Monster trade mark infringement case: court reveals its thinking on calculating costs

The six separate but closely intertwined trade mark infringement actions in Boehringer Ingelheim KG v Swingward Ltd etc commenced in the previous century and were twice referred to the European Court of Justice for preliminary rulings, as well as visiting the Court of Appeal on a few occasions too. The case is by no means concluded, since the Court of Appeal awaits a ruling from the European Court of Justice in a further case, referred from Austria, before it gives its final decision.

Every party embarking upon IP litigation is well advised to examine it as a commercial proposition: what will it cost to sue or to enter a defence? what are the viable alternatives? can the money be better deployed elsewhere? But no-one was likely to predict the remarkably protracted and convoluted path taken by this action, where the total cost in terms of stress, uncertainty, they tying up of time on the part of key management figures, as well as the money, took such a toll.

Today, the parties having unsurprisingly failed to agree the costs issue, Lord Justice Jacob gave a good deal of guidance, including quite a lot of arithmetic and real figures. If you'd like to see the judgment (which is 26 paragraphs long), email me and I'll forward a copy since it's not yet on BAILII.

Former univ spin-off strikes gold

Science Business reports that Proximagen Neuroscience plc has agreed a $232 million worldwide licensing deal with Upsher-Smith Laboratories Inc. for the development and commercialisation of PRX1, a preclinical stage product for the symptomatic treatment of Parkinson’s disease. Proximagen, a spin-off from King’s College London, in 2003, was floated on the Alternative Investment Market AIM in 2005, raising £14.5 million and bringing a £1 million windfall for the university.

This provides a further case-study for the debate as to whether universities do better by keeping a tight rein on the management and exploitation of IP rights generated by research based in their institutions, or whether the flexibility and autonomy of a spin-off is better equipped to raise funds for further development and/or to agree a suitably commercial licensing structure.

Forthcoming IP auction

The Ocean Tomo Fall Auction & Conference is to he held on 29 and 30 October at the Trump International Hotel and Chicago Cultural Center, USA. This is described as

"a full two-day event that includes a 1 1/2-day conference on cutting-edge IP issues, including "Managing IP Risk", "Buying and Selling IP", and “IP Finance” followed by the Live IP Auction ..."

If any reader of this weblog is likely to be attending the auction and would be interested in writing up a short report for us, can he or she please email me here and let me know? Further details of the event are available from Wendy Chou at 312.377.4862 or by email here.

Green IP and patent insurance

Writing in the excellent Intellectual Property Watch last Friday, Itaru Nitta (Green Intellectual Property Project, Geneva, Switzerland) describes how, in its 2008 Assembly, the World Health Organization (WHO) adopted its Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property. This initiative seeks to direct global R&D and IP policy towards the problems facing impoverished nations. In her article, " Patent Insurance Scheme: Financial Resource For WHO Global IP Strategy?" she writes of a proposed Patent Insurance Scheme (also called “Green IP") which would impose

"... an extra, official fee on patent applicants and holders as a form of insurance premium, and to establish a trust fund that would defend patent rights against the risk of compulsory licence and other flexibilities increasingly justified by growing anti-patent protests, while at the same time provide a wide variety of financial assistance relating to R&D and IP for developing countries ...".

She goes on to explain:

"Since the Patent Insurance Scheme is designed to be embedded in the existing patent system, the scheme would possess a substantive and sustainable financial scale (possible annual revenue: up to several tens of billions in US dollars ...) due to continuing growth of both quantity (e.g., filing number) and quality (e.g., subject matter) in the present patent system worldwide".

Readers of this weblog are invited to read Itaru Nitta's article in full (it's not very long) and to take a look at the ideas on the Green IP website too. Without prejudice to the issue of whether the proposal has any merits, it's my feeling is that it's refreshing to see proposals of any sort that seek to build constructively on the present system by adapting it to the present economic, political and environmental challenges it faces. The big challenge will come in trying to sell something like this, which is emanating from a single-issue agency such as the WHO, to WIPO as the body that is often almost paralysed by the conflicting interests arising from the many types of rights and stake-holders involved.

India's Copyright Board given royalty-fixing powers

In a recent decision India's Supreme Court has increased the powers of the Copyright Board, ruling that the Board is entitled not only to grant compulsory licences but also to decide on royalty rates. The rates in question are those payable by radio stations for the use of music, these usually being negotiated with the copyright collecting societies. In this instance, however, Phonographic Licence Ltd was seeking a substantial increase in royalties received, to the alarm of the broadcasters. The Board's decision to grant a licence was appealed the Supreme Court on 1 6May 2008.

While affirming that the Board has the power to establish royalty rates, the Court has also said that the Board should consider whether to order that royalties be payable at a fixed rate or on a revenue basis. In doing so, the Board must take into account the interests of copyright owners and the general public [source: note by Merry Pariyaram, ALMT Legal, Mumbai, writing in World Media Law Report].

It seems to me that, as time progresses, the connection between the IP rights owner and the establishment of a royalty rate grows increasingly tenuous. Originally the rights owner would have established the royalty rate himself; next, it is passed to a collecting society; then it is taken from the collecting society and given to the Board (or Copyright Tribunal). In Europe this in turn may be subject to the final word from the Commission and ultimately the European Court of Justice.

NMMU's tech transfer office bears fruit at 14 months

This week's Tech Transfer E-News reports that the Nelson Mandela Metropolitan University (NMMU), Port Elizabeth (South Africa), has reached an agreement with investment partner Afrepell to commercialize a range of insect repellent products developed by the school's Institute of Chemical Technology, InnoVention. The deal marks a significant milestone for NMMU, being the first commercial agreement which is based on its own researchers' IP, coming about 14 months after it launched a tech transfer office.

The technology relates to a patented insecticide, RepelloX, which is reported to have several advantages over existing products. Afrepell and the university will enter into a joint venture to manufacture, sell and license RepelloX. The company already has agreements with distributors in the UK and the US. Retail products incorporating RepelloX should be available internationally in 2009. For more information click here

The significant thing here is that NMMU have had to keep their tech transfer office staffed and maintained for over a year before seeing any fruits of its labours. In many academic institutions there is a danger that tech transfer and industrial liaison offices have to compete for funding with many other causes -- teaching and residential facilities, infrastructure, marketing of existing programmes and development of new ones. Public funding also can be difficult to secure on a regular basis. NMMU has done well to persist with its tech transfer office; it is hoped that, with a stream of income from RepelloX, it will be able to continue and grow its wealth-generating licensing activities.

Lost profits of a patent owner's subsidiary: can they be recovered?

I've just picked up this item on Lexology: it's a note ("Parent company denied recovery for lost profits of subsidiary") by Philip C. Canelli, from the New York office of McDermott Will & Emery. This note explains the reasoning of the US Court of Appeals for the Federal Circuit in upholding a summary judgment in Mars, Inc. v. Coin Acceptors, Inc.,Case No. 07-1409,-1436 in which a patent infringement claim for damages in respect of a subsidiary's lost profits was dismissed (pdf of full 26-page decision here).

Mars claimed, as long ago as January 1990, that certain products made by Coin Acceptors infringed its coin authentication patents. Coin Acceptors was found to have infringed and was ordered to pay a reasonable royalty of 7 percent from 1996 till the expiry of the last Mars patent in 2003. The court however refused to allow Mars to recover profits lost by its former subsidiary/non-exclusive licensee Mars Electronics International, Inc. since that company lacked standing to seek damages in its own right.

On the issue of lost profits the Federal Circuit, noting that Mars did not make or sell any of the patented machines and that its subsidiary paid it on a straight per-use basis rather than on the basis of any profits, found that its profits did not flow inexorably to Mars.

The Federal Circuit also upheld the 7 percent reasonable royalty rate even though it was higher than the cost that Coin Acceptors would have incurred if it had used non-infringing alternatives. This is because reasonable royalty damages are not capped at the cost of implementing the cheapest available, acceptable, non-infringing alternative.

The notion that a subsidiary's loss of profits cannot be recovered unless it flowed inexorably from licensee to licensor would seem broadly analogous to the position in the UK after Gerber Garments v Lectra, in which the Court of Appeal appeared to require a clear causative link between the infringement and the subsidiary's loss.

European Commission undermines copyright assumptions

According to the European Commission's press release IP/08/1165 last week, the European Commission is ordering 24 European copyright collecting societies to stop restricting competition by limiting their ability to offer their services to authors and commercial users outside their domestic territory, while still letting them keep (i) their current system of bilateral agreements and (ii) their right to set levels of royalty payments due within their domestic territory. Says the press statement,

"The prohibited practices consist of clauses in the reciprocal representation agreements concluded by members of CISAC (the "International Confederation of Societies of Authors and Composers") as well as other concerted practices between those collecting societies. The practices infringe rules on restrictive business practices (Article 81 of the EC Treaty and Article 53 of the EEA Agreement). The Commission decision requires the collecting societies to end these infringements by modifying their agreements and practices, but does not impose fines. The removal of these restrictions will allow authors to choose which collecting society manages their copyright (e.g. on the basis of quality of service, efficiency of collection and level of management fees deducted). It will also make it easier for users to obtain licences for broadcasting music over the internet, by cable and by satellite in several countries from a single collection society of their choice.

Competition Commissioner Neelie Kroes said: "This decision will benefit cultural diversity by encouraging collecting societies to offer composers and lyricists a better deal in terms of collecting the money to which they are entitled. It will also facilitate the development of satellite, cable and internet broadcasting, giving listeners more choice and giving authors more potential revenue. However, the Commission has been careful to ensure that the benefits of the collective rights management system are not put into question in terms of levels of royalties for authors and available music repertoire."

Music authors (lyricists and composers) sign over to collecting societies the rights to manage on their behalf, worldwide, the copyright of their musical works. Based on the CISAC model contract, collecting societies have concluded reciprocal representation agreements for the collective management of the public performance rights of their musical works so that they can each offer the repertoire of all the artists represented by all the collecting societies participating in the representation agreements. The public performance rights enable authors of musical works to authorise or prohibit the exploitation of their works by commercial users such as TV channels and radio stations, and to receive royalties every time their music is played.
The Commission opened an investigation following complaints from broadcasting group RTL and Music Choice, a UK online music provider.

The Commission's decision recognises the valuable role of collecting societies and does not challenge the existence of the reciprocal representation agreements. It does, however, prohibit certain aspects of those agreements as well as concerted practices among collecting societies.

In particular the decision requires the 24 EEA-based collecting societies which are members of CISAC to no longer apply:
* the membership clause, currently applied by 23 collecting societies, that prevents an author from choosing or moving to another collecting society.
* territorial restrictions that prevent a collecting society from offering licences to commercial users outside their domestic territory. These territorial restrictions include an exclusivity clause, currently contained in the contracts of 17 EEA collecting societies, by which a collecting society authorises another collecting society to administer its repertoire on a given territory on an exclusive basis and a concerted practice among all collecting societies resulting in a strict segmentation of the market on a national basis. The effect for a commercial user such as RTL or Music Choice that wants to offer a pan-European media service is that it cannot receive a licence which covers several Member States, but has to negotiate with each individual national collecting society.

The decision will allow collecting societies to compete on the quality of their services and on the level of their administrative costs (which are deducted from the money collected before it is passed on to the author). It will thus provide incentives to collecting societies to improve their efficiency.

In 2007 the Commission sought to resolve the case amicably when formal commitments were offered by CISAC and 18 collecting societies (see IP/07/829). However, interested parties' comments on the commitments were negative. In particular, broadcasters, content providers and certain collecting societies generally considered that the proposed commitments would continue to make it difficult for a commercial user to obtain a pan-European licence.

See also MEMO/08/511".

CISAC has issued its strongly negative response to the Commission's ban in the following terms:

"CISAC regrets a recent Decision of the European Commission which targets 24 authors’ societies in the European Economic Area. The Decision concerns the reciprocal representation contracts existing between those societies for certain exploitations of musical works via the internet, satellite and cable.

The membership issue raised by the Commission has been overtaken by events a long time ago. The interests of the individual creator lie at the heart of collective administration. The principle that creators are free to join whatever society they choose is therefore already well established and widely applied by societies throughout the EEA. As for the issue of exclusivity, the EEA societies have accepted for decades that contracts between them should be based on non-exclusive arrangements.

CISAC’s main disappointment with the Decision, however, lies in the way in which the Commission has responded to the territorial delineations within societies’ reciprocal representation contracts. Whilst it is true that the Decision’s approach to territoriality will inevitably lead to a catastrophic fragmentation of repertoire and therefore to legal uncertainty for music users, it is the Commission’s assertions that the Decision is somehow in the creative community’s interest which has been of particular surprise to CISAC.

Loudly and clearly (but apparently to no avail), the creative community has told the Commission that the community remains deeply concerned about a Decision which claims to act in the name of creators but which in fact is being imposed on them against their express wishes. Time and time again, the creator has pleaded that the Commission’s proposed course of action will lead to a calamitous decline in artistic creation, cultural diversity and creators’ income.

CISAC and its members continue to count the full costs of the Commission’s decision - not just on the world’s 2.5 million creators whose interests have been jeopardised by the Commission’s stance on territoriality, but also on users".

Mindspeed sells off patents

It looks like that Orange County, Calif, based Mindspeed Technologies has found a new source of revenue stream to supplement its revenue from product sale. A press release issued on 21 July 2008 - on the same date that the company reported its 3Q fiscal results suggested that it raised USD 10 Million on the sale of non-core patents. Details of the sale are said to be confidential and no details of the patents sold were issued.

The interesting question is, of course, what patents are involved. Rob vaguely remembers seeing Mindspeed PDAs a few years ago - and his favourite patent database (DEPATISNET) suggests that Mindspeed does have (had?) a small portfolio of patent applications relating to smart telephones and the like. So - have these been sold. And to whom? It looks like we'll have to wait a few weeks to see if the assignments appear on the US PTO's database or EPOLINE.