Thursday, 30 April 2009

But who will value the patent-valuation patents?

From last week's Tech Transfer E-News (Wednesday April 22, 2009) comes this fascinating information about the fact that the "secondary patent market" has begun to generate its own intellectual property. This news item cites the work of Aaron R. Feigelson (right), an IP attorney at the Chicago law firm Leydig, Voit & Mayer and author of the 12:01 Tuesday blog.  Feigelson reports that least 14 patents US have been directed to valuing or marketing IP, and 11 of these were issued in the past 30 months. This is his list:

  • 7,493,262 – Method for valuing intellectual property
  • 7,386,460 - System and method for developing and implementing intellectual property marketing
  • 7,346,545 - Method and system for payment of intellectual property royalties by interposed sponsor on behalf of consumer over a telecommunications network
  • 7,346,518 - System and method for determining the marketability of intellectual property assets
  • 7,315-836 - Method for obtaining and allocating investment income based on the capitalization of intellectual property
  • 7,292,994 - System and method for establishing value and financing of intellectual property
  • 7,272,572 - Method and system for facilitating the transfer of intellectual property
  • 7,269,566 - Method for obtaining and allocating investment income based on the capitalization of intellectual property
  • 7,228,288 - Method of repeatedly securitizing intellectual property assets and facilitating investments therein
  • 7,216,100 - Method for obtaining and allocating investment income based on the capitalization of intellectual property
  • 7,188,069 - Method for valuing intellectual property
  • 6,959,280 - Method of protecting against a change in value of intellectual property, and product providing such protection
  • 6,330,547 - Method and apparatus for establishing and enhancing the creditworthiness of intellectual property
  • 6,018,714 - Method of protecting against a change in value of intellectual property, and product providing such protection

There's an opportunity for some splendid circularity here, since the patents listed here are themselves potential subject-matter for their own valuation methodologies.  European patent practitioners are probably heaving a sigh of relief that the business methods exclusions under the European Patent Convention would either render these patents invalid or cast a dark cloud over their value.

Wednesday, 29 April 2009

App Store: The Long Tail or Trojan Horse?

The oldest "chicken and egg issue" in IP law must be the copyright question: what takes precedence: the author and his work, or its commercializer/distributor? I admit that the question is not precisely fair, because the existence of a work is obviously the prerequisite for its distribution and sale. That said, prior to the means of mass reproduction (I am going all the way back to the advent of the printing press), works were few and commercially irrelevant. True, people have and will always create works, but it is only the ability to commercialize the work that warrants copyright law and the legal and business apparatus that underpins the system. Creations are typically not made for their own creative sake, but with an eye how that work can successfully be distributed and sold.

I thought of this most basic of copyright truisms when I recently read an item published on April 24 on CNBC.com entitled "Big Game Makers Staying Off the iPhone". The gist of the article is the reluctance of some big video game producers to proceed warily with making at least some of their games available for download onto a iPhone via the Apple App Store.

On the one hand, the thought of a games application intentionally shunning the App Store seems difficult to fathom. After all, various media reports have notedthat App Store expects to reach the one billion download level virtually any day. That kind of potential market would seem to make the App Store the dream platform for a game developer seeking to monetize his product in the smartphone environment. And indeed, some game developers appear to have enthusiastically embraced the App Store. The CNBC report indicates that Electronic Arts has five games available, including the high-profile game "Spore". As well, an iPhone version of "Star Wars: The Force Unleashed" was released simultaneously with its release for the xBox 360 and Playstation 3.

However, as noted by CNBC, "[o]f the Top 25 paid applications (most of which are games) in Apple's App Store, only two are from established third-party publishers: EA's Tetris" [I assume the same "Tetris" I played a decade or two ago--njw] and Namco's "Galaga Remix." In particular, the article noted the reluctance of game maker Activision to publish a title via App Store. Notably, Activision is reported to have cut a deal to distribute five "blockbuster" titles to a number of platforms--none of which is the iPhone. The reason for Activision's reluctance seems to be rooted in the current economics of the App Store download market. True, we are reaching the one billion download level, but that activity has not yet translated into the kind of financial flows that make the App Store a preferred distribution platform for the larger players in the electronic games industry.

The business environment created by the App Store was described by John Taylor, an analyst with Arcadia Investment Corporation, as follows:

"It used to be that competitive advantage was defined by time to market and establishing a presence on new platforms before the competition. The genius of the iPhone is that all it takes is a small file and a consumer touching a screen to d0wnload it. It is the most elegant way to deliver interactive entertainment I've ever seen.... It's a huge opportunity, but it is going to be amazingly fragmented."
Well and good--so here's the question: Is the iPhone/App Store combination the Nirvana platform for the "long tail" model of distribution of contents and products? Or is the iPhone/App Store merely a Trojan Horse for ultimate domination by the larger game players when they ultimately decide to mark to App Store as a preferred means of distribution for their products? You will remember that the "long tail" model, as developed Chris Anderson, the editor of Wired magazine, posits that on-line distribution enables niche players to reach a customer audience to which it was unable to have access in the bricks-and-mortar days.

Translated into the App Store environment, "[t]o a small (or single-person) development house, $500,00 or $1 million are significant, but to a video game publisher, they're basically pocket change." That view would seem to support the "long tail" notion, where the potentially huge distribution numbers allow developers at the far end of the tail to reap commercial reward. Stated otherwise, fragmentation of the AppStore market provides exactly the kind of benefit envisioned by the "long tail".

However, the CBNC report suggests that farther out in time, the situation may change. The article suggests that, at some point, there will be more distinct winners and losers on the AppStore. With a reported 8500 games already available and presumably more coming on-line every day, there may be a day where more traditional barriers of entry will come into play, and the ability of the game publisher to support its product at the engineering and marketing level will provide a material competitive advantage and determine the ultimate success of the game.

All of this is a long way from the author-centric notion of copyright. And while "chicken and egg" it might not be, distribution and sales is certainly front and center in connection with the ultimate fate of creations in the computer game world. Let's check back again six months or so and see how things have developed.

The Long Tail on the Prowl

Tuesday, 28 April 2009

Finnish Symposium on IP valuation

Clashing dreadfully with this year's International Trademark Association Meeting in Seattle is an international symposium, “Intellectual Property Valuation in Business”, which the National Board of Patents and Registration of Finland is hosting in Helsinki at Säätytalo and Finlandia-talo on Monday 18 and Tuesday 19 May 2009. The symposium is arranged in co-operation with Otaniemi International Innovation Centre of Helsinki University of Technology. You can read the full programme here. For further details email Eira Juntune here or phone 09 – 6939 5238.

This symposium is the second in a series of four international symposiums on the topic. Its primary aim is to raise awareness of IP valuation issues and increase dialogue among stakeholders. The organizing parties in addition to National Board of Patents and Registration are the Hungarian Patent Office, the Austrian Patent Office and the UK Intellectual Property Office, as partners in this initiative.

IP Finance would like to have sight of the presentations at this symposium and is approaching the organisers in the hope of making them available through the blog.


Trade Secrets v. Patents

If I may, I have request for assistance from readers. Against the sometimes overly patent-centric view of the IP world, we try to balance patents with trade secrets/know-how in the context of business management education. In that context, I like to mention to students that, to the best of my recollection, the OECD carried out a study some time ago that concluded that more technology is either created or transferred or exploited (all of the above; none of the above; other) via trade secrets than by inventions protected by patents. However, I have never succeeded in successfully locating the OECD report that supports this assertion.

Does anyone have a cite or even a lead to this putative OECD study? Or does anyone know of any other studies in this regard?

Monday, 27 April 2009

Brand loyalty: can it be bought?

Writing in today's BrandChannel, Barry Silverstein (co-author of The Breakaway Brand) asks a question to which most of us assume the answer is yes: "Can Brand Loyalty Be Bought?". After summarising the heavy use of brand loyalty programmes, particularly in the airline, hotel and financial sectors, he cites industry figures that claim high levels of membership and participation and then writes, in relevant part:

"... For retailers, buying brand loyalty may be more of a challenge. The research conducted by COLLOQUY “suggests that typical two-tier pricing and discount-based rewards—the model that dominates high-frequency retail environments—simply don’t engage consumers,” the company says. “The retail discount reward is now a commodity.”

... a significant percentage of consumers do not participate in loyalty programs. As reasons for their lack of participation, they cite such economic factors as the need to spend too much and not wanting to pay a program fee, according to COLLOQUY’s research.

There are other non-financial demotivators that brand marketers need to understand. Consumers cited “boring rewards” and the feeling that “all loyalty programs look alike” as reasons for not belonging to a loyalty program. Additionally, there was a high percentage of what COLLOQUY refers to as “category churners—people who had previously played the game and dropped out.” According to the company, “While dropping out of a program is a common consumer experience, the number of consumers churning from the entire category of loyalty programs should raise alarms for loyalty marketers. Clearly, we’re not doing enough to keep customers engaged.”

All audience segments offered as a primary reason for non-participation the “lack of compelling rewards.” Almost half of non-belongers said loyalty programs look too similar. A third issue is the amount of churn: it appears that, regardless of audience segment, people join and then drop out of loyalty programs in relatively high numbers.

Those disappearing high numbers represent lost brand engagement opportunities—a high price for brands to pay in such challenging economic times".
There was once a time when, within the retail sector, brand loyalty was achieved by the creation and establishment of a good reputation for quality, reliability or value for money which would encourage consumers to make repeat purchases. Perhaps one reason why loyalty schemes don't work particularly well in this sector is that they tend to play on the mind of the consumer by offering something other than the branded product to which they wish the consumer to adhere.

Thursday, 23 April 2009

UNCITRAL – IP security

As previously reported on this blog, the UK's Intellectual Property Office requested comments on the latest draft Annex on security rights in intellectual property. Here are some of the comments the UKIPO has received:

1. Registration: the proposed creation of a Security Rights Register, which will increase the searching required to check the title to IP rights, will cause significant problems in identifying the parties against whom a search is made. It will also cause problems in that it is unlikely to identify the rights actually covered by the security documentation.

2. Integrity of licence terms: the possibility that a lender to a licensee may be able to obtain greater rights over the licensed IP than the rights licensed to the licensee remains a problem. There is concern that the Guide will overrule the written terms of a licence agreement, particularly in the event of insolvency and regarding termination terms.

3. Ordinary course of business: the concept of granting/taking a licence in the “ordinary course of business” referred to in the Annex is not known under IP law. There is an expectation that a buyer purchasing tangible goods in “ordinary commerce” under an authorised transaction takes the goods’ title free of any prior claims. For IP assets however, there usually is a common understanding that the use of the IP may be subject to some other, pre-existing rights.

For those who want to spot more issues, the Annex is available on the UNCITRAL website.

Ireland's tax proposals for IP investment and transactions

Writing in the April 2009 issue of Dublin law firm Philip Lee's Media and IP E-Bulletin, Jonathan Kelly's "New Irish Tax Reliefs for Purchasing Intellectual Property" provides a succinct summary of the government's position regarding IP investment and taxation in general following the Irish Minister for Finance's emergency interim budget. In short,

"... the Government intends to introduce a new tax relief for capital expenditure incurred in the purchase of intellectual property assets. The precise details of the scheme ... will be outlined in the forthcoming Finance Bill ...

... the Government has committed to increasing R&D spend to 2½% of GNP by 2013. This is designed to supplement the Government’s measures over the last ten years of having trebled its R&D spend, to a current level of approximately €2.5 billion per annum. ...

[These] measures are a welcome addition to Ireland’s existing tax incentives for intellectual property creation and exploitation. In addition to the Ireland low corporation tax rate of 12.5% for IP exploitation activities which are carried on as an Irish trade, other taxation measures which already form part of Ireland’s intellectual property regime include the following:

Patent Income Exemption
In general, profits or gains arising from a patent (whether received in the form of royalties or as a capital sum) are taxed as income. However, Irish legislation provides a tax exemption (limited to €5 million per annum) for income derived from “qualifying patents” when received by an individual or company resident in Ireland.

A “qualifying patent” is defined as a patent in relation to which the research, planning, processing, experimenting, testing, devising, designing, developing or similar activity leading to the relevant invention was carried out in the European Economic Area. It is not necessary that the patent itself be registered in Ireland or indeed in another country of the EEA. However, the recipient of the royalty income must be Irish resident.

The exemption is generally available from the date on which the patent is granted. A retrospective exemption may be available for income arising in the period between the date of filing of the final patent specification and the date on which the patent is granted.

Where the patent holder is a company, Irish legislation also provides for a tax exemption in respect of dividends paid by a company which is in receipt of tax-free patent income, subject to certain restrictions where the royalty income is received from a related company.

... As there is no requirement that the patent royalty be payable in respect of an invention used for an activity located in Ireland, this exemption has been traditionally very attractive to large international groups, making Ireland a popular location for IP holding companies.

Stamp Duty Exemption
Irish tax law also provides an exemption from stamp duty on the sale, transfer or other disposition of intellectual property, including patents, trade marks, copyright, designs, inventions, domain names, supplementary protection certificates and plant breeder's rights. Goodwill is also expressly included in the exemption to the extent that it is directly attributable to IP. This represents a huge tax saving for companies engaged in the licensing of IP or other hi-tech business and therefore acts as a further incentive to locate IP rights in Ireland.

Research and Development Tax Credits
Tax credits are available on research and development on up to 25% of qualifying expenditure. The credits can be carried back one year as well as forward. Where a company has insufficient corporation tax to absorb the credits, they can instead be set off against payroll taxes over three years ...".

All of this may be compared with Alastair Darling's UK budget proposals yesterday, where -- with the exception of some comforting words for the green innovation sector -- there was not much cheer for prospective investors in IP innovation or the acquisition and commercialisation of existing rights.

Wednesday, 22 April 2009

Marks, Brands and Customer Satisfaction

One of the toughest challenges in teaching trademark law is trying to explain the transformation of the 19th century mark, plain and simple, to the multi-faceted nature of the modern mark in commerce. It was less than a century ago that the English courts held that trademark licensing to be inconsistent with the bedrock trademark law principle (as it was then) of source identification. Under that view, a trademark license was legally ineffective because the owner of the mark was not the actual user of the mark, and vice versa, thus doing fatal harm to the principle of source identification. There was no other justification, at least legal, for trademarks.

How different things are today. Marks are no longer merely identifiers of source, but they are also badges of quality and even self-sustaining valuable rights standing on their own. Even more, marks have transmogrified into brands, with blurred boundaries between the two. So is a mark still primarily an indicator of source, or is badge of quality function paramount? The short answer: it all depends.

Consider an article in the March 2 issue of Business Week, that purported to rank companies on the basis of customer perceptions of service ("Customer Service Champs"). Relying on data gathered by J.D. Power & Associates, the article listed the 25 leading companies from the vantage of customer service. Topping the list was Amazon.com, followed by USAA Insurance, Jaguar, Lexus, The Ritz-Carleton, Publix Supermarkets, Zappos.com, HP, T. Rowe Price, Ace Hardware, Keybank, Four Season Hotels, Nordstrom, Cadillac, Amica, Enterprise Rent-a-Car, American Express, Trader Joe's, Jetblue Airways, Apple, Charles Schwab, BMW, True Value, LL Bean and JW Marriot Hotels. Clearly, the marks listed serve more than to merely designate the source of the goods or services.

I said "amazon.com", not "Amazon"

So what do we make of the list? First and foremost, with the exceptions of HP and Apple, virtually none of the companies listed appears to leader in their industry (at least on the basis of size alone). This suggests that size may be correlated inversely with perceived customer service--the larger the company, the less well-regarded the level of service provided by the company.

Second is the absence of any mega-bank or similar financial institution. The only bank mentioned is Keybank, a regional bank headquartered, I believe , in Ohio. One is tempted to say that this is an expected result, given the cratering of the entire financial industry and the accompanying negative goodwill. But I think that this result is not merely due to the current economic downturn. Rather, it supports the observation, sometimes forgotten, that for all of the size of the financial industry at the top, it remains at its core a person-to-person service industy. Or, stated otherwise, there are no economies of scale in the banking business.

Third, failure of the industry at the so-called top does not mean that all of the participants in that industry are necessarily painted by the consumer with a single, black brush. While none of the leading automobile house brands is mentioned, up-scale automobile brands continue to satisfy customers--witness the inclusion of Jaguar, Lexus, Cadillac, and BMW. Service and brand value are still valued, particularly for some luxury brands.

Fourth, however, customer service satisfaction is not necessarily a function of luxury. For every Four Seasons Hotel and Nordstrom store the is an Ace Hardware, True Value Hardware, Jetblue Airways and Charles Schwab.

Thinking back to our initial observation on the commercial development and evolution of trademarks, it would seem that the quality function of trademarks is not a synonym for brand value. Any list of the world's most valuable brands will have only a limited overlap with the list of brands as identifiers of perceived customer service satisfaction. It would be interesting to know whether profitability is more highly correlated with a company's ranking on the basis of customer service satisfaction or with overall brand value. If any readers have further information on this point, I would be delighted to hear about it.
But do customers still value their services?

Monday, 20 April 2009

Question on Rejection of IP Licenses in Bankruptcy or Insolvency

I am departing from my usual form of commentary to pose a short request for information from readers. I have just completed a short piece for a publication on the issue of the treatment of IP licenses in a bankruptcy proceeding. While there is apparently a major divide on the issue between the U.S. position and the position elsewhere on whether a licensee can seek to force the licensor in bankruptcy to continue with the license, all systems seem to allow the trustee, in some fashion, to reject the license.

My question is whether any reader is aware of a decision under a national bankruptcy law in which a trustee has rejected the license and the issue was later brought to court. If so, I would be most grateful for receiving particulars about such decision. Please post the particulars as a Comment below or, if that is not possible, email me here

Sunday, 19 April 2009

The Malign and the Benign of the Transfer of Know-How

There are various ways to view trade secrets and know-how. From the strict IP vantage point, we like to juxtapose trade secrets with patents on the basis of their largely diametrically opposed characteristics. The one is open, fully disclosed, subject to examination and registration good against the world, limited in time and governed by various international treaties. The other is unexamined, unregistered, disclosed, if it all, on the basis of personal undertakings based on mutual trust, unlimited in time but always vulnerable to public disclosure that reduces its value to first mover advantage, if at all.

From the vantage point of policy and trade, patents are researched from multiple angles, focusing on the role of patents in enabling innovation, and calculating the national winners and losers in the patent registration race. On the contrary, trade secrets are accorded far less research attention. Hand over heart, how many of us have read articles discussing the role of trade secrets in innovation, much less any consideration about one even goes about setting out a a score card for national winners and losers in the trade secret arena. (That is not quite right: there is, of course, the one well-known exception attributed to the OECD, which is reported to have concluded that more technology is due to trade secrets than to patents.)

Against this backdrop, I was struck by two brief passages that appeared in two articles, one right after the other, in the March 21st issue of The Economist . In the first, a three-page Briefing entitled "China and the West", it was observed, citing an article in a Chinese publication (Economic Reference), that the current economic troubles offered China a unique opportunity to expand its strategic influence. One way was for China to purchase U.S. companies with the explicit purpose of acquiring "sophisticated know how". If the Americans resist, China can use its dollar holdings to force the Americans to comply.

In the second article ("Ireland's Economy: The Party is Definitely Over"), the report noted that first phase of the Irish economic miracle, which ended in 2002, was "led by exports and direct foreign investment", primarily American, whereby Ireland was provided with "bags of capital and know how." In exchange, Ireland offered a combination of educated and youthful workforce, at reasonable wage, plus tax benefits, state grants and EU membership. The property bubble came later, and I seem to recall that Dell, one of the early entrants into Ireland, has recently pulled out in favor of Eastern Europe (although this is not mentioned in the article).

What is striking here is the difference in the strategic treatment of approach to know how, as set out in the two articles. In the first article, know-how is treated as a strategic asset, to be prised from its owner by financial force, if necessary. Lurking behind this characterization, it seems to me, is the issue of how know-how shared with Chinese partners can still be protected from unauthorized use and exploitation. There is a view out there that the sharing of know-how via direct investment into China is subject to material risk in this regard, with the result that some valuable know-how is still not shared.

The acquisition of U.S. companies, and the concomitant threat of the dollar weapon, is a means to presumably provide a solution for this problem. There is a sinister, almost Ludlum-like character to the role of know-how in China-U.S. relations. Whether all know-how can be so lumped in this regard, and how about the acquisition of U.S. companies can achieve this presumed goal (as opposed to targeted direct foreign investment and technology transfer), is left for another day and perhaps another article.


When Ludlum meets trade secrets and know how

In contrast, the treatment of know-how in the article on Ireland is, at least superficially, more benign. American know-how (and capital) were transferred to Ireland, factories, plants, and the like, were built, but time marches on (and indeed some of the facilities are going elsewhere). In the meantime, labor costs, retail spending, and a property bubble conspired to halt the Celtic Tiger in its tracks.

In this later phase, the issue of the transfer of know-how seems to have disappeared. This is so, both because inflation and labor costs made the exploitation of the know-how less attractive economically, and presumably because the ultimate ownership of the know-how remained in foreign hands, such that the transfer did not lead to a significant development of more broadly based local Irish technology based on the know-how. It would be interesting to know more about the role of know-how in Irish development, then and now. but here as well, this is left for another day and perhaps another article.

Find the know-how

Friday, 17 April 2009

After The Pirate Bay: what happens next?

IP Finance has received the following note from law student Andrew Logie on the need for a fresh a business strategy for the rights-owning sector in the wake of its victory in The Pirate Bay litigation, which the blog is pleased to publish:

"Why and how the content industries should address piracy by building legal alternatives

As has been widely reported [see eg here], a Swedish court today found the owners of file sharing site the PirateBay (TPB) guilty of copyright infringement. I’m no expert on Swedish copyright law, so can’t comment on the legal details of the judgement to any great extent, but what is clear is that it represents a major milestone in the ever-changing world of file sharing.

I’m sure even the most hardened of BitTorrent indexers will be disturbed by the judgment. In an increasingly harmonised world of IP, I wonder whether the TPB judgment is the first in a series of successful court cases against the major  BitTorrent  sites. Of course, we will have to wait for the outcome of the TPB’s appeal before drawing any conclusions. The TPB owners like to think this is the first chapter in a movie where they – the heroes – will win in the end. As they say:

“But as in all good movies, the heroes lose in the beginning but have an epic victory in the end anyhow. That's the only thing Hollywood ever taught us.”

Much as I’d like to think that completely free movies, music and applications – and by that I also mean advert-free - can go on forever, I doubt that it’s ever likely to be condoned by a court of law, and so on that basis it is likely the appeal will fail.

Ideally, what could have happened is that some agreement would have been reached between torrent indexers and the content creators whereby content is supplied over the existing peer to peer architecture, and revenue from the torrent sites is shared with creators, administered by a commercial or statutory collecting agency. Again, I doubt: 

(a) whether this is either sustainable and commercially viable - the revenue from torrent sites would simply not be enough in its current form - or
(b) whether content creators would be willing to work with most torrent sites. Those bridges were burnt a long time ago – just look at the pitched battles that have gone on in the legal section of TPB.

The reason people use TPB is that you can get content fast, free and with hardly any effort. Take ABC’s popular series ‘Lost’. If you lived in the US you could either watch or record the series on television or watch it online on ABC’s website. However, here in the UK, you could be waiting 6 months to a year to see that same episode on television, and even longer still to buy it on DVD, and if you think you can watch it online on ABC’s website, forget it: licensing restrictions will block UK internet users.

You do have another option: piracy. At the latest count, TPB reports that 26,961 people are seeding the file, meaning that if you want the latest episode, you could probably download it in extremely good quality at about 200kbs-1Mbs, meaning it would be ready to watch in about 20 minutes. What's more, the latest episode becomes available only a few hours after it is shown in the States. And you wouldn’t have to watch it on your PC either. There are a myriad of simple ways to get show the file on your TV so you can watch it from the comfort of your sofa. So this one is a no-brainer. I know so many people in my age group who acquire the majority of their TV and movies this way. No wonder the content industries are worried.

What really stands out for me is that so many content providers have failed ever to provide a reasonable legal alternative to file-sharing. There has never been a better time for content producers to embrace the Net Generation and really monetise the internet. They can’t just sue the torrent site owners and expect everyone to buy DVDs or watch standard TV. Those days are long gone.

The only solution can be to build a piracy-beating legal alternative. Here are some of the things the content industries should be aiming for:

1. Build a Freemium platform which allows people to stream or download an unlimited amount of movies and TV. This would be‘free’ if ad-supported, or ad-free if a reasonable monthly subscription is paid. They could even consider doing ISP bundles. As part of your ISP subscription, you would get unlimited access to the service.

2. Make it fit into existing architecture, run on low end PCs and a good handful of devices. The BitTorrent architecture favoured by pirates runs on almost any PC or Mac, and many auxiliary devices. If it's good enough and platform-neutral, people will adopt it.

3. The quality must be good, if not better than available on torrent sites. That’s quite a tall order, as the quality of torrent releases is often excellent, but not impossible. Think of the buzz Spotify has made for music, and apply this to movies.

4. Break down geographical borders in licensing. The traditional rules which dictate the US gets new series months before anywhere in the world is outdated and is a major cause of piracy. The Net generation will not wait. Every day that the new episode of Lost is not available in the UK is another day when they lose a captive audience to file-sharing sites. Many of the file sharers, I suspect, would tolerate adverts in reasonable quantities, and it's very easy to tailor advertising to particular regions, and better still to particular viewer interests.

5. Provide more content than that which is available on file sharing sites. This is perhaps the most important point of them all. One of the reasons Spotify works so well is because it provides huge back catalogue of music, far more than I can find on file sharing sites. The BBC’s iPlayer is another example of how popular video services can become, but then think of all the content that isn’t available on iPlayer. Shows are available for 7 days then they die, and users are forced to go elsewhere or buy the DVD. This is so backwards. Clearly the BBC want to protect their revenue stream from DVDs, but what’s to say they couldn’t charge a small subscription for access to the full back catalogue of DVDs online? It’s technically possible, and entirely feasible, and I don’t know why they haven’t done it already.

6. Use Open standards. By this I mean make the service highly customisable and make it easy to embed video into other websites. This will allow the service to leverage value in terms of exposure from other sites and the viral nature of the web. In other words, users can share files, legally. This doesn’t mean that advertising revenue will be lost – ads can still be shown in embedded video – and if anything this will allow for more relevant ads to be shown. If a video is embedded on a site which is all about skateboarding, it follows that the viewer might be interested in a particular brand of skate shoe, or a type of music.

The next few years will be interesting and I suspect we will see a major transformation in the way content is licensed and consumed. Downloading or streaming over the internet is rapidly growing to become the dominant means of consumption. There is enormous potential to monetise this, but only if users can be attracted away from file sharing sites run by ‘pirates’ to sites which ultimately pay content producers. The only way I can see this happening is if the services provided by these sites are better than that provided by file sharing sites. I have every confidence that with the right amount of investment, commitment and conviction that this will happen".
IP Finance welcomes readers' comments.

Belarus amends rules on registration of IP pledges

On 21 March 21 the Belarus Council of Ministers adopted a new Regulation on the Registration of Licensing Agreements, Assignment Agreements, Pledge Agreements on Industrial Property Rights and Franchise Agreements. This regulation complies with the State Measures for IP Protection for the period between 2008 and 2010 and requires that licensing agreements, assignment agreements and pledge agreements on industrial property rights, useful patterns, industrial designs, plants, integrated circuit topographies, trade marks and service marks must be registered with the Patent Office.

The regulation, which also applies to franchise agreements and certain know-how licences, establishes registration deadlines and outlines a list of documents necessary for their registration. It is expected to enter into force after its official publication.

Source: note by Jovana Miocinovic, SD Petosevic, Belgrade, for World Trademark Review.

Thursday, 16 April 2009

The Nike challenge

Nike shares fell last month after reports the company is seeing a fall in demand. Mary-Ellen Field, experienced IP analyst and friend from Brand Finance, explains why the brand has performed so poorly in Europe, mainly in the UK. She compares Nike to its competitors and breaks down its brands and profitability.













I find this clip very interesting especially having worked with the Dunlop and Slazenger sports brands for the past decade in various guises. Both Dunlop and Slazenger are over a century old and have endured financial crises, mismanagement and times of absolute dominance along the way. It is incredible how flexible, useful, sensitive and durable brands can be. Nike, a relative newcomer to the sports mix, appears to be in phase of uncertainty which will test those in charge for when demand falls, so do the large budgets that help to sustain its success. In many ways Just Do It becomes much tougher, and Just Do It Right so much more important. Great discussion, thanks Mary Ellen and CNBC.

What a difference a crisis makes

Independent global consultancy Brand Finance has published the 2009 Global 500 Report, its annual report on the world’s most valuable brands. The Report awards each brand a rating, according to its strength, risk and future potential relative to its competitors, as at 31 December 2008.

According to the Report, the world’s most valuable brand now is Walmart with a brand value of US$40.6bn, rising three places to replace Coca-Cola as the top brand. The Report states that “[t]he recession has fuelled rising demand both in the US and in the UK via its [Walmart’s] price leading ASDA subsidiary. Revenues, profits, market cap and brand value have all marched ever upwards. At the moment Walmart owns a 20% share of the entire retail grocery and consumables business in the US.”

Also available on the Brand Finance website is the Global Intangible Finance Tracker 2009 which was published in February, covering more than 37,000 companies quoted on 53 national stock markets, and representing 99% of total global market capitalization. This Report inter alia looks into how companies treat intangible asset impairments (intangible assets being defined widely, including besides IPRs also contractual rights and relationships with customers and distributors). It concludes that “[t]he very modest level of Residual Goodwill and Disclosed Intangible Assets write downs reflected in the Brand Finance Global Intangible Finance Tracker (GIFT™) 2009 suggest that many global companies are in denial about the level of write downs that are really required.”

This blog reported earlier on the 2008 Global 500 Report and on Coca-Cola.

Tuesday, 14 April 2009

The Branding of Financial Entities in Crisis: The BOA/Merrill Lynch Example

From the view of branding, one of the more bewildering fields has to be the banking and financial sector. Even in the relatively more staid days of the past, it was not an infrequent occurrence to witness the disappearance of a venerable investment house brand following merger or acquisition. More recently, the attempt by Citi and others to create so-called universal banks left the customer to wonder exactly what the Citi brand actually stood for in light of the bank's separately branded conglomerate companies.

The events of the last nine months have put to into bas relief the devilish difficulty in cobbling together the brands of the acquired and acquiring company in the financial and banking sector. Perhaps the most notable example is the acquisition, with not a bit of US government arm-twisting it would seem, of Merrill Lynch by Bank of America. (Keep in mind that Bank of America itself was the result of a number of mergers and acquisitions that transformed the bank from a West Coast banking operation to a fully national, and perhaps international brand.)

Both the BOA and Merill logos are well known, indeed, the Merrill bull has the status of a branding icon in the U.S. Not surprisingly, therefore, both names and both logos continue to be used to identity the combined company, which seeks to bring together the staid (at least until recent times) of the BOA banking operations with the more free-wheeling brokerage
and investment activities of Merrill. Truth be told, synergies seem to be few and far between for the two companies. In any event, both companies seem to have suffered since the merger,with BOA feeling the sucking sound of Merrill losses in its bottom line, and Merrill suffering a seemingly never-ending exodus of senior talent and, perhaps, some customer erosion.

Find the banking synergies

How has all of this played out from the branding perspective? Last month, Roben Farzed, a senior writer at Business Week, reported that the current loser seems to be Merrill. As he reported in his article in the March 9 issue ("Is BofA's Merrill Lynch Brand Losing Its Edge?"), the Merrill name seems to be heading straight to a branding cliff. Perhaps most notably, Farzed claims that BOA officials are telling their international people to underplay the Merrill name and famous bull logo when flogging the company's services in Europe. The bank denies that there has been a decision to de-emphasize the Merrill name and brand.

Nevertheless, research suggests that the BOA brand is now better received than is the Merrill brand and logo in Europe, a testimony to what corporate failure can do in short order to even a venerable name. If so, this is astonishing, given that the BOA brand is notable for the presence of a logo which suggests the U.S. flag, imagery that would not seem to play well outside of the U.S., and the Merrill bull is well-recognized in Europe. The article observes that "the Merrill Lynch brand is not quite dead yet. It's in hibernation, and it has been since Bank of America bought them," this according to Carri Degenhardt-Burke, a Wall Street executive recruiter. Degenhardt-Burke went to add poignantly,"[i]t's sad."

I am not fully convinced that the fate of the Merrill bull rises to the level of Greek tragedy. What is sad, nevertheless, is how quickly a venerable brand can lose its cache, which in a service industry must surely have a negative feed-back loop which further erodes the value of the brand. I suspect that service brands are even more vulnerable to a precipitous decline in their value than are marks for goods. We may have a way to test this hypothesis if GM enters in some form of bankruptcy, and the public is not convinced that it will reemerge in some form after reorganization, and even more so for Chrysler, where the likelihood of reorganization seems remote, unless Fiat somehow comes to the rescue.

Of course, the BOA/Merrill branding saga is only one of several branding stories that is taking place in the banking and finance area. As a final exam for those of you out there, please answer the following:

1. How is Wells Fargo being branded since it took over Wachovia?

2. What about J.P. Morgan, Washington Mutual (WAMU) and Bear Stearns?

3. How has Smith Barney been integrated brand-wise with Morgan Stanley?

4. What brands are still left at Citi (and was is the current form of the Citi house mark)?

5. Is the Lehman name still being used?

Recession 2.0: a survey

A press release from IP mega-practice Marks & Clerk, headed "Recession 2.0? -- Business fears counterfeiting is set to spiral in first 'digital recession'", paints an interesting picture of a scenario which calls for attention. The press release reads, in relevant part:

"Businesses call for stricter internet controls and a better cybercrime authority to combat counterfeiting on the web –

• 80 per cent of business people believe they are at much greater risk of counterfeiting than in previous recessions, due to the rise of the internet;
• 75 per cent believe stronger protection is needed to protect companies from counterfeiters in online marketplaces;
• 61 per cent call for a tough cybercrime authority to punish offenders;
• 59 per cent wish to see a protocol created to tackle search engines’ role in helping counterfeiting prosper.

Businesses are concerned that counterfeiting will increase as a result of the recession, and want to see much stronger controls put in place to protect them from internet abuses, according to new research by Marks & Clerk, the leading intellectual property firm. In a survey of over 200 businesses* ["The Marks & Clerk online survey, of 216 businesses in the UK, was conducted in March-April 2009, with an emphasis on mid-ranking to senior business people. Almost half of respondents were managerial level or above, with the remainder coming from Operations, Legal, Technical & Research, or Marketing functions" -- but how were the businesses chosen? From which commercial and industrial sectors were they drawn?  How many were in-house lawyers? Were the respondents giving the official position of their businesses?], 97 per cent believe that counterfeiting will increase in the recession, while 80 per cent believe businesses will be at “much greater risk” than in previous downturns due to the phenomenal growth of the internet. In the last recession in 1990-92, the internet was still very much in its infancy.

75 per cent of respondents argue that stronger action is now required to protect companies from counterfeiters. A clear majority of 61 per cent argue that the solution lies in the creation of a more powerful cybercrime authority, with stiffer penalties being imposed directly on infringers [was this suggestion spontaneous, or were respondents led to it?]. 55 per cent go so far as to suggest that stronger penalties should also be levied against the online marketplaces themselves, such as eBay, in enabling counterfeiting to prosper [ditto]. Over three quarters (76 per cent) feel that the law has failed to keep up with the challenges posed by the rise of the internet, in protecting business’ intellectual property ....
The survey finds that businesses’ concerns extend more broadly to the role that search engines play in enabling access to counterfeit goods. 59 per cent believe that a protocol needs to be created to engage search engines in the fight against counterfeiters. This is notable in view of the long-running dispute between Google and Louis Vuitton’s owner, LVMH. LVMH objects to the service provider selling keywords to the highest bidder, including rivals or potentially counterfeiters [this links the notions of 'access to counterfeit goods' and 'protocol to engage search engines' with 'control of the sale of keywords'. Was this the view of those surveyed? There is evidence to suggest that keywords are purchased by legitimate businesses and we all await a ruling from the ECJ as to whether, and in what circumstances, the purchase of keywords constitutes a trade mark infringement].
... Amongst other findings is the fact that businesses are also concerned about the threat of legitimate competition on the web, particularly when it relates to misinformation from competitors. 58 per cent object to the practice of competitors paying for sponsored keywords in their name, and argue that this too should constitute trade mark infringement [this subtly links the concept of misinformation with the purchase of sponsored keywords].

Yet tellingly, the survey suggests that businesses are reluctant to take on the mantle of protecting their brands in the online marketplace themselves [this suggests that the word "businesses" is synonymous with "product brand-owners". Are retailers, online traders and service suppliers also "businesses" for the purpose of this survey?]. Only 25 per cent think that the burden should fall on businesses to police their brand more effectively [what proportion of these businesses feel the same about policing of traditional markets? It might be good to know], although 39 per cent recognise that they could nonetheless allocate more of their own resources to the problem ...".
I deprecate counterfeiting and trade mark infringement in every form it takes and, as a consumer of branded goods, look forward to the resolution of all the issues raised in this press release in a sensible and equitable manner that will protect my interests as well as those of the brands I buy.  I am however very uncomfortable at receiving press releases that, however genuine they may be in their methodology and sincere in their commitment to reflecting genuine opinions within the business community, give the impression of seeking to influence opinion rather than reflect it. 

Saturday, 11 April 2009

The New Tata Nano; How Important Are the Patents?


As some of you may recall, one of my interests is considering the manner in which influential periodicals and newspapers cover IP matters. After all, to the extent that managers still read print media, it can be expected that they will take note of the contents of such periodicals and newspapers. If this assumption is correct, it bears close attention how IP matters are portrayed in these print contents.

Against this backdrop, I read with interest an article that appeared in the March 28th issue of The Economist ("The Tata Nano: The New People's Car") on the current state of the Tata Nano on its reported launch last week. The Tata Nano is promoted as the cheapest mass market auto ever to hit the showroom. With a starting price of approximately $2,000, it is touted as the motor vehicle that will bring car ownership to the masses. If it succeeds in selling substantial quantities, it will indeed usher in a new era for the penetration of car ownership in the developing world, replete with challenges to infrastructure, population dispersal, and work patterns.

My comments are not directed to the observations of the article, which describe the birth pains of the project and the financial , logistic and pressures on Tata, but rather to the side-bar piece, "Inside the Tata Nano: No Small Achievement." The side-bar weighs in on the question of whether the new car will deliver the kind of performance and design that will enable it to reach its potential. In the very last paragraph, it then notes that Tata has filed for three dozen patents, "most of innovations that are out of sight." Thus, one such patent application addressed the placement of the battery under the driver's seat rather than together with the engine in the back of the car. That is the end of the discussion on the patents.

FIND THE PATENT HERE

What am I supposed to make of the contents of the paragraph? After being told, in previous paragraphs, that the car is small but "surprisingly spacious"; that its zero to 60 mph takes 30 seconds, but that it is a good drive and fuel efficient; that the placement of the engine in the rear is a marvel of design; that it has some flaws (what car does not?), and that is the bane of environmentalists, we are now told that Tata has filed over 30 patent applications. To what end?

Did Tata do this to send a signal to the market that the car represents a technological breakthrough and to keep competitors on edge (at least until the applications are published); are the inventions covered by the applications crucial to the success of the car; if so, do we know what makes the inventions so crucial; and what happens to the Tata Nano project if the applications, in while or in part, are not granted? Or is this simply a bit of public relations, under the theory that it always look good to claim that your new product is the subject of multiple patent applications, irrespective of their genuine value to the project? The article does not say.

Truth be told, we work very hard at trying to get our management students to treat IP as one component of the management mix, sometimes more crucial, sometimes less crucial to the success of the particular company and its activities. This means that we try not to be either a true believer or mere cheerleader for IP rights. In doing so, we hope that the sources of media information and manner of media presentation upon which managers may rely in fashioning their view of the business world will assist them in integrating IP within their larger managerial concerns. From the point of view, I wish that The Economist had done a bit better in connection with its treatment of patent filings and the Tata Nano.

NO IP CHEERELEADERS NEEDED HERE

Friday, 10 April 2009

What’s in a name? - Rebranding towards Obama

What everyone wants right now is an endorsement from the US president, writes Esther Addley in The Guardian’s edition yesterday.


The Obama brand is a phenomenon, with Obama being the first presidential candidate who was marketed like a high-end consumer brand. Now the president is in the race of maintaining this brand, keeping it new, different, and attractive.

To achieve this, the Obama team is using new business tools such as “crowdsourcing” (the outsourcing of a task to a large group of people or a community through an open call) – just as other big companies do, such as Nokia or Pfizer. The Obama brand has been likened to other "accessible" brands like Apple or Volkswagen, trying to look transparent and open.

The Obama brand has been quite a success so far – and also companies and brands associated with it have done fairly well. Marketing solutions company Prodo reported earlier in January that companies have already tried to integrate the popularity of the president into their marketing strategies. Prodo cite for example Pepsi’s new website design idea called “Refresh Everything”, which is coupled with a new slogan of “Yes You Can”, tapping into the significance of change and the overall assertive Obama message “Yes We Can”.

Fashion magazines have enthusiastically reported on Mrs Obama’s fashion choices – predicting and generating new trends with this. For example, US brand Talbots was excited about the publicity triggered by pictures of Mrs Obama dressed in a Talbots dress, recently featured in Essence magazine. Also J. Crew were pleased last year: after the Obama daughters had watched their father being sworn in dressed in J. Crew coats, the US American high-street brand’s website apparently crashed after the event was televised, with demand soaring.

While over in the UK for the G20 summit, Nestlé was delighted to see President Obama keeping “healthily hydrated with bottled water”, sipping from Nestlé’s UK water brand Buxton - and treating the brand to the ultimate free publicity that marketing teams usually only can dream of. The Telegraph reported that marketing company Burns Entertainment estimated the value of this (voluntary) endorsement at about £35 million.

It seems that only the car manufacturing sector tries to somewhat distance itself from the Obama brand these days. Despite the pressure from the Obama administration to accelerate turnaround, General Motors tries to stick to its master plan to have four brands in the US (global brands Chevy and Cadillac, and Buick and GMC - for US buyers who want “something in between”). And Ford tries to restructure in a way distinct from GM and Chrysler, not taking government bailout money to become “Obama Motors”.

More on the building of the Obama brand and the Audacity of Marketing here. For some thoughts on other celebrities who try to Brand It Like Beckham, offered by the BBC in 2004, click here. For branded Easter eggs, click here and here.









Thursday, 9 April 2009

IP Practices robust in downturn

Legalweek's green shoots survey article "Partners hint at better times ahead" caught this blogger's eye this week not so much for the headline but for commentary confirming that IP practices have been robust in the downturn.


"Tim Jones, London head at Freshfields Bruckhaus Deringer, said: “The decline of M&A work does highlight the areas that are doing very well – litigation, restructuring, regulatory work and IP, for example.”

"Other areas cited [for investment] were real estate (10%), intellectual property (9%), banking (8%) and capital markets (4%)."

There has been much debate over whether IP practices would suffer in a downturn and there have been strong signs that it would, with national IP filings showing marked declines across a number of key registries. However, there are good arguments that IP becomes increasingly important in recessionary times, for example, from a litigious/protection, restructuring or licensing point of view. The survey appears to support the view that strong IP departments provide a good foundation for corporate firms, along with traditional counter cyclical departments such as employment and litigation. Readers will note that in the UK, most IP filing work in law firms is outsourced to patent and trade mark filing firms so a drop in filings may not affect them, at least directly.

Wednesday, 8 April 2009

The End of Encarta, the Innovator's Dilemma, and the Tragedy of the Anti-Commons

It was widely reported towards the end of last week that Microsoft will cease production of its encyclopedia software-Encarta. Sales of the PC software will be discontinued by June 2009. Subscribers with premium content will receive a refund for fees paid beyond April 30th, but they will be able to still access the contents on-line until it finally goes offline in October 2009 (a sort of Halloween gift). Japanese subscribers will have access until the end of December 2009 (in time for Christmas).

For those of you who remember the launch of Encarta in the early 1990's, it was widely heralded as spelling the death knell of the printed encyclopedia, first by the easy search and rich text capabilities of the PC software, and later by the added contents available to it via the Internet. (In fact, the original contents of Encarta were licensed from the mass-sale Funk & Wagnalls encyclopedia.) This largely happened in 1996, when the "gold standard" of the encyclopedia world, the Britannica, was forced to sell its rights at less than book value, the victim of the Encarta product.

So what happened? In a statement, Microsoft noted that "Encarta has been a popular product around the world for many years. However, the category of traditional encyclopedias and reference material has changed. People today seek and consume information in considerably different ways than in years past." In more simple terms, it has been replaced by Wikipedia.

I have two related observations in connection with the demise of Encarta. The first is that Clayton Christensen's famous "The Innovator's Dilemma," as described in his landmark book of that name, is at least partially germane. As Christensen noted recently in a Harvard Business School podcast, his notion is based on a product that is blind-sided by a cheaper and more efficient alternative, for which the incumbent is unwilling, or unable, to match, given the nature of is product and the corporate culture in which the incumbent's product is embedded. Here, the decline in cost and increased efficiency came about by the rise of the Wikipedia movement, where royalty payments for contents became a thing of the past due to the royalty-free, collaborative nature of the content providers as well as the sheer scope and ease of both search and content update, all of which left Encarta far back in its wake.

One view of the innovator's dilemma

Second, the Wikipedia movement has put paid the issue of the "tragedy of the anti-commons", which at one time threatened content-gathering exercises such as Encarta. Based on the well-known notion of the "tragedy of the commons" first articulated in the early 1960's (you know, the notion that there are circumstances which are characterized by overuse of an asset when no one person has an interest in preserving the asset, while everyone has a short-term interest in exploiting of the asset, much like the over-grazing of the village commons in pre-modern times), the "tragedy of the anti-commons" turned this notion on its head.

In this situation, developed by Michael Heller in the late 1990's, too many discrete property rights may have the result that a desired project will never get off the ground. Copyright is a great example, where rights clearance may lead to a situation where obtaining rights in the aggregate collection of such proprietary contents may not be achievable. I seem to remember that at the outset of the Encarta project, there was discussion of whether Microsoft could obtain all of the necessary contents if it wished to provide a genuinely broad and diverse array of rich contents, and not simply a digital version of a print encyclopedia. Maybe yes, maybe no, at the time, but certainly irrelevant now, when the issue of proprietary rights in contents is subsumed within a critical mass of content creators, all of whom are willing to part with their individual copyright in favor of the collaborative efforts of the greater community.

No problem of the anti-commons here

So for those of you who keep a scorecard on this kind of thing, it seems that the result of the demise of Encarta is "one to one": the "innovator's dilemma" is alive and well, but "the tragedy of the anti-commons", at least in this context, is a a thing of the past.

Book review

The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property is a book that was published this March by the Portfolio imprint of Penguin. The authors are Mark Blaxill and Ralph Eckardt, both of whom are Boston-based managing partners of 3LP Advisors. The book's theme is how to turn intellectual property into "an indispensable source of competitive advantage" (assuming that it wasn't in the first place). The thesis is not new:

"The key to sustainable profits was intellectual property. Yet most managers are unable to see the power of IP because they were trained to focus on more tangible factors".
The authors address their subject with an all-consuming, fact-filled, anecdote-rich zeal that makes the text almost exhausting to read. If you regularly peruse this weblog, you will have been converted to the cause of intellectual property, that amazingly versatile asset the virtues of which are invisible to all but an exclusive sect of visionary management consultants, long before you turn its pages. Probably the best way to use this book is to present it to the President of an old-style manufacturing company that still has some IP moldering away in its filing cabinets (if you can find such a company -- that's not so easy in the UK where making things seemed to die out the day they invented outsourcing) either shortly before you pitch for his business or before billing him for doing so.

Bibliographic details: ISBN 9781101016244 05. 340 pages, hardback. Price: $27.95. Web page here.

Tuesday, 7 April 2009

Research circles, communities of practice and IP consciousness

The following feature was written by Professor Ruth Soetendorp in response to two earlier posts.

A research circle as described in recent IP Finance postings (here and here) reminds me of 'communities of practice' (see Wikipedia definition) written about early on by, among others, Lave & Wenger. On first reading about communities of practice, it struck me how they were more prevalent in situations where there was risk of damage to human life or to property, for example between different professions in medicine, between the different professions and trades in built environment, but were not to be found between the professions and trades involved in the creation, protection and exploitation of IPR. Teaching about IP, at any level on any programme, I always begin by reference to confidentiality and trade secrets as 'the cheapest and simplest form of intellectual property protection'.

In 2005 the Intellectual Property Quarterly published "Intellectual Property Education—In the Law School and Beyond" in which I wrote:

There are examples of successful interdisciplinary learning projects, where science and technology students have had to study an aspect of the law (for example, environmental law, labour law, contract or intellectual property), which is key, but not core, to their primary discipline studies (61). But there are few, if any, initiatives that bring together creators of intellectual property rights with intellectual property practitioners and professional advisers. The closest many future inventors and innovators will get is an occasional ‘‘one-off’’ lecture from a patent or trade mark professional, and many do not even have that.

Interdisciplinary education initiatives are, of necessity, far more advanced where the safety of lives and property depend on the ability of professionals from different disciplines working successfully together. Interdisciplinarity is key in the education of surgeons and nurses, who work closely in an operating theatre, or builders and architects on a building site (62) The Joint Education Board of the Chartered Institute of Patent Agents and Institute of Trade Mark Attorneys is currently reviewing its foundation stage of training. More universities are expected to be accredited to deliver their foundation units. Perhaps this will be a catalyst for exploring interdisciplinary dialogue between future intellectual property practitioners and their future clients.

Some engineering academics are deterred from including intellectual property in their syllabus because they suspect that students might experience learning difficulties with assessments in a subject from another discipline. They fear this would result in lower assessment grades, which would reflect negatively on the work of the engineering faculty within the institution (63). This has not been the case in Bournemouth, where the Design Engineering and Computing faculty, and the Media School have noted no disparity between marks scored for IPR exam questions and those on other aspects of professional practice (64). Intellectual Property units are successfully completed on interdisciplinary programmes at undergraduate and postgraduate levels.

Learning the hard way?
Expecting graduates to wait until they start their careers to learn about how intellectual property operates in the workplace leaves them vulnerable.

A few years ago an undergraduate final year furniture design student wrote to a well known international low price furniture manufacturer. The student described his innovative project, and invited the company’s support. The company replied that they did not work with students. Six months later his item appeared in their catalogue. In four years of his course, no one had flagged up to the student the importance of confidential disclosure. A patent agent recently commented:
‘‘What I suspect is incontrovertible is that the more aware of the basics, the less likely engineers are either to throw away valuable assets for themselves or their employers".
Footnotes
61. Washington University ‘‘students [from the different disciplines] can learn to communicate together, to maximise their respective skills, and to realise there are no clear dividing lines between the disciplines’’, Prof. Maxine Lipeles, holder of a joint appointment in the School of Law and the School of Engineering, Washington University (http://news-info.wustl.edu/sb/page/normal/78.html).
62. See J. Lave and E. Wenger writing on ‘‘communities of practice’’, e.g. Situated learning: legitimate peripheral participation (Cambridge University Press, 1991).
63. M. Dodridge, ‘‘Learning outcomes and their assessment in higher education’’ (1999) 8 IEE Engineering Science & Education Journal 162–168.
64. R. Soetendorp (unpublished, Bournemouth University, 2002).

When is the right time to call in the strategists?

Circulated this morning under cover of BrandChannel is a short paper (5 pages, of which pages 2 to 4 carry the meat) entitled "Your Brand is an Asset? Show me the money" by Stuart Leo, Director of a "boutique strategic marketing company" in Australia with the splendidly attention-grabbing name of Blirt! The thesis is that, in a downturn, your brand can bring you money.

Hoping for the revelation of some deep truths, I opened the document and was, as ever, a little disappointed. Literature such as this is part-exhortatory and part promotional. It seeks to goad the brand owner into action. There seems to be a huge disconnect between this sort of material and the usual reality, when the exciting idea (in this case (i) sell, (ii) license, (iii) co-brand or (iv) promote) hits the buffers. In most cases the medicine is better than the patient: the brand is poor, the goods or services to which it is attached are not thriving, and so on. By the time the brand owner starts seeking external advice, he has often tried and failed to do one or more of the four things which the author suggests, which narrows options still further.

If there is a moral to all this, it's that the best time to call in anyone -- brand gurus, marketing and advertising experts, business consultants -- is early, when the going is good and a business can afford what many regard as a luxury. It's also the time when the most options remain open.

Monday, 6 April 2009

Trade Secrets: Front and Center?

Permit me to add a few additional thoughts to the post of 3 April by Jeremy Phillips, "Research circles: new and useful"? Jeremy reported on what Jonathan Murray of GE Healthcare describes as a new innovation model called "a research circle." I found Jeremy's skeptical conclusion to be of most interest, in which he observed that "I hadn't realised that the concept was new, and it's certainly not inventive. The real challenge, though, isn't conjuring up the 'research circle' as a new model but in creating the right atmosphere of trust and respect that will enable it to function successfully, not just when it's achieving positive results but when the collaboration is doing no more than eliminating the negatives."

One view of the Open Circle

I would like to push Jeremy's comment further. In my view, one of the biggest failures of the legal education of IP is that it has largely ignored the "trust and respect" scheme of trade secrets as an integral part of IP thinking. This means that IP legal education focuses on the "traditional" forms of IP protection--patents, trademarks and copyright--which can be roughly characterized by disclosure and transparency, elaborate statutory schemes and international structures, and, in part, systems of registration. As such, the focus is proprietary in the purest sense in that these rights are presumably good against the entire world (at least as bound by the relevant territory) and the relationship between parties is morally neutral. If anything goes wrong between the parties, they look first to contract and in a lesser degree to tort to seek remedy.

In such a world, there is no sustained place for trade secrets (or whatever synonym you choose to call it) protection, which is characterized by lack of public disclosure and the centrality of trust between discrete persons, where the right can be lost forever by either disclosure or independent invention, where there are only rudimentary forms of statutory protection and virtually no international structures. In a word, trade secrets is a form of protection of human invention and creation which is in many ways diametrically opposed to the traditional IP rights.

The neglect of trade secrets carries over into MBA and management education, despite the fact that the best evidence that we have seems to show that trade secrets may be no less important than the traditional IP rights as a way of protecting inventions and creations. Anyone on the ground knows this, but those few courses that attempt to genuinely integrate IP into an MBA setting for the most part are driven by the categories of analysis and discourse borrowed from the law school treatment of IP. Indeed, my own MBA teaching experience shows that the students find my treatment of trade secrets and trust to be the most unexpected, and in many ways, most useful part of the course.

Seen in this light, it less perhaps less surprising that the report on "a research circle" seems to have neglected an emphasis on the trust aspect of innovation and development. Without any meaningful legal discourse on IP and trust in legal eduction, and only sporadic treatment of the subject in MBA education, it will take a rare person indeed to successfully integrate the concept into the analytical structures that he or she may have learned in law or business school. There is hope, however. The current economic crisis may well force both legal and management education to a long, hard look at themselves. If so, one result may be that the treatment of the trade secret and trust paradigm will be front and center in such curricular changes.

Trade secrets: secret no longer?