IPEG

IPEG blog moved!

2008-05-19T04:07:00.003-04:00

We moved our IPEG blog, join us on our new blogsite. If you like to subscribe to new posts, just go to our new blog (at www.ipeg.com/blog) and click on "subscribe to our blog" in the top bar.

We hope to see you soon in our new outfit!

INTA, ‘Ghost’ Brands and Trademarks

2008-05-18T02:15:00.002-04:00

INTA, the International Trademark Association is having its Annual Conference in Berlin, starting today. All kind of interesting subjects that brand owners keep happily busy are being dealt with in workshops, break out sessions and the like.

Subjects like "How to Combat Counterfeit", "Taxes and Trademarks" and of course the CTM (Community Trademark) are on the agenda. A more frivolous subject "Why We Do What We Do?" is being offered, as the program describes it "Why it is that trademark professionals seem to enjoy their jobs in ways that practitioners in many other areas of the legal profession do not?" (never realized that we as IP consultants and patent merchant bankers do not enjoy our jobs).

So what's missing in the INTA conference that should be on the agenda, prominently, I would say?

How unused, or ghost or "dormant" brands (and the legal part of it, trademarks) could be sold and subsequently acquired by "revival" companies and prepare them for a second life. Selling trademarks out of your existing portfolios is strangely enough an anathema in trademark world.
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.)

Coincidentally, at breakfast, preparing for this blog, I read in this morning's International Herald Tribune an article (from New York Times Magazine, by Rob Walker, "How ‘ghost' brands can come back to life" on "brand reanimation". A Chicago company, River West Brands seems to have found a niche market by acquiring those ‘dormant' or ‘ghost' brands and using this "brand equity" to take a fresh approach to what companies seem to struggle with: what to do with brands and trademarks that are being abandoned in the big corporate environments. Examples enough: BRIM for decaffeinated coffee from (former) General Foods (now Altria), VOLKSWAGEN BEETLE, and close to (my) home: POSTBANK a well known trademark for a post office bank part of ING Bank, which was abandoned sometime ago.

Why is there not a more active divestiture practice in trademark world? We dealt with that in an earlier blog. Last year IPEG tried to raise interest in the subject at the Annual INTA conference. Not to much avail as it seems, as this year INTA does not cover the subject at all except to see it as a "threat", not an opportunity.

Who takes up the glove and starts the discussion in the trademark community?
To be continued

Standard setting Rambus FTC - EU implications?

2008-05-04T22:10:00.005-04:00

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

The Biogen test revisited

2008-04-11T13:26:00.011-04:00

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.

The Facts
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 enantiomer[1]of 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[2], 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.

Comments

This decision may in practice put an end to the “Biogen Insufficiency” doctrine, and brings the UK patent courts in line with most other patent jurisdictions worldwide as well as the EPO jurisprudence. As to patent validity it may open up a new trend into a more patentee friendly disposition.

[1] Advances in industrial chemical processes have made it economical for pharmaceutical manufacturers to take drugs that were originally marketed in racemic form and market the individual enantiomers, each of which may have unique properties. For some drugs, such as zopiclone, only one enantiomer (eszopiclone) is active; the FDA has allowed such once-generic drugs to be patented and marketed under another name. In other cases, such as ibuprofen, it is not economically feasible to isolate a single enantiomer from a racemic mixture or to synthesize just the active one, and therefore a racemic mixture is marketed, with an essentially doubled recommended dose (see www.answers.com) . See for background chemistry: “Patents and enantiomers: Generics v Lundbeck” by Brian Whitehead, Stuart Jackson, and Richard Kempner in Journal of Intellectual Property Law & Practice, 2007, Vol. 2, No. 12, p. 808-810

[2] In Biogen v Medeva [1997] 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.

Thanks to Simmons & Simmons (London), Howrey (London), Remco de Ranitz (The Hague)

Dutch court refers Round Up patent dispute to ECJ

2008-04-09T14:46:00.016-04:00

In a long standing battle[1] 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”).

The facts
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 Case
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.

Core of the matter is, briefly, whether according to art.9 of the Directive, the scope of preotection for a biotechnology invention is determined on the basis of the generic information having been incorporated in the product and therein exercising its function. Consequently, protection to the plants may not be extended to the derived products in which the genetic information is residual and does not "exercise its (genetic) function".

Question is whether articles 8 and 9 of the Biotech Directive, implemented in Dutch law as article 53a Dutch Patent Act ("Rijksoctrooiwet", or "ROW") merely explicate the scope of protection awarded to biotechnology inventions, or actually limit the scope of these inventions to actively functioning DNA (sequences).

The Hague District Court judgment
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.

Secondly the court rejected an interpretation that the soy meal can be regarded as a “directly obtained product” by application of the claimed methods according to some other claims of the Monsanto patent. Although soy plant and soy bean have been directly obtained by the patented method, the beans are subsequently then separated and subsequently “crushed” the beans are separated, in a number of treatment stages, and worked into different components, finally ending up as soy meal.

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 major question then became whether, if any of the claims relating to genetic material are infringed, as Monsanto alleges, the soy meal contains at least genomic fragments of the Round Up Ready-DNA sequence?

Questions referred to the ECJ

The court reviewed this question in relation to articles 8 and 9 of the 1998 Council Directive 98/44/EG on the protection of biotechnological inventions “the Biotechnology Directive”).

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).

[1] 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

(with thanks to Erik de Vos, Nauta Dutilh, Amsterdam)

Is there an After-Life for Pan European Injunctions?

2008-03-27T13:58:00.007-04:00

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[1] 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).

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 (…)”

Curious why? Read his recent contribution to Netherlands’ well-known IP blog, boek9.nl.

[1] "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."

Europe’s Patent Demise

2008-03-24T12:55:00.011-04:00

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)

How justified are differences in IP duration?

2008-03-23T04:37:00.008-04:00

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[1] 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.

In contrast to the economic and domestically pragmatic arguments, prof. Crews sees several respects in which strengthened IPRS do not include a corresponding balance of the public interest. Recognizing that, in its origins, copyright law was intended to achieve a balance between preserving a public domain or commons of ideas and providing incentive for creative endeavors, he suggests the former is neglected in the trend toward maximizing duration terms of IPRS.

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?

[1] 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.

New chapter in UK saga of patenting computer programs

2008-03-19T12:01:00.004-04:00

There has been another development in the continuing saga of the UK's interpretation of what is and is not patentable subject matter in relation to computer programs.

In Symbian's Patent Application (Patents Court, 18 March 2008), Patten J overturned a decision of the UK-IPO to refuse a patent application because it related to nothing more than a computer program. In his judgment Patten J observed that the UK-IPO's decision illustrates the divide which exists between the UK-IPO and the EPO about how the patentability of inventions involving computer programs is assessed. The equivalent patent has been granted by the EPO. The UK-IPO announced that it will appeal the decision.

Background
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 Symbian decision
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.

Pending the result of its appeal, the UK-IPO will be continuing to follow the the Aerotel vs. Macrossan test set out in its Practice Notices of November 2006 and February 2008. However, it will take account of the Symbian judgment "in appropriate cases".

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.

There have been some reports that Alison Brimelow, the (relatively) new President of the EPO has indicated that the EPO might refer the issue of Article 52(2) exclusions to the Enlarged Board of Appeal. Jacob LJ floated this as a desirable development in his Aerotel/Macrossan judgment but Alain Pompidou, the previous president, rejected it "at this stage". Nothing may come of this (and Ms Brimelow may even have been misquoted) but an authoritative Enlarged Board of Appeal decision would be welcome too.

Peter Hill, Simmons & Simmons (London)

IP-Com extends its patent reach towards HTC in Germany

2008-03-12T04:31:00.004-04:00

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[1], 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)

** As a flip side, these courts do that because they have provide a fast remedy against any such ex parte injunctions as the alleged infringer and “victim” of the injunction can ask the court to stay the injunction pending a hearing they request where their side of the story can be heard. This happens fairly quickly after the injunction is being given. Only then the court hears the full story by both parties and can either upheld or lift the injunction.

** Ex parte injunctions are allowed in any European jurisdiction after the Enforcement Directive. However, UK, France and Netherlands are very difficult to get a preliminary injunction in somewhat complex patent cases. Netherlands’ courts still are very reluctant to provide those types of preliminary injunctions as they have other fast alternatives like the well known “kort geding” (where even in patent cases a preliminary injunction can be given in 6-8 weeks). Ex parte injunctions in patent cases have not been granted, as far as we know, in The Netherlands, nor in any other EU country.

So any suggestion that Germany is a better place for NPE to litigate can not be based upon a tactical advantage of a preliminary injunction. So why would NPEs choose Germany? Firstly because unlike UK patent judges, German courts are generally more friendly on EP patents that come out of the EPO. Germany as the only EU country also has the system of bifurcation (validity and infringement are being dealt with by different courts in Germany), all of which helps the NPE as a patent owner.

[1] 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”

Qualcomm vs. Nokia UK judgement

2008-03-03T13:42:00.006-05:00

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[1] 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.”

The Court preludes to non esentiality in finding that the ‘482 Patent would not, if valid, be “technically 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
technically possible.

The overall findings of the court, are:

*** Qualcomm patent ‘324 is invalid as granted for lack of novelty over two prior art publications (“Cognito” and “Nippon Telegraph”) and obviousness over another prior art document (“NEC”). Qualcomm submitted during trial that it could amend the claims, but that does not help either. The patent would remain invalid as proposed to be amended, for lack of novelty over Cognito and obviousness over NEC, the Court found. As a Dutch comfort for Qualcomm (for what it is worth) ‘324 would, if valid, be infringed by GSM/GPRS in combination with Nokia’s phones.

*** Qualcomm patent ‘482 (that is, claims 1, 2, 9 and 11) are invalid for lack of inventive step over three other prior art documents (“IS-95”, publications relating to patents of Mr. Wheatley, an inventor and “Soliman”, and claims 9 and 11 for insufficiency. Again, Dutch comfort, as the Court held that, had the Qualcomm patent been held valid, Nokia would have infringed claims 1, 2 and 9, but, at the same token, had Qualcomm’s patent been held valid the court would not have found it to be “essential” to the standard.

[1] 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

IP Valuation - A Pandora's Box

2008-03-01T10:39:00.006-05:00

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[1], 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
[1] See for a very interesting interview with Baruch Lev on this subject: “Interview with Baruch Lev: Accounting, Reporting and Intangible Assets”

Is Asia surpassing Europe in innovation by 2015?

2008-02-22T03:27:00.004-05:00

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?

European Research Discussion, IP input urgently needed

2008-02-16T08:43:00.007-05:00

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.

The “debate” on ERA took place between May and August 2007. The result of that debate - written contributions received in response to its Green Paper by European institutions, Member States - are now published.

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.

The Patenting Paradox

2008-02-10T05:44:00.000-05:00

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.

for an ipeg presentation of the different IP management issues, see "Patents and Strategic IPR Management"

Do Not Blame Patent Trolls

2008-02-02T05:45:00.000-05:00

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.

France ratifies the London Agreement

2008-01-30T14:06:00.000-05:00

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

DRM dead?

2008-01-28T09:48:00.000-05:00

“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)

Gemstar EPG patent strategy, sue first then talk

2008-01-27T06:59:00.000-05:00

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.

EU Commission raid on Pharma companies

2008-01-17T05:01:00.000-05:00

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.”

The probe will examine whether industry agreements infringe the EC Treaty’s prohibition on restrictive business practices, and whether companies have created “artificial barriers to innovative or generic product entry, through the misuse of patent rights, vexatious litigation or other means,” Kroes said.

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).

Like any humanly endeavor to extend life where possible, industry has long been seeking to develop policies to extend the life of their successful drugs, known as “life cycle management”. Those opposing or competing the research based pharmaceutical industry rather like to use a more derogatory term, “evergreening”. Those life cycle management policies have increasing come under scrutiny from competition authorities.

In 2005, the EU Commission found against AstraZeneca in an antitrust case brought by Generics (UK) Limited and Scandinavian Pharmaceuticals Generics AB (both part of Merck Generics). AZ adopted in that case a rather extreme interpretation of "marketing authorization date". The Commission found that AZ made misleading representations to national patent offices to (a) obtain supplementary protection certificates (patent extensions) that it would not otherwise have obtained, and (b) obtain supplementary protection certificates for longer periods than it would otherwise have obtained. Secondly, AZ was found to have switched the formulation of Losec from capsules to tablets to delay generic market entry and parallel trade. This was held to be an abuse of their dominant position.

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.

In 2007 the European Commission issued a Statement of Objections against Boehringer Ingelheim with regard to its patenting policy on anti-cholinergics (asthma drugs). Again, there is little information about this, but it is believed that BI were trying to create a “patent thicket” to protect the expiry of one of their major products.

Another examples exist of earlier scrutinies and on-going investigations by the European Commission in the pharmaceutical industry, but these are not public. They are based, in part, on allegations of over-aggressive assertion of patents. However both in the US and in Europe it is already established that it is an abuse of a dominant position to assert a patent when you have no belief in your prospects of winning, but it is still highly debatable whether the competition authorities and/or should become involved in an evaluation of strength of a patent case. In Netherlands this was held by the Dutch the Supreme Court in the case CFS Bakel vs. Stork Titan.

When the reason for the inquiry relates to the assertion of patents against generics, we find it highly debatable whether the competition authorities should become involved in an evaluation of strength of a patent case.

to be continued

New president Patent Division Düsseldorf Appeal Court

2008-01-11T05:53:00.001-05:00

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.

It would be a good thing if we would find an opportunity to have decisions by the main German patent courts available online as soon as they are handed down, and of course it would mean wider distribution if those could be provided in english as well. Hopefully sponsors can be found to make these patent decisions available online in english right after delivery. Who picks up the gloves?

American Presidential Elections and IP

2008-01-07T13:40:00.000-05:00

Does it make a difference for IP who the next US president will be? Prof. Hal Wegner thinks it does.

On the Republican side, Mitt Romney has already made a statement in his campaign on key patent issues and has gained certain support in the patent bar; no "patent pulse" has been observed for Governor Huckabee or any other Republican candidate.

On the Democratic side, a stark contrast exists between Senators Clinton and Obama, while Senator Edwards has not shown a patent pulse. For details of the experience of the two Democratic Senators in patent law, see "Presidential Candidates’ Experience and Interest in Patents: Romney, Obama Tops".

For many months the need for the patent community to get involved with Presidential campaigns at an early stage has been stressed. Only with early involvement will a new President pick a patent-savvy Director instead of making the position a fungible political plum. As important, at least nine (9) of the twelve Federal Circuit judgeships are either currently senior-eligible or will be during the next four years: Getting solid Federal Circuit appointments should be an imperative for serious users of the patent system.

The criticisms voiced by me eralier are directed more at the collective leadership of the patent community that must get involved with all the presidential campaigns. [H]atchet job on poor Hillary". A Hillary defender asked me: "Why the hatchet job on poor Hillary when she’s down after Iowa? The Romney letter is no more than platitudes probably drafted by his PR folks, and only the last two paragraphs of the 9-page Obama campaign piece are directed to nebulous patent reform proposals. Your suggestions that Obama’s putative expertise was acquired by virtue of his tender age and osmosis while on the Chicago faculty are ludicrous."

In fact, it has only been in the past generation that patents have come to the fore: When Hillary was at Yale and in her years at the Rose Law Firm, there was very little interest in patents in the academy or in larger non-patent law firms. All that has changed, making Obama the intergenerational beneficiary. In fact, Obama did have serious interactions while at Chicago with faculty members interested I patents, far from being "ludicrous".

But, again, the point is not Hillary bashing but rather an encouragement that backers of candidates beyond Romney and Obama get involved with the various campaigns, at a time when meaningful input can be made. More on IP and the US Presidency, click here

Hal Wegner, Washington

2007 edition of Booz Allen's "Global Innovation 1000"

2008-01-04T08:08:00.000-05:00

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.

A great patent judge passes away

2008-01-03T05:36:00.000-05:00

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

Patent Trolls Statistics, will Europe escape the trolls?

2008-01-01T09:35:00.000-05:00

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.

Be brief, patent applicant!

2007-12-21T10:31:00.001-05:00

We copycat IPKat*:

The European Patent Office has announced a punitive fee schedule effective April 1, 2009, that will punish applicants filing more than 15 claims in an application. A 200 € ($ 287) fee per claim will be assessed for excess claims. But, if the claims go over 50, the penalty per claim jumps to 500 € ($ 717).

*muchas gracias also Hal Wegner

How much effect has patenting on innovation?

2007-12-17T15:10:00.000-05:00

An interesting study by Brent Allred and Walter Park, “Patent rights and innovative activity: Evidence from national and firm-level data", published in the Journal of International Business Studies 38(6): 878-900, is one of those economist studies that shed some interesting light on the relationship between patents and innovation, a much underexplored area in Europe.

read Roger Smeets’ summary of the study. Roger is a PhD student at the Nijmegen Centre for Economics (Radboud University Nijmegen, Netherlands).

New European Patent Convention in force

2007-12-14T06:05:00.000-05:00

Yesterday, December 13, 2007 the revised European Patent Convention (“EPC2000”) came into effect. It simplifies the patent application procedure before the EPO by eliminating unnecessary requirements and generalizes the BEST system (Bringing Search and Examination Together). It further makes the EPC itself more adaptable by transferring detailed provisions of a procedural or administrative character to the Implementing Regulations.

Changes for users
A radical change? No not quite but a considerable one. The new “refinements” of the EPC reflect the demands of the users of the system, the inventors and scientists that ensure continued progress through their work. Patent applications can now be filed in any language, though subsequently (within 2 months) a translation has to be submitted in English, French or German. Moreover, all EPC contracting states are now automatically designated when filing a European patent.

A useful new feature is that patentees also have the right to limit their patent." A new feature is the limitation procedure, which lets proprietors restrict the scope of their patents in central proceedings before the EPO and with effect for all the contracting states.

It will be interesting to see:

* A new limitation and revocation procedure will be introduced. This will provide a way for the owner of a European patent to limit the claims at any time after grant. The question remains what degree of scrutiny will be given to amendments sought under the central limitation (amendment) procedure and how speedily applications for central limitation will be dealt with. We expect amendments to be handled simply, and relatively quickly, at least at the outset

* what consequences will arise when a national court has found infringement but the European patent is subsequently limited (amended) in scope following the new centralized procedure. Such an amendment will be deemed to have taken effect from the date of the grant of the patent. In the UK at least, an injunction granted may be discharged but any award of damages would stand

* the extent to which a consistent approach to post-grant amendment in national proceedings will be achieved in all contracting states. For example, in the UK, the Comptroller / Court will enjoy only an extremely limited discretion to refuse amendments in light of the amended UK requirement that they should "have regard" to any relevant principles applicable under the EPC

* whether second medical use claims drafted in the new form will be construed by the EPO and national courts as having the same scope as the old 'Swiss form' claims. In particular, direct infringement will take place in the country of use, not the country of manufacture;

* how, when construing a patent claim, national courts will interpret the requirement that they must take "due account" of so-called 'equivalents' to elements specified in the claim. The Dutch and German courts, for example, already apply a doctrine of equivalents. The likelihood is that the English Court will not change its current practice at all. The English Court asks the question "what would the skilled person understand the patentee to mean by using the words of the claims". This may or may not result in a broad construction - all depends upon the invention and its context.

Patent Trolls – The Pot Calling the Pot … Black

2007-12-09T06:17:00.000-05:00

Not later than the nineteenth century patenting of the automobile by Rochester patent attorney George Selden paper patents and marginally developed patents have been obtained for the principal purpose of suing major manufacturers. Whether good or bad, providing a nasty buzz word to describe such activities in a generalized fashion merely inflames the rhetoric.

Thus was born the term “patent troll” to widely define the enforcement of patents by those who do not themselves manufacture and sell products. The originator of this nomenclature has now switched to the dark side and, not surprisingly, says that he “refrain[s] from using [the term “patent troll”] today. It has become too emotionally charged and too often hurled carelessly as an epithet to disparage just about every kind of plaintiff in a patent suit.” See Peter N. Detkin, "Leveling the Patent Playing Field", 6 The John Marshall Review of Intellectual Property law 636, 642 (2007). (*)

Prof. Hal Wegner, December 8, 2007

IPEG's comment:

I have used the term patent troll many times in my blogs (just type in the word “troll” in the search column above and you will see all the previous posts).

That Peter Detkin is trying to refrain from using the term is quite understandable, as he is managing director of Intellectual Ventures, seen by many as a patent troll in optima forma. Intellectual Ventures likes to see themselves as “a combination of a private-equity fund and an innovation hothouse”. So says Nathan Myhrvold, IV’s creator. The Wall Street Journal wonders: “will the company begin launching patent-infringement lawsuits to pressure companies to pay for use of its IP?” Myhrvold says that his firm hasn’t sued anybody for patent infringement but that he can’t rule it out in the future.

And that is exactly what a patent troll does. That it has obtained a negative connotation can hardly be a surprise. Amassing patents with the sole purpose to assert them against industries and users of patented technology by forcing them either by carrot or stick licensing into paying money, has nothing to do with “innovation”.

The relation between patents and innovation is still an area of heated policy debates and theoretical controversies, and empirical studies of the consequences of patenting for innovative activity are scant. Most economic studies and seem to concentrate on the effects of patenting for innovative strength of developing and developed countries (**). One of the most recent studies - and one worth reading(***) - comes to the conclusion that the effects on innovation of patenting is far less in developing countries than it is in developed countries. However there is still a lot of unknowns what the effect is of patenting on innovation between competing undustries.

It’s a far cry from the truth to claim that amassing patents in an organization that in itself does not produce any innovative products, improves working methods or produces any other economically relevant progress, is contributing to “innovation”.

(*) See Hal Wegner on “Who is the Original “Patent Troll”?”
(**) see: Nagesh Kumar, “Intellectual Property Rights, Technology and Economic Development: Experiences of Asian Countries”, Research and Information System for Developing Countries, New Delhi, India.
(***) by Brent B Allred and Walter G Park (“Patent rights and innovative activity: evidence from national and firm-level data”, Journal of International Business Studies (2007) 38, 878–900)

Macrovision acquires Gemstar, a more aggressive IP policy ahead

2007-12-08T08:29:00.000-05:00

Associated Press reported this week about Macrovision's (MVSN) acquisition of Gemstar. MVSN CEO Fred Amoroso commented:

"There is a transformation of home entertainment going on and we want to give consumers the ability to find in and easily across a variety of devices"

Actually the leap of logic required to understand that statement has to do with the fact that MVSN has been steadily acquiring IP and treating it more strategically. Wall Street is valuing the transaction based on Gemstar’s existing revenue streams, a big part of which is the TV Guide magazine, which is a printed weekly magazine of TV listings in the US that has been around forever. Macrovision has utterly no idea what to do with this business, as even its CEO admitted during the analyst call for the acquisition, and it is considered – even by magazine publishing industry standards -- a dying business that has not adapted to the times.

CEO Fred Amoroso didn't provide any definitive answers in a conference call with analysts, saying he didn't know much about publishing and needed more time to assess how TV Guide could fit into his strategy. Fred doesn’t know anything about publishing – his background is accounting/consulting. This is why the stock tanked. It’s a visceral reaction to the long legacy of TV Guide.

More importantly, Gemstar has and EPG (electronic program guide) business – technology and IPRs (patents). Because of Gemstar's declining TV Guide business, their potential as a "patent troll", holding many patents on (e.g) EPG (electronic programming guides) makes it a powerful player in the IPR market.

We are betting that MVSN is preparing to launch a series of very aggressive patent assertion moves both in the US as well as in Europe. This is not something that it can bake into its revenue projections for Wall Street, nor is this the kind of thing that the typical Wall Street analyst understands how to include in his “turn the crank” formula for valuing acquisitions. Ergo, Wall Street tanked both companies’ stocks on the announcement.

As to potential targets for Gemstar's (or better: MVSN) more aggressive approach on IPR: be aware and prepared.

YouTube and IPRs

2007-12-04T03:16:00.000-05:00

Ever tried to find anything interesting on patents at You Tube? You would be surprised

on controversial issues like patenting "life"
Joe Siino, VP IP on Patent Trolls, how to find a patent attorney? Check Mike Mozart
"Inventors" like Denny Klein who patented his "process of converting H2O to HHO, "producing a gas that combines the atomic power of hydrogen with the chemical stability of water"

A somewhat curious mixture of issues in patent law, ranging from Sisvels' enforcement on mp3 patents where Fraunhofer in Germany was the reail inventor on wasting money on R&D what has already been patented ("60,000 million euro, or the combined yearly revenue of Microsoft and Apple") and similar ostensibly IP mismatches, in "Patent Wars":

Nokia makes little progress in its European Qualcomm patent fight

2007-11-30T07:16:00.000-05:00

In our October 1 blog “Is Patent Exhaustion The Big New Thing?” we referred to the “exhaustion” argument as a pretty powerful tool for Nokia against Qualcomm in their negotiations on a continuation of the CDMA/WCDMA license.

Nokia has not come very far in Europe with this argument. This week in the UK the trial between the two started before Mr. Justice Floyd, likely to last 3 weeks. On October 23 , the Landgericht Mannheim in Germany dismissed Nokia’s claim that Qualcomm’s patent rights were “exhausted”. Nokia’s further request to the court to refer the issue of exhaustion of rights to the European Court of Justice, was also denied.

Nokia faced the same fate in The Netherlands, where the District Court denied Nokia’s claim that Qualcomm’s patents were “exhausted” because the chipsets that are used in the Nokia mobile handsets are being obtained from a third party (Texas Instruments) that has a license from Qualcomm under the alleged infringed patents. (for the English translation of the The Hague judgement, see here).

The argument ran parallel to a case in the US between LG Electronics and Quanta Computer Inc. currently before the US Supreme Court. In the Dutch case, the court found against Nokia, e.g. by deciding that Nokia had failed to specify both the products and the patents that were exhausted and which specifics of the products that would be covered under the TI license.

Our take from this is that last word has not been said on this complicated issue, but that clearly Qualcomm has the upper hand now in the negotiations. One wonders whether the Nokia strategy was smart enough to not (try to) agree before the German and Netherlands court would rule (see our October 1 blog).

The case in the UK, from what we could derive from pubic sources, is slightly different than 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. Qualcomm’s claim under '324 is limited to contributory infringement as the product claims require both a handset and a base station. They also seek a declaration of essentiality in respect of '324 re the 3G standard.

The infringement claims relate to specific handsets purchased by Qualcomm, but these are cited merely as 'examples' i.e. they claim the same arguments apply to all Nokia handsets. However, CDMA handsets are excluded as Nokia is licensed for these.

Nokia has counterclaimed for revocation. It also has other arguments to the effect that Qualcomm must grant FRAND licenses, and as to what the terms of those should be. Other Nokia arguments include waiver, estoppel, competition law and non-availability of injunctive relief. However, all these issues have been put off to a 2nd trial in the event that Qualcomm succeeds in the current UK trial.

click here for US ITC decision of December 13, 2007 in favor of Nokia agaisnt Qualcomm.

EU commission’s lethargy on EPLA criticized

2007-11-25T02:27:00.000-05:00

EPLA proponent Jochen Pagenberg delivers fierce criticism on lack of progress on EPLA. Will the European Patent Litigation Agreement have a chance in 2008? Read his critical review in "International Review of Intellectual Property and Competition Law (IIC) 2007, 7).

He seems not particularly optimistic:

"Industry is certainly not willing to waste another year in fruitless discussions. If nothing happens, it will be better to drop EPLA and the Community patent for good - sooner rather than later. The Community patent will be even more difficult to adopt politically because the involvement of all Member States is indeed necessary. But the Community patent should be easier to discuss, when Member States have experience of how EPLA operates. Therefore, if EPLA is not achievable, it would be preferable to maintain the status quo and not even to start on an overhaul of the Community Patent Regulation. None of the Member States and nobody in the Commission will be willing and able to prepare any paper that could even come close to the detailed content of the EPLA draft. Therefore it must be feared that participants will grow tired of continuing discussions on one small item after another - and no end in sight."

German Federal Patent Court Invalidates Pfizer’s Lipitor Patent

2007-11-12T22:35:00.001-05:00

On Wednesday, 31 October 2007, the Federal Patent Court (FPC) in Germany invalidated Pfizer’s Lipitor Patent in a first instance decision. This crucial decision for pharmaceutical companies contains some importantaspects regarding the patentability of secondary patents in Germany.

Background
The parties of the invalidity proceedings have not been published by the FPC, but it is known in the market that the generic drug makers Ranbaxy Laboratories Ltd. and Basics GmbH filed the revocation action against Pfizer’s Lipitor Patent (EP 0 409 281/DE 690 33 840). Lipitor is a popular cholesterol drug, which belongs to the most successful drugs in Pfizer’s drug portfolio. According to secondary sources, Pfizer achieved a turnover of nearly 11 billion USD in 2004 with its drug Lipitor (in Germany known under the trade mark “Sortis”).

Subject of the patent is the hemicalcium salt of R(R*R*) acid for the preparation of pharmaceutical compositions useful for treating mammals, including humans, suffering from hypercholesterolemia or hyperlipidemia. The plaintiffs argued in their revocation action that the invention of the patent is not new due to novelty destroying prior art documents. In particular, a prior art document disclosing the basic chemical compound was seen as novelty destroying by the plaintiffs. Pfizer, however, argued that the preparation of the hemicalcium salt R(R*R*) out of the basic chemical compound is new and patentable. In particular, Pfizer brought forward the argument that a prior art document, that allows an expert to make a selection on how to achieve a specific salt from the basic compound is not novelty destroying. Additionally, Pfizer argued that the European Patent Office confirmed the validity of the patent within prior opposition proceedings.

The decision
The FPC revoked the patent in first instance mainly on the bases of two novelty destroying prior art documents. The FPC is of the opinion that the prior art document comprising the basic chemical compound is novelty destroying in this case. The FPC reasons its decision by stating that novelty destroying state of the art has to be determined not only by considering the wording of the prior art document, but also by any connotation what is a matter of course even if it is not explicitly mentioned in the publication. Additionally, anything which have to be necessarily supplemented or what a person skilled in the art would contemplate by reading the publication needs to be seen as novelty destroying as well. The FPC says that these principles apply for chemical compounds as well, provided that the prior publication contains at least an allusion to the salt from the perspective of a person skilled in the art. In other words, it is novelty destroying if a person skilled in the art understands by reading the prior publications that it would be possible to obtain the salt to which the patent in suit extends. It is not required that the salt itself has already been manufactured. It is sufficient that the option of manufacturing the salt can easily be contemplated by a person skilled in the art by reading the prior publication. In the case in question, the FPC is of the opinion that according to the first prior art destroying document the hemicalcium salt automatically accrues in a composite of stereo isomers with a certain percentage of single isomers. Hence, single stereo isomers are necessarily a product of the chemical reaction within the composite itself. in consequence, the novelty of stereo isomers has to be denied, if an expert contemplates the stereo isomers by applying the teaching of the prior art document. An explicit reference to single stereo isomers as a product of the composite itself is not necessary in the view of the FPC. According to the FPC, there is also a second novelty destroying publication. In this regard, the court made some interesting statements regarding selection inventions. Pfizer argued in its defence that it is not novelty destroying if a person skilled in the art needs to make selections between several options in order to achieve the patented hemicalciumsalt, as this is the case in the second prior art document. The FPC denied this argument, because in its view the selection to be made in this case is anticipated in the relevant prior art document. The court argued that the selection of several carboxamide and their acid forms with pharmaceutical salts are already mentioned in the prior art document. Additionally, the FPC is of the opinion that the selection of calcium as a salt composing cation among only a few metal salts makes the hemicalcium salt of R(R*R*)-enantiomeres not new.

Regarding Pfizer’s argument that the European Patent office confirmed the patent within opposition proceedings, the FPC argued that the criteria for novelty set by the European Patent Office are too narrow and can not be applied under German case law. The FPC underlines that in the light of the decisions of the German Federal Court of Justice, there is no standardized European interpretation guide lines for novelty and inventiveness. Hence, the FPC is of the opinion that the question of novelty and inventiveness has to be interpreted under national standards.

Pfizer is said to appeal the ruling, so that it can take up to another 3 years to get a final
decision in this case. Pfizer does currently not see an immediate commercial impact of the decision. According to Pfizer, neither Ranbaxy nor Basics have received a regulatory approval by German authorities to sell a generic copy of Lipitor yet. Additionally, the patent is going to be expired in July 2010, so likely before a final judgement of the German Federal Court of Justice.

Effects of the decision
Although it is only a first instance decision, it shows that it might be difficult to maintain the validity of secondary European patents in Germany, comparable to the legal situation in UK. Should the decision of the FPC be confirmed by the German Federal Court of Justice, pharmaceutical companies must reconsider their patent strategy in this regard.

Dr. Peter Meyer, Dr. Kaya Köklü
Simmons & Simmons, Düsseldorf

Is France changing its position on EPLA?

2007-10-08T01:31:00.000-04:00

The rumor goes that France is due to make a sea change shift towards supporting the EPLA, an initiative to harmonize the way patents are being litigated in Europe. The French Research Minister (heading the French Ministère de l'Enseignement supérieur et de la Recherche”) Valérie Pecresse, has sent a letter (or is about to do so) to her German counterpart, expressing the French support for EPLA. We have not been able to find any confirmation or hard evidence for this rumor from anyone yet, nor from the French delegates to the AIPPI ExCO meeting currently taking place in Singapore. They do agree though, that such a letter would implicate a sea change in the position of France, who has been the most vocal of antis against the EPLA proposal. One wonders whether the French Minister – in indeed she sent the letter, or is about to do so – could do this without the backing of Nicolas Sarkozy, the French President (not if you are fond of your job as a French Minister, we imagine).

The support would not only be for EPLA, but also for the London Agreement. The London Agreement was concluded in London on 17 October 2000 with the aim of creating a cost attractive post-grant translation regime for European patents. It is the fruit of the work on reducing European patent costs, which was set in motion at the Intergovernmental Conference held in France in June 1999.

EPLA has been on a bumpy road so far. McCreevy, the EU's internal market commissioner, told the Financial Times in 2006 that "anything remotely concerning this patent area is fraught with minefields at every turn of the road". He said the failure to secure backing from national governments made him "pessimistic" about the prospect of making progress on the issue. Should pessimism now turn euphoric? Not yet, I am afraid. Let us see what the position of France, the major non voter so far, is. Does Sarkozy now lets his influence count on this subject as well?

Anyone in the position to (if necessary namelessly) confirm or deny this rumor? Please reply to this blog (below, push the envelope).

other IPEG blogs on EPLA: see http://ipgeek.blogspot.com/2007/02/negative-opinion-on-powers-of-eu-member.html and the column on the right of this blog, called "EPLA - everything you always wanted to know but was unable to find"

The Increased Importance of Patents for Big Oil

2007-10-07T04:47:00.000-04:00

Increasingly, big oil companies use their Intellectual Property to achieve competitive advantage over their state-owned rivals (NOC’s). Why is that so? More than 80% of the world’s oil reserves are in the hands of state-controlled companies. Big Oil is loosing its grip on those energy rich countries and their NOCs. NOCs learned over the years how to handle their natural reserves themselves, using service companies like Schlumberger and Grifco. Rob Cox and Cyrus Sanati suggested three options for the industry to counter this (in “Big Oil, Big Problem” in BreakingViews.com)

“There at least three logical responses by the oil majors to the rise of National Oil Companies (NOCs). The first, already underway, is to invest in countries where they're unlikely to see assets expropriated. The second is to consider buying service firms themselves. Lastly, they could seek mega-mergers, along the lines of an Exxon-Chevron or BP-Shell, to counter the increasing heft of the NOCs.”

The better one, I would say, is using their extensive patent portfolios more aggressively against NOCs and when necessary, also against these service companies. Technological advances and R&D achievements are crucial for the international oil companies to optimize the extraction of oil from the reserves under their control while convincing the NOCs to let them help exploit their resources. By doing so they could more actively rely on their IP, alleging infringement against NOC’s and their service industries.

“Patents will be as valuable as reserves in the future, particularly for the International oil companies”, said Robin West, chairman of PFC Energy. “Technology is critical to unlock the value of reserves”.

A survey by the Financial Times shows an sharp increase in R&D spending by many oil companies. Shell increased their Technology R&D budget 50% over the past three years to US$ 1.2 bn in 2006. Chevron’s R&D has more than doubled over the last 5 years. It is very likely that those increased R&D spending has translated in increased IP portfolios. The strategy behind it must be to provide a greater grip on NOC’s and oil service providers to shield against attempts to cut them out of national reserves exploitation, nationalization and other threats to their market position. By using IP more as a offensive competitive weapon, the oil companies can extend their market share. I expect to see an increase in licensing activity, and, as licensing does not provide the competitive edge, infringement claims may be on the rise in oil and gas the industry.

Is Patent Exhaustion the Big New Thing?

2007-10-01T12:04:00.000-04:00

It can be no coincidence that both in the US as well as in Europe “patent exhaustion” has been brought in the legal limelight. Last week in the US the US Supreme Court allowed certiorari in a case Quanta Computer Inc. v. LG Electronics Inc., 06-937.

At the same time in Europe Nokia alleges in German (Mannheim) and Dutch (The Hague) courts that Qualcomm’s patent(s) are “exhausted” in respect of chipsets supplied by Texas Instruments which have been sold on the European Union market with a Qualcomm license. If Nokia’s claim succeeds, Qualcomm would be prevented in Europe from enforcing its respective patents in relation to Nokia handsets. The reason why the case has been brought in The Netherlands, a relatively small market for handsets, is that TI chips used by Nokia are initially supplied to The Netherlands (Rotterdam biggest port of entry in the EU, the Netherlands being an important EU wide distribution country) and subsequently shipped to plants in Finland Germany and Hungary.

TI and Qualcomm are publicly known to have entered into a so called Patent Portfolio License (CDMA/WCDMA license) in 2000 , which expired April 2007. While Nokia is believed to have the option to extend the license under the same terms till December 2008, it is trying to renegotiate better terms with Qualcomm under a renewed license. The inability of parties to agree on new terms caused the current patent struggle in Europe.

The US Quanta-LG case in the US must have inspired Nokia that “exhaustion” is a pretty powerful tool in the negotiations so it must have chosen to use this weapon in its struggle with Qualcomm for better licensing terms. A finding by a Dutch court that patent have been “exhausted” could have a serious impact on Qualcomm’s position as the leading company holding CDMA/WCDMA intellectual property. This effect would be felt by Qualcomm EU-wide (and so not just in The Netherlands). When the goods imported from TI into Netherlands for further distribution in Europe are “patent”- free, or exhausted, this has the immediate that any goods delivered by TI to Nokia are no longer subject to infringement claims anywhere in Europe, as the goods are brought on the EU market with the “consent” of the patent holder and can therefore be “freely” traded on the whole EU market. Quite a smart way of gaining negotiating power as a “normal” infringement or invalidity case would under the current patent rules have only national ( as opposed to EU wide) effects.

One wonders why Nokia paid under this license until April 2007 if it was of the opinion that the patents were exhausted because of Qualcomm’s license to TI, the maker of the chipsets used by Nokia in its handsets. If you think of the consequences of a finding of “exhaustion” for Nokia themselves one cannot but conclude that Nokia has all the reasons in the world not to let it come to any court decision. Nokia themselves would most likely be ripped of their ability to enforce many of its own patents when confronted with infringement. Like the discussion of patent disclosure and standards, these issues work both ways. Once the finding of “exhaustion” is being supported in court is works both ways, Nokia will on the short run found a way out of paying much lower a price for any Qualcomm license, however it will seriously impound their enforcement capability of enforcing their own patents against other mighty players in this highly competitive IP market.

The judgement by the Dutch court is expected to be delivered on October 31.

EU access to the Hague system on international designs

2007-10-01T11:31:00.000-04:00

On 24th September, the European Union submitted its instrument of accession to the Geneva Act of the Hague Agreement to the World Intellectual Property Organization. The Geneva Act of the Hague Agreement establishes a system for the international registration of industrial designs. After joining it, economic actors will have the possibility to use a single application to obtain protection of a design not only throughout the EU with the Community Design, but also in the countries that are members of the Geneva Act. This will simplify procedures, reduce the costs for international protection and make administration easier.

The new system will enter into force on 1st January 2008, and it is believed that it will simplify administration procedures and lower the costs of obtaining protection.

Philips defeated on JPEG patent after non-disclosure to standard setting bodies

2007-09-23T11:40:00.000-04:00

One of the "hot" issues in the electronics industry (and earlier on in the semiconductor business) is the relationship between standards and patents. Recent examples of clever standard setting policies and the enforcement of patents that come to mind are the way Sisvel enforced Philips’ mp3 patents, reading on an international audio compression standard. Here the comfortable position Philips was in to enforce patents that seem to read on that audio standard. It the reminds me of a saying by the English judge Mr Justice Pumfrey: “Nothing would be pleasanter for a patentee than to participate in the setting of a standard compliance with which would inevitably involve infringement of his patent.” That’s exactly what Philips made all the mp3 manufacturers as well as the Courts in Germany believe: simply comparing all mp3 products with the relevant standard, rather then the patent, by saying: “you - trader in mp3 players- are bringing to practice the specs the standard requires for any mp3 player to work and as it happens to be, I, Philips have those – “padding bits” - patent that exactly read on that standard, so there is my evidence of patent infringement”.

A carefully crafted strategy that worked well and made wonders to Philips and its co-owners of the mp3 patents at stake, making them hundreds of millions of licensing income. So why not using the same trick for compression of camera images on mobile phones, known as the “Baseline” method which is the subject of a JPEG standard discussed by study groups of the International Telegraph en Telephone Consultative Committee (CCITT), The International Standards Organization (ISO) en de British Standards Institution? O, Lucky Me, Philips must have thought as they are the owner of European patent EP 0 260 748, also knows as “Vogel” (named after the inventor).

So, Philips sued LG Electronics in the Netherlands over the use of its Vogel patent – covering the JPEG compression standard - in a large number of its mobile handsets. After the Sisvel miracle this sounded like a done deal. Apparently, that was exactly what happened, as the Dutch court impressed - as the German courts were at the time of the mp3 “padding bit” patent - by Philips’ thoughtful enforcement of the Vogel patent against LG who admitted to have used (no choice, remember, it’s a standard!) the Baseline method, covered by the JPEG standard for that method. LG’s attempts to invalidate the patent were doomed to fail (knowing Philips clever use of study group en engineers outcome of standard meetings to subsequently draft - and redraft if necessary - claims covering that standard setting meeting results).

No surprise then that LG lost its patent infringement case. Philips obtained an infringement injunction against LG in April 2007. The court found infringement on a valid Philips patent (be it a little bit helped by the court in redrafting the claims in a way that made it novel and inventive over the prior art). So far, so good, Philips must have thought.

However, LG had the feel that Philips must have played the standard setting procedure a little too clever, and alleged that Philips had taken part in the engineers and study group meetings and had failed to declare the Vogel patent to the relevant standard setting body (with the result that they could still sue under the patent which they would not have been entitled to do would the Vogel patent be declared prior or pending the standard setting meetings. In that case Philips could only claim licenses (monetary relief, no injunction) under the Standard Setting Rules to license against RAND conditions).

LG sued Philips for that same The Hague District Court, asking in preliminary proceedings (“kort geding”) to order Philips not to enforce the injunction it obtained in April against LG. It succeeded. LG was finally able to deliver evidence that Philips did participate in the Standard committee meetings. Philips tried to save its face by trying to convince the court that the “disclosure rules” are only for “proposers” (parties who provide technical proposals in the committees). It made the Court – in a humorous snub against Philips – say it should have been aware of the disclosure requirement “as a listener”. It added that, had the court known about the convincing evidence that Philips did participate (contrary to what Philips made the court belief in the earlier court case) it would not have rendered the infringement injunction against Philips in the first place.

Interesting to note that in a similar case in the US in 2003 - Rambus Inc. v. Infineon Technologies, 318 F.3d 1081 (Fed. Cir. 2003), the US Court of Appeal for the Federal Circuit (CAFC) said although the JEDEC policy itself (presumably the written policy) did not specify when to disclose patent that read on a standard it took from testimony of witnesses, that the actual practice required that disclosure be made at the time of “formal balloting” with respect to the standard. The question then arose whether JEDEC’s disclosure requirements applied to a member’s intentions or attempts to file patent applications covering the proposed standard? The CAFC found that a member’s subjective beliefs, hopes and desires are irrelevant. Philips beliefs –being not a “proposer” - would in CAFC’s view be irrelevant, the same result as the Dutch court, be it along different lines.

Philips must hope it will not be under the same scrutiny as Rambus has been - and still is – over its standard setting policies, but it will ring the alarm bells in Eindhoven, no doubt.

__________________________________________________________________

The following is a Korean translation of the above blog post: "Philips defeated on JPEG patent after non-disclosure to standard setting bodies"

규격 기준 기관에 비공개로 인해 JPEG 특허 건에서 패한 Philips

전자제품 업계(또한, 최근의 반도체 업계)내에서 “뜨거운” 이슈 중의 하나는 규격 기준과 특허간의 관계이다. 최근의 한 예로 Sisvel이 Philips의 mp3 특허를 국제 오디오 압축 규격에 적용하게 한 예가 기억에 남는다. 이 경우, Philips는 오디오 규격을 적용하는데 별 문제가 없었던 걸로 보인다. 영국의 판사, Mr. Pumfrey J가 말했듯이, “특허를 가진 사람에게는 별 문제 없이 규격기준을 적용하는 것이 어쩔 수 없이 특허권을 침해해야 하는 경우보다 더 좋은 것이 없을 것이다.” Mp3 제작자를 비롯한 독일의 법원도 Phillips에 의해 위의 글을 적용하여 mp3 플레이어들을 특허가 아닌, 적당한 규격과 비교하게 되었으며 또 말하길, “mp3 플레이어 거래인들은 mp3 플레이어 규격에 맞는 성능을 갖춘 기종을 업계에 소개 하는데, Philips가 그 규격에 꼭 맞는 특허를 가지고 있으므로 위의 mp3 플레이어들은 특허권 침해의 증거가 된다.”

심사 숙고해서 짜인 전략은 Philips와 mp3 특허 공동소유자에게 수억의 라이센스 수입을 가져다 주었다. 그렇다면, 연구 그룹 International Telegraph Telephone Consultative Committee (CCITT)와 The International Standards Organization (ISO) 그리고 British Standards Institution (BSI)의 JPEG 규격의 토론으로 떠올랐던 “Baseline”이라 불리는 휴대폰 카메라 이미지 압축 방법에 관해서도, 동일한 전략을 쓰면 되지 않는가? Philips는 자신들이 유럽 특허 EP 0 260 748, “Vogel”(발명가의 이름)의 소유권자라고 생각했던가.

그런 이유로, Philips는 네덜란드 LG 전자를 상대로 Vogel특허의 –JPEG 압축 규격 기준을 포함한–많은 휴대폰에 적용했다는 사실에 소송을 제기했다. Sisvel 기적 이 후, 충분히 가능한 일이라고 믿었다. 실제로 네덜란드 법정은 Baseline 방법을 사용했다고 인정한 (표준 규격이기 때문에!) LG를 상대로 Philips의 영리한 집행에 감명받았다. –독일 법정이 mp3 “padding bits” 특허의 소송시기에 그랬던 것처럼–. LG의 특허를 무효로 만들려는 시도는 실패로 돌아갈 것이 예상되었다. (Philips의 엔지니어들의 규격 기준의 영리한 연구에 따라서 소송내용을 수정하거나 보류할 것으로 알았기 때문이다.)

이변 없이 LG는 특허 침해 건을 지고 말았다. Philips는 LG를 상대로 2007년 4월에 침해 금지명령을 얻었다. 법정은 Philips의 유효한 특허에 대한 LG의 침해라고 결정했다. (이것은 소송내용을 수정 함으로 약간의 법정의 도움을 받은 것이라고도 할 수 있겠다). 여기까지 Philips는 모든 것이 잘 풀렸다고 믿었다.

그러나, LG는 Philips가 규격기준의 결정 행로를 자신들에게 유리한 쪽으로 몰아갔다고 믿어, Philips는 엔지니어들과 연구 그룹들의 미팅에 참여했고, Vegel 특허를 적절한 규격 기준 기관에 신고하지 않았다고 주장했다. (그 결과를 가지고 Vogel이 아닌 다른 특허에 한해서, Vogel특허가 규격 기준 미팅에 신고되기 전이나 보류되었을 경우 소송을 제기할 여지가 남아있었다. 그 경우엔 Philips는 RAND conditions에 대한 규격 지준 지정 법에 한해 라이센스만 요구할 수 있다. (금지 명령이 아닌 금전상의 보상)

LG는 같은 The Hague District Court에 Philips를 상대로 Philips가 4월에 얻은 금지명령을 이행하지 못하도록 preliminary proceedings 을 신청하였다. 그리고 성공하였다. LG는 Philips가 규격 기준 위원회 미팅에 참여했던 것을 밝혀내었다. 이에 Philips는 “disclosure rules”는 “proposers”(기술적인 제안을 위원회에게 제공한 쪽)에게만 적용됨을 법정에 납득시키려 했다. 법정은 공개 요구조건을 “청취자의 입장에서” 인식하고 있어야 했음을 표했다. 또, 법정이 Philips가 미팅에 참여했다는 확고한 증거를 알고 있었다면 (Philips가 전의 케이스에서 법정을 설득시킨 것과는 달리) 특허침해라는 결정은 처음부터 없었을 것임을 더했다.

흥미로운 부분은 2003년에 미국에서 비슷한 케이스 -Rambus Inc. v. Infineon Technologies, 318 F.3d 1081 (Fed. Cir. 2003) 의 경우, the US Court of Appeal for the Federal Circuit (CAFC)가 말하길 JEDEC 정책은 증인에 의해 언제 특허가 공개되었는지는 지정하지 않고 있고, 실제로 규격에 관련된 공개가 “formal balloting”의 시기에 행해지는 것이 요구된다고 밝혔다. 그렇다면 의문이 생기는 부분은 JEDEC의 공개 요구사항이 멤버의 의도, 또는 제시된 기준을 포함하는 특허 신청서를 제기하려는 시도에 적용되었는지 다. CAFC는 멤버의 신념, 바램, 그리고 욕구는 무관계 하다고 밝혔다. Philips의 신념 – “proposer”가 아닌 – 은 CAFC의 관점에서 무관계 한 것이었고, 네덜란드 법정에서도 동일하게 적용되었다.

Philips는 Rambus가 그랬던 것처럼 (아직도 그렇듯이) 기준 지정 정책으로 인한 엄격한 감시가 있지 않기를 바래야 할 것이다.

Will US Patent Reform pass Congress in September?

2007-09-03T04:10:00.000-04:00

Will the US Congress pass Patent Reform legislation this month?

IPO vs. Professor Crouch: In a rare attack on an academic’s view, IPO notes the pronouncement by Professor Dennis Crouch that the legislation will not be enacted by Congress, Congressional Patent Reform is Dead; Long Live Administrative Patent Reform, Patently O (August 30, 2007). Prof. Crouch reminded his readers that several months ago he had --
"declared that new patent legislation [to be] effectively blocked within Congress.…[L]egislative reform is, for the most part, a sideshow as the executive and judicial branches are still running with the ball."

IPO patronizingly notes that "a majority of lobbyists in Washington, who talk to members of Congress every day for and against the legislation, are convinced that some form of it will pass this year or next." (IPO Daily News).

It would be good to take a deep, deep breath, step back, and see just why there are entrenched interests that will be big losers if the current patent reform proposals are enacted, which is precisely why Professor Crouch will be vindicated at the end of the day as patent reform legislation ultimately stalls in the United States Senate.

Hal Wegner, Washington

Statistics, European Patent Filings 2006 now published

2007-08-25T04:55:00.000-04:00

The European Patent Office (EPO) published statistics on European patents and patent applications during 2006. It’s a shame that on the EPO site one cannot easily get a comparison with Patent data of 2005 and so follow the development an grow in patent applications nor compare the listings of the companies that are the largest “users” of the EP system.

The results show again that Germany leads as the EU country with the highest number of patent applications filed, not much different than the figures analyzed and published in 2007 by EuroStat, EU's Statistics Bureau, for 2000.

Worldwide patent applications are growing at an average rate of 4.7% per year. WIPO Director General Dr Kamil Idris considers this as “clearly one indicator of the level of inventiveness and innovation that is occurring around the world and signals those areas in which technological development is most pronounced." This is a hightly contested view. Innovation measuring by numbers of patents is in my view (and that of many others) flawed. A debate in economics about how best to measure innovation is going on for quite a while. Most economists are well aware of the shortcomings of patent data as a measure of innovativeness.

On firm-level, as one would expect, common-sense dictates that not input to the innovation process (employess, money) or byproducts (patents) but rather final output and success is the most useful measure of innovation

"The three metrics that executives consider most valuable are time to market,
new product sales, and return on investment in innovation." (Boston Consulting
Group "Innovation Metrics Survey", 2006)

Only Half of Dutch Top 10 Innovative Companies file patent

2007-07-02T15:34:00.000-04:00

BIZZ, the blog and magazine for small and medium sized enterprises (SMEs) in The Netherlands, published by Reed Business provides a shortlist of the 100 most innovative companies in Holland for 2007, the “Innovatie Top 100” (“Innovation Top 100”). We wonder how many of the 10 most innovative companies have filed one or more patents for their invention. The - preliminary results - are at best scanty, at worst: troubling. We checked the data, using the database for the German Patent Office (Depatisnet) and Espacenet (of the EPO).

For five out of the ten “most innovative” SMEs in The Netherlands we were unable to find one or more patent filed. If this trend would be true for all of the 100 most innovative companies, only 50% applies for a patent. So basically half of Netherlands most innovative companies simply ignore intellectual property or have decided not to use IP for their companies.

Here are the top 10 of BIZZ's "Most Innovative" SMEs, out of the 100 as published by BIZZ:

1. Mampaey Offshore Industries - Dyamic Oval Towing System
One patent filed, (“Sleepboot met ovale ring”, inventor Gerard Mampaeij NL1027414)

2. Bouwbedrijf Kooi - Het 1-2-3 Huis
One patent filed (by “1-2-3 Huis B.V”) , inventor Jaap Kooi NL1029449

3. Claves - Novulo
No patents, nor any (published) application

4. EVOLVE & Vriezema Betonprodukten - Lichtgewicht beton
No patents, nor any (published) application

5. E.V.A .Products - Dieselmotorcycle De Track
No patents, nor any (published) application

6. Wilmink Product Ontwikkeling - Dynamische gehoorbescherming
Two patent applications (“Gehoorbeschermer”), inventor Engbert Wilmink (originator of the patents is TNO), EP 1682059 and EP 1527761

7. SENZ Umbrellas - Stormvaste paraplu
One (Dutch) patent nr. NL1029225, inventor Gerrit Hoogendoorn, pending applications for other countries

8. Van Ruysdael - Isolerend enkelglas voor de restauratie
Two (Dutch) patents NL1020845 and NL1024339, inventor Michel Trompert. One European patent application EP-A-1388413 which is in limbo for years now, does not seem to lead to a patent anytime soon.

9. PayDutch - Veilige online koop/verkoop methode
No patents, nor any (published) application

10. LSB Groep - Kunststof steigerplanken
No patents, nor any (published) application

So, 50% has a patent, 50% has none. Is the glass half empty or half full? Half empty is the right answer. Remember, we are talking about the best innovations by Dutch SMEs. What does it tell us? A faulty view on what IP can do for your company? Maybe management thought they could keep the product characteristics secret? Isn’t that naïve? Worst of all: all these innovations can be easily copied and used without any compensation to the originators of these innovative ideas. Is that what innovation is all about? Is that where Europe spends millions of euros on, to stimulate new inventive products and services which can be copied by anyone doing some reverse engineering?

Netherlands politicians: go do your homework and start thinking how to improve this lack of use of IP and lack of full understanding of what IP can do for the SMEs.

Patent professionals: get finally out of your professional cocoons and start telling and educating the politicians and policymakers as well as SMES what patents can do for you.

Academic world: start educating the students at (technical) universities what patents are, how they can be strategically used, what the difference is between freedom-to-operate and patents as a strategic tool.

Universities and Business Schools: start promoting academic research into the exact role of patent in the innovation process.

This should be a wake-up call for all those involved in the innovation process.

German EU Presidency ends with Patent Seminar

2007-06-25T05:18:00.000-04:00

Today starts, in Munich, a two day Symposium: “The Future of European Patent Jurisdiction” organised by the German Federal Patent Court, in consultation with the Federal Ministry of Justice, The meeting is expected to bring together 200-250 participants from all over Europe who are actively engaged with this issue in their work as judges and lawyers, as members of the business or scientific communities, or as decision-makers in EU Member State governments and the European Commission. Federal Minister of Justice Brigitte Zypries will attend the symposium and deliver the opening speech.

If only Germany could be as effective in brokering a EU Treaty consensus as they can be on reaching a common view on EPLA, wouldn't that be what the European patent community is waiting for too long?

We hope to be able to get you news from the conference later today.

EPO is not eager to receive EU political oversight

2007-06-21T06:00:00.000-04:00

Joff Wild reported on his blog (June 19) of an internal memo of the EPO (European Patent Office) reporting on the attitude of staff to the way in which the EPO is being run. Almost simultaneously, the head of legal affairs at the EPO stated that it is now too easy to obtain patents and there needs to be a shift towards fewer, but higher-quality, rights.
Joff wrote: “And to add a certain spice to the situation, as well as handing valuable ammunition to the EPO’s opponent’s, Wim Van der Eijk, Principal Director of the International Legal Affairs and Patent Law Department, was last week quoted as saying: “Patents are granted too easily … We need to have a more critical look, and steer policy in the direction of less, but stronger patents.” Now I don’t know in what context he was talking and if he was referring to the EPO or not, but it strikes me that at a time when the EPO is awarding more patents than it ever has before, this was not a particularly clever thing to say.”

Another view is possible. The criticism makes sense when one reads in the internal memo:

“There is a strong belief amongst staff that the financial benefits to the
Member States arising from the renewal fees motivate the Administrative
Council, and consequently the EPO administration, to focus on the quantity
rather than the quality of the granted patents.”

My guess is that Wim van der Eijk, assuming he is being quoted correctly, was adding to the criticism (which the internal memo signals is being shared internally at the EPO) that the national patent offices, by means of their representation in the Administrative Council of the EPO, have a natural tendency of promoting volume over quality of patents (more patents means more income for the member states). That policy, when adopted by the EPO Examiners, would result in more not better patents, which in turn would mean that quality will suffer. Put otherwise, we are not so sure that all EPO principals are really happy with the rise in patent numbers and are concerned that quality issues may soon result in additional political pressure by (e.g.) the European Parliament to force the EPO to be subject to some new Policy Review Oversight. We can see why no one in the EPO would be particularly happy with such a development.

Mobile, mobile, mobile

2007-06-20T03:19:00.000-04:00

Tony Fish of AMF Ventures commented in his blog on Eric Schmidt, the CEO of Google, who spoke about “mobile, mobile, mobile” as the next opportunity at the O’Reilly Web2Expo in San Francisco last month.

It’s funny – you could pretty easily find the same types of things said about Web 1.0 during Bubble 1.0. For example, this is what the book Net Gain: Expanding Markets through Virtual Communities by two McKinsey guys in 1997 was about. Another book that discussed all this was Esther Dyson’s Release 2.0 from the same year. Plus ça change…..

There are two big problems: “Assuming privacy laws and big brother objections can be overcome” (see Tony' blog) is one. The other is how you can give average consumers control of that information in any meaningful way – it’s just way too complex and confusing. The issues are the same whether the device is a PC or a mobile whatchamacallit. We can see the latter problem being somewhat solved over a long period of time by increasing consumer comfort level with technology, but we don’t see how the former one goes away. By the way if you solve the “privacy police” problem, then DRM becomes a whole lot easier.

Bill Rosenblatt, New York

Time for a Reverse Patent Troll to seek invalidation of Sisvel mp3 patents?

2007-06-16T11:49:00.001-04:00

Philips c.s. mp3 patent litigation by Sisvel has mostly come to an end in Europe and the US, as most bigger players in the electronics space have settled with Sisvel (on behalf of the patent holders Philips, France Telecom, IRT and TDF). When Sisvel settled with most vendors of mp3 consumer goods they did that after seizing goods at consumer fairs, starting patent infringement cases, using the European Border Detention Regulation 1383/2003 for blocking incoming mp3 enabled consumer goods from Hong Kong and China and other Asian countries. Many companies were basically forced into license deals, despite the fact that they had very good validity challenges to the patent. This blog has access to prior art that has been found that only a very limited number of companies have been able to get access to. The prior art is extremely powerful and valuable against anyone wanting to challenge the Philips mp3 patents being asserted by Sisvel.

Although many companies agreed to pay substantive royalties for the lifetime of the patent, no one is seeking invalidity. Why would any company not challenge the validity of the patent after signing the license thus saving substantial future royalty fees? The answer is quite simple. In the settlement agreement Sisvel included a clause giving them the right to terminate the license if the licensee challenges the validity of the patent. The clause reads:

“10.03 Audio MPEG and SISVEL shall have the right to jointly or independently terminate this Agreement forthwith or to revoke the license respectively granted under any of the US Patents and Non-US Patents in the event that LICENSEE or any of its Controlled Companies, directly or indirectly (e.g. via its customers and/or suppliers) brings a lawsuit or other proceeding to contest the validity or enforceability of any of the US Patents and/or Non-US Patents.”
Most US companies and those European companies with substantial US exposure refrain from even looking into the possibility of seeking invalidity as this could result in a termination of the license something they do not want to get into, endangering the continuous supply of phones, handheld or other consumer goods with their mp3 functionality. Most US attorneys advise their clients not to be part of any attempt, by whomever, to challenge the Philips/Sisvel patents, despite the very powerful prior art available, wary of the risk of termination and subsequent further business disruption. Besides who cares anymore when everyone pays the license which is in all cases been passed on to the end consumer?

Earlier we pointed out that a direct non-challenge clause is contrary to almost every antitrust legislation in the world. So how come Sisvel can get away with this quasi no-challenge clause? Strictly speaking clause 10.3 above is not a no-challenge clause. The licensee is still allowed to challenge the underlying patents in any court. However, doing so gives Sisvel under this challenge-clause (see above) the right to terminate the license agreement. Under previously held US law, a licensee cannot have it both ways: and getting patent peace by obtaining a license from the patent holder and at the same time challenging the patent’s invalidity while enjoying the license (as that would prevent the patent owner from seeking an injunction to use the patent pending the license) . However the US Supreme Court changed that in MedImmune vs. Genentech. According to the US Supreme Court, language promising to pay royalties on patents that have not been held invalid "does not amount to a promise not to seek a holding of their invalidity."

Although one would expect a challenge to the clause 10.3 in the Sisvel license (settlement) agreement, we do not know of any.

Reverse Patent Troll
Both the public in general as well as al the mp3 electronics consumers that now pay the price for the Sisvel licenses need to have a “Reverse Patent Troll” act against the Sisvel patents, seeking invalidation of the Philips c.s. patents. The Reverse Patent Troll can then use prior art that has only been used by two companies in their EU proceedings (which were subsequently withdrawn after settlement with Sisvel) which is very convincing, very powerful and not yet publicly known, so useful as it cannot be used by everyone to invalidate the Sisvel patents, making the Reverse Patent Troll a very attractive one.

Prior Art
Prior Art has been found that is unique and a powerful tool against the Sisvel patents. For further information, contact bonanza@ipeg.com.

IP as trade barrier

2007-06-10T12:01:00.000-04:00

Interested in the use of Intellectual Property as a trade barrier? Listen to an interview on China Radio international with Jasper Helder, of Simmons & Simmons at http://english.cri.cn/4026/2007/06/06/1241@235394.htm

Patent Auctions, Where Are the Buyers?

2007-05-27T10:45:00.001-04:00

When the first patent auction by Ocean Tomo was held in San Francisco, it caused a huge media hype in the US. It looks that the next one, in London on June 1, will receive the same attention from European media (if by then, we do not have an overdose of hype already because of the Michael Jackson auction on Wednesday and Thursday). The reason it will is, no doubt, because of the esoteric nature of the goods being auctioned. We can imagine old cars, antique books, art, wines and other “tangible” goods being sold on an auction. Even 3G wireless licenses. But patents?

Trading products of the mind, like an invention embedded in a patent, or “intellectual assets” (or “intangible assets”) are much harder to imagine when it comes to putting value on it. “Value” makes most intangible assets indeterminate. But how come we can value 3G wireless licenses (be it too high) but we have trouble valuing patents? There are over 100 methods of putting a value on patents[1]. What is the “value” of a patent, or more broadly, value of intangible assets? In case of the 3G the value must have been driven by market (and profit) expectations. But what profit can be made from patents?

These and other problematic issues make the auction of a patent a daring event. Or are we too much of an iconoclast to take issue with conventional wisdom that a patent is by itself and stripped from its application of the patented invention has no value at all?

Intangibles represent “immaterial” value, such as relationships of companies with its business partners, and its ability to innovate (R&D capital). Stripped from its context, however, the “value” of a patent is nothing but a assertion of a right to an invention, a monopoly right granted by the government for an innovation that is both new, inventive and contributes to the “art”. It is a long way from a “right” to “value”. For some the sole right to exclude others to use the same invention for which a patent has been obtained is what the real value of a patent is. Contrary to this view, licensing officers, business development and financial people interested in monetizing IP, see the real value of patent in its potential to add value to the organization (e.g. by shorten its own R&D time), or by establishing relationships in open innovation projects or by using it to realize financial value (e.g. lowering the cost of capital by securitization the license income stream that (some) patents generate.

So a smart buyer will ask himself some tough questions. Am I really interested in buying a right without the product that is the result of the patented invention, or the certainty that what is being described in the patent actually works for you? What is the value of that (paper) right that is being auctioned? Is it the right it conveys to exclude others and how sure can you be of that (have you not misread the claim, do you have a full overview on the closest prior art and did you do your due diligence on validity of what is being claimed? Or, do I buy to enlarge my own portfolio and to what extent? Does the offered patent grant me access to other players in the market by leveraging this new patent against the rights other companies have whose cooperation I seek? Although patents are meant to be useful, studies show that almost 95% of all patents have never been used in any product and have created no economic value. They are being filed as a guarantee (actually rather an expectation) that it deters competitors from copying the invention. Patent as a “freedom to operate” mechanism. But how does that confer value to any other party than the originator of the invention?

So, one wonders, who is interested in a patent without some proof attached to it that the invention has potential applications or is capable of rendering a commercially viable product? Yes surely patents are being traded, actually in quite large numbers. These patents are being traded (either sold or exclusively licensed) after detailed negotiations and careful due diligence on behalf of the buyer, in private dealing rooms.

But how about auctions? Tim Harford, in the Financial Times Magazine (“Under the hammer”) cites economist Paul Klemperer, Europe’s best known auction expert, who showed that trivial seeming features of an auction can have big (and sometimes disastrous) effects by repelling bidders. Take the question whether there should be an open or secret reserve. Auction theory offers an argument that a secret reserve price is better (IPA did that during the Munich patent auction, however, no bidders). The idea behind it is that bidders, confronted with gradually ascending bids will draw confidence that a bidder is not alone in valuing the item, even if the bids are too low to reach the reserve. In 2001 Katkar and Reily put this theory to the test by selling 50 matched pairs of collectible cards, 50% open and 50% secret reserve of the same level. They concluded that secret reserve is counterproductive. Far from stimulating interest they seem to put off bidders, fearing that a secret reserve is secret because it is far too high.

A further misconception is that small inventors or SMEs when seeing the figures for which patents in total have been auctioned (as Ocean Tomo did), might be lured into thinking that having a patent will make them rich. As we wrote earlier, there is a lot more needed to make money out of a patent than selling it on an auction.

In that respect IP auctions will not be the value driver of IP that some will make you belief it is.

[1] Relief from royalty, Excess profits or notional maximum royalty payable, Capitalization of earnings, Net present value of incremental cash flows, Gross profit differential, Premium sales price , Comparable market transactions, Cost based, etc. etc

Patent auction in Munich, success or failure?

2007-05-16T04:13:00.000-04:00

Was the first IP auction in Munich, yesterday at Kempinski hotel, a success? Well, it depends how you define “success”. Certainly the German organizers, Intellectual Property Auctions GmbH (IPA) did a great job. You must be courageous to organize an auction in Europe, where the notion of selling and buying patents is still in its infancy and general IP awareness is at minimal levels. So yes, it was a success in the sense that IPA has been the first one to create greater awareness that patents are more than rights you acquire to then shelve them.

In terms of proceeds, no, the auction was a washout. Out of the 81 lots of patent(families) covering 12 fields of technology as well as one (!) trademark, the highest bid – 50K euros, by an absentee bidder – was for a patent on a reduced light scattering ultra phobic material, owned by a German company. Most sellers were, by the way German companies and institutions, among which Fraunhofer. Fraunhofer did relatively the best business, out of 11 patents auctioned, 10 were sold, be it for an average of an abysmal 17K euros, for a total of 188K euros. The lowest amount for which a patent was sold was for 5K (can you imagine, that’s not even 1/100th of the costs for an average European patent application covering 5 countries).

There were some exotic patents as well. A patent for making leather out of fish skin, wouldn’t that be great to support Europe’s fishing industry’s competitive edge? No bids however, an inevitable fate for most lots as it was clear from the start that, again, more tyre kickers than buyers frequented the auction. Or a patent offered for sale by a German patent attorneys firm for wound treatment, asking price 80K, no bids.

The only trademark auctioned was NUTRI-CARE of BASF, sold for 14K, after a (telephone) bidding with increments of 1,000 euro. Not a bad result though for a trademark if you compare it to the results for patents were (almost exclusively telephone) bidders did not want to pay more for any patent than a paltry 15k-17K euros. The only bid that was made on a certain patent from the audience was - guess what – from Ocean Tomo, the US auction organizer, who will have its first European action on June 1 in London. The bid failed as it was overturned by a telephone bid. How sad can it be?

What can we learn from this first auction?
First and foremost that a successful sale of patents is still the terrain of the patent brokers and IP merchant bankers, rather than the auction houses. Secondly, that the big issue that need to be overcome is: where are the buyers? In that respect it does not help that the organizers have waited too long before making the auction catalogue available on the internet free of charge (only after filling in forms, paying entry fees, etc). How else would a potential buyer know about what is being offered, leaving sufficient time for due diligence? Instead, IPA was much too secretive and restrictive about who is selling what, for what price and what details could be provided for any interested party to get him to bid. Thirdly, crucial details in the catalogue were missing, price indication, value estimators, valuation analysis that IPA must have done before accepting the lots, etc.

Let us wait how Ocean Tomo does the London auction before giving the final verdict.

Europe's First IP auction in Munich

2007-05-15T02:43:00.000-04:00

If a newly identified work of Vincent van Gogh would be auctioned, would it be noticed by the bloggers, the press, any attention at all? Probably only when a new record is being set by the auctioned price. No the picture for this blog does not represent the proceeds of one of the patents auctioned today in Munich. The auction is organized by IP Auctions GmbH, a German IP valuation group. It is very much modeled after the Ocean Tomo auction, held in San Francisco, Chicago and New York. It was announced that next to patents, also trademarks and licenses would be auctioned. The appetite for trademarks seems to be low, as only trademark, “Nutri-Care” will be under the hammer. The auction, held today at 2:00 p.m in Kempinski hotel, will be both an English and a Dutch auction, the latter known from the first auction of flowers, whereby the auctioneer starts to call the object at the highest price, slowly lowering it until the first bidder raises it hand.
What is striking about the auction is that the sellers are predominantly German companies, including Fraunhofer, Germany’s top technological research institute, comparable to TNO in the Netherlands, ABB Group, Merck Patent GmbH, the German Rolls Royce company, some German academics and the University of Saarland (also Germany). Volkswagen AG offers one non-exclusive license under a European patent for the manufacturing of a plastic autopart. One of the few non-German sellers is (I presume) a Spaniard, Salvador Perez, offering a patent “Pay-as-you-drive” as it is described, filed in 1994 (so with a limited lifetime left) “for evaluating the risk of a motor vehicle”. No details of the patent are being given, expect a link to a website where some unclear references are made in a rather clumsy way, to anything to do with car insurance. Hardly the sort of patents, one would expect to raise great interest for.

The other non-German sellers include an interesting Dutch invention of a Netherlands based electro technical company, Wolters Engineering, for a reuse of paper waste. And belief it or not, who thought Chinese only copy are mistaken, a real Chinese patent is being sold for pharmaceutical wastewater treatment. Sounds like something the Chinese seller could license in China quite successfully (aren’t we hearing about massive pollution issues in China?). Why buying, if even the Chinese patent owner rather sells his patent than to enforce its own invention nationwide?

To be continued after the actual auctions has taken place

On the Munich auction, see also Frontrunner, a technology blog by Bert van Dijk, editor for Het Financieele Dagblad, Netherlands largest financial daily.

IPEG –European Merchant banking, now also in Korean & Japanese

2007-05-12T05:10:00.000-04:00

Europe’s first Intellectual Property merchant banking, delivering services to monetize IP, whether it are patents, trademarks or copyrights, has its corporate website now in Korean and Japanese, see http://www.ipeg.com/

특허, 상표, 저작권을 막론한 지적재산의 경제적 효용을 위한 서비스를 제공하는 유럽 최초의 지적 재산 상업 은행, IPEG가 한국어와 일본어 웹사이트를 개설하였습니다. http://www.ipeg.com/을 방문해 보세요.

特許、商標、著作権を問わず、知的財産の経済的効用のためのサービスを提供するヨーロッパ初の知的財産商業銀行、IPEGが韓国語と日本語のウェブサイトを開設しました。http://www.ipeg.com/　を訪問してみて下さい。

Obviousness in the US and what patents do for innovation

2007-05-02T17:06:00.000-04:00

“We build and create by bringing to the tangible and palpable reality around us new works based on instinct, simple logic, ordinary inferences, extraordinary ideas, and sometimes even genius.” A citation from the opinion of the US Supreme Court in KSR vs. Teleflex of April 30, 2007. The court gave its opinion in a closely watched case on “obviousness”. It is the fifth patent case in the past two years in which the Supreme Court has reversed the Federal Circuit, all of them unanimous or near unanimous decisions. The Supreme Court not only rejected the Federal Circuit’s test for obviousness, it proceeded to apply the correct test that it had just enunciated to the facts of the case before it and rule for the defendant below rather than remanding to the Federal Circuit and allowing it to apply the Supreme Court’s test to the case. The Court’s opinion suggests that patents which are based on new combinations of elements or components already known in a technical field are quite likely to be found obvious under its view of the correct analysis – a development that will likely lead to many more patents being found obvious in the electronics field but should have less impact in the life sciences field. The Court explicitly rejected the Federal Circuit’s longstanding view that a patent cannot be proved obvious merely by showing that the combination of elements was “obvious to try.” Again, this holding may have more impact on patents in the electronics field than in the life sciences technologies.

Many comments have already been published on patent blogs. See for Hal Wegner’s comments on the case his column on the right side of this blog.

For European practice the decision may not be very important other than that it gives additional ammunition in the current debate in Europe whether patents are granted too easily leading to low quality and stifling of innovation. The Supreme Court uses the word “innovation” eight times in its opinion:

“These advances, once part of our shared knowledge, define a new threshold from
which innovation starts once more. And as progress beginning from higher levels
of achievement is expected in the nor-mal course, the results of ordinary
innovation are not the subject of exclusive rights under the patent laws. Were
it otherwise patents might stifle, rather than promote, the progress of useful
arts.”

(…)

“Granting patent protection to advances that would occur in the ordinary course
without real innovation retards progress and may, for patents combining
previously known elements, deprive prior inventions of their value or utility.
Since the TSM test was devised, the Federal Circuit doubtless has applied it in
accord with these principles in many cases. There is no necessary inconsistency
between the test and the Graham analysis. But a court errs where, as here, it
transforms general principle into a rigid rule limiting the obviousness
inquiry.”

(…)

“When there is a design need or market pressure to solve a problem and there are
a finite number of identified, predictable solutions, a person of ordinary skill
in the art has good reason to pursue the known options within his or her
technical grasp. If this leads to the anticipated success, it is likely the
product not of innovation but of ordinary skill and common sense.”

(…)

“Although common sense directs one to look with care at a patent application
that claims as innovation the combination of two known devices according to
their established functions, it can be important to identify a reason that would
have prompted a person of ordinary skill in the relevant field to combine the
elements in the way the claimed new invention does. This is so because
inventions in most, if not all, instances rely upon building blocks long since
uncovered, and claimed discoveries almost of necessity will be combinations of
what, in some sense, is already known.”

(…)

“If this leads to the anticipated success, it is likely the product not of
innovation but of ordinary skill and common sense. In that instance the fact
that a combination was obvious to try might show that it was obvious under
§103.”

(…)

“These advances, once part of our shared knowledge, define a new threshold from
which innovation starts once more. And as progress beginning from higher levels
of achievement is expected in the normal course, the results of ordinary
innovation are not the subject of exclusive rights under the patent laws.”
and by far the best:
"A person of ordinary skill is also a person of ordinary creativity, not an automaton. [page 17]

IP securitization: the new hot thing in Europe

2007-04-15T08:58:00.000-04:00

Intellectual property securitization has had a promising history- from the initial excitement over Bowie Bonds, which securitized David Bowie's song catalog, and other early deals, followed by a recent lull, during which it was thought the idea was dead. Recently IP securitization has been revived and the heros are the financial institutions and IP merchant bankers. They are basically retail products and franchises, nowadays mostly patents and trademarks rather than copyrights. Goldman Sachs closed a $200 million IP securitization for IHOP backed by its intellectual property and franchising assets. Lehman Brothers leads an IP deal for Domino's Pizza; it aims to raise $1.85 billion. Dunkin Donuts really got the IPO ball rolling last May with its well-received deal. All of this being fueled in part by hedge funds and the liquidity they bring. We'll likely see a lot more deals. With the marketplace shifting to a more knowledge-based, or "IP-centric," economy and major investment banks testing the waters, IP securitizations are quickly changing the financing landscape and are reviving the possibility that this type of arrangement will become mainstream. Securitization normally refers to the pooling of different financial assets and the issuance of new securities backed by those assets. In principle, these assets can be any claims that have reasonably predictable cash flows, or even future receivables that are exclusive. Thus securitization is possible for future royalty payments from licensing patents or trademarks (or compositions or recording rights of a musician). At present, the markets for intellectual property asset-based securities are still rather small, as the universe of buyers and sellers is limited. But if the recent proliferation of IP as the new asset class (auctions, IP merchant bankers, and so on) then it is only a matter of time before all concerned will develop greater interest and capacity to use IP assets for financing business start-ups and expansions. As more cash flows are generated by intellectual property, more opportunities will be created for securitization. New player in the field is IPEG, Europe’s first IP merchant banking. They are in the process of developing their own IP securitization product, to be launched soon.

Japan has toughest patent system

2007-04-13T12:41:00.000-04:00

Japan today has the toughest patent system in the world in terms of the odds of a patentee winning a patent trial against an accused infringer. Japanese trial courts hold against patentees in nearly 90 % of all cases, according to statistics released by the Japanese attorney Eiji Katayama at the “Fordham Conference”, the law school’s Fifteenth Annual Conference on International Intellectual Property Law & Policy that commenced on April 12. For the year 2006, Mr. Katayama reported that for the Tokyo and Osaka District Courts 33 out of 37 final trial decisions ended with a finding of non infringement. Of the 33 patentee losses, two-thirds were decided on the basis of invalidity (22/33) while more than 85 % of the invalidity determinations were keyed to a lack of an inventive step or obviousness (19-22).

During the panel discussion at the Fordham Conference, the point was made that on appeal, there is generally an 80% affirmance rate. Prof. Obuchi explained that many of the currently litigated patents had been granted many years ago under a much lower standard of patentability. He indicated that this was one reason for the low rate of patentee success. Mr. Katayama noted a disparity in claim construction methodologies for infringement and validity. The matter is serious enough that it was to be resolved by the Intellectual Property High Court by its Grand Panel division. But, the test case – Toshiba v. Hynix – was ultimately settled before a decision was reached.

As noted by Prof. Tetsuya Obuchi at the Fordham Conference, many Japanese patents enforced today are from an earlier era which had lower standards of patentability than today, thus in part explaining the very low success rate for patentees in their infringement suits. A helpful perspective is provided by former Deputy Commissioner Shinjiro Ono, who has been responsible much of the recent push for higher quality examination at the PTO.

prof. Hal Wegner

Is DRM dead?

2007-04-03T15:53:00.000-04:00

Now EMI decided to deliver “DRM[1]” free music, (no limitations once the music file has been downloaded) it seems that everyone in the technology and CE space is going to take a wait-and-see attitude for the next few months. It is highly unlikely that any big player in the field like Philips will do anything in the area of encryption-based DRM in the very near future.

On the other hand, this could be a huge boon for watermarking. Check DMRC – it spiked mildly (3%) on the news, then retreated somewhat – although only a small percentage of DMRC’s revenue is media related (as opposed to government and other applications). Still, if you were to invest in individual securities, buy DMRC right now. (There are money managers who deal with this).

So we take it DRM is not dead. One fact that got lost in the recent hoopla is that DRM-ed tracks from EMI are still going to be available on iTunes. So, it’s about offering consumer choice and responding to the market, which is what DRM is supposed to be about. For companies like e.g. Intertrust that have DRM technology for all types of content, it looks that it’s not going to make much difference, though they are most likely going to have to cut their royalty rates for music devices.

However other companies may do less well, like e.g. SDC of Switzerland, because they are music only –good news for Michael Bornhaeusser because he cashed out in time (SDC was recently, and quietly, acquired by a US company called PacketVideo that makes software for media applications on handheld devices).

[1] Digital Rights Management

German Court invalidates drug dosage patent

2007-03-20T09:51:00.000-04:00

Germany's highest court, the Bundesgerichtshof rendered its decision in the Carvedilol II case. Subject of the decision of the Federal Court of Justice was the validity of a patent claim containing a specific dosage instruction for Carvedilol, a beta blocker indicated in the treatment of congestive heart failure. The patent claim contained detailed instructions regarding the use of carvedilol as follows:

"[...]
4.1.1. administering a pharmaceutical formulation which contains either 3.125 or 6.25 mg carvedilol per day,
4.1.2. for a period of 7-28 days,
4.2.1. followed by an increase of the dosage
4.2.2. each with an interval of 14 days
4.3. administering finally a maximum dosage of 2 x 25.0 mg carvedilol per day."

The Federal Court of Justice revoked the claim and underlined that a specific dosage instruction for the use of drugs should be seen as a non-patentable method for treatment of the human body. According to the reasons of the decision the non-patentability results from the spirit and purpose of Art. 52 (4) EPC. The provision reflects the will of the legislator to protect a doctor's freedom to determine an individual therapy plan for patients, in particular to determine the dosage of drugs individually, without being restricted by opposing patent claims. Further, the court concluded from the non-patentability of such dosage instructions that these isntructions should not be considered for the question of novelty and inventiveness regarding the remaining part of the claim. Unfortunately, the court has made no clear statements regarding the question, whether claims containing such non-patentable dosage instructions are entirely invalid even though the remaining part of the claims may still be novel and inventive. While the European Patent Office assessed in several cases that such claims are invalid as a whole, the Federal Court of Justice left this question explicitly unanswered.

Nonetheless, this decision restricts the possibilities for life science companies to expand protection for their patents by simply formulating dosage instructions in their patent claims. Since it cannot be excluded that the use of specific dosage instructions may lead to the revocation of a whole claim, applicants have to draft new patent applications very carefully and should refrain from any reference to dosage instructions for the use of medicines within the claims. They should focus more on the ingredients and substance of the medicine itself.

Dr. Kaya Köklü, Simmons & Simmons, Düsseldorf

European Commission investigation into Taiwan’s CDR compulsory licences

2007-03-17T10:24:00.000-04:00

The European Commission has launched an in-depth investigation into the WTO consistency of the granting of compulsory licenses by Taiwan for recordable compact discs (CDRs) under the Trade Barriers Regulation. This follows a complaint lodged by Philips, the electronics manufacturer which holds patents in the technology for CDRs. A compulsory license is a permission granted by a government which permits a domestic producer to use a patent without having to negotiate a licensing agreement for the use of the patent with the patent owner. The conditions for the grant and use of compulsory licenses are regulated in the WTO TRIPs (Trade Related Aspects of Intellectual Property Rights) Agreement.

EU Commissioner for Trade, Peter Mandelson said: "The proper enforcement of intellectual property rights one of the central planks of the EU's Global Europe Strategy. The allegations made in respect of the grant of these compulsory licences give ground for substantial concerns and the Commission will thoroughly investigate them. I am hopeful that we can find a means to resolve any WTO violations identified in the investigation".

The Commission is acting on the basis of a complaint lodged by Philips, the Dutch electronics manufacturer pursuant to the Trade Barriers Regulation. Philips is the inventor of some of the core technologies for CDRs and holds patents in those technologies. The complaint alleges that Taiwan granted compulsory licences inconsistently with the WTO TRIPs Agreement. In particular, it is alleged that Taiwan granted these licences where Philips had made reasonable efforts to provide its licenses on a voluntary basis by offering terms acceptable to seven of the eight main producers in Taiwan. It is also alleged that Taiwan granted the licence in full knowledge of the fact that the CDRs produced would be for export ( Taiwan produces 80% of the world's CDRs) despite the express prohibition on the use of such licences for export production in the TRIPs Agreement. The Commission is satisfied that there is sufficient prima facie evidence of a violation of the TRIPs Agreement and of adverse effects on the Community to merit an investigation.

The Trade Barriers Regulation provides EU companies and industry associations with a right to file a complaint with the Commission when they face trade barriers in third countries. Following Philips's complaint, the Commission has decided to initiate an investigation procedure. When this happens, the Commission normally has five months to decide on whether to proceed with a commercial policy measure. The investigation process involves gathering information in Taiwan, in cooperation with the Taiwanese government. Member States can assist in the fact-finding process, for instance through their local delegations. EU and Taiwanese companies will also be asked to participate in the investigation by way of questionnaires and meetings. Parties interested in participating in the investigation should consult the Notice of Initiation in the Official Journal of the European Union.

Several outcomes are possible. The Commission may find the claims unfounded and decide to terminate the procedure. The Commission may also decide that satisfactory steps are being taken by Taiwan to eliminate the barrier to trade, and may monitor developments. The Commission may seek a solution with Taiwan. The Commission may also decide to initiate international dispute settlement proceedings in the WTO against Taiwan.

FD on IPEG as Europe's first IP merchant banking group

2007-03-12T02:53:00.000-04:00

Today, in Netherlands financial daily "Het Financieele Dagblad" an article on Europe's first IP merchant banking group, IPEG and its founder, Severin de Wit.

For English translation, click here

SanDisk Philips-Sisvel - Pumfrey J on jurisdiction

2007-03-07T12:07:00.000-05:00

Further to our earlier post about the SanDisk vs. Philips judgement by Pumfrey J, here is a verbatim account on what the court contemplated about the question to what extent this case leaves open issues for the Court of Appeal to decide on jurisdiction

"I am of the view that if this jurisdiction needs to be worked out and if there is no substantial challenge to my approach to the cases such as they are, then this is a matter where the Court of Appeal should themselves decide is a suitable occasion for working out such principles as need to be worked out. I am not satisfied that on the materials that are available there is a reasonable prospect of success. I must acknowledge that further refinements in the statements of the law by the Court of Appeal might create a prospect of success where there is none. That possibility cannot be excluded, but it is not for me to exploit it and the application for permission must be made to the Court of Appeal.

I think, at first instance, unless one is satisfied that there is an arguable case on the present state of the authorities, one refuses leave and one leaves it to the Court of Appeal to see if they want to have to say anything about it. It may be that in fact the one point which is slightly vulnerable, maybe I do not know is Domicrest. That is a first instance decision. None of the rest can I see even them doing anything, but I am bound by it. I am certainly bound by Domicrest, and that is a matter for the Court of Appeal, whether they wish to take it or not."

Europe in 2010 will be where the US was in 1981

2007-03-06T02:51:00.000-05:00

It has been said many times over: EU is not getting where “Lisbon” wants it to be by 2010. According to a study by Chambers– the EU organization of Chambers of Commerce – the EU lags behind the US in R&D spending. Not a new conclusion, both McKinsey and Booz Hamilton reached the alarm bell earlier. Saddest of all, Europe reaches only now the level of R&D investment per capita that the US already achieved in 1978.

So how will 2010 look like? According to this figures Europe in 2010 will look like where the US was already in 1981 (in August of that year IBM announced its first PC). We had not heard about mobile phones and US companies like Dell, Google and Cisco had yet to emerge. So are we wasting our time here in Europe? Did you sense a feel of emergency among European politicians?

European Patent Opposition Statistics for 2005

2007-03-05T11:59:00.000-05:00

In 2005, oppositions were filed against 5.4% of granted patents, compared with a rate of 5.3% in 2004. Fewer oppositions were filed in 2005 (2,960) than in 2004 (3,100), reflecting a slight fall in the number of patents granted over the same period, see James Wilding and Andy Bridle in Managing Intellectual Property

see for full statistics

US software patents under legal scrutiny

2007-03-04T06:04:00.000-05:00

On October 31, 2006 we blogged about the case Microsoft Corp. v. AT&T Corp. where the US Supreme Court accepted to hear a case about “extra territoriality” under US Patent Law art. 35 (USC § 271(f). On February 21, 2007, the court heard arguments in this case.
At issue the question: Is there patent infringement liability for the export of unpatented physical components of a patented combination?

In 1984, the U.S. Congress decided that US patent owners should be able to sue for infringement companies that supply from the U.S. components of a US patented invention off-shore for assembly outside the US that would infringe the patent if it occurred in the US. This rule is codified in US patent law as “Section 271(f)”.

The US and European IT industry are closely watching this case, as this might have implications in the US as well as in Europe.

Prof. Pamela Samuelson in her article, discussing this case and its implications, “Legally Speaking: Software Patents and the Metaphysics of 271(f)”, concludes:

“Because of this, it is difficult to believe that the Court would outlaw software patents altogether. But one can always hope. Based on twenty-four years of studying software intellectual property protection, I believe the software industry would be no less innovative and no less competitive in the world market if software patents disappeared tomorrow.”

This should be encouraging for those that have, for the last two years, argued that software patents should be abandoned in Europe all together as they rather stifle than stimulate innovation

SanDisk vs. Philips, mp3 litigation in the UK, J Pumfrey denies injunction

2007-03-02T09:10:00.000-05:00

In a high profile legal battle on mp3 patents, UK Judge Pumfrey rendered its judgment in a request for interim injunction by SanDisk against Philips et al. The first four defendants (the patentees, registered in the Netherlands, France, France and Germany respectively) own a number of European patents relevant to mp3 technology. The patents have been the subject of an intensive licensing campaign carried out on behalf of the patentees by the fifth defendant, Sisvel, an Italian licensing company. Sisvel claims that five of the patents in dispute are essential for the making and/or selling of an mp3 player in the EU and that if an mp3 player complies with a particular standard, it will necessarily infringe these four “essential” patents. It seems that most of the principal manufacturers and/or sellers of mp3 players (with the exception of the claimant, SanDisk) have entered into licenses, though the terms of those licenses have not been made public. SanDisk, a US corporation, which inter alia imports and sells in the EU (unlicensed) mp3 players was offered a license, upon filing the action, relating only to the four “essential” patents but nevertheless on the standard royalty rate by Sisvel.

In February 2006, SanDisk began invalidity proceedings in the Patents Court in relation to the five patents. In March 2006, SanDisk also started proceedings for declarations relating to essentiality and non-infringement. The Patentees counterclaimed for infringement. These proceedings are ultimately due to come together for trial in February 2008. Subsequent to the start of proceedings in the UK, Sisvel sought to enforce the patents elsewhere in the EU by summary means. It obtained several Border Detention Orders and consequent infringement proceedings are pending in Germany and the Netherlands. Sisvel also sought domestic remedies in Germany and Italy, including the seizure by the Berlin Public Prosecutor of mp3 players exhibited in the SanDisk booth at a major exhibition, an action which resulted in significant publicity (among which this blog posts).

SanDisk alleged several breaches of arts. 81 and 82 EC Treaty. These were considered by Pumfrey J in relation to the jurisdiction issue but they also raised interesting substantive issues, for example whether the offer of an objectionable license could be characterized as an abuse of a dominant position (the patentees refused to grant licenses on an individual basis having agreed that all licenses would be granted by Sisvel).

Relief sought

SanDisk claims that Sisvel and the patentees enjoy a dominant position in two relevant defined markets and that their conduct constitutes harassment amounting to an abuse of that dominant position. It argued that this is actionable in the UK and also justified at least limited interlocutory relief requiring Sisvel to notify SanDisk of any further proposed complaint to the relevant administrative or prosecuting authorities. This would enable SanDisk to approach those authorities and explain to them why it believes the essentiality argument is a bad one before the authorities decided whether to act. SanDisk also complained about certain aspects of the licensing activities of Sisvel, claiming that these also amount to abuse of a dominant position. In respect of both the "harassment" allegation and the licensing allegation, Sisvel argued that there was no jurisdiction either to entertain the substantive complaint or to grant any form of interim relief in England and Wales.

Jurisdiction in the Substantive Claim

Pumfrey J held that the court had no jurisdiction to determine the substantive claim.He started by noting that Sisvel (an Italian company), against whom the greatest complaint was made, could be sued in Italy and that the Patentees could be joined to such proceedings under Article 6(1), Brussels Regulation. However, because none of the defendants were domiciled in England and Wales, SanDisk needed to establish that a special jurisdiction was available under Art 5(3).In order for the English court to possess the exceptional jurisdiction pursuant to Art 5(3) which would allow it to adjudicate upon the alleged abuses of a dominant position in the present case, either the event setting the tort in motion must have been in England and Wales or, alternatively, the claimant needed to show that it was the immediate victim of that abuse suffering direct harm in England and Wales. In addition, the scope of the two jurisdictions was different. The jurisdiction based upon the place of the harmful event was international, while the jurisdiction based upon the relevant harm was restricted to England and Wales. Pumfrey J concluded that SanDisk had not established that any of the first steps of the abuses complained of took place in the UK, nor that immediate damage was caused to SanDisk in the UK by reason of the alleged abuses. SanDisk also needed to demonstrate a good arguable case before jurisdiction would be assumed under Art 5(3). Since there were courts (for example in the Netherlands, Germany, France and Italy) which indisputably had jurisdiction over the individual defendants pursuant to Art 2, something better than a case which was merely arguable was required in order to preserve the necessarily exceptional nature of Article 5(3) jurisdiction and for the purpose of ensuring the uniform application of the Brussels Regulation. In relation to the enforcement steps taken by Sisvel in Germany and Italy (by use of criminal complaints) and in the Netherlands (and possible Germany) by the employment of Border Detention Orders, Pumfrey J noted that - assuming it was possible to invoke these administrative actions in an abusive manner, for example by relying upon a patent positively known to be invalid - the damage resulting from the abuse was plainly suffered in the Member State in which the Border Detention Order has been effected. There was no Border Detention Order in the UK. Similarly, in relation to the seizure by the Public Prosecutor in Berlin, both the act itself and the harm immediately flowing from it arose in Germany. Pumfrey J observed it could be thought that all these legal proceedings were duplicative and so potentially oppressive. However, this could not be the case. Although all the patents in question derived from the same European patent applications, the patent system meant that these matured into domestic patents in the designated contracting states and that enforcement had to be undertaken state by state. Infringement could not be litigated for all designated states in only one of them: if validity is or will come into issue, enforcement must be on a country-by-country basis (GAT vs. LuK and Roche vs. Primus).

Enforcement of patent rights as abusive conduct

Pumfrey J also considered a separate issue relating to jurisdiction under both Article 5(3) (see above) and Article 31 (see below) under the heading "Enforcement of patent rights as abusive conduct". SanDisk claimed that there was a sustained campaign of abusive and anti-competitive activity throughout Europe, including the UK. This resulted in loss by SanDisk throughout the EU and immediate damage in every country, thus giving the English court jurisdiction. The core of this argument related to the enforcement steps invoked by Sisvel in various Member States and the interim relief sought by SanDisk was targeted at enforcement measures. Assuming that the Patentees and/or Sisvel have a dominant position within a relevant market, and assuming that the effect of enforcing their intellectual property rights will consolidate that position of dominance, Pumfrey J asked in what circumstances would the law recognize that enforcement through the legal channels provided for either by Community law or by domestic law of the Member States amounted to abuse? He said that a comprehensive answer was provided by ITT Promedia NV vs. Commission (Case T-111/96), a judgment of the EU Court of First Instance. Pumfrey J concluded from this case that where there is no dispute that the patents have been granted to the patentee, the enforcement action can be considered to be merely harassing if the patent is obviously not infringed or if the patent is invalid and in either case the patentee either knows or believes that to be the case. He acknowledged that it might be argued that duplication of patent proceedings takes on a harassing aspect, but, as he had already explained, enforcement must proceed, if it proceeds at all, on a country-by-country basis. As a result, he ruled that that not only was there no arguable case for saying that immediate loss was suffered by SanDisk in England and Wales as a result of the acts complained of, but the basis upon which it can be supposed that the conduct was abusive at all was very thin indeed. In any event, the appraisal of the abusive nature of litigation or other administrative action was surely for the relevant jurisdiction to decide. Article 31, Brussels Regulation and the interim relief sought. Art 31 states that “Application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that State, even if, under this Regulation, the courts of another Member State have jurisdiction as to the substance of the matter."

Conclusion

Pumfrey J concluded from the case law that jurisdiction under Article 31 is to be exercised by the court best placed to be acquainted with and to understand the effects of the provisional and protective measures which are sought. Jurisdiction was conditional, inter alia, on the existence of a real connecting link between the subject-matter of the provisional or protective measures sought and the territorial jurisdiction of the Contracting State of the court before which those measures are sought. The nature of this connection could be purely physical – there were assets within the jurisdiction – or one of control – the person who was the subject of the order was within the jurisdiction and immediately susceptible to such coercive measures to secure compliance as might be necessary. In any event, Pumfrey J ruled that there was no such connection in the present case. He also noted that none of the defendants were UK companies, that there were no Border Detention Orders in the UK and that no proceedings other than the present set of patent infringement proceedings were on foot in the UK. The courts in the Members States where Border Detention Orders had been obtained were beyond doubt in the best position to decide what, if any, measures of warning it was appropriate for Sisvel to give SanDisk, and it was plain that these courts were live to the possibility of abuse of the various measures available to Sisvel for the purpose of enforcing the patents.

Art. 31 jurisdiction

Pumfrey J noted that the scope of the relief sought was not very wide and should not cause Sisvel any difficulties. However, since the existence of the jurisdiction itself depended upon the factors outlined above, he held that there was no Art 31 jurisdiction to grant the order sought. Pumfrey J also noted that the only part of this dispute which could conceivably support the grant of interlocutory relief was, for various reasons, unarguably bad. For this reason, and also because of the extraordinary delay which had already taken place both before the issue of this application and this hearing, he would in any event have refused any form of interim relief.

see on mp3 software, for alternative padding detection algorithm, dr. Otto Witte @ http://www.ipeg.com/ipeg_institute.php

IP Enforcement Directive and Gathering Evidence in Germany

2007-02-28T16:35:00.000-05:00

On 26 February 2007, Judge Kühnen, one of the chairmen of the regional court in Düsseldorf for patent litigation, made a speech about legal instruments to obtain evidence in patent infringement cases in Germany. In front of a large attendance of patent experts he stressed that although the IP Enforcement Directive is formally not implemented into German law yet, its application is already ensured by existing provisions in German law.

Obtaining evidence in patent disputes is often difficult, especially if the infringing conduct is not public. According to German law, the general principle is that the defendant is under no obligation to disclose evidence to its disadvantage and German civil procedure law does not know a specific procedure such as "saisie contrefacon" in France or "search order" in UK. Nonetheless, the Düsseldorf courts supported by a decision of the Federal Court of Justice achieve a similar result in line with the IP Enforcement Directive by a specific interpretation of some general provisions of the German Civil Code and the German Civil Procedure Act. According to this interpretation the defendant or any third party in the possession of relevant documents or possibly infringing products can be obliged (1) to disclose them or (2) to tolerate an expert's examination. Important to mention is that the court can order such measures by a preliminary injunction without an oral hearing. In this regard, Judge Kühnen underlined that the requirements to obtain such an order are not high, in particular if the documents or products are relevant to support the claimants position. He proposed that patentees should always take these options into account when litigating in Germany.

Surely, such a decision is subject to the principle of proportionality. Especially confidentiality interests have to be considered at this point. Parties may have a protectable interest, that information material about their business remain confidential and are not disclosed to others, in particular not to competitors. In its recent decision, the Federal Court of Justice recognized this problem and offered a pragmatic solution: confidential parts of documents should be blacken or garbled. If the court orders the expert to enter the potential infringer's premises for carrying out an experts examination, data of such examination reports can be kept confidential if the results do not indicate a likelihood of patent infringement. Is this the case, only the court, the defendant and eventually the claimant's lawyers would be informed about the outcome of the examination, but not the claimant himself.

The recent decision of the German Federal Court of Justice and the legal practice of the regional courts in Düsseldorf show that although the IP Enforcement Directive is not formally implemented into German law yet, there are already efficient options to obtain evidence in patent cases. Though not fully identical to the legal instruments under French and English law, the German legal practice now provides a well equipped and similar instrument for claimants in such litigation. Especially the practice of the regional courts in Düsseldorf leads to a further strengthening of the position of patentees litigating in Germany.

Dr. Kaya Köklü , Simmons & Simmons Düsseldorf

You thought paying Sisvel ended your license concerns?

2007-02-25T06:07:00.000-05:00

In earlier posts, I described the mp3[1] patent area as a minefield. One big landmine has been added to the terrain, the mp3 patents of the French company Alcatel. Last Friday Alcatel won a US Federal Court Jury verdict for US$ 1.52 billion damage award for patent infringement by Microsoft. The largest patent infringement damage award ever (the last record was the Kodak damage award of approx 900 million US$). According to reports, about half of the damage award is based on foreign sales under US patent law section 271(f).

At issue is the way the Windows Media Player software from Microsoft plays audio files using mp3 compression technology. If the ruling stands, hundreds of other companies that make products that play mp3 files, including portable players, computers and software, could also face demands to pay royalties to Alcatel. That will be most likely the next big thing for consumer electronics manufacturers: Alcatel knocking on the door of companies like LG, Samsung, SanDisk, NEC, Matsushita, Nokia, Huawei, ZTE to collect the next round of royalty fees for mp3 technology.

Those companies already had their share of unpleasant surprises when they were forced to pay Sisvel, Philips’ licensing arm, for Philip’s mp3 patents. Most of them paid the license fee, adding to the manufacturing costs of consumer electronics. That made Alcatel’s attorney tell the US jury: "We invented it and everybody else is making money off of it."

What's the point?
The point to make is this. MP3 technology has been already developed as early as 1987 (EUREKA project) by Fraunhofer Institute, Germany. Only much later, basically when Apple began to popularize the use of digital audio through its iPod around 2000, mp3 became ubiquitous, a tool to be used in any digital device. That popularity provoked companies like Philips, who were running short in licensing income from their previous IP cash cows, CD and DVD technology, to look in their portfolio for patent license potentials.

Philips, through their licensing arm Sisvel (Italy) and MPEG LA (US) used their mp3 patent portfolio (basically mp2, but asserted against mp3 players) to generate their next generation licensing income. The intellectual property was developed around 1993, after the main development in mp3 was started by Fraunhofer in the late 80’, and even after BBC Research experimented with digital transmission systems in as early as 1985. Philips’ main patent in the area, EP 0 402 973 and its US counterpart, granted in 1994 for the use of “padding bits” in a digital transmission system, EP 0 599 824 (for intensity stereo encoding and decoding), and EP 0 660 540 (for a decoder) became at the heart of an impressive licensing program. Fraunhofer already launched a less aggressive licensing program –together with Thomson of France- under their mp3 patents earlier.

What normally happens when a successful product enters the market happened in the service industry (in this case IP licensing) as well: other mp3 patent holders follow suit, lured into money making licensing programs similar to the Philips/Sisvel deals.

Alcatel now uses its mp3 patent to launch its licensing program. To convince the market they need a license under Alcatel patents as well, Alcatel did what most successful licensing strategies do: you take up against a giant first, gets him on his knees, get a court order against the alleged infringer and use that outcome against others to convince them they should not fight the patent but take a license (“the giant defender already lost, so what’s the point duplicating that?”). If the patent is also part of a standard and you can assert it as an “essential” patent, as Philips and Sisvel do, than your licensing program is complete. The license fee must be against RAND (reasonable and non discriminatory) conditions, but still, when hundreds of consumer electronics companies take the license, you are in for a more then lucrative license outcome.

What are the lessons to be learned from this?
First and foremost that companies ought to get their patent portfolios in “hot” technical areas ready in a very early stage and not wait until the technology gets mainstream. That requires foresight by management and a clear intellectual property strategy to acquire the necessary IP support for that technology in an early stage. It requires participation in standard setting procedures as well as actively managing the IP surrounding that technology. Although many companies may lack the necessary R&D output necessary to back up own IP, an alternative, much underused and undervalued, is to engage IP merchant bankers to allocate and acquire that necessary IP for them.

[1] popular digital audio encoding, lossy compression format, and algorithm, designed to greatly reduce the amount of data required to represent audio, yet still sound like a faithful reproduction of the original uncompressed audio to most listeners

The UK Blackberry case RIM vs Inpro

2007-02-14T09:51:00.000-05:00

The UK Court of Appeal handed down a judgment on Wednesday 7 February in the UK "Blackberry"case, RIM v Inpro (Inpro is a technology licensing company or, some might say, a "troll"). As expected, the Court upheld the first instance decision revoking Inpro's European patent in the UK on the grounds of obviousness. Inpro's patent claimed a system for enabling web pages to be made available to hand-held computers via proxy servers based on (amongst other things) screen size and resolution, and utilisation of a single transfer file rather than multiple HTTP-type files. The obviousness of these claimed concepts was upheld over at least 3 pieces of prior art.There appears to be no grounds for appeal to the House of Lords. Unlike NTP in the US, Inpro will obtain no licensing income from RIM as a result of this litigation.

Negative Opinion on powers of EU member states to agree individually on EPLA

2007-02-10T07:50:00.000-05:00

When the European Parliament debated the EPLA agreement in October 2006, a resolution was adopted whereby the Legal Service of the EP was asked “to provide an interim opinion on EU-related aspects of the possible conclusion of the EPLA by the Member States in the light of overlaps between the EPLA and the “acquis communautaire”.

"Acquis Communautaires" is a French term meaning, essentially, "the EU as it is" - in other words, the rights and obligations that EU countries share. The "acquis" includes all the EU's treaties and laws, declarations and resolutions, international agreements on EU affairs and the judgments given by the Court of Justice. It also includes action that EU governments take together in the area of "justice and home affairs" and on the Common Foreign and Security Policy.

On February 1, the Legal Service produced its opinion. It creates a new hurdle for EPLA to become reality anytime soon, as it concludes:

"1) The purpose of the Agreement on the establishment of a European patent litigation system ("EPLA") is to set up the European Patent Judiciary to settle litigation concerning the infringement and validity of European patents

2) Where common rules have been adopted, the Member States of the European Community no longer have the right, acting individually or even collectively, to undertake obligations with non-member countries which affect those rules

3) Directive 2004/48/EC harmonizes national legislation on the enforcement of intellectual property rights Not only would EPLA govern matters already dealt with by this Directive, but there are also contradictions between the two instruments on a number of matters

4) EPLA aims to lay down rules in certain areas governed by Regulation 44/200 I concerning jurisdiction and the recognition and enforcement of judgments. Notwithstanding the specific provisions of EPLA governing its relations with that Regulation, the conclusion of EPLA would affect the uniform and consistent application of the Community rules on jurisdiction and the recognition and the enforcement of judgments in civil and commercial matters

5) Compliance with Article 98[1] of EPLA would prima facie constitute a breach of Article 292 EC Treaty

6) It follows that the Community's competence is exclusive for the matters governed by EPLA and Member States therefore are not entitled on their own to conclude that Agreement."

[1] Article 98 of the EPLA agreement reads:
“Disputes between Contracting States. (1) Any dispute between Contracting States concerning the interpretation or application of this Agreement which is not settled by negotiation shall be submitted, at the request of one of the States concerned, to the Administrative Committee, which shall endeavor to bring about agreement between the States concerned. (2) If such agreement is not reached, any one of the States concerned may submit the dispute to the International Court of Justice for a binding decision."

Article 292 of the EC Treaty reads:
"Member States undertake not to submit a dispute concerning the interpretation or application of this Treaty to any method of settlement other than those provided for therein."

The Impediments of the Cannots

2007-02-09T03:57:00.000-05:00

In 2007, no doubt, we will see an increasing interest in intellectual assets as the new asset class and what it means for innovation, for R&D, for IP professionals but also for those that treat any intellectual property issue as a not-so-high-on-my-priority-list. Why many treat IP like this is remarkable, given that licensing of patents and know how has become an important channel for diffusing knowledge. Well-functioning technology markets can improve the efficiency of innovation processes by facilitating exchanges of patented inventions. Yet there are many impediments to overcome before Intellectual property will be treated as an equal to other asset classes.

In the upcoming blogs, we would like to explore what impediments exist within corporations, organizations, universities and R&D to fully appreciate intellectual property and its importance for innovation (or, again impediment for innovation). What causes IP to be always so low on the corporate priority list. Often one hears what CAN NOT be done with patents and other intellectual property rights:

IP cannot be valuated properly

IP cannot assist in improving innovation

IP cannot be consistently used as a collateral in financial transactions

IP cannot be appreciated by banks and financial institutions as they do not trust IP enough

IP cannot be visualized like other asset classes

IP cannot be easily understood

IP cannot be monetized

IP cannot be seen as an effective mean to contribute to recoup R&D costs

As we cover these “cannots” in the coming months, this blogs hopes to provoke debate, invites ideas and suggestions, so as to make 2007 the year of acknowledgment that IP is the New Asset Class and should be treated that way.

First European IP merchant banking

2007-02-09T03:26:00.000-05:00

On February 1, 2007 Europe got its first company that will primarily focus on acquisition (and divestiture, for that matter) of intellectual property (mostly patents). IP is a new and valuable asset class. IP merchant services (also “IP merchant banking”) are widely offered for all kind of asset classes, except, intellectual property. Similar to the more widely know asset classes as real estate, precious metals, currencies and stocks, there are other assets one can trade, like permits to emit carbon dioxide and other greenhouse gasses. There are markets for aircraft leases and to buy and sell energy. Yet the buying and selling of intellectual assets, like patents, R&D outputs and knowledge in general often happens mostly outside the public eye. There is no “market place”, at least not a visible or physical one for intellectaual assets. Recently, Ocean Tomo, a Chicago based, US company started patent auctions (see our earlier posts) soon to be followed by the first Europen patent auction by a german company, IPA, to be held in Munich (see upcoming IP events on the right side of this blog) .

The new IPEG company will primarily focus on assisting companies to acquire (or divest) intellectual assets like patents. Several trends, like shortening of time-to-marketand price erosion (mainly in the consumer electronics industry), have caused R&D managers to more closely look into their intellectual property portfolios to see how investment in patents can be organized in such a way that it contributes to the financing of R&D investments, to contribute to P&L, and to provide leverage in cross licensing deals.

UK and Dutch Court differ on validity of stents patent

2007-01-30T11:26:00.000-05:00

On January 16th the UK Court of Appeal in Angiotech Pharm., Inc. v. Conor MedSystems Inc., [2007] EWCA Civ 5 (Jacob, L.J.) affirmed an invalidity ruling of critical claim 12 of Angiotech’s patent [2006] EWHC 260 (Pat) (Pumfrey, J.), while the very next day - in counterpart litigation – the The Hague District Court in The Netherlands upheld the same claim in Conor MedSystems Inc. v. Angiotech Pharm., Inc., No. 258022/HA ZA 06-261 (judgment January 17, 2007).

The patent is about taxol as the factor to be used in a drug eluting stent. Angiotech Pharmaceuticals Inc. is the owner together with the University of British Columbia of European patent 0706376 (or “Hunter”). Boston Scientific Corporation is the licensee in the field of the cardiovascular medicine under EP 376.

Beyond providing a comparative study of obviousness on counterpart patents where both courts were obviously aware of the progress of both actions, the British decision from one of the leading common law patent jurists provides an interesting comparative framework for the soon to be decided U.S. Supreme Court KSR decision which may occur in the February session of the Court that commences February 20, 2007.

The British decision makes special note of the counterpart Dutch proceedings and an earlier Dutch decision involving different parties. See ¶ 65- ¶ 68 (pp. 24-25). Lord Justice Jacob made the following observation:

“One can, of course, postulate a different policy under which a [patent] monopoly might make sense. There are old or obvious ideas which take a lot of work, expense and time to develop and turn into something practical and successful. Without the incentive of a monopoly, people may not do that work or spend the time and money. The Fosamax case, Teva v Gentili [2003] EWHC 5 (Patent), [2003] EWCA Civ 1545, is an example of an obvious invention which cost lots to bring to market. But patent law provided no protection for all that investment because the basic invention was obvious. The courts’ job is not, however, to uphold any claim to a monopoly for an idea which requires investment and risk to bring to market, only those for ideas which are new, non-obvious and enabled.”

The British opinion also has an extensive discussion of the law of obviousness, particularly beginning at ¶ 39-¶ 60 (pp. 18-23), including extensive comparative law discussions with a quotation from Circuit Judge Rich:

“Slight reflection suggests, we think, that there is usually an element of
‘obviousness to try’ in any research endeavour that is not undertaken with
complete blindness but rather with some semblance of a chance of success, and
that patentability determinations based on that as the test would not only be
contrary to statute but result in a marked deterioration of the whole patent
system as an incentive to invest in those efforts and attempts which go by the
name of ‘research’.”

Prof. Hal Wegner, Washington D.C

Patent prosecution file history can be used in infringement case

2007-01-28T06:04:00.000-05:00

On December 22, 2006 the Dutch Supreme Court ruled in the case Dijkstra vs. Saier that the patent prosecution file history may be invoked to prevent the patentee disclaiming an aspect of his patent monopoly in order to get a patent granted, but then reclaiming it during infringement proceedings. In Anglo American practice this is known as file wrapper estoppel, “amendment estoppel”, or “argument estoppel”. This prevents a proprietor who has narrowed his claims during prosecution in order to meet requirements of patentability from then asserting the patent against any equivalent technologies falling within the scope of a surrendered territory. The latter type of estoppel (“argument estoppel”), is similar as amendment estoppel, in that where a patentee has made statements to the Patent Office (or in the Dijksta vs. Saier case) during prosecution - namely during the opposition proceedings before the European Patent Office - with regard to the scope of a claim, he cannot subsequently assert the patent against equivalent technology in contradiction of that assertion.

The Court thus affirmed its findings in the first case on the use of prosecution file history in a patent infringement case, Ciba-Geigy vs. Oté Optics (NJ 1995/391). In that case the Dutch Supreme Court ruled that the scope of protection of a patent has to be ascertained by considering four factors: (1) in interpreting the terms of the claims, the Court is to determine the essence of the invention; in other words, consider the inventive concept behind the wording of the claims; (2) this interpretation then needs to be corrected to give a reasonable degree of certainty for third parties, which may sometimes justify a restricted, literal interpretation of the wording of the claims; (3) the skilled person may - with restraint - use the prosecution history file for the purpose of claim interpretation; (4) and all other circumstances of the case are to be taken into account, including the possible 'breakthrough' nature of an invention (justifying a broader scope). When considering factors (2) and (3), poor drafting of the patent may be construed to be patentee's disadvantage. In subsequent decisions (including Impro vs. Liko, rendered three weeks after Amgen in the UK), the Netherlands Supreme Court has expressly confirmed this approach. The approach certainly appears to be more in line with the EPC requirements, although there is a lingering feeling amongst practitioners that, underlying the approach, the Supreme Court still continues to embrace its ‘essence of the invention’ approach.

In Van Bentum vs. Kool (HR 29 maart 2002, NJ 2002/530 m nt. ChG), a clear case of non-literal infringement, the Supreme Court has clarified the approach in Ciba-Geigy vs. Oté Optics such that the skilled person is only to assume that the patentee has surrendered part of the protection (e.g. beyond the literal wording of the claims but within the full extent of the invention) if there is ‘proper ground’ for the skilled person to do so. Such “proper ground” can for example be found in the patent description or the prosecution history file. This was confirmed in the case Impro vs. Liko, HR 12 November 2004, NJ 2004, 674).

The MedImmune US Supreme Court decision and European implications

2007-01-10T12:24:00.000-05:00

Every once in a while this blog pays attention to patent cases outside Europe, if there is an impact for Europe and European patent pratise.

Surely this is the case for the decision by the US Supreme in MedImmune, Inc. v. Genentech, Inc., No. 05-608, U.S. (2007) (Scalia, J.). The issues at stake is whether a patent can be challenged by a licensee even after taking a license under that same license. The question is whether certain US law provisions require a patent licensee to terminate or be in breach of its licenseagreement before it can seek a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed.

Many jurisdictions in Europe, among which Germany, take the view that if and someone takes a license under a patent he cannot have it both ways: buying peace and freedom from suit under the patent he takes a license under and at the same time challenge the validity. In Europe, a clause in a license agreement outright forbidding the licensee to challenge the validity is a no-go under current competition law. However, challenging the patent by the licensee, even after taking a license, gives the licensor the right to terminate the license. By allowing this termination practise by German courts, the practical result is that no licensee who has "bought patent peace" will be able to effectively challenge the patent after taking the license. To me this seems much like the situation under the "old" US law, as developped by the Court of Appeal for the Federal Circuit ("CAFC"), the Federal appeals court for patents in the US. It also gives rise to the question how effective the anti competion porvision is that a no-challenge clause is illegal under EU competition law if practically the licensor can achieve this result by simply terminating the license agreement after the licensee has taken up the gauntlets against the licensor.

Interesting is Prof Hal Wegner's comments and summary on this recent decision, as can be seen in his post, as can be found on this blog under "US Patent Law Updates by Hal Wegner" (on the right side of this blog under "IP Presentations").

See also:
Lynn E. Eccleston, "MedImmune: The Practical Implications"

Patents and Innovation, What We Learn From History

2007-01-09T04:46:00.000-05:00

This is the text of a lecture given by Severin de Wit on the occasion of DSM SPECIAL INVENTION REWARD 2006 on January 9, 2007 at Huis van de Toekomst in Rosmalen, Netherlands.

I am grateful to be able to witness today the grant of the DSM Special Invention Reward. This prestigious award is given to select DSM researchers whose exceptional scientific achievements have been patented and have created a distinct line of business for DSM. DSM’s most prestigious inventions and its creators are being celebrated today. It seems to me that an appropriate topic for today’s festivities is to take you back for a moment in history to show the relationship between patents and innovation. Let us see what we can learn for tomorrow what happened yesterday.

This is the time of the year that we can read about inventions that top the list of imaginary innovations, the best of the best – like TIME’s “Best Inventions 2006”, where YouTube appears as top invention of 2006, as well as hypoallergenic cats, a hydrogen bomber and a new way of drying your wet umbrella.

When people think of innovations they fantasize about tourism to Mars, immortality in a bottle, or a smarter internet. In fact the best innovations of all times are those that take into account to what degree inventions are actually used by people. As David Edgerton points out in his newly published book: “The Shock of the Old”, corrugated iron is as revolutionary an invention as is the microchip, as this light durable and easily worked building material is used for walls, roofs and even to collect rainwater, patented in 1829 to shelter goods waiting in London’s harbor. It became a global technology, changing our lives more dramatically than the hot new ones.

So let us explore history to see what innovations and patents have to do with each other and what lessons can be learned from it. After the American Revolutionary War with Britain, many of the English traditions remained in the hearts and minds of the Americans. One of those fundamental notions was that patent protection encouraged innovation. By the late 1700s, Britain had the longest continuous patent protection in the world, tracking back to 1449 when Henry VI issued John of Utynam a letter patent granting this Flemish glassmaker a twenty year monopoly on the process that produced the colored glass windows at Eaton College.

After American’s Independence, creating a working system of patents was a top priority for the first American President, George Washington. In his first State of the Union on January 8, 1790, he recommended Congress to enact legislation to encourage the introduction of new inventions from abroad and foster their creation domestically. Congress acted quickly and enacted the first Patent Act in April of that same year.

The Patent Act made issuance of a patent a matter of the highest importance. There was no Patent Office. Rather the issuing of patents was handled by the President, George Washington, and three senior cabinet officials, Secretary of State, Thomas Jefferson, Secretary of War Henry Knox and Attorney General Edmund Randolph. They met on the last Saturday of every month to review patent applications. If two of the three approved, a patent letter was prepared for the personal signature of George Washington.

Jefferson was surprised by the number of innovations inspired by the first patent act. More inventions were submitted than the three member Board could handle. The first patent act had a false start: too many inventors hated the system as long delays were faced before their inventions became patented. Furthermore it was very hard to get a patent: for every one patent granted, one was denied.

A new patent system had to be more flexible than the first 1790 Act. What emerged was the Patent Act of 1836, eventually the foundation of the modern patent system, with an appointed Commissioner of Patents as well as a major library of scientific works. The new Law marked a major divide in economic history. It unleashed a major innovative wave of breakthrough inventions among which

· 1837: Thomas Davenport with an electric motor that could power shop machinery, thus creating power tools.

· 1844: Charles Goodyear was granted a patent on a process for “vulcanizing” rubber, creating a pliable material unaffected by temperature.

· 1854: Elisha Graves Otis demonstrated at the Crystal Palace Hotel in New York his new safety braking system for elevators, basically introducing the first safe elevator and by doing so transformed urban design worldwide

Major innovations at the time changed life dramatically and created whole new industries, not know by men before. However it came to a huge price, either because famous inventors had to fight to get their patent rewarded and enforced, or they were too greedy and convinced of the strength of their inventions that they failed to share at reasonable prices.

We all know Samuel Morse, a portrait painter and professor of literature of art at NY University. Here you see Morse's colored sketch of railway telegraph, ca. 1838. He conceived the first practical telegraph, helping to shape what became a completely new communications industry. Morse filed his patent application in 1838, got a patent two years later. On May 11 1844 he wired from a chamber of the US Supreme Court to a small group in Baltimore the now famous message – chosen by the daughter of the US Commissioner of Patents – “what hath God Wrought”. Although he spent years in litigation over patents, he was eventually rewarded for his efforts and was prosperous in his later years.

However, as history also shows, a great innovation leading to a useful patent in itself does not always do the job. One of the best examples is the story of Eli Whitney and some of his best known innovations: the cotton gin. He came to his invention basically by accident. He was invited to become a tutor for a wealthy South Carolina plantation owner. On his arrival in Savannah, he was casually confronted with a major problem of that period.

The green cotton they were raising had short strands with seeds firmly attached to the fiber. The fiber was valuable but only without the seeds. All plantation owners and major cotton producers faced a major, insolvable problem. The cotton plant was easy to grow and easy to harvest but the fiber was difficult to separate from the seeds. Whitney – who had never seen cotton in his life – was captivated by the land owners request to try to come with something innovative. Whitney eventually came with what is known as a “gin”. The gin was easy to make and caused the southern agricultural states to see its fortune changing overnight to become one of the richest areas in the whole country.

Whitney got his patent in 1794. What Whitney and his former host and now commercial benefactor, Miller, did not realize at the time was that smart licensing of a good invention brings a lot more gain than trying to own all the cotton gins, something that is very familiar in our age, but then again we have learned the advantages of an “open innovation”. Whitney and Miller’s charged high prices for anyone who wanted to use the invention. Because of the too high a price, competing cottoners copied Whitney’s product. Whitney found out the hard way that those who invent something valuable are destined to a life in court, particularly when the patent laws are weak and vague. Whitney had to fight in court to get his patent validated, which led him to say: “An invention can be so valuable as to be worthless to the inventor”. He found out the hard way that marketing and licensing the patent is as valuable to an invention as the invention itself.

Another lesson to be learned from history is that a successful innovation needs a fertile corporate environment and vision by business people who believe in the invention to make it a success.

Alexander Graham Bell was granted a patent that recognized him as the sole inventor of the telephone, US patent no. 174,465, eventually became known as “the single most valuable patent ever issued in the history of the world”. What is lesser known is that Bell brought his invention to Gardiner G. Hubbard, a prominent Boston attorney and entrepreneur. Hubbard helped Bell in finding practical business and political advice, understood wire communications and what it meant politically at that time. Hubbard got what Bell did not have to build the greatest telecommunications monopoly of its time: money, political connections, and above all business experience. Even after Bell was awarded his patent, few people immediately recognized its potential.

Hubbard also gave Bell the opportunity to show his telephone on a major exhibition, the 1876 Centennial Exposition in Philadelphia. Bell allowed Hubbard to make the appropriate arrangements for ownership of the patent and creation of a new company to develop it. Hubbard organized a trust that issued 5,000 shares of stock. Bell shared the stock with Thomas Watson, his assistant, Hubbard, and Thomas Sanders, another key figure making his invention to become a business success, the Bell Telephone Company.

So what are the lessons learned from history?
· That innovation cannot foster without legal protection from sound patent laws.
· That great innovations need fertile and sound business environments.
· That groundbreaking inventions need clever enforcement strategies by people familiar with the intellectual property workings. Whitney learned the hard way that clever licensing can enhance the prospects of the invention, trying to be exclusionary and greedy can be disastrous.

So far we have seen what great innovations have done for welfare and our well-being. Whitney, Morse and Bell would not have reached their fame without the grant of a patent. However neither an invention alone, nor the sole working of a patent can achieve great business success. Neither can do without the other.

The importance of intellectual property is often underestimated. Like Whitney, Bell and Morse learned their lessons, the 21st century will prove that those that are best equipped by smart intellectual property strategies will be the next generation winners in a time of global challenges by low costs manufacturing countries, like China and India. Let me briefly explain.

My favorite question to students at the RSM is: Why do you think that President Bush when visiting China, always has intellectual property at the top of his agenda?

The most instinctive response is that this is under pressure from the fashion, food and consumer electronics industry. Sure, Louis Vuitton deserves to be protected against piracy of its designs. But could Bush not leave this to Chirac? The real story is that policymakers have come to the conclusion that intellectual property and most notably patents, are the best protection against the low manufacturing threat from China and India. China’s position as the “world’s workshop” is based on a significant advantage with regard to manufacturing cost. Generally, one could say that the west has lost the manufacturing game. Chinese made products compete with European and American products on the respective markets.Although much of China’s current production of technology based products is still originating from the west outsourcing manufacturing, many Chinese operators are leaving the OEM model behind and start introducing their products under their own brands in western markets. Traditionally, the influx of cheap products has been countered by safeguards and anti-dumping duties, but these instruments and their application are restricted by WTO agreements. Although they temporarily can reduce the difference in price between local made and foreign products, they do not resolve the difference in the long run. Western economies are knowledge based. There is a long tradition of transforming R&D efforts into patents. This is different in China. Accordingly, in many tech sectors, Chinese companies who want to enter the western market need to license-in technology for their products. The royalties payable under such agreements can significantly increase the basic cost of such products. This reduces the competitive advantage for Chinese exporters which currently mostly is based on lower manufacturing cost. And that provides interesting possibilities to regulate the influx of Chinese products.

So the outlook may well be that patents and standards are taking over the role of traditional trade regulation instruments. This gives a new and challenging meaning to patents as a powerful tool against cheap Chinese imports.

DSM encountered this problem before when DSM Dyneema, the was faced with a threat against its strong ultrahigh molecular weight polyethylene Dyneema®, and used their patent against Hangzhou Pivot International Co Ltd of Hangzhou, in France to stop the Chinese. This is not merely a matter of asserting IP. It is a public policy issue to use Western knowledge based intellectual property to raise the bar for Chinese to enter the European and US market. For that same reason Europe introduced its own system of EU border protection by mirroring the US International Trade Commission’s powers to stop goods from being imported in the EU by using patents for Customs to be able to halt importation.

For companies like DSM there is therefore more to intellectual property and patents than a reward for R&D investments. It becomes a public policy instrument capable of leveraging power on the world market. That’s why Bush has IP on its top priority list. That is also why innovative companies like DSM will make intellectual property a key corporate policy issue.

And for a company like DSM what can it achieve in this new IP policy game if it has no access to talented inventors who will eventually enable it to play this economic power play on the world markets. DSM has shown what innovative spirit and a clever IP can achieve. And that is what we celebrate today.

sources: Pat Choate, “Hot Property, The stealing of Ideas in an Age of Globalization”¸ New York Alfred A. Knopf (2005), Newsweek, “Invention, Slow and Steady”, January 8, 2007, David Edgerton, “The Shock of the Old”, January 2007

Patents as the New China Trade Regulation Instrument

2006-12-20T06:17:00.000-05:00

The common opinion is that the WTO Doha negotiations have failed to accelerate global free trade. However, it is also clear that the commitments accepted by WTO members will ultimately reduce traditional trade barriers such as import duties, quota etc. Specifically for certain technology based sectors (such as ICT products, semiconductors, pharmaceuticals and telecoms) commitments in relation to the reduction of trade barriers such as tariffs are way ahead of the generally agreed pace of tariffs-reduction agreed in the WTO.

Nevertheless, regional markets such as the EU and the US (NAFTA) will retain an interest in (at least the possibility) to maintain trade barriers. As far as the trade in goods is concerned, these will follow the tradition patterns of levies, duties, minimum safety standards for food etc. However, such barriers are restricted by the WTO commitments of states and markets.

An interesting “mega trend” is the emergence of intellectual property as a trade regulation instrument. There is a good reason why for example the level of IP protection is a continuous topic in trade discussions between the US and China.

China’s position as the “world’s workshop” is based on a significant advantage with regard to manufacturing cost. Generally, one could say that the west has lost the manufacturing game. Chinese made products compete with European and American products on the respective markets.

Although much of China’s current production of technology based products is still originating from the west outsourcing manufacturing, many Chinese operators are leaving the OEM model behind and start introducing their products under their own brands in western markets. Examples are companies like Haier, Huawei and Lenovo.

Traditionally, the influx of cheap products has been countered by safeguards and anti-dumping duties, but these instruments and their application are restricted by WTO agreements. Although they temporarily can reduce the difference in price between local made and foreign products, they do not resolve the difference in the long run.

The discussion between the US and China on IP seems to focus in particular on counterfeiting and the alleged lack of IP protection in China. A closer look, specifically in relation to technology products and patents however, reveals a more complex agenda.

Western economies are knowledge based. There is a long tradition of transforming R&D efforts into patents. This is different in China. Accordingly, in many tech sectors, Chinese companies who want to enter the western market need to license-in technology for their products. The royalties payable under such agreements can significantly increase the basic cost of such products. This reduces the competitive advantage for Chinese exporters which currently mostly is based on lower manufacturing cost. And that provides interesting possibilities to regulate the influx of Chinese products.

The difference of course is that rather than for example import duties, royalties are payments to private enterprises. However, increased royalty payments do not benefit the recipients alone, but also their governments. They increase corporate taxation revenues and contribute to growth and facilitate more jobs. Also, they can assist in restricting market access to foreign products. And being a private sector issue, the commercialization of patents and licensing policies are not restricted by WTO commitments. Rather, TRIPS imposes minimum levels on WTO members than restrictions on their policies.

On the other side, there are signals which seem to confirm that China is quite well aware of this agenda. China of course has a vast internal market which offers significant opportunities for western companies. And by establishing its own standards such as the EVD standard for DVD, and its 3G telecoms networks, China introduces technology as well as IP based barriers for market access.

So the outlook may well be that patents and standards are taking over the role of traditional trade regulation instruments. An interesting convergence for patent and trade practitioners.

To be continued

German stem cell patent revoked

2006-12-15T09:26:00.000-05:00

In a decision announced on December 5, 2006, the German Federal Patent Court (“Bundespatentgericht”), in a nullity action, has partially revoked the German patent DE 197 56 864 directed to neuronal or glial precursor or stem cells. The Court based its decision on § 2 (3) No. 3 PatG where it is laid down that German patents shall not be granted in respect of biotechnological inventions which concern uses of human embryos for industrial or commercial purposes. Interestingly, the claims of the patent are not directed to such uses. However, in the hearing, according to press reports, the Court stated that, for obtaining the stem cells, it had been necessary to destroy human embryos, and this was also contrary to the regulations of § 2 (3) No. 3 PatG. The written decision is not yet available, but it will be interesting to see how the judges will justify their position. After issuance of the written decision, the patentee will be allowed to file an appeal to the German Federal Supreme Court.

This decision of the German Federal Patent Court will also have some impact on a comparable case pending before the Enlarged Board of Appeal of the European Patent Office. In fact, already on November 18, 2005, the Technical Board of Appeal 3.3.8 has referred in the case T 1374/04 inter alia the following question to the Enlarged Board of Appeal: “… does Rule 23d(c) EPC [the regulation corresponding to § 2 (3) No. 3 PatG in Germany] forbid the patenting of claims directed to products (here: human embryonic stem cell cultures) which – as described in the application – at the filing date could be prepared exclusively by a method which necessarily involved the destruction of the human embryos from which said products are derived, if said method is not part of the claims (emphasis added)?. Thus, with respect to that question, the Enlarged Board of Appeal is charged with the same question which has now already been answered in a national law suit in Germany.

It is presently not clear when the decision of the Enlarged Board, which will be the final one for examination or opposition proceedings at the European Patent Office, will be issued. Even more, it is, at present completely unclear how the Enlarged Board will decide. Inter alia, the issue is whether the regulations of the EPO have to be interpreted narrowly or not. In the case G 1/98, which concerned the scope of the exclusion of plant varieties from patentability under Art. 53 (b) EPC, the Enlarged Board arrived at a narrow construction by finding that this article does allow claims covering plant varieties, unless a specific variety is not mentioned in the claim.

Furthermore, in case that an appeal will be filed in Germany, it will be interesting to see whether the German Federal Supreme Court will wait for the decision of the Enlarged Board and follow this decision. In the past, in unrelated matters, the German Federal Supreme Court has stated several times that they consider decisions of the EPO very seriously, but that they are free to make their own decisions. Especially with respect to novelty, the German Patent Supreme Court has established principles of law which deviate from the practice of the EPO and of its Technical Boards of Appeal.

Dr. Fritz Lahrtz (Isenbruck Bösl Hörschler Wichmann Huhn, Munich, Germany)

See also: "The patenting of biotechnological inventions involving the use of biological material of human origin", German National Ethics Council and "Optionen bei der Umsetzung der Richtlinie EG 98/44 über den rechtlichen Schutz biotechologischer Erfindungen", Swiss Federal Institute of Intellectual Property.

UK: Gowers Review published, on IP policy review

2006-12-06T12:36:00.000-05:00

In the UK the so the “Gowers Review” has at last been published as part of UK Finance minister Gordon Brown's pre-budget review, which finished a short while ago. Some of the key recommendations include a recommendation for a fast track registration system for trade marks to allow marks to be examined and accepted within 10 days of the application being filed. Although there are some interesting recommendations in many areas, they remain, of course, recommendations only at this stage. The Review aims to ensure the correct balance in IP rights and to foster competitive and innovative markets strengthen enforcement of IP rights (particularly to protect the UK's creative industries from piracy and counterfeiting for the benefit of consumers) and to provide support for businesses using the IP system.

The main recommendations for patents are:

Recommendation 1: Amend section 60(5) of the Patents Act 1977 to clarify the research exception to facilitate experimentation, innovation and education. (page 51)
Recommendation 22: Maintain a high quality of patents awarded by increasing the use of "section 21" observations: streamlining procedures and raising awareness. (page 88
Recommendation 25a: Introduce accelerated grant process for patents to complement the accelerated examination and combined patent search and examination procedures. (page 90)
Recommendation 30a: The Patent Office should publish and maintain an open standards web database, linked to the EPO’s esp@cenet web database, containing all patents issued under licence of right. (page 94)
Recommendation 30b: The Patent Office should publish and maintain an open standards web database, linked to esp@cenet containing all expired patents. (page 95)
Recommendation 23: The Patent Office should conduct a pilot of Beth Noveck’s Community Patent Review in 2007 in the UK to determine whether this would have a positive impact on the quality of the patent stock. (page 90). Such a review is is intended to harness the collective knowledge of experts through the internet in order to help patent examiners find the right citations. The public is invited to submit prior art via a webpage, which can then be rated by the community. The aim is to ensure that bad patent applications are not granted and to narrow claims in applications in order to narrow the scope of protection.
Recommendation 25a: Introduce accelerated grant process for patents to complement the accelerated examination and combined patent search and examination procedures. (page 90)
Recommendation 17: Maintain policy of not extending patent rights beyond their present limits within the areas of software, business methods and genes. (page 80)
Other Recommendation refer to support for the establishment of a single Community Patent, the EPLA and the London Agreement (as an interim step towards COMPAT, and as an improvement in its own right).

Lower standards for patentability in the US?

2006-11-29T03:40:00.000-05:00

In an earlier blog (“Undesirable Software Patents and the US case KSR vs. Teleflex”) we reported on the case KSR vs. Teleflex. This is not just a patent case, it has wider implications, also for Europe. If the plaintiff gets its way obtaining a patent in the US will be harder. The treshold for patentability (also - and most likely foremost - for software patents). Also at stake is what seems like a more critical approach by the US Supreme Court towards the highest patent court in the US, the Court of Appeal for the Federal Circuit in Washington, DC (“CAFC”). The CAFC seems to want to bring greater predictability to patent law issues, but this predictability comes at the expense of compromising complex issues. The Supreme Court flatly rejects the CAFC’s attempts at “bright line” rules.

The obviousness test, currently debated in this case, is of crucial importance for future patent grants. The test is used to prove that a person of ordinary skill in the art would combine earlier findings in the same manner claimed in the patent. A change in use of the test would constitute one of the biggest changes to IP law in a generation. If the obviousness test as applied by the CAFC is dropped, the challenges to existing patents and pending patent applications will have a significant impact on the practice of patent law, including an increase in challenges to licensing agreements and settlements.

Yesterday, parties held their oral argument before the court. The transcripts of the hearing can be found here.

See Prof. Hal Wegner's "same day analysis" of the hearing.
See also: “Supreme Court: Current Test of Obviousness is "Gobbledygook”, Patently-O blog.

Reach Trough Claims in Europe, opportunities for a patent troll?

2006-11-25T12:20:00.000-05:00

Biotech is R&D intensive, so research tools are a crucial element in this industry. It is not surprising that inventors who have found a new tool to do the expensive research are looking for ways to expand the reach of their tool invention. One way of doing so is to claim that the invention (the research tool, that is the composition or method to do experiments) is not only useful in conducting those experiments, but also in establishing what the result of this research will be, even if one does not know the outcome of this research as yet. Regularly this is referred to as “upstream” research to cover also the “downstream” results of that research. If the inventor of such an “upstream” research tool – such as cell lines, monoclonal antibodies, expression systems etc. - seeks patent protection he wants more than just freedom to operate the initial or “upstream” research tool .

The patentee wants to “reach through” the results of the use of this patented tool to also claim inventions not yet made by him. In claiming his invention he formulates “reach-through claims” which go beyond what he has actually discovered and which he described in detail in the patent specification. The claims extend to generally foreseeable products discovered through use of the invented search tool. The “reach-through” products are identified only by reference to the material or assay used to find or identify them, but they are not described specifically. An example of such a “reach through” is when someone discovers a new protein which might be suitable for use as a drug target. He is not satisfied to obtain protection only for the isolated drug target and methods of screening for drugs which act as inhibitors or agonists (as appropriate) for that drug target. He also wants to obtain explicit protection for all drugs which act as inhibitors or agonists for that drug target. Or in case of a drug screening process, the party who discovers such a process may wish to claim all drugs discovered through that process.

Needless to say that this “reaching through” practise evokes a great deal of excitement, and, as a result, litigation. The key issues is that such reach through patent claims on a downstream product are not automatically rendered novel and inventive simply because it has been discovered through a novel and inventive upstream process. One of the more recent and well known patent fights relate to such a patent: Ariad Pharmaceuticals et al v. Eli Lilly and Company.

What happened? Researchers identified a so called NF-kB signaling biological pathway. Rel or NF-kappaB (NF-kB) proteins comprise a family of structurally-related eukaryotic transcription factors that are involved in the control of a large number of normal cellular processes, such as immune and inflammatory responses, developmental processes and cellular growth. These transcription factors are active in a number of diseases such as cancer, arthritis, chronic inflammation, asthma and heart disease.

A jury found in May 2006 that the US patent (nr. 6, 410,516) that covered the research tool (the Nf-kB signaling pathway), owned by Harvard, the Massachusetts Institute of Technology, and the Whitehead Institute and which was licensed to Ariad Pharmaceuticals, was valid and infringed by Lilly's sale of two products, Evista® and Xigris®. The patent, expiring in June 2019, covers disease treatment methods that affect the NF-kB pathway. The question at stake was if Lilly’s drug was acting on the patented pathway (the research tool) while the drug already existed before the pathway was discovered, would this prior existence of the drug invalidate the patent on the pathway by rendering it not "new", or “novel”? The Ariad patent tried to “reach through” the Eli Lilly drug. If that is allowed, a previously “patent free” drug can all of a sudden be “reached” by a new research tool, as in this case the Nf-kB signaling pathway.

It is a hotly debated issue, for obvious reasons: if the patent is held to be novel, than this research tool becomes a money blockbuster in the hands of the patentee, who can then extend, or reach through, his invention to all molecules and compounds made as a result of the patented research tool. The licensing income would be enormous.

Could Europe have a “Ariad” like outcome as in the US?

Would the “reach through” practice be a viable option in Europe? If so, why would any patent troll not obtain the license rights (or even the European equivalent of the US patent) to this research tool?

European counterpart of the Ariad patent, EP 0407411 B1 (priority 01.03.1988)reads in granted claim 1:

“A method of altering expression in a cell of a gene whose transcriptional activity is altered by binding of nuclear factor kappa B (NF-κB) to the enhancer of said gene, comprising introducing an agent which controls dissociation of the nuclear factor kappa (NF-κB—IκB) complex present in the cytoplasm of said cell”

In many European countries the patentee of such a patent, in order to be successful in an infringement case against a “Lilly” type company would have to rely on the section in the EU patent laws relating to infringement by product of a process to establish an infringement claim. As to validity, the requirement that an invention claimed in a European patent must be both novel and involve an inventive step applies to reach-through claims in the same way as conventional claims. A claim to a downstream product is not automatically rendered novel and inventive simply because it has been discovered through a novel and inventive upstream process.

Another issue which is particularly relevant in Europe results from the European approach to evaluating inventive step. The presence of an inventive step is determined by considering the objective technical problem (derivable from the patent application) to be solved by the claimed invention. If an inventive screening process may be used to discover new drugs, then in order to have any prospects of obtaining protection for the potential drugs, a patent application should discuss the problems to be solved by the potential drugs, not just the problems solved by the screening process.

In the United Kingdom it is likely that reach through claims are vulnerable to sufficiency attacks. Following the Court of Appeal’s decision in American Home Products Corporation v Novartis Pharmaceuticals UK Ltd, such claims may be treated as mere invitations to carry out a research project. Unless the patentee has identified and characterized specific compounds using the assay, the court may well find that there are too many uncertainties involved in identifying such compounds to allow the scope of the patentees monopoly to cover any compound identified using the patented assay.

The answer to the European outcome of an Ariad equivalent patent attack remains uncertain. This European “terra incognita” could bear interesting potentials for anyone with a big purse and a cool head.

sources:
(1) Andrew Christie, Amanda Lim, Reach-through Patent Claims in Biotechnology: An Analysis of the Examination Practices of the United States, European and Japanese Patent Offices, University of Melbourne Research Paper No. 176, Intellectual Property Quarterly, Vol. 3, 2005
(2) Hindle Lowther, Reach Through Claims, Chartered Patent Agents, registered trade mark agents and European patent attorneys, Edinburgh, Scotland
(3) Rochelle Seide, Michelle le Cointe, Reach-Through Claims: How far may your patent extend? Baker Botts LLP
(4) Johan Brants, De Clercq, Brants & Partners, Gent, Belgium, Reach Through Claims and SPC's (see on the right side of this IPEG blog under "IP Presentations"

EIRMA on Booz Allen study on R&D spending

2006-11-14T02:42:00.000-05:00

The conclusions from the Booz Allen Hamilton study - as mentioned in yesterday's post on this blog ("R&D spending doess not necessarlity increase profits") are quite in line with the points I make in public events. However, the Booz Allen study is often being misquoted, and one needs also to understand the context in which the DTI study is being prepared. The BA study does demonstrate that companies need to manage their investment on R&D as part of an overall effective innovation process. So when people quote as its conclusion that there is 'no correlation with performance', this is misleading.

The study simply demonstrates that throwing more money at R&D without attention to the rest of thechain will be ineffective. Ditto throwing less money at it. There is a sweet spot which is strategy dependent. The UK DTI scoreboard is a 'straight down the line' tabulation from companies' accounts. It is an important reference document, as the alternative national statistics do not break the figures per company. (The DTI figures are highly misleading if looked at 'per country'.)

Taken together, national and company statistics are helpful in trying toget a sense of what is going on. The DTI's main headline this year, which is that countries face a historic sector bias, was pointed out by EIRMA in 2001/2002. It has taken five years for most policy people to accept this. Second point about the UK scoreboard is to understand that it is part of an on-going process to get many companies to understand that R&D *at any level* matters as part of a robust business strategy. In that sense, I'm prepared to live with a certain ambiguity and slight overstatement.

Andrew Dearing, EIRMA (European Industrial Research Management Association)

R&D spending does not necessarily increase profits

2006-11-13T11:49:00.000-05:00

Companies spend billions of dollars on R&D to boost innovation output in the expectation of increasing profitability. From a study publised today by Booz Allen Hamilton, “Smart Spenders: The Global Innovation 1000“, it appears that it is not as easy as that: R&D spending does not necessarily increase profits. Booz Allen Hamilton’s annual study of the world’s 1,000 largest corporate R&D budgets uncovers a small group of high-leverage innovators who outperform their industries. Financial Times, claims it undermines repeated calls by governments in the UK and Europe for more corporate investments to close the transatlantic technology gap with the US. The Booz Allen Hamilton study, to be published in “strategy+business” seem to come to opposite conclusions as the DTI Scoreboard 2006, a study recently published by the UK Department of Trade & Industry (DTI).

However, the Booz Allen and DTI studies use different methodologies to rate R&D spending and its effects. Booz Allen conducts a more detailed analysis of the financial performance of the world’s leading R&D spenders to find the linkages between spending on innovation and corporate performance. This allows Booz Allen to identify the companies that outperform their competitors by getting better results from their innovation investment.

Both studies find increased R&D investment by the companies that spend the most on R&D spending. However, the Booz Allen study reports that revenues rose at an even faster rate.

Indeed, the most meaningful indicator of innovation investment, R&D spending as a percentage of sales, has decreased steadily since 2001, and by that measure, only 40% of the companies actually increased their spending rate in 2005.

Most importantly, the two studies examine the link between R&D and performance at different levels.

The DTI study shows that R&D-intensive industries, such as software, have higher market capital and grow share price faster than industries, such as chemicals, that spend a lower percentage of sales on R&D. This does not mean, however, that one software or chemical company spending more on R&D than its competitors will therefore enjoy higher financial results.

By contrast, the Booz Allen study focuses on companies, and finds no relationship between R&D spending and the primary measures of corporate financial performance. By indexing R&D spend within industries, Booz Allen eliminates Wall Street bias of one industry over another and are able to examine performance drivers within and across industries. High leverage innovators such as Toyota and Apple stand out for their effectiveness as innovators, even when spending less on R&D than their competitors, both in percentage and absolute terms.

In the end, both studies agree that return on innovation investment depends on the effectiveness of a company’s innovation processes and organization, rather than the magnitude of its R&D spend (“Money doesn’t buy results”). A business also needs to make good strategic choices, demonstrate operational excellence and balance its R&D investment with investment in areas such as market development and design for production.

European Patent Judges agree on rules and procedures for new EU Patent Court

2006-11-07T16:28:00.000-05:00

Twenty six patent judges from all over Europe gathered in San Servolo, Italy, for the second time to discuss and decide on rules and procedures for the EPLA court, the first centralized European Patent Court. After meeting for a week all 26 judges agreed and signed a Resolution ("Second Venice Resolution"), approving new rules how to conduct the procedures in this newly to be established EU patent court. The Rules deal with all aspects of patent litigation, from how to start the litigation to case management, the way oral arguments will be heard and which protective measures can be ordered by the court, and much more.

The unanimous vote in favour of Uniform Rules of Proceedings is a striking result, as it is quite a challenge to get Europeans to decide on anything so far reaching as how to litigate under uniform principles. Most of the EU countries have their own rules of procedure which differ substantially. One can imagine how difficult it must have been to agree on rules that could work for all European states that will eventually participate in the EU court.

The judges’ choice seems to be made for an EU patent court modelled after a continental European, rather than the UK judicial system.

Bloomberg cites Kevin Mooney, the President of the European Patent Lawyers Association (EPLAW), which organized the judges conference:

"What the judges are saying to the politicians is to get on with it. If the
European Commission supports it and if the European Parliament supports it, then
we could see a patent court within three years."

The unity within the judiciary is the more prominent in comparison with the deep divides among politicians, as was reported in our earlier post. It remains to be seen how much “cloud” the judges have over the legislative process. It surely signals a strong support among practitioners and judges that EPLA and the EU patent court is the only way forward or a united patent enforcement system. Now the politicians must move.

For the 11-page, full text of the “Principles Relating to the Rules of Procedure of the European Court”, click here.

Patent litigation increasingly expensive in Europe

2006-11-05T06:07:00.000-05:00

When on November 2, 2006 the US company Garmin - maker of GPS consumer products - and their direct competitor, the successful Dutch company TomTom, received its favorable judgment against TomTom in an IP matter, the District Court The Hague also awarded Garmin with a unprecedented judgment in court fees: €37,000 (US$ 47,000), to be paid by TomTom.

With regard costs, IP litigation used to be almost “risk free” in Europe and especially Netherlands, as the court costs, awarded to the winning party was nominal, in comparison to the actual attorney fees and other trial expenses. Although still small in comparison to US litigation, a litigant in The Netherlands can ask the court to be awarded with the full legal costs incurred. How did that happen and what is there in stock for the future?

The renewed interest in litigation costs originates from the TRIPS Agreement on the Enforcement of IP rights, art. 45 par. 2:

“The judicial authorities shall also have the authority to order the
infringer to pay the right holder expenses, which may include appropriate
attorney's fees. In appropriate cases, Members may authorize the judicial
authorities to order recovery of profits and/or payment of pre-established
damages even where the infringer did not knowingly, or with reasonable grounds
to know, engage in infringing activity.”

As a result, in April 2004 the EU Directive 2004/48/EC (“on Measures and Procedures to Ensure the Enforcement of Intellectual Property Rights”), was adopted. The Directive regulates the measures, procedures and remedies which can be ordered by the competent judicial authorities in case of an IP infringement at the request of an entitled party, among which costs for litigation to be paid by the losing party. (Additionally, it aims to implement further instruments to enforce IP rights, which have been identified as 'best practice' measures in some Member States, which is not the subject this post). The Member States were due to implement the Directive in their national legislations by Spring 2006 at the latest (art. 20 (1). The Directive is still not implemented in all countries (see Overview implementation per October 2006).

Article 14 of the Directive directs the member states to harmonize their legislation on the payment of court costs (attorney fees and other expenses incurred by the successful party). These differ quite substantially (see Bruno Vermeulen in Journal of Intellectual Property Law & Practice, Vol. 1, No. 1).

In Italy, for instance, although the law states that the losing party should pay the costs of the litigation, the courts are reluctant to award payment of the entire sum. Moreover, when the subject matter of the litigation is particularly complex or when the claimant is only partially successful, the Italian court can divide the costs between the parties.

In contrast, the English courts are more inclined to award litigation costs at the expense of the losing party, or they may award costs against a party who has unnecessarily incurred expense by raising futile arguments or causing unnecessary procedures, even if that party wins.

In Germany, costs must be borne by the losing party, but they are strictly calculated according to formal rules, resulting in the so called “Streitwert” of the proceedings.

In Belgium, the Supreme Court allowed the recovery of attorneys’ fees, but it is still unclear how this will be implemented further.

In the Netherlands fixed compensation for administrative costs based on the number of court actions is common in Dutch civil proceedings. In practice, it boiled down to a situation where litigants had to bear their own legal costs.

A change in the way court costs are being attributed is especially helpful for patent owners in smaller jurisdictions like the Benelux where damage awards are usually very low (small market), but where the costs for successful enforcement of a patent may not necessarily be lower than in other, bigger, countries. As a result of the Directive the Netherlands proposed to change its law of civil procedure on court costs as well as other changes proposed under the Directive. Dutch courts are now applying - under art 237 Law on Civil Procedure - the Directive (“horizontal direct effect”) to allow full compensation of court costs in IP matters, rather than a “token” award of costs, as was previously the case. The debate is still going on in Holland how to calculate the actual costs and how to use this in a fair and equitable manner by the courts. In patent litigation the attorney fees are usually far higher than in "soft" IP matters. There are voices that recommend to introduce a similar system as in Germany, court costs are there based on the "value" of the case, or "Streitwert". Soon we may therefor see even larger court costs rewards in Netherlands than the one in Garwin vs. TomTom (which was a design law issue, not a patent infringement case).

As per November 2006 not all EU member states have implemented the Directive in their national legislation. For a full overview on the Enforcement Directive and the way it has been implemented in various EU countries, click here.

Cross Border Relief à-la-US

2006-10-31T04:25:00.000-05:00

In Europe we had our time when the Netherlands courts, soon followed by courts in Germany, rendered cross border relief under a European Patent in most of the 90’s. This effort to create a truly European wide enforcement of patents after a uniformed granting procedure, was stalled after the ECJ’s decisions in GAT vs. Luk and Primus et al vs. Roche.

In the US extra territoriality is now also at the heart of a judicial review. On October 27, the US Supreme Court granted certiorari (accepted to hear a case) in the Microsoft vs. AT&T case. In 1984 the US Patent Law (article 35 USC § 271(f) extended infringement liability for the export of unpatented physical components of a patented combination. The current precedent is the “Deepsouth” case in which it was held that making and shipping component parts of a patented combination invention did not constitute ‘making’ the patented invention in the United States. In the pending US case this position will be reconsidered by the US Supreme Court. It will have vast consequences.

see Prof. Harold C. Wegner’s paper “Microsoft Extraterritoriality: “Mutiny…Heresy” where he argues that while the Microsoft case is generally understood in the business press as merely involving whether there is liability for the export of software to be loaded onto original equipment personal computers, this is an oversimplification of the issues. In fact, there are two issues before the Court, Prof. Wegner argues, the first questioning whether software or object code is capable of being a “component” of a patented combination for purposes of the statute, and only in the second instance whether there is infringement liability.

See also the US patent weblog Patently-O.

British Court of Appeal reviews business method and software patents

2006-10-28T08:32:00.000-04:00

On October 27, the UK Court of Appeal handed down its judgment in two cases concerning the exclusions to patentability for business methods and computer programs under Article 52(2) and 52(3) of the EPC (s1(2) PA 1977), the first between Aerotel Ltd vs. Telco Holdings Ltd. cs. and the other in the matter of Application Neal William Macrossan.

Mr. Macrossan’s patent application claimed a patent for an automated method of producing and acquiring the documents necessary to incorporate a company, through communication between a remote server and a user. The application for a patent was refused by the hearing officer, on the grounds that it fell within the exclusions from patentable inventions. She concluded that the invention amounted to a method of performing a mental act, a method of doing business and a program for a computer. English case law at the time of the hearing was taken to have established that an invention which at first glance fell within the excluded categories (because it relied on a computer program) could nevertheless be considered patentable if, and to the extent that, it were found to provide a “technical contribution”. For example, a computer program which speeded up the operation of equipment could be considered to provide such a “technical contribution”, and therefore not amount to a computer program “as such”.

The hearing officer concluded that the claimed invention provided no “technical contribution” sufficient to take it outside the excluded categories, rather it “merely reduced cost, labor and error”. Mr. Macrossan appealed this decision to the High Court, where the case was considered by Mr. Justice Mann. Mann J’s only point of divergence from the decision in the Patent Office was his finding that the claimed invention was not excluded as a “method of doing business”, drawing a distinction between methods of carrying out business (excluded) and tools which might be used in a business (not excluded). He stated that “The activity involved in the invention is a business service, or end product, for which the customer is prepared to pay and for which the customer contracts…but that is not what the exclusion in the Act is aimed at, in my view”.

Since the decision of the hearing officer in March 2005, the decisions in CFPH LLC’s Application and Halliburton Energy Services Inc v Smith International (North Sea) Ltd [note] had been taken by some as having altered the approach to be taken by the Patent Office to the application of the exclusions, in particular by de-emphasizing the “technical contribution” element of the test. This approach had apparently been subsequently affirmed in Shoppalotto.com Ltd’s Application and Research in Motion (UK) Ltd v Inpro Licensing SARL.

As summarized by Mr. Justice Pumfrey in the Research in Motion case: “It is now settled…that the right approach to the exclusions can be stated as follows. Taking the claims correctly construed, what does the claimed invention contribute to the art outside excluded subject matter?”. Separately, Aerotel Limited sought to rely on a patent for a pre-paid telephony system, which was attacked on the grounds of excluded subject matter.

The Court of Appeal decision

The Court of Appeal thoroughly reviewed the national and EPO decisions and concluded that “the time has come for matters to be clarified by an Enlarged [EPO] Board of Appeal,” because the existing EPO decisions were contradictory. The Court did not concern itself with political considerations or any views either way as to whether the exclusions were “a good thing”. It noted the broader approach taken in the USA but did not find it a helpful guide. Although there was a “need to place great weight on decisions of the [EPO] Boards of Appeal”, to do so in this area would be premature, the Court felt, given the fact that three distinct new approaches had emerged in the EPO case law, each to some extent in conflict with the others.

The Court therefore suggested that this was a point of law which it would be appropriate for the President of the EPO to refer to an Enlarged Board of Appeal, and the Court ventured to suggest questions to assist the President in formulating the reference. Until such a reference, however, the court declined to follow the EPO cases, considering itself bound by its previous decisions and, in particular, Merrill Lynch’s Application. This meant applying the “technical effect” approach, which it summarized as: “Ask whether the invention as defined in the claim makes a technical contribution to the known art – if no, Art 52(2) applies”, with the ‘rider’ that “novel or inventive purely excluded matter does not count as a ‘technical contribution’”.

It was also agreed that, although there are different reasons for the different exclusions, a common approach can be adopted by applying a four-step test:

(1) properly construe the claim;

(2) identify the actual contribution;

(3) ask whether it falls solely within the excluded subject matter; and

(4) check whether the actual or alleged contribution is actually technical in nature (although this step, required under Merrill Lynch, may be superfluous).

Aerotel was allowed to keep its telephony patent, but Mr. Macrossan fared less well. The Court of Appeal did doubt whether Mr. Macrossan’s invention constituted a method of performing a mental act: “we are doubtful as to whether the exclusion extends to electronic means of doing what could otherwise have been done mentally”, but did not decide that one way or another because it was firmly of the opinion that the invention was both a method of doing business as such and for a computer program as such.

By finding that the invention was a method of doing business, the Court of Appeal disagreed with the High Court Judge, and concluded that drawing a line between excluded abstract methods and tools which might be used in a business was not feasible. In addition, the requirement implicit in Mr. Justice Mann’s reasoning that the exclusion should only apply where what is claimed involves the completion of a business transaction was also overruled, with support being found in the French and German versions of the European Patent Convention.

The Court then went on to apply the re-formulated four step test in light of the business method and computer program exclusions:

(1) the construction of the claim presented no difficulties;

(2) the actual contribution of the inventor – “what he added to human knowledge” – was said to be that “he has thought of…an interactive system which will do the job which otherwise would have been done by a solicitor or company formation agent” and has provided “a computer program (in practice probably an interactive website) which can be used to carry out the method”;

(3) these contributions were considered to fall solely within excluded subject matter: “Mr. Macrossan’s method is for the very business itself, the business of advising upon and creating appropriate company formation documents” and “the contribution is just the devised program up and running”; and

(4) no technical contribution was found: “there is obviously none beyond the mere fact of the running of a computer program”.

Comment

The decision in this case should bring clarity to the approach to be taken by those applying the exclusions in the UK. It has not, however, broadened what is patentable. It is a judgment that appears to be tinged with regret. First, because the Court of Appeal could not itself force a reconciliation of the conflicting EPO authorities, and second because the Court was obliged to apply Merrill Lynch with its emphasis on “technical contribution”. It is apparent that the Court would have preferred to view technical contribution as inherent in the question, “does the contribution consist of excluded subject matter as such?”. In addition, the Court commented that in its view the EPO cases tend to take too generous an approach in relation to computer programs. That is, the Court criticised EPO decisions permitting patents for software recorded on some form of media, indicating that the framers of the EPC meant to exclude computer programs in a practical and operable form, not just in the abstract. The UK Patent Office should now be clear as to the correct test. But this approach may well need revisiting if the EPO Enlarged Board of Appeal does have the matter referred to it.

Nevertheless, even following such a clarification, given the EPO case law (however contradictory in approach) in our view it is unlikely that business methods will become patentable in Europe (as they are in the USA). And the patentability of software inventions in Europe is likely to remain debatable for some time.

Jeremy Morton, Simmons & Simmons, London, UK (see also Simmons IP news alert
[note: see also note Severin de Wit in publication in Dutch IP magazine IER ("Intellectuele Eigendom & Reclamerecht", with Dutch comments.

Second Patent Auction by Ocean Tomo, critical views on auctioning patents

2006-10-26T10:04:00.000-04:00

October 25 and 26 the second public patent auction, organized by Ocean Tomo, was held in New York. The first one, in San Francisco on April 5 and 6 had, at best, mixed results. 78 lots of patents ranging from material science, automotive industry, bar code scanners/radio frequency identification (RFID), information technology, to name a few, were among the technologies covered.

In the October 2006 issue of Journal of Intellectual Property Law & Practice (published by Oxford University Press) Dr. Hidero Niioka presents a highly critical view on this new phenomenon. Although patents attract attention as high return on investment opportunities, patents are also notoriously unpredictable to put a value on, Niioka observes. Patents were until recently practically only traded by private dealmakers. Such deals are concluded in negotiations, beyond the public eye. Auctions have surely changed that and have made valuation of patents more visible. Dr. Niioka sees an increased interest in commercialization of IP by IP merchant bankers, brokers and attorney firms. In analyzing the results of the first public auction in April 2006 he concludes that the bidding process was a deception, where it only generated US$ 2,75 million for 24 out of the 78 lots sold. The lowest selling price per patent was about US$ 555, the average price for a patent sold, US$ 30,344, hardly enough to cover the costs of the patent.

In an interesting article dr. Niioka, he described the Gold Rush climate that surrounds patents, exemplary by the RIM vs. NTP, Inc case, that ended in a US$ 621.5 million settlement in favor of NTP, a patent holding company. Niioka signals an “information asymmetry” between the seller and a buyer of patents. IP asset transactions give the purchaser, unlike in an M&A transaction, the chance of a more business and investment relevant information than the seller.

In the last paragraph of his article he doubts whether public auctions, like the one Ocean Tomo organized yesterday and today in New York, are a good marketplace for investors looking for valuable patents. Time to get sufficient due diligence is too short, argues the writer, but more importantly whether valuable patents will ever be auctioned. Auctioneering patents is an indication that the seller does not consider these patents any longer as “core business”, not having a reason anymore to keep the patents for themselves. This may indicate that the seller is out of a particular business or that the patents he auctions are “old timers”, not current technology. Niioka observes that it is improbable that large companies will not make an arbitrary choice regarding which patents to pass along to a patent auction. Nobody wants to create their own competitors either, nor do sellers want their patents to be picked up by patent trolls. There are other issues however that dr. Niioka does not mention. To name one: in a public auction one cannot make specific deals, that are possible in private deals, like a provision covering the situation that the seller is being attacked by a third party for patent infringement, where he can still invoke - his formerly owned – patents, now in the hands of the buyer, with his assistance and against a certain remuneration.

Niioka concludes that entrusting a patent portfolio to an IP merchant banker or patent broker or other IP professional is a better and safer way for a patent holder to exploit his IP.

A political brawl between Germany and France over EPLA

2006-10-25T09:30:00.000-04:00

A seemingly innocent European Commission memo, called “Communication from the Commission to the European Council (informal meeting in Lahti – Finland, 20 October 2006), An innovation-friendly, modern Europe” turned into a row between Germany and France.

What happened? Well, have a look at the Commission’s document on page 6.
It says: “The adoption of a cost-effective Community Patent is the most important step.”

Nothing wrong, you would say. Except that in the original document the word “Community patent” did not appear. It said “The adoption of a cost-effective EPLA is the most important step.”

Some high ranking French official, based in Brussels and well connected within the EU Commission, changed on his own authority the word EPLA into “Community patent”, worse: without the knowledge of the two responsible EU Commissioners, Mc Creevy and Verheugen.

So that’s the way politics creep into the EPLA debate. Thought that only happened in Banana Republics?

Patent Review, Back to the Future?

2006-10-24T11:41:00.000-04:00

When the United States enacted their first Patent Act in 1790, they made the issuance a matter of the highest importance. There was no patent office. The president himself (George Washington) with assistance of a committee of three (Thomas Jefferson, Henry Knox and the Attorney General Edmund Randolph) met on the last Saturday of every month to review each and every patent application. They established strict rules for obtaining a patent [1].

Although that resulted in too few patents and was soon changed to allow patents without any substantial patent review, this first system of a Patent Review Board consisting of politicians rather than technicians, was never repeated again in any patent system after 1790.

This may soon end. If the European Parliament gets its way, review of patent applications must be a job done under “democratic” supervision. On October 12, the European parliament agreed by a large majority to the European Commission’s plan of going forward with talks on patent reform in Europe, but with a number of amendments to the current plan aimed at ensuring “democratic control” of the process. The vote of the EP was on the Commission’s plan to support the EPLA (see earlier IPEG posts), so the question whether the European Community should “accede to” the European Patent Litigation Agreement (EPLA), which would mean –among other things - the setting up of a European patent court.

Do we want politicians to rule on novelty and inventive step? Hell, no! This very idea signals a worrisome trend in the way politicians look upon intellectual property. Where European innovation falls significantly behind the US and Asia and China surpasses Germany as the 5th world largest supplier of patent applications one would expect European politicians to focus on enhancing innovation rather than beset us with ludicrous ideas about “democratic” review of how patents are being granted by the EPO. European Parliament’s engrossment with so called “undesirable patents” coming out of the EPO (an allegation grossly exaggerated, see memo Severin de Wit to the Dutch Ministry of Economic Affairs of April 15, 2005) prevents a fact-based discussion on how to improve the patent system. It misguidedly focuses on issues that are irrelevant and do not at all help us making the patent system a more effective instrument to further innovation.

The idea of “democratic supervision” is both without merit, incomprehensible and legally nonsensical. Without merit because the question whether a patent has been rightfully granted by the European Patent Office is ultimately for the judiciary to decide, not the lawmakers, nor the executive. Incomprehensible, because there are much more pressing issues to be resolved by European Parliament in making the patent system more apt to the 21st century. Last but not least the whole idea is legally nonsense.

Patents are being granted by the European Patent Office, which is the executive arm of the European Patent Organization, an intergovernmental body set up under the European Patent Convention (“EPC”), whose members are the EPC’s 31 contracting states. Established by the EPC (or “Convention on the Grant of European Patents”), signed in Munich 1973, the EPO is the outcome of the European countries' collective political determination to establish a uniform patent system in Europe. The activities of the EPO are supervised by the Organization’s Administrative Council, composed of delegates from the contracting states. Oversight is being conducted by this Council. Any member of the EU Parliament can lobby its own national members of parliament to take positions and come up with new ideas in the EPO’s Administrative Council.

So what is in the European Parliament members mind when they talk about “democratic” supervision? Do they refer to the concern that EPLA judges would be mostly recruited from the EPO’s Appeal Boards? That is a legitimate concern, but what has that to do with “democratic” review? Or do MEPs mean to say that the current ideas about EPLA and the proposed system of judicial review of EPO patents should not be done by contracting states individually (so by an international agreement between European states), rather than by means of EU legislation like the Community Patent? If that’s the case, again it is a point to make, but what does that have to do with democratizing the grant of patents?

Alternatively, is it that MEPs want to have a say what type of inventions qualify as a “patent” (vide the discussion on software patents)? Lets hope this is not what MEPs really want, because if they do, we better abandon the whole patent system altogether. Why would anyone be attracted by the idea that 732 MEPs vote whether an invention is novel and inventive, so worthy of a European patent?

[1]“Hot Property” by Pat Choate, New York 2005, p.27/28