Volume XLI No.4

After a quarter century of what by most objective standards has been an exceptional success, the Bayh-Dole law is under increasing attack today. Most of the attacks have come from individuals who have little experience with the comprehensive nature of how the law is implemented. They do not know what Bayh-Dole does and does not do, and why certain features were incorporated into the law. Equally important, these nay-sayers have no appreciation for the factors that motivated our efforts to develop this legislation in the first place. Most unfortunate of all, these modern-day experts in technology transfer apparently do not understand the basic factors upon which our nation’s free enterprise system is based.

There is a pressing need for our profession to speak up on what we are about. A little reflection shows that what we are really doing is fostering international economic development. And what could be more important in the current world situation? We need to take this larger view. Broad based economic growth is intricately linked with political freedom. Political freedom fosters stable international relations. Stable international relations promote wealth creation. And so the cycle grows.

From the many well publicized success stories there is broad awareness that patent licensing can provide a good source for generating revenue. This holds true not just for large corporations like IBM but also for smaller organizations and inventors without the resources to commercialize inventions on their own. But there is growing public sentiment that patent licensing has been too good to the wrong people .those who have neither developed nor commercialized the patented technology they license and who inappropriately have been characterized as undeserving to license and enforce their legal rights in the patents.the so called patent trolls. Coupled with a growing public sentiment that bad patents or patents of dubious quality are being granted by the Patent Office and asserted by licensing companies an environment of hostility towards patents and patent licensing is being generated and reflected in the media.

The data reported here are from the third annual survey of the licensing industry of the United States and Canada taken by the Licensing Foundation in cooperation with LES (USA & Canada). The ambitious reference to the licensing industry is however confined to the perspective provided by the membership of LES (USA & Canada) who responded to faxed and emailed requests for participation in this project. The data obtained primarily in March 2006 were for the period 2005.

Because technology innovation is becoming more globalized it is now more important than ever to develop a strategic understanding of the intellectual property (IP) protections available for that innovation. For many innovator companies new competitive threats are increasingly likely to be launched from one of the innovation hot spots that are emerging in countries around the globe. Many of these new hot spots are located in regions where IP protection is currently inadequate. Because IP protections in these regions are shifting and uncertain the risks and benefits of IP options are highly ambiguous.

One current corporate practice is to develop a business model (or business unit) around your company’s intellectual property (IP) portfolio. The literature and press over the last decade has posited some divergent views of the strategic, tactical, and operational methodologies required to manage and extract value from IP. How does a company select an appropriate blue¬print for its’ own unique universe? Why even attempt to manage an IP portfolio as a business? Doesn’t IP come into existence in response to product strate¬gies? Aren’t the inception, timing, and cost of the prosecution of IP fundamentally un-plannable; reactive rather than proactive? Don’t most of the inventors now work elsewhere? And even if you are able to claim some success in the management of the process, isn’t the actual value of the IP both intrinsic and extrinsic? Isn’t the actual value of IP uncertain at best? IP in single instances or in strategic bundles can provide the seed elements of product development, the glue in development partnerships, and the cata¬lyst required to turn invention, opportunity, capabil¬ity, and knowledge into innovation. Understanding how to manage this asset class as a business, how¬ever, depends on a thorough understanding of the type and mix of IP in the existing portfolio; how it is encumbered, and how new IP is derived, positioned, and protected.

Patents have taken over additionally to their original function of protecting their own innovative achievements in the industrial area against copying more and more the function of an instrument for the strategic management of business enterprises. In particular the patents are increasingly also used as sources of income through licensing or patent sales as bargaining chips in cross license agreements as know how currency in the acquisition of enterprises or as basis of financial transactions. Up to the 1980s the numbers of annually filed patent applications was proportional to the R&D expenses but as a consequence of the shift in the importance of patents since then the patent filings have grown more than proportionally.

The Global Forum for Health Research (www.globalforumhealth.org) recently published a two volume report titled Global Forum Update on Research for Health 2005. In summary this report showed that there is a disparity in the research effort to improve healthcare between developed and developing countries. For example there is high research effort in both rich and poor countries for diseases that affect large populations such as Hepatitis B and diabetes but there is a low research effort for diseases that primarily affect poor countries such as HIV AIDS and tuberculosis. There is also a group of neglected diseases that exclusively affect people in poor countries such as malaria Chagas disease and leishmaniasis and until very recently very little research is focused on finding cures for such neglected diseases.

The proportion of patented technologies as intangible assets possessed by enterprises is rapidly increasing in todays world. A patent license contract for the licensor is not only an important means to reduce R&D risks and obtain advanced technologies but also a significant means of developing markets and gaining profit. Patent licensing therefore plays an increasingly important role in todays international technology trade. However the bankruptcy of licensors brings risks to the performance of contracts. This article will based on the relevant Chinese laws and regulations as well as judicial theories and practices study the risks to and precautions which may be taken by a licensee to a patent license contract where the licensor is bankrupted.

The current trend of characterising patents as assets entails a risk: when considering the economic aspects of patents it tends to restrict the scope of analysis to the patent rights owned by the company and their valuation. However for a company which owns and exploits patents in its business an evaluation taking into account patent assets alone is seriously incomplete as it ignores the other side of the coin: patent liabilities. A company is exposed as a result of its commercial activity to the risk of infringing third party’s rights.

On 27 September 2006, the European Court of First Instance (CFI) partially annulled the European Commission Decision condemning GlaxoSmithKline’s policy of charging higher prices for Spanish products destined for export. The judgement marks another step in the pro¬longed debate between antitrust authorities and pharmaceutical companies on the legitimacy of inhibiting parallel trade. The CFI ruled that the Commission had failed adequately to assess whether “dual pricing” could have benefited research and development and therefore have been eligible for exemption from EU antitrust rules. The CFI further concluded that the Commission was incorrect in its assessment that the scheme was by its very nature restrictive of competition, and criticised the Com¬mission for failing to take sufficient account of “the specific nature of the pharmaceuticals sector,” in particular the potential benefits to consumers from R&D expenditure. It also accepted, as asserted during the court case by GSK, that “it cannot be presumed that parallel trade tends to reduce prices.” However, the CFI did confirm that the Commission had been correct to conclude that in the specific circumstances of this case, the dual pricing had the effect of restrict¬ing competition.

Volume XLI No.3

At the time when the mode of calculation termed license analogy was introduced in German legal practice intensive discussions immediately set in as to the ratio something else than 1:1. which should be applied between the royalty rate payable by a condemned patent infringer in accordance with license analogy and a customary royalty rate assumed in a fictitious license agreement relating to the technology in question. A helpful overview of corresponding case law particularly jurisdiction by the highest German court can be found in Benkard Patentgesetz 9th edition marginal nos. 63 71 in respect of 139 PatG (German patent law).

China has undergone drastic economic transformation since 1978. In the past it was regarded as merely a place for cheap labor. A lot of manufacturing was done in China for export to the rest of the world and it is still a major world manufacturing site. Then multinational corporations noticed the untapped reservoir of talent for research and development in China. As a result many R&D centers were established with sponsorship from these corporations in state owned enterprises or state owned laboratories or universities. Now it is also widely recognized that China is a major consumer market that should not be overlooked. It follows that intellectual property and technology related transactions are on the rise.

Intellectual property litigation continues without relent. In light of global competition shorter product life cycles and easier access to information patents and trademarks are now among the few remaining barriers of entry to companies seeking to differentiate a product in order to secure a niche in the market. Protecting these intellectual properties (IP) which also include copyrights trade secrets technical know how and proprietary data often involves a life and death struggle to gain competitive advantage that can at times determine the survival of a business. The spoils of that struggle damages seek to deter others from trespassing on sacred ground. While an injunction may be more valuable than damages in a particular case it is the damages that often form the tip of the sword for enforcement.

rands have become key drivers of corporate value and brand licensing is becoming an increasingly important part of overall brand strategy. Not only can brand licensing have a major impact on bottom line profits but it has the capability of taking your brand to places never considered before elevating exposure and ultimately increasing brand value. However the rewards are not without risk and the fight for consumer attention is only getting more difficult in an age where choice and accessibility are ever increasing. Brand licensing therefore needs to be effective.

What is fair and reasonable in royalty rate determination is not clear despite a longstanding debate and maybe because of it. As often in complex uncertain situations simple rules of thumb then tend to emerge and over time set some standard rule of reason and fairness.

Over the years businesses have come to recognize the enormous economic value of intellectual property rights such as patents designs trademarks and service marks trade secrets and copyrights ( IP Rights ). Innumerable transactions have been structured around the purchase or sale of these valuable assets. Given the stakes involved one might expect that the parties to these transactions would make the necessary investment in time and resources to maintain and regularize title to these IP Rights at the national patent and trademark offices. As discussed below however both Buyers and Sellers often fail to undertake this critical step.

For developing countries burdened by foreign debt the level of strong currency reserves a technology acquisition or screening policy and the level of economic development all appear to contribute to difficulties (or ease) in recording contracts with the government for the purpose of remitting payments abroad. A country s inability to produce significant technology for the world market also means that it may be in an uncomfortable position in terms of balance of payments for this specific tradeable.

In late 2004 and early 2005 the LES Silicon Valley Chapter collaborated on a study of invention and innovation with Dr. Cynthia Wagner Weick Management Professor at the University of the Pacific in Stockton California. The study focused on the degree and type of external licensing activities undertaken by companies. Data was gathered from selected members of LES in the greater San Francisco Area via an electronic survey. Subsequent follow ups were administered through email phone and postal mail. The LES Silicon Valley Chapter Coordinator Julie Alsing and Managing Director Lawrence J. Udell assisted in generating the master list of companies from which a sample germane to the study objectives was drawn. Dr. Weick was assisted by James D. Martin an MBA Graduate Research Assistant.

Not the only but the most prominent piece of patent legislation in Europe in recent years was the discussion around the EU Directive on Patentability of Computer Implemented Inventions (the CII Directive). It ended in summer 2005 with the EU Parliaments rejection of the CII Directive. Hard times for patents? This question is broader than the EU Parliaments rejection of the CII Directive. But the question shall be approached also in view of the circumstances that led to the above mentioned decision on the EU level.

DISTRICT COURT REFUSES TO GRANT A PERMANENT INJUNCTION TO A PATENT OWNER Historically it has been presumed that when a defendant has been found to infringe a patent the patent owner would be entitled to a permanent injunction preventing the defendant from further infringement.

Bruce Berman has produced another stimulating collection of essays on Intellectual Property Management following on his previous book From Ideas to Assets Investing Wisely in Intellectual Property.

1. SonyBMG On 13 July 2006 in an unprecedented judgement the Court of First Instance of the European Communities reversed the European Commissions 2004 decision approving the creation of a joint venture between Sony and Bertelsmann combining their recorded music businesses. This is the first time that the Community judiciary has reversed a decision of the Commission granting unconditional approval for a transaction.

Almost every international president starts the September message to the LES members with the line that a “short year” comes to an end. You may not be surprised to hear the same from me. At the end of my term I can confirm that time flies by while trying to serve the Society best and putting by far too many things on your personal agenda to accomplish.

Volume XLI No.2

The academic landscape in Switzerland consists of two federal institutes of technology (ETH Zurich and EPFL in Lausanne), ten cantonal universities and seven inter-cantonal universities of applied science. Historically, university technology transfer first developed within the two federal institutes of technology, which both have had a long tradition of relationships with industry. Licensing activities were pioneered at the EPFL in the late eighties. Later the cantonal universities also engaged in such activities and set up technology transfer offices. This was also the time when the legal framework both at the federal and at the cantonal levels was adapted to facilitate and promote technology transfer from academia to industry. In 2005, a programme sponsored by the federal government was launched to promote technology transfer to SME’s. This programme involves all the Swiss academic institutions and is organized in four consortia, each run by one technology transfer office.

The United States is a very large country, and technology transfer practices differ depending on the institution and its mission, whether it is public or private, and where geographically the university is located. This article is drawn from my personal experience after ten years working in Research and Development in industry as a mechanical engineer and working for the last seven years at private institutions in university technology transfer (Carnegie Mellon, Harvard, and Rice)

Due to the changes in IP Law that have taken place in Mexico in the past few years, high impact technologies developed by industrialized countries are now easily flowing into Mexico. Unfortunately, the situation related to technologies developped by Mexican nationals is completely different

There are many steps from idea conception to commercialization. Throughout the process government policies always come into play. Although this process is the same worldwide, the importance that a government places on each step of the process varies. Furthermore, cultural difference and economic condition will affect who does what and where research is done. This paper examines the practices of tech transfer in China (including Hong Kong), Japan, Korea, and Singapore.

American universities have been transferring their technology to industry since before World War II. This technology is now developed with the more than $35 billion that the universities receive annually from the federal government and industry, with the latter providing less than 10% of the total. The universities annually receive in total more than $1 billion in royalty payments, create hundreds of new start-up companies every year, and are the recipients of more than 3,400 U.S. patents. Most of the royalties are paid for biomedical and pharmaceutical (“bio” and “pharma”) research, with these funding companies usually insisting on and obtaining exclusive intellectual property (IP) rights. As a pure business model, this process is somewhat questionable for the universities, but the other benefits obtained by the universities and society more than compensate for the costs. This paper will address U.S. technology transfer based on broad experience in this field both with a major “customer”—IBM—and as a consultant to “buyers” and “sellers” of intellectual property. From this experience we will identify some of the challenges facing Technology Licensing Offices (TLO’s) as well as newly “privatized” Japanese universities, and propose some suggestions for what we believe are “best practices” in technology transfer

In the same manner as in the USA and in Japan, the questions of patenting of and obtaining commercial worth from inventions made by university researchers have been considered in various European countries as mentioned in particular in the document of the European Commission “Management of Intellectual Property in Publicly-Funded Research Organizations: Towards European Guidelines.”

The present work shows the Brazilian revolution in technology transfer and innovation, emphasizing the case of State University of Campinas, which is leading patenting and licensing activities in Brazil and Latin America. Among the discussed subjects, there will be Brazilian laws and practices concerned with ownership rights and benefit sharing, government incentives to innovation, results achieved by Inova Unicamp TLO, and two successful cases.

As the number of patent applications being filed is on the increase and more patent rights are being granted in China, foreign companies are starting to feel concerned as to whether their patents can be enforced in China. Until recently, the Chinese legal system has been a mystery to Western-trained lawyers. Chinese intellectual property (IP) law is relatively new, and the interpretation of Chinese IP law appears not to be uniform and is unpredictably applied. This article is intended only as an introduction for foreign attorneys to familiarize themselves with IP protection in the People’s Republic of China (PRC), especially concerning enforcement of patents in China.

As is often the case, the Supreme Court’s most recent foray into the arcane world of patent law has answered one set of questions at the expense of leaving a path strewn with new sets of unanswered questions. In Merck v. Integra, the Court reviewed a decision of the Court of Appeals for the Federal Circuit (“Federal Circuit”), answering the question whether Merck infringed Integra’s patents by using Integra’s patented compounds in preclinical research. The Court, in a brief opinion by Justice Scalia, held “no infringement.”

On June 24 of 2005, the Brazilian government enacted legislation that would override Abbott Laboratories’ patent on Kaletra®, an anti-retroviral drug used to treat HIV and AIDS, and would enable generic production and sale of the drug at nearly half the price that Abbott currently charges. Abbott was given ten days from that date in which to respond to this legislation and enter negotiations with Brazilian health officials to reduce the price at which Kaletra® is sold in the country. Preliminary agreements on price reductions and technology transfer programs have been proposed, but no binding agreement has been reached as of the date of this article.

In fiscal 2001, NEC experienced management crisis due to the double hit of a burst global communications bubble and a depressed semiconductor sector, which includes DRAM. Spurred on by this difficult situation, however, the company has gone ahead with the concentration and selection of business domains to focus on IT/NW integrated solutions and semiconductor solutions, principally including system LSIs, which has resulted in the D/E ratio rapidly recovering to 1.4 from a one-time low of 4.17 (as is seen in Fig.1), and the laying of groundwork for new developments for a ubiquitous society

Timing and cost are two key factors involved in patent filing decisions. This paper will explore mechanisms for delaying the high costs of filing a patent application as long as possible, so that additional information on an invention and its worthiness can be gathered. The efforts to minimize upfront costs are balanced against the potential need to secure viable patent rights at some point in the future.

Tax consequences, payment, currency, and other financial challenges are important issues to consider when structuring international licensing agreements. Many intellectual property and other transactional attorneys, however, do not have sufficient understanding of these issues or give them appropriate consideration. This article aims to identify these issues and to suggest best practices or approaches by which to address these issues and to improve the collection of payments under international licensing agreements. By becoming more knowledgeable about the financial issues involved in international intellectual property licensing transactions, attorneys can add demonstrable value to their services to clients and correspondingly improve client satisfaction, retention and referrals.

Volume XLI No.1

As the economy has transformed from a manufacturing base manned by laborers to a service base driven by knowledge workers, intellectual capital has emerged as a leading asset class among industrialized countries worldwide. Furthermore, recent and anticipated changes in accounting rules and securities reporting will broaden the market’s recognition of intangible assets, allowing companies to maximize value derived from their intellectual capital. This paper will review the character of intellectual capital, as well as chronicle its ongoing rise in importance as a measure of market value. To do so, we examine the growth of this asset class since the 1970s within the U.S. equities market as measured by the S&P 500® Index. Finally, we discuss the potential for more accurate valuations of intellectual property based on innovations of analysis, which stand to benefit investors

Every once in while it is useful to stop, look back, and see what has changed in the business you are in. For as Willie Jolley said: “The past is supposed to be a place of reference, not a place of residence! There is a reason your car has a big windshield and a small rearview mirror. You are supposed to keep your eyes on where you are going, and just occasionally check out where you have been…Otherwise you are going to crash.”

Small pharmaceutical companies are always looking for that “diamond in the rough.” That “undiscovered research asset” which the large pharmaceutical company has discontinued or somehow ignored may represent a significant marketing opportunity for a small pharmaceutical company. Perpetuating this phenomena within the pharmaceutical business are recent ”in-licensing” success stories for “small” pharmaceuticals companies, such as Imclone, “Erbitux”—oncology treatment; Adolor, “Entreg”—an acute care hospital treatment; Actelion, “Tracleer” for congestive heart failure; CV Therapeutics, “Aceon” for hypertension, Forest Laboratories, “Celexa”—depression and The Medicines Company, “Angiomax,” an anti-thrombolytic therapy. The common denominator for these products is that they were in-licensed from larger companies and are now marketed or near approval. The market capitalizations of these small organizations often exceed $1 billion and the collective revenues of these in-licensed products exceed $3 billion. Such success stories breed many new pharmaceutical entrepreneurs with venture capital backing salivating for such opportunities.

You’re a Salesman and You Didn’t Know It! The Licensing Executives Society (LES) has a distinguished history of serving professionals in the licensing community for over 40 years. As a member of the Society for a little over 10 years (or half my professional life) I have read nearly all the issues of les Nouvelles, and attended many of the Society’s meetings. In addition to my involvement with LES, I would consider myself a student of the profession, learning new approaches from my colleagues, and building upon an ever-expanding knowledge base.

The most effective way that governments can leverage the potential of universities to drive economic development is for political leaders to focus resources on supporting great university research and building a robust entrepreneurial infrastructure. However, in pursuing economic stimulus, governments (and universities themselves) sometimes resort to funding companies spun-out of universities as well as sponsoring “translational research” conducted on campuses. Indeed, funding start-ups has the allure of fast results—i.e. the direct creation of companies and jobs; and sponsoring product development under the cloak of translational research has the appeal of being practical. But, creating a government or university system for supporting start-ups and product development doesn’t leverage the time-proven ability of an entrepreneurial ecosystem to deftly evaluate, fund and grow companies. This ecosystem works best when an extensive pipeline of innovative research is coupled to an educated pool of entrepreneurs within a robust infrastructure of services. Government programs that seek to circumvent, instead of foster this ecosystem, more often result in taxpayer money that is wasted on short-lived ventures that don’t create profitable products and spawn new industries.

Abstract This paper discusses several methods of calculating an option fee for a license. It is concluded that most option fees, with a technology now ready for the market, can be calculated simply as “interest” due on the net present value of the license. If substantial risk or time is involved before the product can come to market, like pharmaceuticals, the purpose of the option fee changes and it becomes a “place holder” for more potential income; but, the option fee can still be determined from a simple net present value calculation that includes both a discount rate factor and a technology risk factor.

Submission to the World Health Organisation’s Commission on Intellectual Property Rights, Innovation and Public Health (CIPIH) Summary ICC firmly believes that maintaining intellectual property protection for innovation, including so-called “incremental innovation”, assists development, and in particular access to medicines in the developing world. That view was expressed, and its basis explained, by the ICC representatives who met the CIPIH in Brussels on 15 March 2005. This paper confirms that view and explains the reasons for it in more detail. It also addresses some of the specific questions raised by the CIPIH at that meeting.

I. Introduction On April 7, 2004, the European Commission adopted a new block exemption regulation with respect to Technology Transfer Agreements (TTBER). The TTBER replaces the existing Regulation 240/96 and sets out a new regulatory framework for applying competition policy to the licensing of patents, know-how and software copyrights. It contains extensive changes and is part of the fundamental revision of the Commission’s rules for safeguarding competition, which has a particular focus on a more economic-based approach in the assessment of agreements. It entered into force on May 1, 2004, at the same date when the new regulation on the implementation of the rules on competition 1/2003 became effective. The TTBER is accompanied by detailed guidelines that shall assist market participants in the assessment of restrictive agreements, in particular when they fall outside the scope of the TTBER.

In March 2004, the EU adopted a package reforming the European pharmaceutical legislation comprising Directive 2001/83/EC of 6 November 2001 of the Community code relating to medicinal products for human use and Regulation 2309/93/EC of 22 July 1993 establishing Community procedures for the authorization (the centralized procedure) and supervision of medicinal products for human and veterinary use and establishing the EMEA

I have been advising universities on their contracts with industry—research contracts, collaborations, consultancies, technology licensing, assignments, and the rest—for nearly 20 years. By coincidence, some U.K. universities have roughly the same amount of direct experience of technology transfer. In 1985, a Government minister announced in the House of Commons, that in the future universities would be free to undertake their own technology transfer activities, in respect to inventions arising out of work conducted using Research Council funding. Prior to that date, BTG (British Technology Group, formerly the National Research and Development Corporation) held a monopoly over such inventions. Since then, many universities have built up their technology transfer departments, or formed separate companies to manage their technology transfer activities.

PATENT LICENSEE DOES NOT HAVE STANDING TO SUE FOR PATENT INFRINGEMENT DESPITE BEING GRANTED EXCLUSIVE RIGHT TO SUE FOR COMMERCIAL INFRINGEMENT Generally, only the owner of a patent may bring a suit for patent infringement. A licensee may bring suit, however, if the rights they have been granted are tantamount to an assignment of the patent. In order to determine whether a license agreement should be treated as an assignment, the courts look to whether the licensee has been granted “all substantial rights” in the patent. In Sicom Systems Ltd. v. Agilent Technologies., Inc., No. 05-1066 (Oct. 18, 2005), the Court of Appeals for the Federal Circuit held that a licensee who had been granted the exclusive right to sue for commercial infringement was not granted “all substantial rights” because the patent owner had retained the right to permit infringement in certain cases, because the agreement required either the patent owner’s consent to litigation or that the patent owner be consulted on the litigation, depending on the circumstances, and because the agreement could not be assigned.