Thursday 31 July 2008

Monster trade mark infringement case: court reveals its thinking on calculating costs

The six separate but closely intertwined trade mark infringement actions in Boehringer Ingelheim KG v Swingward Ltd etc commenced in the previous century and were twice referred to the European Court of Justice for preliminary rulings, as well as visiting the Court of Appeal on a few occasions too. The case is by no means concluded, since the Court of Appeal awaits a ruling from the European Court of Justice in a further case, referred from Austria, before it gives its final decision.

Every party embarking upon IP litigation is well advised to examine it as a commercial proposition: what will it cost to sue or to enter a defence? what are the viable alternatives? can the money be better deployed elsewhere? But no-one was likely to predict the remarkably protracted and convoluted path taken by this action, where the total cost in terms of stress, uncertainty, they tying up of time on the part of key management figures, as well as the money, took such a toll.

Today, the parties having unsurprisingly failed to agree the costs issue, Lord Justice Jacob gave a good deal of guidance, including quite a lot of arithmetic and real figures. If you'd like to see the judgment (which is 26 paragraphs long), email me and I'll forward a copy since it's not yet on BAILII.

Former univ spin-off strikes gold

Science Business reports that Proximagen Neuroscience plc has agreed a $232 million worldwide licensing deal with Upsher-Smith Laboratories Inc. for the development and commercialisation of PRX1, a preclinical stage product for the symptomatic treatment of Parkinson’s disease. Proximagen, a spin-off from King’s College London, in 2003, was floated on the Alternative Investment Market AIM in 2005, raising £14.5 million and bringing a £1 million windfall for the university.

This provides a further case-study for the debate as to whether universities do better by keeping a tight rein on the management and exploitation of IP rights generated by research based in their institutions, or whether the flexibility and autonomy of a spin-off is better equipped to raise funds for further development and/or to agree a suitably commercial licensing structure.

Tuesday 29 July 2008

Forthcoming IP auction

The Ocean Tomo Fall Auction & Conference is to he held on 29 and 30 October at the Trump International Hotel and Chicago Cultural Center, USA. This is described as
"a full two-day event that includes a 1 1/2-day conference on cutting-edge IP issues, including "Managing IP Risk", "Buying and Selling IP", and “IP Finance” followed by the Live IP Auction ..."
If any reader of this weblog is likely to be attending the auction and would be interested in writing up a short report for us, can he or she please email me here and let me know? Further details of the event are available from Wendy Chou at 312.377.4862 or by email here.

Monday 28 July 2008

Green IP and patent insurance

Writing in the excellent Intellectual Property Watch last Friday, Itaru Nitta (Green Intellectual Property Project, Geneva, Switzerland) describes how, in its 2008 Assembly, the World Health Organization (WHO) adopted its Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property. This initiative seeks to direct global R&D and IP policy towards the problems facing impoverished nations. In her article, " Patent Insurance Scheme: Financial Resource For WHO Global IP Strategy?" she writes of a proposed Patent Insurance Scheme (also called “Green IP") which would impose
"... an extra, official fee on patent applicants and holders as a form of insurance premium, and to establish a trust fund that would defend patent rights against the risk of compulsory licence and other flexibilities increasingly justified by growing anti-patent protests, while at the same time provide a wide variety of financial assistance relating to R&D and IP for developing countries ...".
She goes on to explain:
"Since the Patent Insurance Scheme is designed to be embedded in the existing patent system, the scheme would possess a substantive and sustainable financial scale (possible annual revenue: up to several tens of billions in US dollars ...) due to continuing growth of both quantity (e.g., filing number) and quality (e.g., subject matter) in the present patent system worldwide".
Readers of this weblog are invited to read Itaru Nitta's article in full (it's not very long) and to take a look at the ideas on the Green IP website too. Without prejudice to the issue of whether the proposal has any merits, it's my feeling is that it's refreshing to see proposals of any sort that seek to build constructively on the present system by adapting it to the present economic, political and environmental challenges it faces. The big challenge will come in trying to sell something like this, which is emanating from a single-issue agency such as the WHO, to WIPO as the body that is often almost paralysed by the conflicting interests arising from the many types of rights and stake-holders involved.

Friday 25 July 2008

India's Copyright Board given royalty-fixing powers

In a recent decision India's Supreme Court has increased the powers of the Copyright Board, ruling that the Board is entitled not only to grant compulsory licences but also to decide on royalty rates. The rates in question are those payable by radio stations for the use of music, these usually being negotiated with the copyright collecting societies. In this instance, however, Phonographic Licence Ltd was seeking a substantial increase in royalties received, to the alarm of the broadcasters. The Board's decision to grant a licence was appealed the Supreme Court on 1 6May 2008.

While affirming that the Board has the power to establish royalty rates, the Court has also said that the Board should consider whether to order that royalties be payable at a fixed rate or on a revenue basis. In doing so, the Board must take into account the interests of copyright owners and the general public [source: note by Merry Pariyaram, ALMT Legal, Mumbai, writing in World Media Law Report].

It seems to me that, as time progresses, the connection between the IP rights owner and the establishment of a royalty rate grows increasingly tenuous. Originally the rights owner would have established the royalty rate himself; next, it is passed to a collecting society; then it is taken from the collecting society and given to the Board (or Copyright Tribunal). In Europe this in turn may be subject to the final word from the Commission and ultimately the European Court of Justice.

Thursday 24 July 2008

NMMU's tech transfer office bears fruit at 14 months

This week's Tech Transfer E-News reports that the Nelson Mandela Metropolitan University (NMMU), Port Elizabeth (South Africa), has reached an agreement with investment partner Afrepell to commercialize a range of insect repellent products developed by the school's Institute of Chemical Technology, InnoVention. The deal marks a significant milestone for NMMU, being the first commercial agreement which is based on its own researchers' IP, coming about 14 months after it launched a tech transfer office.

The technology relates to a patented insecticide, RepelloX, which is reported to have several advantages over existing products. Afrepell and the university will enter into a joint venture to manufacture, sell and license RepelloX. The company already has agreements with distributors in the UK and the US. Retail products incorporating RepelloX should be available internationally in 2009. For more information click here

The significant thing here is that NMMU have had to keep their tech transfer office staffed and maintained for over a year before seeing any fruits of its labours. In many academic institutions there is a danger that tech transfer and industrial liaison offices have to compete for funding with many other causes -- teaching and residential facilities, infrastructure, marketing of existing programmes and development of new ones. Public funding also can be difficult to secure on a regular basis. NMMU has done well to persist with its tech transfer office; it is hoped that, with a stream of income from RepelloX, it will be able to continue and grow its wealth-generating licensing activities.

Wednesday 23 July 2008

Lost profits of a patent owner's subsidiary: can they be recovered?

I've just picked up this item on Lexology: it's a note ("Parent company denied recovery for lost profits of subsidiary") by Philip C. Canelli, from the New York office of McDermott Will & Emery. This note explains the reasoning of the US Court of Appeals for the Federal Circuit in upholding a summary judgment in Mars, Inc. v. Coin Acceptors, Inc.,Case No. 07-1409,-1436 in which a patent infringement claim for damages in respect of a subsidiary's lost profits was dismissed (pdf of full 26-page decision here).

Mars claimed, as long ago as January 1990, that certain products made by Coin Acceptors infringed its coin authentication patents. Coin Acceptors was found to have infringed and was ordered to pay a reasonable royalty of 7 percent from 1996 till the expiry of the last Mars patent in 2003. The court however refused to allow Mars to recover profits lost by its former subsidiary/non-exclusive licensee Mars Electronics International, Inc. since that company lacked standing to seek damages in its own right.

On the issue of lost profits the Federal Circuit, noting that Mars did not make or sell any of the patented machines and that its subsidiary paid it on a straight per-use basis rather than on the basis of any profits, found that its profits did not flow inexorably to Mars.

The Federal Circuit also upheld the 7 percent reasonable royalty rate even though it was higher than the cost that Coin Acceptors would have incurred if it had used non-infringing alternatives. This is because reasonable royalty damages are not capped at the cost of implementing the cheapest available, acceptable, non-infringing alternative.

The notion that a subsidiary's loss of profits cannot be recovered unless it flowed inexorably from licensee to licensor would seem broadly analogous to the position in the UK after Gerber Garments v Lectra, in which the Court of Appeal appeared to require a clear causative link between the infringement and the subsidiary's loss.

Tuesday 22 July 2008

European Commission undermines copyright assumptions

According to the European Commission's press release IP/08/1165 last week, the European Commission is ordering 24 European copyright collecting societies to stop restricting competition by limiting their ability to offer their services to authors and commercial users outside their domestic territory, while still letting them keep (i) their current system of bilateral agreements and (ii) their right to set levels of royalty payments due within their domestic territory. Says the press statement,

"The prohibited practices consist of clauses in the reciprocal representation agreements concluded by members of CISAC (the "International Confederation of Societies of Authors and Composers") as well as other concerted practices between those collecting societies. The practices infringe rules on restrictive business practices (Article 81 of the EC Treaty and Article 53 of the EEA Agreement). The Commission decision requires the collecting societies to end these infringements by modifying their agreements and practices, but does not impose fines. The removal of these restrictions will allow authors to choose which collecting society manages their copyright (e.g. on the basis of quality of service, efficiency of collection and level of management fees deducted). It will also make it easier for users to obtain licences for broadcasting music over the internet, by cable and by satellite in several countries from a single collection society of their choice.

Competition Commissioner Neelie Kroes said: "This decision will benefit cultural diversity by encouraging collecting societies to offer composers and lyricists a better deal in terms of collecting the money to which they are entitled. It will also facilitate the development of satellite, cable and internet broadcasting, giving listeners more choice and giving authors more potential revenue. However, the Commission has been careful to ensure that the benefits of the collective rights management system are not put into question in terms of levels of royalties for authors and available music repertoire."

Music authors (lyricists and composers) sign over to collecting societies the rights to manage on their behalf, worldwide, the copyright of their musical works. Based on the CISAC model contract, collecting societies have concluded reciprocal representation agreements for the collective management of the public performance rights of their musical works so that they can each offer the repertoire of all the artists represented by all the collecting societies participating in the representation agreements. The public performance rights enable authors of musical works to authorise or prohibit the exploitation of their works by commercial users such as TV channels and radio stations, and to receive royalties every time their music is played.
The Commission opened an investigation following complaints from broadcasting group RTL and Music Choice, a UK online music provider.

The Commission's decision recognises the valuable role of collecting societies and does not challenge the existence of the reciprocal representation agreements. It does, however, prohibit certain aspects of those agreements as well as concerted practices among collecting societies.

In particular the decision requires the 24 EEA-based collecting societies which are members of CISAC to no longer apply:
* the membership clause, currently applied by 23 collecting societies, that prevents an author from choosing or moving to another collecting society.
* territorial restrictions that prevent a collecting society from offering licences to commercial users outside their domestic territory. These territorial restrictions include an exclusivity clause, currently contained in the contracts of 17 EEA collecting societies, by which a collecting society authorises another collecting society to administer its repertoire on a given territory on an exclusive basis and a concerted practice among all collecting societies resulting in a strict segmentation of the market on a national basis. The effect for a commercial user such as RTL or Music Choice that wants to offer a pan-European media service is that it cannot receive a licence which covers several Member States, but has to negotiate with each individual national collecting society.

The decision will allow collecting societies to compete on the quality of their services and on the level of their administrative costs (which are deducted from the money collected before it is passed on to the author). It will thus provide incentives to collecting societies to improve their efficiency.

In 2007 the Commission sought to resolve the case amicably when formal commitments were offered by CISAC and 18 collecting societies (see IP/07/829). However, interested parties' comments on the commitments were negative. In particular, broadcasters, content providers and certain collecting societies generally considered that the proposed commitments would continue to make it difficult for a commercial user to obtain a pan-European licence.

See also MEMO/08/511".

CISAC has issued its strongly negative response to the Commission's ban in the following terms:
"CISAC regrets a recent Decision of the European Commission which targets 24 authors’ societies in the European Economic Area. The Decision concerns the reciprocal representation contracts existing between those societies for certain exploitations of musical works via the internet, satellite and cable.

The membership issue raised by the Commission has been overtaken by events a long time ago. The interests of the individual creator lie at the heart of collective administration. The principle that creators are free to join whatever society they choose is therefore already well established and widely applied by societies throughout the EEA. As for the issue of exclusivity, the EEA societies have accepted for decades that contracts between them should be based on non-exclusive arrangements.

CISAC’s main disappointment with the Decision, however, lies in the way in which the Commission has responded to the territorial delineations within societies’ reciprocal representation contracts. Whilst it is true that the Decision’s approach to territoriality will inevitably lead to a catastrophic fragmentation of repertoire and therefore to legal uncertainty for music users, it is the Commission’s assertions that the Decision is somehow in the creative community’s interest which has been of particular surprise to CISAC.

Loudly and clearly (but apparently to no avail), the creative community has told the Commission that the community remains deeply concerned about a Decision which claims to act in the name of creators but which in fact is being imposed on them against their express wishes. Time and time again, the creator has pleaded that the Commission’s proposed course of action will lead to a calamitous decline in artistic creation, cultural diversity and creators’ income.

CISAC and its members continue to count the full costs of the Commission’s decision - not just on the world’s 2.5 million creators whose interests have been jeopardised by the Commission’s stance on territoriality, but also on users".

Mindspeed sells off patents

It looks like that Orange County, Calif, based Mindspeed Technologies has found a new source of revenue stream to supplement its revenue from product sale. A press release issued on 21 July 2008 - on the same date that the company reported its 3Q fiscal results suggested that it raised USD 10 Million on the sale of non-core patents. Details of the sale are said to be confidential and no details of the patents sold were issued.

The interesting question is, of course, what patents are involved. Rob vaguely remembers seeing Mindspeed PDAs a few years ago - and his favourite patent database (DEPATISNET) suggests that Mindspeed does have (had?) a small portfolio of patent applications relating to smart telephones and the like. So - have these been sold. And to whom? It looks like we'll have to wait a few weeks to see if the assignments appear on the US PTO's database or EPOLINE.

Monday 21 July 2008

Magma - Security Class Action

There is an interesting report about a securities class action against US company Magma Design Automation on today. Magma and Synopsis had been fighting a patent infringement suit for several years when the inventor (Lucas van Ginneken) on the Magma patents admitted that he had come up with the ideas in the Magma patents whilst a Synopsis employee. Even worse, he claimed that the Magma management knew all about it. Not surprisingly Magma's stock dropped from $9.52 a share to $5.58 a share in a single day.

A number of Magma shareholders clearly did not think much of this - and filed a security class action against Magma management. Last week the judge gave preliminary approval to a payment of $13.5 million to settle the case. report note that this type of action is rare in a patent-related matter since the facts are generally known and shareholders are able to make an informed decision about whether to invest in a company - even if patent suits are pending. What made this case so unique (and the shareholder soooo angry) was the statement by the inventor that Senior Management clearly knew what was going on.

Trade mark auction resolves judicial dispute

Writing on the Class 46 European trade mark weblog, Ignacio Marqués describes a recent Spanish trade mark auction that was conducted by a court as a means of resolving a lengthy dispute between two joint owners of a trade mark that was a key asset of a jointly owned business. The mark, represented here, which is well known in Spain for dried fruits, fetched 7.12 million euro following bidding between the two brothers who owned the business. You can read about this auction here.

FTC approves merger -- so long as parties offer free patent licences to competitors

Susan L. Ross from Fulbright’s New York Intellectual Property & Technology Group and Daniel L. Wellington from Fulbright’s Washington, D.C. Antitrust and Competition Group report that, on July 10, 2008, the Federal Trade Commission published for public comment its proposed approval of a merger between Flow International Corporation (“Flow”) and OMAX Corporation (“OMAX”), being the largest and second-largest manufacturers of waterjet cutting systems in the United States. In order to alleviate the FTC’s concerns that the merger would substantially lessen competition, the FTC has proposed an unusual remedy: that the merged entity be required to license two key patents on a royalty-free basis to any competitor that requests a licence. The public comment period lasts until Friday 8 August 2008.

Ross and Wellington note that, while it is common for the FTC to require merging parties to license intellectual property in order to remedy perceived anticompetitive effects of the merger, it is uncommon to require licensing all comers at no charge. For example, in 2005, the FTC permitted the merger between Union Oil of California and Chevron by conditioning FTC approval on Union Oil's agreement not to enforce its patents.

Ross and Wellington observe that the proposed Order for the Flow/OMAX merger differs from earlier precedents because the licence is available (a) at no cost and (b) to any interested party that meets the definition of “Competitor.” Furthermore, unlike previous FTC matters, this proposed Order permits the licensor to retain some control over the patents, and permits the licensor to terminate the licence due to the licensee’s breach, subject to an ongoing notice and reporting obligation to the FTC.

Without embarking on an analysis of the underlying, complex issues, it is notable that the FTC is willing to take on the challenge of at least exploring possible commercial outcomes other than simply saying “no”.

Click here to view Fulbright’s briefing online and download a printable version.

This item was prepared by IP Finance team member Julian Gyngell, but posted by me.

Sunday 20 July 2008

P&G enters the music business

The New York Times reported last week that hip-hop and R&B producer Jermaine Dupri, who runs the urban music division of the Island Def Jam Music Group, is also looking for fresh talent for a new label financed by a company new to the music industry. The new player in question, surprisingly, is Procter & Gamble. According to this article, P&G
"... is part of a wave of companies getting into the music business to promote their own products, essentially becoming record labels themselves.

Procter & Gamble ... is joining Island Def Jam in a joint venture called Tag Records, a label that will sign and release albums by new hip-hop acts. It is named after a brand of body spray that P.& G. acquired when it bought Gillette.

... At a time when online file-sharing is rampant, record stores are closing and consumers are buying singles instead of albums, getting into the music business might seem like running into a burning building. But as record labels struggle to adjust to a harsh new digital reality, other companies are stepping up their involvement in music, going far beyond standard endorsement contracts and the use of songs in commercials.

These companies — like Procter & Gamble, Red Bull and Nike — are stepping outside of their core businesses to promote, finance and even distribute music themselves.

A few months ago, Bacardi announced that it would help the English electronic music duo Groove Armada pay for and promote its next release. Caress, the body-care line owned by Unilever, commissioned the Pussycat Dolls singer Nicole Scherzinger to record a version of Duran Duran’s “Rio” that it gave away on its Web site to promote its “Brazilian body wash” product. The energy drink company Red Bull is starting a label that is expected to release music before the end of the year.

And at least some of this music is credible: a hip-hop song that Nike released by Kanye West, Nas, Rakim and KRS-One was nominated for a Grammy Award for best rap performance by a duo or group.

Unlike Starbucks, which got into the music business to sell CDs at its stores, these companies want to use music to promote products they already sell.”
The article develops the theme, demonstrating a surprising twist in the tale of the search for viable business models for promoting and recording new musical works in the post-traditional copyright era. One might consider that this marks a return to patronage, but with the brand-rich IP portfolio owner replacing the church, state or nobility [Source: Miri Frankel, Beanstalk, NY].

Wednesday 16 July 2008

SA reducing incentives for intellectual property outflows

In an article for Clayton Bonnette explains how the introduction of S231 of the South African Income Tax Act seeks to squash so called "intellectual property arbitrage".

"It is not uncommon for intellectual property rights (IP) to be developed by one group company and subsequently transferred to another group company on arms length terms. The reasons for transferring IP between group companies are generally not only motivated by the possibility of reducing royalty withholding taxes. There are non-tax reasons too and these include ensuring that the continued development of the IP takes place where the necessary technical skills can be found and that the jurisdiction from which the licensing of the IP takes place is "credible". The "credibility" of the jurisdiction not only facilitates the international exploitation of the IP but also increases the possibilities of raising additional capital to fund the ongoing development expenditure.

The perceived resulting loss of tax base in the country in which the IP was initially developed has resulted in a number of tax administrations carefully scrutinising these types of arrangements. In order to counter so-called "intellectual property arbitrage", section 23I was introduced into the Income Tax Act, no 58 of 1962 (ITA) by the Revenue Laws Amendment Act, no 35 of 2007.

Section 23I, which comes into operation on January 1 2009, places restrictions on the quantum of the royalty payments to non-residents (payee) that a South African taxpayer (payor) may claim as a tax deduction in certain circumstances.

The mischief that section 23I broadly seeks to cure is to deny or restrict the tax deductibility of the royalty expenditure incurred by a payor, where the royalty is payable to a payee that is a non-South African resident for the use of IP that was either originally owned by a South African resident or was created or developed in South Africa."

Monday 14 July 2008

IP - Take it to the Bank

The value of Intellectual Property is also very much an issue in Jamaica.

The Export-Import Bank (co-sponsored by Foga Daley & Co.) recently hosted an IP seminar on “Valuing Creative Assets”, aimed inter alia at determining the value of intellectual assets and using them to leverage financing. The seminar was held under the fitting theme: “Intellectual Property - Take it to the Bank”.

Aron Levko, a PwC Partner in Chicago, explained the current prominence of IP issues, with “IP having grown in importance to be the predominant asset value in corporations, rising to over 70% of total market value for the S&P 500*”. Michael Stern, Minister of State in the Ministry of Industry, Investment and Commerce (pictured), said that Jamaica was at the vanguard of promoting IPR protection in the region and that IPRs were significant contributors to enterprise value.

More information can be found here, here and here.

Thursday 10 July 2008

Braveheart pays for options on Aberdeen research results

In The Scotsman (which I found via Technology Transfer E-News) there's a very positive piece about a 15-year deal struck between Aberdeen University and Perth-based investment syndicate Braveheart to provide funding and development for the school’s innovations. The deal gives Braveheart the right of first refusal to license the university’s research in defined areas, while Aberdeen get significant funding for start-ups –- amounting to some £5m over a period of two to five years. Braveheart already has similar arrangements with the universities of Strathclyde and Edinburgh.

Wednesday 9 July 2008

After bankruptcy: what happens to the Italian business format franchise?

Although, once a business format is successfully trialled, a franchise contract runs a heavily reduced risk of encountering an episode of bankruptcy on either side, this event can still occur. The Italian Bankruptcy Law (267/1942) divides business contracts into three categories:
* contracts that terminate on an adjudication of bankruptcy;

* contracts to which the bankruptcy trustee automatically succeeds the bankrupt because continued performance is to the creditors' advantage;

* contracts that are suspended until the bankruptcy trustee decides whether to terminate or continue them.
Franchise agreements, despite their ubiquity, are not however mentioned -- an oversight that was not addressed when the Franchising Law was revised in 2004. This means that their regulation on bankruptcy must be handled by analogising them to one of the three categories mentioned above.

In intellectual property terms, franchise agreements can span a number of elements of the contractual relationship:
* the use of trade marks and other signs belonging to the franchisor;

* the transfer of the franchisor's know-how to the franchisee;

* the sale by the franchisee of products and services and

* the payment by the franchisee of agreed royalties or fees.
The diverse nature of these provisions makes franchise agreements comparable to several types of contract, such as licence, agency, distribution, supply and commission agreements.

Some commentators consider the franchise relationship to be one of personal trust, which automatically terminates in the event of either party's bankruptcy, in the same manner as agency and commission agreements. Case law from the Court of Turin in January 1995 however construed the franchise as a supply agreement in which the franchisor supplied services, rather than goods. On this basis it was regulated by the provisions of the Bankruptcy Law that provide for the suspension of performance of mutual obligations until the bankruptcy trustee decides whether to terminate or continue the contract. This ruling has however been questioned on practical grounds.

Ultimately each case will be decided on its own facts and its own merits. Parties are advised to stipulate the consequences of bankruptcy in advance, to avoid undertainties and undesired consequences [source: Marco De Leo and Beatrice Masi, of Rinaldi e Associati, writing in International Law Office].

Tuesday 8 July 2008

A cricketer's pose

The West Indies Players Association have been assigned the image and intellectual property rights for 75 of their members as set out in the formal agreement between the players and WIPA. It is an initiative that has been welcomed by WIPA and its members as the organisation seeks to exploit and maximize the full commercial potential for the use of the players' intellectual property and image rights. "WIPA has fought many long and tough battles in recent times including those to protect the intellectual property and imaging rights of players and we are quite pleased that the parameters are now much clearer in relation to such rights," said WIPA president and CEO, Dinanath Ramnarine. He said the deal with the 75 cricketers follow the emerging trend of similar arrangements between cricket players and their associations as in the case with the equivalent groups in South Africa and England.(source:

There is often much debate about whether it should be the individual, the team or the league or the federations in charge of the sport as to ownership of image rights. Some people argue that the personalities have worked hard to create their fame and so should be able to control commercially the results of this hard work by owning the rights themselves. There is also a case that since the public created the personality's fame, that it should be the public as a whole that decide who owns the rights.

Whatever the position this development must come as relief to WICA who suffered the emabarrasment of a revolt over image rights, as reported in the Telegraph here in 2004.

Monday 7 July 2008

Music recordings: the Lincoff model

The excellent Intellectual Property Watch weblog carries a lengthy feature by Bennett Lincoff (right), "Inside Views: A New Business Model For The Music Industry Explained". This feature, which is itself based on a longer work (a 64 page article), succinctly describes the current problem facing the recording industry. Having outlined the status quo, Mr Lincoff proposes as follows:

"I suggest that lawmakers aggregate the rights of songwriters, music publishers, recording artists and record labels in their respective musical works and sound recordings and create a single right for digital transmissions of recorded music. The digital transmission right would replace the parties’ now-existing reproduction, public performance and distribution rights (and, where applicable, the communication and making available rights) for purposes of digital transmissions.

Going forward, the determinative consideration will be whether transmissions of recorded music have occurred, not whether transmissions result in sales, promote sales, or may cause sales to be lost. Licences will be made available without regard to whether recordings are streamed, downloaded, or transmitted by some means not yet devised; whether programming is interactive or non-interactive, or contains this, that or another recording; or whether the service that provides the transmission accepts user-generated content or operates as a P2P network. The number of copies made in the course of transmissions (including server copies, and ephemeral, transitory and buffer copies), the type of transmission technology used, and the file format in which recordings are transmitted will not be of concern.

Ownership of the digital transmission right in each recording will be held jointly by the songwriter(s), music publisher(s), recording artist(s) and record label who contribute to it. Each party will be a co-owner of the right in the recording in question. Moreover, regardless of the nature of their relationships to each other under pre-existing agreements, or to particular recordings under current law, under the digital transmission right each rights holder will have independent and sufficient authority to grant non-exclusive licences on any terms to which they and their licensees agree. The only limitation on this authority will be the obligation to account to co-owners for royalties earned.


The digital transmission right would only be enforceable against those who provide digital transmissions, retransmissions or further transmissions of recorded music.

Accordingly, consumers would not incur any liability to rights holders for accessing streams, downloading music, or making copies of recordings for personal use. Similarly, software distributors, technology firms, consumer electronics makers, and telecommunications and internet service providers, as such, would have no liability.

On the other hand, audio service providers will need licences if they operate websites or other services that provide digital transmissions, retransmissions or further transmissions of recorded music.


Operators of centralised P2P networks would be jointly liable with their users who share music. These operators would also be liable for further transmissions or retransmissions through their servers of transmissions of recordings initiated by their users. A through-to-the-user licence would authorise all transmissions of licensed recordings through an operator’s centralised network; and individual users would be free to share those recordings through that network without the need to obtain licences themselves ...".

Whatever you may think of the author's proposals,
* it's great to say that someone with experience in the field in question is actually putting solid suggestions on the table rather than simply saying "the recording companies should stop harking back to the halcyon days when their old (pre-digital) business model worked and should design something else;

* it's notable that Mr Lincoff's proposals start with legislative reform as a sine qua non for the development of a new business model -- and this raises the question whether business models should shape the law or merely respond to it;

* given the nature of the distribution media, any solution will depend for its efficacy on the adoption of uniform legal provisions internationally. If there is no international norm, any business model will have to factor in the potentially devastating effect of havens in which the model becomes meaningless.

Friday 4 July 2008

Combining trade marks in a Jointly owned IP holding company

I spotted this recent article by Lanning Bryer and Matthew Asbell (both of Ladas & Parry) in issue 3 of INTA's Trademark Reporter, vol. 98 (May-June 2008). Entitled "Combining Trademarks in a Jointly Owned IP Holding Company", its abstract runs as follows:

"With the advent of increased trademark sharing between unrelated entities, intellectual property holding companies have been formed specifically to enable combined ownership of trademarks among multiple companies. A mutual trademark holding company (“MTHC”) is often formed as the jointly owned subsidiary of multiple parent companies to act as owner of trademark rights. Companies should consider the formation of MTHCs with the goal of sharing trademarks while finding safer avenues toward at least some of the benefits of the traditional wholly-owned IP holding company model.

MTHCs may: (a) provide a sensible means for companies either to partition and sell off portions of their goodwill; (b) allow them to find opportunities for synergy with others that can help their brands grow; (c) help companies to accurately assess and improve the value of these assets; and (d) provide tax and other additional benefits. However, corporate law, tax law, antitrust law, IP law, and other laws may complicate the use of MTHCs. Thus, the decision to employ an MTHC should only be considered carefully with all relevant issues explored. This article describes the risks and advantages of using an MTHC as the owner of trademark rights in a strategic branding plan".

Do readers of this blog have any thoughts on this topic, particularly when the issues involved are not confined to the US but are driven by international considerations?

Thursday 3 July 2008

InnovationMatters to cease publication

Norman Kaderlan, Editor of InnovationMatters, has issued a circular which announces as follows:
"This month marks the fifth anniversary of InnovationMatters —- and our last issue. The growth of Technology Innovation Group, Inc. has made it increasingly clear that we must focus our efforts on other activities. I am pleased to inform you, however, that we have arranged with our colleagues at Technology Transfer Tactics to service our subscribers in order to keep you up to date with the latest developments in innovation, technology transfer and technology commercialization".

Do any readers of the IP Finance weblog make use of either of these publications? How useful, if at all, are they? What implications will this change have for the IP commercialisation fraternity? Please post your comments below.

Wednesday 2 July 2008

World's most valuable brands

Brand Finance has recently published Brand Finance 500: the annual report on the world's most valuable brands. The full report is 36 pages in length, introducing its publisher, giving mini brand-biographies of the top 10 brands and, before listing its "league table", discussing some of the methodological issues encountered in this exercise. This year's report is twice as ambitious as last year's, which tackled only the top 250 brands.

As usual, Coca-Cola tops the chart. What is interesting is that the three brands in closest pursuit have all been tainted by a fair degree of opprobrium in the past year -- whether from consumers or from competition authorities: Microsoft, Google and Wal-mart. How precisely this can be factored into a complex calculation alongside the more easily quantifiable criteria remains a matter for debate.

Tuesday 1 July 2008

EBAY fined £31million for counterfeits

It is not often that an IP related case steals the front page of London's popular free daily Metro paper but Ebay have done just and scooped headlines across the world. The well known auction site eBay has been fined £31million for selling fake Louis Vuitton goods online. The French fashion house took eBay to court for selling a range of fake luxury bags, clothes and perfumes. A Paris court ordered the internet giant to pay damages to Louis Vuitton and barred eBay from selling perfume brands Christian Dior, Kenzo, Givenchy and Guerlain, also owned by Luxury goods firm Louis Vuitton Moet Hennessy. eBay bosses have apparently said that they plan to lodge an appeal. The court also warned eBay that they face a daily £40,000 fine if they run adverts for the perfume and cosmetic brands. French courts have long been in favour of brand holder's rights and a number of brand holders have used the French system to enforce their trade marks and related IP but none it appears on this scale, not only for the potential legal effect of the decision across world but also for the amount of damages awarded. If anyone has a copy of the decision (in English preferably) please send it here.