In Memoriam

Charles Goldfinger, our IP columnist, died on 3 June in Brussels.

Charles had a distinguished career in many aspects of economics policy – including serving as advisor to the Belgian Finance Minister and to the CEO of Belgacom. He also served as head of the European Commission study group on e-finance, as well as European director of Broadview Associates and head of product planning for Swift, the Belgian-based interbank-transfer system. His most recent projects included helping an innovative cancer research company in his native Poland get access to Western funding. His French-language books included studies on the “intangible economy” and labour policy. At the time of his death, he was concluding his latest book, in English, on the theory of quantum economics.

He leaves his wife, Eva, and his son, Alex. His funeral is 5 June in Brussels.

5 June 2007

The story of the basmati rice patent battle

Within the potentially rich but still largely unexplored lore of intellectual property (we are still waiting for an Isaiah Berlin of the history of IP), I came across a case that should be of considerable interest to the readers of this blog. It concerns a portfolio of US patents for basmati rice, the secular staple of the Indian continent.  

This portfolio is owned by Texas company, Rice Tec, and has been accumulated since 1997. It is part of a larger movement of seeking IPR on products, which are traded globally. According to Jennifer Moulin, deputy executive of a specialised NGO, “Just a few decades ago, there were no patents on rice. Today, more than 600 have been filed.”

It should be perfectly clear that what RiceTec patented was not the genome of basmati rice or a genetically developed variety (RiceTec makes the point that all its products are natural). It was simply a hybrid of basmati obtained from cross-breeding with an US long rice variety.

In its wisdom, the US Patent Office in September 1997 judged the result, named basmati 867, sufficiently novel to grant it patent #5,663,484, entitled “Basmati Rice Lines and Grains”, giving RiceTec exclusive rights to any basmati hybrid grown anywhere in the western hemisphere. Besides the highly questionable “novelty” of the invention (cross-breeding has been practised for centuries, including by Punjabi farmers, who produced a variety of basmati rice), what is striking is the inequity and asymmetry of the approach.

By including basmati name into the patent definition, RiceTec could claim wide-ranging rights over a traditional name, for which it did not acknowledge the origin or the originality, let alone the copyright. The practical impact of RiceTec’s patent would be to jeopardise the prospects of Indian basmati rice suppliers seeking to export to the US and other western countries

The award of the basmati rice patent rapidly triggered a wave of protests and judicial challenges, initially from the US- and Canada-based NGOs and grass-roots organisations, which called for boycott of RiceTec products.  Later, the Indian government approached the US Patent Office and urged it to re-examine the patent in order to protect the interests of India’s rice. It also took the issue to the World Trade Organization.

Rebranding

In 2002, as a result of judicial and political challenges, RiceTec withdrew 15 claims (out of 20), thus removing obstacles to Indian rice exports to the US. More significantly, the US Patent Office ordered that the title of the patent be changed to “Rice Lines Bas867, RT 1117 and RT1121”. RiceTec, which seeks to maintain the image of an ecological, all-natural-ingredients company, has rebranded its basmati-based products, Texmati, Jasmati and Kasmati, and studiously avoids any reference to its patent or patent litigation on its Web site,  

The Indian government, for its part, is trying to reinforce its protection of the basmati brand. Last April, it introduced IP legislation on Geographical Indication (GI) of the origin of agricultural products (similar to the French Appellation Controlée system used for wine but also for meat and poultry). Initial hopes that similar legislation would be introduced in Pakistan have been disappointed, perhaps because Pakistani exports are considerably below the India’s one. Nevertheless, India intends to proceed on its own.

Basmati rice story is a morality tale, with a developing country taking on a US company and US institutions and winning. For some anti-globalist activists, it has become a myth, to the point when they discuss it as if a patent battle were still under way, when in fact it was decisively settled five years ago.

21 May 2007

Recurring themes

The universe of intellectual property is structured around a number of recurring themes. I might be useful to provide a quick update on three of those themes, all discussed in earlier blogs: the conflict between big pharma companies and Less-Developing Countries (LDC) concerning HIV/AIDS drugs; the evolution of the open-source software; and the increasing braziness of IP ‘trolls” and “vampires,” seeking to exploit the deep pockets of major IT players.

HIV/AIDS drugs

The country in the forefront of this conflict has long been Thailand. A few weeks ago, it looked like the pharma companies, in particular GSK, were getting the upper hand, taking advantage of the diminished credibility of military regime which now rules Thailand to get the US government to refer the country to the WTO for the non-respect of IP laws.

Then the situation changed dramatically, following what appeared to be a choreographed two-step movement.

First, Brazil announced on 4 May a deal with two Indian companies for the supply of HIV/AIDS drug, based on Merck patent. This deal bypassed the patent, through issuance of a compulsory licence, a procedure authorised by the WTO in case of abusive pricing.

Second, ex-President Clinton announced on 10 May, as part of his Global Initiative, an ambitious programme amounting to more than $100 million to fund the Brazil, Thailand and other countries undertaking similar approaches.

Clinton’s involvement is giving those approaches a quasi-official endorsement (despite the fact that some of countries involved, such as India, rule out granting patents to foreign pharma companies and even threaten compulsory licensing) and is therefore likely to trigger a flood of concessionary HIV/AIDS drug deals. Already, GSK has announced it will sign a deal with Brazil, reducing the price of its Abacavir by close to 30 per cent.

The billion-dollar question is whether this flood will remain confined to HIV/AIDS or would extend to medicines for other illnesses.

Open source software

The big news about open source software is the speed with which it has been moving to the IT mainstream. In desktop software, Microsoft and Novell, one of the two leading providers of Linux services, signed an agreement with Dell to distribute Linux OS as part of Dell’s offering. In web services, as Wired magazine put it, “Big Guns Jump on Open-Source Bandwagon for New Web Apps.” Those big guns include Sun Microcomputers, Adobe and Microsoft.

Sun and Adobe are releasing free-source versions of their flagship products, Java Fx Script for Sun and Flash for Adobe. Microsoft is more cautious and is releasing an open source version of a new product, seen as a Flash-killer, Silverlight.

Those are not just PR efforts. The mainstream companies are trying to play catch-up with leading developers, which have adopted open-source tools such as Ajax.

Yet this apparently irresistible progress of open source raises a question about the change in its underlying philosophy. Widespread adoption means that some of the more idealistic goals of the open source movement may have been pushed into the background.

The strategies employed by Sun, Microsoft and Adobe are actually pulling the open-source community closer to proprietary software. Yet mixed developments do not work as well as those built on the cooperative pure open-source model.

A business concern is that the mainstream players adopt a free-rider strategy to “build proprietary gardens on open source soil, selectively giving back, and making a mint in the process”. Google is seen as an example of a company using such strategy very successfully. Open source supporters argue that its greater use shifts the competitive advantage from code to service. But they tend to overlook the fact that mainstream players are in good position to develop a wide array of services.

Trolls and vampires

You have to hand it to the IP trolls and vampires, who try to make living by ambushing big IT players: their ingenuity knows no bounds.

Take a recent case of a California outfit, Media Right Technology (MRT). MRT accuses big companies such Apple, Microsoft, Adobe and Real Networks of not using its proprietary software. The argument is that under the US Digital Millenium Copyright Act, companies have an obligation to use digital rights management (DRM) to prevent unauthorised use and copyright violations.

MRT sent letters to the companies generously giving them ten days to implement the MRT DRM solution. If this is not done, MRT threatens filing lawsuits for $200 billion.

As brazen as the MRT approach may look, it is not entirely irrational. The chances of MRT being taken seriously are very low, but in the current IP legal environment, they are not zero, which may prompt one of the companies to seek a settlement with MRT.

16 May 2007

Patent reform: déjà vu all over again?

Is it because the patent process is not entirely broken that it appears so difficult to fix?

Over the last few weeks, proposals for the reform of patent process both in the US and in the EU have been published. I hesitate to call those proposals “new” as they appear depressingly familiar: yet another attempt by the European Commission to create a “community patent”; and yet another incremental, yet controversial, proposal to modify the US patent law.

One can accuse the Commission of many sins but  lack of persistence is not among them. For several years now, the Commission has been promoting a single community patent, which would reduce the cost of intellectual property protection and contribute to enhance its competitiveness. Unfortunately, a legislative proposal for the European patent was killed by the European Parliament in 2004.

After a decent interval, the Commission decided to relaunch the European patent idea. The first step was an extensive public consultation among patent stakeholders, launched in January 2006 and which generated over 2,500 responses.

As usual in such a case, these responses covered a range of reactions and suggestions, which were difficult to synthesise with a view to formulating coherent recommendations. Nevertheless, the Commission managed to accomplish precisely that and in early April, it published the results of the consultations as well as its own recommendations.

Those recommendations do not contain anything really revolutionary. For instance, the idea of mutual recognition of national patents, similar to that used for financial services, is discarded in favour of a centralised approach, based on the European Patent Office and an EU-wide patent jurisdiction.

The main interest of the EU paper is its focus on integration of patent jurisdiction. The paper reiterates a hope that progress on various aspects of patent framework will be made. At the same time, it remains cautious about the pace and the scope of this progress. No date is provided for an agreement on common jurisdiction and for new community patent proposal. In light of past experience, I am not holding my breath on rapid progress in this area.

Meanwhile, across the Atlantic…

In the United States the bi-partisan Patent Reform Act of 2007 was introduced in the House and Senate on 18 April. The bill updates the current legal framework for US patents. Its main feature is the clear affirmation of a “first-to-file” principle and an attempt to reduce the potential for litigation.

This is not a first attempt to reform the Patent Law, which has remained essentially unchanged for the past fifty years. Recent attempts failed because of the lack of political support. This time, the new Democratic majority appears more committed to the reform. Nevertheless, its approval is far from certain.

The problem is a deep divergence of views between two main patent constituencies: IT heavyweights support it, while pharma and biotechnology enterprises oppose it. Other analysts criticise the bill for its lack of ambition – for instance, its affirmation of the“first-to-file” principle simply aligns the US with all other major countries.

There is also concern that proposed remedies to reduce litigation – giving US Patent Office the right to review already approved but contested patents – will increase uncertainty about patent validity. In any case, the bill does not address the key issues, discussed in our earlier blogs, of patent coverage and patent backlog.

26 April 2007

Copyrighting tribal tradition

Extension of the coverage of the copyright has been one of the dominant traits of the inexorable rise of intellectual property. It is usually discussed in the context of high-technologies and, more specifically, of computer software. Now it appears that  copyright may be useful not only for the present and the future but also for the past.

According to a well-researched article published in the Herald, a local newspaper in Washington State, the indigenous Indian tribe of Tulalips want to use the copyright to preserve their tribal tradition, which goes back for several centuries and comprises songs, paintings and carvings as well as oral stories, built around gods and monsters invented by storytellers. In the absence of such protection, tribe leaders believe that their culture will be either become extinct as elder members of the tribe die, or be misappropriated and disfigured by outside commercial interests. In order to physically preserve the tradition, a computerised database of various artefacts is being designed.

Tribal leaders are drafting a specific legislation, with the help of community volunteers and the Center for World Indigenous Studies in Olympia, Washington. Such a law is needed as the current copyright usage in the United States does not cover collective works, whose authorship cannot be precisely attributed.

In this era of growing interest in cultural heritage and tradition, the potential impact of the approach of Tulalips goes well beyond the northwestern corner of the US and has global implications. According to the article, WIPO follows the Tulalips’ case closely and wants to use the proposed Tulalip law as a model for other indigenous groups worldwide.

18 April 2007

The battle of the giants: Nokia vs. Qualcomm

The ongoing conflict between Nokia and Qualcomm is shaping up to be one of the defining IT IP (Information Technology-related IP) events of the early 21st century. Its outcome will affect not only the market position of the two combatants but also the approaches to patent valuation in this area as well as the relevant royalty calculations, not to mention the development and exploitation of industry-wide standards. 

The core of the battle is not so much about the validity of patents but about their economic implications. Before discussing the prospects for the case, let’s recall its background.

Qualcomm, one of the gladiators of IT IP, owns key patents for 3G, the next generation of mobile communication networks. The relevant technology comes in two variants: CDMA2000, a direct descendant of earlier generation of CDMA networks, and W-CDMA (also referred to as UMTS), which is the 3G technology path migration for GSM networks.

On the basis of current trends, it would appear that W-CDMA will ultimately gain a considerably larger market share than CDMA2000.

Qualcomm’s position has been that its contribution and patent coverage was as important for W-CDMA as it was for CDMA2000. This position appeared to be validated by official telecom standard organisations such as ETSI (the European Telecommunication Standard Institute) and more importantly by other suppliers, including Nokia, who all signed in the last five years licensing agreements concerning W-CDMA patents. However, with deployment of the full-scale deployment W-CDMA network approaching, many suppliers felt that licensing costs were excessive and adversely impacted the speed of deployment.

Nokia was in the forefront of offensive against Qualcomm for several years now. Its action was multi-fold and included a complaint (with eight other suppliers) in October 2005 to the European Commission.

Its particular focus however was on W-CDMA, which according to Nokia was a very different case from CDMA2000. Nokia refused to accept that the Qualcomm patents were central to deployment of the former, arguing, on a basis of a 2005 study by two US academics (study funded by Nokia), that the number of W-CDMA patents was lower than that owned by Nokia and the bulk of Qualcomm patents were of the not essential variety. It made plain and public that Nokia wanted to renegotiate licensing agreement, which was due to expire on 9 April.

Qualcomm, not surprisingly, rejected with its usual vehemence the arguments of Nokia.  It argued that most patents filed by Nokia had limited value and it hired its own advisers to rebut the Nokia study.

Qualcomm’s advisers argued that the methodology of Nokia study was flawed as the value of a patent portfolio is not a function of the number of patents. Qualcomm also stressed a large number of existing W-CDMA agreements with important industry participants, including Motorola and Alcatel Lucent, some of which were signed recently.

The vigour of Qualcomm’s defence has been based on a strong conviction that any substantial concession to Nokia may trigger a wave of similar or tougher demands from other licensees. And given Qualcomm’s dependence on royalties as a major source of revenue, the impact of the royalty decision, whatever it is, on the company is likely to be considerably greater than on Nokia.

This may explain the recent volatility of Qualcomm shares: as the conflict is widely publicised, any news affects expectations and in turn moves the stock price, often significantly (with monthly variations of over 10 per cent and daily variations of over 1 per cent).

13 April 2007

Ocean Tomo and e-commerce

The irrepressible bunch of IP pioneers from Chicago, Ocean Tomo, which we have been tracking quite closely, is at it again.

On 19 April, it will organise another (third, if my count is correct) live auction. This one will be dedicated to e-commerce patents. It is somewhat paradoxical that those quintessentially intangible assets will be auctioned in a traditional way rather using the Internet. We will monitor the auction and comment on its results.

13 April 2007

Will peer-to-patents fly?

It looked and sounded like a very good idea. In a reaction to chronic problems of long delays (up to four years) in granting patents and growing complaints about the quality of patent reviews (see our blog of 6 February 2007), the faculty of the New York Law School’s Institute for Information Law and Policy, in particular Professor Beth Noveck, developed a new approach called the “peer-to-patent”.

This approach consists essentially in bringing together the community of institutions with the necessary expertise to review patent applications and fast-track those which are of greatest interest to the community.

The first sector to test this approach is software. The institute approached several large corporations involved in software design and intensive use, and the US Patent Office, with a proposal to set up a Community Patent Review project  for software patent applications.

Such a project would use social software to bring together experts, who would review applications online. The proposal was very well received – it was endorsed by the Patent Office and, on the corporate side, obtained commitments from IBM, Microsoft, General Electric, Red Hat and Computer Associates as well as from McArthur Foundation and the Omidyar Nework. The project is now in the advanced planning phase, with initial testing for up to 250 applications, starting in early April and the target launch date for the pilot set for 1 June 2007. If this project is successful, Patent Office and the institute plan to extend it to other technologies, such as biotechnology.

Yet, for all its innovative and apparent widespread support of major software patents’ constituencies, the success of the project is far from certain. Many potential participants are concerned that the proposed approach exposes reviewers to potential infringement charges, which may result in triple damages. Another risk is that of either excessive or incomplete disclosure of patent details, which may lead to suits by competitors and result in partial or complete invalidation of litigious patents.

The project’s promoters are seeking to assuage those concerns but they will need to ensure that their legal framework is airtight, without becoming too similar to existing arrangements for information exchange. One would also expect that the project participants will initially be quite selective and cautious in submitting their applications.

2 April 2007

Intellectual property everywhere….

Let me let you in on a secret: when there is no obvious topic for my weekly blog, I scour the Web. I am in particular a fan of Google News, which, unlike other news sites, operates without human intervention. Its bias is due solely to its search algorithm (which is proprietary and protected by a trade secret). Thus its use, filtered only by chronology, gives sometimes unforeseen results.

This week, Google News highlighted a number of items of interest: another case of generic drugs in India, a visit of Indian businessmen to China to participate in the Global IP summit, analyses of continuing and new lawsuits in semiconductors and software (last week Nokia sued Qualcomm, and Oracle attacked SAP).

But there were other, less evident, less mainstream nuggets of information:

• A specialised buy-out firm purchases a furniture company, Jeffco. The purchase  comprises “the assets, real estate and intellectual property of Jeffco Furniture”. The distinction between assets, presumably physical, and intellectual property highlights the importance of brand and design in this supposedly traditional business. 
  
  
• Israel’s Education Ministry instituted intellectual property rights education in some 600, or 20 per cent, of its secondary schools.
  
  
• A Maltese TV reality show is sued by holders of the rights to the “Big Brother” format, Endemol BV, for an alleged breach of its intellectual property
  
  
• The Latter Day Saints church (LDS) in Salt Lake City, Utah, asks a local coffee shop to quit using the statue of Angel Moroni, part of the LDS statuary, in its tongue-in-cheek promotions. According to LDS, the coffee shop infringes its IP trademark.
  
  
• Local press publishers of community calendars in the US consider the announcements supplied by community groups as the intellectual property of the publishers
  
  
• Heavy metal band WHITE LINE FEVER changes its name to SPYDERZ, in order to avoid any intellectual property lawsuits. The new name is trademarked.
  
  
• Jim Thorpe, the now retired Australian swimmer, owes his success to a stroke developed by an American coach Milt Nemens. Nemens protects the stroke and his other methods by intellectual property. I wonder whether he filed a business method patent. In any case, he is affiliated with a specialised sport swimming science firm, Parametrix Research.

These news items cover various sectors and activities, dispersed across the globe. Taken together they make a very simple point: intellectual property is not limited to high tech industries in advanced economies, but has become a global mainstream phenomenon.

26 March 2007

IP in China: is the bad boy coming good?

Among IP experts, China has long had a reputation for being the “baddest of them all.” This reputation is well deserved. International intellectual property, in all its forms, copyrights and patents, is subject to a plunder on a truly massive scale.

The US Chamber of Commerce estimates that China accounts for two-thirds of all global counterfeiting and intellectual property theft. Counterfeiting is not limited to software (Microsoft loses hundred of millions in revenues from pirated copies of Windows and Office), movies and fashion design. Industrial IP theft is estimated to cost US companies as much as a quarter of a trillion dollars annually. It concerns a range of products from automobile brake pads and airline parts to pharmaceuticals and from mobile phones to batteries. For example, fake airplane parts are believed to cause more than 100 airplane accidents per year. Counterfeit baby foods formulas cause the annual death of over 200 babies.

The problem is widespread and deeply rooted at all levels of economy and economic policy. Reverse engineering of industrial designs and processes, whether or not covered by patents, has been practically a standard practice among state enterprises, many of which are controlled by the military. And counterfeited goods have created large industries, with mass employment and cheap products, affordable to the local consumers.

For their part, the government and the Communist Party long condoned those systematic violations of IP rights. Moreover, they actually favoured them by forcing foreign companies, with “desirable” technologies, to enter into joint ventures with Chinese partners, and to transfer IP rights to those joint ventures.

An alternative approach has been to encourage the development of “local” technologies, based on foreign IP, and developed in co-peration with non-Chinese companies, competing with the original core IP owner, For instance, after allowing Qualcomm to licence its CDMA 3G mobile technology to Chinese network operators, the government in 2000 launched a project to develop a competing CDMA standard, TS-CDMA, in co-operation with Alcatel and Siemens. At present, it is not clear whether China will actually deploy TS-CDMA or use one or both global standards (W-CDMA or CDMA2000).

As China is fast becoming a global economic power, in addition to being the largest retail market in the world, the IP problems are becoming both more acute and more delicate. It was reported earlier this week by the World Intellectual Property Organization (WIPO) that in 2005, China was the top destination of requests for trademark protection under WIPO's so-called Madrid System.

Together with the yuan’s exchange rate, IP is the probably the top issue in discussions between China, US and EU. The US government made conformity with international intellectual property a condition of approving China's accession to the World Trade Organization. Yet, at the same time, despite limited real progress, criticism from official sources became more muted. Thus, in its recent pronouncements, the US Chamber of Commerce put considerable emphasis on new government commitments. Its CEO, Thomas Donohue, will deliver a keynote speech at the Global IPR summit, organised by the Chamber and Chamber and the China Council for the Promotion of International Trade (CCPIT) on March 27–28 in Peking. His speech is awaited with great interest.

The lessening of outside criticism reflects not only a recognition of China’s growing international status but also a genuine evolution of official attitudes. On 16 March, the Communist Party Congress approved landmark legislation granting official recognition to private property. Furthermore, the Chinese policy makers recognise that China’s exports shift to products and services with higher technological content requires a solid IP basis. Thus, among developing countries involved in the WIPO’s Madrid System, Chinese companies, such as China Network Communications Shanghai Tyre and Rubber, were the most active in seeking trademark protection.

19 March 2007

The MP3 imbroglio

When a few weeks ago I discussed the peculiar features of patent situation of MP3 and the general sense that the MP3 inventor, the Fraunhofer Society, and its licensee Thomson Electronics, left money on the table, I did not know that an astute player was already seeking to quantify and collect a large chunk of it.

On 22 February the US Federal Court in San Diego ruled against Microsoft and awarded Alcatel-Lucent, representing the Bell Labs, $1.52 billion in damages for infringement of MP3 patents filed by Bell Labs in the 1990s.

This is the largest amount ever awarded in an information technology patent infringement case. And, if the award is upheld, it will open a real flood of follow-up lawsuits and a torrent of money. For instance, should Apple be sued, as most analysts expect, it could be found liable for an even bigger amount – given its dominance of the musical downloads.

However, it is far from certain whether the San Diego judgement will be upheld on appeal, as the underlying patent situation appears quite complex (or some may even say, downright confused). Microsoft argued that it had a valid patent licence purchased (for a one-time payment of $16 million) from the Fraunhofer, the widely recognised designer of the MP3 standard. Thomson, which was not the party to the Microsoft–Fraunhofer agreement, declared that the Bell Labs patents were totally unrelated to its MP3 patents. And to make things even simpler, one of the Fraunhofer inventors worked for a time at Bell Labs (and one of the original developers of the Bell Labs patents now works for Microsoft).

From what I was able to understand, Bell Labs patents do not deal with MP3 but with a related technology, called MPEG-2 AAC, or Motion Picture Expert Group, Level 2 Advanced Audio Coding. It appears difficult to argue that two technologies are unrelated, given that the full name of MP3 is MPEG-1 and most specialists agree that MPEG-2 is built on the foundations of MPEG-1. Most commercial offerings, whether from Apple, Microsoft or Sony, combine both standards (MP3 for actual content, AAC for its encoding and decoding).

It beggars belief that the IP implications between the two technologies have not been exhaustively explored by legal departments of the companies concerned, which do not have a reputation for IP leniency – quite to the contrary – or by companies that filed patents or by the US Patent Office. Yet that appears to be the case.

At this point, two things are certain. First, the MP3 (and now MPEG2-AAC) story is far from over. Second, using internationally recognised ISO-approved standards is no longer a guarantee of avoiding IP litigation.

26 February 2007

India’s intellectual property dilemma

In the past few years, India has become a new development success story. Its rise was brought spectacularly to the public attention with audacious and successful takeovers in the global steel industry. But there is much more to India’s performance than steel, or textiles.

The country made impressive progress in developing and exporting high technology products and services, backed by home-grown know-how and expertise. Indian firms such as Infosys, Wipro and Tara Consulting systems became global giants in computer services for major enterprises worldwide. Indian software firms such as I-flex became acquisition targets for US giants such as Oracle.

The Indian diaspora in Silicon Valley, composed for most part of people educated in India, took prominent positions in various segments of IT industry: design, development, project management as well as in venture capital. Fortune magazine estimated the wealth generated by Indian Silicon Valley entrepreneurs at around $250 billion.

These impressive achievements have helped to open up the Indian economy. They are also imposing substantive changes on the official IP posture.

Traditionally, India has assumed a defensive attitude toward IP, considering it as a necessary evil, required to do business with advanced economies. Owing to its legal tradition, inherited from the British rule, it was less of a rogue than its great regional rival, China, the “bad boy” of global IP. Yet it has been in the forefront of the countries, which sought to reform the current international IP framework.

In the official forums such as WIPO and WTO, India was a champion of the two-tier approach, arguing that developing countries require a less restrictive and cheaper approach to using IP, particularly as far as medical drugs is concerned.  Thus, India was active in pressuring drug companies to attribute cheap IP licences for AIDS drugs. This also facilitated the development of a formidable Indian generic drug industry, which has not only taken strong positions in the home market but has become a major exporter across Asia. This is a controversial posture, and India remains embroiled in lawsuits with large pharmas such as Novartis.

However, as India seeks to increase its share of high-value knowledge-based activities and to export it worldwide, Indian firms and Indian nationals are becoming not only consumers but also producers of advanced IP.

For instance, according to Stanford Professor Arogyaswami Paulraj, holder of some 25 patents, India is well-placed to develop a strong IP base for Wimax, the emerging wireless communication protocol. Furthermore, many analysts outside and inside India believe that India could reduce its lag behind China in electronics manufacturing by focusing on IP-intensive design and development.

Such a strategy requires an aggressive IP policy based on patent building and enforcement of IP rights, including restrictions on patent-related information. And the Indian government has begun to implement changes in its IP framework. It is now considering legislation giving greater protection to patent holders in biotechnology.

Some politicians criticise such a legislation as a u-turn, ia cave-in to the global bio industry. Yet the ability of Indian firms and individuals to protect and promote their IP is one of the keys to India becoming global technology powerhouse.

16 February 2007

Patent infrastructure: an authorised view

For those of you, who were interested in patent process challenges as summarised in our recent blog, I would like to recommend an informative communication by the President of European Patent Office made to its Administrative Council last June.

It compares patent infrastructure in US, Europe and Japan and is part of the broader strategy debate. Here is the link, which lists various documents produced as part of the debate. Patent landscape paper is referenced as CA/115/06.

16 February 2007

Intellectual property in (huge) numbers

Statements about critical importance of IP to the contemporary economy have now become commonplace. Rarely, however, are those statements backed by concrete data. Two recent documents put in a sharper focus the sheer size and resulting challenges of the IP economy.

The first document is the is International Intellectual Property Alliance’s 2006 economic report on the economic import of the copyright in the US. The alliance is a private lobby group  formed in 1984 to represent US copyright-based industries in bilateral and multilateral efforts to improve international protection of copyrighted materials. It comprises trade associations representing various segments of the U.S. copyright community and companies producing and distributing materials protected by copyright laws throughout the world – all types of software, films, television programmes, home videos, music and books.

According to the report,  industries that depend on copyright protection laws for their existence accounted for U$819 billion of the US economy last year. In 2005 the economic contribution of “core copyright industries” (those whose main purpose is to produce and distribute the copyrighted material) made up 6.6 per cent of US GDP, up from $760.5 billion, or 6.5 per cent, in 2004.

Those industries were responsible for almost 13 per cent of US economic growth in 2005 and grow twice as quickly as the overall economy. Core copyright industries last year employed over 4 per cent of US workers, or about 5.38 million people in 2005, slightly higher than in 2004. Foreign sales and exports reached $110.8 billion, topping the contributions from the car, food, chemical and pharmaceutical industries.

“What is clear from this and previous studies of the copyright industries is that their contribution to this country's economic growth continues to increase in size and importance,” a representative of the alliance said in a statement. Not surprisingly, given the alliance’s purpose, this statement also highlighted the magnitude of copyright piracy and violations affecting US copyright industry, estimated at $35 billion in 2005 (not counting Internet piracy).

Alongside copyright, patents are another main vector of the IP economy. While we do not have reliable data about the “patent industry”, we know that patents themselves are growing at ever quicker rate. Thus,  in the 145 years from its founding in 1790 until 1935, the US Patent Office issued its first 2 million patents. It took just 41 years to grant the next 2 million patents. The next 2 million took only 23 years. 

This rapid increase poses serious challenges to patent offices, challenges discussed during a Trading Ideas symposium organised by the Australian government in Sydney from 28 to 30 January. This meeting brought together the heads of major patent offices around the world, including the US and European Patent Offices.

The Director of the US Patent Office, John Dudas, highlighted the increasing backlog of patents. He estimated that at present there are 18 million patent applications in the world, as against some 12 million in 2000. For her part, Alison Brimelow, president-elect of the European Patent Office, stressed the risk of deterioration in the quality of patents under pressure to accelerate the application process.

Clearly, current patent procedures are anything but frictionless and the efforts to streamline them do not appear to have been very effective. It is time to consider more radical remedies.

In a recent blog, we discussed the proposals to nationalise key pharmaceutical patents. In view of the current problems of existing patent offices, it may be useful to consider a solution going in the opposite direction – to introduce competition in patent attribution.

The idea is not to privatise the the existing patent offices but to allow the creation of new privately owned patent offices. Those would be regulated and their governance should provide all guarantees of quality and independence. To a certain extent, competition between various patent offices already exists. It is time to make it more explicit and effective.

6 February 2007

eBay and ‘virtual artefacts’

The widely read blog Slashdot reported on 26 January that eBay had decided to discontinue the all auctions for virtual property on its site. According to Slashdot, the eBay spokesman said that the difficulties of establishing clearly the ownership of the property and led to so much litigation that this business became uneconomical.

This looked like important news and was picked by other blogs and and b y Google News alert. For many commentators, this looked like another confirmation that IP is notoriously difficult to trade online (this was why Oecan Como auctions patents in a physical setting, and with mixed results, it would seem  – see our 9 April 2006 article). Others took it as an example of the change of in eBay strategy: it is now looking to focus on higher-value, more profitable listings. They also noted that the virtual property trade on the internet was increasing rapidly, particularly in the form of RMT (real money transfer).

Before adding my two-cents worth of opinion, I took a closer look at the announcement. And there is both more and less to it than meets the eye. The eBay decision concerns only a specific segment of virtual property: items related to MMORPG (massively multiplayer online role-playing game). These include game characters, and resources that allow players to gain upper hand.

What is interesting is how large this segment is. According to Wikipedia, in China, there are some 100 000 people employed in “gold farming”, or in collecting MMORPG resources. The gold farming turnover is estimated at over US$1.2 billion. This is an estimate as gold farming is largely illegal and game designers specifically forbid it. The legal problems explain both eBay’s decision and its strategy of reducing its exposure to China.

That said, there is little doubt that eBay is generally wary of the digital goods trade. Its published digital goods policy clearly states that the policy is restrictive and starts by listing items that cannot be sold. Unequivocal ownership is the key requirement. And, to the extent that digital delivery is not considered as shipping, digital items are not covered by the PayPal Seller Protection Policy. This is somewhat paradoxical, given that Paypal itself is a virtual artefact.

All in all, one does not get the impression that eBay encourages the use of its infrastructure for trading in digital goods.

31 January 2007