19 May 2008
18 May 2008
The only subject at the INTA conference that comes close is a subject with a rather lawyerly title "Europe, possible threats Arising from Dormant Marks". Must have been drafted by lawyers, which is not surprising, as (trademark) lawyers are trained to look at risks, not at opportunities. Hence the title oppugning the viability of a practice of active selling and buying of trademarks.)
To be continued
posted by IPEG at Sunday, May 18, 2008
04 May 2008
Standard setting is a big issue in patent circles these days, not only in the US, but equally in Europe. One wonders therefore what effect, if any, the decision of April 22 of the US Court of Appeals for the District of Columbia Circuit in “Rambus Inc. v. Federal Trade Commission D.C. Cir.”, No. 07-1086) has for Europe.
The Court of Appeals found that the Federal Trade Commission (“FTC”) failed to demonstrate that Rambus Inc. engaged in conduct that was exclusionary "under settled principles of antitrust law". Setting aside the commission's orders restricting Rambus' ability to set licensing fees for its patents related to DRAM technologies, the court said that the (FTC) Commission failed to sustain its allegation of monopolization. The Commission's conclusion that Rambus deceived the standard setting organization in order to avoid limits on its patent licensing fees- enabling the monopolist to charge higher prices than it otherwise would have charged -"would not in itself constitute monopolization," the court held. The court also addressed whether there was substantial evidence that Rambus engaged in deceptive conduct at all, and it expressed "serious concerns" about the sufficiency of the evidence presented by complaint counsel.
From a very first reaction to the Rambus decision it seems that what really bothered the court of appeals was the facts, not the law. It can be inferred from the decision that the courts of appeal believed that the rules and disclosure requirements of the standard-setting body were not very clear or strong. The FTC found in its decision that those provisions were sufficiently clear, and the court should not have second-guessed the FTC on those factual findings. Under U.S. law, the CoA should uphold an agency's factual findings unless there is no substantial evidence supporting the findings. And the court of appeals does not say there is no substantial evidence. But, reading between the lines of the last section of the decision, I think the court disagreed with the FTC's factual findings. Since it could not properly reverse the FTC on that basis, we tend to think it did so on the law instead. If this quick reading is correct, the real lesson of the decision for standard setting operations in the future is that such bodies need to be very clear and detailed about the extent of disclosure and sharing that they are requiring of their members.
A second reaction is that it seems that the Rambus decision is limited because of a combination of the FTC's decision basis and its litigation strategy. As the court explained, the FTC found that Rambus's bad behavior prevented the standard setting body either from adopting a different standard or from extracting a RAND commitment. Since the FTC did not conclusively find the first alternative to be the case , the court of appeals required that the latter alternative must be sufficient to justify the FTC's decision. But, as the court noted, the law is not entirely favorable on the latter alternative as an antitrust violation. Knowing that, the FTC could have found that the latter alternative was, even if not an antitrust violation, nevertheless an "unfair" trade practice. But the FTC chose to rely solely on the antitrust theory and did not appeal on the unfair trade practice theory. So, it seems to me that the possibility of a finding of an "unfair" trade practice in this case, or at least in a similar setting in the future, is still quite possible, either in this case or in a future case. The court opinion suggests that the evidence in this case may not be strong enough to support an unfair trade practice conclusion. But it does not preclude the FTC from making such a determination. And it certainly could do so in other future cases as well. Consequently, the Rambus decision does not fully insulate companies against such allegations in the future.
With thanks to James B. Altman, Miller & Chevalier, Washington
posted by IPEG at Sunday, May 04, 2008
11 April 2008
When is a product claim in a patent insufficient? That is the core question in the judgement of April 10 by the UK Court of Appeal in Generics (UK) Limited v Lundbeck A/S in an appeal against the High Court Mr Justice Kitchin’s judgement in 2007.
The key issue is the extent of the monopoly given by a product claim in a patent. Kitchin J had extended the application of the Biogen test for patent insufficiency such that the scope of the monopoly for a product claim could be severely reduced. Lundbeck’s successful appeal, therefore, has significant commercial implications for the pharmaceutical industry as a whole.
Three generic pharmaceutical manufacturers sought to revoke’s Lundbeck patent EP (UK) 0,347,066 for an anti depressant drug escitalopram (a single enantiomer of citalopram), claiming pharmaceutical compositions containing escitalopram, and a method of preparing escitalopram. Lundbeck’s patent expired several years ago. Citalopram was marketed as a racemic mixture and Lundbeck found a way to isolate the (+) enantiomer, discovered that this was the effective enantiomer and applied for the patent. The claims in issue were for the (+) enantiomer itself and for a pharmaceutical composition containing it.
The First Instance
The Patents Court concluded that, as was generally believed, a single enantiomerof a known chemical compound was not patentable. Interesting to the pharmaceutical industry, increasingly reliant upon life cycle management, is why precisely this should be the case. The High Court found these claims were invalid for insufficiency. Kitchin J reasoned that since the existence of the (+) enantiomer was known as part of the citalopram mixture and isolation of the separate enantiomers was known to be desirable, Lundbeck’s invention lay solely in the discovery of a way to make it. He concluded that this should not entitle Lundbeck to a monopoly of every way of making it i.e. a product per se claim. He applied the test set out by Lord Hoffmann in the House of Lords case, Biogen v Medeva, that for “sufficiency” a disclosure should enable the full extent of the claim and not merely a single example of something within the claim.
The Court of Appeal Decision
The Court unanimously upheld Lundbeck’s appeal and found that the product claims were not invalid for insufficiency. A product claim is sufficiently enabled if the specification discloses one way of making it. In the words of Lord Hoffmann: “in an ordinary product claim, the product is the invention. It is sufficiently enabled if the specification and common general knowledge enables the skilled person to make it. One method is enough.” Lord Hoffmann confirmed that the Biogen test applied to a hybrid or “product-by-process” claim such as that considered by the House of Lords in the Biogen case itself. The test could not be extended to an ordinary product claim in which the product is not defined by a class of processes of manufacture or is not simply a member of a large class. An inventor who finds a way to make a new product is entitled to claim the product however made and however used, even if the desirability of making it was known. The Court of Appeal also upheld Kitchin J in holding that the product claims were novel and inventive.
 In Biogen v Medeva  R.P.C. 1, Biogen's patent for recombinant DNA coding for a polypeptide having hepatitis B virus (HBV) antigen specificity was held by the House of Lords in 1996 to be insufficiently enabled by its specification, not because of any inability for the described invention to deliver all the promised results, but because the same claimed results could be produced by different means which owe nothing to the teaching of the patent or any principle it disclosed.
posted by IPEG at Friday, April 11, 2008
09 April 2008
In a long standing battle between Monsanto, Argentina and importers of soymeal, the District Court The Hague gave its (interim) judgment on March 19, 2008, referring the case to the ECJ for their interpretation of articles 8 and 9 of the 1998 Council Directive 98/44/EG relating to the protection of biotechnological inventions (“Biotechnology Directive”).
Monsanto is the owner of EP patent 0546090, relating to enzymes which, if expressed by a plant, confer resistance to a herbicide. In 1995 Monsanto introduced "Roundup Ready soy plants" soya meal that have had a copy of a gene from the bacterium, Agrobacterium sp. strain CP4, inserted into its genome that allows the transgenic plant to survive after being sprayed by Monsanto's this non-selective herbicide, Roundup. Glyphosate, the active ingredient in Roundup, kills conventional soy plants. The bacterial gene is EPSP (5-enolpyruvyl shikimic acid-3-phosphate) synthase. Regular Soy also has a version of this gene, but the regular version is sensitive to glyphosate, while the CP4 version is not.
The glyphosate works by inhibiting a certain enzyme called EPSPS which is present in the plant. This enzyme is important for the production of aromatic amino acids, these being necessary for the plant growth. The patent describes a class of EPSPS enzymes which are not sensitive to glyphosate, the so-called Class II enzymes. Glyphosate blocks the active centre of Class I EPSPS enzymes whereby the production of aromatic amino acids is disturbed. The plant cannot produce any or at least cannot produce sufficient proteins without these aromatic amino acids and therefore dies off. Plants possessing Class II EPSPS enzymes do not have this problem so they survive the use of glyphosate whilst the weeds around them die.
The defendants purchased soy beans in Argentina (where there was no patent protection), the beans being grown from plants carrying one of the genes disclosed in the patent. The beans, grown in Argentina, were imported by the defendants into the Netherlands as processed soy meal. Monsanto has no patent protection in Argentina. The patent claims are directed to isolated DNA sequences, a recombinant DNA molecule, a method of producing genetically transformed plants which are tolerant of certain herbicides and a herbicide-tolerant plant cell comprising the previously mentioned DNA molecule. Monsanto maintained that importation of the soybeans infringed its European (Netherlands) patent, the defendants disputed that.
In its interim judgment, the court firstly held that those claims covering an isolated DNA sequence constitute no infringement as the DNA is not present as isolated matter but is incorporated in the soy meal. The court rejected Monsanto’s reasoning that the DNA sequence has been taken out of its natural environment – the bacterial chromosome - and has been encoded in the DNA of the soy plant and, for this reason, the DNA in the soy meal should be regarded as an isolated DNA sequence, or, that it contains this. The average person skilled in the art would understand the term isolated DNA as DNA that has been retrieved from the cell (core) of an organism for further treatment in a manner as is usual in the relevant profession.
Thirdly, the court considered whether any product claims were infringed, which claims relate to a DNA sequence or a DNA molecule. The dispute focused around the question whether the DNA sequence which encodes for the synthesis of a Class II EPSPS enzyme was found in the samples taken from the cargo imported by defendants. Parties then argued on whether any of the DNA sequence was present in the soy meal, so imported. The importers, supported by the Government of Argentina, argued that the DNA sequence was at best present “in fragmented form”, caused by heating during the “crushing process” of the beans.
The first question of the court to the ECJ relates to the scope of art. 9 of the Biotechnology Directive, especially when DNA “performs its function”. Monsanto argued that the DNA found in the imported soybeans may not then and there “performs its function”, but in order to invoke patent protection under art. 9 of the Biotechnology Directive it would suffice for the DNA-sequence to - at any particular moment - have performed its function in the soya plant or that the DNA could again “perform its function” after having been isolated from the soy meal and inserted into living material again. The court wants to know from the ECJ whether this interpretation of Monsanto is correct.
The second question relates to the question whether or not the protection of a biological material by the Biotechnology Directive prevents the national Dutch Patent Act (art 53) from protecting next and above the protection conferred upon DNA as such ("classic product protection")irrespective of whether the DNA sequence it “performs its function”.
The third question is whether in answering the second question it makes any difference that the patent has been granted before the Directive came into force (artt. 27 and 30 TRIPS).
 See for an interesting resume of the history of Monsanto’s battle against Argentina patent policy, “Harvesting Royalties for Sowing Dissent? Monsanto's Campaign against Argentina's Patent Policy”, www.grain.org, and http://snipurl.com/23xnu
posted by IPEG at Wednesday, April 09, 2008
27 March 2008
I am sure you remember the good old days when Dutch patent practitioners introduced the “pan European injunctions”. Based on the idea that a European patent granted in Munich according to uniform (and unified) principles of patentability should enjoy pan-European protection by a single strike. The Dutch, not known for their shyness when it comes to introducing creative policies, introduced the idea of a “cross border” injunction, of course, to be rendered by Dutch courts. This was the early 90’s. The Dutch Supreme Court opened the cross border doors in its decision Lincoln/Interlas of 24 October 1993, published in NJ 1992/404). At least, that was what the originator of Europe’s Cross Border Practice, Willem Hoyng, advocated. He proposed to organize a mock trial, held in the dependence of the European Patent Office in Rijswijk (The Hague, Netherlands) for an audience of over 200 patent practitioners, opening the eyes of many to show that this was the solution to Europe’s lack in promoting a uniform patent enforcement strategy. In what became his “house style” advocacy Willem Hoyng defended that art 69 European Patent Convention provided for a stepping stone for a uniform interpretation of a EPO granted patent. Uniformly granted, according to unified principles of patentability, so what’s wrong in letting a Netherlands judge order an injunction Europe-wide on the basis of such unified principles?
The Cross Border Practice worked very well. For a while, that is. It did attract in the 90’s and early 2000 numerous –mostly US – companies to the Dutch courts, frustrated as they were by the slow pace of European patent integration and notoriously unpredictable outcomes (as the ones we still experience now, anno 2008, see our post on the ECB vs. DCC case).
The Cross Border Practice worked very well. For a while, that is. It did attract in the 90’s and early 2000 numerous –mostly US – companies to the Dutch courts, frustrated as they were by the slow pace of European patent integration and notoriously unpredictable outcomes (as the ones we still experience now, anno 2008, see our post on the ECB vs. DCC case).
All this ended with the outcome of legal scrutiny by the European Court of Justice. Two ECJ cases choked the breath out of Cross Border Relief, GAT vs. LUK and Primus/Roche. Blogger did argue the same, in IER (Netherlands Intellectual Property Monthly). Not so, Willem Hoyng, argues, disputatious as he (still) is:
"(…) We think that GAT-LUK and also the Dutch Supreme Court decision have to be interpreted in such a way that the court can deal with infringement questions as long as it does not rule on the validity. We conclude this from the fact that the court is competent to hear the infringement case and does not need to rule on validity in order to make a decision. This may certainly be the case where a defendant denies that he has committed infringement acts in certain or all countries. Furthermore, many technical non infringement arguments do not necessitate a ruling on validity (…)”
 "Article 69 should not be interpreted in the sense that the extent of the protection conferred by a European patent is to be understood as that defined by the strict, literal meaning of the wording used in the claims, the description and drawings being employed only for the purpose of resolving an ambiguity found in the claims. Neither should it be interpreted in the sense that the claims serve only as a guideline and that the actual protection conferred may extend to what, from a consideration of the description and drawings by a person skilled in the art, the patentee has contemplated. On the contrary, it is to be interpreted as defining a position between these extremes which combines a fair protection for the patentee with a reasonable degree of certainty for third parties."
posted by IPEG at Thursday, March 27, 2008
24 March 2008
You are a European institution, the European Central Bank, and you seek the invalidation of what has been granted as a valid right by another European institution, the European Patent Office (EPO). The last weeks we got a taste of how The Great Patent Divide, the most un-European experience in patent law, has turned into Europe's Patent Demise.
Threatened by an patent infringement claim of a US company, Document Security Systems, Inc. (DSS) the ECB seeks the invalidation in several European countries. The UK patents court (in first instance) invalidates the patent, EP 0455 750 B1 for a ‘Method of making a nonreplicable document’ on March 26, 2007. A day later the German Federal Patent Court ("BundesPatentGericht") disagrees with the UK court and finds the patent valid. By judgment of March 12, 2008 the District Court in The Hague, Netherlands, upheld the patent as valid and follows Germany. Just a few weeks earlier, on 9th January 2008, the French court ("Tribunal de Grande Instance de Paris") agreed with the UK court in first instance and distances itself from the German court and found the patent invalid.
On March 19, 2008, the UK Appeal Court affirmed the invalidity findings of its first instance colleagues. Patent dead, in the UK and France (so far, appeal in France still pending).
You still with me?
What a disgrace. What a sorry state European patent law is in. We know that Europe is lacking a European view on validity (and infringement for that matter), but how can this be explained? The view, generally held, is that UK courts are (very) critical on what comes out of the European Patent Office. Patent 0455750 should not have been granted, if it were for the UK. France, not yet known as “patent-unfriendly” has chosen the side of the UK in this case. Is this a scary sign of what is there to come? Maybe (just) an incident and no forbode of what is next (France as the next patent basher)? One begins to wonder, are the Germans more fond of what comes out of their (“own”) EPO, located in Munich? Is Holland more inclined to accept what comes out of Munich as well? Or is this all “coincidence”? We think not. We have seen this divide before (on stents: Angiotech's patent for Taxus stent revoked by UK Court of Appeal, (partially) upheld by the Dutch District Court, but then it was only for Germany & Holland versus the UK. Is France now joining the chorus of “we-know-it-all-better-than-the-EPO” ?
(see also Dennis Crouch' Patently-O blog)
posted by IPEG at Monday, March 24, 2008
23 March 2008
Ever thought about the reasons why copyright protégés have been able to extend the duration of the copyright law in many countries now to 70 years after the death of the author while patents are lagging behind? Why can’t get patent owners more than a scanty 20 year legal protection after the date of filing while their copyright counterpart enjoy the law’s protection for more than three times longer? It crossed my mind re-reading the European Court’s September 2007 judgment in Merck Genericos vs. Merck. The case was about a provision in the Portuguese patent law maximizing patent protection to 15 years rather than 20 years, as is provided for in art. 33 of the TRIPs Agreement. The issue then was whether this article has “direct effect” in national (in casu Portuguese) law and can be applied directly by a national court. The Court held that as patent law in Europe, although in many ways uniformed, is still not “community law”, national courts can choose whether or not to give direct effect to that provision.
So a patchwork on terms for duration of intellectual property rights exist, not only between IPRs (copyright vs. patent protection) but also within IPRs (patent laws in different countries). Intellectual property right being an economic property right there are no doubt economic reasons to justify the difference. Take copyright law: an extended term of protection may generate twenty more years of commercial revenue for many economically viable works. Driven by US lawmakers and lobbyists, its not hard to see why. Much of US revenue may come from foreign countries where many novels, motion pictures, and other U.S. works find a market. The economic argument translates not only into greater revenues for U.S. copyright holders, but also into the subsequent tax revenues, employment prospects, and shareholder profits that accompany expanded business. First Monday, a “peer-reviewed journal on the internet”, cites Prof. Crews in that if those revenues are derived from foreign markets, the strengthened protection and longer term of protection for copyrights may also help shift the balance of international trade in favor of the US.
Why then is the copyright term so much longer than for patents? How “limited” should the duration be to effectuate the appropriate balance between reward to authors and inventors and the public domain? Traditionally benefits for longer copyright protection have been defended by arguing that this would enhance incentives for authors and artists to create. But why would that be different with technological innovations? I would rather argue the opposite. Many innovations would deserve a much longer duration of protection than some literary works. Why would the inventor of a now widely used technology, the first practical visible-spectrum LED (Light Emitting Diode, the bright screen in many electronics products) Nick Holonyak, Jr of General Electric, see his invention of 1962 long run out of patent protection, while had he copyright, would have still enjoyed his legal privilege?
 K.D. CREWS, Harmonization and the Goals of Copyright: Property Rights or Cultural Progress? in 6 Ind. J. of Global Legal Studies, 1998, 117 ff.
posted by IPEG at Sunday, March 23, 2008
19 March 2008
The UK-IPO's interpretation of what was patentable was relaxed slightly following Kitchin J's judgment in Astron Clinica. A new Practice Note was published on 7 February 2008 to supplement the Practice Note of 2 November 2006 (which had been published subsequent to the Court of Appeal's decision in Aerotel/Macrossan).
The UK-IPO considers that Patten J did not apply the Aerotel/Macrossan test in the way intended by the Court of Appeal and that this has created uncertainty about how the Aerotel/Macrossan test should be applied when deciding whether a computer implemented invention is patentable.
Hopefully the appeal will provide the opportunity for an authoritative Court of Appeal decision one way or another. The present uncertainty and the difference in approach betwwen the EPO and the UK-IPO is clearly unsatisfactory. However, while apparently contradictory decisions of the EPO Boards of Appeal exist, confusion is bound to remain.
posted by IPEG at Wednesday, March 19, 2008
12 March 2008
In our blog: “Do Not Blame Patent Trolls” of February 2, we touched upon a new player in the patent arena in Europe, IP-Com in Germany. Since then the debate has heated up whether NPEs (Non Practicing Entities) have reached Europe. They did (actually a while ago). In a Dow Jones Newswire, hot from the press, Stuart Weinberg reports on the background of the patents IP-Com bought from Bosch to subsequently assert those against Nokia in a German court.
Just very recently HTC, a major Taiwanese player on the electronics market in Europe became the next target of Europe’s latest addition to the family of NPEs, IP-Com, attacking HTC’s mobile communications handhelds. IP-Com (from Munich) obtained from the Frankfurt court a preliminary injunction (“Einstweilige Verfügung”) against HTC. This is an ex parte court order obtained without hearing HTC. Next week HTC will get its chance in the District Court (Landesgericht) Frankfurt opposing this injunction.
It’s a déjà vu. In our blog “Sisvel brings Patent Wild West into Germany” we commented about previous tactics another NPE used in getting SanDisk on their knees. IP-Com opts for the a more common approach, using the possibility to obtain a preliminary injunction. Germany used to be one of the few countries where an ex parte injunction, even in complex patent cases, could be obtained. No longer so. Since the enactment in most EU laws of the European Directive 2004/48 of 30 April 2004 on Enforcement of Intellectual Property Rights, every EU country has the possibility to obtain such ex parte injunctions. The idea behind is that those injunctions were needed to fight against counterfeit and would commonly be used against imports of counterfeit consumer goods, not in patent disputes. The reason being that patent cases are usually about either defending market share or obtaining license fees from an unwilling party. In the former case an injunction is a possibility. In the latter case this is rare, mostly granted only when there is a serious risk that the alleged infringer can’t pay any royalty or damage the patent holder may occur once the injunction is being upheld. In this respect the comment of Ray Niro in the Dow Jones newswire -("Germany may actually have a more enlightened view of the need for injunctive relief when patents are being violated than we do”) is mostly misconceived.
** Only a few courts in Germany tend to allow preliminary injunctions more easily then others. These German “rocket docket” courts are not the ones that do the bulk of the patent cases (being concentrated in Hamburg, Düsseldorf and München)
 See “Summary of the Implementation of Directive 2004/48 on the Enforcement of IPRs in EU member States as per October 2006”) on the right side of the ipeg blog, under “Patent, Innovation and R&D documentation”
posted by IPEG at Wednesday, March 12, 2008
03 March 2008
Today, the UK court (Mr. Justice Floyd) rendered its decision in the Qualcomm vs Nokia case. The case in the UK is slightly different than similar fights that take place in Netherlands and Germany in that Qualcomm is suing Nokia in the UK under 2 patents (EP 0,629,324 and EP 0,695,482) both related to power control. European Patent 0,629,324 (“’324”) relates to an apparatus for controlling the way in which the mobile telephone reduces power consumption by monitoring a channel for incoming messages intermittently. The second, European Patent 0,695,482 (“ ’482”) relates to a method and device for the correction and limitation of the transmitted power of a mobile telephone.
Qualcomm’s claim under ‘324 is limited to contributory infringement as the product claims require both a handset and a base station. Qualcomm also sought a declaration of essentiality in respect of ‘324 re the 3G standard.
As to ‘482 the UK court comes to the conclusion that Qualcomm’s patent ‘482 is invalid. Had the patent been valid, Qualcomm would have established infringement by Nokia of claims 1, 2 and 9. Although essentiality did not form part of this litigation as yet, the court ruled in an obiter dictum:
(…) Essential is defined in the ETSI IPR Policy document as follows:
“ESSENTIAL” as applied to IPR means that it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT or METHODS which comply with a STANDARD without infringing that IPR. For the avoidance of doubt in exceptional cases where a STANDARD can only be implemented by technical solutions, all of which are infringement of IPRs, all such IPRs shall be considered ESSENTIAL.”
“ ‘482 claims a specific circuit for and method of using a combination
of open and closed loop power control commands. Whilst the standard
requires the phone to be capable of using both types of power control, it is
silent on how to implement its requirements. For example it does not
specify calibration, far less how calibration is to be achieved. The
evidence also established (see for example document X21) that there were other
ways of achieving this objective. I was not satisfied that these were not
 paragraph 15 of the ETSI IPR Policy (blogger), the first part of the cited sentence I could find in the ETSI document, not the second sentence
posted by IPEG at Monday, March 03, 2008
01 March 2008
Two European trademark blogs, MarkenBlog and Class 46 referred to a publication in Germany’s business newspaper Handelsblatt on the effect of the proposed new "Bilanzrichtlinien modernisierungs gesetz” (Accounting Directives Modernizations Law). According to the two blogs this introduces new accounting rules for small and medium sized companies how and when to report development costs of their intellectual property on their corporate balance sheet.
As we all know valuation of IP is always the biggest stumbling block in deals where patents are either sold, licensed or securitized. Most intangible assets generate premium returns for the business that owns them, either through an increase in revenues or through a reduction in costs. It’s the subject where a multiple companies make their money, adding to the confusion. There over a 100 different methods of valuating intellectual property and it’s no wonder that many don’t see the wood for the trees anymore.
Different compelling arguments have been advanced for a better understanding and appreciation of the value of IP and its potential impact on business value. Intangible assets (patents, marks, know-how, licenses..) play increasingly a key factor for firms’ economic performance. They are particularly important for early stage-technology based companies as IP is viewed as the primary contribution to earning power and future value.
And of course, not only are there accountants, IP valuators, IP management companies but also lawyers seeking revenues from their own, proprietary methods of valuating patents, some seek proprietary gains from patenting their own valuation method (see patent application WO/2005/019964 for a “System and method of Valuation of Intellectual Property".
More than ever there is a dire need to coordinate global efforts to “standardize” the valuation methodology as this is one of the major impediments to increase the value and tradeability of intellectual assets.
The Canadian Institute of Chartered Accountants, provided updates on the Global Reporting Initiative in 2006 mentioned several topics to be dealt with in achieving such “standardization” are:
** The challenge that intellectual capital creates for accounting;
** Possible responses to this challenge – why the "intangibles approach" is of questionable value; ** Restating the challenge to accounting;
** Proposals to the international accounting community
The German Institute for Industry Standards (Deutsches Institut für Normung e.V) is working on a standard for patent valuation (“Grundsätze ordnungsgemäßer Patentbewertung”) together with Steinbeis in Hamburg, whereas banks are working on a standard to valuate IP for financing purposes. None of these initiatives have led to a worldwide standard yet.
It can be doubted whether the final rescue will come from accountants, as the IASB (International Accounting Standards Board) who contemplated to undertake an active project on intangible assets (that is, excluding goodwill) jointly with the FASB in December 2007, was rejected, stating “that properly addressing the accounting for intangible assets would impose a large demand on the Board’s limited resources.”
So who’s going to take the lead? We expect this to be the ISO (International Organization for Standardization) after DIN submitted its standard proposal in December 2007.
Interesting resources on developments in standardizing accounting and valuation principles of intangibles assets, or intellectual capital:
** Intellectual Capital Forum
** IHS: ANSI Seeks Comments on Proposal for ISO Work Item on Patent Valuation
 See for a very interesting interview with Baruch Lev on this subject: “Interview with Baruch Lev: Accounting, Reporting and Intangible Assets”
posted by IPEG at Saturday, March 01, 2008
22 February 2008
WIPO just published the statistics on patent filings 2007. “East Asia closes in on Europe in patent rankings”, writes FT this morning. At the same time Europe published its European Innovation Scoreboard 2007. On page 49 of that EU report it states: “One indicator of the rate of new product innovation is the number of patents.” Forget for the moment whether this is indeed true or not, so whether number of patents tell you something about innovation output. Asian countries surpass Europe in number of patent filings. What does this indicate is that Asian countries will surpass Europe by 2015 in innovation output if we were to take the number of patents and patent applications as a indicator.
We have always understood that Europe - and the Western world in general – have one thing in common over the Asian Tigers, most notably China: that we have a knowledge advantage, that our strengths is not in being the world’s cheapest manufacturing place (we lost that to China a while ago) but in providing intangible assets: knowledge. The idea is that we could compete on the world market with China’s low manufacturing price by letting them pay for our knowledge and the use of our intangible assets (e.g. patents). In order to sell their low costs products on the world market we would force China and other Asian manufacturers to take licenses under our patents to pay for our knowledge and thus making their products more expensive to market, thus “balancing” the price of Western companies and Chinese on the world market.
If this simple economics is true (blogger is just a simple country lawyer, so maybe I am wrong) what happens if that advantage we have over China and other Asian countries, evaporates? What if China and other Asian countries produce more patentable inventions then the West? Would our goal of competing against China and other powerful economic players fail?
posted by IPEG at Friday, February 22, 2008
16 February 2008
The European Research Area (ERA) was created at the EU Council, held in Lisbon in 2000 in the context of the Lisbon Strategy, also known as the Lisbon Agenda or Lisbon Process. It’s aim is (or, better, was) to make the EU "the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment by 2010". What have become of these ambitions? Europe’s knowledge based economies still lag behind the US and Japan. It is two years left until 2010. EU has not even left the starting point. It is not much of an overstatement to say that the Lisbon Agenda is largely a failure. Still the European Commission is not short on initiatives. Whether it helps?
In 2007 the Commission published a “Green Paper on ERA” to review “progress” and raise questions for debate. The Green Paper set out six “axes”:
- high mobility of researchers between institutions and countries
- world class research infrastructures
- effective public-private co-operation and partnerships
- knowledge-sharing between public research and industry, as well as with the public at large
- coordination of research programs and definition of common priorities
- opening of ERA to the world to address global challenges.
Time for us to have a look what is being said about intellectual property in general and specifically on patents.
Do the results of the debate last year show a different approach towards IP? Or maybe a more common view on IP? Not quite. After all this is Europe. The result is as disappointing as the results of the Lisbon Agenda itself. See ipeg’s summary of IP positions in the ERA Green Paper, and the results of the “debate”. Not really surprising for those in the IP profession: IP raises eyebrows, concerns, question marks and no solutions or stimulus. It remains the EU stepchild of politicians and technology transfer professionals alike. Unlike the US where the Bay-Dohle Act made a huge difference in the way universities and publicly funded R&D institutions relate to intellectual property and patents, Europe lags behind in providing IP leadership and IP innovative thinking.
So we fund research institutions, we reach political agreement on a European Institute of Technology (EIT) to educate young scientists so as to compete with the US and Asia, but yet we fail to think about what the role of IP is in those initiatives? What do politicians expect when those young doctors, receiving their PhD’s at EIT and leave Europe to use their newly gained knowledge for the US anyway, or even China? Have we thought of maintaining access to the knowledge generated in Europe? Or are we waiting for the New Asian Tigers to let us pay for the intellectual property that we failed to secure, more interested in “sharing the knowledge to the public” than enjoying the fruits of our own knowledge society?
May we give the European Commission one advise? You recently decided to set up a “European Research Area Board” consisting of 22 members, “representing the scientific community, industry and civil society”, to advise on the progress on ERA. Would it not be a good idea to add an intellectual property thinker to contribute to this Board and promulgate the very important intellectual property aspects of knowledge dissemination? Someone who could liaise with IP professionals in the many EU institutions who do developed IP methodologies that mediate between a too “open source” type of knowledge management and proprietary models?
We have two years left to achieve some Lisbon goals. It’s time for real IP action now.
posted by IPEG at Saturday, February 16, 2008
10 February 2008
Tomorrow, Monday February 11, Arnaud Gasnier, receives his PhD at Technical University Delft (TU Delft) for a study on efficient patent management ("The Patenting Paradox") . Gasnier’s study shows that despite a dramatic increase in the number of patents filed each year, the majority of those patents are not actively used. This behavior is called the “Patenting Paradox”. Why does it exist? What are its effects? How can this paradox be solved? This study addresses these issues. It provides models to better understand the complexity of patent management; and tools to help the firm navigate in the competitive environment. Current practices are illustrated with pertinent patent information. This study also presents the results from a survey among more than 1,100 patent users, which explains the roots of the paradox in the firm.
Many companies, R&D institutes and universities in Europe have no IP management nor strategy in place to manage the patents in such a way that it creates value to their organizations. The value of a firm’s IP can be in its economic or financial importance (contribution to finance R&D efforts) or strategic means (obtaining cross licenses of third parties) or defensive purposes (freedom to operate).
The study proposes the use of game-based interventions to improve patent management (awareness, collaboration, strategy). A very interesting and welcome contribution to IP management in a undervalued area of academic research in Europe.
posted by IPEG at Sunday, February 10, 2008
02 February 2008
In our January 1 blog, we wondered “Will 2008 bring the same troll trend in Europe?”. Well it’s no surprise that it does. A yet relatively unknown NPE (Non Practicing Entity, or otherwise called "patent troll") an IP exploitation company called “IP-Com”, backed by private equity funds, sued Nokia for infringement of 8 patent families at the patent court in Mannheim (Germany) this week. IP-Com by doing so, threatens Nokia’s financials in its core business, mobile phones. IP-Com demands significant license fees. Nokia, in a common Pavlov reaction, rejected all allegations arguing that the NPEs patents are invalid.
So trolls or NPEs have now reached Germany as well. With the separation of infringement and validity procedure the German court system may be particularly suitable for such claims and litigations by exploitation companies backed by funds. As we set out in our blog on January 1, this clearly marks a new trend in European patent enforcement, where NPEs will soon crawl over European industry to assert patents to create value out of IP positions. We expect this phenomenon to increase dramatically in 2008.
In cases like this there are likely two options. Either the NPE, in this case IP-Com, asserts patents resulting from their own innovative efforts, or, as is more likely, the patents have been acquired from third parties with an eye to assert them against industries like Nokia to create license income. According to press publications the latter is the case, as IP-Com is said to have bought the patents from Bosch. Does this make a difference? It does.
If the patents are the result of own innovative R&D output, asserting them against alleged infringers who use these intangible assets in their own products in order to recoup investments in own R&D in no way differs from any patent assertion strategy as we know them. If however is these patents have been bought from a third party with the purpose of enforcing it against companies using the patented technology is exposes a flaw in existing IP strategies of major European companies. Or, at best, the uncovering of unused potentials in existing IP portfolios of those companies. Obviously these patents have been bought by a party that decided to make value of patents where the seller did not see it, or where the patents did not represent core business anymore, or, alternatively, where the seller decided that doing it themselves would be out of their (financial or organizational) reach. The price the buyer (IP-Com) was willing to pay (having made the analysis that they would be in a better position to make even more money of those patents, backed by investors, than the original owner) reflects the potential and true value of the patents.
This is what we will increasingly see happening. A lot of companies are sitting on IP that is not subject to active value creating strategies, but rather used as defensive (and passive) “freedom-to-operate” thinking. One can hardly blame parties for looking to find “Rembrandts in the attic” and come up with a viable value extracting enforcement strategy for pursuing financial rewards from intangible assets, where the original owners did not.
So, is this reason for European companies to grumble? If you read the commentaries and listen to the comments made in boardrooms of many companies, they certainly do. We would argue that this is not the way this phenomenon should be addressed. Rather than complaining, companies should more actively seek active strategies to extract value out of their own patent portfolios, or- depending on where they stand at the equation – hire expertise to pursue a more active IP strategy. Whether that is to engage arm’s length companies to license out their non used IP, or buy defensive IP positions on the market before NPEs doing just that. The point we would like to make is: get rid of that grinded and often wrong idea that patents are just to create freedom to operate.
This will in turn requires a much more active debate about the need to get a more transparent IP market. As there is no real and open “market” for IP - in the economic sense - where buyers and sellers can meet supply and demand, based on generally accepted value propositions, the call for improvement of the market conditions for IP will increase. The actions by NPEs will therefore have two positive outcomes. Firstly companies are forced to critically evaluate and reform their IP strategies and secondly, there will be a innovative push to create new market mechanisms for IP to be more easily change hands.
posted by IPEG at Saturday, February 02, 2008
30 January 2008
France has formally communicated its ratification of the London Agreement. This at last clears the way for the Agreement to come into force, which will happen on 1 May 2008. The consequent savings on translation costs will have a significant practical impact for patentees in those European Patent Convention states which are party to the London Agreement.
The European Patent Office ("EPO") acknowledges that translation costs can account for between 20% and 40% of the cost of filing for patent protection in Europe. As an example of the impact of the London Agreement, the EPO describes a situation where the patentee applies for a patent in seven states, five of which are parties to the London Agreement. The reduction in translation costs for a typical patent could be as much as 45%. As more states become party to the London Agreement, patent proprietors will be able to validate their patents in a greater number of states without having to meet almost prohibitive translation costs.
What does the London Agreement say?
A state which is a party to the London Agreement and whose official language is French, German or English (the official languages of the EPO), agrees to dispense with the patent translation requirements for the full patent. However, the patent claims will always be available in the three EPO languages. Other states which are parties to the Agreement will dispense with the full translation requirements if the patent is available in the EPO official language prescribed by that state. Only when this is not the case will a full translation of the full patent specification into the relevant national language be required. These states will continue to have the right to require a translation of the claims into one of their official languages.
In the event of a dispute relating to a European patent, a state can require the patentee (at the patentee's expense) to supply a full translation into that state’s official language following a request made either by the alleged infringer or by the court.
To which countries will the London Agreement apply?
From 1 May, the London Agreement will apply to all states which have both ratified it and deposited their instruments of ratification. As of today, these are Germany, the UK, France, the Netherlands, Luxembourg, Iceland, Latvia, Liechtenstein, Monaco, Croatia, Slovenia and Switzerland. Denmark and Sweden have made provision to amend their respective Patent Acts but have so far delayed deposit of their instruments of ratification. It is expected that many more EPC countries will ratify the Agreement now that the French have done so.
Click here for the London Agreement text, and for other background documents, see this blog at the right side under under "EPLA, everything you always wanted to know but were unable to find).
Rowan Freeland, Simmons & Simmons, London
posted by IPEG at Wednesday, January 30, 2008
28 January 2008
“IP 360” published an article, headed “DRM Technology For Music May Be Dead: Experts”, saying:
“The recording industry pushed digital rights management, or DRM, technology to protect its copyrighted music from piracy and maintain revenue streams, but under pressure from consumers, record companies have waved the white flag on encoding all of their music with DRM — a decision experts say forecasts the end of such technology in the music industry (…)”
The article is pretty much correct as far as it goes. But like much of these commentaries, it ignores the subscription model, wherein you pay something like 10-15 dollars/Euros per month for unlimited access to a library of millions of tracks. Services like Rhapsody (RealNetworks), Zune Marketplace (Microsoft), and Napster offer this. Such services use DRM and no one is talking about removing DRM from them – otherwise you would have a scenario where someone could sign up for one of these services, get a very fast broadband connection, download every track in the entire library (which would take maybe a few months), then cancel the service. Voila – 5-6 million music tracks for $50-100.
The aggregate subscribership of these services is maybe 4-5 million people worldwide, which is probably less than 1/10 the number of people who have downloaded tracks from iTunes, but it is growing at 100% per year. The generally accepted wisdom is that clunkiness of transferring tracks from PCs to portable devices is holding back further growth of this business model, so when cheap portable devices with wireless broadband come out (say 2010), the subscription model is expected to take off more rapidly.
Bill Rosenblatt, GiantSteps Media Technology Strategies (http://www.giantstepsmts.com/index.htm)
posted by IPEG at Monday, January 28, 2008
27 January 2008
Our prediction on December 8, 2007 what would happen after the acquisition of Gemstar by Macrovision proved right (see “Macrovision acquires Gemstar, a more aggressive IP policy ahead”. Last week Gemstar sued Virgin Media for patent infringement before a UK court.
Gemstar holds IP rights to a number of “interactive television”, or, more precisely, EPG (Electronic Programming Guide) patents, in the US also known as “interactive programme guides” or IPGs. Through that interactive television entry, many players looking into expanding their video-on-demand, television commerce, Internet access, gaming and other interactive applications. Some predict interactive television will provide the exchange of millions of euros in goods and services via the television. Gemstar has the patents to technologies that would allegedly provide the gateway to this future income streams. Gemstar, focused on the programming guide as the springboard to interactive activities alleges that the electronic programming guide for a long time will be where the consumer moves to interactivity.
Gemstar by acquiring TV Guide of the US consolidated its hold on the electronic programming guide space. Gemstar owns the patent that allows viewers to record a TV show by inputting into the VCR a number listed in a television guide. The navigational devices in tomorrow's interactive TV will prove to be the next battle ground in IP in Europe, taken the vast market it covers. The guide not only lists shows to watch, but provides the gateway for consumers to order movies, record programs and purchase a pizza or other goods and services via a remote control.
When Macrovision acquired Gemstar, it anticipated synergies with another of its recent acquisitions: Mediabolic, a company whose technology enables interoperability of content on multiple devices in the networked digital home. Gemstar's EPG technology could be combined with Mediabolic to create tools for users to find, move, and play content on different devices on their home networks from one convenient user interface. This makes the EPG technology strategic to Macrovision's business on more than just an IP level.
As a result it seems logical that Gemstar will extend their aggressive IP approach to other EPG players in Europe.
posted by IPEG at Sunday, January 27, 2008
17 January 2008
Yesterday, EU Commissioner Neelie Kroes launched an inquiry into the workings of the pharmaceutical industry, especially into patent-dispute settlements between companies including Pfizer Inc., AstraZeneca Plc and Johnson & Johnson, which companies offices were raided yesterday by Commission officials. The reasons for this raid were expounded in a press release:
“We have launched this inquiry because pharmaceuticals markets are not working as well as they might. Patent protection has never been stronger, but the number of new pharmaceuticals coming to market is declining. Patents can sometimes be invented around and will always expire eventually, but generic manufacturers are not jumping into the markets as quickly as we would expect.”
Although this seems all new, it is not. Already in 2007 the industry has been the subject of scrutiny by national competition (antitrust) agencies, as well as by the EU Commission. The reason is well known. Pharmaceutical houses are becoming increasingly reliant on sales from blockbuster drugs--formulations that generate at least $1 billion a year in revenue. But sales of most drugs eventually decline because of patent expiration or competition from newer generic, treatments and drugs. The problem is that less new big selling drugs are in the pipeline. The arrival of cheaper generic variants pose a legal and political challenge for both the companies involved (research based as well as generic newbies) and the EU health authorities (and the competition agencies as a result thereof).
The UK Office of Fair Trading (OFT) already investigated in 2006 claims that Novartis attempted to impede generic market entry in relation to Clozapine, a schizophrenia drug. Allegedly this was a strategy of keeping the market price up by supplying potential generic competitors, charging them a relatively high price so that they could not undercut as much as they might otherwise have done. Very little detail is publicly known and the Competition Commission eventually cleared Novartis, issuing only a very short decision giving little detail.
posted by IPEG at Thursday, January 17, 2008
11 January 2008
Judge Kühnen, the wel known patent judge in the reginal District court of Düsseldorf for patent litigation, has recently been appointed as the new chairman of the Patent Division at the Düsseldorf Appeal Court (Oberlandesgericht). He succeeds Judge Steinacker, who retires after many years as the chairman of the court.
The Düsseldorf courts for patent litigation are the most popular patent trial forums for patentees in Europe. Just the regional court has about 500 cases a year, which is more than anywhere else in Europe. It is not clear who will succeed Judge Kühnen as the chairman of the regional court in Düsseldorf, but there are strong indications that Judge Ulrike Voss will be the new District Court President. She already heads one of the two chambers for patent litigation at the regional court provisionally.
posted by IPEG at Friday, January 11, 2008
07 January 2008
posted by IPEG at Monday, January 07, 2008
04 January 2008
A little belated to report by blogger, but once again Booz Allen Hamilton published in December 2007 their “Global Innovation 1000” 2007 edition. Overall spending on research and development rose, to US$447 billion in 2007. The researchers found, as in 2006, no statistically significant connection between the amount of money a company spent on innovation and its financial performance. BAH selected a group of the Global Innovation 1000 companies, that spent a combined total of $68 billion on R&D in 2006. Through surveys and follow-up interviews with senior executives of those companies Booz Hamilton explored their approaches to technology, customers, and markets, and how tightly their innovation strategies were connected to their overall corporate goals and direction.
Three innovation strategies are identified in the study, “Need Seekers”, “Market Readers” and “Technology Drivers”. However none of the strategies performed significantly better than the other. Customer focus is still the key. This year, nine of our 10 industry sectors accelerated their R&D spending — only the automotive industry spend grew at a slower rate over the last year than its five-year historic growth rate. More intriguing were the changes in the geographic distribution of R&D spending. Companies headquartered in North America increased their absolute R&D spending by 13 percent, accounting for most of the growth among the Global Innovation 1000. China and India continued to lag in intensity, with a spending level of only 0.8 percent of sales, reflecting the lower level of maturity in these markets and perhaps lower costs.
posted by IPEG at Friday, January 04, 2008
03 January 2008
As blogger just learned, on Christmas Eve, one of Europe's great patent judges, Lord Justice Pumfrey, passed away quite unexpectedly at the much too young an age of 56. He was the author of many judgements that changed the patent landscape in the last years, not just for the UK but for many European patent professionals, who followed his learnings closely. He was admired and respected and we surely feel deeply sorry that we have to miss a great judge.
see also Times Online, Jan. 3
posted by IPEG at Thursday, January 03, 2008
01 January 2008
Patent Troll Tracker tracks patent litigation. Read their year end’s "rundown on some numbers concerning patent litigation". The Troll Tracker looks at the Fortune 100 (top 100 US companies in terms of revenues) to see who got sued the most for patent infringement, and found that the top 35 companies were sued a combined 500 times for patent infringement in the last two years alone. TechDirt refers to this amount as “an awful lot of money wasted on lawyers that could be going towards actual innovation”. However, I wish there is a clear 1-to-1 relationship between patents and innovation. Intuitively we think of innovation unthinkable without patents. However, history has shown that innovation is achieved in areas where patents are rare or seldom used.
Patent Troll Tracker uses the term “non-practicing entities” or NPEs defined as “entities that don't make any products”. PTT asserts that of the lawsuits over the past two years, approximately 50% came from NPE’s. However, in the last 3 months, according to PTT, “that number shoots up to 70% from companies that don't make products. And if you limit the list to tech companies, 80% of the lawsuits came from companies that don't make products”.
TechDirt wonders: “shouldn't this be ringing some alarm bells?” We have a similar contemplation: Will 2008 bring the same troll trend in Europe? We already reported a few times on Sisvel, Europe’s largest patent troll. However, the American companies that focus on patents, whether they qualify as a NPE, such as Gemstar, the newly acquired patent troll of Macrovision, may use 2008 to assert their patents in Europe based on the use of various electronic programming guides. 2008 also show an increase in NPE patent assertion activity in Europe, no doubt. Would be interesting to see if anyone in Europe, like PTT, can do some research on this.
posted by IPEG at Tuesday, January 01, 2008