Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company FICPI/AIPLA Colloquium Reform of the Patent Cooperation Treaty Nice, France April 8-9, 2003 Impact of Recent PCT Changes on Third Parties (and PCT Users) Lawrence T. Welch

April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company The IP World Is Best Served By A Vibrant PCT System,Which Provides: Notice to third parties of potential patent rights and likelihood they will be granted Time for informed decision-making by both users and third parties Users get to review IPER and further development of the invention before spending significant resources on national entry and prosecution Third parties can analyze the IP landscape for potential infringement and patentability issues before patents are granted More consistent global prosecution Standardized, quality search and examination performed by all offices As much transparency as possible

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company Concerns of Third Parties No common database for determining when cases enter national phase Many more cases are proceeding without any kind of preliminary examination (due to Article 22 change), or a very limited one (EP rationalized process) Changes to be implemented 1 January 2004 will address this Limited access to preliminary examination information Common quality framework not yet implemented

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company A Positive Trend, with Some Concerns Increased flexibility: preliminary exam can be fully utilized, used to a limited extent, or avoided completely Third parties do not necessarily benefit from delayed exam Greater safeguards: restoration of right of priority Notice to third parties provided; some uncertainty remains Some positive future trends: Electronic filing and prosecution can expand the available resources Proposal to allow publishing in a second language (likely to be English, due to US 64(4) reservation and 35 USC 102(e) issues) will enhance public accessibility Some concerns for the future Implementation of expanded search cuts out applicant’ right to comment to the examiner prior to preliminary examination Future reforms that help offices, not users or third parties

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company A Positive Trend, cont’d PCT reform has come a long way from the perspective of third parties and users, though the impact of many changes remains to be seen Major changes have already been adopted, some have been implemented, with more to come in 2004 Expanded International Search Report (EISR) is a positive development, but issues include treatment by national offices and ability to have applicant’s comments considered during Chapter II if requested Near complete adoption of revised Article 22, but for a handful of countries (perhaps most notably Brazil, Norway, South Africa and Singapore) should provide greater flexibility for applicants

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company Comments of Users /Third Parties Users commented on several issues as they were presented at last PCT reform meeting Restoration of right of priority –US Organizations favored “unintentional” standard, European user groups favored a “due care” standard Proposed changes regarding search and examination: required filing of search and examination request together; option for additional office searches; greater sharing of searches between offices –User groups are generally in agreement that flexibility should be retained, allowing applicants the option to receive a search before publication, and before having to pay for preliminary examination –Expanded International Search Reports (EISR), beginning in 2004, will provide limited examination with search, so some groups suggested this matter be deferred until there is more experience with this system

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company Comments (cont’d) Unity of Invention Proposal to limit ability to protest non-unity determinations, are not favored by user groups –Suggestion to limit the ability to pay for additional searches was not pursued, but would not be favored by user groups either Quality standards User groups are in favor of common quality framework to the extent it would facilitate user options, particularly if it will mean that search reports will be given some credit in other offices

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company Comments (cont’d) Revision of the treaty versus regulations Users generally favor uniformity, so if the treaty is amended, implementation of the new treaty should only occur after all countries have ratified the revised treaty Third parties are best served by a uniform treaty.

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company Concerns Possible loss of options as offices propose “streamlined” procedures, e.g. Forced combination of search and examination is undesirable for users Unity of invention protest procedure was criticized by offices –Latest proposal is to simplify, but retain, the protest procedure Third parties and users must be vigilant to insure that their voices are heard

Lawrence T. Welch April, 2003 Company Confidential Copyright © 2003 Eli Lilly and Company Goals Full impact of recently enacted revisions needs to be better understood Flexibility for users is very important There is a very real prospect that users will have the ability to file electronically, receive an expanded search which will be given some weight in other offices, including a discount, optionally requesting preliminary examination Third parties will be best served by such a system, provided that appropriate transparency is maintained