As the importance of intellectual property (“IP”) protection has grown, so has the sophistication of tools used to value it. Discounted cash flow,1 capitalization of earnings,2 return on investment,3 Monte Carlo simulation 4 and modified Black-Scholes option valuation methods 5 have been of great value. Nonetheless, the fairly simple “25 Per Cent Rule” (“Rule”) is over 40 years old and its use continues. Richard Razgaitis has called it the “most famous heuristic, or rule of thumb, for licensing valuation.”6

This paper looks at brain power and human relations and how we can effectively capture the brain power and how we can use it for the benefit of mankind. So brain power, use it or lose it.

The world of licensing professionals is changing, with more documentation and analysis being required to arrive at the values of intellectual property, especially for “In Process” R&D. This article will highlight some of the key points from the American Institute of CPA’s (AICPA’s) Practice Aid, Assets Acquired in a Business Combination to be used in Research and Development Activities: A Focus in Software, Electronic Devices, and Pharmaceutical Industries.

In the modern economy tecnology has undoubtedly become an essential tool to enable a country to achieve a certain level of development. Investment in technology not only enhances and encourages scientific research but also makes the country a more attractive market for foreign investments. In addition, technology development improves the quality and speed of industrial production constituting a vital element for an emerging country like Brazil, enabling it properly to supply its internal market and to face its international competitors. In this perspective, the selling, transfer or even “rental” of a specific technology through the so-called Technology Transfer Agreements is seen in Brazil as an important economic and commercial negotiation which must both observe the applicable laws and be registered at the Brazilian Patent and Trademark Office (BPTO).

The evolving technology-based economy of the 1990s, characterized by shorter product cycles, rapid infiltration of e-commerce and an increase in patenting activity, brought forth a shift in strategic thinking for many companies. In 1982, only 32% of the average company’s asset base was comprised of intangible assets. Today, this figure is over 70% and growing.1 Realizing this trend, and seeking competitive advantage during this time of change, firms began to focus on how to generate additional value from these intellectual assets. The focus of this article is to illustrate the short-term financial benefits and long term strategic and competitive advantages that a firm will realize from having an integrated and focused IAM program. It will provide the reader with a basic understanding of IAM and offer tools to begin company-wide implementation of an IAM program.

Royalty” is the compensation paid by users to owners of Intellectual “Property Rights (IPR). Owners of IPR who have, in varying degrees, the “right to exclude” others from practicing the subject matter of those rights, be it patents, copyrights, trademarks or trade-secrets, forego that right in return for the royalty. Theoretically, the licensor may seem to have the unfettered right to dictate the royalty charged to the licensee.1 If only this were true, it would reduce the innumerable hours spent by executives and attorneys at license negotiation tables. Judges required by law to determine “reasonable royalty”2 would not “find it a difficult judicial chore, seeming often to involve more the talents of a conjurer.”3 The proposition that the owner is unlikely to be able to exploit fully his invention all by himself and hence would seek to collaborate with others may seem to suggest that the contribution of the licensee is more decisive. Extended logically, the licensee should have the prerogative to decide the royalty. The fallacy is immediately apparent– the need for licensee’s input in the commercialization process is only secondary to the invention. Said differently, the product 4 is the primary focus of every enterprise and the process by which it is put in the hands of the customer becomes a secondary focus, although both are needed for a commercial success. Moreover, since every licensee’s business does not stop with the product-under-focus alone, his quest in seeking maximized returns in his overall business would involve factors inconsequential to the success of the focal venture.

For companies involved in the business of providing satellite, broadcasting or telecommunications services in Asia, the effective negotiation of technology acquisition contracts is a critical activity. Technology acquisition is a capital-intensive activity, and in many instances the selection of a particular technology and/or technology vendor results in the purchaser being ‘locked–in’ to a technology and/or vendor for system expansion, maintenance and support for years to come. Examples of critical technology acquisitions in the mobile telecom area include the purchase of radio base stations, switches and supporting software; in the satellite business the selection and purchase of a satellite and contracting with a launch service provider; for digital pay television broadcasters, the selection of a conditional access system and set-top box manufacturer; and for an electronic assembly manufacturer, the purchase of automated manufacturing equipment.

This is an excellent practical book, a timely addition to our literature on intellectual asset management. For me it filled a void with indepth, well reasoned and useful resources. It is one of the best collections of articles I have read and I appreciate the artistry of its organization. I tend to underline in yellow what I like – don’t do that unless you like reading yellow pages. Thanks, Bruce Berman, for the two years you spent encouraging these experts to write, and then organizing the material in such a thoughtful manner.

As intangibles have become increasingly important as sets for business, so has the need for companies to manage them and report on their value to investors. But despite the best efforts of companies, regulators, and standard-setting bodies, doing so consistently and clearly has been difficult, and common standards are few.

Probably the least analyzed but perhaps most important contractual provision from the perspective of the purchaser or licensor is the indemnity agreement. Typically, these terms are not actively negotiated, may be on the back of a printed form in the “small print,” and will generally not receive much attention. Usually, parties assume the provision exists and is valid and meaningful. The reality, however, is that they may be included but provide little protection. Many companies have a false sense of security that if they buy or license a product, they are immune from an infringement suit on that product. This complacency, however, is extremely dangerous as we explain below.

R&D investment is a key component of the economic policy of all of the advanced industrialized economies. It is the key tool in the drive to maintain innovation and continued growth in a competitive global economy. Any analysis of international R&D trends must invariably look closely at what is happening in the USA, which spent about $265 billion in R&D in 2000, up from $221 Billion in 1998, and more than the combined spending of the UK, France, Germany and Japan, which are nonetheless among the other large global R&D spenders. So in terms of absolute numbers, the U.S. R&D spending is the most significant. The USA is also the most active in production of new patents on a global basis. U.S. trends and activity are therefore most influential on the global R&D outlook.

Traditionally, trademark licensing and franchising had been handled in Mexico as a single concept. The law had assimilated franchise and license agreements without taking into consideration their different natures and specific characteristics. This assimilation, coupled with prohibitions under Mexican law against confidentiality provisions lasting longer than the term of the agreement, and against provisions preventing a franchisee from purchasing supplies from other than approved sources, posed major obstacles to the development of franchising before the 1990s. In addition, before the beginning of the 1990s, consistent with the Mexican government’s so called “substitution of imports” policy, the law imposed severe restrictions on the parties’ freedom to negotiate license and franchise agreements, required registration of such agreements, and granted very broad discretionary powers to the authorities to approve or disapprove each and every license and franchise agreement.

It was over 84 years ago that Benjamin Cardozo, one of America’s most noted jurists, handed down the decision in Wood v. Lady Duff- Gordon.1 In that case, Justice Cardozo set forth the principle that an exclusive licensee has a duty to use “best efforts”2 to exploit the exclusive license when that license is granted in exchange for a promise to pay royalties to the licensor. Despite the many years that have passed since Wood, it remains the guideline that courts follow to determine the propriety of implying a covenant to use best efforts in exclusive licensing agreements.

While there is no single or best method for determining the license value of a patent portfolio, certain parameters may be relied upon when ne- gotiating an arms-length agreement – especially when a charge of infringement is included. Analyses such as those used in the courtroom are frequently seen for what they are – a construction sometimes more suited for punishment than for providing a basis to forge an agreement. In the negotiating room, creditability and understanding are essential. Overanalyzing or diving into minutia often complicates the process. Negotiated settlements do not depend on convincing a third-party (the jury) whether or not a plaintiff is grievously injured. When two antagonists look at each other across a table, they must find agreeable value systems that allow them to put the matter to rest.

Until a better solution is conceived, we in the United States are stuck with the English language, with all of its ambiguities, to define the metes and bounds of the patent estate. The claims (a set of notoriously cryptic legal incantations at the end of every patent) bear the primary burden of establishing the legal line between infringement and non-infringement.

From a country referred to by Winston Churchill as a mere ‘geographic expression,’ India has come a long way. Today India has emerged as one of the world's hot spots for information technology. This long journey is not a mere accident but the result of a rigorous discipline in building a strong technological tradition. The emphasis on education has been a main reason for the metamorphosis of India. From a country where every- thing ‘foren’ was shunned, today India concentrates on evolving progressive economic development plans, infrastructure and technical education strategies to cater to national as well as multinational businesses. A decade ago political debates concentrated on allowing foreign capital into India. Today the debate is on how best to allow foreign companies into the country. Indians have tasted capitalism and now demand a more sumptuous meal of the same.

The European Commission has taken action on a price-fixing scandal involving the world’s two major auction houses, Christie’s and Sotheby’s, by opening cartel proceedings against the two companies concerning the effect of an illegal agreement on the European market. This came shortly after the chairman of Sotheby’s, Alfred Taubman, had been sentenced to a year in an American prison and fined $7.5 million for his part in the conspiracy, the final part of the American prosecution process that began in January 2000.

Natural persons may file an action of nullity against the Decisions of the Andean Council of Foreign Affairs Ministers, of the Commission of the Andean Community, the Resolutions of the General Secretariat or of the Conventions that affect their subjective rights or legitimate interests, in accordance with the recent decision from the Andean Court.

In Ecolab, Inc. v. Paraclipse, Inc., No. 01-1204, -1205, (Fed. Cir. April 3, 2002), the Federal Circuit held that an earlier consent judgment stating that a patent was valid did not foreclose a challenge of that patent’s validity in a later litigation where the accused products in the first and second lawsuits were different.

The recently published LESI Guide to Licensing Best Practices provides valuable insights into a broad range of current issues in the licensing of patents, trademarks, and technology. The editor has assembled an outstanding roster of LES experts to present their unique perspectives on the most relevant and topical issues in licensing today.

Creating a technology licensing program and establishing its activities within the academic research culture are a challenging undertaking. For those just beginning a program in technology transfer at an academic research center, introducing the obvious business and entrepreneurial objectives of the program may be the most difficult of any of its subsequent responsibilities. This article is intended to identify some of the important cultural barriers that may be encountered in setting an academic technology transfer office in place and hopefully will provide some helpful suggestions for overcoming these barriers and achieving a successful and productive academic technology licensing program.

The valuation of intangible assets typically covers selected economic theories behind valuations, including the well-known Market, Cost, and Income approaches. In an effort to educate biopharmaceutical professionals on the details of intangible asset appraisals, we focus here on two areas within the biopharmaceutical field that create special problems for assigning an accurate value to technology – research tools and platform technology. How should an appraiser value these types of technology?

Economic agents, manufactur ers and consumers, act, ac cording to the neoclassic balance theory, in order to maximize their personal benefit and use, in an environment characterized by uncertainty. Our economy is a market economy and some trends in its progression may be observed.

International license agreements should include a choice of law provision and either a jurisdiction clause or an arbitration clause. But why do e.g. a British licensor and a Japanese licensee agree on Swiss law and Swiss arbitration in their license agreement? Probably, because neither party wanted to be subject to the law and jurisdiction of the other party. Looking for a “neutral” legal system and seat of arbitration, Switzerland came to their mind when thinking of a neutral forum.

Before licensing any intellectual property rights, obviously it must be made certain that the respective inventions really are owned by the party wishing to grant rights resulting therefrom. Of specific importance is that in Germany very peculiar rules exist, binding and not being able to be excluded by employment agreements, which employers must follow in order to get ownership of inventions.

A license agreement is the instrument through which a party called licensor, owner of a right in an intangible asset, grants to another party, called the licensee, rights to exploit, use or manufacture the intangible asset.

On March 5, 2002, President George W. Bush anounced that the United States would impose temporary safeguard measures on imports into the U.S. of a wide range of steel products, to be effective from March 20, 2002. The move has been internationally condemned as inconsistent with WTO rules and the spirit of free trade but there is also wide recognition that the decision was taken for domestic political reasons.

In Gardner v. Nike, Inc., No. 00-56404, (9th Cir. Jan. 31, 2002), the Ninth Circuit held that the Copyright Act of 1976 does not permit an exclusive licensee to transfer its rights without the original licensorʼs consent, absent contractual provisions to the contrary.

An agreement for the joint development of new technol- ogy is probably the most difficult type of agreement for business people and lawyers to negotiate, draft and administer. Joint development agreements for other business ventures are more straightforward. For example, for joint development of a shopping center, the parties have architectural plans and the parties know what steps are required to complete the project and know what the project will look like when it is finished. Joint projects for development of new technology require having a business plan and a legal agreement for future technology and property rights that do not exist at the time the agreement is signed. In addition, depending on the field of technology, it may be fairly unpredictable whether the proposed technology can be developed, and if it can, what the final technology will be. The business objective, of course, is to create new technology that will provide each party with a competitive advantage over its competitors. This competitive advantage can normally only be secured with patent rights that each party can use to preclude its competitors from copying the new technology in the marketplace.

Anyone following the price fluctuations of Internet stocks in recent years knows that the market has provided little day-to-day comfort, or even consistency, in the valuing of Internet companies. Little comfort also came from industry pundits, who previously had nothing but giddy enthusiasm for Internet stocks but now disagree on which direction e-business is going. One side believes e-commerce is the future, while the other side sees the business-to-business (B2B) market burning out.

An intellectual property system is a crucial part of a country's economic infrastructure and enhances the ability to strengthen and advance its technological base in a sustained way. Furthermore, it allocates financial resources and fosters the movement of technical knowledge across borders. Increasingly, much of a company’s true value relates to intellectual property and the financial community is making the presence or absence of a company’s IP strategy a factor in its investment decisions.1 Therefore, in today’ s hypercompetitive marketplace, businesses try to guard these assets. If a company feels that a competitor has infringed on any of its holdings, it has the option to bring claims for monetary damages, injunctive reliefs and temporary restraining orders to stop the offending activities. Thus, businesses pursuing claims against other businesses who may have infringed on their intellectual property rights or businesses who want to guard themselves from commercial claims must have a strategy to handle intellectual property claims. In general, larger companies can afford to maintain patent litigation, while smaller companies or individuals who pursue judicial recourse often do not have the necessary capital to sustain a long court battle against a well-financed opponent. Because the firm’ s protection of intellectual property is essential for its market position and its future development, insurance coverage of intellectual property is becoming increasingly important from both an offensive and a defensive perspective.

The loss of trade secrets is a growing problem. Pricewaterhouse Coopers and the American Society for Industrial Security (ASIS) both reported that the Fortune 1000 suffer $45 billion per year in lost business information with the trend accelerating during the last few years.1 It is so widespread that 45 percent of Fortune 1,000 companies reported incidents last year.2 Why is this occurring? Part of it has to do with the way we do business today with increased use of contractors, temporary workers and out-sourcing. Employee loyalty has declined and job changes are more and more common. Former employees bring at least their residual knowledge and at worst their notebooks, floppies and other records to their new employer. Because innovation is costly and time consuming (e.g. it is faster and cheaper to steal) some companies “look the other way” when other’s trade secrets fall into their laps. Organized crime has also discovered the money to be made in stealing high tech intellectual property (“IP”). This has all created a perilous environment where IP carelessness can have devastating consequences.

This is the second in a series of articles about benchmarking as it relates to licensing. Whereas our September 2001 paper in les Nouvelles provided a strategic overview of benchmarking by companies engaged in licensing activities, this article focuses on specific benchmarking practices. Also, in this article, we will describe an actual benchmarking activity and the results it produced.

After much draft and discussion, China has completed the amendment to its Trademark Law. This amended version was promulgated on October 27, 2001, which became effective as of December 1, 2001. This article will discuss the major changes in the amended version and its possible effect on trademark owners who seek trademark protection under the amended Trademark Law.

Mergers make good box-office material. They combine high finance, politics and strong personalities, sometimes with foreign affairs and potential trade wars thrown in for good measure. These elements also make merger control very difficult. It demands seeing clearly into a clouded crystal ball. The European Union’s system for reviewing mergers, therefore, seems condemned to controversy. But that should not blind us to its many qualities—or prevent us from calling for change where it is needed.

The vigor, creativity and general success of global business since the end of World War II has been chronicled by a series of insightful authors. But these leading writers did not merely record the developments they witnessed. Their commentaries about innovative events also served to publicize their underlying ideas and thereby accelerated the adoption of these same ideas by readers all over the world who were eager to learn.

Normally, when talking about exhaustion of trademark rights, reference is made to the extent of the rights by the proprietor of a trademark registration, for determining, restricting or imposing conditions, generally territorial, for commercialization of the products bearing the related trademark once those products have been lawfully placed in commerce in a country, directly or by a third party under consent from the owner.

In Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp., No. 00-1218, (Fed. Cir. Nov. 19, 2001), the Federal Circuit affirmed a district court’s judgment against DeKalb Genetics Corp. (DeKalb) on fraudulent inducement to enter into a license agreement, trade secret misappropriation, patent infringement, and the award of punitive damages.