The subject: INTERNATIONAL SALE OF GOODSDiscuss: “Although the United Nations Convention on Contracts for the International Sale of Goods (CISG) 1980 is regularly opted out of by commercial parties involved in the international sale of goods contracts, it may have led to greater predictability of the law applicable to such contracts.”The requirement: applying the method of writing, argumentation, legal language, and the references in the example. 15 search pages without the reference pages … without plagiarism…..‏The formatting: I want the structure essay same the example. everything same the exampleStudent ID: 4246090
Module Code: M34041
1.
In relation to ANY TWO of the following, compare, contrast and evaluate the
approach of, on the one hand, EU law in the TFEU and EU directives 2014/24/EU
(Public Contracts Directive) and 2014/25/EU (Utilities Directive) and, on the other
hand, the WTO Agreement on Government Procurement 2012 as contained in the
WTO document GPA/113(GPA):
(i)
(ii)
(iii)
the coverage of contracts awarded by public undertakings;
the use of public procurement to promote participation of small and medium
sized enterprises (SMEs);
the use of negotiation in award procedures.
Introduction
It is admitted that public procurement contracts have gained more importance recently in
the contrast that laws and regulations became necessary to regulate the process. The
reason of these regulations is to ensure that the procurement process goes in a
transparent and non-discriminatory way. An example of these regulations are EU public
contract directive, EU utilities directive and the WTO agreement on government
procurement (GPA).
The main difference between the abovementioned laws is that the first two
directives are derived form the European Union treaties which adheres member states to
oblige with it, which is also derived from the main principles that the EU adopts such as
transparency and equal competition. On the other hand, the GPA agreement is based on
negotiations between its members which means that its member states must accept the
principles. Thus, more flexibility could be seen in GPA more than EU directives as its
member states can make for instance exceptions to the agreement.
This essay will argue that the GPA agreement provides more flexibility than EU
directives, in terms of the coverage of contracts awarded by public undertakings and the
use of negotiations in award procedures. In order to discuss these issues, the paper will
be structured as follows: the first aspect will be comparing between both EU public
contracts and Utilities directives and the GPA agreement and it will compare and evaluate
between these two legislations. The second aspect will place emphasis on the use of
negotiations in EU directives and the GPA agreement.
1
1. The Coverage of Contracts Awarded by Public Undertakings
The types of contracts covered under ‘public undertakings’ differ from one law to another.
This paper will discuss the differences between certain EU directives (the Public Contracts
Directive and the Utilities Directive) and the WTO Agreement on Government Procurement,
known as the GPA.
1.1.
The Coverage of Contracts Under the EU Public Contracts Directive
It is well known that the EU intends to open markets among its member states and attempt
to break barriers in those markets. This development could be made possible under the
Treaty on the Functioning of the European Union (TFEU) through many of its articles, such
as the free movement of goods (Article 34), the freedom of providing services (Article 56),
and the freedom of establishment (Article 49). 1 The main purpose of opening markets is
to spread peace, since promoting economic cooperation between member states of the
European Union has the potential to achieve this aim, especially after the devastation of
the World War II.
In order to achieve this aim, many concepts have been adopted in the EU laws on
public procurement, such as providing transparency and abandoning discrimination of
foreign suppliers directly or indirectly. In fact, the treaty goes even further to conclude
that any restriction on procurement is a violation, even if it affects both national and
foreign suppliers. This could be seen in Commission v Netherlands, when the court held
that a requirement to use the UNIX operating system violated Article 34 of the TFEU
because, even if did not favour domestic products, it excluded firms from using systems
other than UNIX.2 This shows the emphasis that the TFEU puts on competition, prohibiting
any kind of discrimination or limiting of this competition, even if it affects both national
and foreign suppliers.
1
the treaty on functioning of the European Union, Article (34) (56) (49)
2
Case C-359/93, Commission v Netherlands (“UNIX”) [1995] E.C.R. I-157
2
The reason for adopting such strict laws prohibiting any discrimination for both national
and foreign suppliers was that discrimination was identified in national public purchasing.
This was seen as an obstacle to a single free European market. 3 In 1985, a survey of five
member states (the UK, Italy, France, Germany and Belgium) revealed import rates of 22
per cent for their economies as a whole, while the figure for the public sector was some 2
per cent.4 This gap showed that public purchasers were favouring national suppliers more
than foreign ones and led to a series of European procurement directives to eradicate
discriminatory practices in favour of national suppliers. 5 These directives became
important with the passage of time due to the expansion of both quantitative and
qualitative public contractual action.6 The European procurement directives which prohibit
discrimination go even further in putting conditions on public bodies, to the extent that
public entities are not free to choose their contractual partners if they intend to start a
public-private partnership.7 In other words, the procuring entity must follow a formal
procedure in choosing the private party.8
The EU Public Contracts Directive covers three types of contracts: public works
contracts, public supply contracts and public service contracts. 9 Public works contracts
include works identified in Annex II of the directive, while public supply contracts are
essentially those which have as an objective ’the purchase, lease, rental or hire-purchase
with or without an option to buy, of products’. Public service contracts can be defined, in
general, as works that are a type of service.10 Those three types of contracts seem to be
distinguishable, since the characteristics of each of them are identifiable. In other words,
the procuring entity has the potential to identify whether a contract is one of these types
and thus will be covered by the EU Public Contracts Directive. However, a problem might
3
STEPHEN MARTIN, KEITH HARTLEY AND ANDREW COX, Public procurement directives in the European Union:
a study of local authority purchasing (1999) 77 (2) Public Administration, 387-406.
4
ibid
5
ibid
6
Paola Chirulli, Public Contracts (2011) 34 (1) International Journal of Public Administration, 134-137
7
ibid
8
ibid
9
The Public Contracts Directive 2014
10
The Public Contracts Directive, Article 2(1)(6), 2(1)(8) and 2(1)(9)
3
occur if these three types of contracts overlap. For example, a single contract might include
public works and, at the same time, a service. This situation is known as a ‘mixed contract’.
A mixed contract could be simply defined as a contract which contains work, service
or supply in a single contract. 11 The provision of mixed contracts is based on the types
which are integrated. If the mixed contract is a mix between works and services or a mix
between works and supplies, the authority must then apply rules that are applicable to
the type of procurement that characterises the main subject of the contract in question. 12
If the contract is a mix between supplies and services, the assessment is relatively easy,
since the procuring entity has to apply the value test instead of the purpose. That means
the value of supply versus services is the main test in deciding which rules to apply. 13
Therefore, the procuring entity must identify the characteristics of a contract in order to
apply the appropriate rules.
It could be argued that the main characteristic of a contract is vague, which gives
the procuring entity a wide discretion to apply the rules it finds suitable. For example,
Gestión Hotelera, a Spanish procuring entity, concluded a contract to renovate a hotel and
fit out a casino.14 This contract was challenged, and it was argued that carrying out
renovation work meant that a notice had to be published in the official journal. 15 The Court
of Justice of the European Union (CJEU) held that this contract was not a public works
contract because the ‘work’ was not the main objective, but rather incidental to the
installation.16
The court’s judgement raises an additional question about the meaning of incidental
actions and how they should be characterised in a contract. The European Commission
also referred to the purpose test, but it did not elaborate how it would be determined. 17 If
11
Abby Semple and Marta Andrecka, Classification, Conflicts of Interest and Change of Contractor: A Critical
Look at the Public Sector Procurement Directive (2015) 10 (3) European Procurement Public Private
Partnership Law Review, 171-186
12
ibid
13
ibid
14
Case C-331/92 Cestion Hotelera InternationalSA [1994] ECR 1-1329.
15
ibid
16
ibid
17
Semple and Andrecka (n 11)
4
we assume that in the abovementioned case (the renovation of a hotel) the casino fit out
is more expensive than the renovation, and that this casino will be the main attraction for
consumers, is the main purpose of the contract a work (establishing a casino)? Or would
the judgment remain the same? The CJEU commented as follows in Commission v Italy
on how to decide the purpose of the contract:
The assessment must be made in the light of the essential obligations which
predominate and which, as such, characterize the transaction, as opposed
to those which are only ancillary or supplementary in nature and are
required by the very purpose of the contract; the value of the various
matters covered by the contract is, in that regard, just one criterion among
others to be taken into account for the purposes of the assessment.18
This assessment still does not give an indication of the meaning of the main subject of the
contract, as it says that the assessment must be made in light of the essential obligations
which predominate. This does not help the procuring entity identify the main purpose of
the contract, and thus know what rules should be applied.
Whether mixed or not, the contracts covered under the EU Public Contracts Directive
must be above a certain monetary threshold for each type. 19 For work contracts that
threshold is £4 104 394, for service contracts it is £106 047 and for supply contracts it is
£106 047 (for some contracting authorities it is £164 176).20 If a contract is below the
threshold, the procuring entity is still obliged to apply the rules of the EU treaty, since this
treaty has to be applied regardless the value of the contract. However, the EU directives
are only obligatory if the contract is above the threshold. 21 More specifically, if the contract
is below the threshold, member states have to apply rules related to free movement of
goods, freedom to provide services, and freedom of establishment, as well as the principles
related to them such as transparency, equal treatment and non-discrimination.22
18
Case C-412/04 Commission v Italy [2008] ECR 1-619 [48-49].
19
Dacian Dragos and Roxana Vornicu, Public Procurement below Thresholds in the European Union – EU Law
Principles and National Responses (2015) 10 (3) European Procurement & Public Private Partnership Law
Review, 187-206.
20
EU Public Contracts Directive 2014
21
Dragos and Vornicu (n 19)
22
ibid
5
These principles have to be applied under one condition: cross-border interest. If
this condition is not satisfied, the EU treaty does not apply.23 This condition means that a
contract that is below the threshold must attract foreign suppliers so the EU treaties’
principles can be applied. When the contract is above the threshold, it is assumed to attract
cross-border interest. This raises questions about when cross-border interest exists and
how that line can be drawn; for example, small value contracts in a specific field might
attract cross-border interest while in other fields they might not. This condition can be
predicted and thus a wide discretion given to the European courts in deciding whether the
contract attracts a cross-border interest or not.
The final point that can be discussed under the EU Public Contracts Directive is that
this directive does not cover concession contracts, since these types of contracts differ
from public procurement contracts for the following reasons. 24 First, in concession
contracts, the supplier charges a fee to the public for the service or the work in the
contract, not the public body.25 This situation goes against the idea of public procurement
where the government pays the supplier. The second reason is that the operator bears
the economic risks, rather than the public body. 26 This also goes against the concept of
public procurement, where the public body takes on some risk and not only the supplier.
As a result of these major differences, the Directive on Public Procurement was deemed
not suitable to handle with these concession contracts, and thus the Concessions Directive
was adopted in 2014 to cover these kinds of contracts. 27
1.2.
The Coverage of Contracts Under the EU Utilities Directive
The EU Utilities Directive can be defined simply as the directive applied if the scope of a
contract involves water, transport, energy, or postal service. 28 This directive gives public
23
ibid
24
Bozena Bulum, Marija Pijaca and Marina Zuzul, Directive 2014/23/EU on the Award of Concession Contracts
and Its Application in the Shipping Sector (2016) 66 (2) Zbornik Pravnog Fakulteta u Zagrebu, 309-334
25
María Baeza and José Vassallo, Private concession contracts for toll roads in Spain: analysis and
recommendations (2010) 30 (5) Public Money & Management, 299-304
26
ibid
27
Bulum, Pijaca and Zuzul (n 24)
28
Chapter II of the EU utilities directive 2014
6
bodies more flexibility than the EU Public Contracts Directive, which is the main reason for
not including these activities under that directive. There might also be a lack of political
will to combine them; member states tend to prefer national suppliers for those major
activities, since they are considered essential activities in every country.29 As a result of
this tendency, if a contract is mixed and includes utilities (for example, water or energy),
then the Utilities Directive has to be applied.30 One might question whether this rule is
applied regardless of the focus of the contract. For example, if the contract includes an
activity covered by the Utilities Directive (such as energy development), plus an activity
not covered by that directive, would that mean that the Utilities Directive has to be applied,
even if the main focus of the contract is not on the energy? Since the law does not
distinguish whether the activities covered by the directive have to be the main focus in
the contract, it could be argued that the Utilities Directive must be applied regardless of
the focus. This shows clearly the preference to apply this directive more often than the
Public Contracts Directive.
The flexibility of the EU Utilities Directive can be demonstrated by looking at the
thresholds it includes for each type of contract, which are higher than those included in
the EU Public Contracts Directive. Contracts must be worth more than EUR 414 000 for
supply and service contracts as well as for design contests, EUR 5 186 000 for works
contracts, and EUR 1 000 000 for service contracts for social and other specific services
listed in Annex XVII.31 The reason for the higher thresholds is that essential activities,
such as those involving water, are considered to be linked to national security, requiring
more flexible rules.
There is an exception to these high thresholds for activities covered by the directive:
when the activity is directly exposed to competition in markets where access is not
restricted.32 In these competitive markets there is pressure on the public body to procure
29
Silvester Van Koten and Andreas Ortmann, The unbundling regime for electricity utilities in the EU: A case of
legislative and regulatory capture? (2008) 30 (6) Energy Economics, 3128–3140
30
Article 6 of the EU utilities directive 2014
31
Article 15 of the EU utilities directive 2014
32
Article 34 of the EU utilities directive 2014
7
in a commercial way, without favouring national firms or products. This point of view goes
with the theory of the perfect market, which argues that if market pressure works
perfectly, no legislation or intervention by the state is necessary. 33 The thinking goes that
consumers will not need to be protected by the state because they send signals to suppliers
about what they value. Suppliers who provide these interests will do well, while those who
do not will lose customers and fail.34
The abovementioned argument can be criticized by pointing out that the meaning of
a ‘competitive market’ is not clear. More specifically, the concept of the perfect market—
which is more general than the concept of a competitive market—is equally imprecise. For
instance, it is argued that one of the characteristics of the perfect market is the possibility
of free entry to and exit from the market, which means increasing competition. If this
condition is limited, then the theory of the perfect market is damaged. 35
This idea has been proven to not work effectively in the modern market for the
following reasons. First, certain industries are regulated. For example, the state cannot
allow any manufacturer to produce medicines and sell them to the market without state
testing. Another example is that banks cannot be established without approval by the state
due to their profound effect on the economy. The second reason is that the theory, which
is compatible with the competitive market idea, assumes that consumers are rational.
Many experts have proven that this assumption is mistaken.36 For instance, Hopkins—the
famous man who convinced Americans to buy his toothpaste in the 1930s—argued that
knowing the psychology of consumers would lead to a significant success. 37 He found the
simple and obvious cue (the importance of brushing) and clearly defined the reward (clean
33
LEE BOLDEMAN, The Cult of the Market: Economic Fundamentalism and its Discontents (2007, ANU Press).
34
Neil Averitt and Robert Lande, Consumer Sovereignty: A Unified Theory of Antitrust and Consumer
Protection Law (1997) 65 (3) Antitrust Law Journal, 713-756.
35
Iain Ramsay, Rationales for Intervention in the Consumer Marketplace: An Occasional Paper Prepared for
the Office of Fair Trading (OFT 1984).
36
Rossella Incardona and Cristina Poncibo, The average consumer, the unfair commercial practices directive,
and the cognitive revolution (2007) 30 (1) Journal of Consumer Policy, 21–38.
37
Charles Duhigg, The power of habit: Why we do what we do in life and business (2012, Random House
Trade Paperbacks)
8
teeth).38 He made consumers want to use his product without a rational reason, but rather
based on their habits.
These examples show that concepts such as the perfect market or competitive market
cannot be defined easily because they are based on unrealistic assumptions. Therefore, it
follows that the competitive market exception included under the Utilities Directive is also
unclear and can be criticized for the same reasons as the theory of the perfect market.
Nevertheless, it allows public bodies to use this exemption widely in order to avoid applying
the directive to their contracts.
1.3.
The Coverage of Contracts Under the World Trade Organization
Agreement on Government Procurement
The World Trade Organization (WTO) is an international organisation which deals with the
rules of trade between nations. Its main goal is to help producers of goods and services
conduct their businesses. This organisation has many agreements, one of which is the
agreement on government procurement (GPA). It is a purgatorial agreement, which
means that it binds only those members who decide to join.39 The GPA is more flexible
than both the EU Public Contracts Directive and the EU Utilities Directive, because its
members have to accept the principles that apply to them. Under the EU directives,
members are bound by the principles adopted by the EU treaties, such as nondiscrimination.
The GPA covers procurement, meaning procurement for governmental purposes. 40 This
leads to the question of the meaning of governmental purposes. In the case of Canada’s
renewable energy, it was demonstrated that the concept of ‘governmental purposes’ refers
to what is consumed by government or what is provided by government to recipients in
38
ibid
39
Ping Wang, COVERAGE OF THE WTO’S AGREEMENT ON GOVERNMENT PROCUREMENT: CHALLENGES OF
INTEGRATING CHINA AND OTHER COUNTRIES WITH A LARGE STATE SECTOR INTO THE GLOBALTRADING
SYSTEM (2007) 10 (4) Journal of International Economic Law, 887–920.
40
Article II of the GPA
9
the discharge of its public functions.41 This definition raises further questions, such as what
the public functions are and whether everything consumed by the government is for
governmental purposes. These questions might be important if governments have
different responsibilities towards the recipients of their goods and services, and thus
different obligations under the GPA. It is also unclear who decides what the responsibilities
of governments are. A government that has few responsibilities would have fewer public
procurement contracts that are subject to the GPA. For governments with more
responsibilities, the GPA would be applied in all of its public procurement contracts; this
situation might be considered unfair.
The principles adopted by the GPA are significantly different than the ones adopted by
the EU treaties. In the GPA, countries are allowed to treat domestic industries more
favourably than foreign industries.42 They might prefer domestic suppliers if a competition
were held between them and foreign ones, or they might prevent foreign suppliers from
participating at all.43 One possible reason for such flexibility is to stimulate some
developing countries under the GPA. Their national suppliers might not be able to compete
with foreign companies, leaving them in danger international companies. 44 Another
possible reason is political in nature, as governments prefer to use domestic companies
rather than foreign ones to achieve some political advantages, such as growing national
companies which could help national security. 45 For these reasons, not adopting nondiscrimination principles in the GPA might be justified.
The principles adopted by the GPA are not the only differences between it and the EU
directives. It also differs in relation to its thresholds, which members are allowed to
increase or decrease. In other words, there is no standardised threshold for activities
41
Appellate Body Reports, Canada-Certain Measures Affecting the Renewable Energy Generation Sector and
Canada-Measures Relation to the Feed-In Tariff Program, WT/DS412/AB/R and WT/DS426/AB/R, adopted 24
may 2013 (“Canada Renewable Energy”)
42
Christopher Yukins and Johannes Schnitzer, GPA Accession: Lessons Learned on the Strengths and
Weaknesses of the WTO Government Procurement Agreement (2015) 7 (1) Trade, Law and Development, 89119
43
ibid
44
ibid
45
ibid
10
covered by the agreement; each member state has its own threshold. 46 For instance, in
annexes 2 and 3, the threshold is completely different from one member state to the next,
which means that they have the potential to increase the threshold significantly in order
to decrease the possibility of applying this agreement in many contracts. 47
The GPA goes even further by allowing member states to exempt certain activities from
the application of this agreement. For instance, Japan made several exceptions for
contracts that cover ’daily profitmaking activities’. 48 Another example is exempting the
bus transportation sector or bus services. 49 Moreover, many states, such as Canada and
the US, made some exceptions in order to support small businesses. 50 This shows clearly
the flexible approach held by the GPA, as it allows member states to make some exceptions
to the agreements as well as increasing the threshold of contracts.
2.
The Use of Negotiation in Award Procedures Under the EU Directives and
the GPA
2.1.
Negotiations Under the EU Public Contracts Directive and the EU
Utilities Directives
The use of negotiations is allowed under both the EU Public Contracts Directive and the
Utilities Directive, with the latter being the more flexible. The EU Public Contracts Directive
has the strictest rules. There are six types of award procedures under this directive—open
procedure, restricted procedure, competitive dialogue, competitive procedure with
negotiation, innovation partnership and negotiated procedure without prior publication. 51
However, in general, member states are allowed to use only the open procedure and
restricted procedure as they are the formal methods of procurement. Both of these
methods prohibit the use of negotiations in their procedures. 52 In general terms, the
46
The GPA, Article II and III
47
ibid
48
Jean Grier, Japan’s Implementation of the WTO Agreement on Government Procurement (1996) 17 (2)
University of Pennsylvania Journal of International Economic Law, 605-658.
49
Annex 3 of the GPA
50
Sue Arrowsmith, Government Procurement in the WTO (Kluwer Law International 2003) 349
51
Chapter I of the EU Public Contracts Directive 2014
52
Article 26(2) of the EU Public Contracts Directive 2014
11
directive seems to indicate that the use of negations might increase the possibility of
corruption.
Negotiations are allowed under two of the other procedures: competitive procedure
with negotiation and negotiated procedure without prior publication. 53 The former can be
applied only if one of the following occurs: the needs of the contracting authority cannot
be met without adaptation of readily available solutions, and they include design or
innovative solutions.54 The latter can be applied in very limited cases, namely, when no
tenders, (or no suitable tenders, or no requests to participate, or no suitable requests to
participate) have been submitted in response to an open procedure or a restricted
procedure.55 In other words, this method is used when competition is absent for technical
reasons.56 These two procedures are the only ones in which negotiations can be conducted,
and they can be applied only in very limited circumstances.
It could be argued that grounds for using the abovementioned procedures are not
clear, and it gives the procuring entity a wide discretion to rely on them and thus use them
to allow negotiations. For instance, it has been demonstrated that the procuring entity can
use ‘competitive procedure with negotiation’ if innovative solutions are needed. 57 One
might argue this concept is vague as an ’innovative’ concept cannot be identified. In fact,
this concept launched an endless debate in patent law, as it has been argued that
‘inventive’ means not obvious to a skilled person in that particular art. 58 In other words,
people who work in the art or in the field cannot easily reach this inventive solution. If the
procuring entity wants to rely on the need for inventive solutions as a basis for applying
‘competitive procedure with negotiation’, it needs to prove that the suppliers cannot
provide inventive solutions. This raises questions about the extent to which the procuring
entity considers a solution as inventive, that is, what the difference is between an inventive
53
Article 26(4) of the EU Public Contracts Directive 2014
54
ibid
55
Article 32(2)(a) of the EU Public Contracts Directive 2014
56
Article 32(2)(b) of the EU Public Contracts Directive 2014
57
see (n 53)
58
Paul Torremans, Holyoak and Torremans Intellectual Property Law, (8th ed., 2016, OUP).
12
solution and an ordinary solution. The procuring entity can demand that negotiations are
needed to reach an inventive solution, and thus avoid applying the formal procedures
(open tendering or restricted tendering).
The EU Utilities Directive uses a more flexible approach than the EU Public Contracts
Directive in terms using of the award procedures, and thus expanding the use of
procedures which allow negotiations. In the Utilities Directive, the procuring entity is free
to choose from the producers covered by the directive. 59 It does not have to use open
tendering, which is considered the most transparent procedure, but instead might use the
competitive dialogue procedure. It could be argued that giving wide discretion to the
procuring entity might not be wise, as it has been demonstrated that member states tend
to favour dealing with national suppliers. By giving them the ability to use any procedure,
they might decrease the number of foreign suppliers, which might disregard the principles
of the EU treaties, such as the non-discriminatory clause.
It seems obvious and rational that the Utilities Directive provides a flexible approach
for the procuring entities because its main purpose is to provide alternatives for the
activities it covers. However, it is unclear how a balance can be struck between this
flexibility given to member states and the principles covered by TFEU. More specifically, it
seems difficult to achieve transparency and non-discrimination if the procuring entity is
allowed to decrease the number of suppliers without setting criteria for this limitation.
Thus, it is also unclear how to apply the principles of the TFEU in a procurement with such
a significantly flexible approach. This flexibility can be seen, for instance, in the directive
where the procuring entity can exclude suppliers which have proven unreliable.60 From
this basis, the procuring entity can exclude interested suppliers by simply arguing that the
supplier is not reliable, since there is not a clear meaning of the concept ’reliable’. This
shows the significant flexibility that the EU Utilities Directive provides in contrast to the
EU Public Contract Directive.
59
Article 93 of the EU utilities directive 2014
60
Paragraph 106 of the EU utilities directive 2014
13
2.2.
Negotiations Under the GPA
The GPA provides the most flexible approach in comparison to both the EU Public Contracts
Directive and the EU Utilities Directives. The award procedures covered by the GPA can be
divided into three types: open tendering, selected tendering and limited tendering. 61 The
procuring entity can choose any of these except the limited procedures, which means that
open tendering is not the main method. Aside from explaining the award procedures,
negotiations can be widely used under the GPA, which might give the procuring entity a
better chance to get to know suppliers, and thus increase the possibility of corruption.
The procuring entity can conduct negotiations in all procedures where (1) the entity
has indicated its intent to conduct negotiations in the notice of intended procurement, and
(2) where it appears from the evaluation that no tender is obviously the most
advantageous.62 The second condition means that the procuring entity can conduct
negotiations merely by arguing that no tender is the most advantageous, and since one
cannot predict whether the tender is the most advantageous or not, this gives a wide
discretion to the procuring entity to conduct negotiations. As it is known, expanding
negotiations increases the chance for corruption. Even more troubling is the first condition,
which means that the procuring entity can use negotiations by merely indicating that
negotiations will be used. This means the procuring entity provides no justification for
negotiations. These conditions show clearly that the GPA allows the free use of
negotiations more than both the EU Public Contracts Directive and the Utilities Directive.
Conclusion
It could be argued that the GPA provides a much more flexible approach in both the
coverage of contracts awarded by public undertakings and using negotiations in the award
procedures than the EU directives. A possible reason for this is that the GPA was developed
61
Arie Reich, THE NEW TEXT OF THE AGREEMENT ON GOVERNMENT PROCUREMENT: AN ANALYSIS AND
ASSESSMENT (2009) 12 (4) Journal of International Economic Law, 989–1022.
62
Article XII of the GPA 2012
14
after negotiations and in order to protect the interests of WTO member states. In contrast,
the EU treaties were based on the principles adopted by the European Union and its
member states, who have to adhere to these principles. Thus, it is reasonable to notice
that the GPA is much more flexible than the EU directives (both the Public Contracts
Directive and the Utilities Directives).
15
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I

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II
Student ID: 4246090
Module Code: M34114
1.
‘The threshold for inventive step has become so high that small and medium size
companies can no longer effectively use the patent system to their benefit and the
system cannot fulfil its aims’.
Discuss.
Introduction
Patent law is a system that is designed to motivate inventors to create. This system gives
inventors the exclusive rights to their inventions so that others cannot sell identical
products in the market. In this way, competitors invent new products in order to compete
with inventors who have already gained patents. Easy access to patenting can reduce
competition, which is at odds with the idea of a free market with free competition. Thus,
patents must be held to a certain standard. This involves the identification of the inventive
step, which may not always be obvious to the person skilled in the art. By identifying the
inventive step, the purpose of patents, which is to incentivise creators to invent while
supporting competition in the market at the same time, can be fulfilled.
Because the threshold for the inventive step is high, small- and medium-sized
companies have been incapable of using the patent system to their benefit. For example,
certain inventions require the person who is skilled in the art to have an incredible
imagination in the field of biotechnology. Moreover, if an invention is created in a way that
is obvious to a person skilled in the art to try, one may consider the invention to be obvious
even if several of its features are complex.
Because the threshold for the inventive step is extremely high, the patent system
has both failed in its ability to fulfil its aims and been ineffective in its capacity to benefit
small- and medium-sized companies, alike. In order to discuss this issue, this essay will
focus on the first aspect of the patent system’s rationale. It will then use the Windsurfing
test to evaluate how obviousness in patents is assessed. The Windsurfing text covers four
main issues that include the concept of the person skilled in the art, the identification of
the inventive step, the identification of differences between the inventive step and the
prior art and the question of whether the inventive step is obvious to the person skilled in
the art. All of these issues will be discussed below.
The Rationale of the Patent System
Under European Union (EU) legislation, competition and free trade are essential. This is
apparent in the Treaty on the Functioning of the European Union (TFEU), which states that
the free movement of goods and the freedom of provided services shall be held in EU
1
member states without any kind of restriction. 1 Restriction usually occurs when member
states favour their own companies, as it is preferred for member states to receive their
goods and services from national companies rather than from non-national companies.
The TFEU prohibits any kind of restriction that limits competition.2 For example, in
Commission v. Netherlands, the court held that the use of the UNIX operating system
violated Article 34 of the TFEU, as it did not favour domestic products and excluded firms
to use systems other than UNIX.3 This illustrates the EU’s tendency to adopt a free market
theory that prohibits monopolies and limited competition.
However, free markets and prohibited monopolies do not always encourage
innovation. In other words, inventors, whether they are an individual or a company, may
be deterred from investing their money and effort into research and development if they
learn that their invention is easy to appropriate.4 Thus, the patent law system was
developed to encourage innovation and to give inventors the exclusive right to sell their
inventions in the market as a reward for their skill and hard work.5 This means that patent
law is the primary incentive for individuals and companies to invent. The patent system
also carries economic value, as new knowledge makes the production of new products and
the dissemination of scientific and technical information possible, which makes it easier to
develop further innovations.6 The production of new products can benefit not only the
inventor but the public as a whole. For instance, the production of new medicines can
prove useful to consumers. To further this example, without patents, new medicines would
not see circulation in the market. Thus, the patent system must not only benefit inventors
but the public and the economy, as well.
1 the treaty on functioning of the European Union Article (34,56)
2 ibid
3 Case C-359/93, Commission v Netherlands (“UNIX”) [1995] E.C.R. I-157
4 John Duffy, Rethinking the Prospect Theory of Patents (2004) 71 (2) The University of Chicago Law Review,
439-510.
5 Paul Torremans, Holyoak and Torremans Intellectual Property Law, (8th ed., 2016, OUP).
6 Corinne Langinier and GianCarlo Moschini, The Economics of Patents: An Overview (2002) Intellectual
Property Rights in Animal Breeding and Genetics, 31-50.
2
It should be noted that widespread patenting can lead to serious issues. For
example, widespread patenting can distort the market by damaging rivals when the patent
allows one competitor to monopolise on a product but restricts the other’s ability to
generate income with a similar product. The second issue with widespread patenting is in
part due to the first issue, in that the lack of competition may restrict consumers’ choices
in purchasing products. This problem can encourage patentees to increase the monetary
value of a product that is in high demand. Thus, while widespread patenting can harm
both rivals and consumers, it is also at odds with the free market theory adopted by the
EU. It has been argued that patents should be restricted rather than given widely and that
the threshold for patenting should be high to facilitate a greater balance between the
interests of inventors and others. In sum, any decrease to the threshold of patenting could
lead to a reduction in the rate of future inventions and ultimately harm inventors, the
public and the economy.
The Concept of the Inventive Step:
Inventive step a condition given in addition to first step towards patent “Novelty”, which
says that the invention has to be new, which requires the inventor to provide an inventive
step in his invention.7 As not everything that is new is necessarily inventive, novelty alone
is insufficient as an indicator of the inventive step. Rather, this step ensures that all
inventions must represent a sufficient advancement in technology before they can gain
exclusive rights.8 The inventive condition is satisfied when an invention is not obvious to
the person skilled in the art (the skilled person concept will be explained below). 9 An
invention’s obviousness should be the primary factor used to determine the identity of the
inventive step. Furthermore, the extent to which the inventive step is satisfied should be
measured before the patenting of an invention has been authorised. The inventive step is
the most important step in evaluating an invention’s suitability for a patent, as it excludes
7 Torremans (n 5) 69
8 Amy Nelson, Obviousness or Inventive Step as Applied to Nucleic Acid Molecules: A Global Perspective (2004)
6 (1) North Carolina Journal of Law & Technology, 1-40.
9 Torremans (n 5) 69
3
novel inventions that are deemed to be obvious to the person skilled in the art. The
exclusion of obvious inventions and the high threshold for the inventive step have been
set in place to balance the value between an inventor’s right to exclude and the public’s
interest in gaining knowledge related to technology. 10 It could therefore be argued that to
provide a greater balance between inventors’ interests and the public’s needs, a high
threshold for the inventive step should be required.
It has also been argued that there is no relationship between patents and inventions,
as competition in the marketplace can breed innovation without the need for patents or
the exclusive rights to inventions.11 For instance, econometric analyses of U.S. and
Japanese patent data provided no evidence of any increase in the number of inventions
as a result of patent system.12 This could be viewed as evidence to the validity of the free
market theory, which states that interventions that limit competition fail to benefit the
market. Indeed, the market would perform better if suppliers knew the needs of their
consumers so that they could provide or invent them. In order to achieve success,
suppliers must aim to satisfy their consumers by inventing the goods or products that they
need. This in and of itself can sufficiently increase the number of inventions without the
patent system’s aid.
In a study where economists assessed the relationship between inventions and the
patent system, it was determined that innovation increased as a result of the protection
of certain inventions but not others.13 While protection allows the patent system to achieve
its aim to increase innovation by setting the bar for the inventive threshold high, it also
requires innovations to be differentiated so that inventions that require protection under
the patent system can be identified. It has been argued that the test for obviousness
cannot accurately gauge if an invention should be protected, as it lowers the standards to
10 Nelson (n 8) 1
11 Mariko Sakakibara and Lee Branstetter, Do Stronger Patents Induce More Innovation? Evidence from the
1988 Japanese Patent Law Reforms (2001) 32 (1) The RAND Journal of Economics, 77-100.
12 ibid
13 Hazel Moir, Empirical Evidence on the Inventive Step (2013) European Intellectual Property Review, 1-40.
4
which inventions are considered for protection.14 It has also been asserted that the
application of the test for obviousness may result in the patenting of inventions that
contribute no new knowledge nor offer benefits that can offset their costs.15 In addition,
researchers have claimed that trivial inventions rarely fail the test.16 It is therefore
recommended that patentors revise the question, ‘Is this invention obvious?’ so that it
reads, ‘What new knowledge can this invention provide?’ By doing so, inventions that add
new knowledge will be more likely to gain protection under the patent system.17
In spite of the debate that was covered above, patent law protects many inventions
that are not obvious to the person skilled in the art.18 As a result, the obviousness test
has been adopted as the primary test for determining if an invention shall be granted a
patent. Alternative measurements of obviousness were assessed through a test that was
held in Windsurfing International Inc. v. Tabur Marine (Great Britain) and amended in
Pozzoli Spa v. BDMO SA & Anor. This test provided the following processes for the
assessment of the inventive step:19,
1.
20 21
,
(a) Identify the notional ‘person skilled in the art’, (b) Identify the relevant common
general knowledge of that person;
2.
Identify the inventive concept of the claim in question or if that cannot readily be
done, construe it;
3.
Identify what, if any, differences exist between the matter cited as forming part of
the ‘state of the art’ and the inventive concept of the claim or the claim as construed;
14 ibid
15 ibid
16 ibid
17 ibid
18 Torremans (n 5) 69
19 Windsurfing v Tabur Marine[1985] RPC 59
20 Pozzoli SpA v BDMO SA [2007] EWCA Civ 588
21 Stanley Lai, The Future of Inventive Step in Patent Law (2012) 24, Singapore Academy of Law Journal, 599633.
5
4.
Viewed without any knowledge of the alleged invention as claimed, do those
differences constitute steps which would have been obvious to the person skilled in the
art or do they require any degree of invention?
The Person Skilled in the Art
A person skilled in the art is a hypothetical technician who is skilled, well acquainted with
workshop technique and has carefully read the literature relevant to the invention that
they are evaluating.22 In other words, this person is fictitious. Regardless, because this
skilled person has read the relevant literature in their field, they are capable of
distinguishing between obvious and non-obvious inventions. The skilled person in the art
always sees the obvious but never recognises the inventive.23 They also take any piece of
existing art and place it in the context of common general knowledge.24 Common general
knowledge can be defined as the technical background of the skilled person in the art
against which existing art must be considered.25
With the idea of the skilled person of the art, a question might arise about the
amount of time that this person needs to decide whether or not an invention is obvious.
In other words, if an inventor takes five years to invent something, does the assessment
of that invention’s obviousness require five years, as well? This issue can present
challenges to the skilled person in the art’s assessment of obviousness. For instance, if it
is assumed that science develops every year, does this development also cover the
knowledge of the skilled person in the art and therefore increase the threshold for their
assessment of obviousness? It is difficult to respond to this question because an
assessment of the skilled person’s character is unrealistic. For instance, L.J. Hoffmann
criticised the idea of the skilled person in the art by claiming that it was a folksy way of
explaining the law to a jury.26 This might be problematic for small and medium companies
as these companies might invent an invention in a relatively long time due to the lack of
22 Technograph Printed Circuits Limited V. Mills and Rockley (Electronics) Limited [1972] RPC 346
23 Torremans (n 5) 73
24 ibid
25 Raychem Corporation’s Patent [1998] RPC 31.
26 société technique de publicité v Emerson Europe LTD [1993] RPC 513
6
resources and experts and as a result of this long time, it court be argued that this
invention would be obvious for the skilled person in the art if had spent this amount of
time.
In spite of the aforementioned concerns, courts have gone further in boarding the
character of the skilled person in the art by agreeing that inventions are obvious when the
skilled person claims that the steps used to create an invention are obvious, as well.27 In
other words, the skilled person in the art is not required to assess the obviousness of an
invention that uses obvious steps. This prerequisite increases the threshold of the
inventive step, which hinders small and medium companies in their ability to create and
reduces the potential for them to receive protection for their ideas. It is also at odds with
the patent system’s primary purpose to increase inventions through the provision of
patents. In addition, because the meaning of the word ‘obvious’ is imprecise, although it
is thought to refer to the ease with which something can be invented, it is unclear how the
skilled person is able to claim if a new invention is obvious. It could therefore be argued
that if an invention is obvious, it should have already been invented. The lack of clarity
about the term ‘obvious’ can decrease the incentive for inventors to invest their time and
money into new inventions, as this uncertainty reduces their ability to forecast if they will
receive patenting for their ideas. In other words, the vague and general definition of the
term ‘obviousness’ fails to serve the primary purpose of the patent system.
The threshold for obviousness has also increased since the Genentech case, when
the court held that in the field of biotechnology, a skilled person in the art should preferably
be a person with an inventive capacity who is capable of raising the obviousness threshold
due to the nature of the field.28 This increased threshold has had significant repercussions
on fields where inventions, such as chemicals and medical pharmaceuticals, exist.29 As the
threshold for the inventive step is now considerably higher, firms and experts in those
27 Medimmune Ltd v Novartis Pharmaceuticals UK Ltd & Ors [2012] EWCA Civ 1234.
28 Anatoli Tsakalidou, The Intricacies of Partly New Inventions: Should We Grant Patentability (2015) 3 (2)
Legal Issues Journal, 101-116.
29 ibid
7
fields have been deterred from putting the time and effort into creating new inventions.
This clearly means that small participation in this field from small and medium companies
will not be given patent as the threshold of the person skilled in the art has been expanded.
This might mean reducing the possibility for small and medium companies to gain patent
as those companies cannot invent an invention satisfies the high threshold put by the
court due to the limited amount of money and experts. In the Genentech case, the
applicant spent a considerable amount of their resources and employed a well-qualified
staff to invent a workable method for the creation of a pharmaceutical product that could
offer several advantages to the public.30 Unfortunately, the court revoked the patent that
had been awarded to the applicant, arguing that the applicant’s invention was obvious due
to the skilled person in the art’s inventive capacity.31 It has also been argued that when
the problem, method and solution are known, the skilled person in the art can identify no
inventive step in an invention regardless of its benefits to the public.
The intelligence of the skilled person with an inventive capacity is frequently
questioned. In other words, courts often assess the intelligence of the person skilled in
the art to determine if they are capable of making a judgement about an invention’s
obviousness. It is unclear if the skilled person in the art’s character can influence their
ability to assess inventions that combine features from multiple sources, such as computer
sciences and mathematics. Should that person be skilled in both fields, or should their
intelligence be measured in only one of those fields? It is also unclear how a skilled person
in the art can assess an invention that has been created by a group of scientists. Is the
skilled person an individual or does the term ‘skilled person in the art’ refer to a group of
multiple skilled individuals? If it refers to multiple skilled individuals, how does one
measure their intelligence? In summary, the anonymity of the skilled person makes the
incentive for new inventions low, especially for small and medium companies which might
30 Genentech [1989] RPC 147.
31 ibid
8
get rid of their participation as these participation will be low in comparison to the
threshold put by the case law.
Identifying the Inventive Step in an Invention
The second requirement in the Windsurfing test is to identify an invention’s inventive
step.32 The inventive step must be clearly identified for an invention to receive a patent.
This step has led experts to question the definition of the term ‘invention’. Speculation
about whether one product can be comprised of a single invention or two or more
inventions at the same time has also become frequent. If a single product is comprised of
two or more inventions, one may ask if a patent should be given to the product as a whole
or be limited to the inventive step itself. In other words, when two inventors use different
steps to create the same product, experts may construe that no violation to patent law
has been made. To explain this, Lord Hoffmann stated that ‘A compact motor car may
contain many inventions, each operating independently of each other but all designed to
contribute to the overall goal of having a compact car. 33 That does not make the car a
single invention’.34
According to J. Laddie, two integers can contribute to a single invention when they
interact with one another.35 In other words, when an inventive step does not work
independently from other inventive steps, it can only retain its identity as an inventive
step if it interacts with other integers. On this basis, one may question if an inventive step
is interactive when it only partially interacts with other integers, or alternatively, if a
certain amount of interaction between an inventive step and other integers can be
considered to be elements of a single invention. Experts have also questioned when an
inventive step should be considered to be an integer that interacts with other integers. It
is unclear if an inventive step needs to interact directly with other integers to be
interactive, or if an inventive step can act independently from other integers but directly
32 Windsurfing case (n 19)
33 SABAF SpA v MFI Furniture Centre Ltd [2005] RPC 10.
34 ibid
35 Lai (n 21)
9
influence them. Many unanswered questions related to the interaction between the
inventive step and other integers make this concept unclear.
According
to
J.
Laddie,
separate
inventions
are
integers
that
perform
independently from one another.36 This argument lacks clarity, as integers can work
independently from one another and influence each other at the same time. As with
integration integers, it is unclear if the interactions between independent integers are
physical or functional. In a different scenario, if an inventive step could not be identified
because it was completely integrated with other integers, would that mean that the
inventive step and integers were separate inventions? This unanswered question, and
others like it, make the application of the separate inventions theory difficult to practise.
While some arguments have held that inventions must be considered in their
entirety,37 others have asserted that one cannot consider an invention or its various
features to be obvious when it is comprised of several parts.38 This later point of view
appears to consider the patent system’s aim to give inventors the right to protect every
part of their inventions. It also suggests that it is irrational to protect an invention’s specific
integers but not the entire invention. This argument was supported in the Genentech case
when the court argued that when the problem, method and solution of an invention are
clear, the invention is obvious and thus incapable of receiving protection under the patent
system.39
The Difference between the Inventive Step and the State of the Art
The third requirement of the Windsurfing test is partially related to the previous
requirement, in that the inventive step must be identified before differences between it
and the state of the art can be found.40 This means that the inventive step must be
identified individually whether it has been combined with other integers or not. It is difficult
to differentiate an inventive step from other integers that it has been combined with.
36 ibid
37 SABAF case (n 33)
38 ibid
39 Genentech case (n 30)
40 Windsurfing case (n 19)
10
Indeed, many have questioned if inexact differentiation, or cases where the inventive step
has somehow been combined with other integers, can satisfy the third requirement of the
Windsurfing test. This requirement is related to the second one and so makes the
aforementioned arguments relevant here.
The Obviousness of the Inventive Step
Many experts have argued that the inventive step appears to mandate a one-step test
that is based on the obviousness of an invention to the skilled person in the art.41 David
Bainbridge claimed that the first three steps of the Windsurfing test paved the way for the
obviousness of inventions to be determined by the skilled person in the art.42 It is difficult
to establish standardised rules to assess the obviousness of the inventive step. While in
straightforward cases, the inventive step might be obvious to the skilled person in the art,
in more complex cases, the obviousness of the step might be more difficult to assess.
Thus, assessments of obviousness must be based on the facts of each case.43 This includes
several factors, such as the expectation of success, the motivation to find solutions to
different problems and the number of possible avenues for research.44
The threshold for assessing the obviousness of an invention also includes the
inventive steps for making a product in a certain way. In other words, an inventive step
is considered obvious and cannot be granted a patent when it uses an alternative method
to make an existing product. This was evident in the Genentech case when the court held
that an applicant’s invention is not entitled to a patent when the problem, method and
solutions of that invention are already known.45 This closes the door for small and medium
companies how might invent an existence inventions but in a different method. It means
that those companies have to invent an invention which is not existed at all and that
requires a large amount of money and effort which might constitute as a barrier for those
companies to grant a patent. However, according to Lord Hoffmann, this does not mean
41 Lai (n 21) 612
42 ibid
43 Generics (UK) LTD v. H Lundbeck A/S [2007] RPC 32.
44 Haberman v Jackel [1999] FSR 685.
45 Genentech case (n 30).
11
that an inventor is entitled to a monopoly on every method for creating a single
invention.46 In other words, if the inventive step is based on another method or process
of creating an existing invention, it may be granted a patent regardless of whether or not
it is obvious to the skilled person in the art. Because the concept of obviousness is abstract,
it is unclear how one could receive a patent for using an alternative method to create an
existing invention.
Certain experts have questioned the extent to which a minor step forward in the
state of the art may be considered obvious. In order to answer this question, there is a
need to understand what constitutes a step forward from the prior state of the art. Most
importantly, it is vital to understand a step forward from the prior state of the art through
the perspective of the skilled person in the art rather than through the perspective of the
public, as the public might consider any addition to existing knowledge to be a step forward
from the prior state of the art. On this basis, it could be argued that any technical
advancement in the state of the art is a step forward.47 This means that any adaptation to
an existing invention could be considered to be a step forward and thus be deemed
patentable. Another important issue that needs to be addressed is the extent to which an
existing invention must be adapted before it can be considered a step forward. It has also
been questioned if an adaptation in and of itself can be considered a step forward from
the prior state of the art. Furthermore, it has been argued that an adaptation is obvious
when it does not change an invention’s function. This measure of obviousness is based on
an argument from court that asserts when a problem and solution are known, the inventive
step (adaptation) is considered obvious to the skilled person in the art.48 This would
argument would make granting patent difficult for small and medium companies as they
might adapt an exist invention without changing its functions, but by adding to that
invention additions which might develop this invention technically such as working in a
46 Eddy Ventose, The House of Lords Clarifies “Biogen Insufficiency” (2009) 6 (3) SCRIPTed: A Journal of Law,
Technology and Society, 718-728.
47 Uma Suthersanen, Graham Dutfield and Kit Chow, Innovation Without Patents: Harnessing the Creative
Spirit in a Diverse World (2007, Edward Elgar Publishing).
48 Genentech case (n 30).
12
better manner. On the other hand, if an adaptation shifts the function of an invention, the
invention may receive a patent if the amount of adaptation is not obvious to the skilled
person in the art. In sum, for inventors to save their time, effort and money, the threshold
for adaptation must be identified so that they can predict if their adaptations will be
patentable.
The adaptation of existing inventions is not the only issue that should be addressed
for inventors who wish to make changes to existing inventions. They should also question
if the combination of multiple inventions should be considered to be an inventive step as
this might encourage small and medium companies to put their time and money because
combination does not require a large amount of money and effort. In Williams v. Nye, the
court reviewed a patent that had been awarded to a machine that combined mincing and
filling for sausage manufactures.49 The court rejected this combination, claiming that the
inventive step of combining two machines that performed similar tasks would be obvious
to the skilled person in the art.50 On the other hand, the skilled person in the art may
deem a creation to be less obvious, and thus patentable, if it combines two machines that
perform dissimilar functions. In cases like these, the inventive step might not be clear, as
it could either refer to the process of combining the two machines or to the overall function
of the machines after they have been combined. Another scenario worth examining is
when an existing invention has been combined with a new invention. In cases like these,
it would be unclear if the inventive step was comprised of the combination of inventions,
of the sum of the combined inventions or of the process of combining two separate
inventions into one.
It should be noted that the assessment of obviousness can prove difficult due to the
many factors that contribute to the concept.51 The first factor that might play a role in an
assessment of obviousness is commercial success.52 For instance, an invention’s potential
49 Williams v Nye (1890) 7 RPC 62.
50 ibid
51 Michael Meurer and Katherine Strandburg, Patent Carrots and Sticks: A Model of Nonobviousness (2008) 12
(2) Lewis & Clark Law Review, 547-578.
52 Torremans (n 5) 82
13
for commercial success may be considered inventive since consumers are less likely to
show interest in products that do not provide additional value over other, existing
products. According to Lord Hoffman and J. Mummery, this argument is irrelevant, as
obviousness is a technical question instead of a commercial one.53 To assess obviousness,
J. Laddie proposed a number of metrics, such as the length, the significance and the
identification of a problem that a patented development addressed.54 These metrics
suggested that an invention must offer a solution to a problem, implying that inventions
should not receive patents when they are unable to solve problems or when the solutions
to the problems they are designed to solve are already known. In summary, the
assessment of obviousness contradicts the patent system’s primary aim to increase the
number of inventions especially from small and medium companies.
Conclusion
This essay discussed the patent system’s usefulness for small- and medium-size
companies. In the first section, it covered the rationale of the patent system to illustrate
the system’s aim to motivate companies and individuals to invent products for the benefit
of the public and the pursuit of knowledge. Under the patent system, inventors are
awarded the exclusive rights to their creations so that they can sell them commercially in
the market. The second section of the paper evaluated the Windsurfing test, which covers
four main points, like the concept of the fictitious skilled person in the art who identifies
the obviousness of an invention. It is generally understood that this person always
recognises the obvious but never sees the inventive. In relation to inventions in the field
of biotechnology, the skilled person of the art must have an extraordinary imaginary
capacity to account for the specialisation that the field requires. The second step in the
Windsurfing test is to identify an invention’s inventive step. It has been debated if patents
should be awarded to inventions as a whole or limited to the inventive step so that others
may be granted the opportunity to create similar inventions that use different methods.
53 ibid
54 ibid
14
According to Lord Hoffman, offering an inventor a monopoly for their invention should not
give them the right to monopolise in every way of making it. The third step in the
Windsurfing test examines the differences between the invention and the prior state of the
art so that those differences can be deemed obvious to the skilled person in the art. The
last section of the Windsurfing test assesses the obviousness of the differences between
an invention and the prior state of the art. It has been argued that an invention is obvious
when the inventive step, or any attempts to try it, are obvious to the skilled person in the
art. It has also been asserted that if the problem, method and solutions of an invention
are known, no patent will be given, even if an invention benefits the public (primarily in
relation to medicine).
In conclusion, the Windsurfing test does not correspond with the rationale of the
patent system, which is to motivate inventors to create. This means that any invention
that offers new additions to the prior state of the art, which includes new ways of creating
existing inventions, shall be granted a patent. Unfortunately, case law states that an
inventive step is obvious when it is based on a known problem and solution. Furthermore,
in the field of biotechnology, the skilled person in the art must have an extraordinary
imaginary capacity, which by increasing the skilled person in the art’s expertise, reduces
the rate at which patents are given. These restrictions prevent small- and medium-sized
companies from risking the time, money and effort that it takes to create new inventions,
as the high threshold for the inventive step makes it less likely that their inventions will
be granted a patent. In conclusion, measurements of the inventive step decrease the
number of inventions and combat the patent system’s primary aim to generate more
inventions.
15
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Langinier C and Moschini G, The Economics of Patents: An Overview (2002)
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Lai S, The Future of Inventive Step in Patent Law (2012) 24, Singapore Academy
of Law Journal, 599-633.

Meurer M and Strandburg K, Patent Carrots and Sticks: A Model of
Nonobviousness (2008) 12 (2) Lewis & Clark Law Review, 547-578.

Moir H, Empirical Evidence on the Inventive Step (2013) European Intellectual
Property Review, 1-40.

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II

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