New regime for film finance down under

From 1 July a new statutory body will be responsible for film production finance in Australia: Screen Australia will merge the present functions of three bodies -- the Australian Film Commission, the Film Finance Corp. and documentary production agency Film Australia -- into a single agency which will be responsible for film and TV industry financing and cultural development. The National Film and Sound Archive will be spun off as a separate government agency. According to the government, the new agency

"will help restore investor confidence and put the industry on a new growth path. It will ensure a strong Australian voice across film, television, documentary and children's programs".

Screen Australia will oversee the new financing incentives that were put in place last year, including a 40% tax offset available to producers of qualifying Australian films, a 15% locations offset and a 12.5% tax offset for postproduction.

Artemis Eternal and the eliminated middle man

According to the Student Operated Press a group of international moviegoers has announced that it is are backing filmmaker Jessica Mae Stover's fundraising project for her motion picture Artemis Eternal; the group is reportedly inviting other film fans to do the same. According to this item:

"On the official site for the project, visitors can explore an interactive map of the development, track progress and impact production by contributing funds directly. By relying on contributors to promote the website, reach out to local press and even create press releases such as this one, Stover has cut out the middleman, and allied with the audience to break ground on a new formula for film finance, production and exhibition".

This venture is then explained in a manner which is as much historical and aesthetic as commercial in its content:

"Like medieval patrons, six major media conglomerates and a handful of matrixed millionaires control the ebb and flow of art and media.

In a move that it is part film, part movement, part philosophy - the audience funding 'Artemis Eternal' posits that throughout history patronage has only appeared to shelter artists outside of this system. "Art patronage tended to arise wherever a royal or imperial system and an aristocracy dominated a society and controlled a significant share of resources. Rulers, nobles, and very wealthy people used patronage of the arts to endorse their political ambitions, social positions, and prestige." Stover & Co.'s purist, modern twist on the outdated, elitist model of patronage opens the floor to everyone. Now the groundlings can commission a play from Shakespeare, not just the Queen: Something that would be impossible without the advent of the Internet.

Contributors are quick to chime in on message boards and Facebook, "There are a lot of people rooting for us. We've contributed $40,000 and only have another $60,000 to go. We're 40% there." Says another in e-mail, "Hundreds of millions of people are online and many will want to be a part of this. We're thinking our odds are pretty good, especially if the press will help us 'elevate' our story."

... Stover isn't glossing over the difficulties behind this new model she's found herself helming, "It's a stressful undertaking. I'm an able craftsman and willing to put myself, my ideas and my intellectual property out there, but fundraising is brutal no matter how good you are. I cannot succeed alone. We need help." This realistic and candid side to professional filmmaking has drawn aspiring artists, filmmakers and film fans who not only seek to understand the decline of movies and theaters, but to work toward improving the film experience; to contribute their hard-earned dollars to the film in hopes that other quality artists can use the model they're helping to trailblaze.

Stover continues, "It's like the end of the 'NeverEnding Story.' We need someone to name the project. To name me. Studios aren't going to do that, the press isn't going to do that. The audience is Bastian. We've really put our fate in their hands. They are the story."

"Even if we fail we win," says one commenter on the official site. Another adds, "This is more than one endeavor, it's a way of life and working together to conquer obstacles." The comments flow until someone encapsulates the spirit of the project tidily, "Only $1 to ride? Count me in. ThunderCats, ho!"".

Official Artemis Eternal website here
If you'd like to comment on this IP finance initiative, or on the "All Rights Reserved" notice, please post your comment below or send it by email here.

Patent valuation through frequency of citations

Eva Lehnert (IFPI) has drawn our attention to this piece in Business Week on assessing the value of a patent by the frequency of its citation in patent filings: it's "A Powerful New Tool for Patent Valuation", by Chi-an Chang. While this is a good idea, she says, it depends on the details of the patent filings and the willingness of the applicant deliberately to attract attention to prior art which might get into the way (one of the comments posted regarding this article refers to this stumbling block).

New kid on the block

Technology Transfer Tactics is the title of a journal (details and access to sample copy here), which describes itself as a "new monthly newsletter filled with expert guidance and practical, how-to strategies for technology transfer professionals!". Setting aside my prejudice against the use of exclamation marks in B2B advertising material, I took a look at it. Published out of Naples, Florida rather than Naples, Italy its style and content reflect a work that is written by Americans for an American market. But then, America continues to lead this field, and would continue to play a major tole in tech transfer even if it didn't.

TTT promises to address issues that greatly concern readers of this weblog, seeking to help readers

"implement improved valuation methods and models ... strengthen licensing, royalty, and joint venture agreements ...evaluate and prioritize IP for commercial potential ... tighten post-license performance monitoring ... develop and manage lucrative spin-outs and start-ups ... find and win more grants and tap into outside funding sources",

among other things. This rather reminded me of advertisements for dietary health supplements that claim to tone up muscles, burn up fat, purge the digestive system, sweeten the breath, restore hair growth and improve performance in the sort of activities that one does not expect to read about on an IP Finance blog.

I've always felt that a problem with developing sensible tech transfer-related literature is that there two very distinct interests involved: there's the top end, consisting of the decision-making, and there's the bottom-end, consisting of the people who make it happen and see that it keeps on happening. In large corporations there's often a large gulf, in terms of training, professional expertise and even communication, between the two camps, while in small businesses, start-ups and so on those two interests are often combined in the same person. My hunch is that TTT will be of most benefit to the smaller business, providing a monthly drip-feed of accessible news, well-explained technical terms and general background. However, a US$597 annual subscription suggests that it's aimed more at the bigger entity, where increased specialisation may mean that TTT is too wide in terms of its scope but insufficiently deep in terms of its analysis to attract a faithful following.

Of particular interest to readers of this blog is a piece on option funds I quote from it in order to give readers some idea of style and content. This piece commences:

"Establishing an “option fund” -- a lower risk investment vehicle that allows angels to increase their stake in a technology only after certain developmental milestones are met -- appears to hold promise as a way of increasing early-stage funding for university innovations and getting more research into the marketplace.

The pioneer of the newfangled financing vehicle is Patrick Jones, PhD, president-elect of the Association of University Technology Managers and the head of the University of Arizona’s tech transfer office in Tucson. Since 2001, Jones has been working with Desert Angels, a local investment group that is closely associated with the university, to put an option fund into place. He believes the fund’s risk-sensitive design will get more angels to the table at a time when their market expertise and entrepreneurial know-how can make a crucial difference to budding projects".

This piece starts on the front cover, then continues over pages 11, 12 and 13 -- ideal for the purpose of making sure that readers are tempted by the sight of bits of articles they aren't reading, but infuriating for environmentalists who will be tutting about the fact that fewer sheets of A4 could have been required for photocpoying the same piece.

If any readers of this weblog are subscribing to TTT and can offer any comments concerning its utility or anything else, we'll be delighted to hear from them.

“The Good, the Bad and the Ugly II”

“The Good, the Bad and the Ugly II” (title of a movie with Clint Eastwood)

A personal comment by Roya Ghafele, Ph.D.

Here is the world as we know it: globalization is driven by restlessly profit maximizing companies, which will seek to leverage any opportunity possible to maximize corporate interests. On the other side, there are a range of bilateral and multilateral agencies, striving to preserve the public interest and do everything they can to help those underprivileged in current Globalization dynamics. In the big theater play of international affairs the roles and functions appear clearly defined. Within this context Intellectual Property (IP) kicks in as yet another tool to protect corporate interests at the detriment of the poor, a handy weapon and useful barrier to protect the wealth of those who have from those who don’t.

If Hollywood were to pick up the issue, it would probably come up with the “The Good, the Bad and the Ugly, part II.” It would be a gangster movie, portraying greedy men in grey suits (no place for women in that movie) in their pursuit for ever more self fulfilling desires and in doing so destroying whoever and whatever comes their way, primarily through their newly created super arm “IP”.

Unfortunately, I tend to get bored by movies with fairly predictable outcomes and clear-cut role distributions. My preference is more subtle cinema where it is a good deal harder to distinguish the “good” from the “bad.” Just for the fun of it, and clearly without policy implications or even critique of current actors, I would like to sketch out a new plot for the stage of current world affairs.

IP is currently primarily rooted within the realms of the legal profession. Called “IPR” – “Intellectual Property Rights” rather than “IP”, it helps its owner to “preserve its right”, sanction “violators” and bring them to court, so they can serve their sentence, if found guilty. Since the law allows to “police” IP, competition can be kept at bay, a lawyer’s major contribution to business strategy or respectively policy making is fulfilled; the issue of the relationship of IP to competition policy is of course a different chapter. A major effect created by the eager search for the defense of private property is ignored in the argument. Namely, that the attribution of property rights over knowledge allows to leverage intellectual capital as a tool for economic growth. Known to economists as new economic growth theory or knowledge based growth, knowledge assets provide the opportunity to engage in entrepreneurial activity based on innovation and creativity. As such, IP can be bought, sold, traded in exchange for other goods and services or used as a trump in mergers and acquisitions and other growth oriented strategies.

Important to note in the context of the international development discourse:
Knowledge is not a resource reserved to the developed world. The cornerstone of the IP system, creative, open minded thinking is inherent to ALL of the world’s societies, unless censored by authoritarianism.

The trick is to look at IP as an emerging asset class and find novel ways to engage developing countries in the global economy. The story line for my fictive movie therefore goes as follows:
Companies take up their corporate social responsibility and use their entrepreneurial skills not only for ever growing margins, but also to promote the public good. They are motivated to do so, not only to promote their reputation, but also because they are made up of people as well, just as the NGOs and multi and bilateral organizations are. People engaging with people; all over the world, no matter their institutional context. (Nay-sayers already exclaiming their doubts, keep in mind its fiction!) The financial sector for example could provide the much needed cash to get developing countries’ innovation systems going. An initial IP scope allows to identify IP that can subsequently be traded on Wall Street and leveraged in financial transactions, such as a securitization. Rated by a recognized rating agency and pooled together with IP assets from developed countries, the introduction of a financial mechanism for IP would provide immediate cash for innovators and creators all over the world. Unrealistic?

Yes, at first sight. But then again, firms such as SEARS, Dominos Pizza or Dunkin Donuts leveraged in the last 24 months quite successfully their IP to access on average 1.8 billion dollars and beyond. Also, the IP from developing countries need not be given a good rating, but be rated at all to engage financial mechanisms, even badly rated IP can provide cash to its owners. A last point on the valuation: The tools are out there, ranging from the traditional discounted cash flow, income and market approach to the more sophisticated tools like the Black Scholes model. Have they been used in the past? Yes. Do they work? Probably. Can they be improved? Very likely, but for the time being that’s as good as it gets and markets learn by experience.

This is the narrative I am suggesting. Anyone interested in joining the play, very welcome to do so!

Roya Ghafele currently is an international research scholar at the Haas School of Business at the University of California, Berkeley. The views expressed in this article are not necessarily those of UC Berkeley. She can be reached at Ghafele@haas.berkeley.edu

Microsoft reduces provision for damages in Alcatel-Lucent suit

Bloomberg is reporting that Microsoft has apparently reduced its provisions for a potential damages claim in its long-running suit with Alcatel-Lucent concerning patents relating to audio file compression. The story in Bloomberg is not complete, but reading between the lines it seems that the story refers to the recent judgment issued against Microsoft by a jury in San Diego which awarded USD 1.52 Billion against Microsoft [Bloomberg says USD 2 Billion]. Had Microsoft been found guilty of "willful infringement" then these damage claims could have been increased by up to three times. In other words, Microsoft needed to make provision for a maximum claim of USD 4.5 Billion.

However, a decision by the US Court of Appeals for the Federal Circuit last summer revised the standard for establishing willful patent infringement. In re Seagate Technology the Court of Appeal decided that triple damages would only be awarded if there was clear evdience of objective recklessness in infringing the patent.

Clearly Microsoft do not think that they have been reckless in infringing the Alcatel-Lucent patent - and indeed are defending themselves in the San Diego trial. So instead of making a provision of USD 4,5 Billion in their accounts, they only need to make a provision of USD 1,5 Billion. A massive saving of USD 3 Billion (which Bloomberg states is USD 4 Billion and points out is 41c a share).

Microsoft have already issued a statement stating that they will be appealing and pointing out that they have already taken a licence to the German Fraunhofer Institute's MP3 patent portfolio.

Calculating patent damages in the US

Via NERA Economic Consulting I've just come across an article, "Patent Damages and Real Options: How Judicial Characterization of Non-Infringing Alternatives Reduces Incentives to Innovate", by the triumvirate of Gregory Leonard, Jerry Hausman J. Gregory Sidak -- all US academics with impressive credentials. According the note on NERA,

"The legal framework under which patent damages are calculated changed substantially after the Federal Circuit decided Grain Processing Corp. v American Maize-Products Co. in 1999. Grain Processing eased the restriction on the set of non-infringing substitutes available in the but-for world by allowing an infringer to claim that it would have offered a non-infringing product that, although not actually sold in the marketplace, was technically feasible at the time and could have been made commercially available relatively quickly.

[The authors] examine a factor that the authors see as one of the decision's most important economic ramifications: the grant of a free option to the infringer. Although it is widely appreciated how Grain Processing has made it more difficult for patent holders to claim lost profits damages, it is less well understood how Grain Processing has affected the incentives of companies to risk litigation by using patented technology (without a license) rather than to avoid infringement by using an economically inferior non-infringing technology".

This decision presumably contrasts unfavourably for patent owners, when compared with the position in the European Union following the implementation in 2006 of the IP Enforcement Directive, which makes it easier for patent claimants to obtain lost profits damages and has incentivised them to invest in litigation.
Abstract here.