Tuesday, 30 September 2008

Private Equity and the Media

The credit crunch is the issue dominating the news these days – but what is its impact on the UK’s creative economy?

You have a chance to find out on 7 October 2008 when Westminster Media Forum most timely organises a seminar on equity buyouts and their impact on creative output, editorial risk-taking and audiences.

The seminar will bring together policy makers from Parliament, Government and regulation, with stakeholders from the financial and media sectors, in order to assess whether private equity is good for the UK’s creative economy.

The seminar will look inter alia at the benefits and challenges of private equity backing for a media organisation and explore the issues specific to financing the media.

Key note addresses will be given by Peter Bazalgette, Media Investor and Consultant; and Jon Moulton, Managing Partner, Alchemy Partners. Other speakers are confirmed from 7digital, August Equity, BDO Stoy Hayward, Pact, Private Equity News, Clifford Chance, and Human Capital.

More information on the seminar can be found here and the booking form here.

Monday, 29 September 2008

WIPO Magazine special focus

The October 2008 issue of the WIPO Magazine carries a special focus on intellectual property finance, written with a view to making the subject more accessible to the wider IP community. This focus is in the form of four features:

* "Intellectual Property Financing – An introduction" by Beatrice Renggli,

* "IP Financing: the Ten Commandments", by Jeremy Phillips

* Ben Goodger's "IP Financing - Implications of the UNCITRAL Process" and

* "The Challenge of IP Financing", by Lorin Brennan.

The IP Finance blog is thrilled that WIPO should have taken this initiative and is delighted that the organisation has provided an effective agenda for debate in the IP community as to what effect the finance community's requirements and anxieties have on IP rights owners and their transactions.

Friday, 26 September 2008

Royalty rate survey

IP Finance has received a request from Technology Transfer Tactics relating to a survey conducted by Eureka! Ranch. Readers may wish to participate in it. The Request runs as follows:

"We're looking for your opinion on what is the FAIR MARKET VALUE when licensing innovations.

In exchange for 5 minutes of your time we'll send you a copy of our findings, which you can use to help you estimate the relative value of prototypes, patents, etc.
The survey is being conducted by Eureka! Ranch International in partnership with the Kauffman Foundation, and you can access it by simply clicking on this link.

This data will be used to set a NATIONAL REFERENCE STANDARD for royalty rates in connection with a set of interconnected NATIONAL INNOVATION MARKETPLACES being developed in the USA, CANADA, UK and EU. Recently the Wall Street Journal and New York Times did feature stories on the initiative (click here for links to the articles).

By way of background - Eureka! Ranch International is a 30 year old innovation consulting firm that works with the likes of Nike, American Express, Ford, Procter & Gamble, and Hewlett Packard as well as industrial firms like Schlumberger, Dow Chemical and others. The USA National Innovation Marketplace is an alliance between Eureka! Ranch and the Manufacturing Extension Partnership Network (a Federal & State initiative).

The value of the survey depends on how many responses we get, so your help is greatly appreciated. In fact, please forward the survey to other people who have experience buying and/or selling innovations and the data will be even more useful".

IP Finance will do its best to keep up with subsequent developments concerning this initiative, and would like to hear from any readers who are actively involved in it (email here).

Wednesday, 24 September 2008

When is a digital book a book?

Risbey's Photography Ltd and Digital Albums Ltd v Revenue & Customs Commissioners, VAT & Duty Tribunal, Manchester, 22 August 2008 (noted on the Lawtel subscription service), is a decision on the tax status of so-called 'digital books' in the United Kingdom.

Risbey's digitally produced wedding books which were created from photographs taken by it. Those books were supplied to customers as part of a general 'wedding package'. Risbey's also designed wedding books for outside photographers, who commissioned it to produce the book using photographs which hey supplied. The books displayed selected images of the wedding day, accompanied by text appropriate to the occasion. Once bound, the books could not be altered.

Risbey's submitted that the wedding books had all the physical characteristics of a book and met the zero rating requirements in the Value Added Tax Act 1994 Sch.8 Group 3. The VAT Commissioners disagreed. In their opinion the wedding book did not share the physical characteristics of a book and did not fall within the meaning of book in sch.8 at all. Rather, Risbey's was supplying a single photographic service, which was standard-rated for VAT purposes.

The Tribunal upheld the assessment of the Commissioners that the supply of Risbey's wedding books attracted VAT at the standard rate. In its opinion

* the wedding book did not fall within the ordinary meaning of a book, even though it shared many of the physical characteristics of a book. This was because it was not an object which had the characteristics of being read or looked at. Instead it was a pictorial record, of interest only to persons immediately connected to the event, and the text used had no value in its own right.

* the wedding book was, to all intents and purposes, a wedding album. To restrict the meaning of "wedding albums" to traditional forms would be contrary to the Community principle of equal treatment, which ensured that similar goods in competition with each other were not treated differently for VAT purposes.

* the restriction of the meaning of "wedding albums" to the traditional format would be a failure to acknowledge advances in digital photography--the mere fact that the wedding book could not be altered after publication did not alter its function as a wedding album. Accordingly Risbey's supply of wedding books was standard rated for VAT purposes.

* Risbey's principal activity was the supply of photographic services. The supply of the wedding book was ancillary to, and a means of better enjoying, those services and was entirely dependent on the photographs being taken in the first place.

* Risbey also made a single supply of photographic services when it applied digital photographic processes to the photographs supplied by outside photographers when producing the wedding book.

Tuesday, 23 September 2008

Intellectual Ventures in the Wall Street Journal

This blog has already reported on the activities of Intellectual Ventures in buying up patents. The Wall Street Journal had an article on them a few days ago which can be found here. In a post early in August we noted that we had seen no publicity surrounding patent licensing deals which had been made by Intellectual Ventures. The WSJ reports deals with Cisco and Verizon. Verizon's deal includes a stake in a patent investment fund.

IBM threatens to review tech standards policy

The Wall Street Journal has reported that International Business Machines Corporation, one of the leading players in the establishment of global technological standards, is to review its membership of the bodies that set common standards within the technology industries and may even withdraw from some. Such a step could undermine both the credibility and the efficacy of the system that makes electronic equipment and software interoperable worldwide. Apparently IBM has become frustrated by what it considers the opaque processes and poor decision-making in some of the hundreds of bodies that set technical standards for everything from data-storage systems to programming languages.

It seems to me that this may be more of a political gesture than a serious threat. By announcing its intention to review existing agreements on the basis that the decision-making is poor, IBM can at the same time (i) remind fellow standards-setters of the massive value of its commitment to standards and its need to receive remuneration commensurate with its commitment while (ii) checking its exposure to allegations of anticompetitive price-fixing and cartel-mongering.

Monday, 22 September 2008

Interbrand Global Brand valuation methodology

For anyone who wants to read it -- and for what it's worth -- here's the Interbrand/Businessweek Best Global Brands list for 2008. The bit on methodology is reproduced below, so you can decide for yourselves what weight to place upon its valuation of, say, top brand Coca-Cola at 66.667 million dollars.

The Interbrand method for valuing brands is a proven, straightforward, and profound formula that examines brands through the lens of financial strength, importance in driving consumer selection, and the likelihood of ongoing branded revenue. Our method evaluates brands much like analysts would value any other asset: on the basis of how much they're likely to earn in the future. There are three core components to our proprietary method:

Financial Analysis
Our approach to valuation starts by forecasting the current and future revenue specifically attributable to the branded products. We subtract operating costs from revenue to calculate branded operating profit. We then apply a charge to the branded profit for capital employed. This gives us economic earnings.

All financial analysis is based on publicly available company information. Interbrand culls from a range of analysts' reports to build a consensus estimate for financial reporting.

Role of Brand Analysis
A measure of how the brand influences customer demand at the point of purchase is applied to the economic earnings to arrive at Branded Earnings.

For this study, industry benchmark analysis for the role the brand plays in driving customer demand is derived from Interbrand's database of more than 5,000 prior valuations conducted over the course of 20 years. In-house market research is used to establish individual brand scores against our industry benchmarks.

Brand Strength Score
This is a benchmark of the brand's ability to secure ongoing customer demand (loyalty, repurchase and retention) and thus sustain future earnings, translating branded earnings into net present value. This assessment is a structured way of determining the specific risk to the strength of the brand. We compare the brand against common factors of brand strength, such as: market position, customer franchise, image, and support.

Apart from idle speculation as to how far the values of the listed financial sector brands might have plummeted while the research results were being proofed and printed, there are plenty of points to ponder. One is the relatively poor performance of brands in the pharmaceutical and healthcare sectors; another is the relatively good showing among some business-to-business brands. A third is the reminder that a brand and a trade mark are entirely different things: BlackBerry the trade mark is in danger of being genericised to death by its admiring consumers, while BlackBerry the brand would appear to be flying high.

If you'd like to post any comments on this year's Interbrand list, please feel free to do so below.

Franchisors may be obliged to give financial information to their franchisees, rules Japanese court

Earlier this year the Japanese Supreme Court rendered a highly significant judgment in a case concerning a business format franchise. Under the terms laid down by the franchisor, each franchisee ran its own store but was unaware of the details of the franchisor's payments to the vendors from which franchisees procured products for sale. In this action the franchisees filed suit against the franchisor, demanding that it disclose certain information, including details of the products purchased for sale, payment dates and amounts and the names of the parties that received such payments. The franchisees argued that the franchisor had a duty to disclose these payment details under the Civil Code. The Tokyo High Court found that no such duty existed. The Supreme Court has now reversed the decision and remitted the action to the High Court for further consideration.

The court held that the purchase of products was essential to the franchisees' operations and that it would not have been difficult for the franchisor to inform the franchisees of the details of its payments to recommended vendors. Accordingly, although the franchise agreement did not explicitly impose a duty on the franchisor to disclose such information to its franchisees, the agreement could be interpreted as imposing a mandatory duty to make disclosures to the franchisees at the latter's request. The court added that, in general, a franchisor is subject to a duty to report information to its franchisees, but it did not specify the information that may be withheld from franchisees.

[source: Kenichi Sadaka, Aoi Inoue and Taisuke Yamamoto (Anderson Mori & Tomotsune), writing for International Law Office].

Sunday, 21 September 2008

MARQUES produces IAM toolkit

MARQUES, the Association of European Trade Mark Owners, had a surprise for those attending its 22nd Annual Meeting in Noordwijk, the Netherlands, last week. Each participant received, as part of the conference pack, an intellectual asset management toolkit that includes
* a generic intellectual asset management PowerPoint presentation
* case studies
* catch phrases
* articles and
* useful links.
This is a tremendous initiative from the MARQUES Intellectual Asset Management Team, who should be warmly congratulated for their efforts. Anyone wanting to know more about this Toolkit, or who wishes to help build on the foundations laid by the MARQUES IAM Team, should contact Ben Goodger (Rouse Legal) for further details.

Wednesday, 17 September 2008

Blockbuster innovations: time to cash in?

University tech transfer offices (TTOs) in the United States are reported to be cashing in on their blockbuster innovations are sitting pretty. The current environment in royalty monetization is a "sellers' market", as is evidenced by several recent sales of big royalty streams. There is also a rise in the number of businesses now lining up as potential buyers. n particular, Royalty Pharma has been involved in the following deals:
* the sale by Children's Hospital Foundation (Philadelphia) of its royalty interest in the oral gastroenteritis vaccine RotaTeq for $182 million in cash;
* Northwestern University's sale of a portion of its worldwide royalty stake in pain treatment drug Lyrica for $700 million in cash;
* New York University's sale of rheumatoid arthritis drug Remicade for $650 million in cash, plus additional payments if sales exceed certain milestones.

The market is worth watching, so see whether the increased interest in royalty interests can be correlated with uncertainties over more traditional income routes during the current period of sustained economic uncertainty.

Source: "A Seller's Market", in The Deal.

Tuesday, 16 September 2008

Times Online to reap rewards of user access to its archive

In a curious case of one newspaper reporting on the business model of another, the Guardian records that the highly popular Times Online is to charge for access to its hitherto free online archive service. The change, in the form of a 'paywall', comes in with effect from this Thursday.

Times Online will erect a paywall in front of its fledgling online archive service from Thursday, now that it appears that a solid user base has developed. Access rates are said to be £4.95 per day, £14.95 per month or £74.95 per year. Featured front page items will remain free.

Times Online has had to choose between monetising its extensive archive by opening pages for free and relying on advertising, or relying on traditional business-to-business revenues from libraries. The solution adopted means that sites can preserve their existing contracts with library firms, while keeping the service available to consumers; it is likely to be seen as a more stable revenue stream in the current economic climate.

The archive itself goes back to 1785 and is likely to contain a sizeable proportion of works in respect of which Times Online is not the copyright owner and has no right to store or control.

Monday, 15 September 2008

Bollywood: time to invest in cross-over products?

In "Bollywood duets with the west", Joe Leahy writes in the Financial Times about the increasingly serious flirtation between Indian films and music on the one hand and the lucrative Western market on the other. Although the Indian diaspora in the West is sizeable, there is doubt as to whether it alone can provide and sustain a sufficient commercial incentive for the large-scale mainline exploitation of rights in those works. This article asks, however, whether the Indian product may, at least in part, prove attractive to Western audiences in its own right, being a refreshingly colourful and escapist alternative to the slick, narrative-oriented productions that hail from US studios.

The prospect of mining a fresh stream of IP in India and sending it west is tantalising. But questions of money arise. How much does one invest in effectively untried entertainment products? And how great is the scope for the development of 'cross-over' products which seek to blend the Indian genre with non-Indian elements of music, plot, dress or location?

The article mentions that Reliance Big Entertainment is currently working with Hollywood director Steven Spielberg on a joint venture, with initial funding of $500m (£285m); other projects are cited too. Other projects may follow, depending on the real or apparent success of the pioneers.

Friday, 12 September 2008

What is to be of the CHRYSLER brand?

The tendency to disassociate trademarks from manufacturing and production misses the complex interrelationship between the two. Of particular interest is the move by a company from being an anonymous contract manufacturer (think of Taiwan and the semiconductor and electronics industries) to brand holder, whereby the manufacturer attempts to garner the value-added of consumer goodwill for its products.

The move from manufacturer to brand holder is not an easy one. The seemingly endless gestation of the ACER mark is testament to the difficulties that even the most successful contract manufacturer faces when it seeks to enter the brand-building and goodwill-generating arena.

An interesting twist on this phenomenon was reported recently in Business Week, under the title "A Strange Detour for Chrysler." We all know that US car manufacturers are in a dire straights, battered by gas that is too dear for many Americans, and stuck with dinosaur-sized SUVs that interest only the curator at the Smithsonian Institute. What to do with the excess manufacturing and distribution capacity? Chrysler seems to have come up with a challenging solution--turn yourself in a contract manufacturer and even a marketer of the cars of others.

The new home for SUVs?

As reported, it is not just that Chrysler is planning to put the CHRYSLER mark on a restyled Versa subcompact made by Nissan. After all, sharing platforms and the like is already old-hat in the auto industry. What is more interesting is that Chrysler is negotiating with Nissan to sell Nissan's ALTIMA brand vehicle through the Chrysler sales and distribution network. Moreover, Chrysler is also reported to be offering itself as an "assembler-for-hire" for any manufacturer that wants to sell truck and minivan products, but might want to save on the costs of manufacturer and production. (Why anyone wants to get into this business at the moment, especially since Chrysler itself has been a market leader, is another question, but both Nissan and Volkswagen seem to be interested of renting the Chrysler facilities for this purpose.)

One can be skeptical about this and ask the obvious question: If the name of the game in the US auto industry is to try and design cars that US consumers are likely to buy in an age of elevated oil prices, and if Chrysler is committed to protecting its brand, why is it selling cars for Nissan and making minivans for Volkswagen? That seems to be a sure-fire formula for brand dilution or worse. Should not Chrysler be committing 150% of its resources to designing, building and selling cars that Americans will want to buy?

According to the report, the reason for these measures can be found at the doorstep of Cerberus Capital Management, the private equity entity that forked over $7.4 billion dollars for 80% of Chrysler. Chrysler, aka Cerberus, needs to find ways to save cash and reduce costs. Better to generate an income stream for your underutilized sales and manufacturing facilities, even if they might dilute the long-term value of the marks and names.

Maybe that is the key point here. Maybe there isn't any long-term plan for preserving Chrysler as a going-concern and with it, the CHRYSLER name and brand. Save and cut costs today, and sell-off the company tomorrow. The name (in whole or in part) will go, and the sales and manufacturing capacities will change hands to someone else better able to turn them into successful product lines--but under that person's name and brand.

First you cut cookies, then you cut brands.

Differential calculus: the AG opines in STIM v Kanal 5 and TV 4

The Opinion of the Advocate General in Case C-52/07 Kanal 5 and TV 4 v STIM (not yet available in English) makes fascinating reading. It addresses a reference from Sweden to the European Court of Justice for a preliminary ruling on the circumstances in which different forms of royalty calculation levied by a copyright collecting society may be viewed as abusive exercises of the performing rights in its portfolio. A note on this case appears on the IPKat weblog, which credits Franck Latrémolière (Reckon) as its source.

On average, once the Advocate General has given an Opinion it takes some 5-6 months for the Court to rule. That would suggest that we should have some guidance from the court next Spring.

Wednesday, 10 September 2008

Reed to sell, but is the target price the right one?

A little snippet of news from Times Online sheds some light on the value of magazine titles. Publishing group Reed Elsevier is believed to be offering about £190 million in vendor financing from its own balance sheet in the sale of its trade magazines arm. Further developments are worth watching, particularly if the view is correct that trade magazines, like most of the periodical print sector, are suffering from erosion of advertising revenue, declining sales and a weak economic outlook.

Second Global Forum on Intellectual Property 2009

Following the success of its inaugural Global Forum on Intellectual Property in August 2006, the IP Academy Singapore now organises the second Global Forum on Intellectual Property 2009 (GFIP 2009) on 8 and 9 January 2009 at the Raffles City Convention Centre in Singapore.

According to Chairman David Llewelyn, GFIP 2009 is "shaping up to be the foremost multidisciplinary IP conference in the Asia Pacific region for 2009". The theme of GFIP 2009 (which is expected to draw about 500 delegates from various IP related fields around the world) is "The Evolving Intellectual Property Ecosystem: Conflicts or Consensus?".

Finance issues feature prominently in the provisional program: on day one there is a session on IP and Intellectual Asset Management (for example featuring a panel discussion on maximising IA revenue from a tax perspective) and on day two there is a session planed on IP & Finance.

More information on the GFIP 2009 and the value of IP assets is available here and here; more information on the IP Academy Singapore – established in 2003 as part of a national initiative to develop Singapore into an IP hub - here.

Tuesday, 9 September 2008

Broad construction of patent licence keeps royalties flowing

Sitting as a Deputy Judge of the Patents Court, England and Wales, last week, Peter Prescott QC had to consider entitlements to patent royalties in Oxonica Energy Ltd v Neuftec Ltd [2008] EWHC 2127 (Pat), which you can read here in full via BAILII.

In short, Neuftec was in possession of some valuable know-how concerning additives for diesel fuel. This know-how enabled additives to be dispersed in such a manner as to reduce fuel consumption and engine emissions. Neuftec filed an international patent application under the Patent Cooperation Treaty (PCT) and secured national patents in a number of countries.

While the fuel additives were still being developed Oxonica and Neuftec cooperated in solving a problem in the manufacture of the small particles necessary for the creation of the additives. In December 2001 Neuftec and Oxonica struck an exclusive licence and knowhow deal under the terms of which Oxonica had to pay Neuftec royalties in respect of the manufacture, use, sale or other exploitation of what the contract called "Licensed Products": these were "any product, process or use falling within the scope of the claims in the Licensed Application or Licensed Patent". For this purpose "Licensed Application" was defined as the PCT application together with "any continuation, continuation-in-part or divisional applications thereof as well as foreign counterparts and re-issues thereof". "Licensed Patent" was defined as "any patent issuing from the Licensed Application thereof as well as foreign counterparts and re-issues thereof". Oxonica exploited Neuftec's knowhow which it received under the licence agreement, developing its own commercial fuel additive which it called "Envirox", making royalty payments as provided under the licence.

Subsequently, Oxonica wanted to supply a variation of Envirox ("Envirox 2") to a Turkish oil company. But was Envirox 2 a Licensed Product within the meaning of the licence agreement? Oxonica went to court and sued for a declaration that it was not. Neuftec counterclaimed that it was entitled to an audit in respect of sales of Envirox 2, as well as payment of all royalty sums in respect of Envirox 2 that were due under the licence. The parties agreed that Envirox 2 fell within the broadest claims of the original PCT application but, at least in some important countries, it fell outside the broadest claims of the patents as granted in those countries.

Peter Prescott QC dismissed Oxonica's claim and allowed Neuftec's counterclaim.

1. On the application of settled principles of law regarding the interpretation of ambiguous formal commercial agreements, the licence was to be construed so that "Licensed Products" referred to products that fell within the scope of the claims of the Licensed Application or Licensed Patent, as the context required.

2. The context was that the obligation to pay royalties applied equally to the definitions of Licensed Application and Licensed Patent. Indeed, royalties were payable on things falling within the scope of the claims of the PCT application as filed, and nothing else.

3. This being so, Envirox 2 was a Licensed Product as defined, and attracted royalties accordingly.

The judgment has some interesting asides on contact interpretation, including whether the canons of interpretation contra proferentem are applicable in situations such as this.

South Africa's controversial Mineral and Petroleum Resources Royalty bill

Mining houses have reacted cautiously to the controversial Mineral and Petroleum Resources Royalty bill, approved by Parliament in South Africa recently.

The bill comes into effect on May 1 2009. It replaces fixed royalty rates with formula-based royalty rates, calculated according to the profitability of the mine – the less profitable a mine, the lower the royalty that must be paid, and the more profitable a mine, the higher the royalty that must be paid.

This is good news for marginal mines – start-up operations and mines close to the end of their lifespan – because the royalty rate they have to pay will decline as profitability declines.

But Goldfields chief executive Nick Holland said: “We hope that the authorities will re-evaluate the situation if royalties prove to be too onerous, given the cost pressures facing all mining companies. Lizel Oberholzer, senior associate at Bowman Gilfillan Attorneys, said the bill is not good news for offshore oil and gas exploration. Oberholzer added that the fluctuation in the amount to be paid in royalties would deter investors.

My own view is that the principle of royalty rates based (inversely) on profitability may actually encourage inefficiencies.

(Source: The Sowetan)

Monday, 8 September 2008

Next live IP auction coming up

The Ocean Tomo Fall 2008 Live IP Auction & Conference will be held on October 29-30 in Chicago. According to the company's email, the event includes a one and a half day CLE approved conference at the Trump Hotel, a gala dinner at The Art Institute and a Live IP Auction at the Chicago Cultural Center.

Ocean Tomo expects some 500 IP and business professionals to attend, including Fortune 500 IP and licensing professionals, C-level executives from small and mid-size companies, investors, individual inventors, attorneys and members of the press. The three concurrent conference programme tracks include
* Managing IP Risk
* Buying & Selling IP
* Maximizing IP Value for Business Professionals
The full programme can be viewed here. For various reasons, most of them connected to the facts that (i) I have to earn a living, (ii) I'm neither buying nor selling any IP and (iii) no-one invited me to speak, I won't actually be there. But if any readers of this weblog are going to be there and would like their brief reflections on the event to be recorded here for posterity, can they please email me here and let me know.

Friday, 5 September 2008

Facebook--Is It Commercially More Than a Bunch of Pretty Faces?

So is social networking the next big thing? Ever since Google's triumphant IPO and meteoric growth in online advertising revenues, pundits have been looking for the next big thing (even if we are talking about a time-line of only several years). Skype and YouTube have not quite panned out, but the explosion of MySpace and then Facebook has focused attention on the growth potential in social networking.

There is no doubt that participation in social networking continues to grow (although my memory tells me that there have reports of a slow-down, or at least a deceleration in the rate of growth of U.S. users of social networking sites). Another possibly telling sign was reported in August 18th issue of Business Week. In an article entitled "Has Facebook's Value Taken a Hit?", the author describes unsubstantiated reports that insiders, including at the highest level of management, have been putting up their shares fore sale in the still-private company. The supposed purchasers of the shares are various funds and institutional investors.

If true, it is unusual for this kind of sale of shares by insiders to take place in the context of a start-up, especially one as lauded and applauded as Facebook. More typically, such shareholders hold onto their equity until a public offering or sale of the company takes place. A further downside to the report is that it has alleged led to employee grumbling. To remedy such possible dissension, Facebook apparently has developed a one-time program to allow employees with vested share options to realize a portion (20%) of their holdings.

There is an interesting company valuation issue here. When Microsoft purchased a small equity stake in Facebook in October 2007 ($240 million for 1.6% of preferred stock), the two companies implied a valuation of $15 billion. However, the plan enabling employees to realize a portion of their vested stock options is based on a $4 billion valuation. Indeed, it is reported that departing employees will be subject to certain restrictions should they then seek to sell their shares. One of the conditions is that they will permitted to sell their shares for no more than a $3.75 billion company valuation.

Has Facebook Suffered a Valuation Drought?

What does this all mean? In particular, do such sales reflect merely doubts about the short and middle term prospects for shareholders to cash out, due to the deteriorating status of the capital and equity markets, or does it also reflect doubts about the ultimate long-term prospects for the company in the so-called "real economy"? I.e., how will Facebook make money from its site, whether from ads or elsewhere?

Facebook can perhaps take some solace in the fact that when I tried to elaborate on this question with my 20-something son, he simply shrugged his shoulders and returned to embellish his own Facebook site.

Facebook Facing the Music

Wednesday, 3 September 2008

Protection for marketing strategies -- is it realistic?

A feature in yesterday's IP Marketing E-News (for details click here) asks whether a marketing strategy can be considered protectable as intellectual property. This is a depressingly familiar question for Europeans, who are terrified that the first to conceive a new business technique might be able to monopolise it with disastrous consequences for competition (consider what might have happened if, in the earliest and mainly passive days of the internet, the strategy of interactive marketing and online sale were patented). Americans are often also depressed by the question but for quite another reason -- they can't see why something that is truly new and innovative should be deprived of protection just because it happens to be a business method. The article, being of American origin, reads in part:

"To clarify, patents can be granted on any of the following:

Utility patents, which may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof;

Design patents, which may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture; and

Plant patents, which may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant.

Assuming your idea falls into any one of these three categories, then it may be patentable. If this is the case, then you should discuss this possibility with your attorney. However, if your idea does not fall into any of these categories, then it may still be protectable by other means.

First of all, it is always a good idea to walk into any such meeting with a well-drafted nondisclosure agreement in hand. An intellectual property attorney should be able to advise you on the terms and conditions that need to be in such an agreement to protect the information you intend to disclose to the other company.

Second of all, since the idea you seek to protect is a marketing strategy, the possibility exists that it may be protectable by copyright law. While ideas themselves are not protectable, certain aspects of your strategy may be protectable by copyright law. An intellectual property attorney in your jurisdiction with expertise in copyright law should be in a position to advise you as to whether or not your strategy is in fact protectable by copyright law and, if so, the steps you should take to protect it".

Copyright provides only limited, formal protection -- and confidentiality (even assuming that it could be initially preserved, would be unlikely to survive many business transactional uses before it became the preserve of the market analyst and the competition authorities). with patent protection being either unavailable or of dubious utility, that leaves the trade mark and marketing itself as the best form of protection. Get on the market first with a new marketing idea and work hard to remain one step ahead -- and you may find the rewards for investing in the market itself are greater than the rewards for trying to fence it in with IP rights.

Tuesday, 2 September 2008

Vivendi games licence income staunches UMG losses

This blog has previously noted the potentially positive impact of video game licensing for owners of music copyright portfolios. Today's Telegraph contains a further example when it reports that rising income from video games has offset declining music sales at entertainment group Vivendi, according to its second quarter reporting. This has given it the opportunity to cancel what seemed an inevitable rights issue. Vivendi, which controls the works of artists such as Amy Winehouse and the Rolling Stones through its Universal Music Group, showed a 5.3% fall in recordings sales, but its Vivendi Games, mobile phone operator SFR and France's Canal Plus divisions all recorded sales increases over the same period.

Monday, 1 September 2008

US Supreme Court ruling on exhaustion worries lots of people

An article, "US Supreme Court decision on patent exhaustion worries TTOs", appears in the August issue of the subscription-only journal Technology Transfer Tactics. It discusses the US Supreme Court decision on patent exhaustion in June in Quanta Computers, Inc. v LG Electronics, Inc. The court ruled, in essence, that the application of the doctrine of patent exhaustion meant that LG could not control the downstream use of technology that it had licensed to Intel. That technology was used in Intel chips that were later sold to Quanta and other computer manufacturers. The decision means that LG cannot seek royalty payments from Quanta or other computer makers that purchased components produced by Intel under its licensing agreement with LG. Experts agree that this decision, while not in fact earth-shattering, underscores the need for strategic thinking when formulating licensing strategy and deciding how to implement it.