filed within this one year period, but the PCT procedure is greatly simplified when compared to filing procedures in individual countries. The PCT application designates all contracting states bound by the PCT on the international filing date for the grant of both regional and national patents. These regional offices further simplify filing in multiple foreign countries by allowing prosecution through a single office. Prosecution in foreign countries which are members of a regional organization are deferred even further until the issuance of a regional patent by the organization. Alternatively, an EPO application may be filed separately from the PCT filing where no other PCT member countries are involved. In certain instances, it is possible to file a non-convention application in foreign countries after expiration of the one-

6 year filing date. However, this should be considered only in rare situations. Certain valuable rights may be lost by filing delays.

7 Appendix A PCT Member Countries (as of October 1, 2006) AE United Arab Emirates GM Gambia NG Nigeria AG AL Antigua and Barbuda Albania GN GQ Guinea Equatorial Guinea NI NL Nicaragua Netherlands AM AP AT AU AZ BA BB BE BF BG BJ BR BW BY BZ CA CF CG CH CI CM CN CO CR CU CY CZ DE DK DM DZ EA EC EE EG EP ES FI FR GA GB GD GE GH Armenia African Regional Intellectual Property Organization* Austria Australia Azerbaijan Bosnia & Herzegovina Barbados Belgium Burkina Faso Bulgaria Benin Brazil Botswana Belarus Belize Canada Central African Republic Congo Switzerland Côte d'ivoire Cameroon China Colombia Costa Rica Cuba Cyprus Czech Republic Germany Denmark Dominica Algeria Eurasian Patent Organization* Ecuador Estonia Egypt European Patent Organization* Spain Finland France Gabon United Kingdom Grenada Georgia Ghana GR GW HN HR HU IB ID IE IL IN IS IT JP KE KG KM KN KP KR KZ LA LC LI LK LR LS LT LU LV LY MA MC MD MG MK ML MN MR MW MX MY MZ NA NE Greece Guinea-Bissau Honduras Croatia Hungary World Intellectual Property Organization Indonesia Ireland Israel India Iceland Italy Japan Kenya Kyrgyzstan Comoros Saint Kitts and Nevis Democratic People's Republic of Korea Republic of Korea Kazakhstan Lao People's Democratic Republic Saint Lucia Liechtenstein Sri Lanka Liberia Lesotho Lithuania Luxembourg Latvia Libyan Arab Jamahiriya Morocco Monaco Republic of Moldova Madagascar The former Yugoslav Republic of Macedonia Mali Mongolia Mauritania Malawi Mexico Malaysia Mozambique Namibia Niger NO NZ OA OM PG PH PL PT RO RU SC SD SE SG SI SK SL SM SN SV SY SZ TD TG TJ TM TN TR TT TZ UA UG US UZ VC VN YU ZA ZM ZW Norway New Zealand African Intellectual Property Organization* Oman Papua New Guinea Philippines Poland Portugal Romania Russian Federation Seychelles Sudan Sweden Singapore Slovenia Slovakia Sierra Leone San Marino Senegal El Salvador Syrian Arab Republic Swaziland Chad Togo Tajikistan Turkmenistan Tunisia Turkey Trinidad and Tobago United Republic of Tanzania Ukraine Uganda United States of America Uzbekistan Saint Vincent and the Grenadines Viet Nam Serbia and Montenegro South Africa Zambia Zimbabwe * Regional Patent Protection Covering Multiple Countries

8 Appendix B Partial Listing of Non-PCT Member Countries (as of October 1, 2006) AR BL CL IR IQ KW PY PE SA TH TW UY VE YE Argentina Bolivia Chile Iran Iraq Kuwait Paraguay Peru Saudi Arabia Thailand Taiwan Uruguay Venezuala Yemen