In his budget speech, Financial Secretary John Tsang Chun-wah proposed a rather interesting innovation - intellectual property trading. His premise was that technology and product R&D will stimulate the development of intellectual property trading. Since Hong Kong has a sound regime for the protection of intellectual property rights, it is well-equipped to develop into a regional intellectual property trading hub. The Secretary for Commerce and Economic Development will lead a working group to study the overall strategy for promoting Hong Kong as a hub for intellectual property trading. This last part of the proposal is to be welcomed.
First of all, we notice that Hong Kong is not the place for creating patents. In 2008, the number of standard patents filed with Hong Kong origin was 173, or 1.2 percent of all the standard patents filed in the year. In 2012, this figure was 1.3 percent. On the other hand, every year in the past five, there were over 17,000 patents recognized from elsewhere to seek registration in Hong Kong. This phenomenon means that demand for Hong Kong registration has a large market.
The regulation of patents registration is a complex matter and often requires specialists in support. The large number of patents registered generates potentially a large number of licensing business. This carries with it a potential but not unreal problem of what code of conduct if any should apply for those in the business. The problem is wide ranging but it has to be addressed.
In Hong Kong, we do not have bodies like the Chartered Institute of Patent Attorneys (CIPA) in the United Kingdom and independent regulatory bodies overseeing conduct of its members. Members of such bodies would inevitably address problems such as conflict of interest, which are unlikely to be transparent to the owners of the intellectual property rights until it is very late.
Since 2007, the UK Legal Services Act requires the setting up of an independent board (the Intellectual Property Regulation Board - IPReg). The board sets standards for patent attorneys and polices them. Registered UK patent attorneys and their employees are now subject to this board. The IPReg has apparently done its job in promoting awareness of problems of conduct issues.
What happened was, recently, a practice note issued by the IPReg, which regulates patent and trademark attorneys, warns practitioners to ensure that exercising a lien over intellectual property in settlement of a client account might put them at risk of a conflict of interest. The problem is because patent attorneys frequently work with start-up businesses, and the relationship between regulated persons in the intellectual property sector can be different from many other sectors. The patent attorney would have a lot of bills and when they were unpaid, they might believe they could exercise a contractual lien to keep the intellectual property rights for themselves. This has now been stated to be wrong. The reason is simply that contractual liens may put lawyers in breach of rules. In the case of members of CIPA, this would be governed by Rule 2 and 5 of its conduct rules.
The practice note may not have come to light but for a case from the independent IPReg Joint Disciplinary Panel in January, which ruled that a registered patent attorney "had placed himself in an inadvertent conflict of interest" with a former client.
According to the statement of facts, the patent attorney had acted as patent attorney for its former client. After a breakdown in relations, the patent attorney executed a deed of transfer of the client's intellectual property under powers he claimed to have acquired under his terms of business. It was found that this was unauthorized and in breach of the code of conduct of the CIPA.
Following the hearing, the patent attorney undertook to transfer to its former client the legal title to intellectual property acquired. He also undertook to contribute 8,000 pounds ($11,900) towards the costs of the Patent Regulation Board (acting as applicant).
The Disciplinary Panel issued a statement setting out its views, in the context of any future complaint, on the use in terms and conditions of rights to assign the intellectual property of clients as security for unpaid costs. Following this statement IPReg has issued a Practice Note and Guidance. All these bring about transparency, certainty and confidence to the London market in intellectual property trading because of the integrity in the regulation of its intellectual property lawyers. In mapping out our strategy for intellectual property trading, title investigation is one of the topics that ought to be addressed. However, comprehensive conduct rules ought not to be forgotten in relation to not only the traders but also the many stakeholders, in order that Hong Kong can become a true regional intellectual property hub.
(Source:China Daily)
