Tuesday, 28 July 2015

Lex Machina Trademark Litigation Report: Trademark Litigation Alive and Well in the U.S.

Lex Machina, the IP data analytics firm, recently released its "teaser" Trademark Litigation Report (Report).  The Report reviews and gleans insight from U.S. District Court trademark cases pending between 2009 to March 31, 2015.  The Press Release for the Report notes several eye-catching statistics:

[Over] 6,900 . . .  cases where permanent injunctions were granted, and . . . over $9 billion in cumulative damages awarded in trademark cases since 2009.  More than 24,000 trademark cases have been filed since 2009, with over 4,000 new cases filed in 2014 alone.

Unsurprisingly, trademark litigation is ubiquitous given the value of brands and the nature of the law itself, which encourages litigation to protect and expand the legal protection of a trademark.  However, the sheer number of suits is always impressive to see. The Report dives into several case studies concerning specific brand owners.  Interestingly, Deckers ($3.4 billion) and Chanel (and almost $1 billion) account for almost half of the damages awarded.  Moreover, the vast majority of the damages awarded come after a default judgment—most of the rest result from consent judgments.  It would be interesting to know how much is actually collected. 

Some of the other interesting information in the Report concerns the amount of time it takes to obtain various types of injunctions, top districts for trademark and related filings, and data concerning types of judgments and findings by the courts reviewed.  For example, the Report notes that permanent injunctions are issued faster in cases only involving trademark claims as opposed to cases involving trademark and patent or copyright claims.  Moreover, preliminary injunctions in cybersquatting cases alone are issued faster than trademark claims alone. The top five districts for trademark filings include two California districts: the Central District (coming in first by far) and the Northern District.

The Report utilizes, in part, the following methodology in collecting data:

This report draws on data from Lex Machina’s proprietary intellectual property litigation database. Although some of our data is derived from litigation information publicly available from PACER (the federal court system’s document website), Lex Machina applies additional layers of intelligence to bring consistency to, and ensure the completeness of, the data. Beyond the automation, key areas of Lex Machina’s data are either human-reviewed or hand-coded by a dedicated team of attorneys to ensure accuracy.

You can obtain a copy of the Report by registering with Lex Machina here.  It is a quick and interesting read.  Has there been a similar study on trademark litigation in other parts of the world?

Transparency in Patent Ownership: now you can see the movie

Now for the sequel...
Intellectual Asset Management magazine (IAM) has put together a short (4 minute 27 second) and well-presented video, "Transparency in Patent Ownership". Prepared at this year's IPBC 2015 conference in San Francisco, it succinctly summarises the virtues of signing up for the ORoPO Open Register of Patent Ownership (for example, you can more easily check who owns a patent and therefore whether you've already been paid the right business for a licence to use it; it can also lead to the making of major savings).

The hesitancy felt by at least one major patent owner -- Philips -- about making its verified patent ownership data available is also expressed (good idea in principle but, on the "pool's a bit cold so let's all jump in together" basis, the decision is easier if one's competitors are doing the same thing at the same time).

You can view the video by clicking here.

Thursday, 16 July 2015

Under-reporting of IP licence royalties: is it a problem worth tackling?

IP Finance has received word from InvotexIP of the findings of its 14th Royalty Compliance Report in which, it reports, licensors who fail to audit their intellectual property income may be losing significant revenue. The study shows that a staggering 87% of audited licensees underpay royalties. The errors are substantial: 
  • 57% of licensees under-report sales
  • 31% misinterpret the licensing agreement
  • 27% under-report due to disallowed deductions

The report also offers data on the frequency rate of common under-reporting errors, findings by error type and under-reported royalties as a percent of reported royalties.

This blogger is not surprised. Noting that 57, 31 and 27 add up to rather more than 100%, he has no doubt that some licensees under-report in more than one way -- and he is sure that there are other bases upon which under-reporting is made. Rigorous auditing by licensors is often resented both by licensees who find it invasive and embarrassing and by licensors who find it expensive and inconvenient. However,the cost of taking measures to ensure accurate reporting of sales volumes, income and so on should be measured against the cost of not taking them.

Huawei ruling: bad news for SEPs?

From our friend Colm Ahern (Elzaburu, Madrid) comes the following hot-off-the-press comment on today's decision of the Court of Justice of the European Union in Case C-170/13 Huawei v ZTE [noted on the IPKat here].

Standard Essential Patents Lose Ground

The judgment in in Huawei v ZTE (C‑170/13) which was published today largely confirms the Advocate General’s Opinion. It amounts to a significant departure from the very strict conditions laid down by the German Bundesgerichtshof (BGH) in the Orange Book case regarding standard essential patents (SEPs) and antitrust law. It also vindicates the Commission’s position, which has been openly critical of Orange Book.

The Court effectively rejects the rules established by the BGH in the Orange Book case whereby the seeking of a cessation injunction by a patent holder with a dominant position, would only constitute abuse of that position if the alleged infringer had made an unconditional and binding licence offer which could not be limited to cases where patent infringement had been proven. By contrast the Court places the burden on the patent holder to first send a notice letter setting out not only the alleged infringement. Failure to do so before seeking a cessation injunction and removal of infringing products would constitute abuse of dominant position. If the alleged infringer expresses willingness to negotiate, then the patent holder must offer licence terms offer under FRAND conditions specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated. The alleged infringer could then respond with a counter-offer setting out alternative terms. If this offer is rejected the alleged infringer could provide a bank guarantee or place the amounts necessary on deposit. The patent holder could only avoid the charge of abuse if the counter-offer were held not to be serious and to constitute a mere delaying tactic. The alleged infringer could also reserve the right to later challenge both patent validity and the existence of infringement.

The rights held by owners of SEP patents under the “Orange Book Standard” have been significantly curtailed as a result of this judgment.
Thanks, Colm!

Friday, 10 July 2015

What was Jared Fogle worth as the Subway Guy?

IP valuation tends to operate in the area bounded primarily by patents and secondarily by trade marks and copyright. The ways of IP evaluation are several, which sometimes leads skeptics to question how accurate any such valuation can ever be. One need only recall the 4.5 billion dollar valuation given to the Kodak patent portfolio in 2011, only to see that when all of the dust settled in the face of the company’s business meltdown, the portfolio fetched only slightly more than 500 million dollars. When trade marks and copyright are involved, the valuation that can be ascribed to a portfolio of trade marks and even to a back library of rights in films is even more murky.

The challenges of carrying out IP valuation occurred to this blogger as he read the account of the rise and apparent fall of Jared Fogle, the iconic (at least in the US) pitchman for Subway, the franchise restaurant operation. Fogle is the once-anonymous obese college student from Indiana, who reportedly once weighed nearly 450 pounds, but who then proceeded to lose 245 pounds in a single year, centring on his claimed healthy use of Subway food offerings, thereby giving meaning to the notion of the “Subway diet”. An ad agency in Chicago leveraged Fogle’s story as the basis for advertisements on behalf of Subway. One thing led to another, and Fogle found himself as the chief pitchman for the company,becoming known as the Subway Guy, travelling all around the world on behalf of the company in support of maintaining a healthy life style based on Subway food offerings. In 2004, he established the Jared Foundation in support of efforts to combat child obesity. Fogle had become a renowned media figure in his own right.

All of that seems to have come tumbled down upon him this week, at least with respect to Subway. A couple of months ago, the executive director at the Jared Foundation became involved in a scandal relating to child pornography. Fogle was not implicated. However, this week it was reported that officials and agents, led by Indiana's Internet Crimes Against Children Task Force, carried out a raid on Fogle’s home in suburban Indianapolis, during which they seized computers, various media storage devices and documents. It does not appear that Fogle has been charged with a crime and he is reported to be cooperating with the authorities. Nevertheless, the next day, Subway and Fogle parted ways, the upshot being that Fogle is no longer connected with the company.

Let’s be clear about the human side of this saga—this blogger wishes Fogle no ill and we draw no conclusions in this regard. The story did, however, give rise to the question: how much were Fogle’s efforts worth to Subway, at least until this week? The Wikipedia entry on Fogle states that, between one-third and a half of the growth in sales of the overall franchise operations since 2000 (the company is reported to have grown three-fold during that period) is attributed to Fogle’s promotional efforts. While no official company figures were given, an article on Bloomberg.com pointed to one estimate that, in the US alone for 2014, sales reached nearly 12 billion dollars. Against this, Fogle is reported in Wikipedia as being worth 15 million dollars.

And so the question: how does one place a value on Fogle’s efforts in connection with Subway, prior to Tuesday of the week? Start with the estimate, as reported above, that his efforts were responsible for perhaps up to one-half of the growth in sales of the company since 2000. How does one go about creating a metric to establish this conclusion? In his younger days, this blogger engaged actively in social science research, where multivariate analysis was central in trying to disentangle the extent to which each of the variables independently contributed to the dependent variable under scrutiny. Is something like this being used to reach the conclusion about Fogle’s contribution to the sales growth of the company; if not, what was used to reach this result?

Moreover, assuming that Fogle’s contribution to the growth of the company can be quantified, how should this contribution be valued, and how should Fogle then be compensated? This blogger does not have any ready answers. Valuing patents is challenging enough, but valuing the worth of a media pitchman behalf of a company and then compensating him or her accordingly seems an even more daunting task.