Patent Insurance: a financial prescription for neglected diseases?

IP Finance is hosting a guest posting from Itaru Nitta (Chair, Green Intellectual Property Project (http://www.greenip.org/), Geneva, Switzerland). It is titled "Patent Insurance: a financial prescription for neglected diseases?" and it runs as follows:

"On November 19th, the World Health Organization appointed the expert working group as a response to the Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property (IP) adopted at the World Health Assembly this May. One of the group's main tasks is to find new funding mechanisms fostering needed medical research on neglected diseases and ensuring unimpeded access to necessary meditations irrespective of commercial profitability for developing nations.
The working group would likely find an answer with the Patent Insurance scheme being proposed by Geneva-based IP consulting group Green IP Project to impose an extra official fee on patent applicants and holders as a form of insurance premium, and to establish a trust fund that would finance the compensation of technology transfer costs, particularly royalty assumption, and other subsidies for purchasing patented medicines in developing counties, as well as a wide variety of funding proposed for need-based research for public benefit rather than profit motive, including medical grants, prizes, treaties, public-private partnerships, advance market commitments, market exclusivities (orphan drug schemes) and tax credits.

These financial assistances would convince society of the wisdom of patent, resulting in upholding the efficiency of the patent regime against recently growing the global criticism over the patent protection of essential medicines and resultantly diminishing societal trust over patent. In other words, the extra fee would serve as a "premium" for defending patent rights against the risk of compulsory license and other safeguard flexibilities which the worldwide anti-patent protest has increasingly justified, and resultant erosion of the entire patent system. Consequently, the dual benefit of the premium not only for developing nations in the financial aids but also for developed nations in ensuring patent rights would readily build consensus by developed nation patentees on their burden of paying the patent premium.

Such premium would be an additional weight for patentees in the traditional balance of public interest (innovation disclosure) and private right (patent monopoly as a reward for the disclosure) in the patent legitimacy. In the sense of economics, the patent premium would serve as a kind of "green taxation" to facilitate market incorporating its failure that patent protections generate in society, while maintaining the major function of patent to enhance knowledge pie in society through innovation disclosure, suppression of corporate secrecy and capital concentration for further innovations.

Since the Patent Insurance scheme would be embedded in the existing patent system, the scheme would possess a substantive and sustainable financial scale (possible annual revenue: up to several tens of billions in US dollars) due to enormous amount of both quantity (e.g., filing number) and quality (e.g., subject matter) in the present patent system worldwide.

The scheme would also equip to prevent the burden of paying the premium from inflating the price of patented medicines by two measures: the translation waiver and reduced price of official fees.

Under the translation waiver, patent applicants would no longer need to file an application translation with a local patent office once they paid the patent insurance premium. This waiver of translation would compensate or even outweigh the financial load of the premium because application translation accounts for a significant proportion in the costs of obtaining a foreign patent (roughly speaking, the total cost for a single foreign application is US$10,000 and its translation costs usually US$3,000 or more). The translation waiver would be supported by considerable improvement in computer translation, allowing a patent office to examine an application without a human-conducted translation or even by utilizing such translation of limited portions (e.g., only claims and relevant descriptions in a specification).

In addition to computer translation, another technical progress in examination of patent applications would offer a discounted official fee for those who have already paid the premium. This lowering would be brought about by streamlining examination by means of emerging technologies for identifying and measuring innovations. These tools would include information & communication technologies, highly-evolved patent-mappings and other intelligent methodologies.

Besides the scheme's original functionality of insuring patent, the financial advantage of the translation waiver and discounted official fees would further facilitate an agreement by patentees and industries in developed countries on paying the patent insurance premium.

The Patent Insurance scheme would no longer regard the patent as a mere innovation protector, but rather as more like a pro-active financial driver of funding for the largest overall benefit in society".

If you'd like further information about Green Intellectual Property or want to make any comments on this piece, you can email Itaru here.

The Music World: More than Copyright and Licenses

In thinking about the music world, we usually divide it into two parts. There are the lofty heights of musical creation (aka copyright), on the one hand, and the less elegiac world of commercial exploitation (aka licensing), on the other. Listening today to a podcast on the life and works of Duke Ellington, the legendary US composer and orchestra leader, reminded me that there is an essential space in the music world that bridges copyright and licensing, in which neither copyright law nor unabashed commercial considerations prevail.

The podcast about Duke Ellington was one in a regular series--"Jazz Profiles"-- produced by the U.S. National Public Radio, and it took me back 40 years to a smallish hall in New Haven, Connecticut, where this author, as a college student arriving from the wilds of the American Southwest, somehow found himself at a concert given by the Duke Ellington Orchestra. It was one of the unforgettable experiences where musical legend was melded with the musical experience of the moment, and the memory of that evening provided the impetus for my jazz odyssey from that time to the present.

What struck me in the podcast was a brief description of two aspects in connection with Ellington's musical creations, particularly in the 1930s and 1940s. The first aspect was an observation that, at that time, Ellington preferred not to reduce at least some of his musical compositions to writing, for fear that it would ease the task of would-be imitators. So he urged his orchestra members to memorize the musical work at hand.

In other words, Ellington had turned copyright on his head, seemingly using trade secrets to try and protect at least some of his musical works. What an interesting notion--musical as artistic confidence. Reverse engineer my musical creation, if you like!

Try to reverse-engineer this!

The second aspect addressed the complex relationship between Ellington and his orchestra members about their role in the composition of his works. Apparently, Ellington made liberal use of the musical input of his musicians, usually without adding them as "co-composers" of the resulting work. According to the podcast, some grumbled, some settled for monetary compensation, and some seemed to receive credit of some kind.

We can teach students all we want about copyright ownership and attribution, but the reality of how ownership and attribution play out reveals a degree of complexity that pure law cannot capture. This is especially so when music becomes more of a collective activity, where the composer is also the arranger and also the orchestra leader. The genius of 18th and 19th century composer gives way to more complicated relationships between multiple actors in the creation and performance of music. In that space, neither copyright nor licensing is fully informing.

Over-defended IP action -- who pays the costs?

Who pays for the cost of intellectual property litigation (here, copyright) where the successful defendant in what might be regarded as a test case effectively "over-defends" by unnecessarily raising several issues each of which went against the otherwise successful defendant? In Peer International Corporation, Southern Music Publishing Co and Peermusic (UK) Ltd v Editoria Musical de Cuba [2008] EWCA Civ 1260 the Court of Appeal for England and Wales (Arden LJ, Lloyd LJ, Moore-Bick LJ) held yesterday that the trial judge had been correct in deciding to make no costs order at all. Although his decision was described as "unusual", it was supported by the judge's reasoning.

The costs of the case were no doubt increased by the need to argue the various issues for two days before the Court of Appeal itself.

Recession...what recession?

A quick review of the trade mark filing statistics in the US and EU illustrates that there is not (yet) evidence of a slowdown in the investment in trade mark filings. The USPTO 2008 Annual Report reflects that over 300,000 trade marks were filed in the US for the financial year ending 30 September - another record year. The EU stats released by OHIM and accurate to 12 November 2008 reflect that Community Trade Mark filings are on course to match last year's figures - a record year too.

Of course, it is difficult to discern filing trends over the past six weeks from these figures and there will inevitably be a lag period if filings drop in the face of adverse economic conditions. However, it is not as if there has been upbeat financial news over the past 12 months, particularly in the States, leading one to think that filings are quite robust. If this growth continues despite the poor economic outlook for 2009 then perhaps it is a sign that companies are preferring to spend their money on defensive filings (as opposed to litigation) or that brands are being squeezed into new categories (requiring news filings) to generate revenue or that simply, the trade mark business just keeps growing. That said, as GDP growth levels drop (even into negative territory) one cannot help but feel that trade mark filings (traditionally symptomatic of growth) will do so too. The dot com crash, for example, saw a 15% drop in filings in the EU which took a three full years to recover, between 2000 and 2004.

DHL and Tiger Woods; Sport Sponsorships in Turmoil

What happens when when globalization meets sports sponsorship meets economic turn down? The recent announcement of DHL regarding its continuing sponsorship of Major League Baseball in the US (what we call "MLB") is an interesting case in point.

According to a November 18th article in Bloomberg.com ("MLB Holds Talks with DHL over Sponsorships After Exist from U.S."), the discussions between MLB and DHL arose after DHL, a unit of Deutsche Post, announced that it was withdrawing from the U.S. express delivery market. It was reported that DHL fired 14,900 employees and shut down 3/4 of its outlets due to a lack of commercial success in competing with UPS and FedEx in the U.S. market. As a result, DHL will focus only on international deliveries from the U.S.

It appears that DHL sponsors a number of baseball teams--including Cincinnati, Los Angeles, San Francisco, (my beloved) Cleveland Indians, New York (Mets) and Atlanta for various periods through the year 2010. DHL also sponsors an award for excellence for a particular position of baseball, namely the relief pitcher (for you non-U.S. readers, you can find more about that position here). DHL also highlighted baseball players in its commercials, with a thematic tie-in between the players and the ad contents that only a U.S. native could appreciate.

Relief Pitcher: Vermeer style

So we have an interesting marketing question. As DHL withdraws from the U.S. marketplace, what is the value in being associated with a quintessential U.S. sport? DHL did not indicate that it intends to take any current steps to refashion its promotion relationship with MLB, if for no other reason that to avoid the potential damage to its goodwill that might follow from a midstream unilateral change in its sponsorship. Still, one wonders how much bang for its buck DHL can get from promoting overseas delivery services via sponsoring baseball games for the denizens of say Cleveland (my home town, by the way), Cincinnati or St. Louis? Do I detect a possible renegotiation of sponsorship rates?

If Kodak will apparently cease to sponsor the Olympics after the current Beijing Games, it is difficult to imagine how DHL will find much benefit it continuing to sponsor MLB in various forms after the current agreements come to an end. However, views have been expressed that seem to suggest that DHL might be well-advised to refashion its relationship with MLB, but not terminate it in its entirety. We can only wait and see.

Less complicated to understand is a short item that appeared today, also on Bloomberg.com. Entitled "GM, Tiger Woods to End Nine-Year Endorsement", the gist of which is clear from the title. In fact, while Wood's contract was set to run through 2009, the relationship will conclude at year's end. Two quotes from the article say it all:

"We began speaking with Woods earlier this year," Ternes [ a spokesman for GM] said in an interview. "He expressed an interest in growing his own Tiger brand and we have been looking for market savings."

Or, as noted by an advertising executive: "This is something you kind of expected that they had to do."


The Tiger on the Prowl for a New Sponsorship

Inherited IP: benefits and burdens

TMG Strategies ran an article earlier this month, "Bequeathed IP: The gift that keeps on giving", which asks "much money can IP earn after the inventor has passed away?" The article focuses on the case of the late, great Albert Einstein, whose bequeathed IP earned a reported US$18 million for the Hebrew University of Jerusalem last year. It also mentions what can be regarded as a substantial downside, in that the beneficiary receives not only the chance of a long, strong income stream but also -- at least in the case of image rights and copyright -- an ongoing need to police and enforce those rights. The cost of this should be factored into any budgeting before the licensing royalty income is carved up and allocated to worthy causes, if the IP is not to cause internal accounting problems and possible shortfalls at a later stage.

No interim relief for "non-urgent" collecting societies

On 14 November, in Cases T-398/08 R Stowarzyszenie Autorow ZAiKS v Commission Competition, T-401/08 R Saveltajain Tekijanoikeustoimisto Teosto v Commission, T-410/08 R GEMA v Commission Competition; T-411/08 R Artisjus v Commission Competition and T-422/08 R Sacem v Commission the Court of First Instance of the European Communities dismissed an application by several national copyright collecting societies to suspend the effect of a European Commission order pending their appeal against it. The applicants, music-royalty collecting societies from France, Germany, Hungary, Finland and Poland, failed to convince the Court that there existed any urgent need to lift the order before the court rules on their appeal. It was in July that the Commission ordered that songwriters should be allowed to choose which collecting society manages the licensing of their copyright works. Broadcasters may benefit if large collecting societies, such as France's Sacem, have to cut royalty charges in order to compete with smaller agencies. While the Court phrased its decision in terms of lack of urgent need for relief, it also had this to say (in Artisjus -- the cases are available in a variety languages: Artisjus is available in English):

"The applicant for its part has not produced any figures ... to demonstrate in any other way the seriousness of the alleged financial damage by showing that the ‘online’ field represented the great majority of its income. Such detailed figures, which were within the applicant’s power, should already have appeared in the application for interim measures itself. Such an application must be sufficiently detailed in itself to enable the defendant to prepare his observations and the judge hearing the application to rule on it, where necessary, without other supporting information, and the essential elements of fact and law must be apparent from the application for interim measures itself".

This indicates that the burden faced by any IP-based business that seeks to suspend a Commission order relating to its business operations is a substantial one: actual financial damage must be shown. This stacks the odds against the business itself, since figure[based evidence is always historical while the damage which the business seeks to prevent, through suspending the order, is going to be felt (assuming it exists) in the future. Where the market is a dynamic one that is subject to rapid and sometimes unpredictable changes, the evidential burden will presumably be rarely met, if at all.