Guest Post: Professor Denoncourt's Event Report -- Intellectual property: meeting global business and technology challenges

IP Finance is very happy to offer our readers this guest post by Nottingham Law School professor Janice Denoncourt summarizing the high points of a Montreal Council on Foreign Relations event featuring Francis Gurry, outgoing Director General of WIPO.  

On 15 September 2020 the Montreal Council on Foreign Relations (CORIM) organised a fascinating 30 minute webinar with Francis Gurry, Director General, WIPO.  The event is part of CORIM’s Business Series Online accessible for a small fee of CAD $30.  “Who will finance Innovation?”  is the strapline of WIPO’s Global Innovation Index 2020 https://www.wipo.int/global_innovation_index/en/2020/.  Canada currently ranks 17th overall behind Japan and Ireland, retaining its position from last year, but well out of the top 10 where it aspires to be.

From Geneva, Gurry discussed emerging global business and technology challenges with moderator, Lally Rementilla.  Lally is well-known in the Canadian intellectual property (IP) backed finance world.  In July 2020 she was appointed Managing Partner, IP-Backed-Finance for BDC Capital (www.bdc.ca).      

By way of background, the Business Development Bank for Canada (BDC, French: Banque de Développement du Canada) is Canada’s bank for entrepreneurs.  It is wholly owned by the Government of Canada.    Jérôme Nycz, executive vice president at BDC Capital stated, “Our goal…is to make Canada a leader in the IP space.”  BDC Capital, the bank’s investment arm, has created a new CAD $160 million intellectual property (IP) development financing fund to support IP-rich companies who seek to commercialize their IP, increase their competitiveness and expand globally.  This BDC’s IP finance initiative is a positive reflection on Canada’s comprehensive 2018 National IP Strategy https://ic.gc.ca/eic/site/108.nsf/eng/home. 

The pair discussed several broad topics and set out below are the highlights.  

Rementilla asked for Gurry’s perspective on the role of IP rights in the new world order.  Gurry noted that a number of tendencies have been accelerated by Covid-19 virus and pandemic, not to mention worrisome trade wars and cyberwarfare, resulting in further complexity in the IP world.  Nevertheless, despite the gloom and doom ‘IP is a vector for collaboration’ said Gurry.  Indeed, 2.1% of the world’s global gross domestic product (GDP) is tied to research and development.  Gurry hopes that despite the decline in foreign direct investment, international collaboration in innovation will continue.  He cited the example of innovation hotspot Silicon Valley, where the majority of inventors are foreign.  

A key geopolitical change of course is the rise of Asia and in particular the People’s Republic of China (PRC) as a patent powerhouse.  Gurry noted that the PRC is buoyed by its national focus on IP leading to it overtaking the United States in filing patents overseas.  Indeed, I would add that the PRC announced earlier this year that it is preparing the outline for its second National IP strategy for the 2021-2013 period.  According to Gurry, a successful national IP strategy involves a focus ‘from the top’ on science, technology and innovation and further that ‘success comes when there is an awareness at the very top of the importance of protecting a nation’s competition advantage’. 

Turning to finance for IP-rich tech start-ups, Gurry surmised that ‘With a start-up you are basically backing an intangible asset’.  Further, as author of Intellectual Property, Finance and Corporate Governance (2018) I was delighted to hear that Gurry supports re-thinking the gaps in traditional accounting to better support valuation intangible IP rights.  In December 2019, I had the pleasure of attending a meeting with the BDC’s C-suite in Montreal alongside Lally and other IP experts.  I shared my views and IP in the boardroom research to raise awareness of the potential of IP-backed financing, which has now come to fruition.  

Gurry acknowledges that there are changing perceptions about IP rights.  However, he cautioned that the alternative, a scenario where no one uses IP rights, could lead to a lack of transparency.  The publication of patent information is ‘the most systematic record of humanity’s technology’, he said.   

In response to Professor Isolde Gendreau’s (Université de Montreal, Faculté de Droit) question regarding the potential for supra-national enforcement of IP rights, Gurry recognized that counterfeiting and piracy are now global issues.  These behaviors affect both developed and developing countries alike and require a global response.  Thus, WIPO’s focus is on ‘building respect for IP rights, rather than putting teenagers in jail’.  WIPO will look to ‘build capacity to take action internationally’. 

The CORIM webinar, ‘Intellectual property: meeting global business and technology challenges’ may have flown under the radar for many outside Canada.  However, it is a timely reminder of Gurry’s wisdom and contribution to the global IP landscape as WIPO’s Director-General since 2008.  His term will end this month. Join me in wishing him every success in the future. 

Dr Janice Denoncourt

Associate Professor

Nottingham Law School

Nottingham Trent University

Free Colloquium -- "Technological Progress, COVID-19 and the Future of Globalization"

VIT University Law School in Chennai, India is hosting a Zoom colloquium titled, “Technological Progress, COVID-19 and the Future of Globalization” on June 22 at 6:30 pm Indian Standard Time (6:00 am PST (California); 3:00 pm GMT+2 (Belgium) 9:00 pm GMT+8 (China)). The colloquium participants will offer their preliminary thoughts concerning issues ranging from intellectual property access to vaccine development and manufacturing to investment and the World Trade Organization.  Given the nature of the colloquium, we will not cover all potential issues.  However, a follow-up conference exploring these and additional issues in depth is tentatively scheduled for the Winter of 2020 or Spring of 2021 in Chennai. 

The participants in the Zoom colloquium include: Dean Gandhi Manimuthu (VIT Law); Mark Lemley (Stanford Law); Jim Chen (Michigan State Law); Martin Husovec (Tilburg University); Kirsten Schmalenbach (Univ. of Salzburg Law); Stephan Kirste (Univ. of Salzburg Law); Henrik Andersen (CBS Law); Liu Lina (Xi’an Jiaotong University); Prabash Ranjan (South Asian University); James Nedumpara (Indian Institute of Foreign Trade); Ana Rutchsman (St. Louis Law); Patrick Warto (Univ. of Salzburg Law); and Mike Mireles (Univ. of the Pacific, McGeorge Law).   If you are interested in participating via Zoom, please contact Mike Mireles at msmireles@gmail.com.  There are limited spots available.  Thank you!

IP Valuation for Investment Purposes -- Part 1

Here is the second post by Dr. Roya Ghafele.  It is the first part of a two part series on the importance of IP Valuation.  

IP valuation for Investment Purposes – Part 1

By Roya Ghafele, OxFirst Ltd. www.oxfirst.com

With the European Central Bank’s interest rate decision continuing to be at 0%, investors are forced to put their funds to work in different ways.  Can patents, the underlying rights to an invention, offer such an alternative? 

Any type of investment decision is hinged on an adequate appraisal of risk and return rates of an investment. Ideally, an investment yields high returns, while risk rates are kept as low as possible. The investment in intellectual property forms no exception to that.

The adequate valuation of intellectual property can hence play an important role in the promotion of technology markets. It is through this instrument that investors can make an educated placement of their funds. In spite of the instrumental role that IP valuation could assume, it is often ignored in the financial community. 

The problem does not seem to be that it is not possible to value IP for investment purposes or that IP has any intrinsic features that would prevent its valuation. The problem is a lack of awareness of the many opportunities provided by IP valuation. If investors have IP on their radar screen at all, then they tend to contend themselves with counting patents (apparently, the more, the better seems to be the premise) or to check if the company is involved in any legal proceedings. As to early stage technology companies, investors will at best consult a patent attorney who can undertake a freedom to operate analysis of the underlying patents of a technology. While such an assessment can provide helpful legal insights, it does not allow to understand how IP relates to potential business performance.

IP managers in technology companies on the other hand side do often also not know how to best communicate the value of patents to financial analysts, angel, VC or Private Equity Investors. Current accounting standards that allow to only partially reflect the value of patents do not make things easier.[1]  This leads to market inefficiencies, where valuable technology sits gathering dust, while investors are not able to scope potentially attractive financial opportunities. Already in 2014, the European Commission called for an enhanced usage of IP valuation as a means to better link those in search for funding with those eager to put their money to work.[2] Equally, the UK Intellectual Property Office launched an initiative inviting the City of London to ‘Bank on Intellectual Property.’ [3] Those initiatives have so far shown little results and the best practice for leveraging IP in financial transactions still seems to stem out of Silicon Valley, where some financial institutions have been reported to use IP valuation for investment purposes. [4]  Yet, institutions like these are the worthy exception, rather than the norm. 

So, with a lot to gain from overcoming the little understanding that prevails on IP valuation, the question arises what technology entrepreneurs can do to attract investors to their business.

I turn to this question in the part 2 of this comment, where I will seek to offer some practical tips that may help to better link IP to cash flows.

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[1]  GHAFELE, R. ‘Accounting for Intellectual Property?’ Oxford Journal on Intellectual Property Law & Practice, Nr. 5/7 2010, at 37

[2] EUROPEAN COMMISSION, Report of the Export Group on Intellectual Property Valuation. http://ec.europa.eu/research/innovation-union/pdf/Expert_Group_Report_on_Intellectual_Property_Valuation_IP_web_2.pdf  (2014) at 7, 22-23, 57, 91,

[3] UKIPO ‘Banking on Intellectual Property? The role of intellectual property and intangible assets in facilitating business finance’ available at: http://www.ipo.gov.uk/ipresearch-bankingip.pdf (2014) at 221

[4] See About Silicon Valley Bank, http://www.svb.com/about-silicon-valley-bank/ (disclosing that Silicon Valley Bank’s clients include 50% “of all venture capital-backed tech and life science companies in the US” and that Silicon Valley Bank was established in 1983).

China Sends a Message: Invest in Me

In recent posts (here and here), I have discussed China’s increased protection of intellectual property rights.  Recently, Ian Harvey, the chair of the IP Center Advisory Board at Tsinghua University x Lab in Beijing, sent me his excellent paper on China’s IP law.  Notably, his paper outlines how China’s enforcement of intellectual property has improved and does not deserve its past reputation.  Powerpoint slides relating to his paper are available, here. 

Recently, China’s Supreme People’s Court issued a ruling recognizing Michael Jordan’s rights to his name in Chinese characters.  This decision sends a powerful message both in China and outside China that intellectual property rights will be respected.  Importantly, this is the enforcement of IP rights that were arguably not secured by Michael Jordan in China and there are strong reliance interests by the Chinese company.  I believe the symbolic importance of this decision cannot be overstated.  Interestingly, there are more reports concerning venture capital moving from the United States to Europe and China because of recent developments in U.S. intellectual property law, such as the Alice decision. What will be Donald Trump's reaction?  For more on the decision, please see the New York Times article, Michael Jordan Owns Right to His Name in Chinese Characters, Too, Court Rules. 

1000 Angels hit the skies!

Today marks the launch of 1000 Angels -- billed as the world's largest digital-first, invitation-only network for select angel investors that are interested in venture investing. The idea is to allow members to build a venture portfolio free of management fees, carried interest, large capital commitments or unpredictable capital calls.

1000 Angels is launched by Onevest, whose ecosystem seeks to support founders and investors in building successful startups through crowdfunding of due diligence-checked offerings.

Let's keep an eye on 1000 Angels and see what it does (or rather, what they do) for the cash-hungry and ever-risky world of innovation finance. In our sector, even a thousand angels may not be enough!

The Debate about the U.S. Court of Appeals for the Federal Circuit Continues

Donald Dunner, one of the most respected advocates before the U.S. Court of Appeals for the Federal Circuit and partner at Finnegan Henderson, recently addressed Chief Judge Diane Wood’s (7th Circuit) criticism of the Federal Circuit.  His comments were recently published by the Federal Circuit Bar Association, here.  Dunner challenges Chief Judge Wood's arguments and states:

First, the specialist/generalist alternatives that she posits are reminiscent of the pre-Federal Circuit dialogue and the Rifkind comments to which the Meador proposal was expressly directed. While the Federal Circuit reviews almost all the patent appeals from the district courts and several other tribunals, and its judges develop meaningful expertise in patent law, it is by no means a specialist court. As I earlier noted, only four of the current active Federal Circuit judges had pre-judicial patent backgrounds and that has been true since the inception of the Court in 1982. It is also likely to continue to be true since even the patent bar is comfortable with the notion of having a limit on patent-trained judges on the Court. And the inclusion of many non-patent areas of review within the Court’s jurisdiction further minimizes the prospect that its judges will develop tunnel vision and become Egyptian Priest-like, as Judge Rifkind feared, or that they will never explain what the rules are or why one side or the other prevailed, as Chief Judge Wood fears.

Second, Judge Wood’s repeated focus on the complexity of patent appeals and on the fact that those appeals are no more complex than the non-patent appeals handled regularly by judges in the regional circuit courts is a strawman. The Federal Circuit was not established because it was felt that a special court was needed to deal with complex legal issues. If that was anyone’s concern, it was not vocalized loudly, and indeed I personally do not recall hearing of it -- and I was heavily involved in the events leading to the Court’s formation. On the contrary, the essential arguments in favor of the Court had to do with the widespread attitudinal differences between the circuit courts of appeals’ approach to patent law and the attendant lack of uniformity and predictability in their decision-making, leading to rampant forum shopping and the negative impact that had on corporate R&D decisions.

Third, Judge Wood’s concern about the need for percolation is understandable but not a reason to eliminate the Federal Circuit’s exclusive jurisdiction over patent appeals. For the fact is that the current Federal Circuit model generates a significant amount of percolation, not only in the not infrequent dissents from panel decisions but from the meaningful number of en banc decisions which generate their own meaningful number of dissents. These dissents, coupled with regularly filed amicus briefs and the not infrequent requests by the Supreme Court to the Solicitor General to provide recommendations as to whether Federal Circuit decisions should be reviewed by the Supreme Court, provide the diversity of views which Judge Wood feels is so important, without forfeiting the uniformity and predictability which was essentially non-existent before the establishment of the Federal Circuit.

Fourth, Chief Judge Wood’s observation that the lines between patent law and other areas of IP law are blurring and that there’s no reason why patent law should be singled out for special treatment ignores the fact that these other areas of IP  law were not faced with the problem of huge attitudinal differences between the regional circuits that led to massive forum shopping and a lack of predictability and uniformity in decision-making. As to the quality of Federal Circuit decision-making, which has been called into question by Judge Wood, it compares favorably to the quality of decision-making by the regional appellate courts. And that includes the two subject areas on which Judge Wood focuses: claim construction and obviousness. The Federal Circuit’s decision to make claim construction the province of the bench rather than the jury was affirmed by the Supreme Court in Markman. The Federal Circuit’s decision to adopt no deference appellate review of district court claim construction was adopted en banc in Cybor but has been subjected to an intra-court percolation process leading to the recently heard but yet undecided Lighting Ballast en banc review, providing exactly the percolation process with which Judge Wood is so concerned. As to obviousness, one can debate whether the Federal Circuit’s TSM (Teaching, Suggestion, Motivation) test was responsible for what Judge Wood characterizes as a “low” standard of obviousness resulting in “the thickets of patent rights on marginal improvements”, but I would suggest that the amorphous, ill-defined Supreme Court KSR framework is hardly conducive to generating a uniform and predictable body of law, the raison d’etre for the formation of the Federal Circuit. And the frequent Supreme Court review of Federal Circuit decisions has been the subject of multiple and varying explanations by Supreme Court experts, most of which have not focused on the lack of quality of Federal Circuit decisionmaking.

Which leads me to Judge Wood’s specific proposal for dealing with her concerns. Simply stated, it is in my view unworkable. Before the establishment of the Federal Circuit, the regional appellate courts were all over the lot in their attitudes toward patents, and because litigants had significant choices as between district courts in one or another circuit, subject only to venue and jurisdictional constraints, there not only was extensive forum shopping but little uniformity or predictability in litigation outcomes. Yet that is exactly what would happen under Chief Judge Wood’s proposed regime. While she provides a choice to litigants as between the Federal Circuit or the regional circuit in which their claim was first filed, there is little doubt that that choice would be made based on the same considerations applicable to the pre-Federal Circuit regime, namely which court is most favorable to the particular interests of the litigants. And the problem is compounded by the fact that at the district court level, before the choice of the appellate court is made, the district court would not know whose appellate jurisprudence to follow, not only on substantive but on procedural issues. As demonstrated by the pre-Federal Circuit experience, differences in jurisprudential approaches were often outcome-determinative. Nor is the problem alleviated by the JPML option which she provides for multiple pending appeals pertaining to a single patent in different circuits. For the dysfunctional system that predated the Federal Circuit was not keyed to multiple pending appeals pertaining to a single patent in different circuits. On the contrary, it was keyed to the fact that a patentee or accused infringer of a single patent had meaningful options to forum shop to select a favorable jurisdiction, an option which would also be available under Chief Judge Wood’s proposal. In short, not only are the problems Chief Judge Wood identifies not meaningful but her proposal to take us back to what she calls the “bad old days” is unworkable... It is accordingly my view and that of many of my colleagues in the bar that the appellate experiment that began 31 years ago has been a hugely successful one, for the reasons I have spelled out, and that it is not in need of a major fix of the type contemplated by Chief Judge Wood...

I find Mr. Dunner’s arguments persuasive.  What do you think?  Here is additional coverage of Mr. Dunner’s comments by Corporate Counsel, as well as additional discussion by Mr. Dunner.