Embryonic stem cell research: ALLEA calls for patent protection, increased funding

The European Federation of Academies of Sciences and Humanities, ALLEA, has made a clarion call for greater funding for patentability and research funding relating to embryonic stem cells.  According to its statement, reproduced in relevant part below:

"With its third statement on “Patentability and Research Funding relating to embryonic Stem Cells”, ALLEA follows up on two previous statements regarding this issue – released in May 2011 and September 2012 respectively – both closely linked to the case Brüstle v Greenpeace and the corresponding Judgment of the Court of European Union (CJEU) [noted on the IPKat here]. 

The statement, prepared by the ALLEA Permanent Working Group on Intellectual Property Rights under the chairmanship of Professor Joseph Straus, raises concerns against a possible acceptance of the above mentioned Judgment which would most seriously affect research of essential importance to citizens of the European Union. Therefore, the competent bodies of the European Union are urged “not to accept the proposed amendments and to continue the well balanced funding of the respective research at the Union level”. It is furthermore argued that basic research in this field would need more EU funding rather than less.

In its previous statements, ALLEA had explicitly underlined that a lack of patent protection in the area of embryonic stem cell research could negatively affect the investment in developing therapeutics based on human pluripotent embryonic stem cells. It was also stated that serious concerns of the European scientific community regarding the effects for research in this important area of medicine would need to be taken into account. ..."

ALLEA's previous statements, background documents and further information on this topic can be downloaded here. The full text of this statement can be downloaded here.

ALLEA's credentials are impeccable and its arguments well-founded, but that is no guarantee that its voice will be heeded by a Europe in which decision-makers are frequently caught in the cross-fire of conflicting lobbying, strident campaigning and potent sound-bites.

What the Index for Collaborative Innovation Partners Teaches (and What It Does Not)

The Patent Analytics Group on LinkedIn has brought to my attention a recent blog post by Alex Knapp, which appeared on the forbes.com site. Entitled “Canada, Israel and Switzerland are America’s Top Innovation Partners”, here, the article describes the findings set out in the “U.S.-Israel Innovation Index”, which is described as measuring “bilateral research and development between the U.S. and other countries, here. The study was carried out by the U.S. Israel Science & Technology Foundation. In the words of its Executive Director, Ann Liebschutz, “We picked 16 countries that were geographically diverse, had links to US and had strong innovative tech companies.”

The study examined various parameters of cooperation in R&D, most notably government-to-government connections, pool of human capital, spending on R&D and involvement of private industry. Based on these criteria for measuring which countries are the “largest” innovation partners with the U.S., Switzerland came out number one, followed by Canada and Israel. The reasons why each of these three countries is so highly ranked appear to be unique to each country. Thus what seems to drive US-Swiss innovation collaboration is the role of the pharmaceutical industry in Switzerland. Given the cost and complexity of bringing pharmaceutical products to market, collaboration seems to have become increasingly common in the mutual interest of the pharmaceutical interest in each country. The article does not explicitly address Canada, but one can surmise that the same general dynamics that integrated the US auto industry with the auto manufacturing industry in southern Ontario provided a ready platform for various other forms of collaboration in innovation as well. To all intents and purposes, this integrated region has been one large industrial ecosystem, despite the presence of an international boundary.

As for Israel, emphasis in the piece was placed on the strength of the country’s innovative human capital, fuelled in part by the wide net of military conscription for the country’s post-high school youth. While the post, quoting Ms Liebschutz, overstates this (“The technical training that every Israeli receives in the army produces a country of capable engineers”), there is truth in the observation that clusters of young talent in certain military units, especially in the Intelligence Corps, have created an environment for world class innovation after release from military service. However, set against the country’s strength in human capital are its relatively limited domestic resources for funding substantial R&D activity. In fact, it can be argued that Israel high tech only took off in the 1990s, in part due to the public-private program known as Yozma, here, which brought overseas capital and managerial know-how to the local Israel R&D market.

The centrality of the US role of providing the funding for its innovation partnerships was recognized by Ms Liebschutz herself. As she notes:

“In a time when budgets are lean, you hear a lot about cuts and priorities in terms of where the government should put its resources. International cooperation, when done correctly, is a way to leverage those resources. Israel is good at creating international cooperation for funding. We felt this bilateral innovation index serves not just [the] US-Israel relationship, but the scientific community as a whole where it shows a good ROI on international cooperation.”

One might however ask just how far the US-Israel relationship can be generalised in pointing to valuable forms of cross-border innovation partnerships. Perhaps most notably, unlike Switzerland or Canada, the Israeli hi tech model prefers an exit (as speedy as possible) by the founders and major investors of the local innovation company, usually in favour of an overseas purchaser or investor. The upshot is that the capital brought from the US side into the partnership largely redounds to the benefit of a small number of people connected with the Israel partner and far less (if at all) to the Israel overall labour market, which seems largely unaffected in the aggregate.

Perhaps the ultimate upshot of this study is that there is no “one size fits all” approach for cross-border innovation partnerships, in general, and innovation partnerships with the US, in particular. This means that there will necessarily need to be trial and error in the process as the US seeks to find successful forms of innovation partnership with various countries. Managing this process in a fiscally responsible manner, in the face of uncertain results, poses the greatest challenge for those seeking to obtain benefit from such efforts in innovation partnerships.

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. 

Pay-for-delay: a new article and a couple of questions

"Pay-For-Delay Practices in the Pharmaceutical Sector: Lundbeck, Actavis, and Others" by William Choi, Bruce Den Uyl and Mat Hughes, has just been published in the Journal of European Competition Law & Practice (2014) 5 (1): 44-52. According to the abstract:

"It is straightforward to set out an economic model in which pay-for-delay settlements may lead to monopoly profit sharing, so as to prevent entry and to keep prices high; 

The U.S. Supreme Court's and the European Commission's guidance appears to differ in that regard, with the U.S. Supreme Court focusing primarily on the size of the payment and whether it has a legitimate justification; 

In some circumstances, banning pay-for-delay may reduce the scope for settlements to be agreed and, somewhat paradoxically, delay market entry by generics firms".

This blogger has long been fascinated by the concept of pay-for-delay and has wondered why, so far as he can tell, this phenomenon has not spread beyond the pharma patent sector and into markets that are less emotive and public policy-driven.  Also, given the relatively short life of patents, any harmful effects of such payments -- assuming that they are harmful -- are presumably going to be of pretty short duration anyway.  Can anyone explain

ICC focuses on IP management for innovative SMEs

From Sam Davies (ICC Online Communities Coordinator) comes the following information, which will certainly be of potential interest to many readers of this weblog:

As an IP blogger you may already be aware of the series of research papers into IP and Innovation that the International Chamber of Commerce (ICC) launched late in 2013. We are pleased today to release a video related to the first paper in this series.

The first paper -- Enhancing IP Management and Appropriation by Innovative SMEs --provides an overview of the various internal and external factors that may influence the approach SMEs take to IP management, presents the main types of strategies they adopt, discusses ways to improve their IP management, and articulates a number of recommendations for policy-makers.

In this Google Hangout recording, Daphne Yong-d'Hervé, ICC's Chief Intellectual Property Officer discusses with Omer Hiziroglu, General Manager of Inovent Innovative Ventures (Turkey), and Emil Pot, General Counsel at Actogenix (Belgium), the role that IP property management plays in the business strategies and operations of technologically innovative SMEs.

Please feel free to link to this video or use it to create discussion on your blog or online community. To see the video and find out more about the series, click here.

For further information, please contact Daphne Yong-d'Hervé,dye@iccwbo.org or follow @iccwbo_org on Twitter, or #ICCIP.

The role of the ICC is something that this blogger has never understood.  The organisation does indeed take an interest in intellectual property, as evidenced by the recent promotion of its Positive Innovation Agenda (see IPKat post here), but it doesn't seem to participate in all the usual international and regional forums for intellectual property debate.  Can anyone fill this blogger's knowledge gap?

Also, if there is any reader who would like to review the ICC paper for this weblog, please get in touch!

Copyright's contribution to the US economy: rosy figures, this time round

Thanks to Chris Torrero, my attention has been drawn to "Copyright Industries in the U.S. Economy", a report prepared by the International Intellectual Property Alliance (IIPA) which has, since 1984, been working in partnership with the U.S. government to improve the ability of the copyright industries to do business in foreign markets. Quoting directly from the preface to this report:

"To quantify the contribution of the copyright industries, IIPA commenced a series of economic studies in 1990. Copyright Industries in the U.S. Economy: The 2013 Report, the fourteenth such report, by Stephen E. Siwek of Economists Incorporated, covers the period 2009-2012. This Report shows that the copyright industries make up an increasingly large percentage of value added to GDP; create more and better-paying jobs; grow faster than the rest of the U.S. economy; and contribute substantially to U.S. foreign sales and exports, outpacing many industry sectors. The specific findings of this year’s Report mark a milestone: for the first time, the contribution of the core copyright industries of the U.S. economy surpassed one trillion dollars in 2012".

The report can be accessed in full here.

This blogger is generally quite sceptical of reports and studies that purport to measure the value of copyright industries, partly because of the definitional issues involved and partly because of the risk of double-accounting.  However, where there is a series of reports as is the case here, comparisons between different editions can be quite meaningful.  The period 2009-2012 is perhaps one that should be treated carefully, since it coincides with the astonishing growth of online transactions concerning copyright works at the same time as many non-IP sectors contracted or stagnated in the wake of the US banking crises, sub-prime lending scandals and so on.  Now that a global recovery is gradually manifesting itself, the next set of figures from the IIPA report might show a handsome contribution of copyright industries to the US economy in dollars and cents but a far weaker showing in terms of percentage contributions.

Rockstar and IP Governance

Over at the IP Summit in Paris, John Veschi - CEO of Rockstar - has provided a couple of fascinating insights in how IP is governed and should be included on balance sheets. One of John's thesis is that if Nortel had put the value of IP onto its balance sheet, then the company might not have been placed into bankruptcy. Rockstar - on the other hand - was able to value the IP at USD 4.5 billion because of the arm's length transaction in the form of the purchase by the Applie / Microsoft consortium. Clearly there is / was a mismatch between these two values. Currently it's considered to be too hard to place any value for IP normally onto a balance sheet. Historic costs - including preparation and prosecution costs - is clearly inaccurate because the value of IP changes over time. The difficulty on ascertaining value means that litigation concerns often result in a value of zero being placed on the balance sheet. To date there have been no shareholder suits arguing that the IP should be valued higher. Share analysts fail to understand the value of IP, as this author can confirm having been consulted many times on this subject. John drew an analogy with share options. Their value was originally not included on balance sheets. Today the Black-Scholes method enables at least a rough calculation to be made. The value of IP will also be an inaccurate calculation, because of unknown variable. John concluded that an IP rich company needs a different governance strategy in order to exploit its value. Few CEOs have any IP background and it's not surprising that they tend to be dismissive of IP, particularly when faced with an allegation of infringement. The discussion afterwards also illustrated different opinions. One speaker highlighted the risk of invalidation of IP risks. John pointed out that this risk can be built into calculations.

Security for costs and US litigants in Serbia

Back in November 2010, famous US shoe company Skechers sued Serbian company Safran, which imported and sold sneakers similar to Skechers’ Shape-Ups, for trade mark and copyright infringement and for unfair competition. Safran asked for Skechers to deposit security for litigation costs since, with Skechers not having a presence in Serbia, there was a risk that the company would not reimburse Safran’s litigation costs if it lost (the United States is not a member of the 1954 Hague Convention on Civil Procedure, which provides for free access to the courts). Skechers refused to deposit security for litigation costs and invoked an 1881 Treaty on Commerce between Serbia and the United States which provided, among other things, that citizens of Serbia and the US are to have full reciprocity and access to the courts. Safran objected that the treaty was no longer applicable, because there was no factual reciprocity.

The Court of First Instance refused Safran’s request. Safran appealed; the Appellate Court remitted the action to the Court of First Instance, asking it to seek the opinion of the Ministry of Justice. The Ministry responded that the 1881 treaty is was in force, but that there was no factual reciprocity between the US and Serbia, because Serbian citizens in the US had to deposit security for litigation costs when suing in a state in which they did not have residence.

After the Court of First Instance ordered Skechers to deposit security, Skechers appealed, arguing that Serbia and the US had to respect the 1881 treaty until it was revoked by a special procedure under the treaty itself. Skechers added that the US did comply with the treaty, citing a US Supreme Court decision in which the court explicitly held that the treaty must be respected. In light of this, the Appellate Court refused Safran's request that Skechers deposit security for litigation costs in a decision which is final.

Source: "US companies do not have to deposit security for litigation costs", article for World Trademark Review by Gordana Pavlovic and Maruska Bracic (Cabinet Pavlovic), Belgrade and Brussels, 25 November 2013

FRAND royalties: a new article

J. Gregory Sidak (Criterion Economics LLC) has just informed me that his latest article, "The Meaning of FRAND, Part I: Royalties", has now been published in the Journal of Competition Law & Economics, 9(4), 931–1055. It's 125 pages long and looks most impressive. According to the abstract:

"What does it mean for a patent holder to commit to a standard-setting organization (SSO) to license its standard-essential patents (SEPs) on fair, reasonable, and nondiscriminatory (FRAND) terms? When is a royalty FRAND? Drawing from both legal theory and economic theory, I propose an interpretation of FRAND that distinguishes and reconciles the conflicting definitions of FRAND and provides courts a practical approach to identifying FRAND royalties. A proper understanding of a FRAND royalty requires recognizing the combinatorial value of standard-essential patents. That recognition reveals the fallacy in attempting to apply the “ex ante incremental value” rule to the determination of a FRAND royalty. FRAND royalties divide the aggregate royalties generated by the standard among the holders of patents essential to the standard. Such a division should maximize the surplus resulting from the standard’s creation. It must also satisfy an individual-rationality constraint for the patent holder and the licensee, thereby encouraging continued participation in the setting and implementation of open standards, as opposed to greater reliance on proprietary standards".

Greg has kindly purchased "open access" to the article from Oxford University Press, so anyone may download the published version for free, by clicking here.

This blogger's appreciation of the subject is limited by his relative lack of sophistication in dealing with the economic side of it, but if any reader with the relevant expertise would like to review it, he'd be grateful.