Commercialization: An Investor's View of Intellectual Property

My neighbour, Edward French, a venture capitalist, has produced a rather good slideshow entitled TechGain: An Investor view of Intellectual Property which I thoroughly recommend. I spent a very congenial evening in his presence at the Venturefest dinner some years ago and seem to run into him every so often at events like Open Coffee Leeds where there are a lot of hopeful and hungry geeks, some of whom actually have quite good ideas.

Robert Burns: Born 250 years ago today

"The man o' independent mind, He looks an' laughs at a' that".   A very tenuous connection with intellectual property, I know, but I could not let the day pass without reproducing one of my favourite poems:

"Is there for honest Poverty
That hings his head, an' a' that;
The coward slave-we pass him by,
We dare be poor for a' that!
For a' that, an' a' that,
Our toils obscure an' a' that,
The rank is but the guinea's stamp,
The Man's the gowd for a' that.

What though on hamely fare we dine,
Wear hoddin grey, an' a that;
Gie fools their silks, and knaves their wine;
A Man's a Man for a' that:
For a' that, and a' that,
Their tinsel show, an' a' that;
The honest man, tho' e'er sae poor,
Is king o' men for a' that.

Ye see yon birkie, ca'd a lord,
Wha struts, an' stares, an' a' that;
Tho' hundreds worship at his word,
He's but a cuif for a' that:
For a' that, an' a' that,
His ribband, star, an' a' that:
The man o' independent mind
He looks an' laughs at a' that.

A prince can mak a belted knight,
A marquis, duke, an' a' that;
But an honest man's aboon his might,
Gude faith, he maunna fa' that!
For a' that, an' a' that,
Their dignities an' a' that;
The pith o' sense, an' pride o' worth,
Are higher rank than a' that.

Then let us pray that come it may,
(As come it will for a' that,)
That Sense and Worth, o'er a' the earth,
Shall bear the gree, an' a' that.
For a' that, an' a' that,
It's coming yet for a' that,
That Man to Man, the world o'er,
Shall brothers be for a' that."

Robert Burns (25 January 1759 – 21 July 1796)

Copyright: The Mark of McCain

Shortly after I started this blog in 2005 I reported on a spat between Angela Merkel and the Rolling Stones over her use of their classic Angie as their campaign anthem (see "Stoned! The Difference between Copyright and Rights in Performances" 23 Aug 2005).   It now looks as if presidential hopeful John McCain is in similar lumber with Jackson Browne over "Running on Empty" though he is applying to strike out the claim (see Ben Shefner's "Copyrights & Campaigns" 24 Jan 2009). Ben, who advised McCain, links through to sites from which you can actually read what we would probably call "skellies"  - that is, if you can bear to trawl through 53 pages of argument on behalf of McCain, 25 for Browne and 14 of McCain's reply. 

Much more entertaining are the voces populi on the TMZ site to which Ben links.    A lady called Melissa writes:

"Glad he didn't win the Presidency but here's hoping he wins this one. I hate whiny washed up actors/musicians/dancers who think they are still relevant."

On the other hand, Assamite writes:

" I believe the term that fits is "using the song for personal gain". Which of course MacJ was doing. Since the song itself is not within public domain, the rights to the song and how it may be used belong to the artist. MacJ should just wrap his shredded linen shrouds about his stooped shoulders, shuffle back to his sarcaphogus (sic?), pull the lid closed and shut his whiney ass up!"

Speaking as a foreigner, I have to say that McCain may have been one of the best presidents America never had. I am not talking about the 2008 election.   Had I been an American I would certainly have voted for Obama. But I think he would have made a much better fist of the last 8 years had he been the Republican candidate in 2000 rather than Bush. Even in this election McCain had his moments.  His concession speech was full of grace and generosity.

The return date for the application is 2 Feb 2009 at 09:00.   I will follow Ben's blog and other US sources and let you know what happens.

500th Post - Patents: Actavis UK Ltd v Novartis AG

This was a claim by Actavis for the revocation of a Novartis's European patent for a preparation which released fluvastatin (a cholesterol inhibiting drug) gradually rather than in an immediate burst on grounds of obviousness and insufficiency. There was also a counterclaim by Novartis for infringement of its patent. Novartis conceded that the claims as granted could not be granted and applied for their amendment.   The claim and counterclaim came on before Mr Justice Warren and is reported at Actavis UK Ltd v Novartis AG [2009] EWHC 41 (Ch) (16 January 2009) 

This case is important because it is one of the first cases since Conor Medsystems Inc v Angiotech Pharmaceuticals Inc amd others [2008] UKHL 49 (9 July 2008).  Mr Justice Warren reviewed that case and others such as Windsurfing International Inc. v Tabur Marine (Great Britain) Ltd [1985] RPC 59 and Pozzoli SPA v BDMO SPA [2007] FSR 872 in determining the extent to which Conor had changed the law.

Comparing the teaching of the patent to the pleaded prior art and common general knowledge the judge found that the patent was obvious. The claim on insufficiency failed.    There was no dispute that the claimant's preparation would have infringed the defendant's patent had it been valid but in view of the finding of obviousness the counterclaim failed.

This is a long case and it is very late so there may well be more new law in this than I have the energy to mention here. One passage which did strike me as being quite nifty was Mr Justice Warren's dicta on common general knowledge at paragraph [125]:

"Common general knowledge means the information which at the date of the patent in question is known and accepted without question by those who are engaged in the art or science to which the alleged invention relates. It is important to differentiate between matter which was in the public domain at the priority date of the patent and matter which can properly be regarded as common general knowledge. Evidence that a particular fact is known or even well-known to a witness does not mean that it is common general knowledge. Likewise, a piece of information disclosed in a scientific paper does not become common general knowledge merely because it is widely read. On the other hand, it is not necessary to show that the information is known in the sense that the skilled person has memorised it. Material which is known to exist and to which the skilled person would refer as a matter of course if he cannot remember it is part of the common general knowledge. See generally Terrell on the Law of Patents (16th ed) at paragraphs 6-36 to 6-38"

This case note incidentally is my 500th post.    Quite a lot has happened since I railed against criminalizing patent infringement on 22 August 2005.   As you can see from the photo I looked slightly different in those far off days.

Copyright: IFPI Digital Music Report

"Pirates win music download battle" screamed the headline on the BBC website. "Oh Goody" I thought, "an end to the litigation drought perhaps." 

I am not sure that it is when you actually read the report. Considering the state of consumer confidence and the rapid development of digital technologies, music industry sales seem to be holding up pretty well. And that also accords with my own experience.    I am still drafting and reviewing management and recording contracts for new bands here in Yorkshire. 

There has been a rapid increase in legal downloads although the industry complains that 95 % of music downloads are unauthorized. How they work that out I really don't know.  I think it has Io be taken with the same lorry load of salt as one discounts any other propaganda.

 

Software Patents: January Patents Limited's Application

As I have to present a talk for our seminar on Software Patents after Symbian and Bilski in Liverpool on 5 Feb 2009 I thought I would have a look at the Comptroller's decisions since Symbian Ltd v Comptroller-General [2008] EWCA Civ 1066 to see whether there had been any change in the Office's approach to software and business method patents since the CA's decision.

The official line from the IPO is that this case has not made much difference.   In "Applying the Aerotel/Macrossan Test" the Office revisited four cases that had been decided before Symbian and concluded that they would have been decided in exactly the same way now.  And yet I wonder. Only one case has come before an hearing officer since Symbian and that was a win for the applicant.

In January Patent Ltd.'s application the invention was a combined electronic point of sale device for buying credits for mobile telephones. The examiner had rejected the application on the grounds that the invention was nothing more than a computer program and method of doing business as such. As the hearing officer, Mrs Chalmers, summarized it:

"In the examiner’s view, the EPOS apparatus is entirely conventional and the contribution lies in the provision of a software control module for an existing EPOS apparatus to provide mobile telephone credit for a customer and invoice the credit purchase on the EPOS apparatus."

She concluded that the invention went beyond the mere programming of an existing EPOS apparatus to provide mobile telephone credit:

"the contribution lies in providing a better EPOS apparatus capable of handling mobile telephone credit purchases and other retail transactions comprising, in combination, a software control module operable to provide mobile telephone credit for a customer and invoice the purchase of the credit; means for printing a top-up voucher on the printer of the EPOS apparatus; and means for printing with the printer the value of the top-up voucher onto a customer’s receipt as part of a single or multiple retail transaction.for a customer and invoice the credit purchase". 

In other words, if I am not being unfair to the hearing officer, the arrangement of some conventional electronic point of sale and voucher credit apparatus plus some programming and some output devices.  Would that really have got through before Symbian, I wonder?  

Anyway,  come along to our talk on 5 Feb 2009. Listen to Julyan Elbro the man from the IPO who actually has responsibility for excluded matter who has written all the practice notices on patentability.    Thanks to Kirwans' generous sponsorship this seminar will only set you back a pony.  How much would anyone else would charge you for 2 1/2 hours CPD for the SRA?   What a bargain. Fill out the form below and send it back to us with your cheque and make your firm's training partner happy.

See also Software Patents: New Guidance from the IPO 29 Dec 2009

Patents: Software Protection after Symbian and Bilski 11 Nov 2008

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Practice: Large US Businesses plan to cut Spending on Outside Lawyers

During November 2008 the well known legal consultants, Altman Weil Inc., polled 1,292 general counsel (in-house legal advisors) in the USA as to whether they faced budget cuts in 2009 and, if so, what they planned to do about them.   The consultancy’s findings are published in a report entitled “Law Department Cost Control” which can be downloaded from its website.

Although there were only 115 respondents they represented some of the biggest corporations in America.    Some 43.8% had annual revenues of between US$2 and 10 billion and a further 24.3% had revenues of over US$10 billion. The respondents were not identified but businesses of that size are likely to have worldwide interests including some in the UK. Nearly 70% were public companies, 23% private companies and the rest partnerships, not for profit or government agencies. Over two thirds of those respondents had very substantial legal departments. Some 6.2% employed more than 100 lawyers.

The most depressing finding for the legal services industry is that nearly three quarters of the respondents reported cuts in their budgets for 2009.   In some cases these cuts were expected to be between 31 and 35%. Of the legal advisors whose budgets will not be cut, some 62.1% reported that they expected their budget increase for 2009 to be smaller than in previous years.

As to how they proposed to cut their expenditure, it is perhaps not surprising that the least likely economies were to be outsourcing offshore, numbers of lawyers, paralegals and other staff, lawyers and staff bonuses and lawyers’ earnings.  Savings were most likely to be made by doing more work in-house, attending training and events, looking for cheaper outside advisors and negotiating alternative fee arrangements. By far their greatest concerns over legal spending were outside lawyers’ cots and lack of predictability followed by inefficiencies encouraged by hourly rates and litigation risks. When asked to rank the top three concerns, outside lawyers’ costs came out top.  Well over half the survey reported that they intended to cut back on work to outside lawyers and only 7% anticipated an increase.

While this is an American survey it would be surprising if the results were different for England except that since costs follow the event in England the risks and uncertainties must be even greater. As I said yesterday in  “The Future of IP and TMT Services” even well established  American firms like Cravath, Swaine & Moore LLP are rethinking how they deliver and charge for their services in the face of competition from bricks and mortar firms such as Valorem that charge by the value of their work rather than by the hour and internet based practices which have very low costs.   

In England, and Wales, law firms will face competition not only from within the solicitors’ branch but also from outside it. These include patent and trade mark attorneys with the right to conduct litigation or with law firms attached like Marks & Clerk Solicitors and HGF Law, an increasingly confident and technically savvy Public Access Bar that regards solicitors less as clients as troubled competitors and, above all, well funded alternative business structures brimming with new techniques and innovative services which should be entering the market just as recovery gets under way.

Practice: the Future of IP and TMT Services

Happy New Year!

Every time there is an economic downturn businesses look for ways of saving money on legal services, particularly in intellectual property ("IP") and technology, media and telecommunications ("TMT").    The beneficiaries of the last downturn were regional firms such as Addleshaws of Manchester, Eversheds, Pinsents and Wragge's of Birningham, A V Hammond and Last Suddard of Bradford and, above all, Dibb, Lupton, Broomhead of Leeds and Sheffield which grew rapidly because they could provide high quality services for less than City practices.   This time clients will want to make much greater savings given the severity and probably duration of this downturn, advances in technology and Part V the Legal Services Act 2007.  

One of the talking points of several American blogs is "Kill the Billable Hour" by Evan Chesler which appeared in Forbes just before Christmas. It is subtitled "Lawyers should bill the way Joe the Contractor does."   The piece begins with the words:

"I'm a trial lawyer. I bill by the hour. So do the associates who work for me. I have lots of clients, so I can pretty much work, and bill, as much as I want. This needs to be fixed. Yes, you read that correctly."

One reason why the practice of charging by time and disbursements needs to be fixed is that very well established lawyers like Mr Chelser are facing challenges from all sorts of competitors. 

Some of those competitors will be  bricks and mortar firms like Valorem of Chicago which seems to have more in common with a set of barristers' chambers than a conventional legal partnership. They charge by results rather than by the hour and one of the most audacious things they do is to allow clients to adjust any and every bill. They call that the "Value Adjustment Line" and note on their website:

"Some have said that the Value Adjustment Line is extremely risky. We agree. If we aren't willing to risk our own fees on our service, do you really want us advocating for you?"

How many of the Legal 500 dare do that? Valorem also offer a "tool box" with early case assessment, decision trees, monthly case summaries showing the status of a case with charts showing current cost to budget, phases completed and a breakdown of work and cost, adjustable invoices and after-matter assessment and recommendations. Are these people hacving any effect? See "A Brief Look Back. A Sober Look Forward" written on 9 Jan 2009 by the firm's founder Patrick Lamb and find out.

Since businesses are used to getting all sorts of other services over the Internet, a potentially even more serious challenge is presented by virtual law offices ("VLOs") like Kimbro Legal Services, a one woman practice in Wilmington, North Carolina.  In a podcast interview with Ed Poll of LawBiz, the principal a founder of of that practice, Stephanie Kimbro,  described a virtual law office as a web based practice.   Stephanie is also a founder of Virtual Office Technology LLC which developed the application that she uses in her practice.   It seems to be remarkably cheap to run - a set up fee of US$500 and a monthly rental of US$260.  Consequently the fees she charges for her services seem eminently reasonable by our standards - US$150 for drafting a will and US$300 for a commercial lease. In addition to running a law practice and a web 2.0 business, Stephanie somehow manages to find time to teach at the "Solo Practice University".   The University's website describes it as "a revolutionary new web-based educational community that picks up where your legal education left off."   Courses include planning, building and growing a private practice, differentiating oneself from the competition and attracting and engaging new clients more easily.

Of course Stephanie, Valorem, yours truly and, if you are a lawyer, you - have to come to terms with the realities that Richard Susskind first discussed in detail 10 years ago in "The Future of Law" and revisited recently in "The End of Lawyers"- commoditization of legal services, outsourcing services to professionals and paralegals in low cost countries, the use of expert systems et cetera.    I have been familiar with Richard's ideas ever since I served as a member of the Council of the Society for Computers and Law when he was the Society's chair some 20 years ago. They were very much in my mind when I first set up NIPC as a new and very different sort of barristers' chambers in 1997 and they are still at the forefront of my strategy now.    

I remember discussing Richard's ideas with a young instructing solicitor who had just been taken on by Philip Conn & Co., then one of the few firms of solicitors in Manchester with expertise in intellectual property and technology, media and telecommunications law. This young lady had done well at Oxford and indeed well in her firm but she regarded the whole Susskind thesis as pie in the sky. She was not even persuaded by his book which I lent her and which I found to be one of the most incisive and persuasive on any legal business topic that I have ever read.  Ten years later Philip Conn & Co.are no longer with us but NIPC is stronger than ever. 

There is a lot of despondency at the Bar right now, particularly in Manchester, since Peel Court (arguably the strongest criminal set in Manchester) and 8 King Street (once one of the strongest civil sets and where Judge Ford (the first judge of the Patents County Court) started his career) have recently disbanded. However, I think that the Bar has a better chance of surviving the downturn than most so long as we keep agile, control our costs, pass on cost and efficiency savings to the public and make good use of technology. After all, folk like Patrick Lamb and Stephanie Kimbro don't work all that differently from the way barristers have worked for centuries and look how well they are doing in America.