Onkvisit S., Shaw J. International Marketing: Analysis and Strategy
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136
LEGAL ENVIRONMENT
Figure 5.3 Corruption and business
Source:
Mobil Corp.
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Some highlights of the Code
■ Employees must follow the law wherever they are
around the world.
■ Employees must avoid conflicts of interest. Be
aware of appearances.
■ Financial records – both for internal activities and
external transactions – must be timely and accu-
rate.
■ Company assets – including computers, materials
and work time – must not be used for personal
benefit.
■ Customers and suppliers must be dealt with fairly
and at arm’s length.
■ Employees must never attempt to bribe or improp-
erly influence a government official.
■ Employees must safeguard the company’s non-
public information.
■ Violations of the Code include asking other
employees to violate the Code, not reporting a
Code violation or failing to cooperate in a Code
investigation.
■ Violating the Code will result in discipline.
Discipline will vary depending on the circum-
stances and may include, alone or in combination,
a letter of reprimand, demotion, loss of merit
increase, bonus or stock options, suspension or
even termination.
■ Under the Code, certain actions require written
approval by your Principal Manager.The Principal
Manager is your Division President, Group
President, Corporate function head, or the General
Manager of your operating unit.
■ For those who are themselves Principal Managers,
written approvals must come from the General
Counsel and Chief Financial Officer. Written
approvals for executive officers and directors must
come from the Board of Directors or its desig-
nated committee.
■ If you have questions about any situation, ask.
Always ask.
This Code should help guide your conduct. But the
Code cannot address every circumstance and isn’t
meant to; this is not a catalogue of workplace rules.
You should be aware that the company has policies in
such areas as fair competition, securities trading,
workplace conduct and environmental protection.
Employees should consult the policies of The Coca-
Cola Company in specific areas as they apply.
Your responsibilities
■ It is your responsibility to read and understand the
Code of Business Conduct. You must comply with
the Code in both letter and spirit. Ignorance of the
Code will not excuse you from its requirements.
■ Follow the law wherever you are and in all
circumstances.
■ Never engage in behavior that harms the reputa-
tion of the company. If you wouldn’t want to tell
your parents or your children about your action –
or wouldn’t want to read about it in a newspaper
– don’t do it.
■ Some situations may seem ambiguous. Exercise
caution when you hear yourself or someone else
say, “Everybody does it,” “Maybe just this once,”
“No one will ever know” or “It won’t matter in the
end.”These are signs to stop, think through the sit-
uation and seek guidance. Most importantly, don’t
ignore your instincts. Ultimately, you are responsi-
ble for your actions.
■ You have several options for seeking guidance.You
may discuss concerns with your manager, respon-
sible employees in the Finance or Legal Divisions
or, in the case of potential criminal issues, with
Strategic Security.
EXHIBIT 5.1 THE COCA-COLA COMPANY: THE CODE OF BUSINESS CONDUCT
138
LEGAL ENVIRONMENT
Overview
Conducting business with governments is not the same
as conducting business with private parties. These
transactions often are covered by special legal rules.
You should consult with company legal counsel to be
certain that you are aware of any such rules and you
must have approval of local legal counsel before pro-
viding anything of value to a government official.
The company prohibits the payment of bribes to
government officials. “Government officials” are
employees of any government anywhere in the world,
even low-ranking employees or employees of govern-
ment-controlled entities. The term “government offi-
cials” also includes political parties and candidates
for political office. It is your obligation to understand
whether someone you deal with is a government offi-
cial. When in doubt, consult legal counsel.
In some countries it may be customary at times
to pay government employees for performing their
required duties. These facilitating payments, as they
are known, are small sums paid to facilitate or expe-
dite routine, non-discretionary government actions,
such as obtaining phone service or an ordinary license.
In contrast, a bribe, which is never permissible, is
giving or offering to give anything of value to a gov-
ernment official to influence a discretionary decision.
Understanding the difference between a bribe and
a facilitating payment is critically important. Consult
with your division legal counsel before acting.
Our company and its subsidiaries must comply
with all applicable trade restrictions and boycotts
imposed by the US government. (A boycott is a
restriction on a company’s ability to ship goods into
a specific country or do business there.) Moreover, our
company and its subsidiaries also must abide by US
anti-boycott laws that prohibit companies from par-
ticipating in any international boycott not sanctioned
by the US government.If questions arise, contact legal
counsel.
General principles
■ The ban on bribes applies to third parties acting
on behalf of the company, including all contractors
and consultants. Employees must not engage a
contractor or consultant if the employee has
reason to believe that the contractor or consultant
may attempt to bribe a government official.
■ The company may hire government officials or
employees to perform services that have a legiti-
mate business purpose, with the prior approval of
the Principal Manager. For example, an off-duty
police officer might provide security. Government
officials should never be hired to perform services
that conflict with their official duties.
■ All facilitating payments must be approved in
advance by division legal counsel and recorded
appropriately.
■ Employees must comply with all US boycott and
anti-boycott restrictions.
■ The company may operate and fund through its
employees one or more political action commit-
tees.
■ Political contributions by the company must be in
accordance with local law.They must be approved
by both your Principal Manager and the General
Counsel and they must be properly recorded.
■ Employees will not be reimbursed for political con-
tributions. Your job will not be affected by your
choices in personal political contributions.
The Code in real life
The action
: A finance manager paid $20 to an
employee of a government-owned telephone company
to ensure a telephone line was installed at a company
office on time. Even for that small amount, she sought
approval from Division Legal Counsel and recorded
the transaction as a “facilitating payment.”
EXHIBIT 5.2 THE COCA-COLA COMPANY: THE CODE OF BUSINESS CONDUCT –
WORKING WITH GOVERNMENTS
INTELLECTUAL PROPERTY
Intellectual property (IP), as defined by the World
Intellectual Property Organization (WIPO), is “cre-
ations of the mind: inventions, literary and artistic
works, and symbols, names, images, and designs
used in commerce.” Individuals and firms have the
freedom to own and control the rights to intellec-
tual property (i.e., inventions and creative works).
The terms patent, trademark, copyright, and trade secret
are often used interchangeably. In fact, there are
four basic forms of intellectual property, and they
hold different meanings. A study found a low cor-
relation of the copyright and trademark variables
with Rapp and Rozek’s patent variable. This is an
indication of the theoretical importance of treating
intellectual property law components separately.
One component cannot be used as a proxy for
the other because countries do not assign equal
importance and attention to them.
19
Categories of intellectual property
A trademark is a symbol, word, or object used to
identify a product made or marketed by a particu-
lar firm. It becomes a registered trademark when
the mark is accepted for registration by the
Trademark Office.
A copyright, which is the responsibility of the
Copyright Office, offers protection against unau-
thorized copying by others to an author or artist for
his or her literary, musical, dramatic, and artistic
works.A copyright protects the form of expression
rather than the subject matter.A copyright has now
been extended to computer software as well.
According to the US Supreme Court, databases such
as telephone books are not covered by copyright
law.
In 1790, the US Congress limited copyrights to
fourteen years, renewable for fourteen further
years if the author was living. Since then, copyrights
have been extended eleven times and are now good
for seventy years beyond the life of an author and
ninety-five years for copyrights owned by corpora-
tions. The latest law is the Sonny Bono Copyright
Term Extension Act which was proposed by the
Walt Disney Company, thus dubbed the Mickey
Mouse Protection Act.
20
Ironically, Walt Disney
himself benefited greatly from the value of public
domain. By updating an out-of-copyright character,
he created Mickey Mouse. The latest extension
maintains copyright protection for the early por-
trayals of Mickey Mouse, George Gerschwin’s
Rhapsody in Blue, Robert Frost’s poems, and such
films as Gone With the Wind, Casablanca, and The Wizard
of Oz.
21
In European Union countries, copyright protec-
tion lasts for fifty years. As a result, recordings
made in the early to mid-1950s by such artists as
Elvis Presley, Maria Callas, and Ella Fitzgerald have
entered public domain. A European company can
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The decision
: That was smart. If the payment had
been large, say $600, that might be an indication that
this was not a routine governmental action and might
constitute a bribe. In every case, employees must seek
approval for facilitating payments, and must record
these actions appropriately.
The action
: An account executive was traveling in a
country experiencing civil unrest. A soldier stopped
him at a bridge and demanded payment.
The decision
: When personal safety is at risk, the
employee should, of course, make the payment. Still,
the fee must be reported to the Division Legal Counsel
and recorded appropriately.
The action
: A general manager entertained a gov-
ernment official in charge of issuing special permits
to allow route trucks in a restricted area. During the
meeting, the general manager gave a television and
DVD player to the official as “a token of respect for
the esteemed minister.”
The decision
: That was a bribe. It was a violation of
both the Code and the law.
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LEGAL ENVIRONMENT
Table 5.1 Corruption Perceptions Index
Rank Country CPI 2002 Rank Country CPI 2002
score score
1 Finland 9.7
2 Denmark 9.5
New Zealand 9.5
4 Iceland 9.4
5 Singapore 9.3
Sweden 9.3
7 Canada 9.0
Luxembourg 9.0
Netherlands 9.0
10 United Kingdom 8.7
11 Australia 8.6
12 Norway 8.5
Switzerland 8.5
14 Hong Kong 8.2
15 Austria 7.8
16 USA 7.7
17 Chile 7.5
18 Germany 7.3
Israel 7.3
20 Belgium 7.1
Japan 7.1
Spain 7.1
23 Ireland 6.9
24 Botswana 6.4
25 France 6.3
Portugal 6.3
27 Slovenia 6.0
28 Namibia 5.7
29 Estonia 5.6
Taiwan 5.6
31 Italy 5.2
32 Uruguay 5.1
33 Hungary 4.9
Malaysia 4.9
Trinidad & Tobago 4.9
36 Belarus 4.8
Lithuania 4.8
South Africa 4.8
Tunisia 4.8
40 Costa Rica 4.5
Jordan 4.5
Mauritius 4.5
South Korea 4.5
44 Greece 4.2
45 Brazil 4.0
Bulgaria 4.0
Jamaica 4.0
Peru 4.0
Poland 4.0
50 Ghana 3.9
51 Croatia 3.8
52 Czech Republic 3.7
Latvia 3.7
Morocco 3.7
Slovak Republic 3.7
Sri Lanka 3.7
57 Colombia 3.6
Mexico 3.6
59 China 3.5
Dominican Rep. 3.5
Ethiopia 3.5
62 Egypt 3.4
El Salvador 3.4
64 Thailand 3.2
Turkey 3.2
66 Senegal 3.1
67 Panama 3.0
68 Malawi 2.9
Uzbekistan 2.9
70 Argentina 2.8
71 Cote d’Ivoire 2.7
Honduras 2.7
India 2.7
Russia 2.7
Tanzania 2.7
Zimbabwe 2.7
77 Pakistan 2.6
Philippines 2.6
Romania 2.6
Zambia 2.6
81 Albania 2.5
Guatemala 2.5
thus release albums that were once owned exclu-
sively by particular labels.
22
The USA has finally joined the eighty-nation
Berne Convention for the Protection of
Literary and Artistic Works, allowing greater
protection against foreign pirating of US copy-
righted works in twenty-five additional countries.
In order to conform to the Berne Copyright
Convention, changes in the copyright law in the
USA were necessary. Under the new amendment,
affixing a copyright notice is optional. For works
created after January 1, 1989, mere publication and
use are enough to obtain copyright protection.
Even though the copyright notice is no longer
required, it is still a good idea to place a ©,
the author’s name, and date of publication on
the original work. A clear notice entitles the
author to obtain more effective remedies against
infringers.
A patent protects an invention of a scientific
or technical nature. It is a statutory grant from the
government (the Patent Office) to an inventor in
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Table 5.1 continued
Rank Country CPI 2002 Rank Country CPI 2002
score score
Nicaragua 2.5
Venezuela 2.5
85 Georgia 2.4
Ukraine 2.4
Vietnam 2.4
88 Kazakhstan 2.3
89 Bolivia 2.2
Cameroon 2.2
Ecuador 2.2
Haiti 2.2
Source:
Transparency International
93 Moldova 2.1
Uganda 2.1
95 Azerbaijan 2.0
96 Indonesia 1.9
Kenya 1.9
98 Angola 1.7
Madagascar 1.7
Paraguay 1.7
101 Nigeria 1.6
102 Bangladesh 1.2
Table 5.2 Bribe Payers Index
Rank Score Rank Score
1 Australia 8.5 12 France 5.5
2 Sweden 8.4 13 USA 5.3
Switzerland 8.4 Japan 5.3
4 Austria 8.2 15 Malaysia 4.3
5 Canada 8.1 Hong Kong 4.3
6 Netherlands 7.8 17 Italy 4.1
Belgium 7.8 18 South Korea 3.9
8 United Kingdom 6.9 19 Taiwan 3.8
9 Singapore 6.3 20 People’s Republic of China 3.5
Germany 6.3 21 Russia 3.2
11 Spain 5.8
Domestic companies
1.9
Source:
Transparency International
exchange for public disclosure giving the patent
holder exclusive right to the functional and design
inventions patented and excluding others from
using those inventions for a certain period of time
(twenty years for a functional patent and fourteen
years for a design patent). The purpose of owner-
ship rights is to spur inventiveness. Popular drugs
that have recently lost their patent protection
include Merck’s Zantac (heartburn drug), and
Schering-Plough’s Claritin (allergy drug),
Some have criticized the US Patent Office for
a proliferation of patents – an average of more
than 3000 patents a week.
23
The definition of inven-
tion has gone beyond substantial and concrete
things such as mechanical devices, manufacturing
processes, and chemical processes to include genet-
ically engineered animal and human genes and
proteins – things that were considered to be
mere “discoveries” at one time. Now thought and
abstraction can be patented. Software and algo-
rithms used to be unpatentable, but software is now
the fastest growing patent category. The trivial
devices that have won patent protection include a
technique for measuring a breast with a tape to
determine a bra size and a technique for executing
a tennis stroke while wearing a kneepad.
24
The top patent holder is IBM.
25
For ten years in
a row, IBM generated the most US patents. In 2002,
by receiving 3288 patents, it was the only company
to be awarded more than 3000 US patents in a single
year. The past decade brought IBM 22,357 patents
and allowed the company to beat Canon, the next
closest rival, by 7000 patents. During the same
period, Motorola was the only other American
company that managed to land in the top ten. The
top ten was dominated by mostly Japanese elec-
tronics giants – Canon, NEC, Hitachi,Toshiba, and
Sony.
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LEGAL ENVIRONMENT
Control of corruption indicator
Denmark
Slovenia
Singapore
Belgium
Botswana
BangladeshBolivia
Indonesia
Ukraine
Azerbaijan
Cameroon
Thailand
Chile
Costa Rica
Philippines
El Salvador
UgandaVenezuela
Paraguay
Weak control of corruption
Taijikstan
Nigeria
Netherlands
Strong control of corruption155 countries
Figure 5.4 Control of corruption
Note
This chart shows estimates of control of corruption for 155 countries during 1997–8, with selected countries indicated for illus-
trative purposes.The vertical bars show the likely range of the governance indicators, and the midpoints of these bars show the
most likely value, for each country.The length of these ranges varies with the amount of information available for each country
and according to the extent to which different sources’ perceptions of corruption coincide. Countries with dark blue (light blue)
vertical bars are those for which the governance indicator is statistically significantly in the bottom (top) third of all countries.
Countries with mid blue vertical bars fall into neither of the two previous groups. Countries’ relative positions are subject to
significant margins of error and reflect the perceptions of a variety of public and private sector organizations worldwide.Countries’
relative positions in no way reflect the official views of the World Bank or the International Monetary Fund.
Source:
Daniel Kaufmann, Aart Kraay, and Pablo Zoido-Lobaton,“Governance Matters: From Measurement to Action,”
Finance & Development
, June 2000, 11.
The term trade secret refers to know-how
(e.g., manufacturing methods, formulas, plans, and
so on) that is kept secret within a particular busi-
ness. This know-how, generally unknown in the
industry, may offer the firm a competitive advan-
tage. KFC was alarmed to learn that a handwritten
note was found in the basement of a home once
owned by Colonel Harland Sanders and that the
note might contain his secret KFC recipe. It imme-
diately filed a lawsuit to keep the contents of the
note secret but dropped it later after determining
that the recipe found did not resemble the Colonel’s
original recipe of eleven herbs and spices. Colonel
Sanders first came up with his famous fried chicken
recipe in the late 1930s for his roadside eatery,
Sanders Court and Café. Only a few people know
the recipe, and they have all signed strict confiden-
tiality agreements.
26
Infringement occurs when there is commer-
cial use (i.e., copying or imitating) without the
owner’s consent, with the intent of confusing or
deceiving the public. For example, Texas Instru-
ments charged that eight Japanese firms made
memory chips based on its patents after the expira-
tion of license agreements, and the US company
was able to force the Japanese firms to pay nearly
$300 million in royalties. Texas Instruments also
obtained an International Trade Commission ruling
to seize Samsung’s DRAM (dynamic random
access memory) chips, which infringed upon Texas
Instruments’s semiconductor patents. Samsung then
joined the eight Japanese companies in agreeing to
pay royalties.
In a recent case, Intel filed a lawsuit against Via
Technologies, a Taiwanese chip maker. Intel alleged
that Via’s chip set violated its patents. The legal
dispute subsequently led to eleven cases in five
countries involving twenty-seven patents. In the
end, the two companies settled all litigation related
to microprocessors and chip sets. Under the agree-
ment, Via won a three-year license to make Intel-
compatible microprocessors and a four-year license
to make Pentium 4 chip sets. In addition, both
would cross-license each other on patents for ten
years.
27
Legal rights and requirements
Although patent, trademark, and copyright are dis-
tinctly different, they all have something to do with
the protection of an owner’s property. All require
applications to be filed – not at the same office,
however. Although this section deals with patents
more specifically, the same basic ideas apply as well
to trademarks and copyrights.
When a firm develops an innovation, a patent
should be obtained. The purpose of a patent is to
enable the company to exploit its invention com-
mercially while preventing others from interfering.
Not all new ideas are patentable.A patent is granted
only if the item under consideration is able to satisfy
certain criteria. In general, the item must be new,
unobvious, and useful, and must also involve an
inventive step.
The problem of getting a patent granted is often
difficult in many communist countries and LDCs
because patent laws do not exist or are ignored.
China did not enact its first patent law until 1984.
Such countries may refuse to recognize certain
patents granted elsewhere, or they may refuse to
approve foreign firms’ patent applications in their
own countries. Items not covered by patents in
China include computer software, animals, plants,
food beverages, and atomic-energy-related inven-
tions. Also not fully protected are those items
related to national defense, the economy, and public
health. China does not give patents for chemicals
and pharmaceuticals, reasoning that countries at
similar stages of economic development have not
granted such patents. However, as a new member
of the WTO, China is required to observe intellec-
tual property rights.
Patent laws vary widely, and one should not jump
to conclusions that patent problems are restricted
only to communist or developing countries. Indus-
trial nations may also exclude items from protec-
tion. Canada is the only industrialized nation requir-
ing compulsory licensing of drugs. SmithKline had
success with Tagamet, a drug for treating ulcers, but
Canada issued Novopharm a license for a generic
version only four years after Tagamet first appeared
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on the US market.As a result, SmithKline sued the
Canadian government for violation of patent rights.
An inventor should understand that the patent
obtained in one country does not extend protection
beyond that nation’s territorial limits. For further
protection, it is necessary for the inventor to file
application in other import markets. A few inter-
national agreements help simplify this cumber-
some process. One such agreement is the Patent
Cooperation Treaty (PCT).The PCT is a multi-
lateral treaty that makes it possible to file an inter-
national application simultaneously in up to 115
countries. It thus eliminates the need for separate
applications.
28
Another international agreement is provided by
the Paris Union (Paris Convention) or the
International Convention for the Protection of
Industrial Property of 1883.The Paris Union claims
about eighty countries as its members. The most
important provision is the “priority right,” which
means that the registering of a patent in one mem-
ber country gives the inventor one year from the fil-
ing date to do the same in other countries before
losing the protection. In addition, the convention
establishes other rules, principles, and rights. The
“national treatment” rule prevents discrimina-
tion by requiring member countries to treat foreign
applicants and their own nationals in the same
manner. The principle of “independence of
patents” provides further protection because the
revocation or expiration in the country of original
filing has no effect on its validity in other countries.
Centralized protection of trademarks is easier to
accomplish than centralized protection of patents.
One treaty for the purpose of international registra-
tion is the Madrid Agreement for the Inter-
national Registration of Marks. Twenty-two
countries, mostly in Europe, are signatories, though
the USA is not one of them.The Madrid Agreement
provides an automatic extension of protection to all
member countries when a company pays a single fee
of about $300 for the period of protection of twenty
years.After a trademark owner has registered a mark
in a member country, the International Bureau
of the World Intellectual Property Organiza-
tion (WIPO) in Geneva will then issue and deposit
an international registration with the trademark
offices in member countries for examination in
accordance with their own laws.
The Trademark Registration Treaty (TRT)
simplifies the application process further by not
requiring a prior home registration, as in the case
of the Madrid Arrangement. If member countries
designated in the application do not refuse registra-
tion under their national laws in fifteen months, the
mark is treated as being registered there.
There are other treaty arrangements. For
example, the European Patent Convention
(EPC) establishes a regional patent system for
Western Europe. A person can thus file a single
international application for a European Patent at
the European Patent Office, which administers
patent applications. For Latin America, there is the
Inter-American Convention on Inventions,
Patents, Designs, and Industrial Models.
The cost of preparing and registering patents can
be quite high.There are costs other than the initial
filing fees as well. Periodic maintenance fees (i.e.,
annual taxes) must be paid during the life of the
patent to keep it active. Other requirements must
often be met for both the initial patent and its
renewal. The required evidence in support of the
application usually includes the use and continuous
use of the patent.
Because of the high costs associated with patent
application and maintenance, the costs must be
weighed against the benefits. As a rule of thumb,
patent applications and registration are very import-
ant and are necessary in the most important markets
(i.e., the USA, the EU, and Japan). For other indus-
trialized countries, the potential benefits should
justify the costs. In Eastern Europe and Taiwan, it
may not be economically worthwhile to file for
patents because patent enforcement there is so weak
as to be practically nonexistent. Gucci and Rolex
fought long and largely unsuccessful battles in those
markets.
In spite of the cost, the marketer must realize
that, without a valid patent, it can be more costly to
do business in the long run. A manufacturer that
144
LEGAL ENVIRONMENT
takes legal action against patent violators is often
faced with the burden of proof of ownership. The
failure to obtain a patent encourages active infringe-
ment, and increases the subsequent legal costs and
difficulty of proving a case.The legal costs incurred
in a single court can easily exceed the registration
costs in several countries.
In the process of filing for patent protection, it is
a good idea to make a distinction between common
law countries and statute law countries.A common
law country determines patent ownership by pri-
ority in use. In comparison, the ownership in a
statue law country is determined by priority in
registration; that is, the first-to-file is granted a
patent even if an innovation was actually created or
used earlier by someone else. Europe, Japan, China,
and most countries have the first-to-file patent
system, and they make patent applications public
eighteen months after filing.The USA, as a common
law country, relies on the first-to-invent system.
The US system’s first-to-invent standard is different
because it awards patents to the original inven-
tor even though someone else may have got to
the patent office first. Based on the US system, the
person who had the idea first receives a patent, and
patent applications are kept secret – sometimes for
years – until a patent is granted. It is true that
the European and Japanese systems, by publishing
patent information early, encourage imitators, but
at the same time, this practice alerts other inventors
early enough to avoid redundant research.
The USA was not consistent in treating American
and foreign inventors.Although the USA insisted on
giving ownership to the first-to-invent, that rule did
not protect overseas inventors. US patent law made
it clear that research efforts taking place outside the
USA could not be used to prove when an invention
was conceived. Thus an American inventor would
still get ownership if he or she started working on
a certain concept before a foreigner’s application for
a US patent – even though the foreigner actually
discovered that idea earlier overseas. After decades
of favoritism, the US Patent & Trademark Office, as
mandated by GATT, began giving equal treatment
to overseas inventors in 1996.
The Japanese patent practices appear to discrim-
inate against foreign applicants who have to wait
longer than their Japanese counterparts for a patent
to be granted. In contrast, the US, German, and
British practices may discriminate against foreign
applicants with lower patent grant ratios than for
domestic applicants. The USA and Japan seem to
have different philosophies concerning patents. In
the USA, patents are one’s property. In Japan,
patents are regarded as public good, and that is why
such practices as compulsory licensing and early
publication are encouraged.
29
The USA has complained about other countries’
systems, while those countries have urged the USA
to become more efficient and consistent with the
rest of the world by adopting the system of award-
ing a patent to the first inventor who applies on an
invention. The rationale of the USA is that it
attempts to provide a balance between innovation
and competition. However, the current practice can
and does result in redundant research since other
inventors have no knowledge whether someone has
filed a patent application on the same idea.
Companies have to put up with the US system
because, without US patents, they may be excluded
from the world’s largest market. Most big com-
panies favor the international first-to-file system due
to certainty. One benefit is in terms of the reduc-
tion of the threat of “submarine patents” or those
applications for major innovations which the Patent
Office has kept secret for decades because of inde-
cision about patent approval.When such patents are
granted to obscure inventors who claim to have
an idea first, they can torpedo other firms which
do not know that a patent on the same idea is
pending. As in the case of the microprocessor
patent, it took the Patent Office twenty years to
award a patent to Gilbert P. Hyatt in 1990. As a
result, North American Philips Corp. and others
had to scramble to obtain a license. Critics feel that
some inventors have manipulated the process by
continually filing revisions to the original patent
applications so as to extend such applications for
years or decades. These inventors then suddenly
claim patent rights to a widely used technology and
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LEGAL ENVIRONMENT