Thursday, 31 March 2011
There are a number of differences between working in IP in the United Kingdom and doing the same in South Africa (RSA). One of the biggest is the frequent need to understand the concept of exchange control and how it interfaces with IP (see my earlier post here, for example).
As most readers and any foreign national to RSA who has bought and sold assets in RSA will know, the requirement to obtain exchange control approval from the RSA Treasury is likely to find itself as a condition precedent/suspensive condition to that transaction. It is also trite that IP is an asset in the broad sense with the propensity, directly or indirectly, to create royalty streams. But it can be a real brain twister trying to reconcile legislation designed to control the flow of money first promulgated in 1961, the protectionist mindset of the local Treasury, the more liberal views of those dealing with IP and the nature of IP as an asset in all its registered and unregistered forms, in 2011. The latest RSA Supreme Court of Appeal judgement (Oilwell (Pty) Ltd v Protec International Ltd) illustrates this well enough.
Oilwell had attempted to reverse a trade mark assignment for failure to obtain exchange control. The leading IP judge in RSA (with the support of a full bench) dismisses the appeal. By doing so, he effectively challenges the Treasury to find another way of restricting the flow of IP from RSA. The case, summarised with comments on Afro-IP here, is seen as a victory for those who advocate freedom of exchange and a relief to advisors who had not, as a practice, advised clients to seek exchange control for IP assignments. However, before you get on the dance floor be warned ... there is a strong feeling that the Treasury may turn down the music.
Posted by Darren Olivier to IP Finance
Wednesday, 30 March 2011
Roya's paper discusses the "Third Way", about which she has this to say:
"The ‘Third Way’ of university research commercialization focuses on systemic change, rather than on single stakeholder intervention. It reflects a third generation of innovation policies that focuses on training, awareness raising and the leverage of cluster effects, rather than the development of physical infrastructure (i.e. science parks).You can view the analysis in the form of PowerPoint slides here.
This is a unique approach that outperforms existing best practice in many ways; i.e. it focuses on the leverage of network effects among the various academic institutions, rather than repeating the traditional ‘one university – one commercialization’ approach.
The ‘Third Way’ also outperforms existing best practices by adopting latest trends in IP management , such as online trading, perceiving IP as financial asset, leveraging open innovation for improving patent quality.
Organizational values, structures & procedures of various actors (business, academia, government) are recognized and different institutional cultures are sought to be overcome through boundary spanning.
The competing demands and interests of business & academia are reflected through the introduction of ‘social responsible university research commercialization’, as currently undertaken by U.C. Berkeley".
Tuesday, 29 March 2011
This morning, the High Court of England and Wales handed down an unprecedented judgment which will impact on the complex financial assessment that every company has to make before asking the Court to grant an interim injunction pending trial.
The judgment is the latest in an ongoing dispute which is the first case in recent times in which the Court has been asked to consider the level of damages payable under a cross undertaking given in exchange for an interim injunction in a patent case. In an unusual twist, the judgment ... found that Apotex should pay back to Servier the £17.5 million plus interest that Servier was ordered to pay to Apotex in 2008 after the hearing of the damages inquiry. Liz Cohen, Partner at Bristows comments:
"... As a matter of public policy, a party should not be able to claim compensation for being prevented from infringing one patent on the basis that it would have infringed another patent, if the injunction had not been granted. It further reinforces the principle that there is no automatic right to compensation under a cross undertaking. This will undoubtedly impact on the complex financial assessment that every company has to undertake before launching a product at risk in the UK”It's most unusual for a judge an IP proceedings of this nature to have the chance to apply the principle of ex turpi causa, and Mr Justice Arnold was swift to take the opportunity to do so.
Servier appealed this decision to the Court of Appeal. In February 2010, the Court of Appeal allowed Servier’s amendment and on 15-16 March 2011, the High Court heard the public policy issues relating to Servier’s amended pleading. The judgment handed down this morning reflects the finding of the High Court that Apotex should not be able to rely upon its own illegality to benefit from the cross undertaking given by Servier".
|What better way to consume money?|
"84. I must now decide what sum to award by way of security. I have before me an estimate of Bloomsbury’s costs to date and to carry these proceedings through to a conclusion in the total sum of £723,819. I have a similar estimate of Ms Murray’s costs in the total sum of £1,644,660. The combined total of the defendants’ costs is therefore £2,368,479. By contrast, Mr Allen estimates that his costs to date, excluding the deferred element, are some £800,000 and that he will incur further costs of about £500,000 to carry the proceedings through to a conclusion.Who says you have to be rich to litigate?
85. In deciding what sum to award by way of security, I bear in mind that I should not make an order that will deny Mr Allen access to justice although, for the reasons I have given, I have reached the conclusion that I have inadequate information in this regard from Mr Allen, and that he has been far from full and candid in setting out the means available to him. Accordingly, this is not a factor to which I believe it is appropriate to attach great weight.
86. Other criticisms of the defendants’ costs estimates do, however, seem to me to have more substance. I recognise that Mr Allen has chosen to sue two separate defendants but I question whether they each need to be represented by leading and junior counsel. Moreover, the estimates for the fees that may be incurred in that regard do seem to be unreasonably high. Further, although I recognise the serious nature of the allegations made and the importance of the case to both defendants, the defendants’ estimates do seem to me to include costs in respect of unduly large numbers of separate fee earners, excessive communications with clients, and unwarranted time for consideration of disclosure and preparing experts’ reports. At this stage any attempt to estimate the costs that are likely to be recovered must necessarily be fairly rough and ready in light of the difficulty in assessing the extent of the work that remains to be done. But doing the best I can in all the circumstances, I have reached the conclusion that the proportion of the defendants’ cost estimates I should require Mr Allen to provide by way of security is 65 per cent".
Today's proposals by the British government for protecting unsuccessful defendants in civil proceedings against crippling costs here.
Sunday, 27 March 2011
Another report (morningstar.com, dated March 8th), provided further details about the move by TiVo to obtain $150 millon in public funding. According to this report, as part of the risk factors disclosed in its SEC filing, Microsoft filed a complaint with the U.S. International Trade Commission against the company in late January, seeking relief for alleged patent infringement of four patents dealing with on-screen user interfaces. The company stated that under the worst case scenario, should the company lose on the patent claims, its "business would be immediately and materially adversely impacted." Adverse results in the other patent cases in which the company is involved could also have a material harmful affect on the company, according to the report.
1. The report does not further describe whether the SEC filing offered any assessment of the likelihood of any of the patent cases succeeding, but my guess is that there were no such evaluations. When you think about bond rates for Greece hovering around 10%, the 4% coupon seems to be sending a market signal about the level of assesed risk.
2. In any event, as a legal matter matter, when risk factors are involved, while it is a fine line, it is better to paint darker grey rather than a lighter hue, especially when some future plaintiff's attorney combs the filing at a later date looking for any grounds to sue the issuing company.
3. From the creditor's point of view, the investment is a bet on the likelihood that the company will prevail in the patent cases, and that the company will be able to take advantage to increase its bottom line, which itself will be reflected in a higher share price. That said, I am curious how an institutional investor can quantitfy both the likelihood of success in the litigation and the resulting effect on the company's future revenues, all with an eye towards deciding whether or not to loan TiVo the money.
4. The filing stated the funds obtained may also be used for financing sales and marketing expenses, increasing working capital and/or investments and acquisitions. Still, it is assumed that a substantial share of the funds received will be devoted to patent litigation. If this be true, TiVo, especially for its size, would seem to have one of the largest potential outlays for patent litigation anywhere.
5. More generally, one has to wonder if the patent system was intended for this kind of heavyweight, multiple party patent litigation. One can further ask whether a situation in which at least one of the major participants has to go to the public to fund its patent litigation activities is the optimal way for capital markets to be brought to bear in promoting innovation in the public aggregate.
Thursday, 24 March 2011
Marco Alexandre Saias (Director of the Brokerage Departament, IP Solutions) has taken up the challenge to write a piece for this weblog on IP and standards -- not the FRAND variety, but standards of service provided for IP owners and users, particularly with regard to IP accounting and asset management. He writes:
"ARE WE WAITING FOR IP STANDARDS? HOW IP STANDARDS IMPACT ON THE REAL WORLD
In a new, dynamic world that is wide open to discovery, intellectual property reality lacks the tools to give it the kind of following necessary for it to go beyond its potential. There is still a high level of uncertainty surrounding the IP world, a reason why common standards can and will offer the expected jump forward in IP dynamics.
When asked about what impact common standards would have, my thoughts jump directly to the concepts of safety and reliability.
A standing rule, a common rule applicable to all agents that operate in the sector, provides a cushion against the uncertainty that often operates in IP and a necessary obstacle against the arbitrary will of the individual.
One of the most dominant features in IP and its assets, is its special dynamic because IP is a culmination of the constituent parts that makes up its elements. Its assets are however, constantly changing and the question is then, how can the IP world accommodate this? This brings us to the first point: are standards necessary in the IP world?
The answer is yes. When dealing with new elements in the economy and within the economic activity of enterprises, elements such as contractual freedom achieved by the agreed price may become affected if the parties have no confidence in the real value of what they are willing to trade.
The adoption of common rules and standards might ensure shared safety and reliability by necessarily allocating the trust of both parties, thus allowing a truly free decision-making process. However, the adoption of standards is no easy challenge and requires cautionary steps to be taken.. If they can serve as a tool that supports and ensures trust between the parties, thus creating a competitive market, it is not insignificant that the problems tend to occur when leaving the sphere of removing uncertainty and entering into an exaggerated control of reality.
Again, we return to the question of the dynamics and volatility of IP and its assets. Clear examples of this situation are those technologies for which patents have no business relevance, until that day in which that technology explodes. All the accounting standards used to value that technology become obsolete and even absurd by the new reality that now exists. Thus, what once was worthless, may suddenly turn into gold.
An additional problem associated with the standards of valuation is the lag from reality, due to an overlap which originates in the overuse of accounting concepts.What is most important in a patent? The technology within or the drawing? And in a brand? The brand itself or the associated goodwill? And if the technology within a patent has an associated brand (branded technology), does the value of the patent arise from itself or from the brand’s goodwill? And to complicate the matter just a little further, within the copyright, which aspect should be valued? The copyright itself or the different set of exploitation rights in it? There has been some tendency to consider this reality through an accounting perspective; by subtracting the dynamic and complexity from consideration.
Where does this leave us? As demonstrated above, the adoption of standards should not be taken to apply without question. What is required is caution and should be taken on board in a minimal way, that is, standards should be adopted to provide safety and confidence tools between the parties only. The standard should never be able to override the ability of free agreement between the parties.
What about standards on IP transfer (negotiation, agreements, etc.)? I have the same understanding: common rules should be contemplated in the Law, in just the necessary measure. The parties must be free to negotiate and achieve whatever they decide and this must be given priority. Going beyond this is to confine the behaviour of a free market, which is especially sensitive since in the current economic climate we are already talking of economic monopolies.
In the real world, standards are tools of confidence and security which does not imply that it is always useful or correct. It is for this reason that standards often get reviewed, revised and updated. In the current IP momentum, with the rise of the IP markets as part of the chain of value, standards are a useful solution to a main problem: coordination. The adoption of common standards will allow all parties involved in IP transactions to realize mutual gains. But such mutual gains only happen where both parties are making mutually consistent decisions.
I believe that this necessity is strongly felt as needed especially around the issues surrounding valuation of patents and copyrights.
In patents, apart from excessive accounting view in which many take refuge, there is no common principle or method, and the ones currently in existence are not commonly accepted. For example, I advocate the use of methods of assessment based purely on the market, but in the sense that a patent is worth only what the market is willing to give it at that particular moment, given all the data available. But many people do not see things like that.
As for copyright, the situation is even more confusing, especially in the European system. For example, I, the author, can license in the same territory the exploitation of my movie to three different individuals: theatres, television and DVD. Have we a unique IP asset? Or have we three assets? Personally, I am inclined to fall within the three assets view, simply because I think in terms of profitability of each operation by itself.
Standards are needed and will be well received by the IP market and professionals within it. They provide security, trust and confidence to and between the parties. However, they can never take precedence over the free will and the functioning of the market but instead help and allow it to function freely and effectively and provide balance between the parties.
Going beyond this freedom barrier will only distort the reality of IP, and inevitably pave the way for speculation and abuse of position, the result of which will damage not only the weaker parts but the entire IP market".
Wednesday, 23 March 2011
The good stuff:
- R&D tax relief increased for SMEs to 200% in 2011 and 225% in 2012 - excellent news, assuming that the EU don't demand something significant in return (because the SME relief is a State Aid)
- R&D tax credit repayment no longer restricted by PAYE/NICs - more money back to loss-making SMEs, but don't celebrate too much as the repayment is likely to be restricted with the reduction in small companies' tax rate
- R&D large company relief to include sub-contractor costs - good news, particularly for SMEs that can only claim the large company relief (eg: because they've received a State Aid grant for the R&D project)
- Minimum qualifying spend removed from R&D relief - nice idea but, if you're spending less than £10k on R&D in any one year, the costs of getting the R&D claim in order will probably be more than the relief you get!
- Patent box to have more consultation – but still 10%, still patents only, applying from 1 April 2013 - next consultation paper due May 2011
- The exemption for IP holding controlled foreign companies with minimal UK connection will be in Finance Bill 2011, as expected - no changes (yet) announced following the consultation.
- Vaccine research relief for SMEs reduced to 20% for 2011-12, and then scrapped from 1 April 2012 - but only 10 companies a year claim this relief, so it's not likely to have much impact
- Reductions in corporate tax rate - to 20% for small companies in 2011, to 23% for large companies by 2014 - useful to all companies
- Improvements to reliefs for investors (EIS for individuals, VCT for companies) - may make it marginally easier for companies to raise funds
- Capital allowances (tax deduction for buying equipment) for short-life assets doubled – accelerates tax deduction for assets which will be sold/scrapped within eight years of purchase (but note there are better deductions for R&D assets, and for the first £25,000 expenditure on assets in any one year)
- Enterprise Zones could be attractive - 100% reduction in business rates, some increased tax deductions for asset purchases - and there'll be one in London
- £100m on facilities for "commercialisation of research" (echoes of the need to commercialise patents for the patent box), accommodation for innovative SMEs (probably means patent-seeking) and new research capabilities (no, I don't know what that means either)
- A "new" technology and innovation centre for high value manufacturing - by "new", the Government means integrating the activities of various existing centres
- 24 new University Technical Colleges to be established
Tuesday, 22 March 2011
Tomorrow UK tax-payers of all types will be turning their attention to the Chancellor, George Osborne, who will be presenting his 2011 Budget. This year the emphasis is likely to be on tackling the UK's not insubstantial budget deficit, not to mention tax avoidance, while simultaneously delivering on promises of stability and simplicity.
The Government is expected to confirm the outcome of several consultations on tax reform proposals -- including the review of tax reliefs and the reform of the corporation tax system. The IP Finance Blog is particularly keen to see whether there will be any announcements in relation to R&D tax credits and whether further details of the patent box will be set out following the consultation which closed last month.
This member of the IP Finance team will be following developments on Olswang LLP's Budget Blog here for the latest developments. IP buffs will also be keeping an eye on Anne Fairpo's Intellectual Property Tax blog, here.
Thursday, 17 March 2011
No doubt the research will be rigorous and will deliver plenty of data -- but this blogger has a hunch that he and probably many of the readers of this blog could fill a blank piece of paper with a list of main findings and conclusions that would not fall far short of the real thing.
Thursday, 10 March 2011
The headline from the article that appeared in the 6 March issue of the New York Times had the clarion ring of crisis: "Drug Firms Face Billions in Losses in '11 as Patents End" here . The immediate problem is the spectre that patent expirations in 2011 will mean that drug companies will lose exclusivity over more than 10 major medicines with combined sales of nearly $50 billion, thus exposing, it is claimed, the reliance of the industry on blockbuster products.
At a more systemic level, the drug industry faces a whole set of daunting challenges, including "a drought of big drug breakthroughs and research discoveries: pressure from insurers and the government to hold down prices; regulatory vigilance and government investigation and thousands of layoffs in research and development." Finding the solution for any one of these factors is difficult enough; finding the right mix of solutions for these various factors taken together, can only be described as herculean in difficulty.
Taking Pfizer as an example, the industry is talking about "reinventing itself", "fixing our innovative core", and "refocusing on niche products rather than blockbusters, including branded generics". All of this, at least in Pfizer's case, is to be carried out while reducing R&D spending by 30%, so that R&D is directed only "on the most potentially profitable prospects". The U.S. Government, on its part, through the National Institute of Health, dissatisfied with the pace of current drug development, is talking about the establishment of a billion-dollar centre dedicated to drug development -- this, despite the question why NIH will be able to do a better job of drug development than the companies themselves. In any event, the article then goes on the describe various aspects of the factors, described above, that amount to a potential perfect storm that will challenge the long-term prospects for the industry.
In reading this article from the IP perspective, one thought kept running through my mind. On the one hand, the expiry of more and more patents key to protecting blockbuster drugs is apparently a material proximate cause to the woes facing the industry. On the other hand, the article does not explicitly mention any measures regarding the patent function that might improve the industry's position.
At a certain level, this seems a bit odd. If the patent function is so central, why is there no explicit consideration of that function when considering the steps that the industry can take to reestablish itself. Better R&D--yes; better innovation--yes; but as for better patent strategy, the article is largely silent.
Several thoughts occurred to me:
Linguistic Alignment-- The thinking here is that, when the industry uses terms such as "rediscovery" and "renewed innovation", these notions inherently fold into them proper patent practices. Under this view, patents are an exogenous result of successful execution of these strategic measures. As such, there is no need to consider patents per se separately.
And so my question: would such a CIPO (or other form of restructuring of the patent function within corporate strategy) contribute to the efforts of the drug industry to improve its position in the current circumstances? One answer is that this is already taking place, even if these considerations were not discussed in the article. But another possible answer is that patents, as a strategic consideration, need to be reconsidered together with the other factors discussed above.
Wednesday, 9 March 2011
... In addition to any expected return from this investment Pinewood will also benefit from these films using latent studio capacity at its sites and the expected take-up of ancillary services at the studios. This arrangement will also bring fiscal benefits to the Company in its role as a supporter of British film productions. It is anticipated that Pinewood will invest in four productions annually, which will be selected by industry partners on behalf of the Company.
This move by Pinewood is consistent with the Government’s stated aim to create a sustainable long term British film industry.
... Rt. Hon. Jeremy Hunt, MP, Secretary of State for Culture, Olympics, Media and Sport added:IP Finance is delighted to see money being invested in the film sector, particularly at a time when so many commentators have, quite reasonably, questioned the continued vitality of a business model that is prey to competition from counterfeits and file-sharing as well as the threat of diminishing returns in an increasingly global, and therefore crowded, market that has been wallowing in the trough of a recent recession. But is it true to say that this investment is a sign of confidence in the Government's film policy? Perhaps some elucidation is needed here.
“We are delighted that Pinewood is showing its support for smaller British film productions. As the recent success of The King’s Speech demonstrates, smaller British films have the potential to become smash hits globally and any support that the industry can offer producers, we welcome. This new private sector investment is a sign of confidence in the Government’s film policy. Pinewood has a long heritage as a centre for film making excellence and with this announcement, demonstrates that it continues to sit at the heart of the British film industry.”
Source: "Pinewood Studios To Invest Millions In The British Film Industry" by Craig Sharp, Filmshaft, 9 March 2011
Tuesday, 8 March 2011
"The overall cost to the UK economy from cyber crime is £27bn per year, according to the first joint Government and industry report into the extent and cost of cyber crime across the UK, launched today by the Office of Cyber Security & Information Assurance in the Cabinet Office and information intelligence experts Detica.The summary records as follows with regard to IP theft:
With society now almost entirely dependent on cyber space, developing effective strategies to tackle cyber crime requires a better understanding of its impact. Its breadth and scale have been notoriously difficult to understand and past attempts to set cyber crime policy or develop strategies have been hampered by a real lack of insight into the problem.
"The Cost of Cyber Crime" report reveals that whilst government and the citizen are affected by rising levels of cyber crime, at an estimated £2.2bn and £3.1bn cost respectively, business bears the lion’s share of the cost. The report indicates that, at a total estimated cost of £21bn, over three-quarters of the economic impact of cyber crime in the UK is felt by business. In all probability, and in line with worst-case scenarios, the real impact of cyber crime is likely to be much greater".
"With the exception of the well-understood and documented copyright theft issue, theIP Finance would like to understand more about the mechanism for assessing the cost of cyber crime and IP theft. If any reader has the time and the inclination to read through these documents and would like to write them up for this weblog, he or she should please let me know.
types of IP most likely to be stolen by cyber criminals are ideas, designs, methodologies and trade secrets, which exist mostly in tangible form and add considerable value to a competitor.
But calculating the impact of this type of less-publicised IP theft is complex. Our approach produced three-point estimates for the economic value of IP by taking published figures for the value added to the economy per year in each sector and estimating the fraction attributable to IP.
Our results show that several business sectors are likely to be affected by IP theft because they either generate large volumes of IP or their IP can be exploited with relative ease. However, although no business sector is likely to be entirely immune from IP theft, the impact of cyber attacks is likely to be much smaller in sectors where relatively low volumes of IP are created".
You can download the summary here and the full report here.
Monday, 7 March 2011
The Korean firm of C&S Patent has just sent around its regular newsletter which included a reference to a report by The Bank of Korea in which , the amount of royalties that S. Korean companies paid as fees to "access intellectual property rights" (presumably as royalties) in 2010 was a total of 5.8 billion dollars. This was apparently an increase of approximately 2 billion dollars as compared to the figure of 3.9 billion dollars paid out in 2009 and compares to 2.6 billion dollars paid as royalties in 2006.
C&S Patent report this in the context of a licensing payment of 550 million dollars from Samsung Electronics to Kodak and 400 million dollars from LG Electronics for the use of a patent relating to mobile phone imaging technologies (reported here). This patent has now been held by the US International Trade Commission as being invalid (although Kodak announced that they are appealing the case).
Whatever the merits of the Kodak patent, the case shows the effect that royalty payments can have on the balance of payments of a country. It's no wonder that many national governments in Asia are encouraging their domestic companies to become more active in formulating standards and also to patent aspects of those standards.
Friday, 4 March 2011
"BS 8538 is the British Standard that sets out for the first time good practice and principles of ethical behaviour for organizations providing services to inventors.In recent years there has been a substantial increase in the number of organizations offering services to inventors and other originators and developers of ideas.
These organizations include the Intellectual Property Office (UK-IPO), Business Link , commercial service providers, universities that specialize in invention and product design, and inventors’ clubs. The UK-IPO has long promoted the need for individuals and organizations to take stock of their own novel creations and to secure the commercial rights to them, by way of patents , registered designs, trade marks, etc.
BS 8538 would also help inventors understand what to expect from a provider when seeking to secure the intellectual property rights for an idea.
Success in securing the legal rights can positively influence the business success for the idea. However, the law concerning intellectual property (IP) can be complex and the UK-IPO recommends that the creator of a new idea should always consider seeking advice from a firm of chartered patent attorneys or trade mark attorneys (who are legally qualified and independently regulated), or other advisers with the skills needed to assess whether the idea is appropriate for patent protection, trade mark registration or design registration, and who can prepare an application for the creator seeking potential legal rights.
As well as these practitioners there are other advisers, consultants, invention brokers and inventor-support organizations who offer help and advice covering the commercialization of these novel creations.
It follows that if every UK individual and organization secured the intellectual property (IP) to which they are entitled and then used it to commercial advantage, the UK would gain in the long term.
Other standards have been, or are being, developed for IP, notably the ISO standard for brand valuation (here), the Austrian standard for trade mark valuation (here) and the German standard for patent valuation (here). These are events that are bound to have an impact on IP business activity, yet few people in the IP community appear to be even remotely interested in them. Is there anybody out there who would like to write for IP Finance on the establishment, take-up and impact of standards, and their impact on the real world?
BS 8538 specifies the requirements for the provision of services to the originators of intellectual property with a view to their commercialization. ..."
Tuesday, 1 March 2011
Another Oscar award ceremony has come and gone and, with it, even more than usual, is the media coverage and punditry about the event itself, as well as the winners and losers in an expanding list of film-related categories. As such, this is a good time to reflect on the current state of the ceremony, and what it says about the film business. Let me suggest that the Oscar awards are the functional equivalent of much of the print media--either becoming an anachronsim or irrelevant as other technologies and platforms replace it. If not for the inertia of the spectacle itself, the time might be near to bring the ceremonies to a merciful end.
The Academy Awards appear to have been, from their outset in the late 1920s, a promotional vehicle for Hollywood and the studio system (as it then was). The event merged the American fascination with winning with the aura of glamour and stardom. True, there has always been an odd feel to the entire competition. Who are the voters? (I remember a student teacher of mine in high school in the 1960s who was a voter because she was the cousin of a studio mogul.) How do such voters decide when, as I suspect, many have not seen all of the movies upon which they are voting? No matter what your view is on these points, behind it all was and is the Oscar's goal of promoting the film industry, i.e.,the large Hollywood studies, in particular.
The problem is that, if the Oscars are a promotional vehicle for the industry, the long-term prospects for carrying out this function are not bright. First, it appears that success at the Oscars shows no significant correlation with increased box office revenues. That is not such a surprise, since the ceremonies lag behind the cinema exhibition schedule at the theatres. True, a nomination announced during exhibition time might presumably assist increased box office take, but even then, with 10 movies being nominated for awards such as best film, the nomination itself is a less exclusive designation (rather like VPs of banks).
Moreover, the Oscars is a spectator TV support for those in middle age or above. A podcast report stated that the average age of viewers of the event is 50 years of age, with the figure going up each year. Stated otherwise, youngish hosts Anne Hathaway and James Franco notwithstanding, the young have largely abandoned viewing of the event. Even for those who watched it, I would wager that most viewers did not stay to the end. True, the print media is awash with hype before the event as well as extensive coverage of the Oscar results but, honestly, who remembers very much beyond best picture and best actor and actress, much less the last five winners in each of these categories?
The event itself has had the perverse result of encouraging competition with the very studios, the promotion of which the Oscars were originally estblished. Stated otherwise, the Oscars have allowed the indie (read: "independent") movie business sector (like "The King's Speech" and "Social Network") to gain enjoy mainstream support among those who cast votes for the Oscar competition. Ironically, given the modest budget for such movies, winning the Oscar might actually give them some financial lift. Once again, however, that is not why the Oscar competition was established.
The factors most affecting the movie industry include the perenial challenge of financing studio films; the rapid decline in CD sales (the lifeline of the business for much of the decade) and the uneven ability of most movies to recoup in other facets of the secondary market; the threat of unauthorized digital copying and, even when authorized, the less lucrative (for the studios) streaming business; the attentuated time period between cinema exhibition and access to the movie via various digital and on-line delivery methods; and the partial displacement of the cinema experience by multiple distribution channels at home (or even on the go).
In the face of such challenges, the Oscar ceremonies seem quaint at best and marginal to irrelevant at worst. It's time for the industry to find other ways to promote its product. I am sure that the red carpet will fetch a pretty penny at the ensuing public auction of Oscar memorabilia.