FAST, PIPCU and the IWL: encouraging, but not enough

"FAST welcomes move to restrict ad revenue for pirate sites: PIPCU establishes advertising take down scheme" is the excited headline of a media release that recently tumbled into this blogger's in-box. The release reads as follows:

The Federation Against Software Theft (FAST) has applauded an initiative launched by the Police Intellectual Property Crime Unit (PIPCU), which hopes to starve pirate websites of advertising revenue, making these outfits unprofitable.

PIPCU is funded by the Department for Business, Innovation and Skills and run by the City of London Police to combat IP crimes. Established in 2013, the unit has been instrumental in orchestrating the take down of numerous illicit sites.

Its latest initiative, the Infringing Website List (IWL), will see it working closely with advertisers and the industry to starve pirate sites of the oxygen that is advertising revenue. The IWL is an online portal providing the digital advertising sector with an up-to-date list of copyright infringing sites, as identified by the creative industries and evidenced and verified by the City of London Police unit, so that advertisers can cease placing adverts on these sites.

An initial pilot saw an encouraging trend, with a 12 per cent reduction from major household brands on the identified illegal sites. The pilot also revealed that 46 per cent of ads served to the sites clicked through to fraudulent scams. ..."

While any approach to online piracy that seeks to reduce the volume of advertising revenue enjoyed by pirates is to be welcomed, this blogger doubts whether this approach will even come close to making the sort of inroads into online piracy that will make the business an unattractive proposition.  He would also like to see more attention focused on the banks and credit card companies which receive the monies paid to pirates by IP-owning advertisers, other pirates and consumers alike.  Perhaps if they were to become jointly liable with their pirate clients for acts of online piracy they might make a better job of the sort of due diligence that is so manifestly inadequate today.  Does anyone know how much profit the world's major banking and financial institutions earn from pirate clients? It would be good to know.

Parties interested in signing up to the IWL can email PIPCUIWL@cityoflondon.police.uk

Looking for a challenge? Here's the Project Hatchling innovation competition

Here's something that might appeal to some of the IP Finance weblog's more technically imaginative and commercially savvy readers -- despite the use of the cliched and now obsolescent electric light bulb in the logo on the right:

Project Hatchling 

A new innovation competition open to all inventors and entrepreneurs who have an idea for a brand new product has been launched.  Coller IP, specialists in helping organisations protect, understand, value and commercialise their intangible assets, is working in conjunction with  D2M Innovation, Brand Refinery, and The Turtle MatCompany to set the ball rolling.  Free to enter, the competition winner will receive the support of the competition partners to develop, protect, market and sell their product.

Project Hatchling is an innovation competition open to all inventors and entrepreneurs over 18 and resident in the UK who think that they might have a good idea for a consumer product that could extend the Turtle Mat product family of home furnishings.

The competition will run over three months, opening for entries in early April and culminating in a ‘Dragon’s Den’ style pitch day where the shortlisted entrants will be invited to tell the panel of judges why they believe their idea is the best to partner with. The successful entrant will gain valuable support, commercialising their idea with exposure of their product through Turtle Mats’ distribution network, which includes several major retailers and the customer base of over 80,000 [this appears to be the prize, though the p-word isn't used on the competition website]. Says Jackie Maguire, CEO, Coller IP:

“Project Hatchling is all about giving entrepreneurs and inventors the chance to see their product become a commercial reality.  We are all keen to encourage and stimulate UK entrepreneurship and the winning candidate will receive the support of the professional partners to develop, market and sell their product, including IP advice and a direct consumer channel to bring the product to market.  Our partners have strategic links with major high-street retailers and can provide marketing help to ensure rapid promotion and success for the winning new concept.   

Too often in the product development process, key skills in marketing, manufacturing and idea protection are lacking, significantly affecting the chances of success. It is hoped that collaboration between our team and the competition winner, these risks will be reduced and the chances of success increased.”

Phil Staunton , Managing Director,  D2M Innovation said, 

"We are expecting two types of people to enter.  Firstly, people who have developed and protected concepts that are likely to appeal to Turtle's Mats customer base and would benefit from our support to get their product manufactured and in front of the nation's top retailers. And secondly, innovative thinkers who are inspired to think up new ideas to meet the brief appealing to the specified consumer."

For full details see http://www.projecthatchling.co.uk/

The Terms and Conditions advise entrants to obtain guidance on whether their ideas are patentable before entering the competition. further,

In the event that you win the Competition, you acknowledge that Turtle Mat reserves the right to launch the product within a timeframe as deemed appropriate to them 

You are free to make your submission and do not knowingly infringe the copyright or other intellectual property rights of any third party.

You agree that the Project Hatchling team may contact me for additional information and/or samples/prototypes if applicable, or to discuss ways in which their services may support the development of your product in the future.

In the event that you win the Competition, you acknowledge that Turtle Mat reserves the right to rebrand, change the marketing route, and/or adapt the product to make it more marketable or commercially viable.

In the event that you win the Competition, you acknowledge that Turtle Mat reserves the right to market the product where it deems most appropriate.

Duly noted.  This blog will watch with interest to see what happens, and hopes to find out how the funding of the product launch will be handled.

Patent Trolls Coming Soon to the Bio-pharmaceutical Industry--and a Roadmap?

In a recent article titled “Patent Trolling: Why Bio and Pharmaceuticals Are at Risk”, Professor Robin Feldman of University of California, Hastings College of Law, and W. Nicholson Price II, Fellow at Harvard Law School, argue that so-called patent trolling is likely to develop in the bio-pharmaceutical industry.  The authors examine the biotechnology patent portfolios of five major universities and find many patents that could be used against players in the relevant industry.  Monetization anyone?  Notably, the authors state:

In deciding whether to undertake this analysis, we lost sleep over whether the potential for harm outweighed the potential benefit. If reform efforts are not undertaken, our work could do no more than provide a handy road map for those who would follow. However, with scattered anecdotal evidence suggesting that monetization is moving into biopharmaceuticals, life sciences trolling is predictable and in its infancy. If reforms are implemented before the problem proliferates, legislators and regulators could cabin the activity before it becomes deeply entrenched and too much harm occurs.

I think the authors’ concerns are well-founded, but more information is always helpful.  The authors’ also note that “the Association of University Technology Managers recently announced that it was re-examining its policies that had recommended against transferring rights to non-practicing entities.”  Would anyone like to expand on any anecdotal evidence about monetization in the bio-pharmaceutical industry? 

In examining why “trolling” may occur in the bio-pharmaceutical industry, the article also explains:

There is much truth to the conventional wisdom. Biotechnology and pharmaceutical research does involve a greater investment of time, money and expertise. This results in fewer patents, fewer targets, and a longer lead time for problems to emerge. In addition, developments in product type and patent rules affect the opportunities for patent demands. Biotech and pharmaceutical products tend to have fewer components, and patents in the field tend to be less broad than the software and business method patents that proliferate in the technology industry.

However, the conventional wisdom suffers from three weaknesses. First, it ignores the role that regulation plays in making some pharmaceutical patents harder to invent around, thus raising the potential hold-up costs of what patents are available to monetize. Second, it assumes a classical model of patent bargaining, rather than the strategic bargaining and suit filing adopted by modern monetizers. Third, it assumes that monetizers will confine themselves to a relatively narrow set of technological targets; while high-tech may be low-hanging fruit, the proliferation and increasing sophistication of monetizers means that other industries are likely to be targeted in the near future.

The article goes on to discuss the specific patents held by five universities that could be used by “trolls.”  (Oh, my.  Now I am losing sleep over this blog post about the article.)  And, on to reform efforts and data, IP Finance reader Dr. Reuven K. Mouallem from Israel has sent me links to two of his papers on “patent trolls.”  One paper discusses the issue of “patent trolls” from the patent quality perspective and the second paper examines statistics/procedures from the USPTO, JPO and EPO that evidence quality problems. 

Trade mark valuation book in need of a reviewer

Apologies to readers of the jiplp weblog for the cross-post, but here's a task that might appeal to at least one reader of IP Finance. The Journal of Intellectual Property Law & Practice (JIPLP) is still seeking suitable reviewers for two books which were recently advertised as being available for review, one of which is this:

• Trademark Valuation: A Tool for Brand Management, 2nd Edition
Authors: Gordon V. Smith and Susan M. Richey
Publisher: Wiley

"The Second Edition of Trademark Valuation is a fresh presentation of basic valuation principles, together with important recent changes in worldwide financial reporting regulations and an update on the current worldwide legal conditions and litigation situation as they relate to trademarks.

A new section discussing issues surrounding valuation of counterfeits and the economic effects of trademark counterfeiting is included in this informative Second Edition."

Further information is available from the book's web page here

If you would like to be considered as a reviewer for this title, email Sarah Harris at sarah.harris@oup.com and let her know, by not later than close of play on Monday 24 March.

UK Budget & IP - a quick glance

On a quick skim through the Budget papers, IP tax impact of the Budget is as follows:

- R&D repayable tax credit for SMEs going up to 14.5% from 11% for expenditure on/after 1 April 2014: means the government will contribute (in effect) 32.625% of R&D expenditure for loss-making SMEs. Might be time-limited, as the Impact Note seems to suggest no cost to the Exchequer from 2016-17, but that might just be that they haven't worked out the figures.

- video games tax relief being tweaked to make it EU compliant, and to clarify that separate trade requirement is only for games for which relief is claimed. Similar point for tv relief - only programmes for which relief is claimed need to be treated as separate trades.

- theatrical production tax relief to be introduced, with consultation coming soon on the design of the relief (do any theatre companies actually make a profit for which they could get tax relief? I may be being cynical …)

- introducing an exemption from insurance premium tax for insuring certain risks relating to space satellites (the mind boggles …)

- update to tax rules to prevent duplicate capital gains relief on reinvestment of gains on disposal of tangible assets into the acquisition of an intangible fixed asset (pre-19th March 2014 claims to be adjusted when calculated future tax impact); there's arguably a drafting error in CTA 2009 that could lead to double tax relief, although HMRC are "confident that the courts would recognise [it] as a drafting error".

- R&D allowances to be excluded from the loss-buying anti-avoidance rules: sorting out a snafu in last year's Finance Act, rather than a radical change.

 - annual investment allowance going up to £500k until December 2015: applies to all businesses, not just those with IP. Mostly political posturing, as not all that many businesses spend more than the current £250k allowance on plant & machinery etc during the year (annual investment allowance enables expenditure on these items to be deducted in full on purchase, instead of being deducted in tranches over several years). When originally introduced, the allowance was £50k and was considered to cover the annual qualifying expenditure of over 95% of all UK businesses. So a £500k limit isn't going to make much difference to the majority of businesses.

- capital gains tax relief on reinvestment in SEIS shares will be made permanent: applies to all start-ups, and is intended to make investment more attractive (investors get income tax relief and capital gains tax relief on the investment).

- online (and other remote) gambling will be subject to UK gambling taxes if aimed at UK customers

How copyright affects mid-20th century works

"The Demand for Out-of-Print Works and Their (Un)Availability in Alternative Markets" is the title of the latest piece of published research by Professor Paul J. Heald (University of Illinois College of Law) and available on SSRN here. According to the abstract:

"Prior studies demonstrate the shocking unavailability of most books published in the 20th Century, prompting The Atlantic Monthly headline: "How Copyright Made Mid-Century Books Vanish". The unavailability of new editions of older works would be less problematic, however, if little consumer demand existed for those works. In addition, the lack of new editions would be much less troubling if the works were easily available in alternative forms or markets. Newly collected data provides evidence of the demand for out-of-print books and then charts the availability of out-of-print works in digital form (eBooks and .mp3), in used book stores, and in public libraries. The situation with books remains dismal, although music publishers on iTunes seem to be doing a much better job of digitizing older works and making them available than do book publishers. Some theories for this discrepancy are offered".

This blogger has had the pleasure of exchanging views with Paul Heald, who has done a considerable amount of work on the business of publishing and selling books that fall out of copyright (see eg here). In contrast with some academics who feel safest when dealing with purely theoretical issues and matters of economic or philosophical principle, Paul takes an acute interest in the world around him -- which is why the world around him should take an acute interest in him.

Out of Print: the movie here

Auctioning patent licences of university technology: does it make sense?

The patent auction industry has had its ups and downs as it continues to struggle with whether genuine markets for trading patents can be fashioned. An interesting variation of the patent auction theme was recently proposed by Penn State University, here, as reported on March 5, 2014 on managingip.com, here. According to the report, the university will conduct an auction of exclusive licences for the right to use (but not own) patents created by the university's College of Engineering. It is claimed that this auction, which will take place between March 31 and April 11, is the first of kind involving a university. Approximately 70 patents will be the subject of the licensing auction, focusing on fuel cell technology, acoustics and sensors. The auction will be conducted on the basis of a minimum opening bid, which will range from $5000 to $50,000. It is not entirely clear whether this wide differential in the opening bid reflects differences in the perceived commercial value of the patent or patents at issue, or it simply indicates that a single patent, rather than a bundle of patents, is the subject of the particular license. The rationale for the licence auction, as expressed by Mr Ron Huss, the university’s associate vice-president for research and technology transfer, is as follows:

“ ‘Penn State and other research universities typically have IP that has been marketed by their tech transfer offices but for a variety of reasons has not been picked up by a commercial entity and therefor sits on the proverbial shelf’, said in Huss in a statement. This auction is an effort to get our IP off of the shelf and in the hands of companies that can use the technology, at very favorable terms and price points. The buyers get the rights to use the IP, and the university gets a financial return. It’s a win-win situation.”

A somewhat different narrative explaining the rationale for the auction was given by Mr Neil Sharkey, Interim Vice President for Research. As reported in the Statement announcing the auction, here:

“the novel approach of an online auction was chosen in part to raise awareness among interested parties in business and industry that the University does have licenses available whose commercial applications could prove extremely valuable.” Further-- "[a]s a land-grant institution, Penn State has always strived to pursue research that has real-world impact," Sharkey said. "Our researchers have worked to develop IP that has the potential to add significant value to companies' products and services, but it has no value if people are not made aware of it."

I must confess to a degree of puzzlement about the planned auction. First, neither Huss nor Sharkey provide any compelling explanation why a licence auction will succeed in commercializing this technology where the university’s tech transfer department has apparently failed to do so. Indeed, one wonders whether the auction is a bit of a back-handed criticism of the effectiveness of the university’s tech transfer model. Then there is the licence agreement itself. When ownership of a patent is auctioned, such a sale of rights is a straight-forward disposition of legal rights. Not so with respect to a licence for the use of IP rights in general, and patent rights in particular.

As we all know, a proper patent licence is typically a multi-page document where the respective rights of the licensor and licensee are negotiated (sometimes more, sometimes less) against the backdrop of the particular circumstances of the transaction. Thus, the article states that ‘[t]he winners will have to sign a license agreement with the university.” If that is so, then what exactly is being auctioned with respect to the licence; is it akin to an option on being granted an exclusive licence or is something else intended? The article is not clear. Moreover, what is the process for ultimately negotiating the licence agreement? How much leeway does the winner of the auction have in negotiating the terms and conditions of the licence? Will the extent of this negotiating leeway be taken into account in the amount that the bidders will be prepared to offer? These and other questions cast a shadow on the expected degree of participation by the public and the expected monetary success of the auction. Still, the results of the action bear close attention to see if this auction model will have traction in the marketplace.