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In an article on maximizing IP value, Simon Crossley alluded to a novel use of IP, funding corporate pension plans, citing TUI Travel PLC and its Thomson and First Choice brands as an example.
To fund up to $400 million of its three U.K. defined-benefit plans, TUI Travel created a partnership backed by the Thomson and First Choice brands. The funds will be given a limited interest in the partnership and will receive its pro rata share of periodic royalty payments.
Valuation Research Group (U.K.) has been actively performing engagements in this space, valuing trademarks for pension-funding purposes.
It is not far-fetched to reason that free file-sharing sites damage copyright holders, and now an academic study has been released that adds empirical support to the hypothesis.
The Wall Street Journal reports that “online revenue was between 6% and 10% higher than it would have otherwise been” but for the closing of two major content pirates, citing a study compiled by Brett Danaher, Wellesley College assistant professor of economics, and Michael D. Smith, Carnegie Mellon University professor of information technology and marketing.
“We conclude that shutting down Megaupload and Megavideo caused some customers to shift from cyberlocker-based piracy to purchasing or renting through legal digital channels,” stated the researchers, in effect answering critics of the entertainment industry who had suggested the government take a “no harm, no foul” approach to content piracy.
On March 1, U.S. District Court Judge Lucy Koh ruled that Samsung Electronics should pay Apple adjusted damages of $598 million, down from the jury’s award of just over $1 billion. (A jury found that 14 Samsung products had violated Apple patents.) The restating of the damages was due to two factors: (1) the jury relied heavily on Apple’s expert witness (see analysis below) who used the wrong start date for calculating damages; and (2) as argued by Samsung, some of the awards rested on impermissible legal theories. The judge also ordered a new trial to determine damages for those infringements that do not legally lend themselves to a simple, mathematical recalculation.
“There are eight phones for which the jury awarded 40 percent of Samsung’s profits for the entire period, but, for which, during some of the damages period, infringer’s profits was not an authorized remedy … for utility patent infringement,” the ruling states. “The only remaining possibility is to conduct a new trial on damages for these eight products.”
Prior to Apple v. Samsung, Apple’s expert witness, Terry Musika, was best known for co-founding Invotex and for his testimony in support of NTP Inc. in the $612.5 million win over Research in Motion Ltd. (Mr. Musika passed away in December 2012.) Apple reportedly paid Musika’s 20-person team around $1.75 million in fees and expenses.
At trial, in calculating what was referred to as Samsung’s alleged “unjust enrichment”—i.e., its profits for selling the accused devices—Musika estimated that Apple lost around two million mobile device sales, at a cost of $488.8 million, and put Samsung’s related profits at $2.241 billion.
The issues, according to Judge Koh, are: (1) the Apple estimates pertained to a longer time period than that prescribed by law (“under 35 U.S.C. § 287(a), there can be no damages award where a defendant did not have actual or constructive notice of the patent or registered trade dress at issue”); and (2) more specifically, since the Galaxy Prevail was found to infringe only utility patents, and infringer’s profits are not a legally permissible remedy for utility patent infringement, the jury awarded damages based on a legally impermissible theory.
Musika’s approach to the case (aside from the when-do-damages-start issue) is instructive to others because Judge Koh specifically states in her ruling that the expert’s presentation “constitutes exactly the type of economic evidence of causation that the Federal Circuit requires in sustaining an award of lost profits.”
Musika provided detailed evidence regarding how the market would likely have behaved absent Samsung’s infringement, including: (1) the market share of various smartphone manufacturers, based on data collected and analyzed by independent research firm IDC (including Apple, Samsung, and other manufacturers, to whom he assigned the largest market share); (2) Apple’s capacity to manufacture additional phones and tablets; and (3) consumer demand, based on both expert survey evidence and fact witness testimony. Musika’s opinion answers the question of “how many additional sales Apple would likely have made but for Samsung’s infringement.”
Read the complete digest of Apple, Inc. v. Samsung Electronics Co., No.: 11-CV-01846-LHK (N.D. Cal., March 1, 2013), in the April Business Valuation Update; the court’s decision will be posted soon at BVLaw.
The question about what is meant by a reference to patent “quality” is asked often. Bart van Wezenbeek, writing in Rubicon Personal IP, has offered a definition. Here’s an outline.
- A quality patent meets novelty and inventive step criteria. Dealing with averages, the fewer the patents found to be invalid, the better the quality;
- The prior art search and the examination should be professional and thorough;
- A quality patent will produce consistency. The treatment of the same application in different patent offices should be similar, especially when the same prior art is available;
- The patent office should respond to the application in a timely way; and
- Quality patents will experience an absence of arbitrariness on the part of examiners.
On Wednesday, Feb. 28, 2013, Representatives Peter DeFazio (D-Ore.) and Jason Chaffetz (R-Utah) introduced legislation that would make plaintiffs liable for defendants’ legal costs should a patent lawsuit be unsuccessful.
Dubbed the SHIELD Act, which was laughably reverse engineered from the backronym “saving-high-tech innovators from egregious legal disputes,” the bill appears to have bipartisan support (and clearly has third-party, grass roots support) because it addresses the complaints from technology companies that are being threatened with lawsuits by nonpracticing entities (NPEs), so-called “patent trolls.”
The Hill reports plaintiffs would be exempt if they invented the patent or could show that they had made a substantial investment in trying to bring the patent to market. This is the second time around for like legislation. This one has a better chance of passing, both because of the number of companies NPEs are now affecting and because the new legislation is broadened to include all companies, not just those in technology.
IP Value Wire has blogged in the past about how Microsoft was able to carve out a piece of a supposedly free, open-source operating system and turn it into a profit center. Below is a representative list of reports from FOSS Patents on how well that IP strategy is working.
Background. Back in 2009, Microsoft CEO Steve Ballmer stated Linux was a bigger competitor than Apple. That admission even made Microsoft’s quarterly filing to the SEC.
The Linux operating system, which is also derived from Unix and is available without payment under a General Public License, has gained some acceptance, especially in emerging markets, as competitive pressures lead OEMs to reduce costs and new, lower-price PC form-factors gain adoption.
Far earlier, at the turn of the new century, Microsoft managers were admitting that migration to Linux from Windows was a major concern.
In one of the early signs that Microsoft had synched up its IP and business strategies (a change largely attributed to Brad Smith, who became senior vice president and general counsel in 2002, and the change in the U.S. IP protection remedies for software from copyright to patents), it tore apart Linux and examined how developers worked around various Microsoft patents. In May 2007, it announced Linux, the free, open-source operating system, violates 235 Microsoft patents. The company also laid out a second prong of its strategy: It wanted royalties from OEMs who choose Linux.
How is that Microsoft strategy working? In February 2013, Florian Mueller updated his list of Microsoft’s Android-related patent license agreements that have been made public. You be the judge.
- April 27, 2010: Microsoft Announces Patent Agreement With HTC
- June 27, 2011: Microsoft and General Dynamics Itronix Sign Patent Agreement (“Agreement will cover General Dynamics Itronix devices running the Android platform.”) (FOSS Patents coverage)
- June 29, 2011: Microsoft and Velocity Micro, Inc., Sign Patent Agreement Covering Android-Based Devices (FOSS Patents coverage)
- June 30, 2011: Microsoft and Onkyo Corp. Sign Patent Agreement Covering Android-Based Tablets (FOSS Patents coverage)
- July 5, 2011: Microsoft and Wistron Sign Patent Agreement (“Agreement will cover Wistron’s Android tablets, smartphones and e-readers.”) (FOSS Patents coverage)
- Sept. 8, 2011: Microsoft and Acer Sign Patent License Agreement (“Agreement will cover Acer’s Android tablets and smartphones.”) (FOSS Patents coverage)
- Sept. 8, 2011: Microsoft and ViewSonic Sign Patent Agreement (“Agreement will cover ViewSonic’s Android Tablets and smartphones.”) (FOSS Patents coverage)
- Sept. 28, 2011: Microsoft and Samsung Broaden Smartphone Partnership (“Under the terms of the agreement, Microsoft will receive royalties for Samsung’s mobile phones and tablets running the Android mobile platform.”) (FOSS Patents coverage)
- Oct. 23, 2011: Microsoft and Compal Electronics Sign Patent Agreement Covering Android and Chrome Based Devices
- Jan. 12, 2012: Microsoft and LG Sign Patent Agreement Covering Android and Chrome OS Based Devices (FOSS Patents coverage)
- April 25, 2012: Microsoft and Pegatron Corp. Sign Patent Agreement Covering Android- and Chrome-Based Devices
- April 30, 2012: Barnes & Noble and Microsoft Form Strategic Partnership to Advance World-Class Digital Reading Experiences for Consumers” (“Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its NOOK eReader and Tablet products.”) (FOSS Patents coverage)
- July 9, 2012: Microsoft and Aluratek Inc. Sign Patent Agreement Covering Android and Chrome Based Devices
- Nov. 7, 2012: Microsoft Signs Licensing Agreements for exFAT With Sharp, Sigma, NextoDi, Black Magic and Atomos Global (“The agreements cover Sharp Android tablets, Sigma and NextoDi high-end cameras and accessories, and Black Magic and Atomos Global broadcast-quality video-recording devices.”)
- Dec. 11, 2012: Microsoft and EINS Sign Android Patent Agreement (“EINS manufactures Android tablets under the Cat brand in Germany.”) (FOSS Patents coverage)
- Feb. 21, 2013: Microsoft and Nikon Sign Android Patent Agreement (“Agreement covers certain Nikon cameras running the Android platform.”)
- Dec. 11, 2012: Microsoft and Hoeft & Wessel AG Sign Patent Agreement (“Agreement will cover Hoeft & Wessel devices running the Android platform.”) (FOSS Patents coverage)
What is the value of a trademark when the owner is prohibited from collecting associated revenues?
Johnny Manziel, quarterback of Texas A&M and winner of the 2012 Heisman Trophy, which is awarded to the nation’s best collegiate football player, has a corporation (JMAN2 Enterprises) that owns the trademark rights (application to USPTO dated Feb. 2, 2013) to Johnny Football … at least that’s part of what is being litigated.
In a lawsuit filed in Texas earlier this month against Eric Vaughan, a man who was selling T-shirts that read, “Keep Calm and Johnny Football,” JMAN2 Enterprises claims Vaughan infringed on those trademark rights.
The lawsuit is pretty straightforward, but proving damages would be complicated. Manziel is an amateur, prohibited from collecting on any revenues resulting from the trademark. However, the NCAA says that prohibition does not apply to financial earnings as a result of a legal action.
Historians reveal first e-reader was patented in Spain in 1949
According to the Daily Mail, Ángela Ruiz Robles invented what she called the “mechanical encyclopedia” in 1949 to reduce the weight of books in students’ school bags. The device allowed readers to add different content spools.
Ruiz Robles’s patent application said:
It has some coils where you place the books that you want to learn in whatever language.… By a movement of the same [the coils] it passes over all the topics, making it stop where you would like it to.
Reportedly the device also had a zoom function enabling readers to focus in on a particular area of the text.
It’s official: The Yankees are the ‘Evil Empire’
Earlier this month, a panel of trademark judges listened to the New York Yankees’ arguments that they were, indeed, the “Evil Empire” and denied a 2008 trademark application from Evil Enterprises. The judges wrote:
In short, the record shows that there is only one Evil Empire in baseball and it is the New York Yankees.
Scotiabank rethinks value of BlackBerry patents
Scotiabank, the third largest bank in Canada, has revised its opinion of the value of BlackBerry’s patent portfolio after reviewing IAM Magazine’s US Patent 100. A report issued by Gus Papageorgiou states the case:
We had been putting a value of roughly $1,139M for BlackBerry’s patents, which was simply the value of the acquired Nortel patents ($770M) and the purchased Ericsson patents ($369M). But at this stage we believe that number is far too conservative. If BlackBerry’s patents were only worth half of the Nortel patents (and remember there are more of them at 7,597 vs. roughly 6,000) that would put the value at $2.25B, over twice the value we had estimated.
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