Friday, 29 January 2016

The road ahead for taxation on IP

With foresight and good planning, the road
ahead can afford delightful prospects ...
Forget the clichés about death and taxes: the reality is that, while death is an end-of-the-road experience, taxation is not usually fatal to the commercial viability of a business and, if dealt with in a sensible, realistic and proactive manner, its payment can even be a sign of corporate vitality.   This holds as true for IP-based businesses as it does for others, but the IP tax environment offers a unique array of avenues, containing both road-bumps and fast tracks, for anyone seeking to drive an innovative business to its next level. The world of IP taxation also contains some relatively new concepts with which to juggle, of which the most notable is that of BEPS (base erosion and profit shifting).

Bearing all of this in mind, it's often good to talk, if only to clarify one's own understanding, to find out if your ideas reflect the accepted wisdom and to share a little speculation as to how current turns of event might evolve.  A convenient catalyst for conversation is "The road ahead for taxation on IP", this being a timely Executive Roundtable hosted by Aistemos on Wednesday 23 March. 

What's it all about?  According to the organisers:
"There is no escaping the fact that intangible assets are more important than ever for companies at every stage of development. For SMEs, it is often the intellectual property that defines the ability to secure investment and the associated R&D that helps with early and favourable tax treatment. As companies grow, there is always the possibility of the UK’s Patent Box.

However, the most dramatic shake-up is in the area of the OECD’s changes that will impact all intra-group trading arrangements and associated transfer pricing issues. While the headlines may focus on Starbucks, Google and Amazon, there is no doubt that this is a new set of challenges for all. For the world of IP, this means that IP can no longer be invisible. Companies, advisers and regulators will require cogent evidence to support their views and this in turn has led to renewed interest into fresh sources of data and analytics".
Suitably qualified readers are invited to participate in a roundtable discussion on the recent changes and they opportunities that they will bring (attendance is limited to senior tax advisers from both industry and the profession to discuss the following topics:

  • Is the taxation of intangibles rational or seasonal? 
  • Are brands and inventions so unique that rational and objective treatment is simply impossible? 
  • What approaches and evidential support would reduce friction, increase transparency and avoid disputes? 

Veteran IP valuation expert Kelvin King (Valuation Consulting Co) and Paul Morton (Head of Group Tax, RELX Group) are the co-chairs.

Registration opens at 17:00. The roundtable discussions commence promptly at 17:30 and will continue over the drinks that will be served at 18:30.

Aistemos is hosting the event at conveniently central London address: 90 Long Acre, London WC2E 9RA.

To register, just click here

Tuesday, 26 January 2016

Rabbits join Unicorns in the Investment Menagerie

Regular readers of this weblog will know that over the past six months we have had a good deal to say about Unicorns. But it seems that there are other animals in the investment menagerie.  Writing in Australia's Business Insider ("2016 will be the year of the rabbits", here), Sam Shead picks up on a theme brought to light by CB Insights CEO Anand Sanwal in his daily newsletter: the rise of the Rabbit.  In short, while 2015 was the year in which the cash-rich Unicorn start-up was revealed to the investment community in all its billion-dollar splendour, we can expect to see something quite different this year, with the rise of the Rabbit.  

What is a Rabbit? The letters are an acronym of its key features:
  • Real
  • Actual
  • Business
  • Building
  • Interesting
  • Tech
While the acronym is rather contrived ('real' and 'actual' are synonyms, 'business' is a generic descriptor and it's not easy to find any business that is not, to at least some extent, 'interesting'), the idea is worth bearing in mind.  As Sanwal explains, 2016 will not be the year of the Unicorpses (dead unicorns) -- but it will be the year in which we may be separating the rabbits from some Unicorpses. Shead quotes Sanwal's words:
“With 152 (Unicorns), there will of course be some flame-outs or those that run into issues. These are not riskless bets after all. ... While it’s ‘fun’ in a schadenfreud’y way to claim some absurd number of Unicorns will falter in 2016, it misses out on the fact that 2016’s climate may force many of these Unicorns to become Rabbits.”
The precise mechanism by which Unicorns metamorphose into Rabbits is not spelled out. Some may simply shrink as investor commitment decreases in order to fall in line with a company's intellectual assets and competitiveness rather than hugging the contours of its cash assets or focusing on a market potential that is easier to identify than to fulfil. 

There are however two certainties.  The first is that the role played by patent analytics in guiding both businesses and their investors will increase rather than diminish, as competitors' patents provide a set of hedges and hurdles which Unicorns must navigate if they have insufficient IP to protect their own growth or cross-license to others.  

The second is that, now that Unicorns have been joined by Rabbits, there will be a rash of acronyms as pundits and commentators seek to make a name for themselves. How long will it be before we see the rise of the Badger, the Mongoose and the Wombat?  Readers are invited to submit their own suggestions ...

Monday, 25 January 2016

Plastics, patents and a platform for innovation

The New Plastics Economy: Rethinking the future of plastics offers a fascinating contemporary portrait of an industry that is so large and all-pervasive that we are in danger of being quite unable to see it at all.  This portrait comes in the form of a handsomely-produced 120-page report, published by the pro-environment-by-design Ellen MacArthur Foundation and supported by funding from the conservation-oriented MAVA Foundation.  It envisages a global economy in which plastics never become waste and talks of business-driven multi-industry innovation initiatives to push the world towards the "circular economy" to which it seeks a transition.

Given the centrality of business-driven innovation to the restructuring of plastics with all its ubiquitous facets, it is a little disappointing that relatively impact is placed upon the role of the patent system as a whole, and to the direction in which the environmental sanctity of a threatened planet is currently being taken by owners and applicants for key patents.  To be fair, patents are acknowledged, but only in a minor way. Thus at p. 57, when reviewing marker technology, the report states(with footnotes omitted):
"Another pathway currently being explored is a system in which packaging contains a marker that can be read by sorting machines. This could range from a barcode to invisible chemical markers. Various pieces of information might be embedded in such markers and communicated across the value chain, thereby unlocking new opportunities. Over the last decades, a range of patents has been published on marker chemistry and related instrumentation. Marker-based detection products are used for the security of high-value articles but no marker-based detection system has yet transitioned into widespread use in the recycling industry".  
The EU-funded Polymark project [here] is mentioned as work in progress, and it is noted that chemical marker technology could be used to differentiate various types of plastic items, though industrial-scale tests would still be needed and the detection of multiple markers as ‘binary code’ is yet to be developed.

Also mentioned, at p 91,  is 3D printing, a.k.a. the much-trumpeted technologies of additive manufacturing:
"Cost, speed, and accuracy place limits on widespread adoption but there is little doubt that additive manufacturing is a set of technologies with disruptive potential. The recent expiration of a number of patents is expected to trigger a wave of innovation, and a future of distributed manufacturing is not unimaginable. In this context, the demands on plastic packaging could be significantly different. For example, products travelling shorter distances through fewer (or no) distribution centres would require no packaging, or packaging with greatly reduced protective and storage properties".
A good topic for discussion might be whether it is the availability of patent protection or its expiry that produce greater and more focused incentives for investment and development of new plastic-related products and processes. Further issues to consider might relate to the question of whose patents control the industry as it moves forward, as well as the prospects that environmentally-friendly plastics might afford for the setting of global standards, FRAND licences and even compulsory licensing.

You can read the report in full here.

Friday, 22 January 2016

Joint venture strategies: a new book

Joint Venture Strategies: Design, Bargaining and the Law, by Zenichi Shishido, Munetaka Fukuda and Masato Umetani, is quite the most interesting read this reviewer has seen for some time.  The authors come from quite different backgrounds -- one from academe, the other two from industry -- but their shared interest in reaching a negotiated agreement brings together both their understanding of the practical application of game theory and their management experience with Solar Frontier and Fuji Xerox.

According to the publisher (Anglo-American firm Edward Elgar Publishing):
Although they have the potential to create synergies, joint ventures by their nature contain inherent risk. Therefore, each partner in a joint venture needs to incentivize each other in order to maximize its own payoff. Extensive pre-contractual and post-contractual bargaining is essential. This book provides successful bargaining strategies from the point of view of each partner company.

Using a game theoretical framework to analyze joint venture strategy, it describes practical and legal issues that arise when creating synergies and incentive bargaining in a joint venture. With a particular [and very much welcomed] focus on intellectual property law, including analysis based on many real cases, the book covers issues relating to creating synergies, corporate law issues of conflicts of interest, and antitrust law issues relating to cooperation between independent companies.

Theoretically new and practically useful, Joint Venture Strategies will appeal to academics and practising lawyers. From a corporate perspective, this book is essential for successful joint venture planning and strategy.
While the book has a decidedly Japanese flavour to it, and much detail is drawn from Japanese JVs (there is a lengthy appendix which lists all joint ventures reported in Nikkei over the past 15 years), the default law is that of the United States.

Further information about this book can be accessed from the publisher here.

Wednesday, 20 January 2016

Creating an inventive ideas template: some practical guidance

Our guest posts by Donal O’Connell have proved to be a highly popular feature among readers of this weblog. One of his earlier contributions, "Trade Secrets: a round-up of key issues" (here), made our 2015 top ten list of most-read blogposts even though it was posted just a week before Christmas, and this year's first post -- "Where do IP-relate risks originate?" (here) -- looks as though it will be equally well-read.  

Donal, MD of Chawton Innovation Services Ltd, is a Consultant to Aistemos. Formerly a VP of R&D and a Director of IP at Nokia, he is an acknowledged IP strategist who was listed in the IAM 300 in 2013. 
If only! But a template
is a good place to start

Donal's latest contribution looks at what a business needs to do when it seems it has an inventive and possibly patentable invention on its hands. While inventive ideas differ radically in their content, their potential for commercial exploitation and in the parameters of legal protection that are open to them, it is good for a business to develop its own internal discipline for recording and evaluating them before taking any further steps.  That is effectively what this article is all about.  
Creating an inventive ideas template

What is an ideas template?

A template is a file that serves as a starting point for a new document. When one opens a template, it is pre-formatted in some way to guide the user.

One simple yet effective way to build a level of discipline into the invention capture process is to define a standard template for inventive ideas and insist it is taken into use. It is worth defining the inventive ideas template with carefully considered fields and guidance tips, which meet the needs of your invention capture process. This will help the inventor community understand what is expected of them. It also ensures inventive ideas are captured in a consistent manner.

If the idea is of potential value and is patentable, then the inventor should complete such an inventive ideas template. Completing the template should be considered as the first step in the patent creation process but it does not constitute the filing of the patent application. 

The template should be completed for each discovery or inventive idea that has some potential commercial value or represents a breakthrough in technology. 

Contents of an invention template

The template may consist of the following sections:
  • The title of the inventive idea
  • Inventors details
  • Additional contributors to the inventive idea
  • Is the inventive idea related to a specific project or program?
  • Technology area of the inventive idea
  • Does the inventive idea relate to a Standard?
  • A summary of the inventive idea
  • A more detailed description of the inventive idea, together with any figures or drawings
  • Description of all known, related prior art
  • Will the inventive idea be disclosed publicly?
  • Reference material
Inventive idea title

The title should be defined in one sentence and capture the essence of the inventive idea, although this may or may not be the same as the title of the subsequent patent application filed at the Patent Office.  This is important to note, as it can cause confusion later if they are not identical.

Inventor details

Inventor details need to be defined well.  This means their full given name, home address, telephone number, email address, nationality, employers name and address etcetera so they can for example be contacted when they are needed to sign papers.  The inventor's home address information informs the company where the inventor lived at the time the invention was made.  Such information may be needed to determine where the reward should be paid and which company division or unit should arrange the payment, due possibly to national taxation or legislative issues.  Having the inventor's home address information available may help when answering certain Patent Office requests and it may also help in determining whether the company needs a foreign filing license or deciding where to file first.

Inventive idea ownership

Who is the inventor? If multiple inventors are involved, then such information is also extremely important.  The rules on inventor ownership are quite clear and derive from the rules for patentability.  To be patentable, an idea must not only be novel, but must also involve an inventive step, which is an insight that is not obvious to someone possessing reasonable skill in the relevant technical area.  Anyone who contributes something novel and non-obvious must be named as an inventor on the patent application.  But someone who has not contributed in this way must not be so named.  If inventors are omitted from the application, or if non-inventors are included, any patent/s granted can subsequently be invalidated, so it is very important that this information is correct at the outset.

Where an invention arises in a group session, as a result of a brainstorm or other type of discussion, it is often the case that everyone present has genuinely contributed something.  However, it does not follow from this that everyone present is entitled to be named as an inventor, because not all contributions are novel and non-obvious to someone possessing reasonable skill in the relevant technical area.  If you have thought of something novel and genuinely inventive, and then refine and improve that idea by bouncing it off a number of other people, their contributions do not automatically make them inventors.  Only a person who is responsible for a genuinely novel and non-obvious contribution should be named as an inventor.  It is quite unusual for large groups of people to contribute inventively in this way to the same patent application.  Therefore, if you intend to name more than two people on an application, it is recommended that the inventor gets together with the other people in the group, to do an honest evaluation of what each person contributed, before proceeding.

Joint ownership of an inventive idea

Is the inventive idea based on a joint effort with another company or organization?  If the answer is yes, then it is important that the inventor specifies the other company involved, discloses any relevant agreement or contractual details they may have with this other company, and provides the necessary key contact details.

Project details

Does the inventive idea relate to a specific project?  If yes, then the inventor should identify the name of the project and provide further relevant and helpful details.

Technology area

The primary technology area of the inventive idea needs to be specified and classification systems exist to help guide the inventor here.  A Patent Classification is a code which provides a method for categorizing the invention. In the US Patent Classification (USPC) system, classifications are typically expressed as "482/1".  The first number, 482, represents the class of invention and the number following the slash is the subclass of invention within the class.  There are approximately 450 Classes of invention and 150,000 subclasses of invention in the USPC.

Classes and subclasses have titles which provide a short description of the class or subclass and they also have definitions which provide a more detailed explanation.  Many classes and subclasses have explicitly defined relationships to one another and patents are contained in the subclasses.  In a sense, classes also contain patents but for classification purposes patents are always classified at the subclass level.  Which means that one or more classification (i.e. class/subclass designations) is assigned to each granted patent and each published application.

A patent classification also represents a searchable collection of patents grouped together according to similarly claimed subject matter.  A classification is used both as a tool for finding patents (patentability searches) and for assisting in the assignment of patent applications to examiners, for examination purposes.  Classifications have definitions and hierarchical relationships to one another.


Is the inventive idea planned to be contributed to a “Interoperability Standard”?  If yes, then the inventor should give the name of the standard and the Standards Setting Organization (SSO) plus the date when it is planned that the invention is to be contributed.

Interoperability refers to the ability of diverse systems to work together or inter-operate, without any special effort on the part of the customer or end-user.  It is the ability of two or more networks, systems, devices, applications or components to exchange information between them and to use the information that has been exchanged.  Interoperability standards can help facilitate data integration and transmission.

Patents underpin open standardization and allow the disclosing and sharing of ideas openly and early.  Without patents, it is most likely that secrecy would prevail.  Patents allow technical specifications that can be promulgated consensually and early, thereby making the process inclusive, rather than exclusive. 

Invention summary

A short summary of the inventive idea should be requested in the invention report template and it is helpful to ask certain specific questions such as:

  • What problem is solved by the invention?
  • What are the existing solutions and what limitations do these solutions have?
  • What are the novelty features and the benefits of this invention?
Technical documents, figures and drawings should then be attached to explain the invention in more details.

Prior art

Is the inventor aware of the prior art, which is any evidence that your invention is already known? An existing product is the most obvious form of prior art but prior art does not necessarily need to exist physically or be commercially available.  It is enough that someone, somewhere, at some point in time has previously described, shown or made something that contains a use of technology that is very similar to your invention. 

Search engines on the internet are familiar to everyone browsing the world-wide-web and there are a variety of patent specific search engines available for use, with some being free of charge, which allow you to search through various patent databases.  These can prove extremely useful, for example, when conducting prior art searches.  There are also some patent search tools that are provided by national, regional and global Patent Offices, while others are actual commercial products on sale from specialist companies, usually with some extra ‘bells and whistles’ attached to give some additional value add to the user.  Patent search tools allow you to search through various databases looking through patent claims, using the complete text from an invention disclosure, or free form text.

There are tools for analyzing existing patent data and many people have begun to make increasing use of such patent information.  These tools provide search results and analysis of the patenting activities in an industry, technology or company to ascertain or forecast the direction of technical change and to pinpoint the relative technological position of a company in a particular marketplace.  Patent mapping systems are available to allow you to truly understand the existing patent landscape with many of the more advanced versions allowing the patent analysis results to be displayed by visual representation, using bar graphs, polygonal line graphs, pie charts, radar charts and other charts or graphs, which are typically called ‘Patent Maps’.  Such visualization is an especially effective way of representing the results of this type of patent analysis.  Patent mapping is also a technique that uses patent information to create a graphical or physical representation of the relevant art pertaining to a particular technology area.

Public disclosure

Is the inventive idea expected to be publicly disclosed in any way, and if so, when?  An inventive idea is considered public if it is disclosed in any way. An example could be a publication, university thesis, technical presentation, product user manual, service manual, inter-operability standards specification, a website or a submission to a technical seminar.

There may be a need to sanity check the exact date of intended publication at some seminars or conferences as items such as abstracts may be published before the actual event itself is held, and could act as prior art to the same invention.

There are however some exceptions which do allow disclosure prior to filing a patent application with the Patent Office.  Use of a non-disclosure agreement with an external party is included as an exception since the invention is not made public in this form.  For public disclosures two options can also be found, that is the use of simple "grace" periods, such as with the USPTO, or the more complex example of the EPO exhibition rule.  The local jurisdictions, rules and guidance should be carefully checked to see that you are fully compliant before endeavoring to make any such public disclosure.

Reference material

From the inventor’s perspective, the invention report is the first disclosure of the invention and should include a list of references which relate to that invention but no background references should be quoted in the report.  An Information Disclosure Statement (IDS) is essentially a list of any references that relate to the invention and the full reference must be stated including the author, publisher, ISBN, chapter and page numbers.  The number of pages quoted should be less than ten so as not to infringe any Copyright laws.  Typically, there should be between three and five references listed in the document.  If the inventor has not fulfilled their obligations under the IDS document, the Patent Attorney prosecuting the case will receive a Notification of missing parts and be given an opportunity to correct this.

Other things to consider

The items listed above are not exhaustive, and there may be other things to consider adding into your invention report template including
  • Product information
  • Agreement and contract information
  • Links to note books
Final thoughts

As stated previously, one simple yet effective way to build some discipline into the invention handling process is to define a standard template for inventive ideas generated by the inventor community.  I trust that this paper provides the reader with some ideas and insights on this subject matter.
You can contact Donal via Chawton here.

Monday, 18 January 2016

After the gold rush -- the end of the (banking) world?

Writing for Global Banking and Finance Review this weekend, Aistemos CEO Nigel Swycher again directed his focus on FinTech.  This is what he had to say: 
The end of the (banking) world?

There is substantial interest in the financial technology (FinTech) sector, at a time when the financial services sector is generally experiencing considerable churn. A raft of start-ups are using digital platforms to support innovative business models and deliver products and services more efficiently – with potentially significant consequences for the market incumbents.

No-one remembers cash, or currencies for that matter. No-one quite remembers what the distinction was between credit and debit cards – or why you would use a card in the first place for that matter. Everyone knows the function of banks. They are the utility at the heart of the financial system, heavily regulated, and often-state run – a bit like water and electricity …

It’s a matter of conjecture whether that describes the world 10 or 50 years from now. But it is the future. Historians will not suggest that FinTech caused these changes, any more than people explain the success of Uber, Airbnb, Google, Amazon or Spotify by reference to the world wide web.

What is more interesting at these moments of epic disruption is to wonder why the incumbents sit back and let it happen. The answer is always a combination of two things – disbelief and inertia.

Music and photography are the poster children of industries that saw the challengers in their rear view mirrors and did not look again until had been overtaken. Inertia is the more forgivable of the deadly sins. The companies with market leading positions are so invested in looking after today’s market that is often impossible to adapt.

So let’s take a look at the banks though this lens.

They used to be the only entities trusted to look after our money – and are regulated to the hilt as a result. They once had to be in close proximity with their clients, and this necessity meant vast quantities of people and property. Fast forward to today and few banking customers depend on branch banking, or care about their relationship with the bank manager – gone are the days when that relationship defined borrowing options, or was the source or all investment wisdom.

Crucially, this more distant relationship opens the floodgates to not only the challenger banks, but also to those who can harness the ubiquity of data and analytics to know all that needs to be known faster and more accurately that a single human.

That said, if you take a closer look you will see that FinTech, just like the world wide web, changes everything and nothing at the same time. We still pay someone to drive us, to listen to music and for a bed for the night. What changes is who we pay. In banking too, our needs are largely constant. We want a place, more resilient than a mattress, to deposit our money; a way of making payments, borrowing and saving. How these needs are met will change beyond all recognition, and it is inevitable that some of the related value will flow from the incumbents to the innovators.

In the world of FinTech, this leads to the all-important question: ‘Who are the innovators?’.

In considering an answer, we should not forget the apocryphal truths from the Gold Rush; namely that the inventors of jeans and the manufacturers of shovels made substantial and risk free returns.

The FinTech equivalent consists of a range of encryption, authentication and security technologies. The point is that the evolution of financial services is every bit as dramatic as the devastation of high street retail or the transformation of the automotive sector. If you combine this reality with the fact that consumers will expect better and faster for less, the conclusion that FinTech will reshape the market, and the market participants’ economic return, is a statement of the blindingly obvious.

There is, however, one factor that is largely overlooked when assessing the impact of FinTech, namely the value of money. We can all live with the consequences of a driver who loses his way, a dirty room or a song that corrupts half way through. None of us are even remotely that cavalier when it comes to money. The consequence of this is that there will always be a regulated banking sector at the heart of the financial system. Technology will flourish where the traditional providers offer nothing more than bureaucracy, negativity and delay.

It goes without saying that FinTech is trendy, and we have heard that warning before. It was called dotcom. As hundreds of companies pile into the sector it is worth remembering that there will be winners and losers, and more of the latter than the former. We all like choice, just not too much. We all like new, but not pioneering.

For investors in FinTech this is a difficult time. Stand back and miss out on the next Unicorns. Rush in and you may buy yourself a donkey.
You can check out the original article here.

On the difference between unicorns and donkeys click here

Bank artwork from

Thursday, 14 January 2016

Patents: quantity is vanity, impact is sanity

Top again ...
If we had a web page headed "Things We Wish We Said First", the sentiment expressed by the title of this blogpost would guarantee that it would be among the first axioms to feature in it.  The original line comes from a tweet by Tangible IP (alias patent attorney Nick White) in the course of a Twitter conversation sparked off by the spate of news items, articles, blogposts and tweets on the recently-published US patenting statistics for 2015. 

Much has been made of the fact that fewer patents were granted in 2015 than had been secured the year before; notwithstanding this, IBM kept a firm grip on bragging rights, retaining top spot in the granted patents chart for the 23rd year in a row. Indeed Big Blue received around 50% more grants than second-place Samsung. Techno-heavyweights Canon, Qualcomm, Google, Toshiba and Sony all scored well. Apple didn't even make the Top Ten, crawling in 11th -- and there were no pharma innovators in the list at all.  Isn't this all hugely significant?  The answer is: by itself, no.
 2 hours ago2 hours ago Patent Quantity Is VANITY. Patent Impact is SANITY.
The reality is that annual patent grant and application statistics are not great indicators of anything, except perhaps how busy the United States Patent and Trademark Office was in the course of the year and what sort of fee revenue it might be earning.

In many if not most sectors in which innovation is capable of generating patentable inventions, the patent grant statistics are likely to indicate the nature and extent of research and product or process development that took some time earlier, often several years.  Many patents granted in 2015 will therefore be able to trace their origins to the period between 2008 and 2012, when the industrialised world was struggling to cope with a major international economic recession and investment funding was tighter than it is today. 

Sahara: plenty of it,
but how much is it worth?
Apart from that, the value of a patent lies principally in what it covers. A large number of patents for small, incremental advances over a mature and perhaps even declining technology may be worth far less in commercial terms than a single key patent for a new medicinal formulation, for example.  Patents can also be useful commercially within the context of the licensing of bundles of rights from a portfolio of patents that stretches across all or part of a technological sector -- but even then it is not the number of patent that counts, so much as their industrial focus and actual or potential interrelation.  The quantity-quality dichotomy is not unique to patents, since it applies to all other types of property too.  To put it another way, it's better to own one square mile of real estate in Manhattan or down-town Hong Kong than 10,000 square miles of rubble in the midst of the Sahara desert.

In any event, even if a single year's data regarding patent applications and grants could be said to carry any major significance, that would only be in relation to a wider picture. The 2015 data is just a snapshot, which is devoid of value if it is not framed within the continuum of data relating to other years, the maturity or novelty of the technologies in which patents are sought and granted, the extent to which patents are used in conjunction with other registered and unregistered rights, regulatory data and transactional information concerning open and closed licensing practices.  So the bottom line is this: don't allow yourself to be carried away by the headlines.

Wednesday, 13 January 2016

Investment, finance and entrepreneurship -- two new titles

Two new books have recently been released by Edward Elgar Publishing, each of which might be imagined to offer something to readers who work in the field of investment and innovation analytics. One is International Investment Law and Development: Bridging the Gap, edited by Stephan W. Schill, Christian J. Tams and Rainer Hofmann.  The other is a Research Handbook, Entrepreneurial Finance, edited by Javed G. Hussain and Jonathan M. Scott.

Both books are handsomely produced, well written and feature carefully-researched and authoritative content. But in one of them -- despite its virtues -- there is arguably something missing.  That this is so is not the fault of the editors or the publisher, but is rather a consequence of the fact that intellectual property and innovation have for too long been allowed to persist as blind spots in mainstream investment and finance literature.

One might have hoped for more from International Investment Law and Development: Bridging the Gap, but the bridge referred to in the title does not extend to IP.  Given that intellectual property is something of a magnet for investment in both free and controlled economies, and that the World Intellectual Property Organization (WIPO) has been driven in recent years by its controversial Development Agenda, something on the IP-innovation-investment axis might have been confidently predicted.  However, while the World Trade Organization features in its index, neither WIPO nor the WTO's TRIPS Agreement do.  UNCITRAL is there, but not its work in the field of securitisation of intangibles. Technologies are mentioned, but not technology transfer; and so on. To be fair, it was never the intention of this book to address innovation issues as a subject in their own right. Nonetheless, given the extreme and growing importance of IP in the international investment environment, it would be good if this could be reflected in a book of this nature. 

In terms of its IP relevance Entrepreneurial Finance scores rather higher. Intellectual property, intangible assets, business angels, SMEs, R&D funding, innovation, technology transfer and other promising topics abound. This is a highly eclectic set of essays, almost a set of highly-focused snapshots of entrepreneurial finance in all its different contexts: rural and industrial, advanced and developing, informal and institutional.  While it is in no sense a "how-to-do-it" manual, it provides a wide selection of contexts in which not just IP but its currently fashionable handmaid, IP analytics, can be profitably deployed.

Further details of International Investment Law and Development: Bridging the Gap, edited by Stephan W. Schill, Christian J. Tams and Rainer Hofmann, can be accessed here.

Entrepreneurial Finance, edited by Javed G. Hussain and Jonathan M. Scott, can be accessed here.

Monday, 11 January 2016

The Man Who Sold the World ... Bowie Bonds

News broke this morning of the sad demise of British-born rock star David Bowie, at the early age of 69 following a lengthy battle with cancer.  Many readers will recall a favourite track, album or video clip -- but within the intellectual property community the first thought of many will be about the performer's eponymous Bowie Bond.

The Man Who Sold the World
Properly called a Celebrity Bond, since this investment device was not intended to be confined to use by Bowie, the bond in question was a commercial debt security, issued by a celebrity holder of well-known intellectual property rights (typically copyrights).  Bowie did not invent this instrument; it was conceived and executed by investment banker David Pullman. Operationally the bond enabled the celebrity to receive money from investors in exchange for the right to receive future royalty income earned by the works covered by the bond.  In Bowie's case a series of bonds, issued in 1997, related to the income from some 287 songs which were spread across 25 successful albums.  The typical duration of each bond was 10 years, with an initial interest rate of 7.9%, and there were also tax advantages for Bowie as copyright holder.

Sadly for many investors, the bonds were not the sure-fire success they had anticipated.  The growth of new means of delivering recorded music, and the ease with which digital files could be copied and shared, saw royalty income plunge.  By 2004 Moody's had relegated the Bowie Bonds to just above junk status. 

What message does this have for IP analytics? A steady stream of copyright royalties can never be guaranteed in the face of changes in public taste and style, but there is a recurring pattern of super-stars retaining a large and loyally-committed following regardless of current trends: Frank Sinatra, Bob Marley, Elvis Presley, Marvin Gaye and Buddy Holly are just a few examples.  On this basis, a bond based on the continued goodwill in David Bowie must have looked a safe bet.  However, anyone looking at the means of delivering recorded music in the late 1990s might just have spotted that new technologies were looming on the horizon. 

It is true that 1997 was still four years ahead of Apple's game-changing iTunes service, launched in 2001, and it is quite possible that the risk that as-yet untried technologies would replace consumers' deeply-ingrained and generations-old habit of collecting discs or tapes was a risk worth taking.  Where income based on copyright royalties is contemplated it seems almost counter-intuitive to stop and look at patents and patent applications -- but in this case such an exercise might have been worth the effort.

Our top ten blogposts for 2015: a checklist

2015 has been a busy year for Aistemos, and for its weblog which was relaunched last summer as part of a suite of community resources for IP analytics, along with the Aistemos LinkedIn discussion group and Twitter account.  All in all we posted no fewer than 74 items between May and December, the busiest month being August with 15 posts.   2015 has also been a year of discovery, as we have learned which of the topics on which we have written attract the greatest interest on the part of our readers.

The ten most popular Aistemos blogposts for 2015 are listed below, in descending order of popularity. If you'd like to read them, just click on the title.  

Top 10 Aistemos blogposts for 2015

Six of our top ten posts are sharp focuses on the distribution of patents across businesses and territories in specific sectors: fintech, automotive parts, prosthetics, brewing, cybersecurity and -- perhaps surprisingly -- aquaculture.  Of the remaining four, two are opinion pieces (on the value of expired and lapsing patents and on the quality of advice given to SMEs), plus a round-up of key issues for trade secrets protection and a note on the USPTO's PatentsView visualisation initiative.

Surprisingly, some blogposts did not make the top ten despite their obvious topical interest.  These included three posts on billion-dollar startups (a.k.a. Unicorns), a couple on using analytics to deal with insurance and patent trolls, and articles on disruptive technology, the need for SMEs to formulate an IP-based business strategy and the difference between data and analytics. 

What will be the most popular topics among Aistemos's blogposts for the coming year? Stay tuned: we'll be able to tell you in about a year ...

Friday, 8 January 2016

Where do IP-related risks originate?

Last year this weblog carried some guest posts from Donal O’Connell (Managing Director, Chawton Innovation Services Ltd, developers of the Alder IP Risk Management Tool).  Donal, who is also a consultant to Aistemos, has been asking a critical question about IP-related risks: where do they come from?  This is what he writes:
Where do IP-related risks originate?

By the very nature of intellectual property (IP), there are both rewards and risks associated with it. Risk is the chance of something going wrong, and the danger that damage or loss will occur. Risk management is the process of analysing exposure to risk and determining how best to then handle such exposure.

Not all IP risks are the same and they may be broken down into a variety of different categories. One such category is ‘origin’ -- identifying from where the IP related risk comes.

Sources of risk

Companies and organisations face IP-related risks from a multitude of sources:

  • From within the organisation itself.
  • From entities in the ecosystem of the organization.
  • From competitors.
  • From independent third parties.
  • From Governments entities.
  • From illegal entities.
  • From the organisation’s own network of IP Service & Solution Providers.
Let's explore each of these in more detail, giving real life examples to illustrate each source.

From within the organisation itself

A significant percentage of the IP-related risks that an organisation faces originates within the organisation itself due to the activities of its own people. Sometimes it is due to a lack of awareness and education of IP by employees; other times it is a deliberate act.

Mercedes Benz announced just recently that they were taking legal action against an engineer who allegedly took confidential information as he prepared to join Formula 1 rivals Ferrari. The engineer, who works for engine manufacturers Mercedes AMG High Performance Powertrains, is alleged to have searched and saved race data. He was set to leave Mercedes at the end of 2015.

AMD filed a complaint back in early 2013 alleging that four of its former employees—one former vice-president and three former managers—transferred sensitive AMD documents before joining competing graphics chip maker Nvidia and then violated a “no-solicitation of employees” promise. The company alleged that the four employees collectively downloaded over 100,000 files on to external hard drives in the six months before leaving the company. They were also accused of recruiting AMD employees after leaving for Nvidia.

These two examples highlight deliberate employee theft, but other times it may just be related to poor decision making by employees –- signing NDAs without fully understanding the content of such agreements, divulging confidential information at a conference without thinking, using the IP of others without permission, and so on.

Sadly, many IP-related risks facing organisations are in fact due to the behaviour of their own people.

From entities in the ecosystem of the organisation

Traditionally, internal innovation was the paradigm under which most firms operated, with most innovative companies keeping their discoveries highly secret, making no attempt to assimilate information from outside their own R&D labs.  However, in recent years the world has seen major advances in technology and society which have facilitated the diffusion of information, and companies now work with people inside and outside of the organisation.

Collaborative innovation can take many forms, from working with universities, cooperating closely with key suppliers and vendors, collaborating with application developers, content providers, technology house and design houses, plus working with various communities including 'open’ communities, innovation networks, as well as customers and end-users.  It can also involve working with start-ups and venture capital funded entities, as some of the smallest companies can achieve great things with limited funding.

However, many IP risks originate from these very same entities within the ecosystem of a company, namely its suppliers, partners, distributors, customers and even end-users.

One technology company based in the UK is currently involved in a number of collaborative innovation projects with a variety of different partners (some universities, some start-ups, some European FP7 and Horizon 2020 projects, etc). Each project involves different parts of their IP portfolio (patents, data, software, etc) being utilized. Each project has different IP terms and conditions (definition, ownership, usage, scope, etc) associated with it. They have recognized that these collaborative innovation projects are bringing both IP-related value as well as some IP risks to the company, and they are working diligently to maximize the value and minimize the risks. By the way, their situation is not that dissimilar from many other companies.

Some entities within the ecosystem of a company just may not treat the company’s IP or the IP of third parties with the proper attention and respect it deserves, resulting in IP-related risks to the company.

From competitors

IP-related risks posed by competitors tend to get most press attention. Given the very nature of IP and the legal rights associated with it, IP assets belonging to competitors who design, develop, manufacture, distribute and/or sell similar products or services pose a potential IP risk to any company.

This is well illustrated by looking at the smartphone sector. Smartphones and mobile electronic devices have taken the world by storm. The ubiquity of smartphones has given rise to an incredibly large number of patents being issued to protect all of the technologies vital to these devices. The smartphone wars or smartphone patents licensing and litigation battles are an ongoing business battle by smartphone manufacturers, among others. The conflict may be seen as part of the wider "patent wars" between multinational technology and software corporations.

To secure and increase their market share, companies granted a patent can sue to prevent competitors from using the methods the patent covers. Since 2010 the number of lawsuits, counter-suits, and trade complaints based on patents and designs in the market for smartphones, and devices based on smartphone operating systems such as Android and iOS, has increased significantly.

From independent third parties

IP-related risks may originate from entities like IP holding companies, patent assertion entities, and non-practising entities (NPEs) plus others. Recent US patent statistics show that patent litigation, driven by such type entities, could reach an all-time high in 2015.

Although primarily focus on patents and centred in the US, IP-related risks coming from independent third parties is not limited to that particular form of IP or to that particular jurisdiction.

In the pharma industry sector, we have seen the rise of IP risks from hedge fund managers. One well-known hedge-fund manager is taking a novel approach to making money, by filing and publicizing patent challenges against pharmaceutical companies while also betting against their shares. That strategy utilizes an administrative process known as Inter Partes Review that allows petitions to strike down patents to be heard by a Patent Office Panel. The process was created by the US Congress in 2011 to help companies fight so-called patent trolls, non-operating companies that extract cash settlements from companies they accuse of patent infringement. The Patent Office Panel is a less expensive and faster option than trials in US Federal Courts.

From Government entities

IP-related risks may come from the activities of Government Departments, Industry Regulators, Inter-Operability Standards Setting Bodies, and Intellectual Property Offices themselves.

At the beginning of 2015, the Board of Directors of the Institute of Electrical and Electronics Engineers (IEEE) voted to approve a set of amendments to the organisation’s patent policy.  The changes largely relate to the commitment of IEEE members to license patents to users of IEEE standards on terms that are “fair, reasonable and non-discriminatory” (FRAND).  These FRAND commitments have been the subject of much recent litigation between many of the members of IEEE. Such an IP policy changes brings major benefits to some, but not to others.

There are a number of significant changes or debates about possible changes taking place in the world of IP at the present time. It would be impossible to list all of them here, but it is worthwhile to highlight a few.

The US has already pushed ahead with some patent reform, including already switching to the first to file system. There are numerous pending bills relating to various aspects of US patent law and procedure with the Innovation Act, the STRONG Patents Act, and the TROL Act being three of the major legislative proposals.

There are discussions about trying to move the IP environment to a more permissive environment and away from an exclusive one. There are strong debates about such things as copyright levies, the European patent and pan-European IP licences. Some countries have pushed ahead with some national initiatives such as establishing patent banks in places like Taiwan and Korea. A recent study of IP in the UK placed much emphasis on the creation of a digital copyright exchange. Some are pushing to expand the 'licence of rights' concept.

Many IP Offices face funding challenges and some are pushing to be self-funding or profit making. Debates rages about patent thickets, and a number of countries have already deployed patent box tax initiatives or are about to do so.

Trade secrets can be an important part of an organization's portfolio of IP assets. It is fascinating to see the EU working to harmonize trade secrets laws across Europe. The US is trying to strengthen trade secrets laws with the Defend Trade Secrets Act. China’s State Administration for Industry and Commerce (SAIC) has announced the opening of a discussion regarding a revision to the 1993Anti-Unfair Competition Law (AUCL) which includes trade secret law.

Some companies will clearly benefit from these reforms but others may find their IP risk profile changes in an adverse manner.

From illegal entities

Here I refer to the activities of illegal entities like hackers and counterfeiters, posing major IP risks to many companies.

Hackers are generally external individuals, criminal gangs or even Government sponsored entities whose sole objective is to gain illegal access to the company’s computer infrastructure, with the intention of committing a crime such as the theft of confidential information or trade secrets. Companies that become victims of online espionage are often not aware of any loss until it is far too late. Cyber experts estimate that every company utilizing a computer network is actually being attacked by hackers who are continuously probing for weaknesses.

Counterfeit goods can include fake designer clothes, bags, watches, accessories and perfumes as well as pirate DVDs, CDs, smartphones and computer games. They can also include medicines and components of automobiles and aircraft. The size of the problem posed by counterfeiters is staggering.  According to FBI, Interpol, World Customs Organization and International Chamber of Commerce estimates, roughly 7-8% of world trade every year is in counterfeit goods. That is the equivalent of as much as $512 billion in global lost sales.

IP theft poses a risk to all industry sectors; those most commonly affected by IP theft are manufacturing, consumer goods, technology, software, and biotechnology, including pharmaceuticals. Having personally attended some events organized by Customs officials and Trading Standards Officers in the UK, I am absolutely shocked by some of the counterfeit goods which they have seized.

From the organisation’s own network of IP Service & Solution Providers

Involving an external IP Firm or IP Service Provider into a company’s IP operations basically means buying certain work results from third parties. Subcontract work is normally based on the company’s specifications and requirements but, the company, and the external IP Firm or IP Service Provider may also compile specifications together. This is a better approach as it enables the external entity to contribute based on their skills, competencies and knowledge.

There are many reasons to subcontract work to an external IP Firm or IP Service Provider. Outsourcing may increase the flexibility of the company’s in-house IP in terms of resourcing, leading to faster response times and wider overall opportunities when the competence and capacity pool is expanded. The company may wish to focus its limited in-house IP resources on what it considers to be core activities, critical cases or key competence areas.

Some or all of the tasks of a typical in-house IP function can be subcontracted to external IP Firms or IP Service Providers. The management of external IP Firms or IP Service Providers is, in many ways, very similar to the management of in-house IP resource. It is all about fact-based management and values-based leadership.

Subcontracting to an external entity is not always easy. Yes it can bring tremendous value but it can also bring risks.

Final thoughts

IP risk management is about ensuring that the business really understands its IP related risks, and then mitigates proactively. The rationale for this may be driven by the need for freedom to use technologies already in use or being considered for use in the company’s products, but there are many other reasons why businesses need to take IP risk management seriously.

Truly understanding the origins of many of the IP risks facing a company is a key aspects of proper and professional IP risk management.

Finally it is important not to underestimate or exaggerate the risks associated with IP. As IP relates to innovation and creativity, it can sometimes be an emotive subject and some care is needed.