Finland Is Reforming Its Rules for Defence Inventions — From Expropriation to Confidentiality

Authors: Jasmin Metwally, Martta Salmi-Pekkala, Vilhelm Schröder, Veera Lahtinen Read time: 9 min

The Finnish system for maintaining national defence interests in connection with patent applications is undergoing a reform, and the Government is proposing new legislation to replace the current Act on Inventions of Importance to the Defence of the Country (551/1967, as amended).

As investment in defence technology continues to grow and dual-use innovations become more important, intellectual property has become an increasingly strategic consideration for both companies and public authorities. The Finnish Government has proposed a comprehensive reform to the framework governing defence inventions. Alongside traditional defence inventions, a new segment of defence-related technologies has become increasingly important in recent years due to changes in the geopolitical landscape. At the same time, the Finnish defence and aerospace sector has continued to expand. The ongoing reform of the rules on defence-related inventions is taking place in this broader context.

The new government proposal for an Act on the Protection of the Confidentiality of Defence Inventions addresses certain challenges of the current system. As technology has significantly evolved, these challenges include, for instance, the scope and definition of relevant inventions. The most important general change in the reform is the replacement of the expropriation system by a system of confidentiality. As the expropriation of an invention to the state is the only way to keep it confidential under the current system, and the state’s sole interest in expropriating is to secure confidentiality rather than to commercially exploit the invention, an otherwise useful invention may remain completely unused when it is expropriated to the state and all investments into the invention go to waste. The expropriation of patents also does not allow Finnish patent applicants to make use of the NATO Agreement on Safeguarding Defence-Related Inventions.

We look at the most relevant changes in the proposed new system in more detail below.

Inventions Relevant for National Defence

Differences between the current system and the new proposed system start from the scope of application of relevant inventions. The current law refers to inventions that are “principally of importance” to the defence of the country and thus important to keep secret. This wording has originally been seen to mainly cover munitions. At present, a significant part of technology relevant to the Finnish Defence Forces are dual-use items, which is why the law has also been applied to dual-use items in the recent years. However, to bring the legislation into the current day and ensure that the significance of such inventions to the Defence Forces can be assessed before their publication as part of the patent application process, the scope of application of the new system is clarified: it now covers inventions specified in the national control list annexed to the Finnish Act on the Export Control of Dual-Use Items, as well as defence materiel within the meaning of the Finnish Act on the Export of Defence Materiel. The scope is tied to existing national export control lists for defence materiel and dual-use items rather than to the more open-ended wording of the current law. These inventions are considered defence inventions when confidentiality of the invention is essential for national defence.

Confidentiality Instead of Expropriation for Public Purpose

Under the proposed law, a defence invention would be declared confidential after the patent application is filed, without the obligation to expropriate the invention to the state. Although ownership of the defence invention would remain with the patent applicant, its use would be limited by a duty of confidentiality and a prohibition of exploitation, from which the applicant could depart only to the extent that the use is evidently not harmful to the benefit of national defence. Additionally, the proprietor of the invention would be paid full compensation for the financial losses likely to be caused by the confidentiality order. Factors to be considered in assessing the amount of compensation include especially the costs of making the invention and attaining rights to the invention, the costs arising from the obligation of confidentiality, and the possibilities for the proprietor of the invention to make use of the invention during the period of confidentiality.

By contract, under the current system, an invention that is principally of importance to the defence of the country, and thus important to keep secret, may by a government decision be expropriated for a public purpose after a patent application has been filed for the invention. Therefore, the ownership of the patent has not remained with the patent applicant and only a “reasonable compensation” has been paid to the holder of the invention from state funds.

Under the proposed law, a patent would not be granted by the Finnish Patent and Registration Office during the period of confidentiality, but the application process could be continued after the revocation of the confidentiality decision, if 20 years has not passed from the date of application. A confidentiality decision may be ordered for one year at a time by the Defence Command of the Finnish Defence Forces. If confidentiality is necessary past that year, a new order must be given. Evaluating the need for confidentiality at regular intervals is important, as the need may change relatively quickly due to the fast progress of technology. For the proprietor of the invention, it is also vital to be able to continue the patent application process as soon as possible.

The government proposal also allows appealing a confidentiality decision to the Finnish Market Court. This is significant, as it is an administrative decision and would customarily be appealed to an administrative court. As the Market Court holds more knowledge on patents, it is nevertheless seen as a more competent option in this context.

The current system stipulates that an inventor residing in Finland, or their successor in title, has to apply or authorise another person to apply for a patent first in Finland if it is obvious that an invention is principally of importance to the defence of the country. Determining whether this obligation applies currently requires the applicant to assess the invention’s significance to national defence. Under the new government proposal, the first-filing obligation would instead apply based on the fact that the work resulting in the invention was predominantly carried out in Finland and not based on the inventor’s place of residence. The patent applicant would no longer need to assess the invention’s significance to national defence before filing. The first-filing obligation would, however, apply to a broader scope of inventions, namely inventions relating to dual-use items or defence materiel. The requirement remains necessary, as current legislation does not allow private parties to own confidential defence inventions for which they could apply for patents in other NATO member states under the NATO Agreement on Safeguarding Defence-Related Inventions.

The proposal seeks to balance national security with the interest of companies to operate internationally. Foreign patent application filings would remain possible after the required review process, limiting unnecessary obstacles to patent strategies. A subsequent foreign or regional patent application could generally be filed just 20 working days after the first Finnish filing, unless the Defence Command notifies the applicant that its assessment of the need for confidentiality is still ongoing.

The Use of Defence Inventions During the Confidentiality Period and an Application in Foreign States

As the state does not expropriate inventions, and ownership of an invention remains at least to a limited extent with the proprietor, the government proposal also includes a provision on the use of defence inventions during the confidentiality period. A proprietor may professionally utilise an invention during the period of confidentiality if it is evident that it would not be harmful to the benefit of national defence. In practice, this could allow utilising an invention at least in cooperation with the Defence Forces.

The new system also aims to give Finnish companies better preconditions to operate within the defence market of NATO member states. Thus, a patent may be applied for in foreign states for a defence invention if certain criteria are fulfilled, namely when it is done based on the NATO Agreement on Safeguarding Defence-Related Inventions, under permission of the Defence Command, and when such an invention is also kept confidential in said foreign states. By facilitating the use of the NATO framework for defence-related inventions, the proposal aims to improve opportunities for Finnish companies to participate in cross-border defence projects and international defence markets while maintaining the required level of confidentiality.

Trade Secret Protection as an Option for the Proposed New Rules

The reform of the defence inventions framework is only one option for protecting important but sensitive technology. Seeking patent protection is not always the most feasible solution, and for some innovations, maintaining confidentiality through trade secret protection may still be the preferred option.

Under the Finnish Trade Secrets Act (595/2018, as amended), information qualifies as a trade secret if it is not generally known among or readily accessible to persons who normally deal with the kind of information in question, if it has financial value because of its secrecy, and if it is subject to reasonable measures of protection. Unlike patents, trade secrets do not require registration or publication and can remain protected for as long as their secrecy is maintained.

Finnish law provides both civil and criminal remedies against the unlawful acquisition, use, or disclosure of trade secrets. For companies operating in the defence sector, trade secret protection therefore remains an important option to complement the patent and confidentiality mechanisms discussed above, particularly where the technology is defence-related technology. In practice, companies may rely on a combination of patents, trade secrets, and contractual confidentiality measures, depending on the nature and the significance of the information involved.

Next Steps of the Reform

Although the proposed regime would introduce significant changes to the current framework, confidentiality orders are expected to remain relatively rare in practice and concern approximately one or two patent applications annually rather than becoming a routine feature of the patent system. The reform nevertheless provides a more modern and flexible framework for protecting sensitive defence-related innovations while allowing inventors to retain ownership and, where appropriate, continue commercial activities involving the invention.

The government proposal is now being processed by the Finnish Parliament before the act can be passed. The act is intended to enter into force on 1 June 2027 simultaneously with the new Patents Act to facilitate the implementation of the amendments in the Finnish Patent and Registration Office.

Our IP & Technology and Defence Teams are happy to discuss the reform and related issues.