Time and costs spent searching existing scientific publications and patent registers can avoid costly mistakes when acquiring or licensing technology from a third party or before undertaking a significant R&D program or an extensive patent filing strategy. If the technology in question is anticipated by these earlier publications, then the value of the transaction or the merit of the R&D program or patent filings may be critically reduced.
The need for prior art searching is highlighted in Waikatolink Ltd v Comvita New Zealand Ltd. Comvita had entered into a NZ$3.5m agreement with Waikatolink Ltd (WL) to sell it some honey gel patents and license Comvita to use its "honey IP" for wound and skin care products, including the right to use WL's existing and future knowledge about the unique manuka factor (UMF) molecule responsible for antibacterial activity in manuka honey. In all the agreement covered 11 patents with an estimated $8.8m annual turnover.
The Tauranga High Court found WL had engaged in misleading and deceptive conduct by making representations to Comvita that it was on the brink of isolating and characterizing the UMF bioactive compound, when in fact (contrary to the belief of its own key staff) it was not. Only after paying $1.5m to WL as a first installment under the agreement, Comvita made a Google search and found that the UMF molecule had previously been identified by another party.
Comvita was granted a $1m set-off from the $2m amount owed to WL under the agreement. Justice Harrison commented that with hindsight Comvita had not taken the necessary steps to protect itself in terms of conducting its own preliminary due diligence.
This need to conduct thorough prior art searching will become more critical in the future because of changes to patent laws that will take effect once the new Patents Bill is enacted in early-mid 2011. The Bill will make significant changes designed to provide greater conformity with aspects of the Australian and United Kingdom patents legislation.
One of the significant changes proposed in the Bill is that the standard of "local novelty" in determining what is relevant prior art for assessing patentability will be replaced with an "absolute novelty" standard. Whereas currently the novelty of an invention is determined by what is known (published or used) in New Zealand prior to the priority date of a patent application, under the Bill the novelty threshold will be widened to what is known worldwide prior to the priority date.
A further proposed change of the Patents Bill is that examination of a patent application will include a consideration of inventive step and usefulness, as well as novelty. Currently examination is conducted on the basis of novelty only, but the claims of an accepted patent have to be inventive for the patent to be valid. Whereas novelty is determined by whether the proposed invention has at least one new feature over similar technology, inventive step is assessed on whether the proposed invention is an obvious modification of known technology, even if novel. This higher inventive step threshold will make examination more rigorous and therefore place greater emphasis on carrying out due diligence prior to filing a patent application.
Preliminary searching conducted in-house using one or more of the online patent office databases is strongly recommended before committing to more exhaustive commercial searching conducted by a patent attorney. The time and cost spent understanding the prior art may prevent you from conducting redundant R&D and/or proceeding with patent filings where protection will not ultimately be obtained, or protection obtained is weak or unenforceable and therefore of little commercial value.
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