Benchmarking of employee inventor awards and incentives:a survey is launched

Great invention-- but what does he receive
in addition to his basic salary ...?

According to a media release that it has just been published, "ipPerformance Group Initiates Inventor Rewards and Recognitions Study", a concerted attempt is being made to benchmark employee inventor benefits in the United States -- a jurisdiction that has no statutory schemes relating to the allocation of patent rights as between inventor and employer and no statutory guidelines relating to how much, in terms of money and non-financial benefits, an employee inventor might be entitled to receive. The media release reads as follows, in relevant part:

"ipPerformance ... announces a study on Inventor Rewards and Recognitions Program Best Practices. ipPerformance Group is conducting this study to better understand new trends and best practices in inventor reward and recognition programs. It will cover a range of topics, including financial and non-financial awards, program management and communications, award effectiveness, key objectives and performance metrics.

Information for the study will be gathered via an online survey, which is open to corporate organizations [it would be great if a parallel survey could be opened to employee inventors, as a reality check -- but this would be a very different type of survey, requiring a very different methodology, even if its findings did open up new opportunities to market one's consultancy skills in this field]. The final report will examine the following areas: which program elements have the greatest impact in increasing innovation ideas and patents; methods of managing and rewarding inventors in locations with inventor remuneration laws; and the drivers, impediments, benefits and trends in inventor rewards and recognition programs. The survey ... takes about 25 minutes to complete. Says Robert Williamson, president of ipPerformance Group:

"... We know from previous ipPerformance Group benchmark studies, and from our own extensive experience with implementing effective inventor reward programs, that global inventor reward programs are evolving [given that some countries in which US corporations operate and do R&D have compulsory statutory schemes, it would be good to know what "global" means in this contect]. The major reasons for incentivizing inventors are to maintain inventor interest, increase volume of invention disclosures, and gain better cooperation and responsiveness to patent questions. The aim of this study is to gain insights on which rewards are working well for businesses, where there is room for improvement, methods for handling inventor remunerations in countries that have inventor remuneration laws and what practices are the most effective in improving the impact of incentive programs."

The study investigates the types of recognition and actual financial amounts being used for invention disclosure, initial patent filings, patent grants, design patents, trade secrets, publications, provisional patent applications and licensed-in technology".

The results of this study should be of interest not only to business employing inventors, but to other businesses that might be contemplating a merger or acquisition and which need to get a clear handle on the target company's assets and liabilities, whether because inventor pay-outs might be a deal-breaker or because they need to know how much to borrow to complete the transaction.

To participate in the study, click here. The study closes on 15 July 2014.

Judge Randall Rader Retires

The U.S. Court of Appeals for the Federal Circuit Judge Randall Rader will retire on June 30, 2014.  The IPKat discussed, in detail, the circumstances surrounding Judge Rader's decision to step down as Chief Judge.  We thank Judge Rader for his service and wish him the very best.  I suppose the question now is which law firm will Judge Rader join. 

"IP and Intangible Capital: Corporate Reporting & Valuation Issues From Theory to Action": a free webinar

Together with Stefano Zambon (Professor of Accounting at the University of Ferrara), our friend and one-time IP Finance contributor Roya Ghafele (Oxfirst) is running a free webinar this coming Tuesday on accounting and IP: "IP and Intangible Capital: Corporate Reporting & Valuation Issues From Theory to Action". Stefano is the Chair of Accounting and Business Economics and Director of the CFO M.A. Programme at the University of Ferrara, Italy, President of the ‘Collège des Experts de l’Immatériel’ set up by the French Government, and formerly Vice-President of the International Association for Accounting Education and Research (IAAER). Says Roya:

Today we live in a paradox. There is a universal consensus that intangibles are important, if not crucial, for competitiveness and growth, but at the same time we do not have shared and commonly accepted criteria for managing and reporting on these resources, for properly and systematically informing shareholders and other stakeholders on them, for putting a value thereon.

The Webinar will seek to explore both the reasons underlying this situation and some ways forward to address such a paradox, which shows the limits of our current understanding of, and the boundaries of our capacity to face, the challenges of this new phase in the evolution of capitalistic society and economy.

The webinar takes place on 18 June 2014, 13.00 GMT (U.K. Time). To join, send an email with your name, affiliation and email address to info@oxfirst.com to receive an invitation containing log in contacts for this event.

Is first mover advantage still a relevant trade secret strategy?

One of the more tricky aspects in assessing the strategic advantages of relying on trade secret protection is the circumstance in which the party reasonably believes that the trade secret will eventually be reverse-engineered, but not before, say two years from the time that the product reaches the market. So the question then becomes: should I rely on that window of opportunity or seek some other way to protect my rights? The stock reply tends to be that, if the person believes that the likely period of secrecy of the technology provides him with a reasonable basis to establish first mover advantage, either e.g. by locking up superior distribution or manufacturing capabilities or building up strong brand recognition, reliance on trade secrets to protect the technology is a reasonable approach. That is how we have tended to present the issue in a stripped-down fashion when addressing it in management education.

Against this backdrop, I was unnerved a bit this week in listening to the words of the manager of a venture capital fund, financed by the Bloomberg group and dedicated to making smallish investments in a large number of companies at their very outset. Unlike most other VC operations, this fund bets that it can identify winning companies from certain indicia that precede any real operations by the companies. In that connection, the interviewee baldly stated that the fund did not seek companies with a reasonable likelihood of first mover advantage, but rather “best mover advantage”. In supporting his position, reference was made to the interview comments made by the President of Stanford University, who stated that almost anyone who comes up with a technology will find himself in short order with a number of competitors who have, in effect, copied the technology. The question then becomes who can best parlay this technology into a successful business plan.

Given this, do I need to revise my view about whether reliance on trade secrets is a valid strategy if it can reasonably offer one first mover advantage? Upon reflection, I don’t think so. Pearson Education, here, describes the advantages and challenges of first-mover advantage as follows:

If the business is first into a market, so the thinking goes, it can establish what the military thinkers would call 'defensible ground'. First, it can capture market share much more easily without having to worry about rivals trying to capture the same customers. Second, when the rivals do come along – as they inevitably will – the first-mover and its management team will have advantages in the ensuing competition, such as familiar products, brand loyalty, the best retail outlets, up-and-running distribution systems, and so on. By beating rivals into the market, the first-mover can consolidate its position and compete more effectively, not only defending its previously acquired share but even continuing to expand.

Stated otherwise, “a company's only sustainable competitive advantage may be its ability to learn faster than its competitors.”

Based on these observations, it seems that the notion of meaningful first mover advantage has built in it a time function. Yes, there can be such an advantage, but only if there is sufficient time to allow the person to achieve a critical mass of the factors described above. But with the availability and potentially instantaneous dissemination of information, has the compression of this function reached a stage where it is simply not feasible for this critical mass of factors to take root? That seems to be behind the observation from the Bloomberg-related venture capitalist that what is relevant is no longer the “first mover”, but the “best mover”; there is simply not enough time for the first mover to secure the advantage that efficient exploitation of the time function would previously allow.

My response to that is that it may be true, but only if there are no real barriers to entry or another factors that can slow down the otherwise relentless compression of time. Trade secrets provide one such factor. By slowing down the dissemination of the knowledge and technology to third parties, it potentially enables the person to seek and develop the various aspects of first mover advantage that may confer upon him a meaningful competitive advantage. As such, I still feel comfortable advising that trade secret protection is a reasonable measure to achieve first mover advantage, unless the time function for maintaining secrecy is unusually and severely compressed.

Plunging into a Safe Harbour from SEP Injunctions

The European Commission’s antitrust agency is striking a cunning compromise between divergent views on whether or not and under what circumstances injunctions may be sought for patent infringements where patentees have agreed to license patents, they have declared as potentially essential to the UMTS (WCDMA) standard, on fair, reasonable and non-discriminatory terms. EC press releases announce competition rule infringement by Motorola and commitments given by Samsung on this matter. The Motorola decision creates a competition rule infringement ‘remedy’ which “provides a ‘safe harbour’ for standard implementers who are willing to take a licence on FRAND terms. If they want to be safe from injunctions based on SEPs by the patent holder, they can demonstrate that they are a willing licensee by agreeing that a court or a mutually agreed arbitrator adjudicates the FRAND terms.”  Commitment decision details for Samsung are a practical illustration of the safe harbour principles in the Motorola decision.

The Commission’s Vice President in charge of competition policy Joaquín Almunia said: "The so-called smartphone patent wars should not occur at the expense of consumers.”  However, the Commission has not presented publicly, through the publication of the Samsung decision (the full Motorola decision is yet to be made available) or its public statements, any evidence or diagnosis of actual abuse or harm versus the countervailing positions of others in the smartphone and tablet markets A Q&A memo accompanying the decision announcements simply states that “the Commission’s aim is to prevent SEP holders from using SEP-based injunctions in an anticompetitive way, in order to extract licensing conditions that may restrict competition and ultimately harm consumers.”

To the contrary, there is abundant published evidence and analysis showing consumers and smartphone markets are doing rather well with vigorous competition despite various theories of abuse and harm. The Commission is well aware of this, but has intervened nevertheless. Mr Almunia's spokesperson Antoine Colombani remarked last year that "[t]he markets for smartphones and tablets are very dynamic, innovative and fast-growing. Samsung's growing market position and the success of Google's Android platform are good reasons to believe that competition is strong on these markets."

FRAND licensing terms negotiated or determined by arbitration or the court in the safe harbour must be on the basis of a packaged approach, according to the Licensing Framework set out in the Samsung decision. Notably, recognising that it would be impossible to assess infringement, validity, essentiality for every patent, even in modest-sized portfolios, and that this is not the way license negotiations work in the real world, the EC's approach is not on these basis of individual assessments of these issues on a patent-by-patent basis or in multiple jurisdictions. In other words, if a licensee wants to enter the safe harbour and protect itself from the threat of injunctions for all Mobile SEPs, it must accept that all such SEPs are within the safe harbour and this requires a timely and efficient approach to determining FRAND terms for all those Mobile SEPs. The quid pro quo with the removal of the threat of injunctions in the safe harbour framework is that licensees cannot pull things apart and challenge many or every patent to delay and fragment the licensing process.

It is quite perverse that the availability of injunctions or even seeking them should be an antitrust issue. My detailed analysis of the Commission's decisions including the safe harbour, Licensing Framework, testing for willingness, dominance and abuse, and inter-jurisdictional conflicts can be found here.

Chief Judge Rader of the U.S. Court of Appeals for the Federal Circuit to Resign as Chief Judge

The Federal Circuit Bar Association (FCBA) and Court of Appeals for the Federal Circuit (CAFC) have announced that Chief Judge Rader of the CAFC is to resign as Chief Judge effective May 30, 2014.  Judge Sharon Prost will be the new Chief Judge.  Here is a link to the CAFC announcement.  In comments concerning his resignation published by the FCBA, Chief Judge Rader points to several accomplishments by the CAFC during his tenure as Chief Judge: six new judges on the CAFC, conversion to electronic filing and case management, weathering sequestration and budget cuts, enhanced cooperation with the bar, courtroom renovation, and international judicial cooperation.  Chief Judge Rader was very involved internationally and indeed, some called him "the World Patent Judge."  It will be interesting to see if Judge Prost is similarly involved internationally.  We wish Chief Judge Rader well and thank him for his service as Chief Judge.

Combating online piracy: new UK copyright alert system (VCAP) is imminent

Enforcement of copyright in online infringements is a major headache in terms of cost-effectiveness for the reason that, in the absence of statutory damages, the degree of loss to the copyright owner is frequently low in any given case. This is also why collective efforts at tackling infringement are often preferred to individual ones, and those which are voluntary and seek to avoid ending up in court are preferred to those which depend upon litigation as a first step.  In this guest piece, Bristows associate Tom Ohta explains a development in the UK which is designed both to provide an educative function and to ease the financial burden of copyright owners.  He writes:

Combating online piracy: new UK copyright alert system (VCAP) is imminent

A deal is about to be struck between the entertainment industry and major internet service providers to put in place a Voluntary Copyright Alert Programme (VCAP) designed to combat copyright piracy in the UK. The actual terms of the deal have not yet been made public. However, it appears from a draft leaked to the BBC that the entertainment industry’s interests are represented by the BPI and the Motion Picture Association and that of the internet service providers by BT, Sky, TalkTalk and Virgin.

VCAP was first discussed publicly by the Government’s Communications Minister, Ed Vaizey, earlier this year at a Westminster Hall debate – although commentators indicate that this industry-led initiative has been rumbling on for some four years now. It appears the private agreement between the BPI/MPA and the ISPs which underlies VCAP is not in final form and is certainly not in the public domain yet. However, the draft leaked to the BBC suggests that the key aspects of VCAP are as follows:

·         The rights holder (i.e. the BPI or MPA) identify particular IP addresses linked to infringing activity (e.g. by monitoring BitTorrent sites) and pass the IP address details to the ISP responsible for that IP address in a so-called ‘Copyright Infringement Report’ (or CIR).

·         The ISP then matches the IP address to a particular customer account and sends an alert to the customer about its behaviour, either in a physical letter or by email.

·         A maximum of four alerts may be sent to any given customer, i.e. VCAP is a 4-stage alert system. With each stage, the language used will ‘escalate in severity’, but will not contain threats or mention any consequences for the accused users.

·         Significantly, VCAP does not require ISPs to apply any punitive sanctions (such as reducing internet speeds or terminating internet access). In this way, VCAP will take a soft-hammer approach by being solely educational in its approach and not enforcing punitive sanctions on repeat infringers.

·         Between the ISPs, the total number of alerts that can be sent out per year will be capped at 2.5 million.

·         The BPI & MPA will receive a monthly breakdown of how many alerts have been sent out, though the identities of the customers will not be disclosed.

·         A record of which customer accounts have received alerts will be kept on file by each ISP for up to one year. 

·         The BPI & MPA will pay each ISP £750,000 towards set-up costs, plus an additional £75,000 annually for ongoing maintenance.

·         VCAP is intended to run for three years with regular reviews on its effectiveness.

The lack of a punitive component to VCAP is an issue that has attracted controversy and debate. VCAP can be compared to other countries such as France, New Zealand and South Korea where legislated ‘graduated response’ systems to combat online piracy are based on a ‘three strikes and you’re out’ policy. In other words, there is a series of escalating sanctions against end-users linked to infringing activity, with the third ‘strike’ potentially leading to the temporary or permanent disconnection from the internet. In the US, there is an industry-led voluntary ‘Copyright Alert System’ in place which incorporates punitive sanctions into its six-strike system, such as drastic reductions to internet speed and, ultimately, a temporary suspension of internet access.

Whilst the lack of punitive sanctions in VCAP has attracted controversy, it is arguable that graduated response systems are not designed to punish, but instead are a means of informing end-users about legitimate sources of online content and changing behaviour. Even in countries where punitive sanctions are available in principle, they are very rarely invoked in practice. Moreover, the decision not to incorporate punitive sanctions into VCAP such as suspending internet access may have reduced the risk of the legal basis of VCAP being challenged in the courts on the basis that it disproportionately restricts the fundamental right to access and impart information – perhaps a lesson learned from the issues encountered by the French government with its controversial HADOPI law.

No doubt there will be further vigorous debate over VCAP in the coming weeks – watch this space.

For Tom Ohta’s 15-minute crash course on private graduated response systems, including how they work in the US and in Ireland – see http://youtu.be/vV0mc1dkmeY (recording from the IPKat’s #HappyKat event on 1 April 2014 – see further here).   

EU's new tech transfer regime: a new book

The revised European Competition Law Approach to Technology Transfers: Innovation friendly? is the title of a new book penned by Stéphanie De Smedt and her colleague Yves Van Couter, both from the Brussels office of Loyens & Loeff (Stéphanie's a junior IP-IT lawyer, while Yves is a partner).

This title seeks to provide readers with an overview of the main changes of the new technology transfer exemption regime (which entered into force on 1 May 2014), together with an assessment of their possible impact on the plans and potential plans of businesses contemplating engaging in technology rights transfer and/or licensing agreements within the EEA -- as well as those who, having engaged in tech transfer activities, might be wondering what they've let themselves in for.

The book can be downloaded free of charge by clicking here.

Commission Regulation 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements can be downloaded free of charge by clicking here -- but it's not as much fun.

Fordham Report 2014: General Counsel Roundtable

The General Counsel Roundtable at this year's Fordham IP Conference was moderated by Hugh C. Hansen, the panellists being Michael D. Fricklas (Executive Vice President, General Counsel and Secretary, Viacom Inc., New York), Kimberley D. Harris (Executive Vice President and General Counsel, NBCUniversal, Inc., New York), David Hyman (General Counsel and Secretary, Netflix, Los Gatos), Mark Seeley (Senior Vice President & General Counsel, Elsevier, Boston) and -- by remote link-up -- Brad Smith (Executive Vice President and General Counsel, Legal and Corporate Affairs, Microsoft Corporation, Redmond). This session gave Hugh a chance to probe the practical realities that IP owners face.

Aside from the usual worries about lack of clarity of the current law and the difficulties of predicting future law, as well as the uncertainty as to how regulatory bodies on both sides of the Atlantic will continue to discharge their functions, there were some concerns that addressed the financial side of things.

Hugh asked about Aereo: 20 years ago, no-one would have invested or bought into such a business model. Is it not the uncertainty of existing law and the cost of copyright litigation that have encouraged such investment?  Michael Fricklas responded: so many judges don't have a handle on the new technologies and how copyright law applies to them, but they do understand the need for the law not to shackle innovation. Kimberley Harris added that it was really important, in an era of rapid innovation, for the courts to develop copyright doctrine on an incremental basis rather than make big rules -- particular, Richard observed, since new and disruptive technologies soon become the normative ones.  Some attractive business propositions have already been rejected because of the likelihood of either an adverse result in litigation or the cost of protracted negotiation to avoid it.  On this topic, Brad Smith stated, paradoxically, that the world was becoming "increasingly global" but the application of IP kept differing from place to place -- meaning, as Hugh put it, that "you are bound to be screwed in one country or another".

Brad Smith then struck out with another topic: the fundamental importance of intellectual property in every key area of industrial and commercial concern in the entire world.  There's never a year in which we can say that "nothing happened". This leads to in-house lawyers having to look creatively at business problems. "You have to be nimble to find solutions", Kimberley reminded the audience. Endorsing this, Brad emphasised the need for lawyers to retain their integrity when doing so [this blogger assumes that this is always a potential problem where lawyers engage in fast-moving industrial issues in which the risk of failure presses hard upon them]. David Hyman went further: when giving advice on the business side, try to imagine how it would look if it hit the front page of the New York Times. Don't be afraid of failure -- and be careful about advising that "there's only a 10 per cent chance of failure": it's surprising how often a 10 per cent chance of failure actually happens.

Discussion was then steered from IP to competition issues: how do IP-oriented in-house counsel deal with competition issues? Michael focused immediately on parallel importation of satellite broadcast decoding equipment, while David noted how markets and technologies change far more quickly than regulators can look at them and examine the competition issues.