Meaning
Bad faith registration of technical designs with lower inventiveness requirements allows entities to obstruct legitimate market participants. Through the practice of utility model patent squatting a party files for protection on an existing product that has not yet been patented in the local jurisdiction. The applications do not undergo a substantive examination for novelty before being granted.
The resulting patent provides a legal tool to sue competitors for infringement. The practice creates significant risks for foreign companies entering the market with established technology.
Registration Vulnerability
The speed and ease of obtaining a grant make the system attractive for opportunistic filings. In a case of utility model patent squatting the applicant only needs to pass a preliminary check of the document format. The absence of examination allows for the mass filing of certificates for products found in trade fairs or overseas catalogs.
The certificate holders then wait for the original inventor to begin local sales.
Infringement Claim
Once a patent is issued the holder can demand that retailers stop selling the product. Utility model patent squatting often leads to the seizure of goods at customs or the removal of listings from online marketplaces. The squatter uses the threat of legal action to extract licensing fees or settlement payments.
Because the patent is technically valid until overturned, the legitimate producer must defend itself in court. The process is both expensive and time consuming, often taking over a year to resolve. The disruption to the supply chain can cause more financial damage than the legal fees themselves.
Many firms choose to pay the settlement rather than face the risk of a prolonged sales ban.
Invalidation Defense
The primary remedy against a bad faith filing is a request for invalidation. A victim of utility model patent squatting must provide evidence of prior art to show the design was already public. If the patent is declared invalid, all previous infringement claims based on it fail.
The Patent Reexamination Board handles these cases and makes the final determination on the validity of the grant.
