Why are patents so difficult and expensive?

“The UK Intellectual Property Office [UK IPO] should draw up plans to improve accessibility of the IP system to smaller companies who will benefit from it.  This should involve access to lower cost providers of integrated IP legal and commercial advice.” (Hargreaves Review 2011, recommendation number 9)

At the time of writing, we are still awaiting the UK Government’s response to the recommendations made in Professor Hargreaves’ report: Digital Opportunity – A review of intellectual property and growth.  In the meantime, the UK IPO continues to provide assistance to individuals who choose to file patent applications themselves, without taking advice from a professional patent agent.  This is consistent with the IPO’s Five Year Corporate Strategy, which includes the following statement:

“We will …further improve access to the IP system. This will include assessing whether we can do more to help unrepresented businesses and individuals make the right choices when applying for IP rights.”

Some (or perhaps most) UK patent attorneys view the IPO’s advice to self-filers with deep misgiving.  The LinkedIn Chartered Institute of Patent Attorneys discussion group (you need to be a member of the group to read its discussions) has recently been discussing this guidance from the IPO on using academic papers as the basis for a patent application.  Several patent attorneys thought this advice was unhelpful, if not downright negligent.  Some queried whether the IPO should be giving any advice to self-filers, other than to engage a patent attorney.  There was a view that “dumbing-down” advice to the level of a consumer simply wasn’t possible in the area of patents, and that the IPO should not be attempting to make it easy for self-filers.

More generally, one patent attorney, Tom Hutchison, commented:

“Here’s the crux: it takes a trainee patent attorney, who is immersed 35+ hours per week in the ‘patent process’, on average, 4 years to pass the UK and European drafting exams. The failure and attrition rate is high and that’s because the exam is hard, and that’s because drafting is just plain difficult.”

This comment prompts IP Draughts to ask some dumb questions. Why is it so difficult?  Could it be made any easier?  And will Government accept the view that it is impossible to make it simpler, cheaper and more user-friendly for inventive consumers?

On the last of these questions, the Hargreaves recommendation quoted above suggests a different direction of travel.  Governments are inherently suspicious of professionals arguing for the status quo, as solicitors know only too well.  Might the examples of licensed conveyancers and professional will-writers, relatively new breeds of quasi-professionals who compete with solicitors, provide Government with a template that they feel could be extended to patent writing?  Could we see the emergence of a new, paralegal-level adviser on patents who will provide a cheap, consumer-focussed service?  Or will the IPO expand its help-desk services to the point where self-filers can find all the advice they want under one roof in Newport?

UK Governments have extensively reformed the market for legal services in recent years.  In some areas, patent agents have benefitted from the reforms, eg through rights of audience in the courts.  The most intrusive development for patent agents has probably been the formation of IPReg and all that goes with it.  It remains to be seen whether Government will introduce major reforms to the market for patent services in response to the Hargreaves recommendations.

Inappropriate use of indemnities

Too many contracts include indemnities.  IP Draughts has noticed a increasing trend to include indemnities in commercial contracts, in recent years.

First, we need to distinguish between two types of indemnity.  Take the example of a contract between A and B, under which A is engaged to manufacture a pharmaceutical drug for B, to B’s specification, which B will use in human clinical trials.

A third party indemnity allocates responsibility between A and B for dealing with third party claims or liability.  In the present example, a patient might be injured by the drug.  The manufacturing contract may provide that, if a patient brings a claim in respect of that injury:

(a) if the injury arose because the drug was inherently toxic or harmful, B will indemnify A against the patient’s claim; or

(b) if the injury arose because A introduced some contaminent into the drug during the manufacturing process, or otherwise failed to make the drug to B’s specification, A will indemnify B against the patient’s claim.

Third party indemnities can be contrasted with an inter-party indemnity, e.g. where A indemnifies B against any loss or damage suffered by B, if A fails to perform its obligations under the agreement or is in breach of a contractual warranty.  In the present example, if A fails to deliver the drug by the contractual delivery date, B may have a claim against A for any losses suffered by B arising from that breach.  The contract may provide that A will indemnify B against such losses.

IP Draughts is happy to see third-party indemnities in contracts such as the manufacturing contract described above.  Our concern relates to the over-use of inter-party indemnities.

In the past, a conventional response among English lawyers would have been to query the need for inter-party indemnities.  If A is in breach of contract, B will have remedies under the general law of contract.  There is no need for an indemnity as well.

From A’s perspective, an indemnity in this situation is unattractive.  Depending on how the indemnity is worded, it may remove some of the protections given by general contract law to the party in breach.  Under general contract law principles, B would have to demonstrate that the loss suffered is not too remote from the breach, and B would have to mitigate his loss.  These protections may be swept away by the indemnity (although there is some case law to suggest that mitigation of loss may still be required).

If B’s objective is simply to maximise its legal position, then an indemnity may be attractive.  However, if parties are negotiating on the basis of trying to reach a “reasonable” position, an indemnity may be considered rather one-sided.

IP Draughts believes that the trend towards increasing use of inter-party indemnities has come from the US, where different legal rules operate.  US lawyers have told us that, if a winning party in contract litigation is to recover its legal costs, an indemnity is required.  This is because the courts in the US do not generally award a winning party its legal costs.  English law in this area is very different; usually the winning party is awarded some or all of its legal costs.

If there is a good reason to include an inter-party indemnity in a contract, then it should be included.  However, we have negotiated contracts prepared by the other party, where it appeared that an indemnity was included merely because it formed part of the template agreement on which the draft contract was based, and where the other party had no convincing reason for including the provision.

Our general approach is: if there is no clear reason for including an indemnity, it probably shouldn’t be there.