How do you decide in which countries to apply for a patent?
In the Netherlands, you can apply for a patent with the Netherlands Patent Office. However, the Patent Office can only grant a patent for the Netherlands. If you also want a patent in another country, then in principle you need to apply for one separately in each country; there is no such thing as a worldwide patent.
However, an invention will rarely be limited to a single country. Just think of global supply chains for making products to sell to pretty much everyone in the world who can buy these products. If you are at the stage of wanting to patent your invention, strategically selecting the countries is a must in order to manage the costs. This blog post will help you to make a strategic decision when it comes to countries.
A chain approach
To reach a decision, it is useful to establish the countries where the supply chain is located. First, these are the countries where your own company and your competitors produce the product. Second, the countries where strategic and critical suppliers of your company and your competitors are based. After all, an invention can relate to a part of an end product.
It also provides insight to know the sales market and logistic flows. Insight into logistics hubs, in particular, can lead to strategically choosing a country with a small sales market where the product is not made. In many cases, it is enough to protect part of the sales market in order to make it less attractive for competitors to enter the market.
Using the above information, it is possible to make four lists of candidate countries for applying for a patent:
- Suppliers: countries where parts of the product are made;
- Competitors: countries where the product is made;
- Logistics hubs: countries where there is central transhipment or distribution;
- Sales markets: countries where the product is distributed and used.
The next step in making a decision is to determine, for each list, the expected influence of patent protection on your own company. As a guideline, a number of focus areas and insights are discussed below for each list.
Suppliers of strategic and bottleneck items can acquire a strong position of power in a supply chain. It may be possible to change this position of power by applying for a patent in a country where such a supplier is based.
Take, for example, a patent that relates to the further development of a part that is supplied by such a supplier. This patent can be seen as a way of preventing the supplier from supplying the invention to competitors. Alternatively, the patent may possibly serve as a bargaining tool for improving the supply conditions in exchange for a licence.
An important prerequisite for a strategy focused on suppliers is that there is a high threshold for relocating the business activities. This threshold is usually high for capital-intensive industries such as the steel industry and the semiconductor industry. If your supplier can relocate relatively easily, this strategy will probably not be very effective.
A very common reason to apply for a patent is to block competitors. This is usually focused on preventing the product from being made by the competitors without having recourse to the sales market and suppliers. Of course, this is only possible if you are aware of your competitors and their production sites.
In this case, too, a high threshold for relocating the production site is an important prerequisite for making the most of your patent. Particularly where manufacturing is outsourced in the case of companies such as Foxconn, Flextronics or Jabil Circuit, there may be a relatively low threshold for relocating the production to countries with lower wages. If the manufacturing site is in a relatively small sales market, then your patent will possibly have little value after the manufacturing site is relocated.
If you are not aware of your competitors’ production sites or suppliers, then all that remains is a strategy focused on the sales market and logistics hubs. It usually makes little sense to apply for a patent in a country where your competitor only carries out research. There are, for example, no restrictions on applying patented inventions to research in the Netherlands.
The starting point for a strategy focused on goods flows is that a relatively large sales market is served from a fixed logistics hub. This can include ports, airports and distribution centres. Using a Dutch patent, it is thus possible to cover a significant part of the European sales market for goods that enter Europe via the port of Rotterdam.
However, a patent in the Netherlands will not make an impression on a competitor that can easily use several routes and distribution centres. In that case, a patent targeting the production site or sales market will probably be a better investment.
A point to consider in this strategy is that it may be necessary to approach your company’s (potential) customers. Needless to say, distributors who are forced to cease a lucrative trade will not always be keen to switch over to the patent holder.
As explained above, a strategy focused on the supply chain is not always readily possible. In that case, the ‘only’ remaining option is to protect the sales market. This is a sound strategy particularly for consumer goods. After all, it is far harder for the population to relocate than a factory.
If everyone in the world is a potential customer, you of course need to have criteria for making a selection. Roughly speaking, there are two approaches: a budget limitation or a desired market share. In the case of a budget limitation, a patent is usually applied for in the countries with the largest sales markets until the budget is reached.
The purpose of an approach based on a desired market share is to make it less attractive for competitors to offer the product in the small sales market that remains. For the European market, such an approach usually means that a patent is required in at least the United Kingdom, Germany and France.
Supply chain prevention
Protection for an invention preferably focuses on the top of the supply chain. After all, addressing one or a couple of competitors or suppliers usually bears no comparison to addressing distributors and customers in many countries.
However, this strategy only works well if the threshold for a producer to move to another country is relatively high. Further prerequisites are that the country has a well-functioning patent system and that the threshold for new producers entering the market is high.
If this condition is not met, then protecting part of the sales market is probably a better option. After all, it is harder for the population of a country to relocate than a competitor.
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