Associated Press v All Headline News Corp., 2009 WL 382690 (SDNY, 17 February 2009)

Ben and Marie-Louise provide an update on the 'Hot News' doctrine and the recent District Court of the Southern District of New York case which considered the application of ‘hot news’ misappropriation in the context of an internet-based news headlines aggregation service.

You can obtain a copy of this article in the Oxford University Press  'Journal of Intellectuap Property Law & Practice' in Volume 4, Number 7, July 2009.

I’ve explained some of the metrics we’ve used below.  Note that the numbers above change on a daily basis, so it might be different when you check for yourself.

The top result highlights some of the limitations of the available data.  The statistics for the Google patent search service are actually for the overall Google search engine!  So while the Google patent search service does offer some unique features for free, it’s not as popular as the above table makes out.  And it’s not possible with public data to really compare the Google service with others due to the popularity of its general search engine confusing the results.

Therefore, the most popular free patent search website is FreePatentsOnline, which has also recently added a free chemical search service.  At 1.6 million unique users per month it’s well ahead of the pack. 

But sheer traffic popularity alone shouldn’t be the sole metric by which you measure the popularity of a website.  For a service based website, it’s sometimes more interesting to compare visits per person over the month, which speaks more about the service and type of person accessing the site than raw traffic numbers alone.  For FreePatentsOnline, there are at most 160k users which return to the site more than once a month, a small fraction of its overall traffic.  For sites like PatentLens, all of its users return more than once a month, but it’s still a drop in the ocean compared to FreePatentsOnline overall returning traffic.  Patents.com has 12 times the traffic of PatentLens, but only twice the number of returning users.

It’s difficult to draw any conclusions from that information, particularly given that these services are freely available for anyone to use.  Perhaps the number is more a comment on the consequences of being prominent in Google.  Often being listed high in Google’s search results for generic terms like “patents” will generate significant traffic, but not necessarily traffic that is highly targeted to your particular service.  While other, more targeted links might send only a small trickle of users, but all of them are high users of the service.

Of the government sites, the US sites receives the most attention by far.  Even though it’s scope is narrow, it beats some of the more general free search sites.  Next is the European Patent Office.  Looking at the government sites shows the imprecise nature of the data – there is some significant differences between the Alexa traffic ranking and the Compete.com unique users per month.  There are a number of reasons for these differences, but sometimes it’s the result of advertising increasing the number of users hitting the site, but not actually using the service.

As mentioned above, the data for these sites is changing all the time, as are the services provided by those sites.   It will be interesting to review these services again in 6 months time. 

Please let us know if you have any favourites that should be added to the list.


Notes on the metrics used.

Three popular ways to compare website performance are Google PageRank, Alexa Traffic Rank and Compete.com.  There are many others, but these three are free and commonly used.

Google PageRank is the method used by Google to rank websites on its search engine.  The higher the PageRank (out of a possible score of 10), the more important Google thinks the website is.  While the finer details of the method are known only inside Google (and for good reason), the basic algorithm uses the number of sites linking to a particular site as a measure of its popularity.  The more sites that link, the more important it must be and the higher the PageRank.  When ranking the relevance of search results, Google combines the PageRank value of a website together with the prominence of the particular search term on the page, which determines the order of results.  You can check the PageRank of a website here.

Alexa Traffic Rank is a little different.  Alexa ranks websites based on the overall traffic to that website.  The lower the rank, the more traffic Alexa thinks your website receives.  It’s almost an impossible task to determine the real traffic going to a website, but Alexa makes a reasonable estimate using the log files from many different ISPs and other service providers.  One of the issues/features of using Alexa is that it measures traffic at the domain level, not the page.  So, using Google as an example, Alexa doesn’t distinguish between http://www.google.com and http://www.google.com/patents

Compete.com is similar to Alexa Traffic Rank, but keeps data on subdomains, one of the key reasons for significant difference above. 

And just so you can find them, here are the URLs:

#    Name    URL
1    Google Patent Search    http://www.google.com/patents 
2    Free Patents Online    http://www.freepatentsonline.com
3    EAST (US Govt search)    http://www.uspto.gov/web/offices/ac/ido/pssd/
4    European Patent Office (EPO)    http://ep.espacenet.com/
5    Patents.com    http://www.patents.com 
6    IP Australia (AusPat)    http://www.ipaustralia.gov.au/auspat/index.htm
7    Delphion simple search    http://www.delphion.com/simple
8    Patent Lens    http://www.patentlens.net/daisy/patentlens/patentlens.html
9    Surf-IP    http://www.surfip.gov.sg/_patent-f.htm
10    Patent Analysis Search System    http://www.patentanalysis.com/

(Disclaimer: The views expressed in this article are solely those of the author and can not be attributed to the University of Oxford, its colleges, students, faculty or various departments (nor of Duncan Bucknell Company, for that matter)).

Perceptions of Intellectual Property are, to say the least, controversial, as I sought to illustrate in depth in the online draft discussion paper on “Perceptions of Intellectual Property. A Literature Review.1”

The TRIPS Agreement marks the cornerstone in the public view on intellectual property. While prior to TRIPS, IP passed more or less as a technical non-issue primarily of interest to a few experts, the creation of an international treaty on Intellectual Property under the umbrella of the World Trade Organization caused the most heterogeneous group of people to contest the concept of intellectual property rights. The sharp contrast of “pre-WTO” speak on intellectual property, compared to “post-WTO” IP talk can be best illustrated at the difference in international perceptions of the “WIPO” – the World Intellectual Property Organization and the “WTO” – the World Trade Organization. The WTO is a very recent international body that, which at the time of WIPO’s Director General Dr. Arpad Bogsch, was not even international organization, but nothing than a forum (the “GATT”). Clearly, Dr. Bogsch underestimated the impact of the TRIPS agreement at the time when he said, no doubt with a feeling of superiority that certain countries are proposing to accommodate Intellectual Property Rights in a forum that does not even have the status of an international organization.2 

Why eventually intellectual property found its space in international trade3, is not yet researched. While some say that intellectual property has intrinsic features that link it to trade , others contest this view and argue that the mere reason why the concept of “strong” intellectual property rights was established on the agenda of trade ministers was that it was probably easier to establish a new international perspective on IP within a forum that was created from scratch, proving in this sense Schumpeter’s ideas of creative destruction as a crucial element of innovation.4  Be it as it is, when the U.S. trade representative suggested in the Uruguay round negotiations to establish intellectual property on the trade agenda most negotiators had no idea what they were actually committing themselves to. Dr. Bogsch and WIPO were more or less bypassed and even though the TRIPS agreement at many instances refers to treaties administered by the international bureau of the WIPO, it still constitutes a piece of work on its own. The TRIPS agreement not only reflects the full architecture of the WTO system, but also allows signatories to the treaty to actually go into litigation.

From the perspective of international business the TRIPS agreement had strongly contributed to resolve major business challenges, yet from a mere legal perspective. The physical infrastructure of doing international business was more or less established through excellent means of transportation and the internet, which gave space and time a new meaning. Engaging with business partners in the most remote corners of the world became affordable at low cost, in an easy and uncomplicated manner. Opportunities to move from a traditional Fordist production chain to a network economy were established through means of new technology and transportation. No physical obstacles were in the way to leverage low labour and cheap production costs at the international level. Arbitrage or the leverage of different income levels turned out to be a rewarding business model. Operating as networks and abandoning linear value chains offered knowledge intensive companies previously unknown business opportunities. Yet, the legal infrastructure was and probably still is not at the same height as the technological infrastructure provided for international business.

What TRIPS did, was to resolve at least some of these short comings by providing a minimal legal international context for intellectual property. However and here lies the dilemma of any exercise of branding IP, what was perceived to provide enabling opportunities for international business, was equally perceived as strongly harming human development. Civil society’s outrage against the TRIPS agreement was unheard of before. Human rights advocates, feminists, peace activists, representatives of various churches, health advocates, in a word, the most various interest groups protested against intellectual property. While heterogeneous by background, the Globalization movement not only had the liberalization of international trade as its target, but also intellectual property rights. Best summarized in the slogan “IP kills”, the concept of proprietary knowledge got interwoven with issues such as “gender discrimination”, “famine”, “health gaps” and the further increase of gaps prevailing at the international level. To put it shortly and summarize the comprehensive report on “Perceptions of IP”, intellectual property rights were very much seen as yet another weapon and powerful tool protecting the wealth of those who “have” from those who don’t.5  The debate reached a level of polarization and aggression that it justified Clausewitz view that “war is just politics by other means. ”6 It may however also justify, but no scientific prove of the argument is possible, that the debate was and still is strongly gendered and male dominated. 

It is crucial to understand this historical context when seeking to “brand” intellectual property. Currently, the brand value of IP is somewhere between “patent kills” and a general lack of awareness what IP actually is, a left over from the Pre-TRIPS time.

With that in mind, one question arises: What can be done to calm the situation and to stop the international “IP war”? The crucial element in this exercise is to understand the concept of “incentives”. Both, business and civil society have an “incentive” to move from a stage of war to a constructive, solution driven approach. For business the increasingly negative publicity that IP is giving it, may actually translate into serious bottom line profit losses due to loss of reputation and image. For civil society again, the stage of continuous critique can not be maintained either. At some point in time donors do want to see solutions and constructive output. Thus, there are good chances to move from a “win” to a “win-win” situation.7 

So far, IP has been largely looked upon from a legal perspective, which comes as no surprise since current educational systems worldwide only train lawyers in IP. Economists, political scientists, sociologists, historians or even engineers know most of the times very little about intellectual property.8  A pity, since it is exactly this multidisciplinary perspective that is needed to turn IP into a tool for economic, social and cultural prosperity and leverage it as a means for wealth and welfare creation. A different perspective on IP, one that looks at it as a strategic asset more than a legal framework gives way to new managerial perspectives on intellectual property.  While so far, the readjustment of the IP system has primarily been looked upon through the perspective of compulsory licensing (again a very legal approach to IP management), few have taken a more pragmatic approach and asked what types of management choices may work towards obtaining inclusion and an equitable distribution of research and development findings within the existing intellectual property framework.

Public interest IP management seeks to offer strategic choices on how to reconcile the existing contradiction between the exercise of exclusive rights and the universal right to equitable access. Innovation functions as a public private partnership; according to current research by Ashley Stevens at Boston University the vast majority of FDA (Food and Drug Administration) approved pharmaceuticals were developed with public sector support. While the public sector is asked to thoroughly negotiate agreements in the public interest, business can explore opportunities to leverage IP for the wider public interest.  Public interest IP management comprises different approaches to ownership and access of IP and makes use of market and non-market incentives. It includes defensive publication, the pre-emptive creation of a public domain (including waiving of IP rights) and a deliberate deployment of legal exclusions. The application of the right to exclude can further be used to safeguard the open quality of a shared innovative domain.9  A good example is “humanitarian licensing” where IP is being licensed to market participants on the condition of several tied in arrangements.  In this case the licensor tends to reserve the right to license the technology also out to developing country producers or allow for parallel trading. It is further common practice to assure in licensing agreements “public interest” clauses that aim not only to assure commercial, but also public welfare gains. In practice, “humanitarian licensing” works if regulatory frameworks are in place clarifying ownership over IP developed in the public domain as well as sufficient practice in managing IP.  A comprehensive, strategic IP approach furthermore represents the public interest as early as the selection phase of a research topic and plays a decisive role in the interaction between the public and the private sector. An ex-ante IP strategy is different from an ex-post intervention. The latter are only public interest remedies treating IP as a commodity, where negotiation is only possible over price.10  

Yet, public interest intellectual property management faces several limitations:
It can not refer to successful private sector IP management approaches, which are hampered by inadequate accounting and financial standards, as well as by a general lack of awareness of the pro-active IP management, as compared to the defensive focus on IP protection. In addition, it is limited by the wider constraints associated with public sector management, such as difficulties with the impact assessment of public policies or the provision of incentives within a public sector context.

While Sun Tzu says that one needs to understand who one is fighting, the greatest strategist in time,  also says that the best war is the war that can be avoided.11  In this sense, the management of intellectual property in the public interest, the illustration of the enabling opportunities that can be provided by intellectual property constitutes a clear way to move from the battle field to constructive solutions. Intellectual Property does have the potential to provide enabling opportunities for all the Peoples of the world. Yet, this will not happen by itself. It needs political will, business initiative and the concerted effort of both business and the public sector to foster inclusion and knowledge equity rather than further marginalization and discrimination.

References
1  Roya Ghafele: Perceptions of Intellectual Property: A Literature Review, free for download at http://www.ip-institute.org.uk/pdfs/Perceptions of IP.pdf
2  Michael P. Ryan: Knowledge Diplomacy: Global Competition and the Politics of Intellectual Property.  Brookings Institution Press, New York 1998
3  Keith E. Maskus: Intellectual Property rights in the Global Economy. Institute for International Economics, Washington D.C. 2000
4  Joseph Stiglitz: How to fix the IP imbalance: Too much IP Protection is Bad for the Economy.” Managing Intellectual Property October 28 2004, p. 35-39
5  Roya Ghafele: Perceptions of Intellectual Property: A Literature Review. ibid
6  Carl von Clausewitz: On War. Wordsworth. Hertfordshire 1997
7  Caroline Kamerbeek. Director of Communication. Philips IP. Intervention at the IPI meeting on IP Branding, 2.12.2008
8  Roya Ghafele and Alexander Wurzer: The Clash of Mindsets. Intellectual Asset Management Nr1/2006
9  Antony Taubman: Public–Private Management of Intellectual Property for Public Health Outcomes in the Developing World: The Lessons of Access Conditions in Research and Development Agreements. Initiative on Public Private Partherships for Health. Global Forum Health. Geneva 2004
10  Antony Taubman: Public–Private Management of Intellectual Property for Public Health Outcomes in the Developing World: The Lessons of Access Conditions in Research and Development Agreements. Initiative on Public Private Partherships for Health. Global Forum Health. Geneva 2004
11  Sun Tzu: The Art of War/ Die Kunst des Krieges. Knaur. Muenchen 2001

(Photo credits: 'ip' by Paul Mutant and 'Miniature Warriors' by Susan Renee)

In this presentation Duncan reviews the current contentious strategic approach to intellectual property in the pharmaceutical industry.  He then looks at the fast paced change that is already overwhelming some parts of the industry and, looks to other industries for examples of alternative strategic approaches.  The presentation finishes with some key suggestions and practical examples relating to much greater and more open collaboration between pharmaceutical companies.

Click here or on the 'download media' link at the top of this page for a copy of the slides.

You can download and listen to a podcast of Duncan presenting this material in our podcast area.

Is the value of a patent too specific to context to make any broad statements about this?  Here's the text of a conversation that has recently taken place in From LinkedIn's 'Patent and Intellectual Property Practitioners' Group' - what would you add? 

Head over to our equivalent blog post to add your thoughts, or log in to LinkedIn and do the same.

The Question:

RAJASEKARAN A.B.

asked:

Is it possible to value patents accurately? There are so many companies out there professing to value patents-how far it is true?

The comments so far:

Jerrad Howard

Valuing Patents, as with any form of Intellectual Property, is difficult at best. There are varying methods that are used depending on the type of IP and in what form it is used. In essence though, valuing IP is a current art that is quickly becoming much more effective.

There are three main models for valuing IP: Cost Method, Income Method, and Market Method. I've uploaded a PowerPoint Slide Show to my profile if you would like to review for information on this. However, depending on what you are seeking, it may not be necessary or worth-while to look forther. US GAAP doesn't currently allow accounting value recognition for internally generated intangible assets in financial statements; instead, they only allow recognition of purchased intangibles, goodwill, etc.

There are a number of firms that specifically specialize in IP and, for what it is worth, are accurate because they have been doing it for so long. Patents specifically have inferences that other forms of IP do not have that may demonstrate added value (viz. number of previous patent citations & number of scientific theories) making it a tad more difficult.

Alex Seltzer

A valuation is only as good as the assumptions which drive it.

RAJASEKARAN A.B.

Thanks for the comments. Five years back I wrote an article on valuation in IP Frontline( now available: http://www.intelproplaw.com/Articles/cgi/download.cgi?v=1092110332 ); but not exactly convinced that patents can be valued before hand.

Rahul Dutta

Well, I agree with Alex with some more to add. The valuation depends on the purpose for which it is required to be valued. AS 26, just like US GAAP, does not provide anything for taking account of patent in number terms. If you need a patent to commercialize, it costs you higher but if you have to find a buyer for your patent, it would go cheaper to your estimate. But if you put the patent with a IP dealer, you may expect a better return. They have their own methods for estimating the value of a patent. But such a firm would be interested in patents applied for/granted in the developed countries only. The commercialization of IP part is still evolving. In my opinion patent valuation is very important in IP transactions and is an integral part of the IP due diligence.

Jackie Maguire

Many companies now require their IP to be valued. That is sometimes a package of IP and not just patents. And yes, as Rahul indicates, the method does depend on the purpose for which it is required, which is not always associated with a direct sale or purchase. See http://www.colleripmanagement.com/opinion/opinion.html for more info and case studies.

Paul Teta

Mr. Rajasekaran: I see by the comments you have received that the subject of valuing patents has been discussed from an academic perspective and that reference sites have been provided. I will provide a realistic business perspective. Patents can be valued with the same level of certainty as real property or any asset for that matter. This means it is not all about what it cost to develop plus a reasonable margin. It is more about what the market will be willing to pay. So, it is about comparables, where those are available, and where they are not available, it is about assumptions. When the practice of valuing IP assets started to split from valuing businesses as whole entities (for merger and acquisition activities), distinctive characteristics about IP assets drove the development of the various techniques. Nevertheless, valuing anything is some science and some art. I often say that valuing a patent has equal ability to be wrong as does valuing a manufacturing plant expansion. It also has equal ability to be right! Again, it is all about available comparable data and if that is not available, synthesizing dissimilar data into cogent and plausible assumptions. The rest is math. My company does IP valuations and no two projects are the same. We like to work with a valuation in context with monetizing assets, and finding the value of the asset in the market place (what a buyer is likely to pay) is really the best method to make a transaction happen. If you care to hear more about what we (UTEK Corporation) does to assist clients, please let me know. I am happy to provide more information about this subject in particular, or exploitation of IP assets in general. I hope this has helped. Best Regards, Paul F. Teta; Director IP Consulting and Exploitation

Matthew Siegal

As Messrs. Seltzer and Dutta state, it really depends on why you are valuing the patents. Some patents have existing revenue streams and have been around and unchallenged for years. There, the exercise is more straightforward; but what about a newly issued patent or the one and only patent of a start-up?

When looking at one patent individually, most models ignore or gloss over two of the most important aspects, which are: How broad is the patent's coverage and how strong is the validity of the patent. Unfortunately, these are very complicated questions and many economists are uncomfortable with the intricacies of patent law. So complicated that most models simply ignore them and look at the industry and the value of other patents in the same field, assuming all are equally broad, valid and enforceable.

If you wanted to value an athlete coming out of college, you could take averages for salaries related to his or her sport, from their school and from their conference, but all of that will pale in comparison to watching game films, reviewing statistics and conducting a medical examination.

Rick Neifeld

No, it is not possible to value patents "accurately". Patents are each unique and therefore conventional valuation methodoligies, market, replacement cost, and income generally fail. However, income stream can be a basis for an objective valuation under certain assumptions. That is the basis for the model presented in my papers on patent valuation, and that is the basis of the model employed by "PatentValuePredictor" to value patents and patent portfolios. See http://www.PatentValuePredictor.com .

Nicholas Webb

In my 20 years as a certified management consultant I have found intellectual property evaluation to be a tremendous source of entertainment. We have seen some highly complicated methodologies deployed to evaluate the value of intellectual property to the point where the central focus is taken away from the integrated deal structure. For an example we were recently involved in the negotiation with a group of highly trained technology transfer experts. Their central focus was on the percentage of royalties that they would win for their client and they demanded a 7% royalty of adjusted net sales based on a 40 page model that was anchored to a variety of standards. This is so common and yet so wrong it's not about the value of the patent IT'S ABOUT THE VALUE OF THE DEAL! the principal focus should have been about the global deal structure, EX. is this the right strategic acquirer for the intellectual property? Does the deal structure mandate the development and deployment of an integrated commercialization plan? Is the deal structured as a foundational platform for a continuum of additional technologies with a licensee? A central focus on intellectual property value is amateur to say the least the focus has to be an integrated deal structure that provides the maximum monetization of the technology. One footnote we don't like royalty agreements we took over this deal and set it up as a master distribution arrangement my client took on a small amount of additional risk but increased his percentage is to 35% when valuing and negotiating technology it's important to look at 30 or 40 different deal structures rather than just simply pulling the license/royalty lever. www.lassenscientific.com

Joseph Scott

Malathi Lakshmikumaran Ph.D, FNASc of Lakshmikumaran & Sridharan
(B-6/10, Safdarjung Enclave New Delhi - 110029)

Has access to an interesting claims coverage tool that has valuation applications.

Rahul Dutta

When I wrote my comment, I had no idea that this is going to invite such a vivid response and add value to the discussion. We really need a forum to freely discuss our views and share knowledge.
I agree with the esteemed comments that each patent is a unique case in itself and needs a fresh look for evaluating its value in financial terms due to various reasons and factors. I really appreciate the positive discussion on Patent Valuation triggered by Mr Rajasekaran's question. Patent commercialization is still a puzzle for most of the IP professionals and its knowledge would make the patent life cycle complete. It would indeed increase the respect for patenting in industry at large.

What would you add? 

Log in and add your comments in LinkedIn or head over to our blog area and add your comments there in the associated blog post.

Here are the slides from Duncan's presentation at Medical Devices Law & Policy Conference in Sydney, Australia.  (Click here or the 'download media' link to the right of this page.)

You can download and listen to a podcast of Duncan presenting this material in our podcast area.

Amongst other things, Duncan discusses:

• Whether medical devices are like pharmaceuticals when it comes to IP strategy;
• The downside of confining patents to being competitive weapons;
• The top things to consider in contentious IP Strategy;
• Using IP to add value;
• IP systems and processes; and
• Cross licensing.

Hong Kong has been part of the People’s Republic of China (PRC) since 1997. But the former British crown colony has a very different and nearly autonomous jurisdiction from its motherland. How do the PRC and Hong Kong relate to each other in regard to the protection and enforcement of intellectual property rights (IPR)?

United but different

On 19 December 1984 the governments of the PRC and the United Kingdom signed the Sino-British Joint Declaration on the Question of Hong Kong[1]. The PRC and the United Kingdom declared together that under the principle of "One Country, Two Systems", Hong Kong would keep its capitalist system and retain its own laws and a high degree of autonomy for 50 years. These policies are codified in the Basic Law[2] that came into effect on 1 July 1997. As of that moment Hong Kong would be called a Special Administrative Region of the PRC. The Basic Law is a kind of mini-constitution of Hong Kong, on which all legislation of Hong Kong is based.

(In)dependent jurisdiction

IPR has been dominated by the territoriality principle[3]. This means that the territorial scope of any IP law of a jurisdiction shall be limited to the border of that jurisdiction.

Therefore, if one has registered a trademark or design-patent, invention-patent or utility-patent in the PRC it does not mean that one has registered a trademark, industrial design, patent or utility model in Hong Kong. And if one has registered an IPR in Hong Kong one has not registered a IPR in the PRC, either. Copyright is an automatic right, which arises when it is created. Copyright registration is not needed in the PRC nor in Hong Kong, because of the 'no formalities provision'[4] of the Berne Convention to which the PRC is a signatory[5] and to which Hong Kong implicitly is a member. However, in the PRC you can register your copyright with the National Copyright Administration, which can be helpful to establish prima face evidence, for example ownership. According to the Hong Kong Intellectual Property Department (IPD) registration is not needed to get protection under the law[6]. The territoriality also designates the law of the jurisdiction where the protection is sought as the applicable law to the infringement suit[7]. However, parties can contractually put aside this conflict-of-law rule.

An interesting dependence between the United Kingdom, Hong Kong and the PRC can still be observed in relation to the grant of a standard patent in Hong Kong[8], which can only be granted if it is based on the registration of a patent granted by one of the following three patent offices: PRC’s State Intellectual Property Office (SIPO), the European Patent Office (EPO), in respect of a patent designating the United Kingdom or the United Kingdom Patent Office.

Civil Law versus Common Law tradition

The PRC uses a Civil Law[9] system that is heavily influenced by the German Civil Code[10], Japanese law[11], which itself was influenced by German law and by Socialist Law[12].

The Basic Law of Hong Kong guarantees[13] that Hong Kong courts continue to follow[14] the Common Law[15] tradition, which it inherited from the British. A difference between the Civil Law and Common Law tradition is that in the first the important principles are stated in the civil code, while the statutes complete them; while in the latter the law evolves via jurisprudence and in addition is amended by statute. However, in the area of IPRs, statute law is overwhelmingly important[16] in all jurisdictions, including in the Common Law jurisdiction of Hong Kong.

Another difference is that in Civil Law jurisdictions courts are held to the interpretations by higher courts, while the lower courts in Common Law jurisdictions are bound to follow the reasoning of the interpretation of the higher courts. However, in practice, the people’s courts follow the interpretations of the laws by the Supreme People’s Court, because of its authoritative status. Theoretically Hong Kong’s courts have to follow not only the precedents of Hong Kong’s highest court, the Court of Final Appeal, but also those of the English Court of Appeal. Since the Basic Law of Hong Kong guarantees that Hong Kong should continue its Common Law system, one can argue that post-1997 English court judgments, which might reflect the English pre-handover law more accurately than the post-1997 judgments by the Hong Kong courts, should be applied. However, in practice, post-1997 English court judgments have no binding effect in Hong Kong[17].

Pre-trial evidence versus Discovery

Although most jurisdictions that follow the Common Law tradition have no civil trial by jury anymore, the historical need to bring together a number of citizens to hear the testimony of witnesses, observe the evidence, find the facts, and to apply the facts to the law under instructions from a judge; explains why the civil proceedings in the Common Law tradition is shaped as a single concentrated event[18]. According to Merryman, in Civil Law jurisdictions “[d]iscovery is less necessary because there is little, if any, tactical or strategic advantage to be gained from the element of surprise”[19], in which he is referring to the civil proceedings that are spread out “over a series of isolated meetings of and written communications between the counsel and judge, in which the evidence is introduced, testimony given, procedural motions and rulings are made.”[20]

Merryman noticed a trend in Civil Law jurisdictions toward concentration of the civil proceedings. This could a fortiori be true for IPR proceedings.

Although the PRC Civil Law system does not have a formal discovery process, it provides for preliminary measures to preserve evidence before a party initiates legal proceedings, which could have the same function. Article 74 of the PRC’s Civil Procedure Law[21] in general and article 50 of the PRC’s Copyright Law[22], article 58 of the PRC’s Trademark Law[23] and article 61 of the PRC’s Patent Law[24] for the respective IPRs. Article 65 of the PRC’s Civil Procedure Law[25] states: “The people’s court has the right to acquire evidence from the relevant units and individuals, and they shall not refuse it.” However, article 65 of the PRC’s Civil Procedure law is seldom used.

Hong Kong’s Civil Justice Reform[26] includes legislation that gives the court the authority to order pre-action discovery between the parties and post-commencement discovery against non-parties in all types of civil claims[27], including IPR related ones. It is believed that, with greater transparency between the parties at an early stage, the prospects of an early settlement could be enhanced.

Chinese versus Chinese and English

In the PRC, Chinese is the only official language. English translations of law are for reference only. In Hong Kong English is an official language[28] next to Chinese (Cantonese or Mandarin) and may also be used by the Hong Kong judiciary. Hong Kong can be praised that it not only offers all legislation bilingually[29], but that all legal proceedings be held in English at the party’s request[30].

Transparency

In order to determine whether a legal system is effective one should be able to know what is actually happening. One of the fundamentals is to be able to find the right law, regulation or judicial interpretation. In the PRC there is still room for improvements[31]. In Hong Kong this is nearly perfect: all laws and regulations can be easily found online[32].

Rule by Law versus Rule of Law

The rule of law is arguably the single most important legal principle[33] for any judicial system. It is intended to safeguard against arbitrary governance. Governmental authority can only be exercised legitimately in accordance with written and publicly disclosed laws and enforced in accordance with established procedure. If a state follows the rule of law and apply the law consistently, uniformly and in an impartial way, the societal benefits are legal security for the citizens and, according to the Political and Economic Risk Consultancy (PERC)[34] “[b]etter judicial systems are associated with better IPR protection, lower corruption and wealthier economies.”[35]

The PRC’s leadership clearly wants to restrict lower government authorities to the rule of law. In a survey[36] by PERC 1,537 corporate executives were asked to rate the judicial systems in the Asian countries where they work, using such variables as the protection of IPR, corruption, transparency, enforcement of laws, freedom from political interference and the experience and educational standards of lawyers and judges. PERC states that the less favourable perception of the PRC's judicial system is rooted in political interference, and that the Communist Party is above the law. According to the PERC survey Hong Kong has the best judicial system of Asia. The PRC can only be found on place 11[37].

(In)dependent judiciary

The PRC’s Constitution[38] promulgates that the people’s courts exercise their judicial power independently, without any interference by any administrative organ, public organisation or individual. However, in contradiction to this principle, article 128 PRC’s Constitution[39] states that courts report to the corresponding level of the people’s congresses that created them. At the highest level, the Standing Committee of the National People’s Congress is superior to the Supreme People’s Court: it has the final word when it comes to the interpretation[40] or invalidating[41] of laws by the Supreme People’s Court. Also, the People’s Procuratorate Bureau exercises supervision over the judiciary, leading to the situation where procurators are subject to the authority of the court when they appear before the court as a prosecutor and yet have the authority to challenge the “final” decisions of the court[42].

Hong Kong enjoys a much higher degree of independent judicial power[43], including that of final adjudication. However, it should be noted that the power of interpretation of Hong Kong’s Basic Law is vested in the Standing Committee of the National People’s Congress, which authorises the courts of Hong Kong to interpret on their own, if it concern affairs that are outside the responsibility of the Central People’s Government or do not concern the relation between the PRC and Hong Kong[44]. And then there was the incident in 1999 that the government of Hong Kong ignored an interpretation of the Basic Law by its highest judiciary, the Court of Final Appeal. Instead it sought assistance from the National People’s Congress to come up with an interpretation[45].

Reciprocal agreement of judgments

The PRC and Hong Kong have a mutual recognition of arbitration findings and since July 14, 2006, also the mutual enforcement of court rulings on IP infringements, which is called: Reciprocal Enforcement of Judgments in Civil and Commercial Matters by the Supreme Court of the PRC and the Secretary of Justice of Hong Kong. The arrangement initially only applies to money judgments of commercial cases[46]. Since the parties need to agree on an exclusive jurisdiction clause, the reciprocal agreement of judgments seems to be of limited value in its current form for IPR cases. Most infringements of IPRs are done by unknown parties with whom the IPR right holder has not made any agreements[47].

IPR enforcement in PRC and Hong Kong

Although great gains have been made to date, most people would agree that there is still plenty of improvement in regard to the PRC’s national IPR strategy[48]. Although it is not fair to compare the effectiveness between the PRC and Hong Kong, because Hong Kong is much more synoptic, the government of Hong Kong has shown an unstinting commitment to innovative ways to protect and enforce IPRs. The general perception is that the Hong Kong government is effective in protecting and enforcing IPRs. However, this has not always been the case. Only in 1997, the year that the sovereignty of Hong Kong was returned to the PRC, Hong Kong was put on the 301 Watch List created by the United States Trade Representative (USTR). According to this trade policy adviser to the US President, Hong Kong had problems with IPR protection and enforcement. In 1998 the then Trade and Industry Bureau, the IPD and Customs & Excise Department C&ED worked together to enact and implement a series of amendments to the copyright related legislation[49]. In 1998 the C&ED also set up a Special Task Force to target pirate optical disc outlets. Statistics show the decrease in copyright infringements[50]. In 1999 Hong Kong was removed from the 301 Watch List.

Innovative ways of IPR protection and enforcement in Hong Kong include the “No Fakes” label scheme, to be displayed at shops. In March, 2004, more than 380 retail merchants covering 2,300 outlets have joined the Scheme. The alliance will help monitor and report any counterfeiting and piracy activities. In 2008 the concept was followed by Shanghai[51]. Sometimes the Hong Kong government gets criticism because of perceived excessive anti-counterfeit and piracy measures[52]. This includes recruiting children for IPR surveillance and Mr Chan Nai-ming was the first person in the world that was convicted and sentenced because of uploading movies via BitTorrent. After two appeals Mr Chan was convicted by the Court of Final Appeal to serve a three-month prison term for uploading the movies Daredevil, Miss Congeniality and Red Planet without permission[53] [54].

Hong Kong Tolerates Shadow Companies to the Disadvantage of the PRC

Despite Hong Kong’s successes in the field of IPR protection and enforcement, there are still some problems left that need attention. PRC entities are setting up companies in Hong Kong with company names that are “inherently distinctive”, according to the current legislation, but very similar to well-known trademarks, and accepted by the Hong Kong Trade Marks Registry. These so called shadow companies usually engage in counterfeiting activities in the PRC. In the PRC they show official copies of their Hong Kong certificates of incorporation to Chinese manufacturers[55], who will churn out infringed and pirated goods in good faith. One can argue that the Hong Kong Companies Registry is interpreting the Companies Ordinance Chapter 32, Section 22 (2) and Section 22A and Section 291 too restrictive[56].

Conclusion

Although Hong Kong is part of the PRC it has a separate jurisdiction. Therefore, IPRs need to be registered in each jurisdiction separately, with the exception of copyright. Hong Kong misses a lot of the extra-judicial factors that make enforcement of IPRs difficult. It is the perception of executives in Asia that Hong Kong has the best judicial system, which seems to correlate with good IP enforcement, lower corruption and a wealthier economy. Hong Kong’s judiciary is nearly completely independent from government interference. Legal proceedings in the PRC can only be done in Chinese, in Hong Kong this can be done in both Chinese or English. The transparency in Hong Kong is much bigger than in the PRC. The Reciprocal Agreement of Judgments between the PRC and Hong Kong has not yet great value in relation to IPR cases. The Hong Kong government has developed itself into an effective IPR protector and enforcer using innovative strategies, with the exception of shadow companies.

China's State Council promulgated a national intellectual property strategy [1]. In the policy document there is a lot of talk about doing everything more efficient and more effective. Great, but how to achieve these laudable goals?

Over the last two decades, and especially around the time China ascended to the World Trade Organisation (WTO) in 2001, China impressively improved its system of IP protection and enforcement. However, it’s aspirations to make the enforcement “hard as steel and definitely not soft as bean curd” as China’s premier Wen Jiaobao aspired for in 2006 [2], have not yet materialised. In the so called Compendium of China's National Intellectual Property Strategy [3], an extensive list of aspirations and measures, China is vowing to develop itself into a country with a relatively higher level of intellectual property right creation, utilisation, protection and administration by 2020.

So what exactly is a national IP strategy? Are all desired goals and commitments in there? What is missing? And how to achieve the goals set out in the strategy?

What is a national IP strategy?

National IP strategies are en vogue. The World Intellectual Property Organisation (WIPO) has gathered the summary of  the national IP strategies of 21 countries, plus the African Union and the European Union [4]. WIPO’s definition of a national IP strategy is: “a set of measures formulated and implemented by a government to encourage and facilitate effective creation, development and management of intellectual property.” Professor Daniel Gervais [5] points out to the fact that to make a proper policy analysis is impossible or inherently unreliable, because theoretical models are inadequate or valid empirical data unavailable. Despite this correct observation the promulgation of a national IP strategy can clarify common goals. In this case the national IP strategy is a product of the National Working Group for IPR, made up of 13 officials from 12 IP-related agencies and ministries, including the Ministry of Commerce (MOFCOM), the State Intellectual Property Office (SIPO), Customs, the Supreme People’s Court and the State Administration for Industry and Commerce (SAIC) [6].  So the commitments set in the national IP strategy will be broadly embraced, which increases its chances to be realised.

What stands out in the national IP strategy?

Paragraph 13, 14 and 15 give the contours of strengthening IPRs protection, preventing abuses of IPRs and fostering a culture of IPRs. After that is becomes more interesting, because the more specific tasks are announced. The key industry sectors where China wants to obtain strategic patents are given in paragraph 16. They include: biology, medicine, information, new materials, advanced manufacturing, new energy, oceanography, resources, environmental protection, modern agriculture, modern transportation, aeronautics and astronautics. It is safe to predict that one can expect a lot of patent activities in China in these industry sectors.

Paragraph 17 is about setting technology standards. Chinese national standards, such as AVS in the audio-visual industry [7], the Chinese version of the RFID standard [8] or the TD-SCMDA in the telecoms industry [9] have a chance of developing into de facto international standards, because of China’s growing economical significance in the world.

Paragraph 19 deals with patent examination. It is clear that patent quality in China has enough room for improvement [10]. In the document one cannot find surprising new strategies for trademarks or copyright protection and enforcement. “Stealing trade secrets it to be severely punished according with law”, paragraph 29 stipulates. But as we will see below, sometimes this bland language is a prelude to concrete change, although it is unclear when this will happen. Until now trade secrets are dealt with in China’s Labour Contract Law [11].

China wants to establish or improve upon a protection system for geographical indications (paragraph 32), genetic resources (paragraph 33), traditional knowledge (paragraph 34), folklores (paragraph 35) and layout-designs of integrated circuits (paragraph 36). The wording of these goals and commitments is vague, because how do you measure whether a system is strengthened or sound, and when can you say that the utilisation of rights is more effective? 

More promising is paragraph 45 which stipulates that the trial system for intellectual property should be improved upon, the allocation of judicial resources optimised and remedy procedures simplified. In this paragraph the need for studies to establish special tribunals for civil, administrative and criminal cases involving intellectual property rights is articulated. Also the centralisation of jurisdiction involving patents or other highly technical cases will be studied. This makes a lot of sense, since it will build expertise and bring experience together. Although, this concept is not really new: since 1993, Chinese courts have made efforts to establish special trial chambers of IP. In 2000, China set up special and independent divisions to exclusively deal with all IP related civil cases. These so called No. 3 (or No. 5) Civil Divisions, can be found at the Supreme People’s Court, all High People’s Courts, Intermediate People’s Courts in all provincial cities and many big cities, and even a few Basic People’s Courts. Judges on the panels have science or engineering backgrounds and experience in dealing with IP cases. Such courts include the Intermediate People’s Courts in Beijing, Shanghai, Guangzhou and Shenzhen [12].

Another good development mentioned in paragraph 45 is that China explores to set up courts of appeal for IP cases. This will improve the uniform and consistent application of laws, which will increase the certainty for all stakeholders in the legal process.   Paragraph 52 states the commitment to get high quality databases for patents, trademarks, copyrights, layout-designs of integrated circuits, new varieties of plants and geographical indications. This could dramatically add to the transparency of intellectual property rights in China.

What is lacking in the national IP strategy?

To achieve any goal, one has first to know exactly where one stands. Therefore one needs to be able to measure in an objective way the enforcement and infringement levels in China. For this purpose one could use the Enforcement/Infringement Ratio this author has proposed in his thesis [13].  When the position is known one can set goals, which are well defined and attainable. The vague language in the national IP strategy is not very conducive for this purpose and it remains silent about what the level of IP enforcement compared to the level of infringement should be. The following concepts; effective enforcement and deterrent remedy should be precisely defined.

There is a paragraph about an interdepartmental coordination mechanism to make overall plans for the development of IP human resources (paragraph 59), but there is no plan for a better coordination between the different administrative authorities with overlapping capabilities, such as the State Administration for Industry and Commerce (SAIC) and the Administration of Quality and Security Inspection and Quarantine (AQSIQ) concerning the enforcement of infringed trademarks. In addition to this, there is no plan for a better coordination between the administrative authorities and the Public Security Bureau (PSB) so that criminal cases will be transferred to the PBS, which hardly happens at this moment in time.

One of the most fundamental challenges IP enforcement in China faces is that there is state by law instead of state of law. The law is used to achieve government policies, instead that government policies are used to apply the law. Therefore the administrative route of enforcement is preferred by the Chinese government, so that the judicial enforcement route has still to be developed more fully.

How to implement the national IP strategy?

Annually China comes up with action plans on the enforcement of IPR which have to implement the national IP strategy. March of this year China launched the Action plan on IPR protection 2008 [14]. It deploys 280 detailed measures and announced 16 massive campaigns to fight IP piracy and infringement. Every year these campaigns get names such as ‘Fight Piracy Every Day’, ‘Zero Counterfeiting in Ten Thousand Shops of One Hundred Cities’ and ‘Special Operation Thunderstorm’ on patent protection.

Action Plan 2007 [15] also launched this kind of campaigns with imaginative names and so did Action Plan 2006 [16, 17] Are these massive, temporal, top-down initiated campaigns effective? They might draw attention to the case of IPR protection and enforcement and educate the public at large. However, temporal campaigns that crackdown on piracy and infringement fight the symptoms, but do not seem to solve the fundamental extra-judicial problems of IPR enforcement in China [18].

On a positive note Action Plan 2008 [19] shows that it takes the coordination of criminal cases between administrative authorities and the PBS very serious. Another good omen is that it states that “the People’s courts in central and western parts of China where IPR cases have serious quality problems and the legal team relatively weak” need targeted supervision, inspection and training [20]. This is a probably a good way to fight the prevalent legal protectionism [21]. Other good news in Action Plan 2008 is that China wants to do special research to build a trade secret system and come up with a judicial interpretation about trade secrets [22].

Well who knows, maybe we can “greet the spring of IP cause” soon, as Tian Lipu, SIPO’s commissioner, put it so optimistically and poetically at the beginning of this year [23].

Notes and links:

[1] - National Intellectual Property Strategy issued by the State Council of the People’s Republic of China on June 5, 2008, available at http://www.law-now.com/law-now/sys/getpdf.htm?pdf=outlineofthenationalintellectualpropertystrategy1.pdf.

[2] - ‘Full manuscript of The Times interview with Wen Jiabao’ during his visit to the ASEM, in Helsinki, Finland, The Austalian, September 6, 2006.

[3] - ‘Compendium of China National Intellectual Property Strategy issued’, Intellectual Property Protection in China, SIPO.gov.cn, June 6, 2008, available at http://english.ipr.gov.cn/ipr/en/info/Article.jsp?a_no=214475&col_no=925&dir=200806.

[4] - ‘IP Strategies and Innovation Intellectual Property and New Technologies Division’, WIPO, updated until January 2007, available at http://www.wipo.int/ip-development/en/strategies/national_ip_strategies.html#what.

[5] - Daniel J. Gervais, ‘The TRIPS Agreement and the changing landscape of international intellectual property’, Chaper 3 of Intellectual Property and TRIPs Compliance in China, Edward Elgar, 2007, pg. 65.

[6] - Peter Ollier, ‘China releases national IP strategy, Managing Intellectual Property, June 13, 2008, available at http://www.managingip.com/Article/1945806/China-releases-National-IP-Strategy.html.

[7] - ‘China is developing new standard to own IP’, IP Dragon, February 22, 2006, available at http://ipdragon.blogspot.com/2006/02/china-is-developing-new-standard-to.html.

[8] - ‘China develops own RFID standard to own IPR’, IP Dragon, March 14, 2006, available at http://ipdragon.blogspot.com/2006/03/china-develops-new-rfid-standard-to.html.

[9] - ‘China’s wish to circumvent 3G royalties has its price’, IP Dragon, June 20, 2007, available at http://ipdragon.blogspot.com/2007/06/chinas-wish-to-circumvent-3g-royalties.html.

[10] - ‘Patent quality in China: “You could patent a wheel”, July 3, 2008, IP Dragon, available at http://ipdragon.blogspot.com/2008/07/patent-quality-in-china-you-could.html.

[11] - ‘What has Labour Contract Law in China to do with IP?”, November 15, 2007, IP Dragon, available athttp://ipdragon.blogspot.com/2007/11/what-has-labour-contract-law-in-china.html.

[12] - Danny Friedmann, ‘Paper Tiger or Roaring Dragon, China’s TRIPs Implementations and Enforcement’, July 10, 2007, pg. 98, available at http://www.nfprojects.nl/ipdragon/Paper_Tiger_or_Roaring_Dragon.pdf.

[13] - Data key on road to IPR transparency, IP Dragon, December 19, 2007, available at http://ipdragon.blogspot.com/2007/12/data-key-on-road-to-ipr-transparency.html.

[14] - Action Plan on IPR protection 2008, March 18, 2008, available at http://english.ipr.gov.cn/ipr/en/info/Article.jsp?a_no=197210&col_no=925&dir=200804.

[15] - Action Plan on IPR protection 2007, April 6, 2007, available at http://zgb.mofcom.gov.cn/aarticle/az/k/200704/20070404541058.html.

[16] - Action Plan 2006 on IPR Protection – I, available at http://sbj.saic.gov.cn/english/show.asp?id=460&bm=sbyw.

[17] - Action Plan 2006 on IPR Protection – II available at http://sbj.saic.gov.cn/english/show.asp?id=461&bm=sbyw.

[18] - Friedmann, see note 11, pg. 58.

[19] - Action Plan on IPR protection 2008, Chapter IV Institution Building, paragraphs I (3) and III (1), (3) and (4), see note 13. 

[20] - Action Plan on IPR protection 2008, Chapter VI Training and Education (II)(13), see note 13.

[21] - Friedmann, see note 11, pg. 69.

[22] - Action Plan on IPR protection 2008, Chapter X (I)(V)(1) and Chapter VII (X)(I)(2), see note 13.

[23] - Tian Lipu, ‘To Greet the Spring of IP Cause’, 2008 New Year Address, SIPO, January 3, 2008, available at http://www.sipo.gov.cn/sipo_English/about/commissioner/200801/t20080103_229110.htm.

The participants all came from Contract and Commercial Management backgrounds, and so the discussion Duncan planned focused on five stages of commercial relationships and picked out a few IP issues at each stage :

1. Early discussions

Don’t rush into signing NDA’s. Sometimes it’s better not to, particularly if you may end up receiving information that you already have, or being bound not to compete with something you already knew about. Instead, fully understand the meets and bounds of what you can say and speak to these.

2. More detailed discussions / due diligence

Now may be the time for an NDA. Also, consider using the ‘6Ts’ framework to understand your own and the other party’s intellectual property positions. The 6T’s are: type of IP, territory, time (until expiry), terminated (status), technical scope, true monopoly (validity). You can read more about the 6T’s in our earlier articles:

- Analysing IP - put simply

- IP Due Diligence - put simply™ - with the 6 T’s™ framework

- IP freedom to operate put simply™, with the 6T’s™ framework

3. Formation of an agreement

Here you may be negotiating an agreement, and the usual terms need to be considered. (Readers will be familiar with these, but they include: ownership of current and future IP, cross licences, exclusivitiy, enforcement, warranties, indemnities, infringements, etc.)

On the infringements front, be aware that sometimes third parties may be brought into litigation. Two examples are sponsored links (eg. Google Adwords ) and third party sale of infringing product (eg. eBay’s litigation against Tiffany – eBay was held not liable in the US, but liable in France for providing the platform on which resold originals as well as counterfeit products were sold.)

4. Ongoing relationship

You need to have processes in place to properly run the IP side of things, some examples are capturing new IP, detecting and acting on infringements, and dealing with infringement suits aimed against you. A good example is how to deal with non practicing entities (‘trolls’) – what role will each entity take, and how will this be dealt with?

5. Termination

The agreement ends, but this isn’t the end of your relationship. You may have ongoing confidentiality obligations, confidential information may need to be returned, one party may need to continue to allow access to inventors to sign documents, etc.

6. New deal?

Sometimes new arrangements are forged from existing ones. When this happens, you obviously need to pick where to enter the above flow. Usually somewhere between due diligence and formation of an agreement. Don’t forget to ensure that the intellectual property issues are dealt with fully, even though you have an existing relationship.

Finally, there were some great questions on the call (and thanks again everyone for those). Here’s a quick summary of some of them:

- patent reform in Europe and the US and impact on patent ‘trolls’ (amongst other things, I suggested that the ‘troll’ problem would be largely dampened if winning parties in IP disputes in the US were able to seek some of the attorney’s costs from the losing party. This is standard practice in many jurisdictions.

- the status of intellectual property in China and where to from here (it’s not as bad as people say – you can get a patent infringement judgment faster and cheaper than just about anywhere else, enforcing it against ‘phoeni&xrsquo; companies can be difficult)

- Eastern vs Western philosphilies on IP and what this means for the fuure. (I don’t think that there is a discernable ‘East’ vs ‘West’ anymore. However, there are some cultural differences in the way property rights are viewed. I think there is a growing (and often overlooked, at least by attorneys) movement in ‘open innovation’ and that this is only going to become more important over time.)

- Jurisdictional differences in the way IP is handled. (India vs China, vs Germany, vs US, etc.)

- Is intellectual property law progressing along the road to harmonisation? (Yes, but slowly – look at Europe for an example of the long periods of time that are required. Look at the DSS v European Central Bank patent litigation for an example of how the same patent claims and the same law can be interpreted differently in different countries, partly due to procedural issues, evidence that can be led, etc, etc.

Finally, you might want to take a look at our scorecards to track intellectual property strategy as it unfolds. Here’s a list:

Acacia Technologies Group

Accupril (Quinapril)

Altace / Tritace / Ramace (Ramipril)

Appellate Courts

Apple

Budweiser

Colour trade marks

Compulsory Licenses

Document Security Systems v European Central Bank

Fujitsu

Gleevec / Glivec (Imatinib)

Google

Hewlett Packard - HP

IBM

Lexapro / Cipralex - (Escitalopram)

LG Group

Lipitor (Atorvastatin)

Microsoft

Monsanto

Nexium (Esomeprazole)

Norvasc (Amlodipine)

Paid Keywords for someone else's brand

Perindopril (Coversyl)

Plavix (Clopidogrel)

Rambus

Samsung

Shape or 3 Dimensional Trade Marks

Sony

Tarceva (Erlotinib)

Time Warner

Wal-Mart

Yahoo!

Zyprexa (Olanzapine)

When Google launched its AdWords advertising programme in 2003, keyword-linked advertising seemed to herald the future of online advertising. If only it didn’t infringe brand owners’ IP Rights in the process, says Duncan Bucknell

It all seemed to make perfect sense. Companies looking to ensure their details appeared at the top of a web search results page simply had to purchase ‘pay-per-click’ advertising banners that linked to particular industry-specific search terms. So, for example, if a consumer was looking to find ‘trademark counsel’, the law firm that had sponsored those keywords with a search engine provider, such as Google or Yahoo!, would appear next to the actual search results. It sounds no different from selecting the appropriate keyword terms as website metatags for your own website. That is, after all, how search engines work.

And yet the potential for IP infringement has proved immense, as businesses looking to cash in on their competitors’ goodwill have taken to purchasing trademark-protected terms (for example, the brand or product names of their competitors) as part of their sponsored keyword triggers in order to divert some of the potential customers of their competitors to their own websites. Worse still, say brand owners, Google and its peers have chosen to turn a blind eye.

Trademark owners have started to protest, filing lawsuits claiming trademark infringement, unfair competition, and trademark dilution. To date, Google, AOL’s Netscape search engine, Yahoo! and Excite have all been sued for keyword infringement, with mixed results. Most jurisdictions are clear that trademark infringement exists if a company uses another company’s trademarks as metatags on its own website, but they are divided as to whether the use of trademarks in keyword-linked advertising is trademark infringement or simply a fair means of competition.

France has already ruled that in ‘some’ circumstances it does count as infringement, but UK courts have found the opposite to be true: in their minds the sponsored ads are clearly labelled as such, so the potential for consumer confusion (necessary to prove the common law tort of passing off) has been adequately reduced.
Google, for its part, argues that one of the critical steps in effective advertising is placing the ad where interested consumers may see it. It is not to blame, it suggests, if companies nominate the brand names of their competitors as search terms: ‘As a provider of space for advertisements, we cannot arbitrate trademark disputes between advertisers and trademark owners... We encourage trademark owners to resolve their disputes directly with our advertisers, particularly because the advertisers may have similar advertisements on other sites.’

It has good reason to fight its corner: Google receives the majority of its revenue through pay-per-click keyword advertising. Prior to 2004, it denied advertisers the ability to link their ads to the trademarks of others; however, it modified its ad-linking policy in January 2007 to allow advertisers to bid on the chance to have their ads associated with any keyword, even if those keywords were trademarks owned by a competitor. That is not to say that Google is allowing unbridled use of trademarks, as the company still ‘reviews trademark complaints that relate to the content of the keyword ads, just not the keywords purchased to trigger the ads’. But that is small comfort to brand owners.

• Be committed in the protection and enforcement of your most valuable property: your intellectual property rights.

• Budget enough financial means to protect and enforce your intellectual property rights.

• Raise the awareness in your whole organisation about the risks of intellectual property infringements in China.

One of the clichés about doing business in China is the importance of guanxi (relationships). Indeed, guanxi are very important in China, however, one should by no means overlook the phase before one enters into a relationship.

• Do a due diligence research of your potential business partners. Were they in any way involved in an intellectual property infringement before?

• Demand that potential business partners sign an confidentiality agreement before you hand over any sensitive business information.

• Set up a contract that includes all aspects of intellectual property rights. Who owns what intellectual property right? In what way can the business partner use the intellectual property rights? What is the time frame he can use these? Spell out that you can visit the plant unexpectedly to control how your intellectual property is used. If a potential business partner refuses to sign the contract, find another business partner.

No registration equals no right

If you do not register your intellectual property rights (with the exception of copyrights) in China, you are unprotected and it makes it near impossible to stop counterfeiters. 

• Although with copyright there is no registration needed, according to the 'no formalities provision' of the Berne Convention to which China is a signatory, it can be very helpful to establish prima face evidence, for example ownership. So do register your copyright at the National Copyright Authority of China.

• Register your trade marks in Chinese characters too. If you want to register the phonetic equivalence of your Western name, it is possible you need different sets of Chinese characters, because Chinese characters are pronounced differently in different Chinese dialects, such as Cantonese. Make sure the Chinese characters have a laudatory meaning appropriate for your brand.

• Register your patents, utility models and design rights. In China designs are, together with inventions and utility models, part of the so called inventions-creations, which are protected by the Patent Law of China..

• Know who has access to your plant, to your intellectual property rights.

• Use and combine several anti-counterfeit technologies.

• If there are counterfeit products, track the origin, gather the evidence.

In case of an intellectual property infringement act in an optimal way. Different situations ask for different enforcement routes. Timing is important too. Strike the infringers at a moment when they have added maximum value to their infringed products, because of packaging and transport, in order to hit them hardest financially. 

• In China the administrative enforcement route is the most commonly used. The Administration for Industry and Commerce (AIC) enforces trade marks, the State Intellectual property Organisation (SIPO) enforces patents, utility models and design rights and the National Copyright Administration of China (NCAC) enforces copyrights. Apart from the enforcement of patents, SIPO is responsible for the patent work throughout the country. At the national level SIPO is also responsible for the examination of foreign and domestic patents (Patent Re-examination Board). The Trademark Office (TMO) is responsible for the registration of trade marks and the Trademark Review and Adjudication Board (TRAB), which deals with trade mark disputes, are both under the control of AIC.

• The advantage of the administrative enforcement route is that it is an easy and a cost efficient way. The disadvantage is that no damages are awarded and that the punishment is often limited to the confiscation of the infringing goods and/or a fine for the infringers. And often the infringers use another company as vehicle to continue their infringements.

• Customs is one of the underestimated routes of enforcement. The Chinese customs authorities are willing and able to cooperate with intellectual property right holders. So instruct them on how to recognise genuine from infringing goods and how to track down infringing cargo.

• A lesser known way for trade mark and design rights holders is to base their case on infringements of the Product Quality Law at the Administration of Quality Supervision Inspection and Quarantine.

Civil enforcement route

• If the complexity of the infringement is high and the scale serious, then going to the People’s courts is the preferred route of enforcement.

• The advantage is that the People’s courts can award damages. Disadvantage is that this route is often time-consuming and costly.

• Legal protectionism can be a problem outside the big cities, such as Beijing, Shanghai and Shenzhen, which makes forum shopping of crucial importance.

• Alot is expected from the criminal enforcement route in China, because of the alleged deterrent effect.

• The advantage is that you can harm infringers by locking them up or punish them with serious fines. However, the disadvantage is that there are relatively high evidentiary thresholds before alleged criminal infringers are prosecuted.

• Quality Brands Protection Committee (QBPC) http://www.qbpc.org.cn/, lobby group of 180 multinational companies that want to improve the protection and enforcement of intellectual property in China.

• Business Action to Stop Counterfeiting and Piracy (BASCP) http://www.iccwbo.org/bascap/id1127/index.html address intellectual property rights issues and petition for greater commitments by local, national and international officials in the enforcement and protection of intellectual property rights.

• Intellectual Property Owners Association http://www.ipo.org//AM/Template.cfm?Section=Home trade association for owners of patents, trademarks, copyrights and trade secrets.

• International Trademark Association http://www.inta.org/ association of more than 5,500 trade mark owners.

• American Chamber of Commerce in China http://www.amcham-china.org.cn/amcham/home/index.php.

• European Union Chamber of Commerce in China http://www.euccc.com.cn.

• British Chamber of Commerce in China http://www.britcham.org/index.php.

• Australian Chamber of Commerce in China http://austcham.org/index.html.

• Intellectual Property Protection in China http://english.ipr.gov.cn/en/index.shtml, official website about the activities of the Chinese government to improve protection and enforcement of intellectual property in China.
  

• IP Dragon http://ipdragon.blogspot.com, weblog by Danny Friedmann. Gathering, commenting on and sharing information about intellectual property to make it more transparent, since 2005.
  

• China Law Blog http://www.chinalawblog.com weblog by Daniel Harris has often interesting articles about IPR in China.
  

• China Hearsay http://www.chinahearsay.com weblog by Stan Abrams, has often interesting posts about IPR in China.

Prevent as much infringement as possible, protect your intellectual property rights assertive, anticipate that infringements will still happen, enforce your rights aggressively. In other words build a fierce reputation that no one can infringe the intellectual property rights of your company without feeling the consequences.

The Glivec battle in India

Novartis’s ongoing stoush with the Madras High Court in India created quite a stir on the world stage late last year. It concerns the patentability of the Beta crystalline form of Imatinib, the active pharmaceutical ingredient in the blockbuster drug Glivec (Gleevec). (For those who are unaware, polymorphs are the various crystal forms of a material.)

The case derives from substantial changes to the Indian Patent Act made in 2005 and focuses on section 3(d) which bars from patentability certain types of patents which have traditionally been quite useful to innovator companies. The section reads:

'The following are not inventions within the meaning of this Act,
...
‘the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.'

The case is currently mired in side issues about the constitutionality of the section and the proper composition of the Appeals Board which was to hear the appeal from the original patent office decision. Please read our August 2007 article for further background on the case.

International ramifications

One of the allegations that has been made by Novartis is that India’s section 3(d) does not comply with TRIPS. The contrary argument (much propounded by Shamnad Basheer over at SpicyIP) is that it does, as it is merely an obviousness standard that member states are free to define in a manner consistent with their national policy.

The controversy has become even more acute since a number of other Asian countries have apparently foreshadowed that they will enact provisions similar to India’s 3(d). These include the Philippines, Maldives, Pakistan, Sri Lanka, Vietnam, Indonesia, Malaysia and Bangladesh.

So how are things looking in other jurisdictions?

A mixed bag...

United Kingdom criticises ‘try on’ patents

On 9 May 2008, the UK Court of Appeal handed down its decision in the Perindopril (Coversyl) beta polymorph patent case. In essence, the patent was held to be obvious in light of a prior patent owned by the innovator (Servier) which disclosed an almost identical process to that required to form the beta polymorph.

The Judges were quite critical of the use of this patent to attempt to extend the monopoly period – saying that it was “invalid, and very plainly so’ and ‘It is the sort of patent which can give the patent system a bad name.’

Filing the beta polymorph patent was not the only thing that Servier has done to reinforce their IP position for the drug – they acquired to groups of synthetic process patents from Lupin in April and then October 2007 to add to their portfolio.

Australia – perindopril opposition dismissed, but what does it mean?

The same patent was the subject of an Opposition in Australia which was dismissed on 11 April this year. This doesn’t mean that the Australian Patent Office thinks such patents are automatically valid, only that the grounds on which the opposition was run – that the amendment itself was bad – were insufficient.

United States – Detrol application by Hetero...

The issue of polymorph patentability is yet to be litigated at the CAFC, but the USPTO seems to still be content to issue polymorph patent claims. The latest that I am aware of is Hetero’s tolterodine tartrate (Detrol) polymorph patent application – US 20050131067, which has been allowed with a claim 1 that reads:

1. A crystalline tolterodine tartrate form 1, characterized by an x-ray powder diffraction spectrum having peaks expressed as 2 theta at about 11.9, 13.6, 14.2, 15.9, 16.9, 18.4, 18.8, 20.4, 22.0, 23.9, 25.4, 26.3 and 29.8 degrees.

Whether a District court, or the CAFC would uphold such a claim is a different matter altogether, particularly in light of the greater invalidity risk created by the US Supreme Court in the KSR v Teleflex decision on 30 April 2007. (KSR basically made it easier to invalidate patents on the ground of obviousness.)

Strategic options

For innovators, each of these cases obviously serves as a roadmap as to what you can expect in these respective jurisdictions. Careful attention to developments, and proactive steps will obviously be crucial. You may, for example decide that it is worthwhile to seek amendments well before the time when you are currently expecting generic competition, and you will certainly need to reconsider the drafting and prosecution strategy for these patents.

Generic companies will obviously take heart from some of these developments. However, you should not assume that just because a polymorph patent has been invalidated in one jurisdiction that another will in the same jurisdiction, or that even the equivalent patent will be invalidated in a different jurisdiction. Instead, focus on understanding the underlying rationale for invalidation and deeply analyse the ways that this can be used in the jurisdictions of interest to you.

In the Australian context (for this conference)...

As I wrote in my August 2007 article in IAM Magazine, even at the best of times, Australia is a difficult place to invalidate a patent based on obviousness. As mentioned in the article, this is due to the very narrow prior art base on which obviousness is tested there. Consequently, the mere fact that a particular patent has been invalidated in another country based on obviousness does not mean that this will automatically happen in any other country, and least of all in Australia. You will need to take a very careful look at the prior art used and whether it can be fitted into the narrow category of relevant prior art under the Australian test.

On the innovator side of the equation, I would be considering co-filing an Innovation patent (which is even harder to invalidate) which will at least provide 8 years of stronger protection.

Here is a great article on patent quality from Sara-Jayne Adams at IAM-Magazine - Quality is the key to a bright patent future.

Sara-Jayne interviewed the following people for the article:

• Jonathan Barney, Managing Director of Ocean Tomo
• Alison Brimelow, President of the European Patent Office
• John Dudas, UNder Secretary of Commerce for Intellectual Property and Director of the USPTO
• Douglas Clark, Managing Partner, Lovells, Shanghai, China
• Carl Horton, Chief IP Counse, General Electric Co
• Tom Ewing, IP Value Added Consultant
• Horacio Gutuerrez, Vice President & Deputy General Counsel, IP & Licensing, Microsoft
• Masanobu Katoh, Corporate VP and President, Law & IP, Fujitsu
• Lisa Kellberg, Corporate VP and Head of Corporate Patents, Novo Nordisk
• Judge Pauline Newman, Judge of the United States Court of Appeals of the Federal Circuit
• Sherry Knowles, Senior VP, Corpoate IP, GlaxoSmithKline
• Chris Mercer, Presidento of the EPI
• Stephen Potter, Director and immediate past chair of the R&D Society (UK)
• Manny Schecter, Associate General Counsel, IP Law IBM
• Peter Spours, Director IP Transactions & Strategy, TomTom
• Marian Underweiser, IP Law Counsel, IP Law Strategy & Policy, IBM
  
• Margareta Ydreskog, Group Patent Manager, Corporate Strategy & Business Development, Saab

Two recent books have done patent agents and patent attorneys and their trainees a great favour by making substantial contributions to the body of recorded knowledge on the subject of patent drafting. Paul Cole’s ‘Fundamentals of Patent Drafting’ published by CIPA, will surely go down in history as one of those legendary works and a ‘must-have’ for every patent agent or patent attorney’s library. Similarly, Gwilym Roberts’ book, “A Practical Guide to Drafting Patents” published in Sweet & Maxwell’s EIPR Practice Series, is an extremely practical guide for those wishing to learn more about this black art.

Read the full article, available for download at Oxford University Press' Journal of Intellectual Property & Practice.

Search the internet for “Jeremy Phillips” and you will find out that he is an intellectual property consultant; author, lecturer and commentator on patents, trade marks, copyrights and most contemporary issues involving intellectual property rights. Those who don’t know him would very quickly get the strong impression that he’s been fairly busy in the world of IP during his 50-something years on the planet.

And they would be right: while Jeremy is based in London, his influence extends much further due to his roles in creating, editing and writing for IP magazines and journals, as well as blogging. He is well known as a “founding co-blogmeister” and current blog team member on the award-winning IPKat intellectual property weblog. Not satisfied with that, he has more recently created blogs focusing on European trade marks (Class 46), African IP (Afro-IP) and the interface between IP and monetary matters (IP Finance). It’s frankly surprising that Jeremy has not yet been inducted into the IP Hall of fame, but no doubt that will happen this year.

Duncan: OK, so Jeremy, I’ve often wondered - if you hadn’t been an IP lawyer what would you have been?

Jeremy: er .. I’m not actually an IP lawyer. It’s just that everyone thinks I am. I’ve never held any professional qualification for any job I’ve ever done in my entire career. I would have been a teacher, though. I love teaching and spent the first 11 years of my gainfully employed life in doing just that. But I couldn’t pay the bills …

Duncan: Right, with all due respect to my fellow lawyers and patent and trade marks attorneys, that probably explains why you have been so successful. I know (and have met) a lot of people who have been heavily influenced by you. I’m always delighted to meet one of your former students. Who would you say has been the greatest influence in your IP work and why?

Jeremy: In the Ethics of the Fathers Ben Zoma is quoted as saying “Who is the wise man? He who learns from all men”. I’ve tried to implement that from the start, which means I’ve been influenced by my teachers, colleagues, students, rivals, friends and foes alike.

Duncan. So, getting down to brass tacks - what would you say is the one intellectual property issue that you think successful companies must do incredibly well?

Jeremy: They treat their problems as business problems rather than as legal problems. Many lookalikes and inexact copiers are a distraction that can be swept aside by better marketing policy, rather than by suing them.

Duncan: Why?

Jeremy: It’s because they use their resources to best effect. For example, marketing heads, R&D chiefs, finance and HR are all better at doing their own jobs than in having interminable meetings with lawyers, reading and re-reading witness statements that had to be written for them, hanging around in court, arguing over which bit of the corporate budget the cost of litigating comes out of and delegating their real jobs to others while this all goes on.

Duncan: Another important emerging issue is that some say that IP will gradually be taken over by open source and creative commons, which are based on shared benefits rather than monopolies – do you agree?

Jeremy: Cooperation and easy access has happened in several areas: blanket licensing of copyright, FRAND licensing of technological standards. But there are areas where it is simply inappropriate and will always remain so. One is branding, another is know-how licensing.

Duncan: Can you expand on this?

Jeremy: Let’s take branding as an example. Branding (including business format franchising) depends on functions such as quality control, which are inherently exclusionary. If a fashion house licenses the manufacture of watches bearing its brand, an open source model or collective commons model deprives it of the effective power to control the manner in which licensees make those watches, thus risking fatal damage to the exclusive or quality-laden ethos of the brand that makes people want to take a license to it in the first place.

Duncan: One last burning question - if you could change one thing in the world of IP what would it be?

Jeremy: I’d make all IP investment far more tax-friendly. IP exploitation generates so much in terms of corporation tax, VAT and so on. It creates, stimulates and continually nourishes markets. Anyone investing in the development of IP rights, or the acquisition of an IP portfolio, should be given positive inducements to make it more worthwhile.

Duncan: OK, this really is the last question, how can the IP community best influence governments to this end?

Jeremy: I don’t think the IP community can influence governments at all, because we’re not a single focused community but a complex interrelationship of symbiotic relations. While we see ourselves as a community, the businesses and industries that are based on IP - and which depend on our advice - do not. And they’re often in total conflict with one another. Thus retail chains and independent brand manufacturers are both dependent on IP but their interests are quite different. So too with hardware and software manufacturers, music performers and the music distribution industry. The list is a long one.

Duncan: Thanks so much, as always, Jeremy for your insight.

If you’re unaware of Jeremy’s work, then I recommend visiting his website http://jeremyphillips.blogspot.com/.

I also highly recommend his four blogs: IPKat , Class 46, Afro-IP and IP Finance.

In essence, in a long-awaited decision, the Australian High Court reviewed several key questions pertaining to patent validity and inventive step in particular. In so doing, it has made it harder to invalidate Australian patents.

Abstract, full text, pdf version

"Observational evidence from all continents and most oceans shows that many natural systems are being affected by regional climate changes, particularly temperature increases.

A global assessment of data since 1970 has shown that it is likely that anthropogenic (human made) warming has had a discernible influence on many physical and biological systems."

These excerpts from the Climate Change 2007 report by the Intergovernmental Panel on Climate Change (IPCC) add to the body of evidence that the climate is changing and human activity has contributed.

Whether you agree with the evidence or not, it is certain that there has been a global shift in thinking. In the intellectual property space, there have recently calls for a change in strategy, and proposals for new laws covering innovation and intellectual property for green technology.

Globally populations are looking for ways to reduce pollution and be more resource efficient.

People are keen to adopt (and will need) new technologies, products and services to meet their needs.

Just in case you've missed them, some of the predicted impacts of climate change listed in the IPCC report include;

• Water availability will increase to 10 to 40% at high latitudes and in some wet tropical areas.

• Water availability will decrease by 10 to 30% in some dry regions at mid latitudes and in the dry tropics.

• More areas affected by drought.

• Increased risk of flood

• Changes to ecosystems due to wildfire, the ocean becoming more acidic, flooding and drought.

• Globally food production is predicted to increase with warming of 1 to 30C but above this it will decrease.

• Health effects including increased frequency of cardio-respiratory diseases due to higher concentrations of ground level ozone, increased diarrhoeal disease, increases in malnutrition and consequent disorders, and increased deaths, disease and injury due to heat waves, floods, storms, fires and droughts.

• Altered spatial distribution of some infectious disease vectors

It’s not all doom and gloom - the global mood of change offers plenty of opportunities. Such predictions make the development of new processes, products and technology vital to human life on Earth.

Here are some ideas on potential opportunities;

Technology that provides cleaner electricity and fuels, food packaging and storage technology for hotter climates, water efficient processes and plumbing, filtration devices for water reuse and recycling, drought resistant crops and plants, efficient cooling systems for homes, public buildings and workplaces and pharmaceuticals to deal with increases in disease.

Industries dealing in these areas may have opportunities, but of course there are many more areas. It’s limited only by your ingenuity!

So how can you work climate change into your IP strategy? Climate change should already be one of the variables built into your future business planning and hence your IP strategy.

If not;

• Consider your present and future IP, does it reflect the global shift in thinking regarding climate change?
• Is it time to rethink your branding and marketing message? Are there opportunities to capture a new or emerging market with new trade mark and other branding IP?
• Revisit past IP – an idea that’s in storage may now be economically sound.
• Use Climate Change as a springboard for a workshop on new ideas with your business team.
• Your organization may have an environmental policy, but has it filtered through to your core business or your IP Strategy?
• Does it need to?
• Can you license products in new regions eg. cooling equipment in Southern Europe (predicted to become hotter due to climate change)?
• Can you access government support for Climate Change projects or partner with research organizations?
• Are there tax breaks (or deductions) on offer for Climate Change for your company?
• Don’t forget to promote your good works - there’s marketing and public relations glory to be had as well.

With Climate Change considered as part of your IP strategy you not only save your bacon, but perhaps play a part in saving the world.

Duncan caught up with Deepak Somaya when in Washington earlier this year. Deepak is an Assistant Professor at the R. H. Smith School of Business at the University of Maryland.  (Deepak's Bio)

1. Please tell us a little about your work.

I am a professor in strategic management, so my fundamental goal is to understand how companies can be successful by employing different strategies. I am particularly interested in intellectual property strategies, as well as other managerial approaches to protect and leverage a company's intellectual assets.

It is very important to me as a researcher to ground this understanding in rigorous theoretical models that can then be tested with real-world data. This gives the research findings and conclusions a great deal of robustness and longevity, rather than it being simply someone's opinion.

2. How did you become interested in intellectual property?

I happened to be a Ph.D. student at Cal (University of California at Berkeley) at the same time as a lot of great scholars in intellectual property, which was a fabulous resource. The primary lenses used by these scholars were either law (I benefited greatly from Mark Lemley, Rob Merges, Pamela Samuelson) or economics (Bronwyn Hall, David Mowery, Suzanne Scotchmer, Carl Shapiro, Hal Varian, Brian Wright) ... I may be unintentionally omitting some people. I wanted to do something a little different ... more managerial, strategically oriented ... closer in spirit to David Teece, who was a big influence. I got an opportunity to work on a project studying international differences in patent protection, and it just went on from there.

3. Could you please tell us your current working definition for intellectual property strategy ?

To me, intellectual property strategy encompasses the top management decisions about the use of intellectual property to support business objectives.

I should clarify a little here. Sometimes the conversation about IP can easily get bogged down in the minutiae of IP law. IP strategy is only really successful if one can abstract away from some of this detail and focus on the big picture of what decisions are important, and how they matter to the company.

4. What would you say are the key lessons from businesses that have come out of your work so far?

Let me list two sets of ideas that I think are valuable. The first is to be disciplined and clear about what IP strategy one is pursuing for a given line of business. This is not a stand-alone decision. It depends on the firm's strengths and strategic goals in the business. In most cases, I think the strategy boils down to one of 3 "generic" strategies - a proprietary strategy, a defensive strategy, or a leverage strategy.

The second idea connects patent strategy and business models in industries that I call "multi-invention" industries. Essentially, these are businesses where there are lots of inventions needed to make end products, many of them patentable. Companies may just go ahead and commercialize and "worry about IP later." Sometimes, they are too obsessed with IP and don't think through their business model. In these situations, business models and IP strategy really go hand in hand. One cannot really think about one without the other. So, one needs to develop a good strategy to commercialize innovation, and simultaneously combine this with a well-crafted and compatible intellectual property strategy.

5. Where do you see the future of IP Strategy heading? (For example, I personally think that over time, open source / creative commons type systems will increasingly be demanded by consumers across all industries. There will be great rewards for those who properly prepare for this.)

In my mind, the knowledge and relationships that move when employees move is really big. This goes beyond legal IP alone. It’s in a zone where IP strategy meets strategic HR meets business strategy. I think companies will struggle with this issue for some time to come. A significant fraction of my current research is directed towards this area.

In addition, I think there is still a lot of room for better understanding and strategizing in multi-invention contexts.

This is the second in a series of articles on Pharmaceutical & Biotech Lifecycle Management, the first article looked at whether generics are launching earlier than ever.

The series comes from a pilot study I put together to test some views on the factors which affect success in the ongoing war between 'innovator' and 'generic' companies. In this article I look at how early non-innovator companies are filing patents covering a drug and the effect that this has on the period of monopoly for the drug.

Please join the discussion about this article at the equivalent blog post at IP Thinktank.

Background

The study looked at 15 of the globally top selling pharmaceutical products on the market today to identify possible trends which might explain, and potentially predict what can be done to affect the length of monopoly. Future articles will explore some of the other interesting findiings, and provide updates as more data and aspects of lifecycle management are analysed. (Raw patent filing data was supplied by the team at GenericsWeb.)

Other people are filing patents incredibly early

There's a pdf document with three slides which accompanies this article - you can find it at - http://duncanbucknell.com/articles/141/Pharmaceutical-and-Biotech-Lifecycle-Management-(II).

Slide 1 shows the time from marketing authorisation until the first non-innovator patent is filed. By 'non-innovators' or '3rd party', I mean companies other than the innovator for that particular drug.

The yellow markers each represent a different product. The X axis shows years of monopoly that the innovator has obtained in each instance while the Y axis shows the number of years away from Marketing authorisation.

The first thing to note about the slide is that the values are all negative. That's right - other people are filing patents covering a new pharmaceutical product before the innovator obtains Marketing Authorisation.

The second thing to note about Slide 1 is that there seems to be a reasonable trend upwards and to the right. In other words, the longest monopolies went to those products for which there was minimal delay between 3rd party patent filings and Marketing Authorisation. (Presumably this trend would continue above the X axis - so that a product for which there are no 3rd party patents prior to marketing authorisation would obtain a still longer monopoly - 25 years?)

Slide 2 shows the years from the priority date of the first API patent covering the molecule until the 1st non-innovator patent filing. The axes are the same as slide 1.

The clarity of the trend is less clear here - but there seems to be a suggestion that a delay in the filing of 3rd party patents enables a longer period of monopoly.

For those who have picked it up - yes there's an apparent anomoly in the graph - there are negative values - some 3rd party patents were filed before the original API patent. How could this happen? These are drugs which are second or third generation - so that earlier class-covering patents (for formulations, synthesis or medical methods) also cover the new molecule.

Slide 2 is another reminder as to why second or third generation drugs seldom have a very long period of monopoly. (Of course, they are often commercially very valuable notwithstanding this.)

Strategy
Is there a direct link between the date at which a 3rd party files a patent covering a new pharmaceutical and the years of monopoly that can be expected for that product?

Probably not.

Interestingly based on some other findings in the same study (to be discussed in a future article), it appears as though an accumulation of 3rd party patent holders (especially early on) tends to reinforce the innovator's monopoly and not detract from it. So the timing for the first 3rd party patent is not about this.

However, 3rd party patents are an indicator of the research activity being undertaken by other (usually sophisticated) entities in relation to the product. The earlier they become sophisticated about that product, the more likely they are to be able to successfully deal with any patent barriers put up to sustain a monopoly.

What to do?
Innovator companies should consider how they might delay the time until 3rd parties commence filing patents covering the new molecule. This may mean carefully (even more carefully?) screening company announcements, marketing materials, journal articles and other publications for a set period - even up to marketing authorisation. Public listing disclosure rules and the marketing department will obviously hamper the ability to do this, but my suggestion would be to at least consider it.

These findings tend to reinforce the trend by generic companies towards searching for and developing generic versions of products earlier in their lifecycle than would have been done in the past. The trick of course is to balance this against the investment required and the risk that the product will not be successful on the market. This is obviously particularly important given that the earliest patents are being filed before Marketing Authorisation.

Notes:

The distinction between 'innovator' and 'generic' companies is rapidly disappearing. Many traditional 'innovator' companies have their own generic subsidiaries, and of course will routinely allow authorized generic products. Similarly, the larger 'generic' companies are increasingly engaging in drug discovery and coming up with their own new chemical entities, and / or in-licensing products from smaller firms, etc.

This pilot study was designed to generate discussion, and so it has not been designed to be statistically bullet-proof. Consequently, you will not see R squared values on any of the lines of best fit - there are only 15 data points so far.

Iin this study, 'years of monopoly' was defined as time from first marketing authorisation in any country, until launch by a generic company in any country. (As we all know, the monopoly increases over time as marketing authorisation is granted in each country, and then decays over time as generic competitors are able to launch in new countries. So the measure used in this study is an indicator but not equivalent to the actual monopoly gained.)

You can obtain a copy of the article from the OUP website.