IAM blog
It is time for a holiday I think ...
My old stamping ground of Catalonia – where I spent five very happy years in the late 1980s and early 1990s – is calling. Yes, it’s holiday time and the IAM blog is taking its annual summer break as I head south with my family to a place near Girona for what we all hope will be three weeks or so of intense relaxation (if that is possible). Here’s wishing all our readers a great summer (or winter for those in the southern hemisphere). In one year, this blog has seen its band of regular users double and the number of their views quadruple – many thanks for all your support.
This blog will be back in action on or around 20th August.
Joff Wild, IAM Magazine | 29 Jul 2008
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Senior EPO official warns of tougher patentabiliy standards and higher fees
The latest issue of IAM has now gone to press and will be published at the end of this week. There are a number of highlights, but for the cover story this time around I have gone for a piece written by Ciáran McGinley - the Controller of the EPO and so one of the office’s most senior staff members - on the subject of “global patent warming”.
In the article, Ciáran goes into some detail about what the phrase means and what is causing it. “Incoming volumes are increasing per patent office due to globalisation driven by patent propensity and trade,” he writes. “Pendency volumes are also increasing, pretty much independently of what has been happening to pendency times in the different offices. Finally, woolly boundaries are widespread, not just between granted patents but especially among pending applications. It is becoming too much, the system is gradually becoming much warmer. It may not be warm everywhere (yet). It may not be warm in all industrial sectors (yet). But it is definitely temperate.”
Having identified the phenomenon and explained why it is a problem, Ciáran then goes on to look at what offices such as the EPO are doing about it. He identifies four scenarios:
• Merge the practices and procedures of patent offices to bring the systems closer together.
• Raise quality thresholds inside the existing system, effectively to tighten up standards of patentability.
• Provide greater transparency by, for example, ensuring that people are aware of the uncertainty and risks of their (provisional) rights as currently covered by the IP system. This is important, he says, because there are probably more rights pending in any given system than there are those which are granted and still valid.
• Look at the ways patent examiners cooperate and how they use the tools at their disposal.
Each topic is explored in some detail. Here, I am going to highlight what he discusses in the second bullet point on raising the bar. Essentially, Ciáran sees it as a three part process:
First, create a better status quo by establishing quality standards across all European patent offices and by tightening up current practice.
Second, it is the intention of the EPO to fine-tune certain entry and process rules, and to remove (or limit) opportunities for abuse such that sharper boundaries are established earlier on in the procedure.
Third, and this may take longer, it is the intention of the EPO to raise the bar itself by making the man skilled in the art somewhat more modern, having greater immediate access to knowledge, more used to working in multi-disciplinary teams and endowed with a little bit more common sense.
Although Ciáran is writing in a personal capacity, I think you can take it that what he writes reflects the way that senior managers inside the EPO are now thinking. I am also guessing that much of what he says will also resonate with officials at other major offices. So, essentially, if many administrators get their way, in the future it is going to be harder to get patent protection than it has been in the past. The chances are that it could also get a lot more expensive:
The starting point is the rather obvious economic statement that behaviour is influenced by costs. Costs include fees. There is some evidence to suggest that fee levels on their own do also influence behaviour. Generally, one can say that low fee levels can be seen as an incentive for certain types of behaviour and high fee levels as a disincentive. Sometimes the incentive offered by fee levels combines with rules to reinforce a particular behaviour. Examples that could be cited are poor initial drafting; abuse of divisional mechanisms; delay tactics; strategic patenting (ie, filing with no intention of obtaining a grant) and systematic opposition. These examples directly contribute to global patent warming by creating uncertain boundaries and increasing pendency. Insofar as full-cost coverage of procedural fees can influence this behaviour, it will have a positive impact.
At present, a large proportion of patent office money comes from renewal fees. These essentially subsidise the application process. As I read it, what Ciáran is saying is that an effective way of cooling global patent warming might be to make applicants pay what it actually costs to handle their applications. This may reduce some of the speculative – but entirely legal – behaviour offices believe a good proportion of users of the patent system currently engage in; something which may mean fewer applications. This is an issue that EPO chief Alison Brimelow has also mentioned in the past.
Anyway, it is all interesting stuff. Subscribers to the magazine will be able to read the whole article in their magazines and also online. Non-subscribers can get hold of it by signing up to a free trial subscription.
Joff Wild, IAM Magazine | 28 Jul 2008
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UK film and music industries reap lobbying rewards
Are the various copyright industries in Europe the most effective IP groups when it comes to lobbying for its interests? The answer surely has to be yes. Last week, the European Commission announced plans to extend protection on sound recordings to 95 years, now the British government is proclaiming a groundbreaking deal between broadband providers and Britain’s music and film industries.
In a three month trial, the six largest internet service providers (ISPs) – who make up 90% of the UK market – will send weekly letters to 1,000 prolific illegal downloaders in an attempt to combat net piracy.
The agreement will been seen as quite a breakthrough for the British Phonographic Industry and the Motion Picture Association of America who claim that piracy is costing them billions of pounds in lost revenue every year.
The British government plans to encourage the success of this voluntary deal by threatening to enforce statutory regulation and fines on those ISPs not seen to be doing all they can to deter illegal downloading from as early as next year. While it’s not totally clear just how this legislation will be enforced, Ingrid Silver, media expert at UK law firm Denton Wilde Sapte (DWS), sees the deal as a “very positive development for the entertainment industry”. She continues:
It is a very public acknowledgement of the rights of content creators, and the need for them to see a return on their activities in order to sustain the industry. Clearly this is only one aspect of the solution, since there is a general willingness to pay a fair price for content services, but the market has not yet achieved critical mass in delivering monetisable services which meet people’s requirements. We can expect to see some very exciting developments in terms of the services which appear in the market over the coming year, particularly in the areas of micropayment and the infrastructure surrounding content reporting standards.
Yet, while this deal is certainly a victory for the music and film industries, is it fair on the consumer? Obviously the goal is to put a stop to piracy, but is this the most PR-friendly way of achieving that? Presumably these letters will be sent to the bill payer. But the bill payer is not necessarily the infringer. As John Linneker, internet law expert at DWS points out:
It is a bold and risky step for service providers to agree to write warning letters to their own customers threatening to unplug their internet access. There are some very obvious practical problems in this sort of strategy. For example, it seems unfair to penalise a household by removing internet access because the babysitter did a bit of file sharing while the parents were out having dinner!
While this may be true, I can understand why the broadband providers would be eager to collaborate with the music and film industries now rather than face a battle later. In some European countries, there seems to be a move in the courts towards internet companies being held liable for the activities of their users, and these British ISPs will not want to be stung with the same damages recently awarded against eBay for failing to prevent infringement occurring on its platform. And if the courts will not do it in the UK, the chances are that the government will.
Unlike patents and trademarks, copyrights are pretty easy to get your head round. On top of which, government ministers will always find time to listen to rock stars and Hollywood icons. Owners of other types of IP don’t necessarily have the power to manufacture such effective photo opportunities.
Sara Jayne Adams, IAM Magazine | 25 Jul 2008
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More on the US patent quality debate
The IPBiz blog has been taking a close look at the Ocean Tomo article on US patent quality that I wrote about last week. While not necessarily disagreeing with the authors’ central thesis – that patent quality has gone up at the USPTO over the last five years and not down as the office’s critics suggest – IPBiz has identified what it believes to be a few problems with the article that may, in its words, “distort the true picture”. As far as I have seen, there have not been any other criticisms of the Malackowski and Barney piece yet; although – to be fair – there is a lot to digest in the article and a full critique will take time to produce. If one emerges, I will let you know.
Joff Wild, IAM Magazine | 24 Jul 2008
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There must be money to be made in these wild share price moves
Just to show that share prices do not only go south as the result of patent litigation, Qualcomm’s surged close to 20% in after the bell trading yesterday following the announcement of an agreement that brings to an end the long-running litigation that the company has had with Nokia. And shares in the Finnish company were also up, despite having closed the official trading day down. The deal came on the same day that the San Diego-based company announced third quarter figures that showed a 6% drop in net income, although revenues were up 19%.
Qualcomm is the latest in a string of companies to see their values rocket after a favourable ending to patent litigation. Earlier this year, this blog reported on a 40% rise in Rambus stock following victory in a dispute with Micron Technology Inc. Around the same time Acacia’s shares jumped 29% following the announcement of a big licensing deal and Tessera Technologies’ value rose 39% after a favourable ITC ruling in its dispute with Motorola. Of course, perceived bad news can produce the opposite results, as InterDigital can testify.
These markets are typically being made by people who probably know very little about the dynamics of patent law and patent strategy. This may explain in part, at least, why we see such rapid movements in share price when announcements are made. It must be happening already, but if it is not the surges and the drops surely offer significant money-making opportunities for the patent-literate.
STOP PRESS: It looks like there are some patent-savvy punters out there. I just got this email from a contact of mine in New York:
The uncertainty of patent litigation often causes companies to trade at a significant discount to their intrinsic value. As most on Wall Street do not understand the complexity of IP and law they simply discount the story. This leaves a fantastic opportunity for those of us with the experience and unique skill set necessary to capatalize on this disconnect.
As an example in the Qualcomm situation everyone knew the trial started yesterday. As 90+% of cases ending in settlement and many on the court house stairs, we were on high alert. When the news broke about a delay, suspicion sets in. When earnings didn't hit by 4:15 the speculation starts. By 4:45 when earnings were delayed it was assumed.
Shares increased 20% on the news but options in Qcom which were fifty cents yesterday are now over three dollars.
Joff Wild, IAM Magazine | 24 Jul 2008
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European Commission's copyright extension plans are savaged
Last week the European Commission announced proposals to extend the rights of performers to copyright protection on sound recordings from the current 50 years to 95 years. It was spectacular victory for the music industry, which had been lobbying hard for the change for many years.
Now, however, the backlash to the Commission’s proposals has begun. First of all, the UK Intellectual Property Office issued a press release stating its opposition. Now a group of leading European IP academics have written a letter to The Times expressing their disapproval. Among the signatories are figures from such august institutions as the Max Planck Institute in Munich, the Centre for Intellectual Property and Information Law at the University of Cambridge, the Queen Mary Intellectual Property Research Institute at the University of London, the Centre for International Industrial Property Studies (CEIPI) at the University of Strasbourg and the Institute for Information Law at the University of Amsterdam.
In short, these are not anti-IP flat earthers. And they are clear in their opposition: “The simple truth is that copyright extension benefits most those who already hold rights. It benefits incumbent holders of major back-catalogues, be they record companies, ageing rock stars or, increasingly, artists’ estates. It does nothing for innovation and creativity. The proposed Term Extension Directive undermines the credibility of the copyright system. It will further alienate a younger generation that, justifiably, fails to see a principled basis.”
This blog bows to no-one in its advocacy of strong IP rights as the bedrock for innovation and economic and social progress, but sometimes it is possible to go too far. It is difficult to see how extending the term of copyright protection for recording artists promotes innovation. What’s more, all recoding company personnel and musicians knew the score when they started off in the business, why should they be entitled to a bonus, sometimes many years after they did their work? Rather than lobby to hold back the internet tide, surely what the recording industry needs to do is to adapt itself and to develop new ways of doing business. There is absolutely nothing innovative about being anti-diluvian.
All this kind of proposed legislation really does is provides those with an anti-IP agenda a stick with which to hit all rights owners, who can – yet again – be portrayed as greedy corporates seeking to get one over the paying public. The Commission needs to think again about this. Sadly, it seems pretty clear that the recording industry will not.
Joff Wild, IAM Magazine | 22 Jul 2008
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AdWords lives to fight another day as key US case is settled
The controversial issue of keywords and Google’s AdWords programme in the United States will remain a great imponderable for trademark practitioners following the search engine company’s settlement of a case with American Airlines. The airline had instituted proceedings against Google, claiming that AdWords caused customer confusion which “has cost and unless enjoined will continue to cost American Airlines millions of dollars”.
Although Google has been subjected to action before, all these cases have settled. There was hope in US trademark circles that this time it would be different, as American Airlines is a long-established brand and had stated that it was intent on pursuing the case – to the extent of emphasising that like Google it was a deep pockets corporation. Well, obviously something has changed. As the terms of the settlement are confidential, it is not possible to know who blinked. Was it Google, fearing that this time they might end up losing, something that would put real pressure on the sustainability of what is a highly lucrative revenue stream? Or was it American Airlines, worried about how much information they would have to release in open court and concerned that the chances of prevailing were not high enough to justify this? Or maybe it was a case of two companies realising that they had better things to do than spend a lot of money on trademark litigation: after all, how would shareholders react at a time when the economic news is far from good?
What we do know is that for the time being Google s free to carry on with AdWords in North America, so a settlement suits it just fine. Of course, in the UK and Ireland now there is a similar style AdWords in operation. Despite some ferocious sabre rattling from trademark owners on this side of the Atlantic, as yet I do not think it has produced a legal challenge.
Joff Wild, IAM Magazine | 21 Jul 2008
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Welcome to Brand IP
People working in the IP community would, I think, concede that right now IP has a problem. And it is this. Despite all it has done for the advancement of mankind - culturally, socially, technologically, economically and in health terms – most people outside the IP bubble are almost completely ignorant of what IP is all about. Those who have heard of it tend to be negative to a greater or lesser degree.
In boardrooms IP is usually seen as an expensive, defensive right that makes lawyers rich and companies poorer than they should be. In politics and policy making, IP is normally regarded as a technical subject best left to committees of experts, and not something to interest senior government figures. Among the general public, to the extent there is any interest at all, the feeling seems to be that IP owners make it harder for the poor to access medicines, kids to download music and anyone to buy branded goods, and so on
Those inside the IP bubble tend to find all of this very perplexing. They are certain that IP is a force for good. Without IP there would be no meaningful research into developing new medicines or areas of technology. Without IP there would be no incentive for people to create music, literature and films for a living. Without IP, there would be no way of easily distinguishing quality products from poor quality products. What the IP community is beginning to understand, though, is that the IP brand – for wont of a better term – is in a mess. People either do not know it or, if they do, they do not like it. And as any marketing expert will tell you, when your brand is viewed like that, you are in trouble.
All of which takes me to a meeting I went to yesterday in London. Members of the IP community, including Paula Nelson of Nestlé, Caroline Kamerbeek of Philips and Catriona Hammer of GE, as well as private practice lawyers, academics and researchers, came face to face with marketers. Conceived originally by Ian Harvey, chairman of the Intellectual Property Institute, and facilitated by two senior figures from the UK advertising and marketing industries – Paul Jackson and Mike Smith – the purpose of the meeting was to see whether the marketing people could work out how to decontaminate the IP brand and turn it into something that encapsulates a positive, easily accessible message. The job of the IP people was to sit and listen, and to speak only when they were spoken to.
It was a fascinating few hours and for many of the IP people quite frustrating too. They had to sit there and listen to the marketers struggle with what IP was all about, to misuse the terms they use so easily every day and to repeat many of the inaccurate claims that are made about IP on such a regular basis. But although it was frustrating, it was also very educational – this was the authentic voice of the non-IP person.
But do not think it was a wasted morning. That was far from the case. Instead, it was hugely encouraging. The marketers worked through their negatives to get to a series of positives that IP delivers. These were encapsulated in words such as wealth and enrichment. And it was not only financial gain for IP owners and creators they saw, but also huge benefits for society as a whole; in terms of the jobs and tax takes that IP owners generate; the technological and medical advances that R&D built on the back of patent protection produce; the cultural enrichment that comes from incentivising creativity through copyright; and the informed choices that brands and trademarks enable.
Overall the message from the marketers was upbeat: Brand IP may be poorly, but it can be revived. The issue for the IP community is how this can be done in practice. It is something that was discussed after the marketers had gone home. The conclusion was that a working party called the IP Brand Development Group should be formed. This will reach out to all types and all sizes of IP owner, certainly in Europe and North America, and quite possibly in Asia too. Investment will be necessary to bring about further contact with marketers so that a positive message can be crafted and to ensure that this message is backed up with research which shows that what is being claimed is grounded in reality. Significant time and resources will have to be dedicated to education at all levels – no propaganda, but information that allows people to get a better understanding of IP so that they can come to informed conclusions about it. And it all needs to start happening sooner rather than later. By the autumn at the very latest.
The consensus at the end was that although the task is a daunting one, it is something that can be done. In fact, it is something that has to be done. Of course, none of this will stop IP owners having major differences over specific issues and ways of exploiting rights, while many will need to be convinced that there is anything in it for them at all. But the truth is that all IP owners have a stake in ensuring that people in boardrooms, parliaments and pubs understand what patents, trademarks, copyrights, trade secrets and everything else are all about, and the many benefits they bring. Without such understanding, IP rights will always be vulnerable to attack. And, in the end, if they go unanswered such attacks will lead to the erosion of protection, not only to the detriment of rights owners, but also to the world in general. How does that old song go: “Why does it always seem to go that you don’t know what you've got ‘til it’s gone?”
I will keep you posted on this. But really you should be getting involved.
Joff Wild, IAM Magazine | 18 Jul 2008
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More mixed messages from the European Commission
The Internal Market DG at the European Commission yesterday issued an official communication entitled “An Industrial Property Rights Strategy for Europe”. It is a wide-ranging document that sets out what the DG says are the Commission’s priorities in a number of IP-related areas. In the press release accompanying the communication, Internal Market Commissioner Charlie McCreevy states: "This strategy will offer a springboard for European companies to compete in the global economy. Not only will it help inventors across Europe to protect their ideas with strong industrial property rights, but it will also provide a catalyst for cutting-edge inventions from companies of all sizes to become successful in the market. In addition, the Communication reinforces once more that the EU will strike hard at counterfeiting and piracy."
Among the areas the document discusses is the intersection between IP and competition policy. Included in this section is the following statement: “An area of growing prominence in the interface between industrial property and competition law is standard-setting. In general, standard-setting is a positive contribution to innovation and economic development.” There is then a discussion of situations under which standard-setting may prove problematic. However, the section ends likes this: “… it is generally not for competition law to second guess a specific IP policy of a standard-setting body, but rather to provide guidance on which elements may or may not be anti-competitive. It is for industry to choose which scheme best suits its needs within these parameters.”
It is interesting to compare all of this with a speech made by Competition Commissioner Nellie Kroes last month: “It is simplistic to assume that because some intellectual property protection is good, that such protection should therefore be absolute in all circumstances. It is simplistic to assume that because standardisation sometimes brings benefits, more standardisation will bring more benefits. It is simplistic to assume that if the best approach is sometimes to base a standard on proprietary technology, then that is always the best approach. And it is simplistic to assume that we can fix on a standard today, without paying attention to the risk of being locked-in tomorrow.”
Reading this speech, it is hard to avoid the conclusion that it is simplistic to conclude that Ms Kroes and her team are anything but very wary of intellectual property and patents in particular. In turn, this surely means that it would be simplistic to believe that the document issued yesterday has been produced after a great deal of discussion between the different DGs inside the Commission with an interest in IP. Rights owners in Europe would do well to judge the Commision by its actions and not by its words. And when they do this, only the very simplistic will believe there is one IP policy in Brussels.
Joff Wild, IAM Magazine | 17 Jul 2008
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The WSJ may be spouting patent nonsense, but ask yourself why
The Patent Prospector blog is typically forthright in its condemnation of a recent Wall Street Journal opinion piece entitled “Patent Gridlock Suppresses Innovation”. And while many of us may find the way in which PP expresses itself regretable, it is still possible to have sympathy with the frustration that underlies what the blog’s authors are saying.
For what it’s worth, here are my observations on that WSJ piece:
• It seems to me that the author completely misses the point of AST. Who does he think that it will buy patents from if it is not the innovators that secured them in the first place? By buying patents from innovators, you are rewarding them for the work they have done, not holding them back; and you are incentivising them to do more innovation. The more people there are in a market seeking to buy patents, the higher the price these patents will fetch and the more reward innovators will receive.
• For some reason, the author sees RIM as the victim in the BlackBerry litigation. But is this really the case? RIM had countless opportunities to settle its dispute with NTP at a far lower price than the $600 million it eventually paid. As far as I am aware, the way it presented its case in court was also highly questionable. And we have never really been told how aware of the NTP patents RIM was before it started to develop the BlackBerry. This was not a case of having to wade through 4,000 different patents owned by hundreds of different parties, it was a case of potentially infringing one portfolio owned by one organisation. Is it unreasonable to expect RIM’s management to have been aware of this?
• There is absolutely no evidence to suggest that litigation costs in the US outweigh the value of technology-related patents. Instead, the book Patent Failure argues that if you combine the direct costs of litigation with the time that key workers inside litigating companies have to spend on the dispute and you then throw in falls in share prices when results go the wrong way, then you may be able to argue that patents cost more than the direct income they generate. However, this view is far from universally accepted and, as far as I understand it, does not take into account the fact that many technology companies’ share prices may be at the level they are because they own patent portfolios in the first place. To understand accurately what patents do to share prices, you need to work out how much companies would be worth without the patents they own. I don’t think Patent Failure does this.
• Patent litigation in the US over recent years has remained pretty static. Awards and settlements are either stabilising or going down. The vast majority of patents in the US are never litigated.
• As this blog discussed only recently, the quality of the patents being issued by the USPTO over the last five years seems to have gone up rather than down, while – as the 271 Patent Blog points out – the same research we looked at also seems to indicate that although pendency times are relatively long, they are not at historical highs.
• According to the World Economic Forum, the United States remains the world’s most innovative and competitive country.
However, let’s ask ourselves why the author of the WSJ article reached the conclusions he did in the first place. I would be surprised if it was because he was instinctively anti-patent. More likely, I think, it is because those who oppose the US patent system in its current form are very good at making their arguments interesting and accessible to non-patent specialists. In addition, they are working under the very considerable advantage of not having anyone put the opposite case in equally as cogent a way.
In the US what seems to be developing is something that we have had in Europe for quite a while now – a distorted argument in which one side of the debate is far more willing to put across its point of view than the other side, and to back its arguments up with facts and figures, however dubious these may be. And, as in Europe, they are helped by the fact that different members of the patent-owning community are pretty sharply divided among themselves.
Joff Wild, IAM Magazine | 16 Jul 2008