INTA, ‘Ghost’ Brands and Trademarks

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

Patent auction in Munich, success or failure?

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.

Another episode of rotary shaver wars

One of Philips marketing success stories is the Philishave, the shaver with the well known three heads. Philips filed a trademark for this shape, consisting of the overall shape of an inverted equilateral triangle with three heads sitting within a raised faceplate of clover leaf design superimposed on the triangle. Remington, attracted by the success of the Philips rasor, also introduced the three headed rasor. A long trademark battle emerged.

On Jan. 26 the Court of Appeal in the UK upheld Judge Rimer’s first instance decision that the mark was invalid because it consisted of features of the shapes of the goods which were necessary to produce a technical result, Trade Marks Act 1994 s.3(2)(b).

However, the Appeal court overturned Rimer J's ruling that two device marks were invalid. The policy of the shape marks provisions was all important. The policy was that competition in the relevant market for the goods must not be impaired by the registration of the shape of goods so as to prevent others from selling products incorporating technical solutions or functional characteristics. There was no objection on that ground to the device marks. They were all images with eye appeal of an abstract, non-technical and non-functional nature. None of them were a "shape of goods" in the functional sense used in the Act and fell outside the competition policy of the shape mark provisions and outside the scope of the functionality principle embodied in Art 3(1)(e) Trade Marks Directive 89/104 and s.3(2)(b) of the Trade Marks Act 1994.

IP Valuation - A Pandora's Box

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”

Europe's First IP auction in Munich

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.

Ariad v Lilly, a "a drug pathway" patent dispute

In May 2006, a jury in the U.S. District Court of Massachusetts in Boston issued an initial decision in the case of Ariad Pharmaceuticals et al v. Eli Lilly and Company. The federal jury's verdict is that U.S. Patent No. 6,410,516, owned by Harvard, the Massachusetts Institute of Technology, and the Whitehead Institute and licensed to Ariad Pharmaceuticals, is valid and infringed by Lilly's sale of Evista(R) and Xigris(R). Ariad, based near Boston, sued Indianapolis-based Lilly, accusing the larger company's drugs Evista and Xigris of infringing the patent on its experimental drug pathway, NFkB. The patent covers a method of treating disease by regulating a certain type of cell activity. The patent is on a an experimental drug, AP23573, covering a method of treating soft-tissue and bone cancers. Critics question the validity of the drug’s patent because it attempts to protect the process in which the drug works, not the drug’s chemical composition.

However, jurors in U.S. District Court in Boston agreed with Ariad, slapping Lilly with $65 million in damages in May.

"In my more than thirty years of experience in patent law, which includes involvement in dozens of patent lawsuits, I've never seen a jury verdict with which I so strongly disagree; the finding of infringement stands at odds with the most basic premise of the patent system. If practicing technology that's already known, and therefore is old, infringes a patent, the inventor hasn't properly limited the patent to technology that is new," said Robert A. Armitage, senior vice president and general counsel for Lilly.

This decision appears to go against long-standing patent practice in that one cannot get a patent that would remove known materials from the public. In addition, it has always been the case that one may patent a drug without knowing how it works. If this decision were allowed to stand, many drugs could eventually be found to infringe patents that were issued long after the
drugs themselves were discovered. This also begs the question of if a researcher discovers a drug without ever knowing the drug acts on a patented pathway or before the pathway is
understood, does that constitute infringement? If the drug was acting on the pathway before the pathway was discovered, does the existence of the drug invalidate the patent on the pathway by rendering it not "new"? This could also give rise to an ever-increasing number of conflicting patents. Because NF-kB can activate so many genes, more than 150, it is implicated in many diseases. A separate bench trial with the U.S. District Court of Massachusetts has been held last week (August 7) on Lilly's contention that the patent is unenforceable and will also consider the patent's improper coverage of natural processes. In June 2005, the U.S. Patent and Trademark Office commenced a reexamination of the patent (Reexam. C.N. 90/007,828). The reexamination is currently in progress.

From: Patent Baristas (blog by Stephen, May 4, 2006), CNN Money, August 4, 2006,