Ceres Power - An expert's assessment

A recent announcement from Ceres Power plc, previously discussed here, noted that:

“… the Company has continued to explore various strategic options and these discussions are on-going. In the event, the Company is not able to progress any proposals to a successful conclusion, it will as previously announced commence an orderly wind down of the business.”

The company had previously announced the commissioning of an independent assessment of its fuel cell technology by a respected expert.  An executive summary of the assessment, published in September 2012, concluded that:

“Ceres Power SOFC technology is highly differentiated and has the potential for cost leadership in mass manufacturing of cells and stacks, with performance and durability meeting the requirements of volume applications such as residential CHP. The Company has intellectual property rights and trade secrets which provide considerable protection against emergence of competition.”

and that:

“Patents and know-how covering laser drilled foil substrate, cell configuration, stack design, manufacturing procedures and conditions provide significant protection against competition.”

Entrepreneurship and Innovation: When IP Does Not Seem to Matter

I am a big believer in "narrative". What I mean by "narrative" is the overarching framework of discourse that characterizes discussion about a given topic. Against that backdrop, I have been arguing, both in writing and in talks, that the rise of social media has brought in its wake a material decline in IP as part of the narrative on entrepreneurship and innovation. I have recently had two acute reminders of just how far IP has dropped out of this narrative.

The first reminder was in connection with a university programme on entrepreneurship for which I serve as a consultant. The purpose of the programme is to create an environment for the rapid fostering of start-ups. The programme has attracted international attention due to the number of successful exits that it has spawned. The downside to this obsession with quick exits is that the overwhelming number of start-ups are in the gaming and social media space, with students perceiving lower barriers to entry and where there exists a greater possibility of attracting a willing buyer at an early stage.

In that connection, I have for a number of years given an overview lecture of IP from the commercial perspective. Typically, following the lecture and running throughout the one year of the formal programme, several of the start-up groups consult with me about various IP aspects of their proposed ventures. I had noticed, however, that the number of such student inquiries has been steadily decreasing. How far IP had fallen was made clear following my recent lecture to the current intake.

I came away from the lecture thinking that the session had successfully introduced IP into the students' entrepreneurship narrative. Oh my, how wrong I was! The feedback was quick in coming and it was a stunner. "We found the topic to be totally irrelevant" was the view of most of the budding entrepreneurs in the class. IP was simply of no interest, not specifically to the various start-up projects and not more generally as part of the preferred intellectual arsenal of the young entrepreneurs. What the students want to learn about are issues of privacy, database protection and methods of online collection and payment. Whether I am the person best equipped to lecture on these topics remains an open question.

The second reminder arose in connection with a lengthy survey article-- "A Sense of Place: Technology and Geography", which appeared in the Oct. 27th issue of The Economist here. The focus of the article was to counter that view (promoted by The Economist itself in the 1990s) that digital and telephonic developments would result in the "death of distance." Au contraire--"Geography matters as much as ever, despite the digital revolution", says Patrick Lane, the author of the survey.

The first example brought in the article is a ride-sharing service in operation in San Francisco (where else?) whereby individual drivers "rent out" seats in their car, giving the owner of the service a 20% cut. The service works through a smartphone app, which effectively brings together a willing passenger and willing driver. The service is still dealing with issues of regulation and licensing. Participating drivers are identified by a pink-colored moustache on the front of the car, which is the trade mark for the service.

Try as I might, I could find no other discussion of intellectual property in the article, not in connection with the seat-rental service and not more generally in connection with other goods and services described. In describing entrepreneurial endeavours in the area of how technology is exploiting geographic proximity, IP is once again absent from the narrative.

With all of the media attention being devoted to the patent disputes involving the likes of Apple, Samsung, Google and HTC, the two instances described above are a useful and instructive antidote. Heavyweight patent cases make great theatre, but they do not reflect what is going on beneath the surface. At the level, the narrative of innovation and entrepreneurship is more and more uncoupling itself from traditional categories of IP.

Suppose no-one want to watch ...

The advertisement below arrived in my email inbox earlier today.  Reading it, I found myself pondering over the apparently unstoppable one-way flow of movies from the United States to Europe. We have heard much discussion in recent times about the incentives which copyright provides in order to safeguard the investment which is incurred in the production of relatively high-cost products.  If such an incentive exists, what are the factors that cause investment to be made so much more successfully in US-made movies than in European ones?  European copyright law is surely no weaker than its American counterpart in all relevant respects and there is now a supposedly single market for cultural products within the EU, which has a population of around twice the size of that of the US.

So what is the reason why Europe buys US films but gets so few of its own distributed across the Pond?

Theatrical export of European Films in 2010

A sample analysis of the distribution of European films in 10 non-European markets

46Pages, print edition € 29, pdf edition € 35

Available now!

  

Dear Sir or Madam,

For the first time, the European Audiovisual Observatory has analysed the relative fortunes of European films released outside the EU. The report analyses the success of European films released in 10 major non-European markets as tracked by Rentrak Corporation, the international leading reference source on box office and admission.

Key points:

• Only 103 European films had a theatrical commercial release outside of Europe in 2010.
• The main non-European foreign markets represent about 18% of the world admissions for European films.
• Outside of Europe, European films accounted in 2010 for around 3% of the total admissions, while their market share in Europe was 26%.

More detailed information on the content on our website!

‘Theatrical Export of European Films in 2010’ is available as a hard copy and pdf-version.

To order directly, click here!

Don’t hesitate to contact us if you need any further information! ...

Apple Clocks now run to time - and how to make USD 21 Million

It's well known that swiss trains run to time - and it's good to see that Apple's iOS Operating System is using the image of the iconic Swiss railway clock on the screen. Unfortunately Apple seem to have forgotten to check the trade mark rights on the image in Switzerland which has now lead to around CHF 20 Million being paid in a one-off licence fee, according to Swiss Daily Tagesanzeiger. Given the popularity of Swiss railways (8,585 US billion kilometres travelled in the first half of 2012), this is not really going to reduce the fares in Switzerland. It's however a nice little present in the run-up to Christmas and a reminder to all Apple fans as to how well trains run in Switzerland. Presumably, however, the Mondaine watch company is not madly happy about the deal. They've been producing the "Offical Swiss Railway" watches under licence to Swiss railways for a number of years. Further information (in English) at the following link.

Funding for patent litigation: a new solution?

How do you finance both the fixed costs and the contingent expenses incurred in the course of patent litigation?  This has long been recognised as a threshold question which, if not successfully answered at an early stage, will usually result in one of two outcomes: either the claimant will decide not to commence proceedings because the prospect of an unsuccessful outcome is unaffordable, or the defendant will not put in a defence since the cost of defeat (and not infrequently even the cost of victory) is not worth risking.  It is therefore with great interest that this blogger read the press release, reproduced below, relating to what is claimed to be the first "turnkey" funding solution for patent owners, at any rate.  The level of interest rose when he saw that his friend and colleague, Olswang LLP colleague Campbell Forsyth, has been playing an active part in its development.

The press release reads thus:

HLP Integration launches the ‘HLP3’ patent litigation funding solution  

The first integrated solution for monetizing patents offered in Europe 

 Leading US litigation support consulting and services company HLP Integration has come together with commercial litigation funder Caprica; ATE [that's "after the event"] risk assessors Thomas Miller; and Olswang LLP  to create the first ever turnkey solution for IP owners seeking to generate revenues from their patents.  

Suitable patents admitted to HLP3 will undergo a robust and thorough process of analysis, expert review and risk assessment involving exhaustive research carried out by HLP; evaluation by Olswang LLP; and a further risk evaluation by ATE risk assessors. Subscribing patent owners will have the benefit of an option, for qualifying patents, to obtain funding from Caprica to take a patent case to court.  

Funding commercial cases in the UK has grown significantly in recent years. Potential litigants seeking funding are normally required to undertake considerable preparatory work in order for their case to be reviewed by funders. This can be very time consuming and costly.  Patent cases are also technically complex and therefore require access to specialist expertise at every stage leading to evaluation by a funder.  

HLP3 is a process designed to allow a patent owner or licensee access to a detailed due diligence report provided by industry leaders at the least possible outlay and risk.  The fact that the HLP3 process is integrated ensures the time involved from commencement of the patent review to clarity as to whether a patent can be successfully litigated is as short as practicably possible ...” 

The idea of an integrated multidisciplinary approach is attractive and recognises that far more is needed than pots of money, nerves of steel and a bit of actuarial nous.  The question which most interests this blogger is whether, in reverse mode, the same due diligence-driven approach can be applied to the funding of non-patent-owning litigants too, based on an assessment of the extent to which an allegedly infringing product or process is firmly based upon expired patents, information and technology in the public domain and that vague concept which is so often aired in court, "general knowledge".

Anyone wanting further information about HLP3 should email Peter Rouse at peter.rouse@hlpintegration.com or give him a call on +44 7737 128174.

No Random Penguins after all

Today's news of the merger, via media publishing giants Bertelsmann and Pearson, of the Random House and Penguin publishing imprints, has raised a few eyebrows.  Penguin, it seems, is marrying Random House in order to escape the unwanted attentions of News Corp, whose predatory instincts may be somewhat thwarted by the fact that this is a done deal and the contracts have all been signed.

Random House CEO Markus Dohle has written to his imprint's literary agents to tell them what a promising deal this is.

" ...  In this new partnership with Penguin, we will be retaining the distinct identities of both companies’ imprints [this is good news for brand purists -- there will be no Random Penguins]. You and your clients will benefit from an extraordinary breadth of publishing choices, and editorial talents and experience. Our Random House imprint leadership remains endowed with tremendous autonomy and financial resources to decide which books to publish, and how to publish them. We expect this to continue in our new business.

With our backlist always a priority [ever more so, if you consider how kind the digital publishing scene can be to the long tail], Random House expects the new company to offer an even deeper catalogue, alongside our newly published titles. Our investments in enhancing the supply chain and our marketing support for physical retail will be unwavering, as we continue to transition in the digital space—to seek the most diversified retail marketplace for our titles. And we will be even better positioned to support our authors’ intellectual property and copyrights [this blogger is uncertain as to how two imprints, running effectively in competition with one another, as the next paragraph states, are better positioned to support authors' IP rights, or their own for that matter, than had no merger taken place].

The business combination is all ahead for us. Now, it is business as usual. Random House and Penguin remain competitors ...".

Patent Litigation Funding: What About the Underfunded Defendant?

One of the oft-used terms in discussing investments is "asset class". Stocks are one asset class, bonds are another.  Beyond these two obvious candidates, the challenges of today's investment climate have enhanced the discussion on such other classes as foreign currency, commodities and gold. And then there is patent litigation. As described in the introductory précis to the article by Jack Ellis, "Patent litigation as an asset class" (Intellectual Asset Management, November-December 2012), "[a]s the litigation finance industry grows in prominence, funders and their investors are increasingly turning their attention to patents".

The thrust of the article is that "many small and medium-sized enterprises (SMEs) find themselves between the devil and the deep blue sea when they believe that their patents are being infringed." Thus, if the infringer is a well-heeled competitor with past experience in patent litigation, the SME may simply threw up its hands and allow the infringement to continue to take place. Alternatively, the SME can seek to find a partner to challenge the infringer. However, the price is often that the partner demands ownership of the patent, a problematic step when the patent is central to the SME's activities.

If the patentee deems either of these two outcomes to be too high a price to pay, there is yet another option -- litigation finance. Whether the patentee's motivation is simply a shortage of cash to fund the litigation on its own, or a wish to spend free company cash on something else within the company (e.g., R&D), an increasing number of finance companies are prepared to fund the litigation. The ultimate goal is not an charitable exercise. As the article bluntly notes, "[c]learly, the main attraction of litigation investment is the possibility of big returns", apparently from 20%-50% of the damage award, if any. As well, there may also be the possibility of earning a revenue stream from the continuing payment of royalties.

Unlike funding the outright purchase of a patent, or portfolio of patents, where there may be large front-end outlays without any good sense of the litigation value of the patents, patent litigation funding allows the funder to provide sums on a rolling basis, gaining better control of the outlays in respect of actual litigation. Stated otherwise in the article, this type of funding and the potential rewards from such funding represent a new asset class, described in the article covering "a quality and calibre of IP that is unprecedented -- some of the most valuable patents there are," according to Louden Owen, the chair of i4i, which relied on such funding in its successful suit against Microsoft.

The article devotes some discussion to the question of whether such patent litigation funding is a good or bad thing for patent litigation and the patent system, especially in light of the already existing contingency fee arrangements. All of this discussion overlooks a fundamental question, however: what about the under-resourced potential patent litigation defendant? For every SME that I encounter that agonizes about where to find the necessary funds to pursue litigation, I encounter an under-resourced SME that is at the receiving end of a filed or threatened infringement action.

After all, every patent litigation case has both a plaintiff and a defendant. What about the interests of the actual or potential defendant? After all, no one seems to treat such an SME in terms of an asset class. Where does such a defendant obtain the funds to defend an action, especially where the SME is convinced that it has committed no infringement of the patent at issue? Even if no material patent litigation funding may be required by the plaintiff in such a situation, the result is still that there is a structural asymmetry between the position of the plaintiff and defendant, whereby a non-infringing defendant may still find itself unnecessarily settling the dispute, or more.

For those who live and breathe the search for the next best asset class, the defendant's funding problem is not theirs. Fair enough -- but then, whose problem is it exactly? And is the public interest in maintaining a patent system being well-served by the funding asymmetry? Or no matter -- after all, the funding of patent litigation "is such a great asset class".