How the Government Can Save Money: Pirate Software

The Washington Post reported that the U.S. Army recently was sued for copyright infringement by breaching a license agreement for software—which the U.S. Army apparently did.  Okay, so that is government not at its best.  The silver lining for the U.S. Army is that the copyright owner settled for $50 million--$130 million less than it would have cost the government to license the software.   The silver lining for the copyright owner is an unexpected check for $50 million and, I would hope, a lot more business.  The nice message for the rest of us is that the U.S. government can hire folks that can create software that works well. 

Here is a portion of the complaint:

In March 2009, Apptricity inadvertently learned that the Army may have been using more Apptricity software than that for which it had procured licenses.   Apptricity employees attended a PD TIS Strategic Capabilities Planning Meeting held March 3-5, 2009 in Richmond, Virginia, where the U.S. Army Program Director stated that the Army was deploying thousands of devices with the Apptricity software.

Anyone need an auditor?

WIPO GREEN marketplace open for business

If you are concerned about how to commercialise a green technology, or about what sort of impact someone else's green technology might have on your business, you may want to take a look at the World Intellectual Property Organization's WIPO GREEN database and online marketplace.  It won't solve any of your legal problems, but it will give you a better idea of what's going on in areas in which you (or your client) may be involved.  Details are available from yesterday's WIPO media release that reads as follows:

WIPO GREEN: New Online Marketplace Seeks Environmentally Sustainable Solutions for Climate Change 

Geneva, November 28, 2013: PR/2013/749 

WIPO launched today a new online marketplace connecting a wide variety of groups seeking shared innovation and environmentally friendly technologies to address climate change.
The WIPO GREEN database and network matches owners of new technologies with individuals or companies seeking to commercialize, license or otherwise distribute a green technology. Its objective is to accelerate innovation and diffusion of green technologies and contribute to the efforts of developing countries in addressing climate change. 

This blogger wonders how long it will be before the issues faced by the ICT sector with regard to standard-setting and FRAND licences are endemic in the green technology sector too.  A big difference there is that the perceived public interest in getting businesses to use green technologies may have an impact on both the rate of royalties that a court regards as reasonable and the exercise of discretion in granting injunctive relief.  Thoughts, anyone?

Aspiration versus reality: a perspective on Scottish plans for business-friendliness

From the excellent Dr Andreas Rahmatian (Senior Lecturer, School of Law, University of Glasgow) comes the following observation:

I have started looking through the "White Paper" ("Scotland's Future. Your Guide to an Independent Scotland") on Scottish Independence which was published yesterday. It is, of course, not a White Paper, but a manifesto of the Scottish National Party (SNP) to promote independence of Scotland. Many sections are quite eerie for somebody with some knowledge of political philosophy and modern European history, not only because what it says, but also because what it leaves out.

In that document I have come across the following passage at page 102. It says:

"Intellectual property

We will ensure continuity of the legal framework for protecting intellectual property rights. Independence will also allow Scotland to offer a simpler and cheaper, more business-friendly model than the current UK system, which is bureaucratic and expensive, especially for small firms. The UK is one of the few EU countries which does not offer a scheme which covers the basics of protection. Scotland could follow, for example, the German model which protects technical innovations."

Can anybody explain to me what that means? Judicious answers are appreciated.

This blogger will start the debate.

On a simple level, the meaning of the words is clear: "Let's introduce a cheap system of second-tier legal protection for innovations that are technical because it is cheaper and more business-friendly than an IP system that lacks such a scheme". However, what it means is not just a question of parsing a verbal formula: there is a real-world dimension to it too.  What does this paragraph mean within the context of attracting innovative businesses to Scotland or inducing them not to leave that country? What does it mean in the context of a former manufacturing powerhouse that is now, like many of the first wave of industrially competent countries, now in a profoundly post-industrial phase?  What does "business-friendly" mean in a context in which, where one business is able to secure a right that is cheap to acquire and awkward to dislodge, any number of businesses that compete with it are deprived of part of their freedom to operate. The high aspirations contained in the quoted paragraph are laudable in themselves, but what they mean at ground level, to innovators, manufacturers, distributors and consumers, is what counts.

Liens over electronic data: Court of Appeal to rule

Via the PLC subscription service comes information concerning a 4 October 2013 ruling of the Court of Appeal, England and Wales, Your Response Ltd v Datateam Business Media Ltd [2013] EWCA Civ 1468, on an issue of considerable importance. The Court gave leave to appeal from a County Court judgment in which a counterclaim against a database maintenance service provider was dismissed and the defendant, a former customer, was ordered to pay money due to the provider under outstanding invoices. The proceedings were based on a service provision contract and arose partly from a dispute over the length of the notice period that had to be given to terminate the agreement.

Of particular interest is the comment of Lady Justice Arden that one issue that was worthy of further consideration by the court was whether a service provider can claim a lien over electronic data which it manages for a client. As yet there is no authority to the effect that a lien was exercisable over intangible property.

This blogger suspects that this issue will already have been considered in the United States, and wonders if our US readers can shed any light on the theory and practice of liens over electronic data.

Film funding in Europe: a new Communication

If only ...

The European Commission has now adopted a new Communication on state aid for films and other audiovisual works, to replace the Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on certain legal aspects relating to cinematographic and other audiovisual works (here).

The 2013 version updates the 2001 Cinema Communication by extending the scope of activities which it covers, introducing a higher maximum aid intensity level for cross-border productions and providing for the protection of and access to film heritage. A more digital-friendly, document, it also revises the rules relating to the imposition of territorial spending obligations, while continuing to allow such obligations to be imposed. The new Communication is now in force, having been published in the Official Journal.

Source: European Commission press release here.

Banking on IP? Full report now available

Thanks to Kelvin King (Valuation Consulting Co Ltd, London), we now have a link to the full and unexpurgated version of Banking on IP? The role of intellectual property and intangible assets in facilitating business finance. This is the Final report and it runs to just over 220 pages. You can check it out here. This very thorough and surprisingly readable report was commissioned from Kelvin King and Martin Brassell (Inngot) by the UK's Intellectual Property Office. The report concludes with 10 recommendations, which are worth reproducing below:

1. IP and intangibles must be identified during the financing process

If IP and intangibles are to be given any consideration within credit decision-making, tools to identify and describe the actual assets (not merely evidence of expenditure) need to be embedded within the lending process. Businesses must use them, and lenders must understand and take note of them.

This step will have the wider benefit of boosting IP awareness amongst the business community as a whole and will establish base data for the possible future use of IP as ‘full’ security.

The first steps are to provide a means for companies to identify the assets they own, and to build information on IP and intangibles into the templates companies use when presenting information to prospective funders.

2. The value in IP needs to be taken into account

Whilst immature markets mean that disposal of IP for value is not always straightforward, the most important step in harnessing IP is to acknowledge that its business value is not nil, and therefore requires active consideration within lending and investment decisions.

Robust approaches to determine the value of intangibles exist in the same way as for tangible property and are now included alongside them within the Royal Institute of Chartered Surveyors’ Red Book, regarded as a banking industry reference point.

The obstacle that must be addressed here is to demonstrate, reliably and repeatedly, how an SME’s ‘real’ IP and intangibles may deliver value which bears no relation to anything that may be called an intangible on their balance sheet; this generally only shows a sunk cost.

3. Due diligence guidelines can help to control costs

IP and intangibles that are worth something are, by definition, unique. Because the assets are not commodities, checks will be needed to create confidence that the ownership and quality of the IP and intangibles are understood, that they contribute to cashflow (particularly in the case of debt finance), and that their maturity is in line with what it would be reasonable to expect, given the development stage of the business.

These checks are unfamiliar to most lenders: investors are more practised at them, but it is clear that they too face challenges in obtaining and assessing appropriate data.

Guidelines will involve providing templates, training and/or access to professional advice at a cost lending margins can support, within a turnaround time that meets business requirements.

4. More effective charges should be part of the lending package

Once IP and intangibles are captured, assessed and verified, it becomes possible to create a proper and meaningful interest over them, beyond a simple floating charge. This is not happening at present; there is no real notice of these charges, leaving many lenders exposed to unnecessary risk.

Proper controls are an essential precondition if lenders are to place any reliance on the value inherent in IP and intangibles – which in turn benefits the borrower.

Legal templates and the resource toolkit will help lenders to achieve this at modest cost, firstly by providing appropriate wording for the instruments, and secondly by providing guidance on the procedures which must be followed when recording them to ensure their effectiveness.

5. IP markets and IP financing could be facilitated through infrastructure improvements

The development most likely to transform IP and intangibles as an asset class is the emergence of more transparent and accessible marketplaces where they can be traded. This is a domain where services must stand or fall on their commercial merits; however, the available infrastructure needs to support rather than impede their establishment. A parallel lies in the way value has been added, cost reduced and enforcement activity enhanced across a range of motoring-related services by facilitating access to data held by the Driver and Vehicle Licensing Agency.

As IP and intangibles become more clearly identified and are more freely licensed, bought and sold (together with or separate to the business), services available to register and track financial interests will need to be improved.

This is not a job for government - but solutions will require the co-operation of official registries and the establishment of administrative protocols.

6. On-going management of IP and intangibles should also be supported

IP does not stop being important once credit is granted. Despite being long established, the asset class is unfamiliar in the lending context. Businesses need to understand how to use and protect it so that risk is reduced. Financiers, too, will require assistance in motivating and monitoring appropriate activity; as examples, there could be a role for the introduction of ‘milestones’ within payment schedules (as commonly used in equity and venture debt) and periodic impairment tests.

The proposed toolkit needs to include measures to inform and encourage SMEs to adopt appropriate IP management practices.

7. Affordable risk mitigation strategies ae to be encouraged

Alongside certain guarantees, access to appropriate insurance policies to guard against unforeseen events could greatly increase banking confidence in adding further weight to IP and intangibles within the lending decision. Evidence provided to this report indicates there is private sector appetite to provide these solutions, if lenders are willing to create the demand.

More detailed dialogue on the requirements of both lenders and insurers is urgently required, to ensure that commercial sector activity is able to provide workable and affordable solutions.

8. Asset-based finance techniques should be adapted for IP and intangibles

Recent financial upheavals have triggered something of a return to first principles in lending and a greater emphasis on assets for business finance (reflected, for example, in ‘challenger’ bank activity). This greater emphasis on assets needs to be extended to include IP.

Alongside mainstream lending, where EFG is an obvious area of focus, asset-based and alternative financing methods should be prioritised for IP-backed finance interventions; these are the parts of the industry most accustomed to understanding and assessing individual assets and their value.

9. Steps to stimulate private investment need closer study

IP rights can be well suited to securitisation (patents, trade marks, registered designs and copyright portfolios). Given the successful track record of venture debt, more work is needed to understand onshore and offshore fund appetite to support investment in IP-rich companies, working with managers that have the necessary expertise.

This work fell outside the scope of the current IP and finance project, but is clearly desirable as a follow-up stage.

10. IP demands joined-up thinking

The Intellectual Property Office exists “to promote innovation by providing a clear, accessible and widely understood IP system, which enables the economy and society to benefit from knowledge and ideas”. It therefore has an important role to play in scrutinising Government and finance industry initiatives to boost lending, to ensure that the assets produced by knowledge receive appropriate consideration.

As usual, readers' thoughts and comments are warmly welcomed.

Eva Cassidy profits: another exercise in how not to do it?

The 1709 Blog has posted this note on Straw & Another v Jennings & Others [2013] EWHC 3290 (Ch), a long judgment (369 paragraph) from the Chancery Division of the High Court, England and Wales, by Mr Justice Warren, dating from the beginning of this month.

In this action the claimants, the exclusive licensees of musical recordings of the late American singer Eva Cassidy, claimed £1.6 million from four defendant companies, alleging that they had failed to account for distribution profits owed due under a distribution agreement. The defendants denied the claims and counterclaimed for copyright infringement.

Relatively little of this judgment is taken up by copyright law; the majority deals with the effect of an amended distribution agreement, the nature of the obligation to account for income, identifying the relevant accounting periods, the availability of deductions and sundry related issues.

This blogger continues to be surprised at the extent to which commercial contracts for the licensing of IP rights continue to lack key provisions, requiring one or other party to exercise a good deal of imagination, generally in vain, in trying to persuade a court to imply into it a term which the parties never stated and without which the contract still seems to make reasonable sense.

Absurd (F)RAND licensing-rate determinations for SEPs

I have submitted many articles to IP Finance over the last couple of years as a "guest" contributor. I would like to thank Jeremy Phillips for inviting me to do so, and posting my articles for me with all the editing and production work entailed. This is my first IP Finance posting as a "resident" contributor.

Absurd (F)RAND licensing-rate determinations for SEPs

Judge James L. Robart's findings in the case between Microsoft and Motorola, which issued in April 2013, represent the first U.S. judicial attempt to determine reasonable and non-discriminatory licensing fees. Most recently, Judge James F. Holderman has also had a go in his royalty rate opinion in the Innovatio case. The judges’ rate setting applies only to standard-essential patent technologies in H.264 video and 802.11 WiFi. In my opinion, the rates set in both cases are defectively based and unreasonably low.



Rate-setting in SEP licensing

The judges’ decisions are both based on the faulty dictum that patentees are entitled only to a small proportion of standard-essential patent value. Valuation methods selected unsurprisingly reflect that predisposition. The judgements significantly rely on the defective notion that SEP-owners’ rewards should only reflect “intrinsic value” of technologies, and that they should be deprived a proportion of the value that comes through standardisation including “network effects.” Core technology developers deserve to share in the economic benefits of standardisation because of the significant costs and risks in developing, proposing and integrating their technologies. That has been the basis for investment and market success so far.

Patent pools and chipset profits used by Judges Robart and Holderman respectively provide biased and misleading benchmarks for (F)RAND royalties. The judges identify some major limitations in using patent pools while seeming oblivious to other pitfalls. Judge Robart ill-advisedly uses pools because participants are mainly implementers who tend to be most interested in keeping their royalty costs low. Those with the most valuable patents tend to steer clear. Judge Holderman latches onto an alternative approach, based on silicon chip component manufacturer profits, that is also deeply flawed, while taking comfort from choosing a reasonable royalty rate that falls within the range established for the same standard by Judge Robart. Licensing rates on ICT products commonly apply across the entire product because value is delivered and enjoyed on that basis. They have little to do with and should not be limited to profits on chips.

My full analysis is a rather lengthier 24 pages. Those with the interest and stomach for it can find it in full here as a PDF document.

WIPO report pins dollars and cents to brand spend, strategy

WIPO's latest media release, "New Report Explores Role of Branding in Global Economy & Within Innovation Ecosystem", has just been issued today. It reads:

"Companies around the globe have spent nearly a half-trillion US dollars (USD) annually on branding, exceeding outlays on research and development and design while accounting in some countries for up to a quarter of firms’ overall investments in intangible assets.

WIPO’s second “World Intellectual Property Report” entitled “Brands: Reputation and Image in the Global Marketplace” offers fresh data, analysis and insight into how companies use brands to differentiate their products from those of their rivals - and what the growing use of brands means for consumers, market competition, and innovation. ...

According to the report, companies invested some USD $466 billion globally on branding in 2011, the latest year for which there are reliable data. This figure would be even higher if spending on strategic marketing, corporate communications, other bought-in services that contribute to brand perception, as well as company-internal expenditures on branding were also considered [it's difficult to see why in principle these items should be excluded since they are inextricably woven into brand spend in so many sectors -- but it's equally difficult to apportion them clearly between brand- and non-brand functions]. Fuller data for the US, which accounts for all branding expenditures, show that investment in branding stands at USD $340 billion in 2010 for the US alone - twice as much as previous incomplete estimates. This exceeds US companies’ investments in R&D or design, and accounts for a quarter of their intangible asset investments.

While branding investments correlate closely with the level of economic development around the world, rapidly growing middle-income economies such as China and India today invest more in branding than high-income economies did when they were at a comparable development stage [What can we make of this comparison? There are now far more outlets for brand spend now than there were when high-income economies were at the same development stage, and China's and India's proportional spend on labour and tangible business assets is incomparably lower].

The report shows that the average brand value of companies based in middle-income economies has grown faster than that of companies in high-income economies. In fact, the share of middle-income economies in the total value of the top 500 brands increased from 6 percent to 9 percent between 2009 and 2013.

The report also explores the role of the trademark system in supporting the branding activities of firms. Trademarks are the most widely used form of registered intellectual property (IP) throughout the world. Many low- and middle-income countries see companies intensively file for trademarks, even if they make comparatively less use of other IP forms.

Trademark demand quadrupled between 1985 and 2011, from just under 1 million applications per year in 1985 to 4.2 million by 2011. While high-income economies for which data are available increased their trademark filing intensity relative to GDP by a factor of 1.6 between 1985 and 2011, middle-income economies increased it by a factor of 2.6 during this period. Indeed, in 2001, China’s trademark office had become the top recipient of trademark filings – a position China gained in patent filings ten years later, in 2011.

Looking at trademark institutions, the report argues for policies that promote accessibility to the trademark system, while balancing the interests of right holders and those of third parties. In addition, it highlights the risk of “trademark cluttering” – the registries of national trademark offices growing to the point where there’s a diminished availability of names and other signs for new trademarks.

The report looked at other other policy matters, including whether registration of a trademark should be conditional on the applicant usage of a trademark. Also, to what degree offices should examine whether new applications pose a conflict with earlier trademarks in different ownership.

In a wider perspective, the report explores how companies’ branding strategies interact with their overall innovation strategies. Through branding, companies can increase the demand for their products and enhance the willingness of consumers to pay for them. Evidence shows that branding is one of the most important mechanisms for firms to secure returns on product innovation.

Finally, the report looks at situations where strong brands create barriers to market entry, highlighting the role of brands in assessing the competitive effects of mergers and acquisitions, as well as “vertical” arrangements between manufacturers and distributors [this is the sting-in-the-tail bit which competition authorities and policy shapers will be avidly digging into.  Is is the brand that creates the barrier to market entry, or the consumer's choice ...?]".

You can download the report in its entirety via this link.

National Council of Entrepreneurial Tech Transfer Free (!) Online Research Commercialization Course

The National Council of Entrepreneurial Tech Transfer (NCET2) is offering a free 10-lecture online course titled, “Research Commercialization Introductory Course.”  The course is co-sponsored by the U.S. Department of Homeland Security, National Institutes of Health, National Institute of Standards and Technology, National Academy of Inventors and the National Science Foundation. The course is “designed to help science and engineering researchers better understand how research commercialization works. Over 5000 students, faculty and researchers from across the US have taken this course since it's been offered.”  The course is further described as:

Research commercialization involves taking articles, documentation, know-how, patents, and copyrights, which are created during research activities and getting them to users and patients for real societal impacts. In some cases, commercialization involved taking patents based on the research and licensing them to a company. This usually involves also having the researchers consult to the company. In other cases, commercialization involves forming of creating a startup and applying to federally funded commercialization programs. In all cases, though, research commercialization typically involves defining the nature of the research being commercialized (e.g., in a patent or intellectual property agreement), establishing a commercial relationship with another party (e.g., employment, a sale or license), and negotiating a contract (e.g., compensation).

Areas covered in the course include intellectual property, patents, copyrights, trade secrets, trademarks, licensing agreements, employment agreements, consulting agreements, tech transfer, creating and funding companies, and federally funded Small Business Innovation Research (SBIR) programs

Each lecture is a live 90-minute online class with Q&A.

Here is the course schedule:

CLASS SCHEDULE

Lecture 1: Patents Thursday, November 14, 2013 , 1:00 to 2:30 pm ET

Lecture 2: The Importance of Commercializing Research Friday, November 15, 2013 , 1:00 to 2:30 pm ET

Lecture 3: Copyright, Trademarks and Trade Secrets Tuesday, November 19, 2013 , 1:00 to 2:30 pm ET

Lecture 4: Employment and Consulting Agreements Thursday, November 21, 2013 , 1:00 to 2:30 pm ET

Lecture 5: Tech Transfer and Licensing Agreements Tuesday, November 26, 2013 , 1:00 to 2:30 pm ET

Lecture 6: Small Business Innovation Research (SBIR) Grants Monday, December 2, 2013 , 1:00 to 2:30 pm ET

Lecture 7: Introduction to Early Stage Funding Wednesday, December 4, 2013 , 1:00 to 2:30 pm ET

Lecture 8: Introduction to Structuring and Leading the Research-Intensive Company Friday, December 6, 2013 , 1:00 to 2:30 pm ET

Lecture 9: Moving from R&D to Manufacturing Monday, December 9, 2013 , 1:00 to 2:30 pm ET

Lecture 10: View from the Trenches: Applying what you have Learned Thursday, December 12, 2013 , 1:00 to 2:30 pm ET

This looks like a great program and you can’t beat the price of “free.”  For more information about the course and to register, see here.  (Hat tip to Steven Ferguson at the National Institutes of Health).

Generating value from patents: a conference report

The second session of today's  'From IP to NP'conference, organised by the Israel branch of the AIPPI, offered a break-out section on "Generating Value from Patents", convened by Ilan Cohn (Senior Partner, Reinhold Cohn Group, Israel) and Andrew Ramer (Co-Founder and Chief Executive Officer of Marqera).

First to speak was Eran Zur (Head of the Intellectual Property Finance Group, Fortress Investment [the firm supporting controversial European is-it-a-troll IPCom GmbH]), on "Leveraging your IP: An alternative to patent monetization".  Said Eran, the value of a patent is based on its enforceability; by selling one, you may receive cash but you lose the opportunities and flexibilities in changing the behaviour of competitors that patents offer.  For small companies, litigation is always risky and dangerous: Google bought Motorola for its patents: if a small operating patent owner sues Google, its obvious response is to turn its patents on the threatener.

Fortress does not take equity: it's a debt provider that furnishes a lifeline for small debt-heavy companies by taking a lien over their patents ahead of litigation. If the client company wins, it gets its patents back; if it doesn't, Fortress will seek to monetise the value of those patents and share the yield with the client company.  Said Eran, we help clients leverage their patents by mortgaging them, rather than by suing on them.  If an infringement claim is good and Fortress underwrites it, no contingency payments are incurred. He concluded by observing that Fortress has a pet peeve about patent brokers and patent contingency fee lawyers, who make so much money from other people's patents.

Andrew Ramer (Co-Founder and Chief Executive Officer of patent brokerage Marqera) spoke next, on "The evolution of patent commercialization options". He observed that, in the innovation finance ecosystem, there's very little innovation.  However, there are very large sums of money at stake when patent portfolios are at stake -- and patents are increasingly not seen as being tied to a particular product; they are now being viewed as assets in their own right.  The past eight years, in patent transaction terms, have seen a change from an inability to do almost anything to an ability to achieve a great deal.

Andrew listed the classic possibilities for each patents: sell, license, litigate or build a company. That's great, but each of these options is available for every patent owner.  In this context, trolls are no big deal: what's the problem? If there are no trolls, there's no market. And if you can't sue, why buy? Andrew then waxed lyrical on the US Supreme Court decisions in eBay v MercExchange and Medimmune v Genentech and the impact of those decisions on the value of patents and the development of the asset market. Now people are buying a few patents, putting them into a corporate shell, going public and making a fortune.

Barry Schindler (Greenberg Traurig, USA) then tackled "Building patent value from the start: global patent strategies". As a patent lawyer, he explained that it was important to consider patents as individual assets in order to understand their asset value, and that's what patent lawyers are for.  This means looking at the patent's claims: everything starts and ends with them. Also look at the extent to which that patent is cited and used as a reference in other patents.  What about patent types? Sectoral spin-off should be understood: for example, a software programme developed for use in the pharmaceutical sector may be applicable outside it too.  Within each patent too, the number of claims can be multiplied so as effectively to embrace several inventions in one go.

Barry then listed various offensive pre-grant strategies, taking account of expedited examination, non-publication requests in the US and the patent prosecution highway, it being important to avoid the worst-case scenario of publishing one's invention and then not getting a patent.  Defensive strategies include the submission of third-party statements that point to published prior art.  Post-grant strategies were reviewed too, bearing in mind that it's far more difficult to knock out a killer claim when it's spread across a number of patents, given the cost.

Even without paying for
SEPS, you can still make
telephones

Last to speak was Koenraad Wuyts (Head of the Intellectual Property Group, Royal KPN), on "The evolution of FRAND options". If you have a patent for a standard [ie a 'standard-essential patent', or SEP], Koenraad noted, you get business pretty well from the beginning -- which makes them highly attractive. They do however cause patent pools with stacked royalties [where a licensee pays aggregated royalties to lots of different patent owners], and patent owners are selling their SEPs to patent trolls.  Does this mean that profitable patenting will not exist from the 4G generation? Capping of royalties per product is one possible solution.

Koenraad then reviewed some case law from the Netherlands and Germany, in which it has been shown that injunctive relief may be available to a patent owner even when a patent has been offered for FRAND licensing -- and that interim relief may be obtained where there is no indication that the defendant was seriously intending to take a FRAND licence. The outcome of the reference to the Court of Justice of the European Union in the Orange Book case is keenly awaited.

Intellectual Property Law & Taxation: a new edition is coming!

A new edition of Intellectual Property Law & Taxation, by Nigel Eastaway, Richard Gallafent, Victor Dauppe and Jacquelyn Kimber is expected to be published on the last day of this month.  You can get the full details from the publisher's website here. This book, now emerging in its 8th edition, covers the UK's taxation system as it affects patents, designs, trade marks and copyrights.  While Europe's IP laws are increasingly harmonised, the tax regimes of the EU's 28 Member States are not, and offerings such as the 'patent box' give some jurisdictions an appeal that others lack.

This blogger was just a young lecturer when the first edition was published. While he can't see he was particularly enlightened by the subject matter, tax never having been one of his strongest topics, he loved the examples and case histories that brought the volume to life.  He wishes the new edition, which still has its original authors on board, the best of luck.

Chief Judge Rader’s Recent Comments on Patents and the Federal Circuit Bar Association

The Federal Circuit Bar Association (FCBA) recently released a copy of the remarks of Chief Judge Rader at the recent Eastern District of Texas Bench and Bar Conference.  The FCBA is the bar association for the U.S. Court of Appeals for the Federal Circuit, which hears patent appeals from the district courts in the U.S. along with appeals from the International Trade Commission and the U.S. Patent and Trademark Office.  Chief Judge Rader’s comments address criticisms against the U.S. patent system including the assertion of the tragedy of the anticommons as well as supposed litigation abuses by so-called patent trolls.  Chief Judge Rader notes that empirical evidence doesn’t support the tragedy of the anticommons theory and that the smart phone is a great example of, basically, how the anticommons does not exist.  I believe our fellow blogger Keith Mallinson supports Chief Judge Rader’s view; although I believe, if my memory serves me correctly, that some would argue there is an anticommons like effect in the genetic diagnostics field.  I also wonder about price.  Here are Chief Judge Rader’s comments about the anticommons theory:

As an illustration of the crisis of confidence in the benefits of Patent Law, I wished to just discuss one unsubstantiated charge against the merits of this system of Constitutional dimension.  Academics often charge the Patent system with creating a so-called “tragedy of the anti-commons.”  This academic canard suggests that a “thicket” of patents can actually inhibit innovation; that the administrative burdens of enforcing patents can multiply to frustrate the goal of the Act.  Thus, the law of innovation supposedly works against itself.  In an age of empirical research to verify every legal hypothesis, I would urge you and any policymaker to reject this academic supposition – whether it comes from a high court or any other source – until and unless it is verified by empirical data.   By the way, the only studies on this topic that I have seen could not verify this guess but generally confirmed the opposite – that patents spur innovation. 

May I offer a common sense rebuttal to this academic hypothesis?  [Hold up my smart phone]  This smart phone resides in the technological space most occupied by patents, perhaps in the history of patent law dating back to 1624.  With design patents as part of the equation, this device probably includes easily more than a thousand active patents.  If you count expired patents in this technology back to the advent of the computer age, this device would implicate tens of thousands of patents.  If ever the administrative burdens of a concentration of patents would inhibit innovation, this technology would be the place to observe that encumbrance.  Now you tell me: is this technology experiencing sluggish and encumbered innovation?   I doubt that I could keep track of the pace of innovation in this technology if I devoted my full time to the project.   

No doubt a study would show that the disclosure benefits of patents bring the entire world into the innovation circle that drives smart phone technology forward faster than any of us can fathom.    I am afraid the “tragedy of the anti-commons” has its own tragedy: it simply is academic nonsense.  The patent system does not inhibit invention.

Chief Judge Rader cites his experience working both in the judiciary and in Congress in cautioning the Congress to carefully enact reforms, if any, and to allow the judiciary to correct for any issues from litigation abuse.  Chief Judge Rader first points to the definitional problems concerning the “patent troll”:

Again in simple terms, litigation abuse is a court problem and courts have the best tools to supply the correction. 

Perhaps I could suggest a way that classification fails to address this problem.  Litigation abuse sometimes invites an equally abusive strategy of correction.  This misguided strategy attempts to define some patent-owning entities as the source of the problem.  Regardless of whether you call them NPEs or PAEs or “trolls” or whatever pejorative term suits your fancy, this definition strategy is itself an abuse.   

American law and ethics does not enforce or condition enforcement of basic laws and policy on the characteristics of a party.  American law treats big company and small company, foreign entity and domestic entity, different genders, races, and ethnicities ALIKE.  Our law does not make distinctions based on the characteristics of parties but on their actions proven in a court of law.  The definition of a “troll” will always be over-inclusive or under-inclusive to the detriment of justice.  Instead of finger-pointing and name-calling, the law needs to focus on blameworthy conduct.

Finally, Chief Judge Rader points to three potential avenues of help against so-called trolls.  First, the courts increased use of summary judgment to curb some claims.  Second, the award of attorney fees in exceptional cases—and he notes that the Federal Circuit is “on course” to make it easier for courts to find an exceptional case.  Finally, he points to litigation expense reform and model orders promulgated by the FCBA and the Federal Circuit Advisory Council.  The E-Discovery model order is available here.  The full text of Chief Judge Rader’s remarks are here. 

Since I mentioned the FCBA, I’ll give a “plug” for the FCBA and a panel I am moderating soon.  The FCBA offers a number of other activities, including webinars, conferences and interesting opportunities such as the International Series and the Global Fellows Series.  The FCBA also publishes a newsletter and a law review, The Federal Circuit Bar Journal.  Membership costs are relatively modest and all webinars offered by the organization are free for members.  I am pleased to work with the Diversity Committee of the FCBA and we are offering a webinar, in conjunction with the Law Clerks and Students Committee, concerning intellectual property career planning directed at law students and attorneys with 1-5 years of experience.  The webinar is free for students and members, and will be held this Wednesday (November 6) from noon to 1:30 pm (Pacific Standard Time).  The panelists are: Judge Paul Grewal, Magistrate Judge, U.S. District Court, Northern District of California; Jack Hobaugh, Counsel and Senior Director of Technology, Network Advertising Initiative, Washington D.C.; Paul Korniczky, Partner, Leydig, Voit & Meyer, Chicago, Illinois; Christy LaPierre, Associate, K&L Gates, San Francisco, California; Kim Tran, Associate, Perkins Coie, Palo Alto, California; and A. E. Williams, Retired Patent Examiner, U.S. Patent and Trademark Office.