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Proposals for the Introduction of a Community Utility Model System: A UK Perspective

Dr Margaret Llewelyn*

Copyright © 1995 Margaret Llewelyn. First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.

*Dr Llewelyn is currently writing a report on the implications of Second Tier Protection on Genetic Material for the Common Law Institute of Intellectual Property, London

The European Commission is currently looking at proposals to introduce a new Community intellectual property right (IPR), the Utility Model (UM) which will serve to protect those inventions which are not regarded as capable of fulfilling the strict granting requirements of the patent system. At present twelve of the fifteen member states of the EU operate a form of national UM, but the protection given differs in nine out of the twelve jurisdictions. The Commission wishes, therefore, to harmonise existing practices and to broadened the scope of UM protection to include products and processes at present excluded from most existing UM systems. One of the EU member states which has been the most vocal in voicing its concerns over the proposals is the UK. The reason for the extent of concern is that UK does not at present operate a UM system. There is, therefore, considerable concern and doubt about: a) the need to introduce UM protection and b) the scope and type of protection to be granted.

• Introduction
• Background to the Proposals
• The Proposals
  • The Max-Planck Proposals
  • The CIPA Proposal
  • The Response of the European Commission
• Conclusion

Introduction

In contrast, recent attempts to harmonise certain aspects of national patent laws have met with strong opposition; an example of this is the proposed directive on the Legal Protection of Biotechnological Inventions which was rejected by the European Parliament on 1 March 1995 due to concern over extending patent protection beyond traditionally recognised boundaries. To a considerable extent the national patent laws of most EU member states are already harmonised due to membership of the European Patent Convention (EPC) and Community Patent Convention (CPC). There is, therefore, general concurrence especially with regard to the substantive law. There are, however, forms of IPR in use in many EU countries which are closely aligned to the patent system, yet which diverge greatly as to national scope, content and practice. These are the Utility Model (UM) systems and it is to them that the Commission in now turning its attention with a view to harmonisation. In essence UMs serve to supplement the patent system by providing protection for innovations which would usually not be regarded as sufficiently inventive to justify a patent grant. The right is usually cheaper to obtain than a patent and its duration is far shorter, a maximum of 10 years as opposed to 20 years.

The problem which the Commission is attempting to resolve is that there are, at present, nine different concepts of UM protection in operation across Europe. The common denominators have been outlined in the previous paragraph, and relate to function, cost and duration, but the manner in which the lower inventive order and the mechanism by which the cost is kept down differ considerably. The major disparities are:

(a) the type of material which is protectable. In some countries the scope of protectable material is the same as under the patent system, (for example, Belgium, Denmark, France and Ireland); in other countries protection is restricted to shapes and configurations (for example, Finland, Greece, Italy, and Portugal); or the right specifically excludes processes and chemical or pharmaceutical products (as in Austria, and Germany);

(b) the level of inventiveness which is required. Some countries require an equivalent level of inventive step as under the patent system, (Belgium, and France). Others countries require a lower level of inventive step, (Denmark, Finland, Germany, Greece, Ireland, and Spain);

(c) the duration of the right also varies from 6 years in some countries (Belgium, and France), to 10 years in others (Austria, Denmark, Germany, Ireland, Italy, and Spain); and

(d) finally, the extent to which the application is examined prior to a grant being made. The reason why UM protection is regarded as cheaper and quicker is because the level of examination and search is reduced. In some countries there in no examination of the material prior to grant (Denmark, France, Ireland, and Italy). In other countries there is an initial examination but it is restricted to checking the formalities of the application (Austria, Finland, Germany and Portugal), but no examination is made of novelty or inventive step. Other jurisdictions require a full examination as for a patent application (Belgium, and Spain).

The United Kingdom is one of only three EU member states, the others being Luxembourg and Sweden, which do not provide any explicit form of UM protection, although as will be shown below there is an argument for saying that an equivalent provision is already made by way of the practice of the UK Patent Office.

The reason why there is such disparity across the EU as to UM protection can be explained by the fact that UMs are seen as primarily nationally based rights. They are not regarded as having any effect or use outside national boundaries and indeed studies have shown that few individuals or organisations take out UMs in countries other than their own (Grant 1994, p.20). The explanation for this is that the market position which is being protected tends to be local in nature and as such it is not regarded as necessary to obtain IP rights outside the national jurisdiction. If the innovation is sufficiently important to warrant extensive exploitation and exportation, thereby leading to a need to protect a market position abroad, then usually the inventive step, leading to the creation of the commercially new and desirable product or process, will be regarded as capable of patent protection. The lack of international trade significance, in respect of UM protection, is underlined in the text of the Uruguay Round of GATT. The Trade Related Intellectual Property (TRIPS) agreement makes no reference to Utility Models.

Despite the nationalistic nature of the use of the right, the European Commission feels that it is important to look at the possibility of bringing the divergent practices into some form of Community consensus in order to comply with Article 100a of the EU Treaty (von Kirchmann 1994 p.13). Article 100a seeks to ensure the removal of any obstacles to the free movement of goods and to eliminate any distortion of competition in the EU. In order for Article 100a of the EU Treaty to be complied with the Commission believes that it is essential that Member States operate the same system of UM protection. The view is taken that it would be preferable to level up protection, all Member States providing UM, rather than a leveling down to the UK position of no UM protection.

Until recently the discussions centred on the possibility of introducing a Community UM system whereby a single grant will provide protection across the whole of the Community. It became increasingly clear, however, that the strong resistance to the proposals, which came primarily from the UK, when taken with the lack of trade significance attached to the products protected by UMs, was bringing into question the need for a Community-wide system. The Commission is, therefore, now also considering alternative measures which would harmonise existing national practices and not require the introduction of UM protection in those countries which do not wish to have it.

The questions being asked are:

(1) is there a need for a supplementary form of IPR designed to "catch" those inventions which are not regarded as patentable?

(2) if the answer is yes, then what form should this right take? At a meeting of the British Group of the AIPPI (International Association for the Protection of Industrial Property) on 26 April 1995 it was suggested that rather than looking to providing a form of patent it might be more suitable to look towards the copyright or design right systems.1

(3) if the decision is taken to provide a patent-like system, then how should it inter-relate with the ordinary patent system? To what extent should the two systems diverge/converge especially in relation to the issues of protectable subject-matter, inventive step and remedies; and

(4) finally, is it possible to justify the introduction of Community-wide UM protection given that all the existing evidence shows that it is predominantly a national right? It could be argued that because of the local nature of the right the existing differences relating to grant etc. do not present any actual barrier to free trade. Put simply the goods which are subject to a UM right are not regarded as being of the kind which are commonly exported.

These issues and the responses they have engendered, especially from the UK, have lead to a re-assessment of the stance which the Commission wishes to be seen to take. It was due to publish a Green Paper on Utility Model protection in the summer of 1994 in which, it was rumoured, the Commission would have put forward proposals for a Community-wide UM system. This apparent de facto decision to introduce Community- wide UM protection was, however, not well received, (the negativity was, to a considerable extent, because the Commission was seen, incorrectly it would appear, as allied to the Max-Planck Institute (MPI) which had produced, early in 1994, a draft Regulation on a Community Utility Model system (Kern 1994). The Regulation would have, in practice, effected the introduction of a Community wide version of the German Gebrauchmuster system which was regarded by many in the Community as unacceptable). As a result of this the Green Paper has been expensively revised and it is now expected that it will be published in June 1995.

Underpinning the Commission's decision to look into the question of UM protection is the findings of a survey conducted for them by the German Ifo-Institute for Economic Research which apparently supports the contention that small and medium sized enterprises (SMEs) are failing to achieve the type and extent of protection they require in order to operate most efficiently in the market place. The findings of the Ifo- Institute have, however, only been disseminated in anecdotal form and there is considerable doubt being expressed, especially from within the UK as to the validity of the findings. (This was clearly demonstrated at a Symposium organised by CIPA at Brocket Hall in July 1994 at which the paper given by von Kirchmann was challenged in respect of the weight being given to the Ifo survey on the basis that so far only the Commission, and possibly the Max-Planck Institute, had actually had access to the findings. See The Report and Proceedings of the Brocket Hall Symposium CIPA 1994)

Until the Green Paper is published, interest in the UK is centred on two draft proposals. The first is the MPI proposal. The second is a discussion document written as a response to the MPI proposals which has come from the UK Chartered Institute of Patent Agents (CIPA) (Lees 1994a & CIPA 1993). Before looking the specific proposals it is worth noting the reasons why UM protection is regarded as an important form of IPR by those who are calling for its adoption in the UK.

Forward to Bibliography.
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Background to the Proposals

Tied in with the need to provide some protection for these valuable products is the recognition that it is not always in the public interest to allow unrestricted rights over all types of material. IPRs have, therefore, always been carefully defined and controlled to ensure that the right granted does not act as a fetter on the rights of others. For this reason, especially in respect of patents, there has been considerable strictness exerted in defining the requirements which have to be met before a right will be granted. These are that the applicant must show within the patent specification that his invention is new (not known anywhere in the world prior to his application being filed); involves an inventive step; is capable of industrial use and does not fall within any of the categories of excluded material. (It is European patent practice to exclude from patent protection such things as discoveries and material which might be better suited to protection under another forms of IPR, for example, literary works under copyright; and inventions which might be regarded as per se patentable but for reasons of public interest it is felt that it is not appropriate to allow a patent grant. This latter category includes those inventions which might offend morality or which consist of certain types of living material. (See Article 53 EPC and the UK Patents Act 1977 s 1(3))) The need to permit a legal monopoly in order to encourage innovative work is perceived, therefore, as being tempered by ensuring that the patent system protects only truly new and innovative products and processes.

This perception, however, has lead to a commonly held belief that the patent system only protects those inventions which are radically new or which produce breakthrough technology. The view which follows from this is that the patent system does not serve to protect those minor incremental innovations many of which underpin everyday technological development and which are regarded as of crucial importance in the market place. A seemingly minor advance forward can in fact lead to significant improvements being made to known technology, yet because of the fact that the technology is known and the improvement is not regarded as being sufficiently inventive patent protection will not be forthcoming. Because of this perceived failure in the patent system to protect these minor inventions, it is alleged that these "inventions" remain vulnerable to copying, thereby making it easier for competitors to copy and use them. Because of this innovators are increasingly reluctant to invest time and money in producing these commercially valuable products.

Another perceived problem with the patent system is the cost and time which needs to be expended before a patent grant is made. It can take several thousands of pounds, and many years, before a right is secured. The production of minor innovations is often undertaken by SMEs which tend to have less resources to utilise in respect of obtaining and protecting their intellectual property rights. The patent system is often seen as the bastion of large companies which have lawyers at their beck and call, together with the financial wherewithal necessary to support any legal proceedings which might arise out of inventive activity, whether in the form of obtaining a patent or bringing/defending an infringement/opposition action. Both the above reasons lay behind the introduction of the varying UM systems in Europe and it is for the same reasons that it is now being suggested within the UK that there is a need to also set in place a UM system to destroy the myth that IPRs only serve to protect the commercially strong, or, at least, to acknowledge that there is a place for a Community-wide system (Lees 1994b).

To a considerable extent, however, the problems which have been identified relating to cost, time and type of protectable material can be seen to be purely perceptual in so far as they relate to the UK. Our national system is relatively simple to use, protection is relatively cheap to obtain and it serves to protect a vast array of different types of innovation, some of which could be said to fall within the category of minor incremental innovations. It is, in this respect, fairly flexible. In the past suggestions for the introduction of what is referred to in the UK as Second Tier Protection (STP) have been dismissed on the grounds that it is possible for the existing patent system to take account of any perceived deficiencies. This was clearly the reaction to the proposals for UM given in the White Paper on Intellectual Property and Innovation in 1986 which stated at page 18 that it would be more important to realise the full advantages of the existing patent system." Indeed the Patent Office offers mechanisms which allow for the expedition of patent applications and takes a fairly loose technical approach to determining the level of inventiveness. This view was supported by the current Comptroller-General of the Patent Office (Hartnack 1994, p.67). The concentration of interest within the UK is, therefore, on issue of the novelty of a protectable product or process, on its use and on whether it is, or should be excluded from intellectual property protection.

Because of this there are two issues which need to be resolved in order to respond properly to the proposals from the Commission. These are:

(a) whether the UK needs another form of IPR designed to "supplement" the existing patent system; and

(b) because this decision has to be taken at the same time as the Commission is seeking to establish if there is a need for either a Community-wide system of UM or, if not, if there is a need to approximate existing national laws, this then means that there is additional pressure within the UK to reconcile its existing patent practice with the alleged need for another form of IPR before a decision is made at Community level.

Neither the initial decision to adopt UM protection nor the assessment of how such a system can be reconciled in practice with the existing UK patent system will be easy.

Forward to Bibliography.
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The Proposals

(1) no examination of the material prior to a grant being made. Any examination should only take place in the event of the right being challenged. This is to keep costs to a minimum;

(2) a lower level of inventive step should be required as compared to the patent system; and

(3) the right should only last for a maximum period of ten years.

The similarities, however, end there.

Forward to Bibliography.
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The Max-Planck Proposals

The MPI retains the concept of inventiveness, but reduces the extent to which there must be a technical advance. All that the MPI suggests needs to be shown is "an advantage of practical significance" This essentially means that where it can be shown that the advance forward is obvious, but nonetheless of such industrial and commercial value that it is important, then it will be regarded as protectable under the MPI UM system. The problem with this definition lies in assessing the actual level of inventiveness which needs to be achieved before a right is granted. Need the inventivity be only minuscule in form? Or should it be such that it demonstrates a clear move forward from what was already known?

At the Brocket Hall Symposium the representative of the MPI, Theo. Bodewig, added only that this requirement must be found as "the result of the technical invention claimed and not of some successful marketing methods" (Report and Proceedings of the Brocket Hall Symposium CIPA 1994, p. 49). No further information was forthcoming as to how this requirement would be interpreted in practice. Concern was expressed at the Brocket Hall Symposium that this definition would permit inventions with little or no inventive level to be protected under the UM system. This could allow larger companies to claim rights over commercially valuable material which it is argued should remain freely in the public domain and not subject to any monopoly. (It is recognised by all parties that although the UM system is seen primarily as providing protection for SMEs, it will be used by any organisation, regardless of size, if it proves to be an effective commercial tool.)

In keeping with the attempt to cut the cost and time of obtaining protection the MPI proposes that there should be no formal examination of the application prior to the grant being made. The proposal met with a degree of criticism at the Brocket Hall Symposium. It was felt that it would prove to be too difficult in practice to determine the degree of inventiveness required and also that because the MPI was proposing a Community-wide system along the same lines as the EPC the promise of a reduction in cost and time would not in fact be achieved because the requirement for the application to be translated would be the same. (It is a commonly held belief that the major reason for the time delay and cost of obtaining a European Patent is because of the translation requirements. As the MPI proposals closely follow the EPC this translation requirement is also contained in the UM proposal.)

The MPI proposal contains the same restrictions on protection as are contained in the EPC, namely the exclusions on protection for discoveries, plant and animal varieties and invention which might be likely to offend morality. The view is taken that any UM system should not be as restrictive in either scope or subject-matter as under the patent system and for this reason it was stressed that the MPI should remove the exclusions on protectability. In addition to this the MPI propose that the UM grant should carry with it the same rights as under the patent system, so that any infringement can be stopped by an injunction.

The MPI proposal provoked a great deal of concern when it was discussed at Brocket Hall. The fear was expressed that the European Commission would follow the draft prepared by the MPI thereby avoiding any real negotiating process. The Chartered Institute of Patent Agents, therefore, drafted a response to the MPI proposals which it was aimed at providing a stimuli towards further debate (Lees 1994a). The CIPA proposals are, therefore, much more general in scope and tone. The document seeks to identify issues which are in need of further discussion whilst at the same time also giving an idea of how it would possibly like to see any UM protection structured, if the UK has to adopt such a system.

Forward to Bibliography.
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The CIPA Proposal

One of the aims of the CIPA discussion document is, however, to assess the need for a supplementary form of protection to the patent system, regardless of the practice of other EU member states. In order to establish the different objectives, and possibly in part to indicate that the current forms of UM protection are not seen as automatically applicable to the UK, the term Second Tier Protection is used.

As with the MPI proposal the aim of the CIPA document is to attempt to outline a form of protection which will prove more accessible to the SMEs. The main similarity between the two proposals lies in the suggestion that such protection can most be cheaply and quickly obtained if the right given is not examined before a grant is made.

In relation to inventive step the CIPA proposals agree that a lower level needs to be shown but suggests that this should be assessed by showing that the invention is "not clearly lacking in inventive step". The reason for choosing this definition is, to a considerable extent, because there is a precedent in the UK for its use. Under the old Patents Act 1949 it was possible to bring opposition proceedings on the grounds that an invention was clearly lacking in inventive step, but this was not a granting requirement. This is also the term used in Ireland in its Utility Model law. It is felt that because of previous, and existing, practice this definition would be easier to determine on a practical level than the more theoretical assessment of practical significance.

The problem with this phrase is peculiar to the UK. The term presupposes that the patent requirement of inventive step is higher than that required under UM protection. The fact of the matter is that within the UK patent system the interpretation of inventive step is highly flexible. It is capable of being used to include all aspects of technological advancement. The question which is aimed at the CIPA proposal is how is this level of inventiveness to be determined given that it must be shown to be different to that used in the patent system in order to justify the adoption of a new IPR. The argument being put forward is that the existing patent criterion can be as low as the Patent Office granting division thinks fit. Indeed it is possible to say that in many respect the Patent Office already adopts a system of assessing if the invention is clearly inventive or not. To attempt to distinguish the level of inventiveness by using this phrase is seen by many as purely a semantically distinction which in practice would not demonstrate any difference between the two systems (CIPA 1993). This is not an argument which is commonly aimed at patent systems operating in other European countries as they tend to use a higher assessment of inventive step than in the UK. The Netherlands, for example, has a very high inventive step requirement. There is a need, therefore, for protection for inventions of a lower inventive order than are protectable under the patent system. It is questionable whether this need could not in fact be attained through a reassessment of the patent system, as has ostensibly occurred in the UK, rather than via the introduction of a new system of IPR?

The second main point of divergence is that CIPA does not restrict the types of protectable subject-matter. For its purposes it is felt that any material which is in need of protection should be granted that protection. All types of invention would be regarded as protectable. This has been criticised on the basis that it is possible that material which has been excluded from protection under the patent system, for example, certain discovered material or some forms of biotechnological inventions (such as were denied patent protection by the Court of Appeal in Biogen v Medeva [1995] FSR 4, could be protected under the UM system. The concern is that it will allow unexamined rights over material which, for reasons of public interest, should not be the subject on intellectual property protection.

CIPA does not state what the extent of the right granted should be, but the proposal seems to imply that it is preferable if the right carries with it the same force as an ordinary patent grant. There is considerable concern about giving the same rights and remedies under UM protection as under a patent grant. (This was clearly shown at the meeting of the British Group of the AIPPI on April 26th 1995). Because of this it is more likely that the UK will not support an injunctive remedy to be available in respect of UMs, the other remedies will remain as for patents.

Forward to Bibliography.
Back to contents.

The Response of the European Commission

Forward to Bibliography.
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Conclusion

That the road ahead for UM protection is a difficult one can be seen from the confusion which is rampant within the UK. There is no apparent consensus as to either the need for UM protection nor its scope if adopted. The prevailing impression is one of uncertainty, and possible confusion, over the role UM protection would play. If the decision is taken to adopt UM protection then the UK might accept a system along the lines suggested by CIPA, but as shown at the April AIPPI meeting it is arguable that it might possibly be more appropriate to use a form of copyright. Every meeting in the UK, at which UM protection is discussed, appears to become frustratingly enmeshed in attempts to untangle the distinction between existing forms of IPR and the proposed function of UM. Only by being able to make this distinction is it felt that there will be a justification for introducing another form of IPR. Adding to this problem of drawing a distinction, is the apparent need under Article 100a for EU conformity yet set against this is the fact the right itself would appear to be only national in effect and use.

To a considerable extent it would appear that the MPI proposals are no longer regarded as a viable option. The question which remains is whether the general outline put forward by CIPA will be acceptable to rest of the Community given that it comes from a country with no recent tradition of UM protection. It is possible that the Commission in light of the problems which have been encountered in trying to reach consensus will opt for harmonising existing national laws and not attempt to introduce a Community right. The actions of the Commission notwithstanding it is clear that within the UK there is considerable doubt and confusion as to whether there is a role for UM protection within our national system of IPR and this is only exacerbated by the containing perception of the patent system as unable to meet the needs of all levels of inventive activity. Perhaps in light of this the right, at least in the UK, would be more appropriately named "Utility Muddle".

Back to contents.

Chartered Institute of Patent Agents (1993) Second Tier Protection: Proposals and Discussion Paper CIPA.

Grant (1994) "Second Tier Protection: A Perspective by an Industrial Patent Attorney" in Report and Proceedings of the Brocket Hall Symposium Chartered Institute of Patent Agents, p 19.

Hartnack (1994) Second Tier Protection - A Viable System? in Report and Proceedings of the Brocket Hall Symposium Chartered Institute of Patent Agents, p 67.

Kern (1994) "Towards a European Utility Model Law" IIC Vol. 25 No/ 5/1994 p. 627.

Lees (1994a) "The Road to the CIPA Proposals" Report and Proceedings of the Brocket Hall Symposium Chartered Institute of Patent Agents, p 33.

Lees (1994b) "Do We Need Second Tier Protection?" Report and Proceedings of the Brocket Hall Symposium Chartered Institute of Patent Agents, p 25

"Proposal of the Max-Planck Institute for a European Utility Model" IIC Vol. 25 No 5/1994 700

von Kirchmann (1994) "The Need for Utility Models" The Report and Proceedings of the Brocket Hall Symposium Chartered Institute of Patent Agents, p 13.

White Paper (1986), Intellectual Property and Innovation Cmnd 9712 (London: HMSO).