Damages in Mexico: a helpful explanation

"How to claim damages for IP violations", by Juan Carlos Amaro Alvarado and Carlos Hernandez (Becerril, Coca & Becerril SC), originally published in IAM magazine, has now been posted here on International Law Office. This article describes and explains the remarkably complicated position regarding infringement damages in Mexico, as well as what seems to me to be the apparently superfluous and intrusive involvement of the Mexican Institute of Industrial Property in infringement proceedings. I wonder whether there exist any figures relating to the extra cost of claiming damages there.

The OECD on Innovation: Once Again

Hardly a month goes by without some new pronouncement by a respected body on the subject of innovation. My particular interest is seeing how these efforts view the role of IP within the larger framework of innovation. While it certainly is the case that IP rights are not identical to innovation, there surely is a relationship between them. However, what that relationship is, and how governments may contribute to it, are both questions to which the answers remain elusive.

The latest effort bears the imprimatur of both the OECD (Organization of Economic Co-operation and Development) and The Economist mgazine. In its May 29 issue, under the title "Growth on the Cheap: Promoting Innovation", there is a discussion based on a conference organized by OECD (described in the article as "[t]he rich-country think-tank") on how governments can do a better job "at spurring and measuring innovation." Since I was not at the conference (no surprise there), I rely on the summary set out in the magazine article. Two points caught my eye.

I. "[The OECD] suggests that governments should not merely encourage the supply of innovation (for example, by funding research), but also try to stimulate demand. Economies, after all, benefit not from the invention of new products or services, but form their diffusion. In countries that are good at commercializimg new ideas, such as America and Norway, even newly founded firms coin valuable intellectual property."

The article sets out a table that shows the percentage of "international patents" filed by firms under five years old as a percentage of all patents filed by firms in such country, for the period 2005-2007 . The table ranges from over 20% by Norway and nearly 15% by the U.S. to under 5% by Italy and the Netherlands.

I make two comments here:

a. As for the first point, it has been part of the management/innovation body of knowledge for at least 25 years that the innovator of a technology or product is only infrequently the party that enjoys commercial benefits of the innovation. Succesful commercialization requires a bundle of skills and capacities, such as manufacturing and marketing, that the innovator itself will not often possess. Government policy may affect these capacities as well as provide incentives for the "supply of innovation" itself. If that is what is meant by "diffusion", then there is nothing really new being said here. If "diffusion", however, means something else, then it is a pity that the article does not go to explain this, as well as how governments can facilitate this process.

b. The reference to young firms "coining valuable intellectual property", using patent filings as a proxy, does not seem to follow from the previous assertion about the need to diffuse the benefits of inventions. I had thought that the point of the paragraph is that successful innovation requires more than invention, namely innovative methods for successful commercialization. If so, I don't follow what patent filings by start-up companies (some, if not many, of whose gazes may well be on achieving a quick exit rather than staying in the game for the long haul) has to do with better innovation after the invention has been made.

II. "The OECD encourages governments to rethink their policies in light of globalization and information economy. It notes that "intangibles" such as knowledge networks and open business models now make up much of the value of firms in rich countries and that many companies produce profitable innovations with little or no research in-house. For example, most of the research behind the iPod was done by other firms, but Apple reaped huge profits from its skill in design, systems integration and marketing."

I feel compelled to comment here as well.

a. I am not sure that what is meant is that many companies innovate without carrying out research in-house, thanks to open networks and business models. Indeed, it is odd that Apple, known as a company that resists open development models (except for the app developers for its ITune ecosystem), is brought as an example for the point. I recall a recent Scientific American podcast that discussed the success of Apple (and the iPod in particular) in driving technology in the direction of design and user experience. Nothing in that podcast interview suggested that Apple's skill-set was connected to open networks and business models.

b. The larger issue seems to be the interconnection between and among in-house invention and research (read: patents), in-house skills, open networks and innovation. Maybe the OECD conference addressed this question, but simply failed to include it within the magazine report--or maybe it did not. It would be interesting to know.

It Means Different Things to Different People

Switzerland: World-Class Chocolates, Watches, and IP Tax Benefits

I don’t have much of a sweet tooth but, when I reach for chocolate, I want it to be Swiss. Yum! But Switzerland is not only home to great chocolate, reliable watches, defenders of the Vatican and, arguably, the world’s best tennis player; it’s also home to highly beneficial tax rates for IP owners.

The applicable tax rate for Swiss-registered IP owners or Swiss subsidiaries of foreign IP owners varies, but may often be reduced below 8% based on corporate structuring. Ask your tax professional for advice on your entity's structure! In addition, because Switzerland has double taxation treaties with numerous countries, a company can benefit from a reduced withholding tax on foreign-generated royalties – in many cases to 0%.

The Swiss Federal Institute of Intellectual Property houses registrations of patents, trade marks, copyrights and designs – a true one-stop-shop! It is headquartered in Bern. Brush up on your German before arrival, bitte, because German is the official language in this fourth most-populous city in Switzerland. Though less populous than Zurich or Geneva, Bern is also Switzerland’s capital and home to its Parliament. Bern can also boast being the home of Albert Einstein at a time when he began working on his most famous scientific breakthroughs. One of his former Bern residences has since become a museum.

On arrival, make a beeline for the Kursaal Bern. Just as you can satisfy all your IP needs within the Swiss Federal Institute of Intellectal Property, you can satisfy all of your accommodation, nourishment and entertainment needs at the Kursaal Bern. It houses the Hotel Allegro, a gambling casino, conference center, several restaurants, a rooftop beer garden, and a cigar lounge operated in cooperation with Davidoff, as well as a Toblerone chocolate historical exhibit in the Kursaal Tower section of the property. Of course, Toblerone is available for purchase in the open-round-the-clock hotel gift shop!

Bears are a symbol of the city. Live bears had been kept here in bear pits for public amusement since the city’s founding in 1191, but today can be visited in BärenPark Bern, which opened in 2009. In fact, legend has it that Bern got its name from the hunting of bears here at the time of the city’s founding (from the German word for bears, bären).

Finally, UNESCO recognizes Bern’s medieval city center as a World Heritage Site, so be sure to save time to explore the Old City and to see the Zytglogge, the “Time Bell” medieval clock tower. You can also walk along the shopping arcades that stretch for six kilometers through the city – among the longest covered shopping areas in Europe.

IP Risks in Perspective

A recent press release from the parent company of Cambridge nanotech company Owlstone serves as a useful reminder to IP managers that IP risks represent only a fraction of the risks facing the IP-dependent technology business. The footer to the press release reads:

Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors, including general economic conditions, spending levels, market acceptance of product lines, the recent economic slowdown affecting technology companies, the future success of scientific studies, ability to successfully develop products, rapid technological change, changes in demand for future products, legislative, regulatory and competitive developments, the Company's ability to secure additional working capital and/or generate sufficient cash flow to support its operations, and other factors could cause actual results to differ materially from the Company's expectations.

Securitised trade marks: a quick question

A sudden and somewhat random thought occurred to me yesterday in the course of a conversation with Craig Bailey of Questel Edital.

We understand that the securitisation of trade marks is a convenient means by which lending institutions can protect their position when advancing money to a business which needs to borrow funds. The legal framework for this is known and understood. The question however is this: do lending institutions employ any due diligence or watching routines of their own, to ensure that the integrity or value of a securitised trade mark portfolio is not compromised by subsequent applications by third parties to register similar or conflicting trade marks -- or do they leave it to the borrower? While the latter is the more natural party to discharge the duty of monitoring and protecting securitised interests which it may be using on a daily basis, its failure to do so may weaken the lender's position -- and the borrower may not have enough assets to make it worth suing on a warranty in the event that it fails to keep a proper eye on the securitised rights.

Any thoughts or comments?

Budget, tax and IP

So, what did the budget do for IP? Well, left it mostly alone - for now at least. The swings and roundabouts of corporate tax changes and other such matters will affect IP-related businesses in the same way as they affect all businesses, but the budget releases are fairly light on IP specific material. What there is, is as follows:

- the removal of the IP ownership requirement for small/medium sized companies to claim R&D was confirmed (as announced last November in the Pre-Budget Report, but it is welcome that it will be in the next Finance Bill)
- the film tax credit anomaly on multi-year claims is being dealt with
- the video games industry relief announced by the last Government will not be implemented
- the ongoing consultation on controlled foreign companies (which particularly involves IP, as that is seen as one of the pressure points given the ease with which IP can be transferred to a low-tax country) continues, but there is a commitment to interim measures in 2011 and final implementation in 2012

There is no specific mention of the patent box announced last year (reducing corporate tax on some patent royalties to 10%), although it is included in the costs analysis for measures announced but not yet in force, with a costs estimate of £1.1bn 'in steady state'. There is an announcement that the Government will consult in autumn this year on the future of taxation of intellectual property generally (which the Treasury has today confirmed includes discussions on the patent box, but no more detail than that), and will also consult on the support that R&D tax credits provide for innovation - presumably with a view to tweaking/changing/overhauling as necessary - and finally consultation on how to take forward the Dyson Review (which also supported a patent box).

More details as they arise ...

Today's UK emergency budget

Today the United Kingdom's new Coalition Government is delivering its emergency budget. If there is anything IP-related, the IP Finance weblog will endeavour to draw it to the attention of readers. Also, the Olswang Budget Blog will be providing coverage and comment on all the emergency proposals, whether IP-related or not.

Funding and Flattr-y: new online business models under review

In "New Business Models Proposed In Debate On EU Culture And Copyright", written earlier this month by David Cronin for Intellectual Property Watch , both levies and microfees were again mooted as means of making internet users pay musicians and other artists for the dissemination of copyright-protected work online. The occasion for these proposals was a discussion, hosted by Green Party Members of the European Parliament on 8 June, on "how easy public access to culture can be guaranteed in a way that ensures artists can make a decent living". According to the author,

"Philippe Aigrain, a founder of the French civil liberties group La Quadrature du Net, argued that the fundamental premise of any approach to charging for listening to music or watching films online should be that sharing files is a basic right. ... Aigrain recommended a new system whereby each internet subscriber would be charged a monthly fee of 5 to 7 euros and that this would generate a fund for paying artists whose work is shared on the internet. According to his calculations, such fees should yield between 1.2 billion and 1.7 billion euros each year in France alone – about one twentieth of the country’s “cultural economy”.

The income would then be distributed among artists based on surveys of a “huge panel” of individuals, who would anonymously give details of which files they had downloaded. For audiovisual work, one-third of the revenue generated would be used for remuneration and the remainder to support new productions. Yet the ratio should be reversed for music, considering that it is usually less expensive to record tunes than to make films".

In contrast Peter Sunde, on behalf of Pirate Bay, described the Flattr micro-payment scheme (for a peek at Flattr click here):

"Under it, an internet user would give between 2 and 100 euros per month and could then nominate works that they wish to reward or “flattr”. The system would be similar to the “I like” button on the social networking website Facebook but “with the added value that you actually care ...”.

The article goes on to record a variety of attitudes concerning copyright and collecting societies that don't make very comfortable reading for what is perceived by many culture consumers as the copyright establishment.

Has the Financial Times Found its Way to the Online Promised Land?

The efforts of newspapers to find a business model that will ensure their continued viability in the online world continue unabated.Take the saga of the Financial Times.

As described in the June 16 posting of Chris Cameron's "ReadWriteWeb" blog on nytimes.com ("Financial Times Expects Direct Payments to Outpace Print Ads in 2010") here, itself based on a article that appeared in The Los Angeles Times, the blog focuses on the efforts of the FT to find sources of revenues in a declining print media world. In particular, the piece discusses a report that the FT "will see print ad revenues dip below direct payments made to the paper this year." As well, the FT is developing alternative sources of revenues, including IPhone and IPad applications as well as "series of glitzy events and conferences drawing luminaries from various industries." Let's consider further what seems to be going on.

1. What is entailed by "direct payments? " At least for the FT, "diret payments" appear to mean subscription payments both for its print edition (approxmately $348 per year) and for access to its online contents (approximately $186 per year). If so, this does not really tell us very much. First, we do not know the division between print and on-line subscription payments. Second, and more importantly, we do not know of the trend lying behind this division; is it stable or is it changing over time in favour of online subscriptions? Third, we do know to what extent an increase in "direct payments" can ever make up for the lost revenues from the decline print ads.

2. What about iPhone and IPad applications? What seems to be going on, at least for the moment, is that the FT has made available a free download app for the iPad (thus far available only in the U.S.). There have been over 130,00 downloads of this app since its launch two weeks ago. This is to be compared with the launch of a similar Phone-enabled application last year, the difference being that the iPhone app requires payment of a subscription fee. The FT plans to convert the fee iPad app to a monthly subscription model after the free promotional period comes to an end.

Here, as well, there seems to be less going on than first meet's one eye. The reasonable conclusion to draw from the iPhone experience is that it remains a challenge to convince readers to pay an online subscription fee. So why does the author think that "this time will be different"? In part, he explains, it is "because much of the readership of the paper (like that of the Wall Street Journal) is mainly wealthy financiers and business executives--just the type of audience that is likely to subscribe and more likely to own the expensive iPad."

No offence is intended to the author, but this is hardly convincing. First, his characterization of the FT readership seems off-the-mark (either that, or a number of my friends and colleagues who read the FT have either received significant promotions or suddenly made it big in the stock market). Second, the price amounts involved here, both to obtain the device and to pay for the online subscription, are not so high that the only the wealthy are able to participate (and that is before any possible tax deductions). Third, I am skeptical that wealthy financiers and business executives are the consumer population most likely to be buying, much less using, an iPad.

3. What about those glitzy events? Perhaps I am simply uninformed, but the notion of the FT and glitz together seems a bit dissonant. And yet, the blogpost writes that "the paper hosts events and conferences aimed high-rollers [being the FT's "upper-class audience"--NW]. At the forefront of these events is the Business of Luxury Summit, which has become a strong source of profit for the paper thanks to high-end sponsorships and expensive prices, with executives from companies like Estee Lauder, Calvin Klein and Jimmy Choo drawing in wealthy attendees."

We are fascinated about the apparent brand extension being adotped by the FT. In June 2009, we published a post on this website here where we suggested that brands would become even more important in the online contents world. There, the thought was that strong newspaper and content brands would be best positioned to successfully migrate to a subscription model in the on-line world. We did not imagine at the time that brand leverage would extend beyond the contents themselves to allow the brand owner to take advantage of revenue streams far-removed from the core activities of the newspaper.

That said, if I had to put my proverbial money down on which form of brand leverage is ultimately the more important for the long-term viability of the FT, I stick to my comments of a year ago. Ultimately, it will be the enduring strength of the FT brand as signifying high-value newspaper contents, and not "Business of Luxury Summits", which will determine its business fate in the online world.

Brand leverage?

The Luck O’ the Irish – Tax Exempt Patent Income

While the world’s eyes are on the World Cup in South Africa, I will focus this post on a country that is notably, and unfortunately, absent from the field of play – Ireland. Please don’t hold it against me that I’m a supporter of Arsenal, the team on which Thierry Henry played for eight years.

Patent income received by Irish residents (corporate or individual) is exempt from tax, up to €5 million per year. The exemption is limited to income received from patents that were developed and registered either in Ireland or the European Economic Area at large – as long as the income is received by an Irish resident. IP Finance previously reported on the Irish tax exemption here, here and here.

Ireland’s Patent Office is located in the city of Kilkenny, in County Kilkenny. In southeast Ireland, Kilkenny is quite a small city, with a population of about 22,000. Though small, Kilkenny boasts a variety of castles, historic buildings, art galleries, crafts workshops, theaters, public gardens and museums. If you find yourself in Kilkenny in August, you’ll be able to partake in the annual Kilkenny Art Festival.

This being Ireland, let’s start with where to drink and then sort out where to sleep. The cleverly named Anna Conda, on Parliament Street, is a beer garden and pub with live music on Saturday nights. Anna Conda also has “trad sessions” on Tuesdays, Fridays and Sundays. Not sure what trad sessions are? Neither am I. But they sound like what we call “jam sessions” in the US, where local musicians gather to play together, following each others’ leads. The Pumphouse, also on Parliament Street, has live music, traditional fare, pool tables, dart boards, and a beer garden. It is also promotes itself as stag- and hen-party friendly; if you like mixing business with pleasure, you can handle your patent work and your pre-nuptial events in one location.

Langston’s House Hotel features everything under one roof – executive guest rooms and suites, tea and wine rooms, meeting rooms and a bar. Having opened in 1324, there is plenty of history at Kyteler’s Inn & Medieval Tavern – not least of which is the story of its initial owner, Dame Alice Ie Kyteler. Dame Alice amassed a fortune from the four husbands she married in her lifetime. Though she was eventually accused of witchcraft and burned at the stake, she achieved success in building an inn that had a reputation as "a place of merrymaking and good cheer". Its reputation still precedes it, so join in the merrymaking whether you choose to book a room or merely stop in for a drink.

While in Kilkenny, save time for a round of golf at Jack Nicklaus’s championship course, Mount Juliet. In addition to being a world-class golf course, Mount Juliet features hotel accommodations, a spa, and many on-site activities.

Finally, if you pass through Dublin on your way to or from Kilkenny, your trip would not be complete without a stop at the Guinness Storehouse, the Jameson Irish Whiskey Distillery, or The Brazen Head, Ireland’s oldest pub (est. 1198) and the place where Jameson himself apparently conducted “market research” while developing his famous triple-distilled whiskeys. For a less potent beverage in Dublin, Bewley’s Grafton Street Café roasts and serves the best coffee in Ireland at its café filled with Harry Clarke stained glass windows, original artwork, historical artifacts, hand-painted wallpaper, and theater that hosts weekly events. Bewley’s seems to hold Irish and UK trademarks for its coffee’s aroma; if you have further details about Bewley’s use of this mark, please let us know by leaving a comment.

Enjoy your trip to Ireland… Cheers!

Rambus shares nosedive on court news

It's been rather interesting to follow Rambus stock market fortunes over the past few months (a chart is available over at Yahoo Finance here). Much of the movement over the past few weeks has been based on IP related issues.

We've already reported here earlier issues surrounding Rambus numerous disputes. Rambus has now received a further setback in its various legal cases, as reported by Reuters.

It must be very frustrating for Rambus that the latest delay in resolving their case against Hynix and Micron relates to the retirement of a Federal judge in May of this year, just before a decision was due to be issued in the Appeal procedure about whether Rambus destroyed key documents. Instead of a decision relating to damages payable to Rambus, the court ordered a rehearing in October of this year. The continued uncertainty about whether will be entitled to damages certainly does not help confidence in the company whose share price dropped from USD 21.90 to USD 18.19 on the decision.

The case really highlights the impact that decisions in IP matters have on the value of a company - as measured by the stock price. If Rambus win the case then their business will be backed by a solid base of patent rights and their revenues buoyed up by licence income. Should they lose, then much of their business model could be destroyed. The short term nature of the stock markets does not match with the current leisurely pace of the courts in deciding matters that can effect the long term health of a company. Rambus is probably healthy enough to survive and has had success in other cases not tainted by allegations of deliberate destruction of documents. There are other companies whose fate is decided in court after months of uncertainty.

It's not surprising that Reuters reported that the Rambus CEO spends much of his time dealing with lawyers. Apparently the company spent half of its 2009 USD 115 Million of revenues on legal fees (adding to its corporate running total to its lawyers since founding of USD 300 Million.

Technorati Tags:
Semiconductor, Patent Infringement, Rambus

Intangible Capital in print

A month ago, in "Reputations and Bottom Lines", I mentioned the publication of Mary Adams' and Michael Oleksak's new book Intangible Capital: Putting Knowledge to Work in the 21st-Century Organization. A copy of this little tome has now arrived in my letterbox and I've had a chance to leaf through it.

It's much more fun to read than the rather solemn title suggests, combining strands of history, economics, management, metaphor and common sense, personal experience and anecdote. It's also a monument to the metamorphosis of management and asset management philosophies from the age of bricks and mortar to the world of the internet. It won't provide the answers to all your questions (how many books of 150 pages do?) but it gets the reader into the mindset for asking the right questions. Since the right answers are (i) business-specific and (ii) change in time, while the right questions can be applied more generally and are less subject to the vicissitudes of commercial fashion, this is altogether a greater benefit to the reader.

More news on the Micron patent sale: what is really happening behind the curtains?

On June 1st Darren Oliver relayed an interesting news item (click here and here for the original article) about the acquisition by Round Rock Research LLC of a portfolio of 4,500 patents from Micron Technology Inc., which is the biggest U.S. maker of computer-memory chips. Round Rock is a so-called non-practising entity that has been (or NPE) founded by former Kirkland & Ellis lawyer/patent counsel John Desmarais, who used to represents many leading technology firms in patent infringement cases (he notably won a $1.52 billion verdict for Alcatel-Lucent against Microsoft in 2007.)

The technological spectrum of this portfolio is very broad, as it contains patents related to chipmaking technology, patents on photo imaging, telecommunications and search engine technology, as well as the largest RFID patent cluster. Whereas such diversity does not prevent the risk of buying junk patents, it seems that Mr Desmarais took precautions. A study conducted by CPA Global’s monetzation specialist Rahul Jindal for the IAM(Intellectual Asset Management) Magazine (that you can find here) notably concluded that 20% of the patents sold by Micron are of very high quality. Considering that only 5% of all USPTO reach this level of quality, Desmarais closed an interesting deal with the US chipmaker. Indeed although the value of this transaction has not been publicly revealed, it appears that the amount of money paid for this portfolio - which represents one 1/5 of Micron's entire patent portfolio - is not as high as one could think: as IAM Magazine's Joff Wild pointed out, the sum has been considered as "not material enough to announce to shareholders or the regulatory authorities".

The dubious confidentiality of this transaction leaves some room for much speculation: did Micron’s senior management make a blatant mistake by sanctioning it or does Micron have a vested interest in Round Rock? Although Micron has a licence to use the patents royalty-free, such a large-scale sale does not seem to be the best strategy to recoup R&D investment (which was however the reason behind this patent sale according to the chipmaking firm). Joff Wild did a great job of investigation and tried to get some answers from Micron ... in vain. For him Micron might be involved in some ways with the NPE, contrary to the very anti-patent troll stance recently taken by its CEO. Given the powerful arguments raised by the IAM editor (by the way, the registration to the IAM blog is free and recommended) it is hard not to be suspicious towards Micron. However it might be too early to accuse Micron of hypocrisy. Joff Wild will hopefully keep on investigating and find out what's really happening behind the curtains.

The Branding Wars in Smart Phones.

The media-hyped recent coverage of Steve Jobs, as he discussed the bells and whistles that adorn the 4g iPhone, stands in stark contrast to a sombre article that appeared on Bloomberg.com on 12 May. Entitled "Nokia Goes 'Back to the Future' in Attempt to Topple iPhone" and written by Diana ben-Aaron here, it discusses the appoint of Anssi Vanjoki as head of the company's smartphone unit. Vanjoki's mission: make Nokia competitive in the smartphone space. His challenge (as described by Carolina Milanesi of Gartner, Inc.): "It's a bit back to the future ... [and] he doesn't have much time, so Nokia needs to deliver."

The company's recent history in this area is grim. While the company worldwide is the largest manufacturer of handsets, it has become a laggard in the up-scale smartphone business. In a field with compressed timeframes and ferocious competition, how long ago March 2007 seems now. Then, Nokia launched the N95, the company's first handset with GPS. It reported sold more than 10 million units and enjoyed an operating profit of more than 21%. That was then, however.

In the face of the onslaught of the BlackBerry by Research in Motion, and the iPhone of Apple, not to mention Android-based devices such as those of HTC, Samsung and LG Electronics, operating margins plummeted to just over 10% in Q1 2010. There seems to have been a subsequet model N97, being a combination touchscreen and keyboard phone, but that model has not enabled Nokia to overcome the Blackberry or iPhone products.

Against this backdrop, analyst Tero Kuittnen (MKM Partners) has offered Nokia only luke-warm encouragement: "The stakes couldn't be higher. The iPhone is a luxury juggernaut that can no longer be defeated, but Nokia still have a shot at snuffing out the challenge of its Aisia midrange rivals." Another analyst, Ben Wood, of CCS Insight, was more pointed, observing that "[i]f these people don't suceed, they will be doing something different in three years."

The competition in the handset industry generally, and the smartphone
business, in particular, has been the subject of countless articles and is a favoured topic for business school case studies. I want to mention an IP-based one aspect that tends to be overlooked, namely the role of trade marks. We noted above that the N95 handset was eclipsed by the Blackberry and the iPhone and that the N97 failed to buck this trend. To counter this, Vanjoki plans to roll out a new slim touchscreen device. And what is the name for this new product? Are you ready for this ...? None other than the "N 8."

I simply don't get this branding move by Nokia. First, it is a mystery why a newer model bears a lower number than an earlier model. Weren't we all conditioned to expect that the 386 Intel chip would be an improvement on the 286 product, and that the 486 chip was in improvement on the 386. I know--Intel was unable to register these later chip models as trade marks, at least in the U.S., but that does not change the basic principle that consumers expect higher model numbers or numeric brand names to represent a more advanced product than its lower-numbered predecessor. If my assumption is correct, then the rationale for the progression from N95 to N8 remains a mystery.

Second, the very choice of the series of markets based on "N" plus a number seems odd. Compare it with the Blackberry name, which is a garden-variety (no pun intended) use of an arbitrary name that has planted deep branding roots in the consciousness of consumers. It does not really matter if the consumer knows that Research in Motion (or RIM), stands behind the product. It is enough that one asks for a Blackberry. It is a wonderfully strong arbitrary mark.

The selection of the iPhone suggests an antipodal branding strategy.

Here, Apple has built a stable of strong marks, each of which is comprised of the prefix "i" together with an arguably descirptive noun. Fear not--acquired distinctiveness has or will ensure that each of these family of marks can be protected in its own right, as well as being used together the Apple mark. Both the product name and the house mark come out as branding winners.

Now let's consider N8 (or N95 or N97). Unlike the Blackberry name, there is nothing distinctive about such an alphaneumeric combination. There is ready reason for a consumer to know (and remember) that iPhone is a telephone device and that iPad is a tablet device. The same cannot be said, in my humble opinion, for the N8 mark. This means either that Nokia will have to use N8 together with Nokia, so as least to take advantage of the strong value in Nokia, or settle for a product name that is doomed to be less effective than the names of its rivals. Either way, Nokia would seem to come out second best in the trade mark wars, and where it can ill afford to do so.

Albanian scrutiny of IP licences: will the burden be lifted?

"IP licences examined through a competition lens" is the title of a recent contribution in International Law Office by Shpati Hoxha (Hoxha Memi & Hoxha, Tirana), on developments in IP commercialisation in Albania. The author writes:

"The need to integrate Albania into the global market has prompted the authorities to undertake regulatory reforms. The recently approved Law on Industrial Property (9947/2008) includes provisions which carefully delineate the proprietary rights granted to holders and users of IP rights.

IP rights are increasingly crucial to all sectors of the economy. As such, the use and circulation of IP rights in the market are resulting in an unavoidable intersection with competition policy. ...

Like EU competition legislation, Albanian competition law applies to any type of agreement - whether formal or informal, tacit or explicit, horizontal or vertical - that may damage or hinder competition in the market. ...

Under Article 7 of the Competition Law, agreements related to the licensing and transfer of IP rights may be exempted from the prohibition under Article 4 [of the Competition Law] if (i) the commercial freedom of the acquirer or licensee or other undertakings is not unfairly restricted, and (ii) competition on the market is not substantially impaired.

In particular, the general prohibition on anti-competitive clauses set out in Article 4 will not apply to commitments restricting the acquirer or licensee if:

* they are justified by the seller's or licensor's interest in a satisfactory exploitation of the subject matter of the protected right;
* they impose obligations to exchange experience or to grant non-exclusive licences in respect of inventions relating to improvements or new applications, provided that such obligations correspond to similar obligations on the part of the seller or licensor;
* they do not challenge the licensed protected right;
* they provide for minimum use of the licensed protected right or payment of a minimum fee; or
* they provide for labelling of the licensed products in a manner which does not exclude a reference to the manufacturer.

However, such restrictions must not exceed the term of the acquired or licensed protected right or of the right which constitutes the object of the licence.

Under Article 50 ..., licence agreements are considered to be permitted if the Competition Authority does not issue a decision opposing them within three months of receipt of notification".

The author however identifies problems where competition principles collide with IP rights:

" ... It is therefore necessary to strike a balance between the fight against anti-competitive behaviour and the provision of adequate guarantees for research and development investments through appropriate IP rights. ...

It is only when the rights holder goes beyond the legitimate exercise of rights granted under the respective legislation that the Competition Authority should exercise its powers under the competition legislation to curb such behaviour. The current regime, which requires that each IP licence be notified to the Competition Authority and a decision (or not) awaited, seems overly burdensome and inappropriate. In practice, the Competition Authority receives few such notifications.

In addition, there is a lack of supplementary measures such as block exemptions (corresponding to the EU Technology Transfer Block Exemption or the Antitrust Guidelines for the Licensing of Intellectual Property of the US Department of Justice and Federal Trade Commission) ,and of de minimis provisions that would exclude licences where the parties have a low market share. This produces a paradoxical situation whereby each IP licence needs an exemption from the Competition Authority, regardless of its effect. ...

The Competition Authority recently proposed amendments to the Competition Law in order to harmonize the legislation with EU law pursuant to the Stabilization and Association Agreement with the European Union. Based on these proposals, specific criteria to exempt IPR licences, as well as relevant exemption procedures, would be introduced. In addition, the proposed amendments would introduce new provisions allowing the Competition Authority to approve block exemptions for certain categories of anti-competitive agreement, as well as new de minimis provisions.

The amendments were officially reviewed and approved by a special competition taskforce of the Council of Ministers during April 2010. The draft amendments will be soon submitted to the Council of Ministers for the initiation of the legislative process".

The clash of IP monopoly power and competition principles has been the basis for justifying the current notification provisions, but it seems to me that the government of a jurisdiction which has hitherto exercised fairly tight controls on its economy and on commercial activity within it may have other reasons for continuing burdensome notification requirements. The collection of tax revenue from IP exploitation is not always easy and depends on knowledge of the transactions that give rise to taxable events and income streams. Notification of licences -- particularly in a country in which information passed to one government agency may filter through to another -- may thus serve a secondary purpose to that of regulating competition.

A Welcoming Home for Inventors

Since my apartment is wonderfully cool again, I thought this week I’d focus on northern Europe rather than another island jurisdiction. A few readers had pointed out the tax benefits available to IP owners in Belgium, which I think is a lovely country, having been there several times myself.

As of 2008, Belgian companies are entitled to a tax reduction on patent income (prior IP Finance posts on this tax reduction here and here). The patent income deduction was created to encourage Belgian companies to invest in research and development leading to patent ownership and exploitation. The 80% tax deduction reduces the effective tax rate on patent income to 6.8%. Incidentally, the European Patent Office has an outpost in Brussels. It is located at Av. de Cortenbergh, 60 (see photo, right).

Every major luxury and business hotel brand has at least one property here, if not more. I won’t suggest one over any other – they are all great at servicing business travelers with well-appointed rooms, business centers and room service. If you have a local office or travel with gadgets that function as a mobile office (and thus aren’t in need of a hotel business center) and you are interested in trying a less business-minded hotel, stay at the wonderfully quirky Hotel Welcome by Place Sainte-Catherine. Each room or suite in this unique bed and breakfast is decorated in the style of a different country or region – Egypt, Bali, Morocco, Japan, Cuba, and Tahiti, to name just a few examples.

If the weather is nice, have a picnic in Egmont Park, a rather peaceful and secluded park located near the Palais de Justice and – if you’ve decided to stay there – the Hilton Brussels Hotel, which is situated along the edge of Egmont Park (the hotel’s café overlooks the park).

A great spot for a business lunch is La Maison du Cygne. Karl Marx used to drink at this former tavern that has since become an elegant restaurant on Rue Charles Buls on the edge of Grand Place. For its 50th anniversary, La Maison du Cygne has opened a sister restaurant, also in Grand Place, called Brasserie de l’Ommegang, where you can lunch on the dish of the day for just €15. Appropriately named, La Manufacture is a former leather manufactory that features indoor and outdoor dining and has a menu that is a fusion of Mediterranean and Asian foods.

At Le Cirio, a belle époque style café on Rue de la Bourse, by the Bourse (the Brussels Stock Exchange), the house drink is the “Half and Half”, a concoction made from white wine and champagne; of course, they also serve more traditional drinks if the Half and Half does not appeal to you. A La Morte Subite, another great location for a drink, gets its name from a dice game that bankers used to play while drinking here on their lunch break.

Finally, if you are in a beer drinking mood, you can’t leave Brussels without visiting Delirium Café, an 18th century basement 100 meters from Grand Place. This bar is for the serious beer drinker. With 2,000 beers on tap, the menu is the size of a book. Order by number and the bartender will climb a ladder to fill your glass from one of several levels of taps in the ceiling. I must admit, I only managed to try a few when I visited (your guess is as good as mine as to how many I had sampled before taking the photo to the left). Perhaps you can do better! Delirium’s menu also includes cheeses, sausages, and chips, as well as soft drinks and juices, in case you need to take a break from drinking your way through the extensive beer menu.

If you are arriving by car, you can’t go wrong with Parking 58 municipal parking lot on Rue de L’Eveque near Place Sainte-Catherine. From the 10th floor parking level, you’ll have a safe place to leave your car and an unrivaled, unique 360 degree view of Brussels. You can even see clear across the city to the Atomium from here!

Please Don't Squeeze the "Cushelle"?

I have returned from my annual total immersion in the world of trademarks, also known as the International Trademark Association Annual Meeting. Flush with a plethora of memories, new professional insights, and even a new business card or two, what better way to return to the blogosphere than a consideration of the rebranding of the "Charmin" toilet paper product to the new mark "Cushelle" in Europe.

I must confess: There are few advertisements more memorable for me Stateside than the immortal words of the fictional Mr. Whipple: "Please don't squeeze the Charmin". The brilliance of the message--that toilet paper could be so soft as to invite a furtive squeeze or two-- was one of the few advertising instances where the message was fused with action ("ah, the clerk is gone, now is the time for me to give a squeeze"). Surely, I must have thought, if "diamonds are forever," then Mr Whipple's plea regarding the toilet paper must run a close second for a place in the pantheon of great advertisements.

At least with respect to Europe, and without knowing whether or not Mr Whipple made it to the other side of the Atlantic, I thank fellow blogger Ian Hartwell for recently alerting me to a January 25, 2010 report about the rebranding campaign that appeared at marketingweek.co.uk. Being sympathetic to the old bromide about "better late than never", I have managed to glean from the article the following salient points regarding the February 2010 rebranding of that iconoclastic product name.

1. " The “Cushelle Koala” will replace the “Charmin Bear” in advertising, on packaging and on the embossed tissue. SCA (the full name of the company is Svenska Cellulosa Aktiebogaget here), the Swedish corporate owner of the brand, says it chose the new brand name and koala icon to reflect the product’s softness and appeal to families and Charmin loyalists.

2. "Each new pack will be labeled with ‘formerly Charmin’ on the purple swoosh and the message “same irresistible product, brand new name” to reassure consumers."

3. Since the erstwhile Charmin brand was purchased two years by SCA from Procter & Gamble, there have been no tv ads. With the launch of the new brand, tv ads will be renewed. As well, there will be a new website containing both informational and promotional contents here as well in-store and other forms of advertising and promotion. All in all, over 10 million sterling are reported to have spend in connection with the launch.

4. Cushelle brand marketing controller, Emma Heald, says: “We are investing heavily in the campaign to make sure we reassure our consumers that our product has not changed and we’ll be using the marketing campaign to drive loyalty to the brand and ultimately market share for Cushelle. We are really confident that consumers will connect with the new brand name and icon, we think this is also good news for the category and will engage consumers.”

Holding constant both Mr Whipple and the from-Charmin-to-Cushelle evolution of the bear behind the product, I have several observations:

First, one wonders about the track record of rebranding, especially of a consumer staple in a highly competitive market.

Second, the reliance on the marketing message, "the same irresistable product, brand new name", together with the reference to the erstwhile name, is certainly interesting. The company seems to be betting that (a) the product has recognizable quality; and (b) consumers are willing to engage in the effort of transferring their allegiance to the new name, instead of seeing the campaign as an opportunity to perhaps explore competing brands of the product. Or perhaps the slogan is more directed at potentional new customers, drawn to the claim of quality and willing to give the Cushelle product a try.

However the launch develops, I look forward to engaging in a bit of stealth the next time I am in a London store selling the product. One more squeeze, just like the old days, in homage to MrWhipple.

An IP Tax Haven Amidst Cool Beaches

A couple of weeks ago IP Finance team blogger Jeremy posted this request from a reader seeking information on which countries are good tax havens for intellectual property portfolios. Reader comments and responses pinpointed Luxembourg, Netherlands, Belgium, Ireland, the Cayman Islands and the Channel Islands among others. As many IP practitioners may have reason to visit these locations for client matters, each week we’ll feature an IP Trip Planner for one of these IP- and tax-friendly locales.

This week, I’m starting with the Cayman Islands. With New York in the midst of very hot weather and my air conditioning malfunctioning, I’m dreaming of a trip to Cayman – if I have to sweat out the heat wave, I would rather be on a tropical beach!

Located in the Caribbean Sea, the Cayman Islands is made up of three islands governed together – Grand Cayman, Cayman Brac and Little Cayman – with George Town (on Grand Cayman) as its capital. And, as the Cayman Islands is a self-governing British Overseas Territory, European IP practitioners can rejoice in basing IP in a tax free jurisdiction with laws similar to the UK but with more enjoyable beaches.

The General Registry Office in Grand Cayman maintains a register of companies, patents and trademarks. Several global hotel brands have properties nearby where you might opt to stay for some beach-side rest and relaxation: Ritz-Carlton, Westin, and Marriott. In addition, there are many independent local hotels and villas along the beach, the favorite being the Caribbean Club villas on Seven Mile Beach in Grand Cayman.

Hungry? In George Town, go to Grand Old House, which is indeed located in a grand old house that was built in 1908. Have a meal on Seven Mile Beach at Mezza, a Mediterranean/ French/ Caribbean fusion restaurant. Or try Deckers, a lively spot on Seven Mile Beach that features al fresco dining and live music on Thursday, Friday and Saturday nights – be sure to order the Blood Orange Mojito, a house specialty!

If you can find some time for fun in the sun, Cayman offers many options. SCUBA diving, snorkeling, fishing, sailing, hiking, shopping and – my personal favorite – lazing on the beautiful sandy beaches.

The best part about Cayman Islands trip planning is that the Islands’ “Worry Free Hurricane Guarantee” covers cancellation prior to travel or compensation if travel is cut short due to hurricane weather. Many hotels offer penalty-free cancellation, though some have a one-night penalty, for cancellations up to 48 or 24 hours (depending on property) prior to expected arrival. Check with your hotel when booking for details about its hurricane guarantee.

Troll kalla mik

Mega firm litigation woes: you win a big patent litigation instruction only to find that you cannot act because it may cause a potential conflict with a big corporate the firm is trying to win deal work from. Sound familiar then you may find the latest Bloomberg story (Kolker) on corporate defender turned patent troll interesting, if not inspiring.

"John Desmarais, a former top earner at the 1,500-lawyer firm Kirkland & Ellis, spent more than 15 years representing some of the world’s largest patent owners. Now he’s one of them, and he’s gearing up to slay the kinds of companies he once defended. "

The story once again raises issues over whether trolling is good for IP business. John F. Duffy, a law professor at George Washington University is quoted:

“The good story about nonpracticing entities is that they are developing liquidity in the market for these patent rights. On the negative side, they are given patent rights for goods or services they don’t make and can sue other companies for infringement, he said. "

Illustration by Bob MacNeil