Second Global Forum on Intellectual Property 2009

Following the success of its inaugural Global Forum on Intellectual Property in August 2006, the IP Academy Singapore now organises the second Global Forum on Intellectual Property 2009 (GFIP 2009) on 8 and 9 January 2009 at the Raffles City Convention Centre in Singapore.

According to Chairman David Llewelyn, GFIP 2009 is "shaping up to be the foremost multidisciplinary IP conference in the Asia Pacific region for 2009". The theme of GFIP 2009 (which is expected to draw about 500 delegates from various IP related fields around the world) is "The Evolving Intellectual Property Ecosystem: Conflicts or Consensus?".

Finance issues feature prominently in the provisional program: on day one there is a session on IP and Intellectual Asset Management (for example featuring a panel discussion on maximising IA revenue from a tax perspective) and on day two there is a session planed on IP & Finance.

More information on the GFIP 2009 and the value of IP assets is available here and here; more information on the IP Academy Singapore – established in 2003 as part of a national initiative to develop Singapore into an IP hub - here.

Broad construction of patent licence keeps royalties flowing

Sitting as a Deputy Judge of the Patents Court, England and Wales, last week, Peter Prescott QC had to consider entitlements to patent royalties in Oxonica Energy Ltd v Neuftec Ltd [2008] EWHC 2127 (Pat), which you can read here in full via BAILII.

In short, Neuftec was in possession of some valuable know-how concerning additives for diesel fuel. This know-how enabled additives to be dispersed in such a manner as to reduce fuel consumption and engine emissions. Neuftec filed an international patent application under the Patent Cooperation Treaty (PCT) and secured national patents in a number of countries.

While the fuel additives were still being developed Oxonica and Neuftec cooperated in solving a problem in the manufacture of the small particles necessary for the creation of the additives. In December 2001 Neuftec and Oxonica struck an exclusive licence and knowhow deal under the terms of which Oxonica had to pay Neuftec royalties in respect of the manufacture, use, sale or other exploitation of what the contract called "Licensed Products": these were "any product, process or use falling within the scope of the claims in the Licensed Application or Licensed Patent". For this purpose "Licensed Application" was defined as the PCT application together with "any continuation, continuation-in-part or divisional applications thereof as well as foreign counterparts and re-issues thereof". "Licensed Patent" was defined as "any patent issuing from the Licensed Application thereof as well as foreign counterparts and re-issues thereof". Oxonica exploited Neuftec's knowhow which it received under the licence agreement, developing its own commercial fuel additive which it called "Envirox", making royalty payments as provided under the licence.

Subsequently, Oxonica wanted to supply a variation of Envirox ("Envirox 2") to a Turkish oil company. But was Envirox 2 a Licensed Product within the meaning of the licence agreement? Oxonica went to court and sued for a declaration that it was not. Neuftec counterclaimed that it was entitled to an audit in respect of sales of Envirox 2, as well as payment of all royalty sums in respect of Envirox 2 that were due under the licence. The parties agreed that Envirox 2 fell within the broadest claims of the original PCT application but, at least in some important countries, it fell outside the broadest claims of the patents as granted in those countries.

Peter Prescott QC dismissed Oxonica's claim and allowed Neuftec's counterclaim.

1. On the application of settled principles of law regarding the interpretation of ambiguous formal commercial agreements, the licence was to be construed so that "Licensed Products" referred to products that fell within the scope of the claims of the Licensed Application or Licensed Patent, as the context required.

2. The context was that the obligation to pay royalties applied equally to the definitions of Licensed Application and Licensed Patent. Indeed, royalties were payable on things falling within the scope of the claims of the PCT application as filed, and nothing else.

3. This being so, Envirox 2 was a Licensed Product as defined, and attracted royalties accordingly.

The judgment has some interesting asides on contact interpretation, including whether the canons of interpretation contra proferentem are applicable in situations such as this.

South Africa's controversial Mineral and Petroleum Resources Royalty bill

Mining houses have reacted cautiously to the controversial Mineral and Petroleum Resources Royalty bill, approved by Parliament in South Africa recently.

The bill comes into effect on May 1 2009. It replaces fixed royalty rates with formula-based royalty rates, calculated according to the profitability of the mine – the less profitable a mine, the lower the royalty that must be paid, and the more profitable a mine, the higher the royalty that must be paid.

This is good news for marginal mines – start-up operations and mines close to the end of their lifespan – because the royalty rate they have to pay will decline as profitability declines.

But Goldfields chief executive Nick Holland said: “We hope that the authorities will re-evaluate the situation if royalties prove to be too onerous, given the cost pressures facing all mining companies. Lizel Oberholzer, senior associate at Bowman Gilfillan Attorneys, said the bill is not good news for offshore oil and gas exploration. Oberholzer added that the fluctuation in the amount to be paid in royalties would deter investors.

My own view is that the principle of royalty rates based (inversely) on profitability may actually encourage inefficiencies.

(Source: The Sowetan)

Next live IP auction coming up

The Ocean Tomo Fall 2008 Live IP Auction & Conference will be held on October 29-30 in Chicago. According to the company's email, the event includes a one and a half day CLE approved conference at the Trump Hotel, a gala dinner at The Art Institute and a Live IP Auction at the Chicago Cultural Center.

Ocean Tomo expects some 500 IP and business professionals to attend, including Fortune 500 IP and licensing professionals, C-level executives from small and mid-size companies, investors, individual inventors, attorneys and members of the press. The three concurrent conference programme tracks include

* Managing IP Risk
* Buying & Selling IP
* Maximizing IP Value for Business Professionals

The full programme can be viewed here. For various reasons, most of them connected to the facts that (i) I have to earn a living, (ii) I'm neither buying nor selling any IP and (iii) no-one invited me to speak, I won't actually be there. But if any readers of this weblog are going to be there and would like their brief reflections on the event to be recorded here for posterity, can they please email me here and let me know.

Facebook--Is It Commercially More Than a Bunch of Pretty Faces?

So is social networking the next big thing? Ever since Google's triumphant IPO and meteoric growth in online advertising revenues, pundits have been looking for the next big thing (even if we are talking about a time-line of only several years). Skype and YouTube have not quite panned out, but the explosion of MySpace and then Facebook has focused attention on the growth potential in social networking.

There is no doubt that participation in social networking continues to grow (although my memory tells me that there have reports of a slow-down, or at least a deceleration in the rate of growth of U.S. users of social networking sites). Another possibly telling sign was reported in August 18th issue of Business Week. In an article entitled "Has Facebook's Value Taken a Hit?", the author describes unsubstantiated reports that insiders, including at the highest level of management, have been putting up their shares fore sale in the still-private company. The supposed purchasers of the shares are various funds and institutional investors.

If true, it is unusual for this kind of sale of shares by insiders to take place in the context of a start-up, especially one as lauded and applauded as Facebook. More typically, such shareholders hold onto their equity until a public offering or sale of the company takes place. A further downside to the report is that it has alleged led to employee grumbling. To remedy such possible dissension, Facebook apparently has developed a one-time program to allow employees with vested share options to realize a portion (20%) of their holdings.

There is an interesting company valuation issue here. When Microsoft purchased a small equity stake in Facebook in October 2007 ($240 million for 1.6% of preferred stock), the two companies implied a valuation of $15 billion. However, the plan enabling employees to realize a portion of their vested stock options is based on a $4 billion valuation. Indeed, it is reported that departing employees will be subject to certain restrictions should they then seek to sell their shares. One of the conditions is that they will permitted to sell their shares for no more than a $3.75 billion company valuation.

Has Facebook Suffered a Valuation Drought?

What does this all mean? In particular, do such sales reflect merely doubts about the short and middle term prospects for shareholders to cash out, due to the deteriorating status of the capital and equity markets, or does it also reflect doubts about the ultimate long-term prospects for the company in the so-called "real economy"? I.e., how will Facebook make money from its site, whether from ads or elsewhere?

Facebook can perhaps take some solace in the fact that when I tried to elaborate on this question with my 20-something son, he simply shrugged his shoulders and returned to embellish his own Facebook site.

Facebook Facing the Music

Protection for marketing strategies -- is it realistic?

A feature in yesterday's IP Marketing E-News (for details click here) asks whether a marketing strategy can be considered protectable as intellectual property. This is a depressingly familiar question for Europeans, who are terrified that the first to conceive a new business technique might be able to monopolise it with disastrous consequences for competition (consider what might have happened if, in the earliest and mainly passive days of the internet, the strategy of interactive marketing and online sale were patented). Americans are often also depressed by the question but for quite another reason -- they can't see why something that is truly new and innovative should be deprived of protection just because it happens to be a business method. The article, being of American origin, reads in part:

"To clarify, patents can be granted on any of the following:

Utility patents, which may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof;

Design patents, which may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture; and

Plant patents, which may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant.

Assuming your idea falls into any one of these three categories, then it may be patentable. If this is the case, then you should discuss this possibility with your attorney. However, if your idea does not fall into any of these categories, then it may still be protectable by other means.

First of all, it is always a good idea to walk into any such meeting with a well-drafted nondisclosure agreement in hand. An intellectual property attorney should be able to advise you on the terms and conditions that need to be in such an agreement to protect the information you intend to disclose to the other company.

Second of all, since the idea you seek to protect is a marketing strategy, the possibility exists that it may be protectable by copyright law. While ideas themselves are not protectable, certain aspects of your strategy may be protectable by copyright law. An intellectual property attorney in your jurisdiction with expertise in copyright law should be in a position to advise you as to whether or not your strategy is in fact protectable by copyright law and, if so, the steps you should take to protect it".

Copyright provides only limited, formal protection -- and confidentiality (even assuming that it could be initially preserved, would be unlikely to survive many business transactional uses before it became the preserve of the market analyst and the competition authorities). with patent protection being either unavailable or of dubious utility, that leaves the trade mark and marketing itself as the best form of protection. Get on the market first with a new marketing idea and work hard to remain one step ahead -- and you may find the rewards for investing in the market itself are greater than the rewards for trying to fence it in with IP rights.

Vivendi games licence income staunches UMG losses

This blog has previously noted the potentially positive impact of video game licensing for owners of music copyright portfolios. Today's Telegraph contains a further example when it reports that rising income from video games has offset declining music sales at entertainment group Vivendi, according to its second quarter reporting. This has given it the opportunity to cancel what seemed an inevitable rights issue. Vivendi, which controls the works of artists such as Amy Winehouse and the Rolling Stones through its Universal Music Group, showed a 5.3% fall in recordings sales, but its Vivendi Games, mobile phone operator SFR and France's Canal Plus divisions all recorded sales increases over the same period.