Tuesday, 30 June 2015

European patent markets, trends and consensuses: what comes next?

Following the IP Finance blog's extensive coverage of the IPBCGlobal 2015 conference, the weblog received the following message from Corinne Le Buhan:

"A tweet from @PatentTwit asked "where's the patent market analysis of Europe and Asia? Opening session largely covers US market trends?" This question was discussed briefly towards the end of the panel session, it being suggested that things might change in Europe once the unitary patent came into force and once China had got its act a bit more together. 
I just thought you may also be interested on the recently published report from the EU expert group on patent aggregation.
IMHO it gives an interesting snapshot of the current and anticipated trends in terms of patent markets from a diversity of primarily EU-based stakeholders perspective. I was invited to one of the hearings to bring the innovative SME point of view and we had really good debates that day. The expert group must have had a hard time to deliver a consensus report and recommendations out of the hearings, but I think they did a good job overall, and I’m now curious to see what will come next (see their recommendations in the report).
Readers' comments and prophecies are welcomed. We don't get nearly enough discussion on this blog, so please take the trouble to participate and tell us what you think.

Monday, 22 June 2015

More figures on IP and competitiveness from the EU Observatory -- but what do they mean?

A recent media release from the Office for Harmonisation in the Internal Market (OHIM) has been busily trumpeting the correlation between economic performance and ownership of IP rights. It reads, in relevant part, as follows:

"New study finds that companies owning Intellectual Property rights outshine their competitors in economic performance
Companies owning intellectual property rights (IPRs) have, in general, 29% higher revenue per employee, about six times as many employees and pay wages that are up to 20% higher than firms which do not own IPRs. 

These are the main findings of a study carried out by  ... OHIM acting through the EU Observatory on Infringements of Intellectual Property Rights.

The study, which is based on official public financial data from more than 2.3 million European firms, covers companies which own patents, trade marks and designs at both national and EU level. 

One of the key findings in the study is that a modest share of small and medium sized enterprises (SMEs) in Europe own patents, trade marks or designs. It also finds that those SMEs which own such rights have almost 32% higher revenue per employee – a significantly higher economic performance, showing significant relative benefits associated with the ownership of IPRs. SMEs are companies which employ fewer than 250 people and which have an annual turnover not exceeding 50 million euro. 
This report, which looks at the contribution of IPRs at a company level, is a follow-up to a first EU-wide analysis of the contribution of IPR intensive industries to economic performance and employment in the European Union. 

It found that about 40% of total economic activity in the EU (some €4.7 trillion annually) is generated by IPR-intensive industries, and approximately 35% of all employment in the EU (77 million jobs) stems directly or indirectly from industries that have a higher-than-average use of IP rights".
The report, Intellectual property rights and firm performance in Europe: an economic analysis (here) was published earlier this month.  The previous report, Intellectual property rights intensive industries: contribution to economic performance and employment in the European Union (here), was published in September 2013. 

Headlines and figures are great fun, but one still has to look beyond them and ask which of the following propositions they support:

  • Businesses outperform their competitors because they have intellectual property
  • Businesses have intellectual property because they have outperformed their competitors
  • Businesses that outperform their competitors because they have intellectual property continue to outperform their competitors by acquiring further intellectual property

... or anything else, for that matter.

Friday, 19 June 2015

FRAND in India: how much will your royalties cost you?

"FRAND in India: The Delhi High Court's emerging jurisprudence on royalties for standard-essential patents" by J. Gregory Sidak (Criterion Economics), has just been published online by the Journal of Intellectual Property Law & Practice (2015) doi: 10.1093/jiplp/jpv096. The abstract of this article reads as follows:

Indian jurisprudence on fair, reasonable, and non-discriminatory (FRAND) licensing practices for standard-essential patents (SEPs) is at a relatively nascent stage. Unlike US and EU courts, which have dealt with cases concerning calculating a FRAND royalty for a considerable time, Indian courts and the Indian antitrust authority—the Competition Commission of India (CCI)—have only just begun to decide such cases.

In its initial orders in the first two antitrust complaints concerning SEPs, the CCI seemed to favour using the smallest saleable patent-practising component (SSPPC) as the royalty base to determine a FRAND royalty. However, in the short time since the CCI's orders, the Delhi High Court has rendered contrary decisions in two SEP infringement suits. The Delhi High Court's decisions use the value of the downstream product as a royalty base and rely on comparable licences to determine a FRAND royalty. The Delhi High Court's decisions are not only consistent with sound economic principles, but also indicate that the court is responding to the judicial and industry trends in the rest of the world.

Because the CCI is still investigating the antitrust complaints with respect to the same SEPs, the CCI could benefit from considering the legal and economic arguments in the Delhi High Court's decisions. It would be counterproductive for the emerging FRAND jurisprudence in India if the judiciary and the competition authority take opposing views toward the rights of SEP holders and SEP implementers.
This is an Open Access article, distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which means that you can read the article in full, without payment, here.  The licence permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.

Wednesday, 17 June 2015

IPBC Global 2015: Conference report IX -- Financial services patents

Thanks to Maulin Shah (EnvisionIP), IP Finance can bring you this report on Monday's "Banking on IP" breakout session at IPBC Global 2015.  Much appreciated, Maulin! Incidentally, this post is based on Maulin's original blogpost on PatentVue, here.

The topic of financial services patents was a focus of discussion during a panel moderated by Bruce Berman (Brody Berman Associates) during this year’s IP Business Congress in San Francisco. The panellists included Michael Chernoff (MDB Capital Group), Andrew Ramer (Cantor Fitzgerald) and Sean Reilly (The Clearing House Payments Company).  Each panellist had a significant perspective on the future of patents held by banking and financial services firms, where the majority of these patents are primarily business methods and software-related.
The panellists seemed to agree that, overall, values for patents in their industry have seen a reduction post-Alice Corp.  Michael Chernoff stated that, over the years, he has stressed the difficulty in valuing methods patents, and the current environment is no exception. However, as history has shown, markets tend to rise and fall with the tides, and the panellists acknowledged that the near future could possibly be a low point for methods patents valuations.
Research from Michael Chernoff's firm showed that financial services companies, as well as major technology companies, continue to seek, and are receiving, methods patents, albeit not at the same rate as in previous years. For example, MDB Capital’s analysis of patent applications from 2011 to 2015 shows that eBay owns 585 patent application families related to business methods and software patents relevant to financial transactions and supporting technologies, while Bank of America owns 633.
Andrew Ramer envisioned that patenting activity at his firm, and other financial firms, would continue with regard to financial service-related technology. While he believed methods-related claims will still be sought, patent application filings related to consumer and enterprise facing devices and hardware may increase in the coming months and years.
Sean Reilly believed that the focus at the patent office would be on quality and clarity in terms of business methods patents; he did not feel that stricter legislation is necessarily the correct way to address issues surrounding the use of software patents.
The overall tone of this year’s conference seemed to focus on a pendulum shift from the high values attributed to patents during the Nortel and Motorola patent acquisitions (here and here) just a few years ago.  Many participants and speakers felt that the current environment is an extreme situation caused by an uncertainty in case law, and by the legislative issues still pending in Congress.  Despite the negative headwinds, some feel this may present a unique buying opportunity –- where an increased risk may prove to yield higher returns.

It's hoped that, once some further clarity comes out of the courts and Congress, the pendulum may swing back towards a median, which may signal an increase in overall patent values, especially for software-related patents.

IPBC Global 2015: Conference report VIII

The final round of this year's IPBC Global 2015 conference was given over to breakout sessions. This blogger could not resist the lure of attending the session dedicated to a true IP finance topic: "Value conundrums". According to the event's web-blurb, "Patent value drives the IP marketplace. Working out what it is and how it can be quantified are both complicated tasks; but that is what this session sets out to do".

Damon Matteo (CEO, Fulcrum Strategy) moderated a talented panel consisting of Santosh Mohanty (Vice president, head of IP and product engineering, Tata Consultancy Services Limited), Takuya Saito (Vice president, Shobayashi International Patent & Trademark Office), Bruce Schelkopf (Group senior vice president and chief IP officer, ABB Inc) and Nigel Swycher (CEO, Aistemos). Damon promised to keep the presentations short, to allow plenty of time for questions -- with the heady attractions of cocktails to follow.

First to speak was Santosh, who thanked us for attending this session, hoping that this investment of our time would yield dividends. How does Tata value IP? Santosh identified three topics: 
* the context of the valuation: this includes the technological, social and environmental impact of the IP to be valued, and how end products may be created through its use. Further, how does the brand create valuable goodwill in the tangible world of real products? 
* the context of the marketplace: placing the valuation in a context of time and space, with synergies with other items of the IP portfolio and how they might augment market penetration. Also, how the IP affects the relationship of Tata with its business partners; 
* risk and the sustainable nature of the IP's value. This includes the risk of litigation and the risk of poor market performance.
What of the future? Tata's philosophy is the continuous promotion of creation within its organisation (300,000 employees spread through 50 countries), looking for opportunities to make profit by taking new ideas to the marketplace.  It is impossible to do everything in one go, everywhere, so priorities must be established and areas identified in which Tata can be a pioneer. 

Bruce spoke next, explaining his exposure as an employee to "productisation": the job of finding new products from IP that had already been paid for.  This was "a yeoman's task", but it turned out to be a worthwhile idea and it sensitised him to the potential for making money from IP. If money can be extracted from IP, it must be valuable -- but how to value it? This takes us out of the technical field and into the financial field. We have to learn to speak financial language, since that's the language in which IP is valued.  

Expectations are often set by external events, added Bruce, but it's unreasonable to set one's own expectations in relation to transactions and valuations that relate to others' IP, however exciting they are. Patents are valuable if they're good -- and the definition of a good patent is one that you own. At base, it's not the number of patents that counts but the income they yield, the return on investment.  If it's not being used and generates no income, it's not very valuable. Don't use other people's benchmarks either: set your own metric and stick to it. Think about how much you have to generate in terms of sales in order to fund litigation over your patents; that will put your IP's value in context.  Ultimately, it's a successful business strategy that will create IP growth.

Nigel then took the podium, casting doubt on the mantra that patent value was based on Georgia-Pacific and that you have to sue in order to find out how much your patent is worth.  The problem at present is that litigation is not the best way to perform patent valuations, but the data needed for a proper valuation is not easily available. In any event, 90% of patent suits settle before trial and databases of patent licences only scratch the surface in terms of the proportion of all transactions which they are able to record.  More information and more transparency is needed if decisions based on real, factual data are to be made. 

Yesterday's future is today", said Nigel, "which is great".  In future versions of this conference we can expect to see the disappearance of the word "troll" -- a pejorative term which reflects a lack of data upon which to establish sensible pricing of transactions. Transparency will increase and items such as the identity of patent owners will enhance the ability to transact patent deals properly.  This is why the launch of ORoPO as a means of pinpointing the actual ownership of patents is so important. It may be just one small step towards transparency, but it's a step in the right direction -- and anything that industry can do for itself is preferable to outside regulation.

Takuya then spoke about know-how based intellectual property, which is contained within the human brain rather than in the literature.  It has been possible to introduce an electronic notary-based system, with an electronic signature, that allows for the easy dealing with recorded know-how, the preservation of evidence and the identification of tradable content. An example of how this has been successfully done was given in regard to a Japanese sake brewery whose plant was destroyed in 2011 was able to engage in a technology transfer operation which enabled its sake could be brewed in the United States in accordance with its protected know-how. The result of this is that know-how has become another asset class.