Friday, 30 May 2008

Iron Man: Marvel Morphs into a Movie Studio

An article in the 19 May issue of Business Week, "A Secret Identity for Marvel", uses the success of the movie Iron Man to consider the financial side of this huge cinematic event. First, the awesome box-office numbers. In the opening weekend alone, the movie grossed over $100 million dollars, not bad for our hero's relentless efforts against the evils of terrorists and arms dealers.

No doubt such sums bring a tear of joy to the heart of Marvel Entertainment and its Marvel Studio unit. What is even more interesting is the way in which this comic book publisher--known for such icons as Spider-Man and the Hulk-- has succeeded in competing with much larger movie studios in bringing the movie Iron Man to a theater near you.

Successful as its character licensing, toy sales and comic books are (they generated $486 million dollars in 2007), Marvel needed to find a way to finance its movie activities. It did so by borrowing $525 million dollars in 2005 in order to create a fund that was intended to invest in movie projects. And how did they go about obtaining the funding? According to the article, Marvel pledged the future film revenues for 12 of its proprietary characters as security for the bank loans., while keeping the business of the film fund off the Marvel balance sheet. In this way, Marvel continued to control their characters commercially .

In the past, Marvel simply licensed its characters, such as Spider-Man, for receipt of a flat percentage of the box-office revenue plus amounts received from character merchandising. In so doing, as Business Week noted, Marvel "left a lot of money on the table." No more: In exchange for taking on the direct risk that the movie production might be a failure, the upside is the Marvel will now rake in most of the profits for itself.

In the case of Iron Man, these proceeds seem to be substantial. The report indicates that Marvel drew down $150 million dollars from the investment fund to make the Iron Man movie, and it is paying Paramount Studios 10% of net revenues for ticket and video sales, in addition to fees for marketing and distribution. But these expenses will be worth it, when you are talking about a projected $1 billion dollars in revenues, and estimated profits of up to $200,000 million dollars.

Of course, we all know that the movie business is a fickle, cut-throat industry, and yesterday's mega-hit may be followed by tomorrow's "flop to end all flops." But Marvel may possess both the necessary creative and financial acumen to successfully merchandise its characters on the celluloid screen, in the digital world, and through the sale of collateral products.

"Spurious precision": a short report

Many thanks to Oliver Rivers for his lively and thought-provoking talk to the IP Finance group on the intellectual property valuation issues that militate against any item of IP having any sort of fixed value at any given time during its life cycle. With experience cutting both ways (Oliver was for several years a record producer before taking the MBA route and ending up in IP valuation), Oliver demonstrated a greater sensitivity to IP rights than do many speakers from the money-and-accounting side of things. He also did two rather courageous things. The first was to take a pharmaceutical patent as a paradigm for his presentation. The second was to try to explain Black-Scholes (right) to an audience more comfortable with Black Holes. But methodologies are, it can be argued, only part of the story: in reality (it seems to this reviewer: these are not Oliver's own words!) that the subjective element--in terms of information supplied by the IP valuation client for the purpose of the valuation exercise -- may be the single most influential factor in reaching the range of values that is the outcome of the exercise.

The audience, made up of IP practitioners, financial consultants, investors and IP proprietors, treated the talk as an interactive seminar, probing Oliver on every point and teasing out the differences between different types of IP right and divergent approaches to valuation--which seem to be based more on an appreciation of probability theory than an understanding of the market itself. With so much questioning and audience participation, the intended 20 minute talk easily spanned a full hour, though thankfully there was enough time to enjoy the wine, nibbles and the view from Olswang's High Holborn office (thanks, by the way, for the hospitality).

If you'd like a copy of Oliver's PowerPoint, email me here and I'll send it to you by (more or less) return.
Also, the IP Finance group is looking for a speaker for August/September. We've had securitisation of intangibles and we've had valuation -- so it's probably the turn of assessment of royalty rates. If you'd like to volunteer yourself or recommend someone else, email me here and let me know.

Thursday, 29 May 2008

Next-generation tech transfer metrics

This notice has been received from Technology Transfer E-News:

"Gross data on annual licensing revenues, start-ups, invention disclosures, and patents are commonly used as the yardsticks of tech transfer success. But often these benchmarks are like comparing apples and oranges for offices with major differences across a broad continuum of sizes, philosophies, research budgets, structures, and geographies. A growing number of TTOs are rising to the challenge of meaningful performance measurement. They're devising metrics that apply to their own unique circumstances and goals, provide true insight into the value of their activities and achievements, and offer a data roadmap to pinpoint improvement opportunities. Now you can dramatically boost your ability to gauge -- and prove -- your TTO's performance by implementing advanced metrics and benchmarking systems. Join us on Wednesday, June 25, 2008, 1:00 PM - 2:30 PM eastern daylight time for a live international audioconference: "Tech transfer metrics: Establish meaningful performance measures and demonstrate your TTO’s true value."

Attendees will learn from two tech transfer leaders with unparalleled expertise: John Fraser, AUTM's immediate past president and TTO director at Florida State University, and Dana Bostrom, former AUTM VP for metrics and surveys and director of Innovation & Industry Alliances at Portland State University. For full program details or to register, CLICK HERE".

Tuesday, 27 May 2008

South African: IP Tax/Exchange control issues

The SA Treasury has embarked on a project to:

- ensure legitimate IP transactions are not unnecessarily complicated by tax
- ensure that tax consequences flowing from common IP transactions are logical and expected
- gauge the impact of our Exchange Control Regulations on IP transactions
- identify “negative” IP tax practices and existing / potential loopholes

In doing so they have called for comments on the legislation, more fully described on Afro-IP here.

The blogger is looking to compile a list of countries that have onerous exchange control provisions relating to IP and would welcome additions from readers.

Sunday, 25 May 2008

Film finance: four case studies from Spain

Variety has published an article by Emiliano de Pablos, "Spanish film finance case studies: funding changes impact diverse projects", which briefly highlights the funding bases of the following projects:

* Stephen Soderburgh's two-film "Che Guevara" biopic;
* "Asterix at the Olympic Games", from Ciudad de los Rebates;
* Mediapro's "Suso's Tower";
* Lisandro Alonso's "Liverpool".
The article makes some mention of exploitation rights, together with some of the sums involved.

Thursday, 22 May 2008

PPS proposed for Australia

In November 2006 the Australian Attorney-General released a discussion paper proposing significant Personal Property Securities (PPS) reforms.[1] In this context, “personal property” is any form of tangible or intangible property (other than land or buildings) and includes IP rights. The proposed reforms intend to establish a single, national PPS regime for the registration, protection and enforcement of personal property securities in Australia. The immediate need for reform is the existence of more than 70 separate Acts currently governing PPS in Australia and the reforms are based on similar PPS systems adopted in Canada and the United States.

On 16 May 2008,the A-G released a “consultation draft” of the Personal Property Securities Bill 2008 for public comment.[2] Submissions have been invited by 15 August 2008. At the same time, the A-G’s Department also released a Request for Tender that invites bids from information technology companies interested in building the new electronic PPS Register.

The stated goals of the PPS reform are

* to simplify the existing, fragmented PPS system by creating a single, national online register covering all forms of personal property (including, therefore, all forms of IP);
* to provide a more certain system of taking, registering, and searching security interests over all personal property; and

* to make secured lending more cost-effective and attractive to lenders.
The consultation period runs for three months and, although the PPS legislation has a high political priority, it would be optimistic to think that the Act in its final form will be passed before 2009. Drafting the legislation is the (comparatively) easy part - building the IT platform for the PPS Register may take much longer.[3]

[1] Attorney-General’s Department, “Review of the Law on Personal Property Securities – Discussion Paper 1 – Registration and Search Issues”, November 2006.
[2] See here. Press Release here
[3] See the Press Release here

This item was supplied to IP Finance by Australian solicitor Julian Gyngell.

Good news for IP taxation in the UK -- but is it too late?

In "Alistair Darling retreats from tax on offshore intellectual property", The Times Online, 19 May 2008, reported as follows:

"Alistair Darling [British Chancellor of the Exchequer] will signal another tax U-turn this week to prevent a threatened exodus from Britain of multinational companies.

... the Chancellor will sound the retreat over moves to tax intellectual property held offshore. The proposal was contained in a Treasury discussion paper on reforms to the way in which earnings from foreign subsidiaries are taxed. It led to a storm of protests from companies fearing that patents and brands held offshore were about to be brought within the reach of the British taxman.

Mr Darling is expected to offer an explicit assurance that the new regime will be revenue-neutral and will pose no specific threat to companies rich in intellectual property. A Treasury spokesman said that the final reform package would be unveiled late next month or in early July ...

Last month Jean-Pierre Garnier, the outgoing chief executive of GSK, who is a member of the Prime Minister’s International Business Advisory Council, issued a veiled warning to the Government over proposed changes to its tax regime.

Shire, Britain’s third-biggest pharmaceutical company, will incorporate its new holding company in Jersey and hold all board meetings in Dublin to limit its tax bills. ...".

Wednesday, 21 May 2008

Securitisation and coexistence agreements

Just a quick thought: at the INTA session on dormant trade marks the question arose as to whether a business seeking to roll out a new brand across Europe should enter into coexistence agreements with the owners of earlier rights that might be raised in support of grounds of opposition when applications are made to register the trade marks relatng to that brand.

My feeling is that a registration that is underpinned by such agreements, which may be unenforceable and/or unrecognised in some jurisdictions would be a far less attractive security than a registration where no earlier rights still posed a threat. Any thoughts?

Monday, 19 May 2008

The Scotsman reports that the future funding of stem cell companies is Scotland is dependent on a ruling next month by the European Patent Office's Enlarged Board of Appeals about whether stem cells are patentable or not.

The decision is on a patent application filed by the Wisconsin Alumni Research Foundation (WARF) - which holds the rights to a number of stem cell lines. Initially rejected by the Patent Office, WARF filed an appeal which was passed by the Appeal Board to the Enlarged Board of Appeal for a ruling (see decision here).

Personally I always find it interesting the various excuses made for not funding projects. Whilst the availability of patent protection is clearly one factor, the ruling will only effect the availability in Europe and the conditions that might be placed on the granting of patents in the stem cell field. Patent protection will still be available in other countries, such as the United States. I venture to doubt whether the effect on Scottish research will dependent on this ruling or not. It would be more serious if other countries came to a similar conclusion which would effectively allow a free-for-all in the stem cell field - and that outcome is unlikely to be either beneficial to the financing of research or on ethical grounds.

Brand valuation: art or science?

In an article for BrandChannel ("A How-To Guide to Assessing Brand Value"), Canadian evaluator Catherine Tremblay describes the cost approach, the income approach and the market approach, then concludes:

"In a nutshell, the valuation of a brand can be more of an art than a science—but it’s an exercise that can help management identify and develop the value drivers behind the brand. Professionals, such as Chartered Business Valuators and members of the American Society of Appraisers, can provide insight and assistance in the valuation of brands and other intangible assets".

There seems to be an inherent contradiction here: if it's an art, then why should we be concerned to adopt a scientific approach -- and if it's a science, why is there such a gulf between results of the application of competing methodologies? Comments, please!

Sunday, 18 May 2008

Reporting Intellectual Property - Mapping What Drives Value: Second Part

by Roya Ghafele, Ph.D.
ghafele@haas.berkeley.edu

Current accounting regulations allow only to fully understand how the IP relates to business if revenue streams can be directly related to a discernible, seperately identifiable asset. The worth of internally generated IP or IP that relates indirectly to business performance does not get reflected in accounting. The consequences of this are far reaching:

Firstly, the cost of capital increases, meaning that IP-rich companies may find it difficult to pass the funding hurdle, confirming that little has changed since Arrow[1] published his findings some forty five years ago showing that competitive markets fail to provide socially optimal levels of technology investment. Since IP is literally absent from the accounting, reporting and managerial discourse, investors find it difficult to access information on how a firm’s IP portfolio relates to its income streams. For this reason, risk rates associated with investments in knowledge-intensive sectors may not be adequately assessed and a higher premium may be charged when funding is provided on the basis of IP.

Secondly, the management of a company becomes a much greater challenge since adequate information on all the assets and liabilities of a company are not available.

As Dr. Harvey Bale, Director General of the International Pharmaceutical Association (IFPMA) argues: “Today, IP underpins between 50-70% of a country’s private sector gross earnings, so it is often decisive for the commercial success or failure. This stands in strong contrast to IP management skills of top management. Many chairmen or CEOs do not grab the simple distinction between patentability and freedom to operate. It is like not knowing the difference between profit and cash flow.”[2]

The internal management of IP is seriously hampered since its value is not made explicit on the balance sheet. Since the bulk of the space of the balance sheet is devoted to tangibles, managing intellectual property becomes a very intangible undertaking. The efforts put into this may at best be indirectly reflected, but do not directly become visible.

Thirdly, ratios, such as the market to book value are largely distorted, making it difficult for regulatory authorities and market participants alike to capture the worth of a company. Gillette, for example, which wealth mainly relies within its trademark portfolio, had a book value of 3 million USD, but was bought by Procter and Gamble for 59 million USD which makes up for a gap in the market to book value of 56 million USD that had never been reported anywhere.[3]

The information provided in financial reports frames perceptions and ultimately determines business behaviour. The current information gap, expressed in hidden information on the value of internally generated intellectual property may therefore seriously distort markets for innovation and creativity.

From multinational to micro-enterprise, no business can afford to ignore these issues forever, even though they have to learn to navigate the current business environment challenges without waiting for a quick fix or overnight reform.

An alternative reporting system may be a valuable compass helping companies to ship through troubled waters. While most influential financial standard setting institutions (such as the FASB – Financial Accounting Standards Board) continue to explore various options to better reflect the value of internally generated intangible assets, there is a clear need for further research on how to overcome the existing intangible/tangible reporting asymmetry through reporting systems that are not bound to the current logic of accounting.

[1] This post was first made publicly available in Know IP – The Stockholm Network’s Monthly IPR Journal Volume 3: Issue 4. May 2007. The Stockholm Network has given its kind permission to reproduce this paper on the blog.
Arrow K.J.: Economic Welfare and the Allocation of Resources for Invention. In: Nelson R.R. (ed.) The Rate and Discretion of Innovative Activity: Economic and Social Factors. Princeton University Press. Princeton 1962
[2] In Ghafele, Roya, Wurzer, Alexander Reboul Yves and Hundertmark, Stephan; Rethinking IP Education; Intellectual Asset Management Magazine December/January 2007 Nr. 21, p.28-40
[3] example given by the FASB (Financial Accounting Standards Board) at the United Nations Department of Economic and Social Affairs Conference, July 12-13 2006

Friday, 16 May 2008

Meet the Bloggers

IP Finance is among the 15 blogs at the "Meet the Bloggers" reception in Berlin next Monday evening, which coincides with the International Trademark Association's Annual Meeting in the same city. For details of the reception at the top of Olswang's office at One Potsdamer Platz -- which you are welcome to attend -- click here. For blographies of all 15 intellectual property blogs, provided by Managing Intellectual Property magazine, click here.

Reporting Intellectual Property - Mapping What Drives Value: 1st Part

by Roya Ghafele, Ph.D.
ghafele@haas.berkeley.edu

Reporting systems that lie outside traditional accounting statements are needed so to overcome existing information gaps on intellectual property. IP can be a key driver of an innovative or creative firm, yet information necessary to understand and track what gets business going in markets for ideas is -due to current financial reporting standards- scarce and unsystematic.

The double entry accounting system that is used world wide underpins the notion that all business transactions constitute a unique and identifiable exchange of assets, which results in equal credits and debits.[1] This architecture may however impede borrowers and investors to fully grasp the relevance intellectual property has to a business.

Internally generated intellectual property can be of major relevance to a firm, even if it is not involved directly in a business transaction. This has led Guo and Lev argue that transaction based accounting may give a distorted picture of a creative or innovative company since their driving factors are not necessarily based on an arm’s length transaction between a willing buyer and seller.[2]

Therefore, the transaction-based value reported by accounting may have little to do with the economic value of a company in cases where internally generated IP is the main driver of a business.

Take the following three examples, where immaterial assets, such as patents, trademarks or trade secrets were a main driver of business:

· Texas Instruments leverages its patents through licenses and collected some 800 million USD in royalties between 1986 and 1992.
· The Austrian SME Tinnitronics built its business around the internally developed device Ti-Ex ™ that seeks to fight tinnitus. The firm’s business model is to rent and sell the IP (patents and trademark) protected device to patients. Without IP, Tinnitronics would not be in business.
· Coca Cola keeps its trade secret over its syrup since 1891. Paired with successful trademark management the company’s trade secret makes up for most of its success since the 19th century.

Current accounting regulations allow only to fully understand how the IP relates to business in the context of Texas Instruments, since revenue streams can be directly related to a discernible, seperately identifiable asset (key criteria for an intangible asset under International Accounting Standards - IAS 38). The worth of the patent and trade secret in the latter two cases can/need not be made explicit, which does not allow to understand the value IP has to the company. Thus, both the earnings and the book value of equity may be distorted.


... to be continued

This article was first released in "Know IP – The Stockholm Network’s Monthly IPR Journal
Volume 3: Issue 4. May 2007". The Stockholm Network has given its kind permission to reproduce this article on the website.

[1] Rodov I./Leliaert P. FIMIAM: Financial method of intangible assets measurement. Journal of Intellectual Capital. 2002. 3/3: 323-336.
[2] Guo R.J/Lev B./Zhou N. The Valuation of Biotech IPOs. Journal of Accounting, Auditing & Finance. 2005. 20/4: 423-459.

Wednesday, 14 May 2008

Keeping in STEP with intangible assets?

On 23 June 2008 the National Academies' Board on Science, Technology and Economic Policy (STEP), in cooperation with the Committee on National Statistics, holds a one-day conference in Washington DC on Intangible Assets: Measuring and Enhancing Their Contribution to Corporate Value and Economic Growth (programme details here). According to information received together with the announcement of this event,

"Investment in intangibles, according to a 2006 Federal Reserve Board staff analysis, exceeds all investment in tangible property and, if properly accounted for, would raise US productivity growth by 20 percent for the period 1973-1995. These assets -- computer software, R&D, intellectual property, workforce training, brand equity and organizational capabilities -- now account for three quarters of economic activity. Increasingly, they are a principal driver of the competitiveness of US-based firms, economic growth, and opportunities for American workers. Some intangibles, like intellectual property, are being securitized, auctioned, and traded; a few years ago no one contemplated the existence, let alone the extent, of such "technology markets."

Yet despite these developments many intangible assets are not reported and are treated in the national economic accounts as expenses rather than investments. And there is no coordinated national strategy for promoting intangible investments apart, perhaps, from R&D.Sponsored by the Commerce Department's Bureau of Economic Analysis in response to a congressional directive, the agenda includes discussions of

* what are intangibles and how they work;
* how intangible investments compare and contribute to growth in the US, UK and Japan;
* how intangibles are created and used by firms;
* what new markets in intangibles are emerging;
* what government statistical agencies are doing to gather data on intangibles and
* what the government's role should be in supporting markets and promoting investment in intangibles.

Confirmed speakers include Commerce Under Secretary Cynthia Glassman; Irving Wladawsky-Berger, IBM; Jonathan Haskel, University of London and HM Treasury; Carol Corrado, Conference Board; Ken Flamm, University of Texas-Austin; Laurie Bassi, McBassi & Co; Baruch Lev, NYU Stern School; Ron Bossio, Financial Accounting Standards Board; Doug Lippoldt, OECD; Nir Kossovsky, Steel City Re; and Ken Jarboe, Athena Alliance".

Registration here.

Tuesday, 13 May 2008

IP Securitisation -- can you help?

My friend Julian Gyngell writes:

I am an IP lawyer in Australia and in my spare time I am enrolled in an LLM at Sydney Uni. My final semester (at last) is on the subject of Securitisation. I have written a paper on IP Securitisation (well, almost – it’s due in 9 days time!) and I have built my thesis around a hypothetical IT company that owns a bundle of IP rights and derives “receivables” from the commercialisation of its IP – the receivables are then “securitised” as in any other securitisation.
I know of numerous examples of IP-related securitisations and the Bowie bonds are obviously the starting point. However, although there are quite a number of case studies in the music/film/pharma/franchising space which I am using, by analogy, for my hypothetical IT company, I am not aware of an IT company (in real life) ever having securitised its receivables. If anyone knows of any IT companies that have securitised their IP receivables I’d be very grateful if you could let me know – subject to confidentiality, of course. Please email me here.

"Spurious precision" -- a reminder

As advertised earlier on this blog, Oliver Rivers has agreed to give a short talk on Tuesday 27 May at 5pm at the London office of Olswang, solicitors (map here). The talk is entitled "Spurious precision" -- a concept that will be familiar to anyone who has been involved in the debate between the need to place IP rights within a range of values and the requirement that it have one ascertainable value at the point at which something happens to it.

Oliver has extensive experience working on valuation issues for private equity and venture capital funds, and firms back by PE or VC funding. He has a particular interest in the valuation of creative intellectual property, and recent assignments have included the development of mergers and acquisitions strategy at Boosey and Hawkes, the world’s largest classical music publisher (owned until recently by Hg Capital), and at Chorion (currently owned by 3i), which controls the literary estates of Agatha Christie and Enid Blyton. Before completing his MBA at London Business School, Oliver worked for ten years in the music industry. Between 1993 and 1999 he was a freelance classical record producer, working for most of the major labels, including BMG, Virgin Classics, EMI, and Warner Classics, and some of the most important independents. In 1996 he won a Gramophone Award for Best Selling Classical Album of the Year. Between 1999 and 2003 he was Chief Executive of the chamber orchestra Sinfonia 21.

The meeting should finish by 6.30pm, inclusive of light refreshments: the talk will last around 20 minutes, following which there will be a chance for some light networking, Everyone is welcome. If you'd like to attend, email me here.

Monday, 12 May 2008

The largest trademark verdict in US history?

....so say lawyers at Kilpatrick Stockton who apparently helped win a $304 million victory for shoe company Adidas AG late last Monday. According to Kilpatrick Stockton's press release (c/o this blogger's friend Allison Mcdade at Dell):

"Adidas sued retailer Payless ShoeSource Inc. in 2001 in federal district court in Portland, Ore., for selling imitation footwear that looked like Adidas' three-stripe shoes. Following a 15-day trial, a nine-person jury took two days to decide that Payless had violated Adidas' trademarks. Payless claimed its shoes did not violate Adidas' trademark since they featured two and four stripes, not three. But lawyers
for Adidas argued the so-called knockoffs could cause confusion or dilution of Adidas's logo trademark. "Our entire position was that the three-stripe mark was a very powerful and strong brand," says Kilpatrick partner Bill Brewster. Also representing Adidas was partner Charles Henn Jr. and local counsel Stephen Feldman at Perkins Coie. Payless was represented by Lathrop & Gage partner William
Rudy and Spillane Shaeffer Aronoff Bandlow partner John Schaeffer. A spokesman for Lathrop & Gage referred comment to Collective Brands Inc., which owns Payless.
The Topeka-based company said in a statement that it is "reviewing the verdict and assessing its impact." "The company believes that the verdict was excessive and unjustified," the statement said. "The company will ask the court to set aside the verdict and, if it is not granted, intends to take all necessary steps to overturn it."

The trial was just the latest foray into Adidas' battle to enforce its international ownership of the three-stripe logo. On April 10 the European Court of Justice ruled against retailers C&A, H&M and others, whose lawyers argued that stripes were such common symbols they should be available for anyone to use. Gregor Vos and Antoon Quaedvlieg of Amsterdam-based IP boutique Klos Morel Vos & Schaap represent Adidas in that litigation. In the U.S., says Brewster, the Germany-based shoe manufacturer has won settlements over similar trademark claims against about a dozen retailers, including Target. Brewster adds that a pending claim against Kmart headed toward settlement. Kilpatrick, which has represented Adidas for about 15 years on trademark matters, now is preparing for another trademark infringement trial, this time against Wal-Mart. A lawyer for Wal-Mart, though, says the Payless win will have no impact on his trial. "It's similar issues but very different acts," says Baker Botts partner Russell Falconer. "Basically, they're different products at issue and different documents. The cases have nothing in common other than that they're both trademark infringement acts." Trial is scheduled for October."

This blogger notes that the latest ECJ judgement in Adidas's three stripe enforcement program hinted at a favourable result for the brand owner in Europe too.

Damages calculation totalling $4.3 million

Karin Segall of Foley & Lardner LLP writing for World Trademark Report on the recent case of Gucci America Inc v MyReplicaHandbag.com (Case 2008 WL 512789, February 26 2008) highlights that $4.3 million has been awarded by a US Court in a counterfeiting matter. According to Segall:

"The underlying case involved claims by Gucci America Inc, Chloé SAS and Alfred Dunhill Ltd against several defendants for offering a variety of counterfeit products bearing the trademarks GUCCI, CHLOE and DUNHILL."

"In order to determine the amount of statutory damages per type of goods, the court surveyed case law and noted that most judges award well below the maximum on the basis of "per mark per type of goods". Ultimately, the court drew from its own experience in a similar case in which damages in the amount of $100,000 per mark infringed was awarded. Using that number, it awarded $3.6 million to Gucci, as there were six marks infringed and six different types of counterfeit goods (ie, $100,000 multiplied by six marks multiplied by six types of goods). Chloe was awarded $400,000 based on counterfeiting of four marks and one type of product, and Dunhill was awarded $300,000 for three marks and one type of product. Altogether, the defendants were thus jointly and severally liable for a total amount of $4.3 million."

Friday, 9 May 2008

Confused by the UNCITRAL Guide? Try this!

Lorin Brennan has prepared an excellent memorandum describing quite specifically the interaction between the UNCITRAL Insolvency and Secured Transactions Guide and intellectual property rights. This memo aims to satisfy the twin aims of “keep it short” and “make it accurate”. If you'd like to see a copy, email me here and I'll send it to you.

Tuesday, 6 May 2008

Astute Ethiopia

Ethiopia has opted for increasing brand recognition and demand through licensing rather than immediate royalty income streams in an effort to generate longer term wealth. Ethiopa's strategy reported on Afro-IP here and on News Blaze here has been hailed as the first time an that an African nation has undertaken such an innovative approach to protecting its economy. Ethiopia selects the global distributors for its coffee and sets the conditions for sale. Ethiopia charges no royalty fees for coffee distribution licenses, but, in return, asks the distributors to market each coffee under its separate brand name.

It is sometimes easy to overlook that brand licensing is motivated by numerous factors, apart from money. For example, Allied Domecq succesfully used brand licensing to reposition its Courvoisier brand to a younger market by introducing a trendy clothing line under the brand. Dunlop Slazenger used sub-licensing as a means of keeping it afloat long enough to attract a suitor in the form of Mike Ashley's Sports Direct, whilst the legal proprietor of the Dunlop brand (at the same time) used licensing simply as means of preserving the trade mark right across sports, tyre and other categories. Al Gosling's Extreme Group (ala Richard Branson) use licensing as means of building brand recognition and developing a complete lifestyle brand. Other companies use licensing to reduce their tax liability through complex transfer pricing schemes and others, to settle disputes or co-brand products.

There are not many other assets that can be used in such a flexible way and it is also easy to forget that not all that long ago, legal systems were reluctant to recognise trade mark licensing at all. Ethiopa's decision is progressive because it entails determining and creating a brand and then marketing that brand through worldwide strategic partnerships (not least with Starbucks) and licensing. The efforts are aimed at increasing longer term demand whilst ignoring a politically tempting income stream.

Patent Quality

Day 2 of the LESI Conference in Chicago and I have spent part of the morning with OceanTomo (about which I shall blog separately). The afternoon's session included a fascinating talk about patent quality.

Christopher Ainsley of the the Patent Board reviewed their work on patent quality which seems to be mostly citation based. The Wall Street Journal has started publishing their patent scoreboard (as does the IAM magagzine). The thesis is that patents with a large number of forward citations are worth more than those with fewer citations when normalised across the industry.

Christopher pointed out patents in new technologies cannot be cited as often as technologies with a long history of patenting. They have developed the concepts of momentum patents which are those younger patents attracting a higher degree of interest.

Jonathan Barney of OceanTomo noted that their research on quality factors refelcted in higher prices in the OceanTomo auctions. In addition to citations, one of the quality factors is the renewal rate of the patents. He pointed out that the wacky patents granted over the past few years are often not renewed on payment of the first renewal fee.

During the ensuing discussion, criticism was made about forward citations being used as a quality factor. Both Christopher and Jonathan clarified that they broke their data out into Examiner citations and Applicant's citations (as Information Disclosure Statement). Both OceanTomo and the Patent Board stated that they also used data from outside of the United States (such as that from the EPO and WIPO). Christopher made the point that we need also to consider India and China in the future.

One of the main points that was made is that all of the tools on offer are using quantitative metrics rather than actually reading the claims and the specification. Christopher made the point that research showed that there is a correlation between the more subjective quality of the claims and the bibliometric approach. However, the point was made that the tools on offer are best used to pre-sort the patents. Ultimately a patent attorney is the best judge of the quality of the patent - her or his assessment may well depend on the current focus of the attorney.

Two announcements

Nominations are invited for up to five new inductees to the IP Hall of Fame. Details can be obtained from the IPKat weblog here.



IP Finance is among the weblogs that will be represented at the "Meet the Bloggers" informal session in Berlin on Monday 19 May 2008. Further details are available from the IPKat weblog here.

Monday, 5 May 2008

Metro Naming Rights in Dubai

This being an Olympic Year, the thoughts of IP attorneys turn to the ever-increasing presence of corporate and product sponsorships that will accompany the various athletic competitions: swimming with "Coke" (or whatever software drink purveyor has purchased sponsorship rights), or following the last leg of the 400 meter sprint relay with "Nokia" (or whatever company name adorns the athletic stadium).

With all the anticipated razzmatazz over Olympic sponsors, a full-page ad in the April 26 issue of The Economist caught my eye. Entitled "Dubai Metro Naming Rights", it is an ad on behalf of the Dubai RTA (I assume that means "Rapid Transit Authority") for companies to place their brand on a Dubai metro station, or on one of the two lines of the Dubai Metro network.

None other than IMG is the marketing agent for the name rights program. In case you're wondering, IMG is a world giant in sports and entertainment sponsoring and marketing. For grey-hairs like me, IMG will ever be identified with its promotion of Arnold Palmer, which turned golf into a marketing bonanza and set the table for the phenomenon that we call Tiger Woods.

It is not clear to me how this program will work. Will it mean that instead of calling the station the Dubai equivalent to "Oxford Circus", it will be referred to as the "XYZ" brand station? On the one hand, that seems like a great way to get reinforcing exposure to your brand. On the other hand, calling the station only by the corporate name may confuse the passenger, who will no longer be able to link the name of the station with some kind of geographic or other connection to the site. Or maybe there will be dual names for the station.

In any event, this metro name rights program is an interesting idea. While your brand will not enjoy the intense exposure of hundreds of millions of Olympic-viewing spectators, the games are over in two weeks and, with them, the immediate connection between your brand and the athletic competition. You, on the other hand, will have your name and brand associated on a permanent basis with a site that presumably caters to a large number of passengers and passers-by on a 24/7 basis.

An analogy is the use of sign rights on buildings. It reminds me of that one-time icon of New York City, the Pan Am Building. However, the name recognition that derived from the sign rights apparently did little to save the airline from ultimate business failure, and the building has been called the MetLife Building since the 1980s. In our own day, we need look no further than Chicago, where we find the Sears Tower (the verdict is still out on the ultimate future of Sears) or the John Hancock Building (but I wonder how many non-Americans know that this is the name of an insurance company).

I will be intrigued to see what companies ultimately choose to participate in this program. Will the names that ultimately appear on the Dubai metro reflect local/regional brands (à la John Hancock) or international brands (à la Pan AM), or some combination of the two? For those of you who are interested, you can check out the RTA website , or inquire directly here.

Thursday, 1 May 2008

Licensing Executives Society - International Chicago

Rob's been a little bit quiet lately - he's been helping two clients on diligence reviews!
If any readers are going to be in Chicago next week at the annual LESI conference, then feel free to look him up. You can also use the power networking tool to schedule a meeting!

IP finance ... where money issues meet intellectual property rights: German Standards Institute DIN - General Principles of Proper Patent Valuation

IP finance ... where money issues meet intellectual property rights: German Standards Institute DIN - General Principles of Proper Patent Valuation

Voting ends tomorrow (2nd May) at ISO on whether to create a new project committee for Patent Valuation. In the initial round of comments to the ISO Technical Management Board 25 replies were received. 16 member bodies voted in favour of the starting work on the proposal whilst 8 rejected the idea. One abstained.

Countries rejecting the standard included Japan, Canada, Finland, Netherlands, Spain, South Africa, the UK and the US.

The Netherlands provided the most detailed arguments on their position, essentially maintaining that the idea of a standard was not feasible and that it is difficult to understand how the complexities of the subject matter can be mastered sufficiently to develop any useful standard.

The UK commented that the work on the standard on brand valuation should be completed before starting work on patent valuation.

ANSI in the US considered that a standards development committee was not an appropriate forum for doing the kind of the work needed to develop and evaluate new patent valuation methodologies.

Clearly ISO and its member organisations are divided on the subject. It is difficult to tell whether ISO will take on this project or not. However, one of the most interesting points to emerge from the comments made from the national standards organsiations was the concern of overlap in work with the International Accounting Standards Board. Clearly ISO will need to liaise with this other organisations active in the IP and finance fields if the standard is to be accepted.