Free OxFirst Webinar--"IP Commercialization Tactics for Wealth Generation & Innovation"

OxFirst is hosting another free webinar which, like previous events, promises to be most worthwhile. The topic is ‘IP Commercialization Tactics for Wealth Generation & Innovation’, and the event will take place on February 23rd at 15:00-16:00, British Standard Time. IP has often been portrayed as either an undervalued or underleveraged asset. This talk discusses the various means IP owners have at their disposal to commercialize their IP, be it patent brokerage, IP sales or licensing.

The speaker will be Patrick Terroir, Lead OxFirst Advisor and Chair of Patent and Technology Licensing Committee of Licensing Executive Society. Previously, Mr. Terroir was Managing Director of CDC Intellectual Property. He initiated and contributed to the creation of France Brevets and to the creation of the Tech Transfer Accelerators Companies (SATT) for the French universities. Between 2006 and 2008 he initiated and developed Caisse des Dépôts’s department in charge of industrial innovative clusters. Patrick Terroir is also an Adjunct Professor in Intellectual Property Economics in Sciences Po Paris.

To register, please consult the attached link.

OxFirst asks that you please register with your professional email account as it cannot allow attendees to sign up with private accounts (such as Yahoo or Gmail).

Israel's budget confirms expansion of IP incentives for tech

Israel's budget for 2017-18 confirms some measures for tech companies announced last year, with the changes applying from 1 January 2017.

Firstly, the budget reiterates the 'innovation box' regime proposed last year, introducing a 6% corporate income tax on 'technological earnings'.

The budget also expands on the tax incentives for 'preferred technological enterprises' and 'special preferred technological enterprises':

For PTEs:
- the corporate tax rate is 12% instead of 24% on tech earnings (or lower, if in a development area)
- the withholding tax on dividends out of tech earnings of qualifying companies is reduced to 4% (unless lower by treaty)
- the capital gains tax rate on the sale of qualifying intangibles to a related nonresident is reduced to 12% where the assets were bought from a non-resident (unusual to see a tax incentive for outbound sales of IP)

For SPTEs:
- the corporate tax rate is 6% on tech earnings
- the withholding tax rate on dividends of tech earnings is reduced, as above; the withholding tax rate on all dividends to a nonresident parent is reduced to 5% (unless lower by treaty)
- the capital gains tax rate on qualifying intangibles (as above) is 6%
- the requirements to be an SPTE are modified, reducing the required preferred income by one third, and total required annual income by half

Trump's Nomination of Neil Gorsuch and Intellectual Property

Recently, President Donald Trump nominated Neil Gorsuch of the U.S. Court of Appeals for the 10^th Circuit to the U.S. Supreme Court.  Many have expressed disappointment at the nomination because of his close comparison to the late Associate Justice Antonin Scalia, but it certainly could have been worse to some.  Interestingly, BuzzFeed discusses a survey which finds that based on citations to Scalia opinions there is one justice who is supposedly closer to Scalia of the group considered by Trump: Merrick Garland.  Yes, Merrick Garland, who was former President Obama’s pick. 

What of Neil Gorsuch’s impact on IP should he be confirmed?  There’s some speculation and some have reported that we don’t have enough information.  Interestingly, the Congressional Research Service (CRS) released an initial report yesterday (February 1, 2017) on Judge Gorsuch.  On what area may he have the most impact on IP: his views on executive power and administrative law.  Judge Gorsuch has apparently criticized the Chevron doctrine which essentially provides that courts should provide deference to an agency’s interpretation of law.  The CRS notes:

Nonetheless, at least in one area of considerable congressional interest, Judge Gorsuch’s views on the law could be seen to be quite distinct from those of Justice Scalia: administrative law. For much of his career on the bench, Justice Scalia was a proponent of Chevron deference, the doctrine that when statutory language is ambiguous or silent on an issue, federal courts should defer to an agency’s reasonable interpretation of a statute it administers. He argued that the doctrine operated as a clear, bright-line rule against which Congress could legislate. In contrast, Judge Gorsuch, in a concurring opinion in Gutierrez-Brizuela v. Lynch, argued that Chevron and its progeny allow “executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.” In so writing, Judge Gorsuch suggested that the Supreme Court should reconsider Chevron, an action which, if taken by the Court, could upend decades of administrative law and potentially alter the role of Congress in drafting laws for implementation by administrative agencies.

Overturning Chevron could move some power from the United States Patent and Trademark Office back to the U.S. Court of Appeals for the Federal Circuit—think Couzzo and the broadest reasonable interpretation standard.  Law Professor Jonathan Turley at George Washington University Law School has been one of the loudest critics of executive overreach—including excesses in the George W. Bush and Obama administrations.  (Hat tip to my colleague, Professor John Sims, for the reference to the CRS report). 

$500 Million Dollar Verdict Against Oculus

Corporate Counsel (John Council with Texas Lawyer) has just announced that a Dallas, Texas jury has awarded $500 million against Facebook owned Oculus to ZeniMax Media in a copyright infringement and trade secret misappropriation case.  Interestingly, the article notes that Mark Zuckerberg testified that Facebook only "had just one weekend to conduct a due diligence before completing the deal."  I bet that was a very, very busy weekend for some lawyers.  Whither "Facebook's" virtual reality technology?  It'll be interesting to see how the appeals work out. Please see the article for more information. 

Intellectual Property Owners Association Adopts Resolution to Amend Patent Eligible Subject Matter

The Intellectual Property Owners Association (IPO) board of directors has adopted a resolution which advocates for amending section 101 of the Patent Act in the U.S. to essentially overturn Mayo v. Prometheus and Alice v. CLS Bank.  The reason for the resolution is the development of inconsistent application of the so-called Alice/Mayo test.  Indeed, there have been a number of relatively recent decisions attempting to clarify Alice/Mayo which find patent eligible subject matter satisfied, including DDR, Enfish, McRO, Amdocs, and Cellz Direct.  How does this happen: the development of panel splits at the U.S. Court of Appeals for the Federal Circuit.  Notably, the United States Patent and Trademark Office (USPTO) has worked extremely hard in attempting to provide guidance to patentees and arguably is doing quite a good job.  I think the USPTO deserves a lot of credit for attempting to bring clarity and predictability to the field.  My personal opinion (shared by others) is that section 102 and 103 could provide a better gatekeeper than section 101 even though early resolution may be difficult.  I do think that the USPTO’s attempt to place certain claims in a “streamlined” analysis seems to be a good idea.  Claims drafting gamesmanship and looking at the claim as a whole will always raise issues though (that pesky Diamond v. Diehr!).  Here is the proposed language amending section 101:

101(a) ELIGIBLE SUBJECT MATTER
Whoever invents or discovers, and claims as an invention, any useful process, machine, manufacture, composition of matter, or any useful improvement thereto, shall be entitled to a patent for a claimed invention thereof, subject only to the exceptions, conditions, and requirements set forth in this Title.

101(b) SOLE EXCEPTION TO SUBJECT MATTER ELIGIBILITY
A claimed invention is ineligible under subsection (a) if and only if the claimed invention as a whole, as understood by a person having ordinary skill in the art to which the claimed invention pertains, exists in nature independently of and prior to any human activity, or exists solely in the human mind.

101(c) SOLE ELIGIBILITY STANDARD
The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard as to the requirements or conditions of sections 102, 103, and 112 of this Title, the manner in which the claimed invention was made or discovered, or the claimed invention’s inventive concept.

The Big Boys and Smaller Players of Technology Transfer Offices

One criticism of technology transfer offices is that some may have difficulty making enough money through deals to cover their overhead.  Surely, the benefits of a technology transfer office shouldn’t be limited to revenue generated and there are other opportunities to benefit a university such as practical training opportunities for students.  Moreover, the local community may even benefit through new jobs and tax revenue.  An article in the Recorder came across my desk this morning concerning University of California, San Diego's (UCSD) technology transfer office titled, "UC-San Diego Director Touts its Plethora of Patents." It describes an interview with a technology transfer office at a high performing University of California campus.  Another notice I received concerns a webinar about how smaller technology transfer offices can “overperform.”  

San Diego, located in southern California, has long been known as a hot bed for biotechnology research.  Interestingly, the article notes that of all the University of California campuses the San Diego campus leads in number of patents.  UCSD produces more patents than UC Berkeley, UC San Francisco and all of the other UC campuses.  It also produces more deals, more invention disclosures and sometimes even more startups.  The Director, Ruben Flores-Saiib, notes that this is maybe because of the size of the institution and number of departments.  Flores-Saiib, a recent hire at UCSD, also discusses efforts to expand opportunities for UCSD start-ups including a partnership with a VC that evaluates all startups from the university.  He further notes some of the patent prosecution firms UCSD uses as well as stating that they apparently avoid up front licensing fees and are flexible in working with milestones and royalty payments for firms. 

Notably, Tech Transfer Central is offering a webinar (Thursday, February 23rd) on successful strategies by "overperforming" smaller technology transfer offices by technology transfer officers from Wilkes University and Southern Mississippi University.  Here is a description of the webinar:

Our presenters represent two distinctly different tech transfer offices in distinctly different areas of the country. Each presents its own unique set of challenges, but both TTOs have thrived by employing unique methods for doing more with less, and implementing efficiency strategies that allow for high ratios of commercialization per research dollar and per FTE. Whether your office is considered small or not, you’ll come away from this nuts-and-bolts session with dozens of proven strategies for stretching your budget and your staff, and boosting your TTO’s deal flow. Register today for this information-packed webinar filled with best practices and tons of takeaways. Our panelists will discuss:

• How to navigate your high-dollar budget line items using:

o    Volunteers

o    Interns

o    Alumni

• How to impact your local and regional start-up community and the economic development goals with a smaller budget and fewer staff
• Small office strategies for building strong TTO/faculty relationships
• Ecosystem development in smaller markets
• Strategies for filling the funding gap in flyover regions
• How a variety of approaches to commercialization benefit smaller ecosystems:

o    Traditional licensing

• Entrepreneurial focus
• Engaging corporations in smaller regions
• Tactical and strategic methods for success with limited resources         
• Lessons learned and forecast for the future

When a company's future is caught in the generic drug/proprietary drug crosshairs

There is nothing in any other IP regime analogous to the generic/proprietary divide with respect to the exploitation of patent rights in the pharmaceutical industry. The relatively short period of patent protection, 25 years at the most, in light of the multi-generational staying power of some drugs, means that there is potentially big business in commercially exploiting the public domain after a drug has come off patent. Add to this the symbiotic relationship between proprietary and generic products; without the patent protection undergirding the former, the latter would never come to be.

While a first view of the proprietary/ generic landscape might lead one to think that it is a zero-sum game, i.e., a company that is engaged in

proprietary products will not also be involved in the generic market, and vice versa, the commercial reality is much more complex and nuanced. There is no pharmaceutical company that better reflects the challenges of trying to master both these product markets than the Israeli-based company, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) Thus, while it is often said that Teva is the world’s largest generic drug company, its most successful product over recent years has been the proprietary drug for multiple sclerosis, COPAXONE, reportedly amounting to 35% of profits. This reminds us how a basket of generic drug products can be barbelled by a single proprietary blockbuster.

The problem for Teva is that COPAXONE is coming off patent. Add to this a lackluster track record of acquisitions and general pressures from competitors in the generic space, culminating in the failure of its multi-billion dollar acquisition of the Mexican company, Rimsa. This is before President-elect Trump's comments yesterday on drug prices and manufacture abroad, as reported by fellow blogger, Mike Mireles. It is no surprise, perhaps, that Teva’s shares have continued to tumble.

Against this backdrop, the interview given by Teva activist shareholder Benny Landa is an illuminating window through which to view the challenges facing this mid-sized, proprietary cum generic drug company, with a bit more than $20 billion in sales per annum. Landa is an iconic figure within the Israel high-tech scene, best known as the founder of the digital print product company, Indigo, which was acquired by HP in 2002. In an interview that was published by GLOBES, an Israeli business paper, on January 9th, Landa was pointed in his criticism about the management and strategy of the company.

Landa's criticisms derive from the fact that, as he describes--

"[t]he company has lost half of its value. It's worth less than its debt [a drop of nearly 50% in its share price during this period, pushing its market cap down to $35 billion]. “

The problem starts with the inappropriateness of the board of directors as well as the CEO.

"… it's clear to me that they need one of two things: either a CEO with pharma experience or an experienced board of directors to guide him….. I'd like to see at least a third of the directors with substantial experience - at least one third. For that, the board of directors would have to replace itself, and that's not happening."

Landa continues--

"All the directors are excellent people with experience in their fields, but they can't devise a strategy for a company like Teva. It's no wonder that the company made such mistakes. The directors don't even know what questions to ask.”

In addition to the problem of the composition of the board of directors and the expertise of the CEO in the pharma industry, Landa frontally attacks the company's strategy, in the following words--

"In my opinion, the emphasis on generics is a big mistake. It's a misguided return to the comfort zone, based on the idea that what worked so well in the past will go on working. The world has changed, however. Generics is now competition over price - who can produce the most cheaply. Is that Israel's advantage? Cheap production? That's not what we are.

Teva should follow the trail blazed by COPAXONE - Israeli innovation and technology. Teva knows how to be innovative. It's such a pity that all this capital is going to generics. It's just tying the company's hands, and it can't make innovative acquisitions. Teva has to rid itself of its dependence on generics."

He was emphatic—Teva "mustn't be the Walmart of the drug market. It can't operate in the cheap mass sector."

Not surprisingly, Teva has a different view of the situation here.

The criticism leveled by Landa addresses the more general question of the proper business model for the company, given its historical success in the generic market overlaid by several profitable proprietary products. As Landa notes, the generic market puts a premium on operations, while the prerequisite for proprietary market penetration is R&D, either home-grown or acquired. And in this lies the challenge for Teva: can it successfully carry on with its generics business; does it have the savvy to identify winners in the proprietary space; and does it have the wherewithal to do successful R&D (recall that COPAXONE was based on a discovery made at the Weizmann Institute of Science)? To hear Landa, the answers to these questions may be a matter of commercial life or death for the company.

For more on patent exploitation and the public domain, see here.

Trump on Drug Prices: Pharma/Bio Stocks Drop

Some have criticized Donald Trump for backing off of some of his campaign promises.  However, in a press conference on January 11, 2017, Trump reiterated his concern with drug prices stating that drug companies "are getting away with murder."  I don't know if he could have expressed himself in stronger terms.  Notably, the Washington Post reported that the stock of pharmaceutical and biotechnology companies dropped after the press conference and that concerns were expressed by one biotechnology insider that venture capitalists may move away from biotechnology companies.  This is troubling given the competition that already exists for venture capital funds from software startups and the promise of expensive to develop biologics.  Moreover, some successful securitization deals have greatly benefited a few universities.  The move to take a big step toward drying up the pipeline for new biologics may not be the best approach.  What are some other ideas Trump could consider?  Should Trump look to other developed countries to help carry the supposed very high cost of pharmaceutical/biologic development?  That's not very satisfying.  Should the government invest more public funds into research and development?  For more on pharmaceutical pricing, see here, here and here. 

The Trump is Coming to Town: AIPLA Provides an IP Wish List

The Trump presidency is looming ahead, but what of intellectual property policy.  Interestingly, BNA reported that a Republican Congressional Representative from California (Issa) called on Trump to keep Michelle K. Lee as head of the United States Patent and Trademark Office.  There also have been grumblings about pushing for legislation to undermine and reverse the U.S. Supreme Court’s Alice decision on patent eligible subject matter.  Recently, the American Intellectual Property Law Association (AIPLA) sent an advice letter to Trump regarding intellectual property.  Notably, the AIPLA letter covers patent, trademark and copyright law in some relative detail, and also gives some advice regarding trade secret law, domain names and other matters. 

The copyright focus of the letter relates mostly to Copyright Office leadership choice and modernization.  The trademark focus is on consistency of decision making concerning section 2(a) on disparagement (if it is upheld by the U.S. Supreme Court), removing “deadwood” from the register, protecting U.S. consumers from confusion from U.S. uses of foreign marks well-known in the U.S., and strengthening the Madrid system. 

The patent focus is the longest part of the letter and seems to generally counsel the exercise of care in passing any more patent reform particularly directed at litigation abuse.  The message appears to be that we need to study the changes that have been made to address abuses of the system before we engage in any more changes to address litigation abuse (or at least be fully aware of the changes that have been made).  Notably, the letter states that the existing changes may not address all abuses of the system, but that we also need to consider lawful (non-abusive?) enforcement.  However, there is room for reform in, at least, two areas: the Patent Trial and Appeal Board and patent eligible subject matter.

The letter addresses the Patent Trial and Appeal Board stating:

In the first few years of the PTAB’s existence, its proceedings have been used more than anticipated, and some are concerned that the proceedings, as currently implemented, are not as fair and balanced as they should be, and that they are stacked in favor of those seeking to invalidate patents.  AIPLA believes that the proper balance can be found through targeted changes, and we look forward to working with your Administration in this effort.

And, as alluded to before, patent eligible subject matter and the Alice decision are a major concern.  The letter nicely lays the groundwork for reforming Alice based on administrative necessity and clarity:

Independent inventors, small and large businesses alike need a strong, balanced and predictable patent system to foster R&D, manufacturing and sales.  Section 101 of Title 35 sets out the categories of patent-eligible subject matter that may be entitled to patent protection.  However, recent Supreme Court decisions have created uncertainty about the kinds of innovations that are patent-eligible in certain industries, such as biotechnology and computer software.  Meanwhile, the USPTO has experienced challenges in applying the Court’s evolving interpretation of patent eligibility into its examination processes.  AIPLA believes that more clarity, whether from the courts or from the Congress, is needed in this area, and we ask that efforts to provide such clarity and predictability be supported by your Administration.

The letter concludes with a request for continued and increased enforcement of U.S. IP in foreign markets, continued strengthening of trade secret protection and enforcement given an asserted increase in hacking, and continued involvement in administering the domain name system.