Monday 30 November 2009

Can Bespoke and Generic Software Dance at the Same Software Party?

One of those "better not asked" questions is how to deal with the issue of ownership of bespoke software that relies on the generic platform of the developer. Stated otherwise, consider the situation where Party A commissions Party B to develop a piece of software. Party B is delighted to do so, but in fact the commissioned software relies in some way on non-bespoke, reusable software that also belongs to Party B, for which Party A will need a right of use. The parties reach the moment at which they need to settle on a contract that sets out their relationship.

The initial thought, at least of the commissioning party, is to demand that ownership in the bespoke software be assigned to it. At the most basic level, the typical thinking goes something like this: "I paid for it, so it should be mine", or, "It is my policy to own all of my software." Such a position makes some sense. It is true that ownership of the bespoke software itself, without more, will not enable the commissioning party to make use of it (see below). At the least, however, ownership will enable to commissioning party to dispose of it more easily in the event of a sale or acquisition. Whatever the reason, it would be an unusual circumstance in which the commissioning party would allow the developer to continue to own the bespoke software.

That is fair enough. But how does the commissioning party deal with the generic portion of the software that is necessary for the bespoke software to run? From the developer's point of view, unless the commissioning party is willing to simply buy him out--hook, line and sinker--he will will insist that ownership of the generic software remain with him. If so, that means that the commissioning party will likely receive a non-exclusive license to use the generic software.

Under that arrangement, the commissioning party should take special care to protect itself against the insolvency of the developer, especially if insolvency could lead to termination of the licence in bankruptcy. As well, provisions for escrow deposit of the source code with appropriate release instructions should be included. Moreover, a free right of assignability of the license is essential if the commissioning party is able to dispose of the bespoke software in a way that makes commercial sense. Whether all such clauses can be successfully drafted from the position of the commissioning party is far from certain.

Then there is the issue of overlap between the bespoke and generic software. While it is rhetorically easy to describe the situation in simple dichotomous terms, the reality may well be more complicated. Try as it may, the developer may not be able to completely separate the bespoke portion that belongs to the commissioning party and the generic portion that remains with the developer.

Finally, there is a related issue in connection with trade secrets. If the developer is required to disclose to the commissioning party proprietary knowledge related to the software--either bespoke or generic--how does the developer ensure that such trade secrets are not disclosed in an unauthorized fashion? Disclosure might not be critical if it is tied specifically to the bespoke software but, if the trade secret straddles the bespoke/generic divide, then the developer must be especially careful to protect its interests in this regard.

The upshot is that, in these circumstances, there is a degree of uncertainty that seems to be built-in. How readers have dealt with this uncertainty would be most edifying.

Friday 27 November 2009

IP Finance welcomes Anne Fairpo

The IP Finance team is delighted to welcome Anne Fairpo, who joins the weblog with immediate effect. Anne is a pupil barrister at Atlas Chambers, having previously been a solicitor for more years than she cares to recall, where she is a corporate tax advocate and adviser, specialising in technology-based business and international tax planning and transactions.

Anne is the author of the IP Tax blog, as well as Tottel's Taxation of Intellectual Property and contributes a chapter on the topic to Tolley's Tax Planning (annual editions). She lectures regularly on taxation of IP, as well as more general corporate tax topics, and is a member of the Council of the Chartered Institute of Taxation.

Wednesday 25 November 2009

Trade secrets, a seminar and a chance to say "hello"

"Protection of trade and other secrets: a property right, equitable right or contractual obligation? Does it matter?" That's the title of the forthcoming IP Finance weblog seminar, which will be conducted by Neil Wilkof (Herzog Fox & Neeman, Tel Aviv) and Robert Anderson (Lovells LLP, London).

This seminar will be well worth attending. IP Finance team member Neil -- in the course of a series of posts on this weblog on IP-based business strategies in a changing world -- has asked questions about the juridical nature of the trade secret and its role in modern business. He and Robert Anderson will engage in what should prove a most enlightening debate.

The seminar (which should last for about 45 minutes) will start at 1pm on Monday 14 December 2009. Lovells has kindly agreed to host the event in its London office: that's Atlantic House, 50 Holborn Viaduct, London EC1A 2FG (nearest tubes are St Paul's, Farringdon or Chancery Lane). The seminar will be followed by some appropriately tasty light refreshments and a golden opportunity for some prime networking.

If you're coming, there's nothing to pay. Just email Sarah Turner here. Good news if you're in practice and could do with CDP points: Lovells are arranging for them.

Convergence survey lifts lid on device-users' attitudes to paying for IP content

The 2009 Convergence Survey, launched this morning, represents a combination of field research and interviews conducted by London-based law firm Olswang LLP and YouGov into the use of computers, smartphones, e-books and other devices by more than 1,500 consumers. The 96-page report covers a wide variety of aspects of access to IP content by four categories of device-user: the vanguard, second-wave purchasers, the mainstream and the laggards, also dividing them by age.

Of particular interest to readers of this weblog is the annex, which contains some 172 pages of data derived from the survey, addressing issues such as the extent (if any) to which device users are prepared to contemplate payment for content in terms of existing and future functionality and their attitudes towards micropayments. The difference in spending habits between users of the Apple iPhone and other groups of consumers is quite noticeable. You can access the annex here.

Tuesday 24 November 2009

Delay no bar to an account of profits, rules Hefty court

IP Finance thanks John Smith for drawing the attention of this weblog to the recent ruling in Intellectual Property Development Corporation Pty Ltd and Hefty NZ Ltd v Primary Distributors New Zealand Ltd, D. J. Graham and R. J. Jones [2009] NZCA 429, Appeal Court of New Zealand, 23 September 2009 (IP Finance previously reported on the trial decision here). In this trade mark infringement case the Court -- which had a good deal to say about the the remedy of an account of profits -- held that mere delay in seeking relief is not in itself a ground for refusing an account of profits. You can read this decision in full here.

A full and very helpful account of this decision -- which also reflects on issues relating to the receivership and liquidation of the trade mark proprietor -- can be found on the IP Now blog here.

Monday 23 November 2009

"Tips for minimizing dispute settlement costs": can you help?

In a moment of inspiration or folly some weeks ago, I suggested the following title, "Keep it cheap: ten tips for minimizing dispute settlement costs everywhere", for a short article in an forthcoming issue of the WIPO Magazine which will focus on the cost of resolving intellectual property disputes. This suggestion was accepted.

My deadline is only ten days away and inspiration has yet to knock on my door. If any reader is possessed of one or more absolute truth with regard to keeping the cost of settling an IP dispute down, I'll be delighted to hear it (please post your suggestions below or email me here). All decent suggestions will be acknowledged on this weblog when the article is published.

The current online issue of the WIPO Magazine is available here.

Saturday 21 November 2009

Trade mark licences: beware of the unconventional

While practitioners certainly like to preach against uncertainty in the terms of a licensing agreement, we know how difficult this is to achieve, especially when it comes to provisions relating to termination. The uncertainty may arise from the inevitable elusiveness of achieving drafting perfection, compromises reached during negotiations, or the intention of the parties to leave the issue ambiguous. Whatever the reason, the result is that the parties may find themselves fighting over the meaning of the provision giving rise to the claim of termination.

This lesson was brought home in my favourite trade mark licensing case of the decade, the Australian case of Pacific Brands Sports & Leisure Pty. Ltd v Underworks Ptd. Ltd [2006] FCAFC 40 (for anyone who wants to confront a wide-ranging judicial debate on the meaning trademark assignments and licences, this is the case for you). While the issue of termination was strictly relevant to the disposition of the case, the court could not reach a single view on the proper construction of the licensee/sublicensee's obligations under an unusual form of grant clause. The resulting difference of opinion by the court on the meaning of the provision is instructive about the risks entailed in drafting such a clause.

The licence agreement provided that the licensee was authorized to use the licensed trade marks in connection with specified goods. The issue arose with the addition to the clause that the licensee undertake to “exploit the Products within the Territory to the best advantage of the parties.” The licensee had not succeeded in selling, under the licensed mark, some of the specified goods included within the defined term “Products”. The licensor alleged that since the licensee had not done so, the licensee was in breach of the provision.

What is unusual about this provision? At least two issues come to mind. The first is the use of the term “exploit” (a term more typically found in connection a patent licence) regarding the licensee’s undertaking, as opposed to a term such as “use”. This is especially so, since the term “use” appears elsewhere in the same clause. Does “exploit” mean something other than “use”; if so, what is the difference in meaning between the two terms?

The second issue is the reference to the requirement that the "exploitation be for the “best advantage of the parties.” There is extensive case law and commentary on terms such as “best efforts”, “best endeavours”, “reasonable efforts”, “reasonable endeavours”, and the like, as a self-contained undertaking in a licensing agreement. It is unusual, however, to speak of the “best advantage of the parties”.

To cut to the chase: What is the significance of linking the obligation to “exploit” the mark with a performance criterion defined as the "best advantage of the parties", especially when the meaning of the first term is uncertain and the use of the second term is unusual to an extreme? It is no surprise therefore that the court could not agree on the meaning of the provision.

The majority view of the court of appeal reasoned that no breach had occurred. The licensee was not obliged to use the licensed marks in the event that no market exists for some goods, or that there was no profit to be made with respect to such goods. The majority also rejected the claim that use is required to protect the mark against a claim of non-use of the trade mark. There were other ways within the scope of the agreement to avoid a non-use claim. As well, reference was made to the opinion of the trial court, most notably the original parties to the agreement had recognized the risk that the products might not find a market and that there was a separate right of termination for failure to meet minimum sales (as opposed to termination for no sales with respect to a given product category).

The minority view took a different approach. It focused on the meaning of the word ”exploit”, which it construed as requiring something more extensive than mere “use” of the marks. The requirement that “exploitation” be for “the best advantage of the parties” did not detract from this undertaking, since selling the goods would clearly be to the advantage of both parties. The failure of the licensee to do so was a breach of this undertaking.

Trademark Licenses Can Be Quixotic Too

When confronted with these incompatible constructions of the meaning of the clause, two points come to mind.

First, stick to conventional words and terms when drafting. Within the context of a trademark license, a term such as “use” may cause less difficulty in construction than the the term “exploit”. Even better, provide for a specific description of the intended uses of the mark. The admonition is even stronger when a starkly unconventional term as “best advantage of the parties” is relied upon. Here, as well, specific standards of performance are preferable.

Second, pay close attention to the structure of the license agreement. The terms of the grant, and the measure of the licensee’s performance, are separate and distinct issues. First set out the permitted kinds activities; secondly (and separately), define the performance standards. As was graphically brought home in the Pacific Brands case, conflation of the two provisions only result in uncertainty, if not worse.

Wednesday 18 November 2009

Maximising IP and Intangible Assets: new report

IP Finance has recently received information concerning the new paper from Athena Alliance, Maximizing Intellectual Property and Intangible Assets: Case Studies in Intangible Asset Finance. This report may be accessed from Athena's website here, in html and pdf versions) and on Ken Jarboe's weblog The Intangible Economy. According to Ken,
"The paper looks at how, as innovative companies struggle to raise funds, intellectual property and intangible assets are providing alternative ways of financing innovation. The report outlines increasing, but still nascent, means of financing innovation based on these assets in public, private and venture capital markets. As industry has invested capital in research and development to develop new technology and advance other creative activities, intellectual capital has become a valuable asset class, according to the paper. In response, firms specializing in intangible-based financing are springing up, using them to raise capital for the next round of innovation.

The report details equity, equity-debt, debt, and sale-leaseback transactions, both private and public, that have helped companies raise capital, based on careful, rigorous analysis and conservative underwriting standards. For example, the author notes that in 2000, there were two public deals using royalty securitization, raising $145 million. In 2007-08, $3.3 billion was raised in 19 deals.

Unlike some of the exotic financial vehicles, however, the financial products discussed in this paper are some of the most basic financing mechanisms in business. The innovation is in recognizing the value of intangible assets for corporate finance. These new financial firms are using traditional financial techniques in new ways to help innovative companies.

As a case study paper, the report does not get heavily into policy recommendations but builds on earlier Athena Alliance papers, notably Intangible Asset Monetization: The Promise and the Reality. The report does discuss that the important step would be developing sound, industry-wide, underwriting standards .... For example, Small Business Administration (SBA) rules permit its loans to be used for acquisition of intangible assets when buying on-going businesses. However, it appears that the rules are unclear on whether those assets can be used as collateral. The paper recommends that SBA work with commercial lenders to develop standards for using intangible assets as collateral".
Ken asks that this paper be given some airing, so that he can receive the benefit of readers' comments. You can email him here.

Tuesday 17 November 2009

Bloomberg v The New York Times: Who Will Provide the Contents?

While academics (particularly the U.S. kind) continue to engage in the "high protection/low protection" struggle for the Ivory Tower soul-of-copyright theory, a quite a different struggle is taking place at the level of journalism and the contents they they provide to the public. There, the matter is, quite simply, one of business survival. "Who shall live and who shall die", in the words of the liturgy.

An interesting angle on this struggle was described in the Sunday, November 15 edition of (and summarized on the New York Times podcast--"Weekend Business"). Entitled "At Bloomberg, Modest Strategy to Rule the World", the piece by Stephanie Clifford and Julie Creswell chronicles the efforts of Bloomberg L.P. to become quite simply, in the words of Andrew Lack of the company, to become "the world's most influential news organization."

Heady aspirations indeed. From its beginnings in 1981 through to its place as the leading purveyor of financial information via the eponymous "Bloomberg terminal", this highly profitable company has branched out into tv and radio, and also the print media (as well as seeing its founder--Michael Bloomberg--recently elected for a third term as mayor of New York City). In particular, their recent acquisition of the venerable magazine Business Week signals an intention to expand their audience and readership as well as to try and resuscitate the declining, if still iconic, publication.

I have to admit: I am a podcast addict of Bloomberg programmes; I find the formula of interviews across a wide spectrum of business and related topics to be an attractive way to remain current on significant issues. I also listen to several daily New York Times podcasts. As well, since 1981, I have been a subscriber of Business Week. This means that there is a kind of personal engagement in these contents that drew my special attention to the New York Times piece.

And so the speculation: In light of their efforts, how does Bloomberg stack up with the paragon of old media, the New York Times? Strictly speaking, the two are not precisely rivals, since one could argue that Bloomberg is primarily a business-related enterprise, while the New York Times is a full-content newspaper. That said, a senior Bloomberg official referred to The Economist as the model for a revamped Business Week. If so, the comparison seems more direct and more compelling. So here are my thoughts.

1. The case in favour of Bloomberg seems to be based on the premise that Bloomberg has the crucial advantage--ready cash. While the New York Times, and the print media more generally, struggle cash-wise, Bloomberg seemingly can throw oodles of the stuff at achieving its publishing dreams. One proof of this is reported hiring binge of journalists by Bloomberg, while the New York Times has been reducing its staff.

Will Cash Be King in the World of Journalism?

2. On the other hand, the New York Times is first and foremost a journalistic enterprise, primarily in print form, and more hesitatingly in the online environment. It excels in content, albeit frequently with an noticeable editorial slant. Never a great money-maker even in the best of times, it is struggling to stay afloat in the current economic climate.

3. The upshot is that Bloomberg is betting that being able to make use of the ample cash being thrown off from its content business will provide the basis for establishing an equally dominant position in the world of journalistic contents. That remains to be seen: Money will certainly help, but it is hardly a guarantee of ultimate success. As the phrase goes, "one way to make a small fortune is to spend a large fortune."

4. As for the New York Times, quality content may or may not be enough to succeed commercially in an increasingly online world, where "free" is the reader's expectation, if not the norm. The ability of the New York Times to monetize its content in a world where advertising plays a smaller and smaller role can only be described as challenging.

5. And so a thought: If Bloomberg has the cash, but uncertain capabilities in contents, while the New York Times is exactly in the opposite position, why not have Bloomberg simply acquire the New York Times? This is what another media giant-Rupert Murdoch--has done with his purchase of the Wall Street Journal. "Nonsense", you might say, and that is fair enough. But if so, what alternative suggestions do you have for Bloomberg and the New York Times? After all, quality journalism that is commercially robust is in everyone's interest.

Monday 16 November 2009

But how much does piracy really cost?

Last Monday Intellectual Property Watch posted this item on a subject very close to my heart. Penned by Catherine Saez, "Panel Calls For Disclosure Of Industry Methodology Assessing Losses To Piracy" raises the issue of greater transparency in the evaluation of piracy and assessments of broader social implications -- decades after industry victim self-assessments of loss were first offered as arguments for tougher laws and more cogent means of enforcing them. According to Ms Seaz's report:
"Co-organised by the International Centre for Trade and Sustainable Development (ICTSD) and the Social Science Research Council (SSRC), the event presented the findings of recent research on piracy and IP enforcement in developing countries. The event was held during the 2-4 November World Intellectual Property Organization (WIPO) Advisory Committee on Enforcement.

SSRC presented a research project focused on copyright piracy involving 25 researchers in seven countries and aimed at providing empirical research on piracy.

Industry research has “owned” the debate for a number of years, said Joe Karaganis, program director for media and democracy at SSRC. In the field of copyright, research is difficult and requires a global network, which is accessible by the copyright industry.

The research project seeks to bring the developing country perspective into a serious debate on developed country losses, primarily losses in the United States due to piracy outside the US.

Karaganis noted that piracy also has obvious social benefits, which explains its persistence. In developing countries, piracy is often the primary means to access media goods.

SSRC has concerns about the integrity of industry research, said Karaganis, although there are genuine and valuable research projects in the industry. There is a need for industry research to be documented, to know the inputs used by industry and its methodology, he said, as more transparency in the process would add credibility to the results. SSRC recommended that WIPO put pressure on industry to display their research methodology. ...

In organising this event, ICTSD said it considered Recommendation 45 of the WIPO Development Agenda, which calls for members “to approach intellectual property enforcement in the context of broader societal interests and especially development oriented concerns,” in accordance with Article 7 of the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement".
IP Finance will be watching this debate closely, since this author feels that transparency is valuable on both sides. If, for example, the figures are clearly demonstrated to relate to loss of sale of legitimate product at the factory gate, at wholesale level or at retail prices, the sums are very different. Likewise there are issues of potential double-accounting when the same counterfeit item incorporates a multiplicity of IP rights. It is also helpful to look at the loss to the revenues and the damage caused to the fabric of society by the importation, purchase and consumption of counterfeit goods. The cost-benefit analysis is quite different in respect of different types of goods: fake fashionwear is one thing, useless HIV medicines are another.

Thursday 12 November 2009

Carrefour, Brands and the Russian Market;

I can think of no greater branding challenge than seeking to establish a transnational presence in the retail chain space. Even the 800lb gorilla --Wal-Mart--has not succeeded in establishing a dominant position in each of the national markets which it has sought to enter. The reason is not difficult to fathom. When compared with the difficulties in marketing a single branded product in a new jurisdiction, the requirements for successfully establishing a large-scale retail service brand in a new country are exponentially greater.

Thousands of products of inventory, ranging from perishable food to home furnishings, have to be purchased and made available to customers, real estate sites need to be carefully selected, pricing has to walk a tightrope between being competitive and being profitable, cultural differences have to be addressed, and managerial and on-the-floor service has to be constantly maintained. It is often a wonder that large retail chains can succeed at all across diverse regional settings.

That said, I was struck (even thunderstruck) by the announcement in mid-October that the giant French-based retailer Carrefour here was pulling out the Russian market. Just to keep the size of the company in perspective, it is the second largest retailer in the world (behind Wal-Mart) and racked up sales of nearly $36 billion dollars for Q3 2009. Nor do they shy away from adventurous markets. Nearly half a decade ago, my daughter found herself temporarily working at a Carrefour store in far Western China.

Against that backdrop, the compressed rise and apparent fall of Carrefour in Russia is noteworthy. As reported on the website on October 17, in an article entitled "French Retailer to Close its Russian Stores" under the by-line of Matthew Saltmarsh and Andrew Kramer, Carrefour opened its first hypermarket in Moscow in June 2009. A second store was opened on September 10, 2009, in a city called Krasnodar. The announcement of that opening, as reported on, was careful to add that it was being done "in line with the agreement concluded with the Administration of the Krasnodar region."

And yet, slightly more than one month later, the company announced (albeit apparently "buried ... in a trading update") that the closure was taking place because of an "absence of sufficient organic growth prospects and acquisition opportunities in the short and medium term that would have allowed Carrefour to attain a position of leadership." This is quite remarkable. We are not talking about closing a 180 square meter corner grocery, but rather two facilities, each of which was over 86,000 square feet. Moreover, we are not talking about a gradual phase-out of the facilities, but rather what appears an exodus of Biblical proportions. If there is any recent precedent for a retail pull-back of this size and alacrity from a entire national jurisdiction, I am not aware of it.

Coming and Going in Russia

Oversaturation of the Moscow market, limited growth possibilities elsewhere in the country, a difficult consumer ethos, a deteriorating economic environment, endemic red-tape and even corruption (recall the role of the Administration of the Krasnodar region in the opening of the second Carrefour megastore) all seem to have played a part. Still, these factors did not suddenly come together like a perfect storm only between June and October of this year. If these were factors contributing to the debacle, surely they must have been present, in whole or in part, before the summer 2009. If so, it sure sounds like someone was asleep at the wheel at company headquarters.

And now for the branding question: will the apparently ignominious withdrawal from Russia affect the transnational value of the Carrefour brand? I suspect that the answer is no. Mega-retailing is far more local than international. Still, this is a double-edged sword.

On the one hand, there is likely little added value to the Carrefour name per se when the company seeks to enter a new market. True, the size and recognition of the chain may ease the initial entry into a jurisdiction, but ultimate commercial success, and the resulting goodwill in the brand, must be earned. This seems quite different from the introduction of, for example, a MacDonald's chain into a new country, where the transnational goodwill preceding entry will likely be of assistance.

On the other hand, a local failure will not materially affect the overall value and goodwill of the brand. What happened in Russia will not likely cause an impairment of the Carrefour brand in France--the markets are separate and distinct . Despite globalization, digitization, and the growth of famous marks, for most brands the territoriality notion of trade marks is not merely of legal significance, but of commercial import as well.

IP Australia's IP tax advice

IP Australia's IP Toolbox offers a really useful page full of information concerning the tax implications for various IP regimes. Apart from breaking down current tax breaks and liabilities by (i) type of intellectual property right or product and (ii) species of tax, it also supplies information as to local variations in taxes across the different states. Considering that there are three sets of variables at play here, this page may just come in handy to anyone considering how, or where, to start an IP-based business in Australia.

Monday 9 November 2009

"Let's rumble ..." but how much is it worth?

From Lee Curtis (Harrison Goddard Foote) comes this link to a trade mark which is reputed to have netted its owner Michael Buffer $400 million: the catchphrase slogan "Let's get ready to rumble". The phrase is apparently used at the beginning of boxing and wrestling matches. The same catchphrase is registered in the United Kingdom, for services in Class 35 (Advertising and promotion) and Class 41 (Cultural activities; radio, television, film, music, video and theatre entertainment services; master of ceremonies services; acting and voice-over services) in the name of Ready to Rumble, Inc.

IP Finance wonders whether this trade mark is quite such a valuable business asset in Europe. In particular, is the use of the same phrase by another person when announcing the commencement of a boxing match a 'trade mark use' which can even constitute an infringement? Would the consumer even consider that the phrase, though associated with Buffer, had the quality of a trade mark? Does it truly cause the consumer to believe that a service is being supplied by someone other than the trade mark owner? What if the voice-over had the voice of a woman, a child or a person with a national or regional accent that was manifestly not that of Buffer himself?

Saturday 7 November 2009

The Vegemite/iSnack Trade Mark Saga Down Under: Fiasco or Triumph?

I have always wondered to what extent there is really no such thing as a good trade mark; at the most, there are bad trade marks that you simply wish to avoid. By this I mean that, as long as a trade mark passes muster legally, such that no one can challenge it as being too descriptive, and no third party can assert rights against the mark: it does not really matter at the end of the day what the precise mark actually is.

I thought about this question in reading an article that appeared on 3 November on Entitled "Vegemite Contest Draws Protests", under the byline of Meraiah Foley, the article describes a chain of events that began in July 2009 in connection with finding a name for a new variety of Australia's most distinctive food product--Vegemite. This product is described by the article as "salty, gooey yeast beloved millions of Australians", akin to that icon of the English breakfast table--Marmite. Akin perhaps, but in the eyes (palate?) of millions of Australians, Marmite is clearly inferior to their beloved Vegemite.

I have to admit--I have never understood the culinary attraction of Marmite, which means that I would probably also find Vegemite difficult to swallow. Perhaps the secret of Vegemite is a mix of culture and timing. As observed in the article, well-known Sydney chef Bill Granger observed that "Australian food was really bad until the 1970s: boiled meat and vegetables without any butter or salt. Vegemite was one of the things that actually had any flavor, and that's why it became so incredibly popular It is one of the only foods that is unique to Australia, and people see it as being quintessentially Australian." Whatever the reason, it seems that Vegemite has itself become an icon of Australian food products.

So what does any of this have to do with trade marks? It seems that the producer of Vegemite, Kraft Foods Australia, sought to launch a new variety of the Marmite product (mixed with cream cheese) by means of a contest to find a name for the gooey delight. To this end, Kraft caused jars and jars of the new product to appear on Australian supermarket shelves, with the words "Name Me" on the label. Weeks passed, and more than 3 million jars were sold (1 jar for nearly each 7th denizen of Australia), the product still remaining nameless. On 26 September, Kraft announced the winner via an expensive ad slot that appeared on the televised finals of the Australian football league--"Vegemite iSnack 2.0".

Now I would have thought that with the naming of the new product, the Vegemite business would return to normal. Au contraire. Anger poured in from all directions, inlcuding Facebook, Twitter, and a dedicated website (called "Names that are better than iSnack 2.0"). One online commentator called for the 27-year old designer who had come with the winning name to be "run naked through the streets of Sydney 'as retribution for his cultural crime' ". Another commentator simply said that the name was "un-Australian".

Kraft's reaction (or retribution) was soon to arrive. Four days later it announced that it was putting the name up for a re-vote. The ultimate winner, selected from an online and telephone poll, was --"Cheesybite." Product with the new name will appear on the shelf in a few months, after all of the jars with the "iSnack 2.0" name are sold.

Where Did You Hide the Cheesybite?

A public relations and marketing disaster for Kraft, no? Well, it it is not clear. As for the impact on Kraft's bottom line, the results were in fact spectacularly good. Sales for the "iSnack 2.0"-branded product rose 47% during the first two weeks of sales, while the sales of the original Vegemite product remained unaffected. In other words, Kraft actually increased sales for the Vegemite line. As well, the fact that the product had reached approximately 15% of all Australian households was a marketing achievement that brand managers usually only dream about.

There are those, especially with a conspiratorial bent, who seem convinced that Kraft planned the entire operation as a way of getting the consumers' attention amidst a cluttered and competitive supermarket environment. I rather doubt that, although Kraft's rapid response to the public outcry and subsequent revetting of the name must be applauded as an especially market-savvy move.Getting back to the question I raised at the beginning of this blog post--is there such a thing as a bad trade mark? I guess the answer, based on the Vegemite 'iSnack 2.0" experience, is both "yes" and "no."

On the one hand, the original mark per se seems to have been a bad marketing ploy, taking Australian culture and sensibilities into account. On the other hand, the trade mark issue was quickly resolved, the issue quickly disappeared, and Kraft does not seem to have suffered any harm to its business. So does, or does the mark, not matter? For the last word, I bring the words of Professor of Marketing, Paul Harrison, from Deakin University in Melbourne: "If people like the taste of it, they'll keep buying it--if they don't, they won't. Ultimately, you don't want people thinking too much about your brand, you want people to become habitual about it."

Friday 6 November 2009

Funding and the Fortunes of IP Litigation: forthcoming event

There's an attractive event coming up on 9 February 2010: it's "Funding and the Fortunes of Intellectual Property Litigation", another in the series of 11am to 3pm seminars held under the auspices of barristers' chambers Hardwicke (Lincoln's Inn, London, which is where the event will be held).

At £50 plus VAT, this is a very reasonably priced way to pick up some useful information, do a spot of networking, enjoy a tasty lunch and acquire 3 CPD points. Speakers are Elizabeth Gutteridge (Deloittes) on , financial remedies, Mark Engelman (Hardwicke) on third party funding arrangements before and after the Jackson Review and Mick Smith (Calunius Capital) on the risks and mechanics of IP insurance. IPKat team member Jeremy is in the chair. For full details and registration click here.

Wednesday 4 November 2009

Open Source and Biotechnology: Whither or Whether Ideology?

I venture to say that most of us are well aware of the fault lines between proprietary and open source software. Proprietary software is characterized by keeping source code secret together with contractual restrictions on the use of the software, plus a reliance on the negative right aspects of copyright and other relevant IP law. Open source, to the contrary, rests on collaborative development and disclosure of source code, subject to various terms and conditions.

Less well-known is the effort to adopt the open source model to subject matter other than computer software. A particularly interesting effort in this regard is the use of open source principles in connection with biotechnology. A useful summary can be found in an article by the prolific and distinguished Professor Robin Feldman (left) of the University of California Hastings College of Law and Kris Nelson (a member of the Class of 2009 of the same school) that appeared in the Fall 2008 issue of the Northwestern Journal of Technology and Intellectual Property, "Open Source, Open Access, and Open Transfer: Market Approaches to Research Bottlenecks."

The authors discuss what they call Open Source Technology and Open Science. While the proponents of these variations of open source software are aware of the differences between the underlying subject-matter of software and biotechnology respectively, there appears to be a belief that that there is enough common ground to speak of both areas in a roughly similar fashion.With respect to Open Source Technology, there are two general categories. The first is described as focusing on bioinformatics ("the application of computer software and methodologies to solve biological problems"). The second category is marked by a move from the specific focus of the software interface to an effort "to ensure that the biotechnology tools required for research and innovation are openly available."

In particular, this second category centres on solving biotech-related problems in what the authors call "underserved communities." By this the authors mean communities with limited financial resources, with the result that there is an inability "to navigate the maze of patent rights and licensing necessary to engage in the targeted research." Stated otherwise, this approach intended to enable projects to deal successfully with the daunting problem of patent thickets.

Examples of projects of this kind are: (i) the HapMap Project here (a multi-country project researching genetic differences, with the goal of a certain mapping the human genome); (ii) CAMBIA here (expanding access to biological research, with a focus on disadvantaged communities); and (iii) the Public Patent Foundation here (aimed at solving the problem of patent thickets by establishing patent pools with open accessible patent rights to the participants of the program).
The authors point out several salient differences between Open Source licensing and the biotech variety:

1. Open Science is based on patent rights, which will sooner or later become public knowledge at some point. The same cannot be said of software under Open Source.

2. The resource requirements of Open Science, with an emphasis on sophisticated lab equipment, favor large organizations.

3. The very fact that Open Science is based on patent rights, while Open Source is based on copyright, means that each arrangement will reflect that particular aspects of the underlying legal right.
The authors conclude, with perhaps a tinge of understatement, that "Open Science Systems have not always matched their initial expectations." Perhaps the problem lies in the expectations themselves. When one considers the history of open source software, one is struck by the unique combination of ideology and technology that came together to forge "the movement". It is not at at all clear that this combination exists with respect to biotechnology, with the possible result that ideology may be the driving force, sometimes in an exaggerated and less than helpful fashion. That said, I have virtually no direct experience with open source arrangements in the biotech context. Perhaps my own views on the subject are themselves driven by my own ideological predilection on the subject.

Monday 2 November 2009

Will the sci-fi franchise continue?

Will we yet see more Terminator movies? The Financial Times reported on the weekend that the rights to the Terminator film franchise will be auctioned this month. The rights are being sold by Halcyon, the production company behind Terminator Salvation, the latest instalment in the Terminator series which grossed $380m worldwide. For more information, see also here.

Sunday 1 November 2009

Disney: Is It about Contents, Distribution, or Branding?

Way back, in the 17th century, when proto-copyright regimes were beginning to take shape, authors and publishers groped with finding models that could successfully marry the creation of contents with the means of distribution and sale of such contents. The struggle between contents and distribution remains unabated to this day.

I was reminded of this when I read a brief piece that appeared on October 25th in Entiltled "Disney boss tells Hollywood to rewrite script", the article summarized an interview conducted by the Financial Times with Bob Iger, the chief executive of Disney. Iger's message was stark: the film business, i.e., the business model on which the film business rests, is "changing right before our eyes". As a result, "if we don't adapt to the change there won't be a business." In particular, the sale of DVDs, the mainstay of the film business over the last decade, has been on a steady decline and no alternative platform, including digital distribution, has yet emerged to take its place.

That said, Iger listed the following measures that Disney was taking to steady the Disney film business. They include the following:

1. Cost-cutting--A the direct Disney level, a reexamination of costs at both the production and marketing level, with an emphasis on R&D and risk-taking, together with a cut-back at Miramax studio.

2,. Outsourcing--Entering into a distribution agreement with Steven Spielberg's DreamWork studo, whereby DreamWork would apply the content and internalize the costs of film production.

3. New technologies -- For instance, next month will launch Keychest, a technology that will enable a person to store digital copies of films in a remote location with the capability to move the digitized film across multiple platforms, such as smart phones and games consoles.

4. Acquisitions--In early September, Disney announced agreement to purchase Marvel Entertainment, including its successful stable superheros, for an amount of $4bn, thereby seeking to reach out a different type of film viewer than is currently likely to view at Disney film, as well to possibly to expand the themes offered at the Disney entertainment parks.

5. Cultivating non-American Tastes-- Next week will see the launch of the movie Book of Masters, a film made explicitly for Russian a audience. ("We would not be able to grow the Disney brand ... if we just created product in the US and exported it to the rest of the world", said Mr. Iger).

I think that I need to have a word with my MBA students about all of this, because I am having a bit of difficulty finding a coherent alternative business model in the steps that were described. The "cost-cutting", "outsourcing" and "acquisitions" activities suggest that Disney is viewing itself less as a home-grown content creation company and more of an aggregator of contents developed both in-house and increasingly by third parties.

Plenty of Room for Contents

"Cultivating non-US tastes" certainly seems sensible, since the consensus is that the major drivers of growth will be developing national markets, such as Russia. But cracking such markets will involve making the right choices of content about foreign tastes and finding the appropriate price points for the various overseas markets. Here, as well, it seems that these contents will not likely be home-grown, putting further pressure on Disney's ability as a content aggregator.

The development of "new technologies" seems interesting, but no more. Enabling remote access to a plurality of delivery platforms sounds like an effort to take advantage of the cloud computing model. Disney, however, does not seem to be a likely candidate to be a leader in the cloud environment, such that exactly how much the Keychest technology will mark a sea-change (or even a mild sea-ripple), remains uncertain.

When I think about all of this, it seems to me that in truth Disney is going back to its most basic strength--its brand. While the article focuses on the classic challenge of contents versus distribution in monetizing works of creation, what really lies behind the measures described in a strategy to find various ways to strengthen the overall Disney brand. After all, it is the Disney brand that gives the company its unique position in the entertainment world. And of course, it is the brand that is Disney's to lose, if they get it wrong.