Is Asia surpassing Europe in innovation by 2015?

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

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”:

1. high mobility of researchers between institutions and countries
2. world class research infrastructures
3. effective public-private co-operation and partnerships
4. knowledge-sharing between public research and industry, as well as with the public at large
5. coordination of research programs and definition of common priorities
6. 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

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

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

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?

“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

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

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

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

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"

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

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?

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!

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?

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

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

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

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

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

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.