Tuesday, January 29, 2008

Whose Pashmina?

Squabbles between Pakistan and India over trade-related issues are multiplying. The latest to erupt is over intellectual property protection for the prized pashmina wool and the products made from it, by getting a geographical indication tag. In dispute is the application filed by a Jammu and Kashmir-based handicrafts association to register “Kashmiri Pashmina” as the exclusive brand for products made in this Indian state. This will lend “Kashmiri Pashmina” the same kind of brand protection enjoyed by, say, champagne and Darjeeling tea. And the challenger, predictably, is a pashmina-trading organisation in Pakistan which wants products produced in the part of Kashmir under that country’s occupation to be given the same IPR protection.
Prima facie, Pakistan would appear within its rights to put forth such a plea, as pashmina is produced from the under-growth of the hair of a special changthangi or pashmina breed of goat that has been indigenous to the high altitudes of the Himalayas, including the Pakistan-occupied region. But if that logic is applied, Nepal too should be made a party to this patent protection as its upper mountainous reaches have also been home to pashmina goats for thousands of years and pashmina-based products have been woven there for a long period. Even in India, for that matter, pashmina goats have not been confined to the Kashmir region, and have inhabited the higher hills of Himachal Pradesh and Uttaranchal as well. The real difference lies in the quality, as also exclusivity, of the pashmina fleece and its products produced in different regions though, admittedly, all kinds of genuine pashmina wool possess the envious trait of being incomparably soft. India’s case might be that additional scientific effort has gone into refining the quality of pashmina and improving the fleece yield of these goats.
While it must be presumed that these aspects will be kept in mind by the geographical indications tribunal when considering the application in question, it is important to recognise that pashmina imitations have been in circulation, and been widely traded, in many parts of the world, jeopardising the monopoly of the Himalayan region over this unique wool. For most westerners, cashmere is a synonym for pashmina and even genuine pashmina shawls, scarves and other garments made in Kashmir are traded as cashmere shawls or scarves. Worse still, the growing demand and below-par supplies of genuine pashmina garments have enabled some unscrupulous manufacturers to make and sell products of soft synthetic viscose as pashmina products, and thus to take advantage of the high prices commanded by pashmina. All this needs to be curbed, so fighting the IPR battle for getting a geographical indication tag is only a part of the battle.
So, while the need for getting intellectual property safeguards for pashmina is self-evident, it is not pashmina alone that needs to be protected. There are other products as well, like aromatic basmati rice, which are the common heritage of the sub-continent and which, therefore, need to be safeguarded through mutual cooperation rather than confrontation. Had Pakistan cooperated with India in getting a geographical indication tag for basmati in the same way that it now seeks protection for its pashmina, it would have provided a basis for working together. It is not too late for the two countries to sit together and work out a joint strategy on such issues.

India’s National Knowledge Commission calls for independent body to regulate higher education

Indian Prime Minister Dr Manmohan Singh’s National Knowledge Commission, headed by Sam Pitroda, has called for private participation, philanthropic contributions and industry linkages to improve higher education in India. Pitroda also called for increased public spending, monitored by an independent regulator that remains independent from the government and all stakeholders.

He told reporters on Saturday that the second annual report of the Commission was submitted to the prime minister on Friday. He said it conceptualised an Independent Regulatory Authority for Higher Education (IRAHE) that will streamline regulation of higher education, monitor standards and licence multiple accreditation agencies for rating universities and institutions.

Deepak Nair, one of the commission’s members, said the proposed regulator would ensure transparency. The Commission recommended creation of a series of web portals on the Internet to become aid popular movements supporting the right to information, decentralisation, transparency, accountability and people’s participation.

The commission said that the government would be a key partner in setting up the national portals, which should be managed by a consortium with adequate representation to all stakeholders to ensure that they remain a dynamic repository of information and have greater community ownership.

“A plethora of regulations without adequate autonomy or accountability for institutions has resulted in a system that is over-regulated and under-governed,” the commission said. It recommended reforms in universities through frequent curricula revisions, course credit system, reliance on internal assessment and encouragement to research.

It also called for the restructuring of the affiliated undergraduate colleges that “no longer provide a viable model for quality higher education”. It proposed the creation of more department-based unitary universities and greater autonomy for the existing institutions.

Minority reservation: Commission member Jayati Ghosh said it favoured increasing educational assets and facilitation to provide higher education opportunities to all deserving students, irrespective of their socio-economic background. Asked to comment on a recent demand for reserved university seats for minorities, she said the Indian constitution did not allow religion-based reservation and the commission had acted on that basis in making its recommendations. The report has called for reforms in legal, medical and management education. It has also called for the creation of a health information network and the promotion of open educational resources.

The role of innovation, intellectual property rights, legal framework for public-funded research and traditional health systems have attracted the commission’s attention in a series of reports it submitted to the government during 2007.

In response to a question, Pitroda admitted that those in the government were not open to the new ideas in education that his commission had suggested.

“There is resistance at various levels in the government to new ideas, experimentation, process re-engineering, external interventions, transparency and accountability due to rigid organisational structures with territorial mindsets,” he said.

He said India was too large, too complex and too diverse for “one size fits all” solutions,, and the commission had therefore stressed decentralisation and community participation at the local level.

Patents: The Master Key

The metamorphosis of Indian pharma is not new. From the changing patent regime, being a 'copycat' to innovator, it has tailored itself to cope with global trends. In the bargain it has grown by leaps and bounds, not just within domestic boundaries but across geographies. These companies have begun to leave more pronounced global footprints with many cross-border deals. What future strategies will they implement to grow these footprints in the US and Europe?

Locked 'in'/Behind the scenes

Intellectual property (IP) protection is becoming an important component of global trade. As countries are looking to enter the global market place they are recognising the need to revamp their IP laws to attract multinational companies to participate in their economies. This has certainly been true in India where in 2005 intellectual property laws were implemented protecting product patents; prior to that India only recognised process patents. Before the introduction of this new legislation, Indian pharmaceutical companies were free to legally reverse engineer products obtained from branded manufacturers and sell them within India and other markets with lax patents laws. This new development means that Indian companies will no longer be able to depend on revenues generated from selling copied versions of these branded drugs. "As India's patent regime is applicable to patents after 2005, it is possible for registration of an international product (still under patent, patented before 1995) with studies of bio-equivalence in India. In the EU and US, registration is possible only for products off patent", explains Surjit Aurora, Vice President Marketing, WinMedicare.

The changing dynamics of the regulated markets like the US and EU have presented a number of opportunities for Indian pharma industry to capitalise on. Some of the major concerns facing the global pharma industry are higher healthcare costs, competition from generics, patent expiries of blockbuster drugs, drying R&D pipelines and increasing R&D costs. These translate into a significant growth opportunity for Indian pharma industry, in the form of exports of generics to regulated markets and contract manufacturing/ research for global pharma companies. The Indian pharma industry is therefore exposed to a host of new opportunities and risks.

What are Indian companies looking for?

There are various reasons for Indian companies stepping in the regulated markets. Firstly, CARE research believes that the growth of the Indian pharma companies in the domestic market will get restricted with MNCs introducing newer patented drugs in the country. Under this scenario, growth for formulation companies is likely to come from the generics opportunity in regulated markets and geographic expansion in semi/non regulated markets. The generics market is currently valued at $60 billion with unbranded generics constituting two-thirds of that at approximately $38 billion. The US and Canada make up more than half ( approximately 54 percent) of the revenue for the generics market exceeding the sales of continents of Latin America and the EU. The value of drugs going off-patent in regulated markets is estimated at $ 70-80 billion during the next five years and this represents a huge opportunity for Indian pharma companies to establish their presence in these markets.

"Indian players operate mostly in the generic generics and branded generics segment. The generic generics segment is the one that is legally defined in the regulated markets," informs Utkarsh Palnitkar, Partner-Transaction Advisory Services, Leader-Business Advisory Services, Ernst & Young. This essentially means that the product must be sold on the basis of its molecule and not as a brand.

From a patent challenger to a preferred authorised generic

Many Indian companies have been able to gain generic market share by aggressively challenging patents, and this is a good strategy in the short term. But moving forward, this strategy is risky and ultimately an unsustainable business model. To be profitable in the generic space in the long term, experts believe that working with branded manufacturers to become an authorised generic is a more sustainable strategy. When Indian companies can take advantage of the opportunities of the regulated markets in the areas of cardiovascular, anti-diabetics, OTC, health and nutritional supplements, anti infectives etc, pricing pressure in the regulated markets, high litigation expenses and counter strategies followed by innovator companies are factors that could dampen the growth of Indian companies pursuing the generic opportunity.

The Indian 'key'

India pharma companies are rapidly ramping up their presence in the global pharma space through the inorganic route, and are increasing their horizons beyond domestic boundaries. They are adopting inorganic growth strategies rather than setting up their own manufacturing facilities and distribution networks to hasten their presence in newer markets and consolidate their market share. "Furthermore, with distribution concentrated in few large players in each geography, entry strategies are limited to distribution alliances or outright acquisitions," adds Palnitkar. Alliances have been followed by establishment of subsidiaries as is seen in the case of Dr Reddy's acquisition of Betapharm and Ranbaxy's acquisition of Terapia. The prime strategy behind cross border acquisitions is entering new markets, besides strengthening the value chain, improving the competitive position, expanding the product portfolio, building expertise in new therapeutic areas, and acquiring assets. The Indian players are focusing on other markets and just not relying on one or two prime markets. For instance, the primary objective of Ranbaxy's acquisition of Be Tabs, a leading generics player in South Africa, was to enter the high growth South African market. Dr Reddy's acquired Betapharm, to catapult itself into a significant position in Germany. There has also been a recent trend of pharma companies acquiring front-end pharma marketing companies to strengthen their distribution network.

Set backs

Indian companies have primarily succeeded in acquiring many companies in Europe, whereas significant acquisitions in the US still remain a distant dream, primarily due to very high valuations. "Possibly the cost of acquisition is lower in EU. These companies also operate in the US and have ANDA filings for products going off patent. Cost of entry is lower in EU than in the US," adds Aurora.

Also the attractiveness of the US market has suffered some setback in recent periods, especially for the large generics targeting exclusivity. There is concern, that authorised generics, will take away the shine off 'first-to-file' strategies of generic players, who anticipated windfall gains through the 180-day marketing exclusivity period. Conceding this point, Aurora says, "There is significant price erosion when innovator companies launch authorised generics. This may affect your prices by as much as 50 percent." But players feel that this is not a new thing. Price erosion and products going off-patent does not creep in overnight. It has happened in the past and companies have factored the same in their projections. Other reasons include legal challenges by patent holders delaying and increasing the cost of launch; amongst others have severely impacted the exclusivity-related profits that generic players seek. The Indian pharma companies like Ranbaxy, Dr Reddy's, Wockhardt, Cipla, Nicholas Piramal and Lupin have been doing extremely well in developed markets. Over the years, they have changed their strategies and invested large funds in R&D, set up large numbers of FDA-approved plants and consolidated marketing activity. The companies have their strategies to leverage opportunities and appropriate values existing in formulations, bulk drugs, generics, Novel Drug Delivery Systems, New Chemical Entities, Biotechnology etc. "The industry has thrived so far on reverse engineering skills exploiting the lack of process patent in the country. This has resulted in the Indian pharma players offering their products at some of the lowest prices in the world," remarks Palnitkar. The quality of the products is reflected in the fact that India has the highest number of manufacturing plants approved by US FDA, which is next only to that in the US. The setbacks relate to regulatory requirements and price controls, especially in Europe and increasingly in US. Pharma being a highly regulated field with complex pathways, different geographies have different regulatory guidelines. "Another example is Japan, which has closed its doors to pharma dosage imports. In addition, post Vioxx withdrawal, USFDA has tightened safety and efficacy requirements for generics leading to costly overruns, informs Palnitkar.

What's next

"There is no quick cure. Indian companies have to go through the route mandated to reach the end consumers," feels Palnitkar. It has been found that companies avoid price-controlled markets, and are less likely to introduce products in additional markets after entering a price-controlled country. In the case of EU, launches are further delayed following legalisation of parallel imports. The silver lining is that all regulated markets are looking at increasing generics usage in the healthcare system as a means to counter massive healthcare budget deficits. Indian companies are very optimistic over their plans for regulated markets such as the US and EU. They are following the route of mergers and acquisitions to make inroads in the foreign markets. They need to consolidate further in different parts of the world to become trans-national players. Indian companies will have to rise above the statement of Micheal Porter (1990), that most multinational firms are just national firms with international operations. They shall certainly be at an advantage, as their strong national identities will give them a competitive advantage in global markets.

'Overhaul India’s patent processes’: Panel’s report to the Prime Minister calls for systemic reform to ensure accessibility and transparency

Acknowledging systemic problems with India’s patent offices, the National Knowledge Commission, under the chairmanship of Sam Pitroda, has called for a complete overhaul in the patent examination system.The commission is a high-level advisory body to Prime Minister Manmohan Singh and is charged with transforming India into a knowledge centre.

The commission’s recommendations to Singh, a copy of which has been reviewed, said the patent examination procedures, practices and decisions in patent offices should be streamlined. It also suggested that a new detailed manual for examining patents should be created.

The report was submitted in October, but is only now coming to light. The recommendations were made after consulting industries, lawyers, scientists and technocrats. The commission suggested that patent offices must have adequate technology that will allow for transparent and publicly accessible databases. Recommendations are outlined for 10 key areas that will facilitate a systemic reform.

“The process in intellectual property offices needs to become more accessible and reader-friendly and, therefore, the ultimate objective of all efforts to modernize the patent offices must be to facilitate more transparency and procedural ease for the inventor as well as the common man,” the commission wrote.

The commission recommended that all patent applications be released with complete details so as to give sufficient opportunity for any pre-grant objections. “It is particularly essential to provide electronic access in real time to all steps of a patent application, from the detailed patent description, examination reports at each stage and all amendments introduced at various points, in order to maintain complete transparency,” the report said.

On 31 December, India’s patent offices have been criticized for not releasing enough and timely information about patent applications even as there has been a surge in patents granted. Critics have complained that lack of information prevents them from challenging patent applications.
Indian patent offices publish only abstracts of claims in patent applications, often with a delay of several months before and after they examine such applications.

During 2005-06, the last year for which official data is available, India’s patent grants soared 125% from the previous year. The country’s four patent offices in New Delhi, Kolkata, Mumbai and Chennai collectively granted 4,320 patents during this period even as the number of patent examiners fell to 140 from 196 in the previous year.

Even though the intellectual property offices received some 24,505 patent applications in 2006, there were only 161 oppositions during the year. The number of patent applications abandoned by the department was, however, comparatively lower in 2005-06 than in previous years, according to the 2005-06 annual general report of the controller general of patents, designs and trademarks. Patent offices abandon those applications where there is no merit in the claims.
Other recommendations of the commission include introduction of incentives to attract and retain talent; adequate training and human resource development for patent offices; spreading intellectual property rights education beyond patent offices among scientists and engineers, and establishing an expert institute for patent policy research.

It also called for setting up of a special intellectual property rights tribunal; adequate protection for traditional knowledge; investment in the intellectual needs of small and medium enterprises, and identification of intellectual property issues in fields of emerging technologies.

Plaintiff’s legal rights must be established – Indian court

In an intellectual property case in India, Jorden Electronics v Bombino Video (P) Ltd highlighted the principle that prima facie legal rights must be established in order for a claimant to be entitled to an injunction.

In this case, the legal rights were those arising from the assignment of copyright in the reproduction of Hindi films. Jorden filed a suit over 23 Hindi films claiming it had been assigned exclusive rights to the films by both the producers and alleged existing copyright holders, according to an International Law Office report. It sought an interim injunction prohibiting Bombino from manufacturing, selling, circulating, distributing or hiring out any video cassettes, video compact discs or DVDs in relation to any or all of the films. For reasons of convenience, the respective claims of the parties were considered in relation to the films, and in each case the court found that the plaintiff had failed to establish a prima facie case for the granting of interim protection. In dismissing the application, the court noted that it is settled law that in order to be entitled to an injunction, the plaintiff must establish a prima facie legal right to the same.

Microsoft launches legal online community portal on IPR - Legaladda.com

Microsoft India has launched a legal online community portal, Legaladda.com, which will offer an online community for interaction between legal professionals and update people on topics like intellectual property rights. The company also announced the awardees of the ‘Microsoft Intellectual Property Scholar Programme’.

Neelam Dhawan, Managing Director, Microsoft India, said, “Enforcing IPR laws has been a challenge and the industry, as per studies, has been losing nearly 72 per cent of its revenue due to circulation of pirated software – a menace which hasn’t been checked due to poor awareness among law-enforcing agencies here.”

She further said, “If India has to achieve the status of a truly knowledge-based economy, fostering innovation and creating a strong IPR environment is critical. The Microsoft Intellectual Property Scholar Programme is an attempt to create a sustainable IPR ecosystem, whereby we promote, recognise and reward the best of breed budding IPR practitioners in the country today. It is an investment in India’s future.”

“We are lacking in respect for intellectual property rights. Nearly 95 per cent of the software gets pirated across pharmaceutical, music and IT industry. We should ensure that the laws are in force. Microsoft is offering scholarships to law students to encourage them to specialise in the IT and Intellectual Property field,” Dhawan added.

The scholarship was initiated in 2006 with scholarships for students of Nalsar. The programme has now been extended to other law colleges and universities across the country. The scholarship amount is Rs 80,000 per student and is awarded on the basis of the evaluation of the student’s research papers on pre-approved topics related to IPR by experts from the law firm Amarchand and Mangaldas as well as the legal and corporate affairs team at Microsoft India.

Breather for Novartis on blood patent row, SC stays High Court order [Patents - India]

The Supreme Court on Monday stayed the recent Madras High Court order that had ruled that the Intellectual Property Appellate Board can hear Novartis’ patent rejection appeal without a technical committee.

The IPAB, which was scheduled to hear the Novartis appeal on Monday, adjourned the hearing following the stay order. Natco Pharma had appealed to the Apex Court against the Madras HC ruling saying that a fair decision on the Novartis appeal cannot be taken without a technical expert on the board. Other leading domestic drug makers such as Ranbaxy Laboratories, Cipla and Sun Pharmaceuticals and several patient groups are also opposing Novartis’ move to patent its blood cancer drug Glivec in the country.

Following an appeal by Swiss drug major Novartis over the appointment of former controller general of patents S Chandrasekharan as technical member on the IPAB panel, the Madras High Court ruled that a two-member bench consisting of a chairman and vice-chairman, can hear the appeal instead of the official three-member panel.

The court ruled that the chairman could also act as a technical member of the bench. Novartis raised concerns on the appointment of Mr Chandrasekharan as the technical member and said that its appeal would not be treated fairly since Mr Chandrasekharan was in charge of India’s patent office when the company’s patent application was rejected.

The government had appointed the former patent controller on the board as a technical member in the absence of an expert. Novartis patent for its blockbuster drug Glivec was turned down by the Indian patent office on the grounds that it is a modified form of a known chemical.

Microsoft: King of The Patent Hill

Similar to a stash of weapons a player might rack up during an online adventure game, high technology companies for more than two decades have racked up as many patents as possible.

Patents can come in handy, for instance, as a defense – or an offense—when one company sues another for patent infringement.

On the other hand, cross-licensing patents between two or more companies can cement business collaborations.

For years, IBM has been one of the most prolific tech companies in terms of piling up patents.

Now, it's Microsoft's turn.

The Institute of Electrical and Electronic Engineers' (IEEE) IEEE Spectrum magazine listed Microsoft as the leader in new patents awarded in 2006 in its November 2007 issue. In addition, intellectual property consultancy the Patent Board this week ranked Microsoft first on its Patent Scorecard of top IT patent holders.

The software titan has racked up a total of around 8,500 U.S. patents granted, the company said this week.

Microsoft also has more than 15,000 additional patents pending, and is applying for about 3,000 per year, according to a company statement. That's partly due to the company's aggressive R&D budget—a war chest of $7.1 billion in 2007 alone. While most of that money goes to creating products, it also yields a bounty of intellectual property.

"We pursue patents on only those inventions that are in line with our business objectives and have strategic value to the company," Bart Eppenauer, Microsoft's chief patent counsel and associate general counsel, said in a statement. "Close alignment with our business strategies, goals and priorities has enabled Microsoft to become the new standard bearer for patent quality in the technology industry."

Like virtually anything having to do with Microsoft these days, defending and protecting patents and other forms of intellectual property is highly controversial. Patents can, after all, be used as weapons and also as a means of intimidation.

Last year, CEO Steve Ballmer and other executives asserted that Linux vendors, especially Red Hat, are in violation of as many as 235 of Microsoft's patents – although the company would not disclose which specific patents it believes are being infringed upon.

However, that sword can cut both ways. Last year, Microsoft settled out of court with tiny Eolas Technologies, which holds a patent that lower courts found Microsoft had infringed upon with its Internet Explorer browser.

In November 2006, in one of its most controversial patent deals to date, Microsoft signed an IP cross-licensing and collaboration deal with Linux vendor Novell. The deal was roundly criticized by other members of the open source community who claim Novell sold out by joining forces with Microsoft.

Meanwhile, in September, the European Union's Court of First Instance upheld a European Commission (EC) order that Microsoft license IP, including patents, required for interoperability with its products to competitors.

Tuesday, January 22, 2008

SparkIP Launches Monthly Intellectual Property Index

SparkIP, an online intellectual property (IP) network for the scientific community, today announces the creation of the SparkIP Index, a monthly report highlighting the top five SparkClustersTM, SparkSearch terms, and new innovative technologies found on the site. The Index will provide a snapshot of emerging trends in the scientific community and provide researchers insight into today's marketplace.

SparkIP is the worlds largest actively managed marketplace for top institutions, corporations and individual inventors. The site currently hosts more than 5,500 fully-searchable licensable technologies. The Index identifies the top SparkClustersTM, SparkSearch terms, and new technologies available for licensing.

  • SparkClustersTM, self-categorizing and self-naming contextualized information, are SparkIPs proprietary groupings of patents and new innovation. As of December 2007, there are 40,000 SparkClustersTM on the site.
  • SparkSearch terms are crucial to the scientific and corporate communities, illustrating what people are examining for future research and development opportunities.
  • The top new available technologies, listed on SparkIP's marketplace, emphasize new innovation available from contributing universities and research institutions across the U.S. and abroad, giving SparkIP users access to relevant intellectual property from leading inventors.
"Our SparkIP Index provides a snapshot of top-of-mind technologies and research relevant to the scientific community," says Ed Trimble, CEO of SparkIP. "It provides an easy way for researchers to make an immediate connection to key research and provides a gauge for what technologies are likely to make waves in the marketplace during the coming months.

Sex, Science & Profits: How People Evolved to Make Money by Terence Kealey [International]

What does marijuana tell us about the government funding of science? Well, a vast amount of taxpayers’ money around the world is spent on agricultural research to improve yields. Yet, according to Terence Kealey, pot-growers manage nicely without that aid and have developed “ever stronger and ever more disease-resistant strains” of literally mind-blowing potency.

The case of the cannabis cultivators is characteristic of the irreverence and eclecticism that make Sex, Science & Profits such an absorbing read. The author, who is a clinical biochemist at the University of Buckingham, seeks to demolish the myth that the advancement of scientific learning depends in any way on government intervention.

Four centuries ago, Francis Bacon wrote that “the benefits inventors confer extend to the whole human race”. Economists deem science to be what they call a “public good”, that is, a good of general benefit for which it is impossible to charge. What the market can’t charge for, say the economists, the market won’t provide. They go on to claim that scientific and technological progress will be arrested unless the government provides funds for pure research and companies are rewarded with patents for innovations in applied science. It is also often suggested that government funding of science drives technology which, in turn, generates economic growth.

Kealey disagrees. Rather than science driving technology, the opposite is true. The great inventors in Britain’s industrial revolution, including the steam-engine pioneers Thomas Newcomen and Richard Trevithick, were not fellows of the Royal Society. They were barely literate artisans who found intuitive solutions to practical problems (in Newcomen’s case, how to remove water from Cornish tin mines). Technological breakthroughs often lead science. At the moment of its invention, the steam engine designed by James Watt disobeyed the laws of contemporary physics.

Where property rights are protected and markets are allowed to thrive, technology and science advance together. Merchants invented writing and mathematics in Babylonian times in order to keep their accounts. Science stagnated during the anti-commercial Middle Ages, but re-emerged in renaissance Italy, along with commercial innovations such as double-entry book-keeping, bills of exchange and banking. Kealey identifies the Glorious Revolution of 1688, which guaranteed property rights and the rule of parliament, as the key moment in Britain’s scientific and industrial revolutions. Free markets and competition spur technological innovation and economic progress. Patents are not necessary to drive research and development. Companies, says Kealey, will innovate in order to differentiate their products and boost profits even without patent protection. Philips, one of the world’s largest electronics concerns, was founded in Holland in the 19th century at a time when the Dutch had dispensed with patent laws. During the same period, Swiss chocolatiers innovated successfully despite the absence of domestic patent protection. Many of the great technological advances weren’t made for the love of money but spurred by the joy of invention. Today, computer scientists around the world provide their expertise without charge to develop open-source computer programs, such as the Linux operating system.

Technology and science advance by copying. Yet patents hinder copying, prevent competition and thereby reduce innovation. That leads to slower economic growth. James Watt’s fierce enforcement of his patents held back the development of steam technology by 25 years, says Kealey. During the first world war, the American government decided to suspend the aeronautical patents held by the Wright Brothers in order to promote aircraft innovation. From 1917 to 1975, American aircraft companies collectively pooled their patents. That didn’t stop Boeing from becoming the world’s leading aircraft manufacturer. Kealey also maintains that the American motor industry took off only after Henry Ford breached the patents held by an automobile consortium. A key feature of Apple’s iPod, which has revolutionised the world of digital music, was taken from a competitor’s product.

What about the government funding of pure science? That’s also unjustified, says Kealey. For a start, the distinction between pure and applied science is artificial. Scientists at Bell Labs, the research institute of the telephone giant AT&T, discovered the science of radioastronomy and developed the first semiconductors. In America, IBM boasts the second largest output of published academic papers after Harvard University. Furthermore, there is some evidence that government funding of science leads to less private research. In the 1980s, Mrs Thatcher was attacked for cutting the British government’s science grants. Yet private companies stepped into the breach. As a result, spending on research and development in the UK actually increased.

Scientists have long claimed that science was suffering from the lack of public funds. In 1830, Charles Babbage, the supposed father of the computer, published The Decline of Science in Britain. But the following year, as Kealey points out, Michael Faraday discovered electromagnetic induction and Charles Darwin boarded HMS Beagle. The great advances of Victorian science occurred without government support.

Sex, Science & Profits is a gloriously idiosyncratic work. In developing his argument, Kealey discusses, among other matters, the banking systems of Ptolemaic Egypt, game theory, 12th-century English windmills, the mating calls of humpback whales, and the functioning of ball-valve flushing lavatories. His intellectual enthusiasm is infectious — one is half persuaded when he writes that “it is impossible to read WH Long’s article ‘The Low Yields of Corn in Medieval England’ without astonishment”. His approach is polemical, witty and fearless. Only once does he wobble, when admitting that drug research is now so expensive and time-consuming that patent protection may be justified.

In The Wealth of Nations, Adam Smith claimed that the public interest was best served when the government ceased attempting to direct the economy. Kealey has brilliantly extended his hero Smith’s argument to the world of science, which, like that of commerce, involves much “truck, barter and exchange”. The twin trends of globalisation and digitalisation have enormously benefited certain holders of intellectual property rights, such as Bill Gates’s Microsoft. We need an informed debate on the extent to which those windfall gains are deserved. Sex, Science & Profits provides an excellent starting point.

SEX, SCIENCE & PROFITS: How People Evolved to Make Money by Terence Kealey
Heinemann £20 pp455

Tuesday, January 15, 2008

E-mail and Paper: Equated in Law

A recent Massachusetts Appeals Court ruling enforcing an e-mail settlement agreement of a contractual dispute is a reminder to lawyers that e-mail settlements carry the same weight as deals on paper.

The court ruled on Jan. 7 that a midtrial, e-mail settlement between Basis Technology Corp., a Cambridge, Mass.-based company that makes software for multilingual Web sites, and e-commerce giant Amazon.com Inc. was binding.

Associate Justice Mitchell J. Sikora Jr. wrote that the trial judge correctly ruled that a March 23, 2005, e-mail from Basis to Amazon.com was a "sufficiently complete and unambiguous statement as a matter of law, and that both parties intended to be bound by that communication of settlement terms." Basis Technology Corp. v. Amazon.com Inc., No. 06-P-1048 (Mass. App. Ct.).

Thomas J. Gallitano, a lawyer for Basis, said a statement in the e-mail exchange confirming that six different points in the e-mails contained the essential business terms of the settlement agreement was pivotal to the court's decision.

The Power of Paper

Amazon.com spokeswoman Patty Smith said the company wouldn't comment on the case. Basis sued Amazon in May 2003, for alleged breach of fiduciary duty, and violations of the state's consumer protection laws for not paying for work that fell outside the scope of a contract between the two companies. At the time, Amazon was creating an e-commerce system to sell products in Japan. It hired Basis for technical services.

The two companies were also linked through a stock purchase agreement that involved Amazon.com's purchase of Basis preferred stock and a seat on the private company's board of directors. The settlement required Amazon to give up its board seat and relinquish its rights as preferred shareholder. Basis Technology Corp. v. Amazon.com Inc, No. SUCV2003-02246 (Suffolk Co., Mass., Super Ct.).

After the settlement, Amazon tried to rescind a provision that called for it to convert preferred stock to common stock. Amazon.com also objected to a separate Basis request that Amazon retroactively approve Basis' preferred stock issuance to a separate company and approve a new sale of stock to the same company.

Amazon opposed the sales and filed a separate lawsuit in the Delaware Court of Chancery, because it claimed the other stock sales would reduce its ownership stake in Basis. Amazon appealed the Massachusetts case on the grounds that the judge incorrectly ruled that the e-mail exchange "created a complete and unambiguous agreement" and that Amazon had intended to be bound by the terms of the e-mail.

Thursday, January 10, 2008

Copyright law joy awaits music fans

Proposed changes to copyright laws will allow owners to move their music legally from CDs to MP3 players.

They would also let owners copy music from a PC to a portable player or to CDs.

The proposals, released on Tuesday, amend the Copyright, Designs and Patents Act 1988 which technically makes it illegal for people to shift their music and films from one format to another.

The changes would apply only to content copied for the owner's private use.

Multiple copying and file sharing on the internet would still be banned.

Owners would not be allowed to sell or give away their copies.

"To allow consumers to copy works and then pass on the original could result in a loss of sales for right holders," the proposals warn.

The consultation on proposed changes to UK copyright exceptions were launched on Tuesday by Intellectual Property Minister Lord Triesman.

It follows the Gowers Review of Intellectual Property, which recommended that certain aspects of the system should be reformed.

The proposals are designed to provide clarity about copyright issues in light of changing technologies.

Tuesday, January 08, 2008

Patent Problems [India]

The country’s intellectual property protection regime has seldom been sans controversy, despite amendment of the Patent Act in 2005 to broadly align it with global norms. The latest salvo has been fired by about 150 patent experts and industry representatives, who have written to Prime Minister Manmohan Singh and demanded greater transparency and accountability in the granting of patents. A few weeks prior to this, the National Knowledge Commission had submitted a report to the government, pointing out several systemic problems with the patent office and commended an overhaul of patent-granting processes. Indeed, what is striking is that, though the number of applications being filed for patents has spurted several-fold, especially after the amended law came into effect and provided for product patents in addition to process patents, neither the patent office network nor the facilities available there have been adequately augmented. The patent application examiners are clearly not adequate to handle the swollen volume of work. It is no wonder then that the Knowledge Commission’s recommendation for creating an online database, containing complete information on patent applications and grants, copies of patent office decisions, and patent examination details, has not been implemented as yet. Such information is vital for pre-grant challenge. All that is done usually is to publish abstracts of claims which often happen to be the same as given by the patent seekers in their applications. The details of the patent examiners’ reports, indicating the reasons for accepting or turning down a claim, are mostly not disclosed, rendering the system opaque. This obviously leaves little room for public scrutiny, leave alone peer review, of the patent office’s decisions. Consequently, no more than a fraction of the total patent requests get contested at the pre-grant stage.
The disabilities of the patent office aside, the amended legal framework for patents has run into its own problems. The most direct reference to this was made in the report of the technical experts committee on patents, headed by the noted scientist, R A Mashelkar. It categorically stated that limiting the scope of patentability to new chemical entities alone violates Article 27 of the trade related intellectual property rights (TRIPs) agreement of the World Trade Organisation (WTO). Though this report was subsequently withdrawn by the committee following allegations of plagiarism, that does not make a material difference to the issue raised.
Under such circumstances, the scope for misleading the patent office to get frivolous patents or even ever-greening patents through selective information disclosure cannot be ruled out. It is, therefore, important for the patent office to provide electronic access to the proceedings leading to the grant of patent, including examination reports, so as to ensure transparency and fair play. Also needed is expansion in the staff, notably application examiners, and an upgrade of their technical competence through regular training. Such a measure has become all the more critical following the Indian patent office’s recognition by the WTO’s World Intellectual Property Organisation (WIPO) as the international searching authority and the international preliminary examining authority.

Monday, January 07, 2008

Intellectual Property Protection: Key to Entrepreneur Success

Ensuring your intellectual property is safeguarded against theft is one of the first steps every entrepreneur should
take. From processes to ideas to inventions, intellectual property is often
more valuable than physical assets.

Types of intellectual property
There are four legally defined categories of intellectual property:
patents, trademarks, copyrights and trade secrets. Each category offers
entrepreneurs special protections and violators on state and federal levels
are subject to prosecution.
-- Copyrights protect your ideas and how you express them. Books, songs
and movies are common examples covered by copyright protection.
-- Trade secrets cover the information giving you a commercial advantage
the general public doesn't possess. A good example is Coca-Cola:
trade secrets protect everything from Coca-Cola's formulas to
customer lists to manufacturing processes.
-- Trademarks protect the visual aspects of your business that distinguish
you from competitors, including logos, names and general visual
-- Patents cover inventions that are useful to the public and prevent
anyone else from making, using or selling these devices or processes.
Business method patents protect a method of doing business, like
Amazon.com's "one-click" ordering. Receiving a patent can take several
years, so it's important to apply as soon as possible.

Ensuring your legal bases are covered through copyrights, patents and
trademarks is a solid start to protecting your intellectual property. But
catching and prosecuting offenders is difficult and expensive, and often times
by then the damage has been done -- your critical information is now in the
public domain. Consider these steps to further protect your company's ideas,
processes and inside secrets for success:
-- Prioritize your intellectual property. What company assets would sting
the most if stolen and which are most at risk?
-- Tag it. If it's yours, put your name on it. Otherwise you'll have a
difficult time proving the information was protected.
-- Lock it. Lock up servers and storage, and control the keys.
-- Educate employees. Humans are often the weakest link in the
intellectual property protection chain. Make sure your team is aware of
what's at stake and how to protect it.
-- Think like a competitor. If you were a competitor and wanted to steal
secrets from your company, how would you do it? Use your own insights
as an entrepreneur to further identify what intellectual property needs
protection as you refine your plan for doing so.

Friday, January 04, 2008

E-Business Patent Infringement Cases: Complex Issues to Unravel

Certainly, Google has already earned its place in history as the most-sued Internet Company. Every novel intellectual property ("IP") cause of action has been filed against the search engine giant. First, we witnessed the copyright infringement round. Google has been sued for every type of copyright infringement on thumbnails, meta-tags, keywords, etc. Concomitant with these copyright infringement lawsuits, Google was also accused of trademark violations in keywords, sponsor links, etc. Now, it is the time for the e-business patent round. Google was sued for business patent infringement and, like in most of the other IP lawsuits, it was triumphant (well, partially) this time.

A United States Court of Appeals recently held that Google is not liable for patent infringement when it uses two methods that link online records and provide users with relevant web pages. The plaintiff, Hyperphrase Technologies, LLC, and Hyperphrase, Inc. ("Hyperphrase"), held two business patents related to some systems and methods that linked online records. The technical process used by these systems and methods is similar to the one used by Google through its "AdSense" and "AutoLink" methods. "AdSense" is an advertising method used by Google that combines the advertiser's content with contextually related websites. AutoLink is an online application incorporated into people's computer browser that that helps Google identify relevant web addresses and information according to some ‘string of characters' that they call tokens. Hyperphrase claimed that Google violated its online linking and patented methods through the use of "Autolink" and "AdSense."

"We're very pleased that the Federal Circuit agreed that AdSense does not infringe any of Hyperphrase's patents. We continue to believe the remaining claims in the lawsuit are without merit, and will vigorously defend against those claims," Michael Kwun, Google's managing counsel for litigation, recently said after the US Court of Appeals held (on December 26, 2007) that Google's ‘AdSense' did not infringe on Hyperphrase's patent. Yet, the case was remanded as to Google's business patent infringement with respect to the use of "Autolink" system.

This intriguing case so far has two significant juridical teachings. First, we learned that business patents and its electronic use are slowly but steadily becoming the object of intellectual property litigation. For the time being, this litigation is centered at a domestic level; but, the legal community must be vigilant of how transnational litigation and jurisprudence on e-business patents evolves. Second, we also learned that business patents, especially e-business patents, create extremely complex litigation cases. E-business patent infringement cases involve highly technical computer methods and systems (some related to mathematical equations) and sharp legal and semantic analysis. In other words, computer/business science and sophisticated legal reasoning merge when dealing with a business patent case.

Recent patent/copyright infringement cases filed in U.S. District Courts

  • Beneficial Innovations Inc. vs. AOL LLC et al

    Beneficial Innovations alleges it owns the inventions claimed in U.S. Patent Nos. 6,712,702 for Method and System for Playing Games on a Network and 6,183,366 for Network Gaming System. The suit names AOL, The Dallas Morning News, Google, IGN Enterprises, Morris Communications, Tribune Interactive, Yahoo! and YouTube as defendants in a patent infringement suit.

    The original complaint states that defendants have infringed the patents through Web sites including www.aol.com; www.google.com; www.yahoo.com; www.youtube.com and others.

    "Plaintiff has been damaged by defendants' infringement of the patent and will suffer additional irreparable damage and impairment of the value of its patent rights unless defendants are enjoined from continuing infringement," the complaint states.

    The plaintiff is seeking compensatory damages, treble damages, fees, costs, interest and other relief as justice requires.

    Charles Ainsworth of Parker, Bunt & Ainsworth PC in Tyler is representing the plaintiff.

    The case has been assigned to U.S. District Judge T. John Ward and referred to Magistrate Charles Everingham.

    Case No. 2:07-cv-555-TJW-CE

    Dec. 21

  • Paul Bennett et al vs. Alcoa Closure Sytems International et al

    Paul H. Bennett of California and Thom M. Perlmutter of Rhode Island allege they are co-inventors and co-owners of U.S. Patent No. RE39,867 for a Tamper-Evident Container Closure.

    The plaintiffs allege that Alcoa Closure Systems International, Bericap LLC, Blackhawk Molding Co., CG Roxane, Crystal Geyser Water, Erie County Plastics, International Plastics, Rexam Closure Systems and Seaquist Closures infringe the '867 Patent through manufacture, use and sales of tamper evident closures.

    Various push/pull, thumb pop and twist types of tamper-evident closures are named in the suit as infringing products.

    Plaintiffs are asking that defendants "account for and pay … all damages caused by the infringement of the '867 Patent, which by statute can be no less than a reasonable royalty."

    They are seeking enhanced damages from the defendants as a result of their willful infringement, interest, fees, costs and other just and proper relief.

    Edward W. Goldstein of Goldstein, Faucett & Prebeg LLP of Houston is representing the plaintiffs.

    The case has been assigned to U.S. District Judge T. John Ward.

    Case No. 2:07-cv-558-TJW

    Dec. 28

  • Parallel Networks LLC vs. Netflix Inc. et al

    Plaintiff Parallel Networks is a Texas limited liability company with its principal place of business in Dallas. It claims to have the rights to U.S. Patent Nos. 5,894,554 and 6,415,335 B1, which concern systems and methods for managing dynamic Web page generation requests.

    Parallel Networks alleges that Netflix, SkyMall, ATA Airlines, John Wiley & Sons, E*Trade Financial Corp. and The Finish Line make and/or use systems within the scope of one or more claims of the patents-in-suit.

    "Parallel Networks has suffered damage by reason of defendants' infringement and will continue to suffer additional damage until this court enjoins the infringing conduct," the original complaint states.

    Plaintiff alleges that the defendants' infringement is willful and deliberate, which entitles Parallel Networks to increased damages.

    The plaintiff also seeks an injunction, fees, costs and other just and proper relief.

    Larry D. Carlson of Baker Botts LLP in Dallas is lead attorney for the plaintiff. Attorneys from Ireland, Carroll & Kelley in Tyler; Brown McCarroll LLP in Longview; Jones & Jones of Marshall; and Ward & Smith Law Firm of Longview are also of counsel for the plaintiff.

    The case has been assigned to U.S. District Judge Leonard E. Davis.

    Case No. 2:07-cv-562-LED

  • PACT XPP vs. Xilinx Inc. and Avnet Inc.

    PACT is a German corporation and claims it is the owner of eight patents at issue; including U.S. Patent No. 6,088,795 for a Process for Automatic Dynamic Reloading of Data Flow Processors and Units with Two- or Three-Dimensional Programmable Cell Architectures. PACT was assigned the eight patents by co-inventors Martin Vorbach and Robert Munch.

    "Defendants have infringed and continue to infringe the patents by the Virtex and Spartan lines of FPGAs," the original complaint states. "Defendants' acts of infringement have caused damage to PACT, and PACT is entitled to recover from defendants the damages sustained by PACT as a result of defendants' wrongful acts in an amount subject to proof at trial."

    The plaintiff alleges that the infringement is willful and deliberate, entitling PACT to increased damages, attorney fees and costs. The plaintiff is also seeking interest and other relief the court may deem just and proper.

    Robert Christopher Bunt of Parker, Bunt & Ainsworth PC in Tyler is representing the plaintiff. Attorneys from Susman Godfrey LLP and Jones & Jones of Marshall are also representing the plaintiff.

    The case has been assigned to U.S. District Judge T. John Ward and referred to Magistrate Charles Everingham.

    Case No. 2:07-cv-563-TJW-CE

  • Media Technologies Licensing LLC vs. Tristar Productions Inc. et al

    Plaintiff Media Technologies claims to own the inventions described in U.S. Patent Nos. 5,803,501 and 6,142,532 for a Memorabilia Card.
    The U.S. Patent and Trademark Office issued Ex Parte Reexamination Certificates for the '501 and '532 Patents in November 2007.

    Media Technologies alleges that defendants Tristar Production, Press Pass Inc., Ace Authentic, Bench Warmer International, Stellar Collectibles, SA-GE Collectibles and Razor Entertainment Group have infringed on the patents.

    The plaintiff is seeking a decree permanently enjoining defendants, compensatory damages, enhanced damages, attorney fees, court costs, interest and other relief as justice requires.

    S. Calvin Capshaw of Brown McCarroll LLP in Longview with attorneys from Parker, Bunt & Ainsworth in Tyler and Dovel & Luner LLP of Santa Monica, Calif., are representing the plaintiff.

    The case has been assigned to U.S. District Judge T. John Warner.

    Case No. 2:07-cv-564-TJW

    Dec. 31

  • Mondis Technology Ltd. vs. LG Electronics Inc. et al

    Mondis Technologies is a corporation organized under the laws of England with its principal place of business in London.

    The original complaint refers to seven patents, including U.S. Patent No. 6,057,812, for computer monitors and image display units. Mondis Technologies names LG Electronics, Hon Hai Precision Industry Co., FoxConn and Innolux Display Corp. as defendants in the patent infringement suit.

    "Mondis has been damaged by defendants' infringing activities," the complaint states. "Defendants will continue their infringing activities, and continue to damage Mondis, unless enjoined by this court. Mondis has no adequate remedy at law."

    Mondis is asking that the court enjoin defendants from further infringement of said patents, award damages sufficient to compensate it for the infringement, treble damages, interest, attorney fees, costs, expenses and other relief.

    Otis W. Carroll of Ireland, Carroll & Kelley PC in Tyler is representing the plaintiff with attorneys from Dechert LLP in Philadelphia, Pa., of counsel.

    The case has been assigned to U.S. District Judge T. John Ward and referred to Magistrate Charles Everingham.

    Case No. 2:07-cv-565-TJW-CE
  • Qualcomm hit with patent infringement injunction

    A US Federal District Judge issued an injunction today against wireless giant Qualcomm, ruling that "certain of its products" for the US market infringe three Broadcom patents.

    "We are very pleased with today's ruling which addresses Qualcomm's improper use of our patented technology covering cellular chips and software for advanced consumer devices," said David A. Dull, Broadcom's senior vice president and general counsel.

    "Broadcom should not have to compete against companies that use Broadcom's own patented technology against us, and this injunction puts a stop to Qualcomm doing just that."

    Qualcomm said that the ruling from Judge James V. Selna is "complex", and that it expects further clarification from the court on various aspects of the judgment, including the effect of Verizon's existing licence agreement with Broadcom.

    The ruling provides a 'sunset' provision that stays the order until 31 January 2009 for QChat and 1x/EV-DO products that were found to infringe any of the three patents by providing Qualcomm a limited licence, subject to an ongoing royalty payment.

    This licence is limited to products sold to customers on or before the jury verdict was delivered on 29 May 2007.

    The '010 and '317 patents apply only to Qualcomm's QChat and 1x/EV-DO products. Qualcomm said that it is continuing the development of "workaround solutions" for the '010 and '317 patents.

    "The order imposes an immediate injunction on WCDMA products for the US market that were found to infringe the '686 video encoding patent," Qualcomm stated.

    "Qualcomm today announced the availability of new chips that have already been sampled to customers and expects to have hardware and software workarounds to the '686 patent commercially available in handsets before the end of the first calendar quarter of 2008."

    The company added that it will attempt to obtain "further relief and clarity " from the courts on certain aspects of the order.

    However, Qualcomm warned that the inability to obtain such relief will probably have an immediate, short-term impact as handset customers transition to new designs for WCDMA products relating to the '686 patent.

    The ruling will also have a medium-term impact to certain products in the development pipeline for the US market, and longer-term ability to implement workarounds in time for commercial availability of handsets by the January 2009 'sunset' expiration.

    "Qualcomm is evaluating all its options, including seeking appropriate stays and appeals, and will comply with all directives and orders of the court," the company said.

    "The US Patent Office has also instituted a re-examination of the validity of the '317 patent claims."

    Digg sued for patent infringement

    Digg and several other companies have been sued for patent infringement in Marshall Texas by Beneficial Innovations (i.e., Sheldon Goldberg). There have actually been two lawsuits. In the first one, filed in June and amended later, Beneficial sued 9 companies including Digg and CNet, alleging that they infringed US Patents 6,712,702 and 6,183,366, which cover playing games over a network.

    In the second suit, filed in late December, Beneficial accused 8 more companies including Google and Yahoo of infringement. In both suits, the plaintif claimed infringements somewhere on the defendants’ web sites, but didn’t go into detail about exactly where and how the infringements occurred. All they provided were the home page URLs for the companies in question.

    In July, Digg filed for an extension to answer the suit, which was granted. In a response filed on the last day of the extension, Digg’s lawyers wrote, in part:

    Digg has not and does not infringe (either literally or by the doctrine of equivalents), induce infringement, or contribute to the infringement of any valid and enforceable claim of the ’702 or ’366 Patents.

    One or more of the claims of the ’702 and ’366 Patents are invalid for failure to meet one or more of the conditions of Patentability set forth in 35 U.S.C. §§ 101 et seq.

    On information and belief, the ’702 and ’366 Patents are unenforceable due to an unreasonable and unexplained delay in prosecution.

    Digg counterclaimed and asked the court to declare not only that Digg did not infringe upon the two patents, but also that the patents themselves are invalid. Beneficial replied in October that (surprise) it didn’t agree. The cases are still pending.

    Thursday, January 03, 2008

    Lacoste loses crocodile trademark row [UK]

    A Gloucestershire dental practice has come out smiling after defeating fashion chain Lacoste in a dispute over a crocodile trademark.

    The two dentists were challenged by the French clothing giant after using a grinning reptile as the logo on their practice’s welcome sign.

    Lacoste claimed the cartoon crocodile was too similar to their own globally recognised logo, and could cause confusion among shoppers which could damage their business.

    The battle began in 2004 when dentists Dr Tim Rumney and Dr Simon Moore first applied to register the new logo – a plain green crocodile with white teeth – for The Dental Practice in Cheltenham.

    Lacoste objected saying it was too similar to their own green crocodile logo, which is pictured side-on with gaping red jaws.

    Now, following a three year battle, the UK Intellectual Property Office judge has dismissed claims the emblems are too similar.

    The dentists represented themselves at an initial hearing in May at the Intellectual Property Office in Newport, where Judge Ann Corbett ruled in the practice's favour.

    But Lacoste’s legal team launched a subsequent appeal, which was finally rejected late last year.

    Dr Rumney said he was "astonished" his practice had encountered such difficulties.

    He said: "We are happy the situation has been resolved but astonished by the length of time it took to reach this conclusion.

    "I suppose it is a big success for our business but we certainly did not regard it as taking anyone on."

    He added: "We do not consider ourselves to be in the same market place at all and do not see that we are treading on any toes. We chose the sign with little second thought."

    Lacoste was ordered to pay £1,000 towards the dental practice's legal costs at the initial hearing as well as a further £450 towards the costs of the second hearing.

    Tuesday, January 01, 2008

    Congress Proposes to Enhance IP Enforcement and Penalties

    Just before the holiday recess, the U.S. House of Representatives introduced and held hearings on the Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act, H.R. 4279. The proposed legislation would substantially increase criminal and civil penalties for copyright infringement, eliminate the registration requirement to pursue criminal penalties, and create a White House-level executive position to lead the fight to product U.S. intellectual property interests.

    The proposal could be viewed either as an IP diamond in one’s holiday stocking or as a lump of coal. The analogy is fitting: Coal and diamonds are made of the same basic carbon material, and this bill offers proposals that could be beneficial or damaging depending on the final version and/or how the proposals are implemented.

    The nearly 70-page bill (available at http://thomas.loc.gov/cgi-bin/bdquery/z?d108:H.R.4279:) was introduced with bipartisan support and was sent to the House Judiciary Committee’s Subcommittee on Courts, the Internet, and Intellectual Property, which held hearings on the bill on Dec. 13, 2007. Testifying at the hearings were representatives of the Justice Department, organized labor, the Coalition Against Counterfeiting and Piracy (CACP; www.thecacp.com), and Public Knowledge (www.publicknowledge.org), a digital rights advocacy organization.

    The bill proposes a number of steps to strengthen the enforcement of copyright, trademark, and patent laws and to increase criminal and civil penalties for copyright infringement.

    On the enforcement side, the bill would establish an "Office of the U.S. Intellectual Property Enforcement Representative" in the White House. This office would coordinate IP enforcement activities through a number of government and international agencies. This office would also be charged with developing a "Joint Strategic Plan" to identify, disrupt, and/or eliminate persons and businesses involved in trafficking of counterfeit and pirated goods and sharing information among relevant agencies. The plan would also work with other countries to strengthen IP enforcement and reduce the number of countries that fail to enforce anti-counterfeit and piracy laws.

    The bill would also create an Intellectual Property Enforcement Division within the Justice Department and would appoint IP attachés to work with foreign governments on anti-piracy efforts.

    Criminal penalties for copyright infringement would be enhanced through a number of methods. The bill would eliminate the requirement that copyrighted works be registered before they could be the subject of a criminal action against an infringer. It also strengthens the government’s ability to seize property that is "used or intended to be used" for copyright infringement, and it broadens the amount of property that can be seized. Finally, it would be easier for the courts to order seized property to be forfeited to the government and disposed of.

    A controversial proposal would change the civil penalties for copyright infringement of compiled works. The current law recognizes a compiled work as a single act of infringement, even though there may be more than one work that was infringed in order to create the compilation. The proposal would penalize each separate act of infringement in a compiled work. For example, a website that infringed on five copyrighted works would be subject to five times the penalty than currently applies. Other proposals would double or treble the damages available in trademark counterfeiting cases.

    At the Dec. 13 hearing, all of the committee members and witnesses supported the intention of the act to strengthen anti-copyright and anti-piracy efforts. It was noted that intellectual property infringement costs the U.S. economy as much as $600 billion a year and 750,000 jobs.

    Richard Cotton, general counsel for NBC Universal and chairman of CACP, pointed out that counterfeiting and piracy do not just affect the media industries. Counterfeit pharmaceuticals, auto parts, consumer goods, aircraft parts, animal foods, and other products not only create economic damage but, in some cases, result in life-threatening situations. He complained that IP enforcement often "falls off the radar screen" of law enforcement agents who are tasked with many other priorities. He said that the PRO-IP bill represents a "declaration of war" against pirates and counterfeiters.

    In its testimony, the Justice Department outlined recent efforts and successes in intellectual property enforcement. The department has created 25 "Computer Hacking and Intellectual Property" units around the country with more than 230 prosecutors. These units also provide assistance to prosecutors, judges, and investigators from 107 foreign countries. While the department supported the increased criminal penalties of the PRO-IP Act, it raised concerns that the creation of the White House IP executive position and the Justice Department IP Office might actually dilute enforcement efforts and unnecessarily increase bureaucratic and administrative costs.

    Gigi Sohn, president of Public Knowledge, a public interest organization representing the interests of content users, raised a number of concerns. While affirming the need for the effective enforcement of intellectual property laws, she voiced concerns that the PRO-IP Act would ensnare "ordinary consumers" in overly broad laws.

    Sohn raised particular concerns about the proposal to enhance damages for compilations. She pointed out the already high damages for copyright infringement, particularly when contrasted with proposals to reduce excessive damages for patent infringement which have been incorporated into the present patent reform proposals. More to the point, she argues that higher damages will chill legitimate uses of copyrighted materials, while having little deterrent effect.

    She also argued that eliminating the copyright registration prior to criminal enforcement would reduce incentives for copyright registration. This in turn could lead to an even larger "orphan works" problem than already exists. (Sohn’s written testimony is available at www.publicknowledge.org/node/1306.)

    While at least one commentator suggested that this bill may be more about politics and lobbying by media interests, the bipartisan sponsorship and support of both content and technology providers may indicate otherwise. Further action is not expected until later in spring, when the proposal comes up again for committee action. What will be particularly telling is whether later versions will change to reflect the concerns raised at the December hearings.