Document 212321

InnoSupportTransfer – Supporting Innovations in SME
7. How to protect innovations and intangible assets
7.1 Intellectual Property Protection Tools (including Non disclosure agreements)
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7
How to protect innovations and intangible assets
7.1 Intellectual Property Protection Tools (including Non disclosure
agreements)
Keywords
Intellectual property, non disclosure agreement, intellectual property protection, invention,
business asset, trade secret
After reading this component you will have the capability to explain what the
main Intellectual Property tools are and what these protection tools can provide
to your business. In this component you will see how Intellectual Property
Protection tools could be used to strengthen the innovation potential of an SME. The
component explains how non-disclosure agreements allow confidential information to be
revealed. The estimated time to go through this component is approximately 45 minutes.
Introduction
In our everyday life innovation partway occurs. Every product or service that we use is the
result of a long chain of innovation, such as a new design or improvements that make a
product look or function better. Innovation is the engine of our everyday life. To make this
engine successful in our enterprise we have to see clearly what possibilities intellectual
property can give us. Along with human creativity and inventiveness, Intellectual Property
(IP) is all around us. No matter what product your enterprise makes or what service it
provides, it is likely that it is regularly using and creating a great deal of intellectual
property. This being the case, you should systematically consider the steps required for
protecting, managing and enforcing it, so as to get the best possible commercial results
from its ownership.1
There is an example of how common IP process is and how it pervades our everyday life.
If you look around on a table, you will surely see a ball-pen. Thanks to an outstanding
Hungarian inventor, László Bíró, you can find ballpen everywhere. He protected his
invention by patent. Ballpen can bear with elements which act as a trademark.
MP3 players are another very good example. The player is protected on a number of
levels. Patent protects the use of MP3, the design of the player will bear industrial design
1
www.wipo.int/sme/en/ip_business/importance/relevant.htm
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rights, trademarks rights protect the brand of player and of course the music played by
the artist bears copyright and related rights 2
If you look around, can you name three products which are protected by patent
or trademark?
7.1.1 What are intellectual property protection (IPR) tools?
The winds of liberalisation are blowing across the globe. With the formation of
the World Trade Organisation (WTO) the rules of doing business have
changed.3
Significant effort and investments is made by businesses all around the world to establish
a distinctive platform to enable consumers to identify the origin of a product / service.
Table 1 illustrates the tools that constitute to the IPR tool kit. It should be realised that
each IPR tool protects specific aspects of intellectual creations and it needs to be
appreciated that except for copyright (which is governed by the Berne Convention) the
rights of the other IPR tools are territorial and therefore need to be registered in the
country in which one desires to have the rights. However when combined strategically
they help to erect formidable protective barriers with strong enforceability. 4
IP category
IP protection style
Innovative products and process
Patent, trade secret and utility model
Cultural, artistic and literary work,
computer software and compilation data
Copyrights and related rights
Design, including textile design
Industrial design rights
Distinctive sign
Trade marks, collective marks,
certification mark, geographical
indicators
Microchips
Layout design on topographic of
integrated circuits
Denomination for goods of given quality
Geographical indicators
Confidential business and technical
Trade secret
2
This information was taken from a European Project under Leonardo da Vinci Programme:
http://projects.czu.cz/index.php?shortcut_module=YET
3
This chapter is based on the document of World Intellectual Property Organizations:
http://www.wipo.int/edocs/mdocs/arab/en/wipo_ip_mct_apr_04/wipo_ip_mct_apr_04_5.pdf
4
Ibid.
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information of commerce
Table 1 – Tools of Intellectual Property Protection
7.1.2 Why protect intellectual property?
Sooner or later, many small and medium-sized enterprises (SMEs) operate in more than
one market selling their products or services or licensing/franchising their intellectual
property (IP) rights and know-how beyond their national borders. IP rights, however, are
territorial, implying that they are usually only protected in the home country or region
where protection has been applied for and obtained. Protecting IP in export markets is
therefore crucial so as to enjoy the same benefits of protection abroad as are enjoyed on
the domestic market. You should carefully consider applying for IP protection well in time
in all countries to which you are likely to export or license your product or service in the
foreseeable future5
Regardless of what product your enterprise makes or what service it provides, it is likely
that it is regularly using and creating a great deal of intellectual property. This being the
case, you should systematically consider the steps required for protecting, managing and
enforcing it, so as to get the best possible commercial results from its ownership.
If you have spent brain and money in the development of your innovative products and
you want to avoid others profiting from the fruits of your effort then you should consider
using Intellectual Property Protection Tools.6
Please stop and think: What are the products or services in your organisation
which need to be protected by IP? Can you identify these products from the
following points:
•
It is a technological innovation
•
It is a cultural innovation
•
It can be further developed
•
After selling this product or service in different markets it can create new
jobs in my organisation
•
My organization is going to operate in foreign markets soon
•
I want to grow the trust of my customers
An efficient and equitable intellectual property system can help all countries realise
intellectual property potential as a powerful tool for economic development and social and
5
6
http://www.wipo.int/sme/en/ip_business/ip_protection/international_protection.htm
www.wipo.int/sme/en/ip_business/importance/relevant.htm
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cultural well-being. The intellectual property system helps strike a balance between the
interests of the innovator and the public interest, providing an environment in which
creativity and invention can flourish, to the benefit of all.7
7.1.3 Where each of the protection tools can be used?
From the moment an enterprise has a potentially innovative idea, it is imperative that the
idea or concept be treated as a secret. That is to say that the information surrounding the
creation of the idea must be protected carefully as a trade secret. 8
Not all commercially viable ideas can or will be patented, hence the importance
of treating ideas as trade secrets, particularly at the inception stage. For an idea
that may result in a patentable invention, the final choice between either the
trade secret route or the patent route for protection should be seen as a strategic
business decision to be taken at a later stage of development when all the requirements
of patentability are met. The choice depends on the nature of the invention, its business
potential, the competition, how easy it is to reproduce and the ability of competitors to
reverse engineer it from the final product. Whatever the ultimate decision, the idea must
initially be protected as a trade secret in order to preserve the option of patenting at a
later stage. Even after patenting, a part of the idea may remain an associated trade
secret.9
Please stop and think. Do you properly manage your trade secrets? How do you
think your marketing strategy can support your trade secret and innovation?
Intellectual property, when efficiently used, is an important tool in creating an
image for your business in the minds of your current and potential customers
and in positioning your business in the market. IP rights, combined with other
marketing tools (such as advertisements and other sales promotion activities) are crucial
for:
•
Differentiating your products and services and making them easily recognisable
•
Promoting your products or services and creating a loyal clientele
•
Diversifying your market strategy to various target groups
7
http://www.wipo.int/about-ip/en/
www.wipo.int/wipo_magazine/en/2005/04/article_0002.html
9
Ibid.
8
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•
Marketing your products or services in foreign countries10
7.1.4 How to use intellectual property protection tools?11 12
PATENTS
Protect inventions that are novel, non-obvious and useful. Patents have
a term of 20 years from the date of filing a complete specification.
Trademark and
Service Mark
®™
Protect distinctive marks such as words/signs including personal names,
letters, numerals, figurative elements (logos), visually perceptible 2D
or 3D shapes or their combinations capable of distinguishing the goods
or services in connection with which it is used in course of trade. In
some countries sounds and distinctive smells can also be registered as
trademarks. It can be perpetually renewed from time to time.
Industrial Design
Registration
Protect novel non-functional features of shape, configuration, pattern,
ornamentation or composition of lines or colors, applied to any article
either in two or three dimensional or in both forms by any industrial
process or means whether manual, mechanical or chemical, separate or
combined which in the finished article appeal to and are judged solely by
the eye. This registration has a specific term (initially 10 years and
renewable for another term of 10 years).
Copyright ©
Protect creative works that are musical, literary, artistic, lectures, plays,
art reproductions, models, photographs, computer software, etc. It is
valid for the lifetime of the author and minimum 50 years after the death
of the author.
Layout Designs
for Integrated
Circuits
Geographical
Indications (GI)
Scope of protection not only includes the protected chip but also the
articles incorporating it. The term of protection is 10 years.
Trade Secrets
and Undisclosed
Information
Protect the distinctive names of goods that can be identified as
originating or manufactured in the territory of a country, or a region or
locality in that
territory where a given quality, reputation or other characteristic of such
goods is essentially attributable to its geographical origin. The term is
initially for a period of 10 years and can be renewed perpetually.
Protection to persons/institutions on information lawfully under their
control from being disclosed to, acquired by or used by others without
their consent in a manner contrary to commercial practices so long as
the information is secret and has commercial value because it is secret.
10
InnoSupport: Supporting Innovations in SME. 7.1 Intellectual Property Protection Tools. 2005
http://projects.czu.cz/index.php?shortcut_module=YET
12
Please have a look at chapter 7.2 International Regulation of IPR of this guide.
11
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Competitive
Practices in
Contractual
Licenses
Protection against incorporation of restrictive clauses in licensing deals
such as exclusive grant back conditions, conditions preventing
challenges to validity and coercive package licensing, etc. That may
have adverse impact on trade and impede transfer of technology.
Think it over, do you properly respect the above mentioned IP tools when working
with the knowledge or products of others!
Costs of IP tools may vary widely from country to country but basically it can be divided into
four types of costs.
•
Firstly, the costs relating to the application fees and other legal fees paid to the national
or regional patent offices.
•
Secondly, the costs relating to patent attorneys/agents who assist in drafting the
application.
•
Thirdly, costs of translation. Such costs are only relevant when seeking IP protection in
foreign countries whose official language is different from the language in which the
application has been prepared and may prove to be high, especially for highly technical
patent applications.
•
Fourthly, the cost of maintaining applications and patents through payments to the
patent office. Such fees are usually paid at regular intervals (e.g. every year or once
every five years) in order to maintain the application or the patent.13
A business perspective of IPR is essential and several factors must be taken
into consideration to effectively utilise the system. This should be based on a
sound and well-crafted institutional Intellectual Property Policy that supports and
integrates with the business mission of the organisation. Enabling institutional support on
IPR issues and individuals’ awareness of the IPR essentials are imperatives for
innovation management.14
The various steps towards using IPR in business involve
the creation of value-added innovations,
their identification and
timely protection using diverse tools
of IPR in various countries of business interest making best use of international
conventions15, exploiting the IPR in the products / processes / services, enforcing them
against infringements and/or by their transfer through assignments, renting the rights
13
http://www.wipo.int/sme/en/faq/pat_faqs_q2.html
www.wipo.int/edocs/mdocs/arab/en/wipo_ip_mct_apr_04/wipo_ip_mct_apr_04_5.doc
15
For further information please see chapter 7.2 International Regulations of this guide.
14
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through licenses, selling trade secrets in the form of know how at their appropriate value
or even bartering the rights through cross licenses, and in several cases acquiring IPR
from others to strengthen one’s IPR portfolio and ensure freedom of use etc. The relation
between strategic IPR and revenues of a business has been demonstrated especially by
correlating the patenting activity and the turnover of various companies.16
Patent and trademark are territorial rights and are granted for a particular
countries and they last specific period of time (i.e 20 years for a patent), while
duration of copyright is 50 years after author death.
The community patent and the community trademark (Administrated by OHIM Office in
Alicante, Spain) are titles giving protection in all Europen countries with one single
application. Due to this fact, it is cheaper to protect a European patent in 25 countries with
one application (community patent) than to make 25 different patent applications for all
E.U state members.
7.1.5 Non-disclosure agreements
Now we are going to learn about non-disclosure agreements which are a formal method
of protecting trade secerets. This chapter of the component is based on the Nondisclosure agreement documents of World Intellectual Organisation. 17
Worldwide, the law protecting confidential business information (or trade secrets) is very
varied.
What can be protected?
All companies have secrets. Some are technical such as the detailed specification of a
manufacturing process; some are business-related such as a list of customer names and
addresses, which would be useful to a competitor. Some are of enormous value, e.g. the
recipe for Coca Cola; others are less valuable. Some are simple, even one word long,
such as the name of a company takeover target, others are complex, such as the details
of a planned advertising campaign. The common factor is that all can be protected.
In recent years, many countries have introduced laws on the protection of confidential
business information along the lines proposed by the Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPS), which states that for information to be
legally protectable:
16
17
www.wipo.int/edocs/mdocs/arab/en/wipo_ip_mct_apr_04/wipo_ip_mct_apr_04_5
http://www.wipo.int/sme/en/documents/disclosing_inf.htm#P53_4509
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•
the information must be secret, i.e., not generally known or readily accessible to
persons that normally deal with that kind of information;
•
it must have commercial value because it is secret;
•
the owner must have taken reasonable steps to keep it secret.
The most important thing is for SMEs to have a basic understanding and sensible internal
rules, so that their valuable information retains that value and remains confidential.
An important factor in protection is proper management control. Managers should restrict
access to secrets to the staff who need to know them - the biggest loss of confidential
information from a company occurs when its staff leave and move to another firm in the
same area of business. Also it is important to mark documents with a word such as
"confidential" if this is the case, but avoid the tempting mistake of marking every
document, because such marking will have no real meaning and will be ignored. Other
security precautions may be needed, such as imposing password protections on access
to information.
Please take 10 minutes to name the people in your organisation who you should
involve when setting up your proper management control. Why do you want to
involve them in handling confidental information? Make sure that not all the
information is available to every member of the staff: for example on company
server!
Sharing a secret – The non disclosure agreement
In a normal business it is sometimes necessary to share a secret with another company.
A manufacturer may need to have specialised tests carried out on a prototype, and does
not want competitors to know details of the new product. An assembly company may wish
to know if a supplier can meet a new, tough specification which will give a quick market
advantage, but does not want anyone else to use the same specification. In both of these
examples the prototype and the new specification must pass out of the owner's hands, but
the owner will of course wish to retain control.
The solution is to get the company to which the confidential information is to be disclosed
to sign a Confidentiality Agreement, sometimes called a Non-Disclosure Agreement
(NDA)18
Model Non-Disclosure Agreements
18
http://www.wipo.int/sme/en/documents/disclosing_inf.htm#P53_4509
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To download a simple example of an NDA with instructions it is available in the
online guide only (www.innosupport.net ). You can also use it as a model.
Two-way NDAs
Sometimes the flow of information is two-way, with both parties disclosing confidential
information to the other, such as when a joint venture is being set up between them. A
few changes to the model one-way NDA can cover such an arrangement.
When to use NDA
Companies should not use a Non-Disclosure Agreement too often. The best way to keep
a secret will always be: don't tell anyone. If a secret really must be shared, tell as little as
necessary to achieve the commercial objective; sometimes a general outline is all that is
needed, although for a technical appraisal the full detail of the knowhow will need to be
passed over for review.
Sometimes an NDA sets out a period of time so that information disclosed, say within a
defined year, falls within the agreement. This is useful for complex technical deals, such
as joint ventures (JV), although a separate JV agreement will eventually be needed.
Also, chose the recipient very carefully - are you as sure as you can be that a promise of
secrecy will really be kept?
One weakness of legal protection for secrets is that once they have been published in
some way they cannot be "made secret" again. Even if the owner of the secret goes to
Court and wins a payment for the damage suffered, this will not be as good as having the
information kept confidential. Your competitors will be free to use your hard-won secrets.
So the best practice is to make sure that the secret is kept in the first place.
This summary of confidential information, what it is, and how it can be protected, is based
on English law. However, the principles of English law in this context can be applied to
good effect in many other countries.19
7.1.6 Examples of using Intellectual Property Protection Tools
19
http://www.wipo.int/sme/en/documents/disclosing_inf.htm#P53_4509
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Example 1 - Turning an IP Dispute into a Business Opportunity as reported in the
WIPO SME website
There is a small firm of goldsmiths at Chikpet, Bangalore in the Southern Indian State of
Karnataka. Over the years, the goldsmith, assisted by his son, has been creating new
designs, making ornaments, and selling them directly to customers. One day, while
visiting an upmarket road in downtown Bangalore, he happened to stop at a famous
Jewelry retail outlet of a large Indian industrial conglomerate and was horrified to find on
display items of jewelry based on some of his original designs.
The goldsmith was shell-shocked and did not know what to do. His son, however, decided
not to take things lying down. He approached an intellectual property rights (IPR) Attorney
at Bangalore. Although the goldsmith had not registered his novel designs under the
Design law in India, he was able to produce before the Attorney number of paper-based
sketches and drawings (protected automatically by copyright) that he had made earlier in
respect of the design in question, which clearly indicated the evolution of the designs. A
legal notice was sent to the large Indian industrial conglomerate. In reply the large Indian
industrial conglomerate’s lawyer argued that there was no malafide and, in fact, the
designs had been developed independently by their employees and were co-incidentally
common.
On receiving this reply, the goldsmith’s son went through the records of sales. In the sale
register, he was able to locate the details of sale to the large Indian industrial
conglomerate who had purchased from them a few pieces of this presentation item for
distribution as New Year gifts. This turned out to be clinching evidence and the large
industrial conglomerate agreed to settle the matter out of court. As a part of the
settlement, a lumpsum payment was made to the goldsmith. It was also agreed that the
large industrial conglomerate would stop manufacturing this item and would outsource its
entire requirements over the next five years from the small firm.
This case study provides a number of important insights. Firstly, it shows the importance
of keeping good records of any drawings, designs and business transactions that may be
used in future as evidence in case of an IP dispute. Admittedly, the case would have been
simpler had the goldsmith registered his design under the design law of India in the first
place. However, having preserved the drawings in a systematic manner (dated,
numbered, signed and properly filed) of the gold ornaments in question and having made
proper entries in the sale register showing that the large company had once purchased
the items proved crucial in turning the case in the goldsmith’s favor. Secondly, it illustrates
the importance of relying on qualified IP advice. Thirdly, it shows how an IP dispute, may
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be turned into a business opportunity, as the large company has now become a key client
of the small firm of goldsmiths.20
A second case study that shows the importance of IP regulation can be
downloaded from the online guide only. (www.innosupport.net ).
7.1.7 Summary of Key Points
Intellectual Property is an important tool for the economic, social and cultural development
of all countries. It is very important to know how to use and protect effectively IP.
Intellectual property refers to creations of the mind: inventions, literary and artistic works,
and symbols, names, images, and designs used in commerce.
For SMEs and its innovation it is crucial both to protect IP and to properly choose with
whom to share innovations and trade seceret among the staff and partners.
If you want to operate on foreign markets you have to be aware of international
regulations and different patent regulations.
With this component you have studied how to use IP as a business asset and
understand how IP relates to business. In this module you have learnt the
most important intellectual property protection tools which you can now
implement in your own business. For improving your business effectiveness you have
also learned how you can use non disclosure agreement to protect your business secret
and contracts.
BIBLIOGRAPHY
Young Enterpreneurs Training 2007, University of Prague,
http://projects.czu.cz/index.php?shortcut_module=YET - viewed 5 September 2008
Vision-IPR, Mumbai, India Prof.Ganguli, Prabuddha. (2004) Intellectual Property: A
business
tool
(WIPO
Introductory
Seminar
on
Intellectual
Property)
20
The case study was taken from:
http://www.wipo.int/edocs/mdocs/arab/en/wipo_ip_mct_apr_04/wipo_ip_mct_apr_04_5.pdf pg.9-10.
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http://www.wipo.int/edocs/mdocs/arab/en/wipo_ip_mct_apr_04/wipo_ip_mct_apr_04_5.pd
f -viewed 5 September 2008
World Intellectual Property Organization (2004):
http://www.wipo.int/sme/en/documents/disclosing_inf.htm#P53_4509 - viewed 5
September 2008
World Intellectual Property Organization (2004):
http://www.wipo.int/sme/en/ip_business/ip_protection/international_protection.htm viewed 5 September 2008
World Intellectual Property Organization (2004):
www.wipo.int/export/sites/www/freepublications/en/general/450/wipo_pub_l450faq.pdf viewed 5 September 2008
World Intellectual Property Organization (2004):
http://www.wipo.int/export/sites/www/freepublications/en/general/450/wipo_pub_l450faq.p
df - viewed 5 September 2008
InnoSupport: Supporting Innovations in SME. 7.1 Intellectual Property Protection Tools.
2005. <http://archive.innosupport.net> - viewed 5 September 2008
World Intellectual Property Organization (2004)
http://www.wipo.int/sme/en/faq/pat_faqs_q2.htm - viewed 5 September 2008
World Intellectual Property Organization (2004)
http://www.wipo.int/sme/en/case_studies/enterprise_s.htm - viewed 5 September 2008
World Intellectual Property Organization (2004)
www.wipo.int/sme/en/ip_business/importance/relevant.htm - viewed 5 September 2008
World Intellectual Property Organization (2004)
http://www.wipo.int/about-ip/en/ - viewed 5 September 2008
World Intellectual Property Organization (2004)
www.wipo.int/wipo_magazine/en/2005/04/article_0002.html - viewed 5 September 2008
Further reading
Yo Takagi, Larry Allman, Mpazi A. Sinjela (2008). Published by: World Intellectual
Property Organization, Cambridge Universtity Press: Teaching of Intellectual Property Principles and Methods
Websites
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www.european-patent-office.org viewed 5 September 2008
The European Patent Office (EPO) provides a uniform application procedure for individual
inventors and companies seeking patent protection in up to 38 European countries. It is
the executive arm of the European Patent Organisation and is supervised by the
Administrative Council
http://oami.europa.eu/ows/rw/pages/index.en.do viewed 5 September 2008
The trade mark and designs registration office of the European Union. OHIM is the official
European Union agency responsible for registering trade marks and designs that are valid
in all 27 countries of the EU.
http://www.wipo.int/directory/en/ viewed 5 September 2008
In this page you will find the contacts of all the countries members of World Intellectual
Property Organization.
GLOSSARY
Trade secret: Business information that is the subject of reasonable efforts to preserve
confidentiality and has value because it is not generally known in the trade. Such
confidential information will be protected against those who obtain access through
improper methods or by a breach of confidence. Infringement of a trade secret is a type of
unfair competition. (source: http://en.wikipedia.org/wiki/Trade_secret)
Utility model A utility model is a statutory monopoly granted for a limited time in
exchange for an inventor providing sufficient teaching of his or her invention to permit a
person of ordinary skill in the relevant art to perform the invention. The rights conferred by
utility model laws are very similar to those granted by patent laws, but are more suited to
what may be considered as "incremental inventions". Terms such as "petty patent",
"innovation patent", "minor patent", and "small patent" may also be considered to fall
within the definition of "utility model". (Source: http://en.wikipedia.org/wiki/Utility_model)
Intellectual industrial property Industrial property legislation is part of the wider body of
law known as intellectual property. Intellectual property is usually divided into two
branches, namely industrial property and copyright. The broad application of the term
“industrial” is clearly set out in the Paris Convention for the Protection of Industrial
Property (Article 1 (3)): “Industrial property shall be understood in the broadest sense and
shall apply not only to industry and commerce proper, but likewise to agricultural and
extractive industries and to all manufactured or natural products, for example, wines,
grain, tobacco leaf, fruit, cattle, minerals, mineral waters, beer, flowers, and flour.”
(Source: http://www.wipo.int/freepublications/en/intproperty/895/wipo_pub_895.pdf )
Community patent, also known as the European Community Patent or EC patent and
sometimes abbreviated as COMPAT is a patent law measure being debated within the
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European Union, which would allow individuals and companies to obtain a unitary patent
throughout the European Union. The Community patent should not be confused with
European patents which are granted under the European Patent Convention. European
patents, once granted, become a bundle of nationally enforceable patents, in the
designated states. This can be expensive for the patentee in that enforcement must be
carried out through national courts in individual countries, and for a third party in that
revocation cannot be accomplished centrally once the nine-month opposition period has
expired. (Source: http://en.wikipedia.org/wiki/Community_patent)
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2008-10-06