|
In a unanimous ruling on May 13, 2013, in Bowman v. Monsanto Co. et al., the Supreme Court supported the patent protection afforded Monsanto’s weed-killer-resistant soybeans by saying the principle of patent exhaustion doesn’t permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.
Farmer Vernon Hugh Bowman bought Monsanto’s expensive, patented ‘‘Roundup Ready” seeds for his main crop of soybeans. For his second crop (and for eight more years), he bought much cheaper seeds from a grain elevator that held soybeans it typically sells for feed and other uses, correctly reasoning that the less-expensive soybeans would also show weed-killer resistance, as they were probably sourced from herbicide-resistant seeds (Monsanto’s patented seeds have a 90% market share). Bowman bought soybeans from the grain elevator and planted them and their progeny over an eight-year period. In 2007, Monsanto sued for patent infringement and won an $84,456 judgment.
Bowman’s lawyers argued that Monsanto’s patent rights stopped with the sale of the first crop of beans (first sale), but Monsanto argued that its limited license clearly defines allowable use of the seeds it sells, and the first sale doctrine never came into play anyway, as the new seeds (progeny of the originals) had never been sold.
Justice Elena Kagan agreed. ‘‘Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article,’’ she said. ‘‘Patent exhaustion provides no haven for such conduct.’’
Justice Kagan also dismissed the possibility that the results of the case could be used as guidance in other sensitive situations concerning self-replicating technologies, stating this decision only ‘‘addresses the situation before us.’’
There is a rising tide against patent pools. How fast it is rising is anyone’s guess, but the common thread to the criticism has to do with the value of the patents in a patent pool.
A patent pool, in effect, is an agreement between two companies or more to license their patents collectively for specified technologies. Patent pools exist in or are planned for these industries:
- Molecular diagnostics;
- Chemical;
- Consumer electronics;
- E-commerce;
- Education;
- Energy;
- Environment;
- Healthcare and biotechnology;
- Manufacturing and materials;
- Transportation; and
- Wireless technology.
Steve Pociask, writing in the Huffington Post, describes the need for patent pools:
Some products use hundreds of patents to manufacture. For a manufacturer, getting access to these patents is essential to producing and creating competition in the marketplace. Assume, for instance, that a DVD manufacturer works out deals to use dozens of patents, but one competitor chooses to withhold access to one essential patent. The product never reaches the market.
Department of Justice-approved patent pools provide for the aggregation of companies’ intellectual property rights in one place, for one fee, allowing manufacturers “essential access to these patents.” The manufacturer pays a fee to get that essential access to the required patent bundle, theoretically encouraging innovation and competition.
The problem arises as the essential patents expire. If a reasonable fee on the bundle were $X when the patents included were at their maximum value, it stands to reason the fee should be $X - $Y as those essential technologies come off patent.
One patent pool, MPEG-2, administered by MPEG-LA, has been the topic of discussion in IP Value Wire before. Steve Forbes has pointed out the value of the IP in the patent pool for MPEG-2 is less than half what it once was, due to patent expirations. Yet the fees charged manufacturers, who would now be able to gain access to those expired patents for free, remain the same. “Innovators are forced to accept MPEG-LA’s license fees and terms regardless of actual patent value.”
Analysts should watch the activity of the DOJ, as the patent pool administrators appear to be making no effort to address the valuation issue.
Rovio Entertainment Ltd., the creator of the “Angry Birds” game franchise and all that has come with it, announced it would begin to license its brand to games developed by third parties.
The move to publishing is significant, and a new division has been created to spearhead it: Rovio Stars. In its press release, a spokesperson was quoted as saying that Rovio has “positioned itself as one of the powerhouses of mobile entertainment, so moving into publishing is a logical step for us at this point.”
Just last month, The Licensing Letter predicted Rovio would have to do something dramatic to sustain its rate of growth (revenue doubling year-over-year 2011-2012 and net profits up 57%). The company is rapidly becoming a case study on what’s possible in licensing.
In CLS Bank v. Alice Corporation, 11-1301, the U.S. Court of Appeals for the Federal Circuit (Washington) ruled on May 10, 2013, that patents held by an Australian electronic financial firm (Alice Corp.) are not valid because the claims are too abstract to qualify for such intellectual property protection. Alice had argued the patents were valid because the claims were tied to a computer system.
Those in the software industry and valuators with software company clients hoping for clarity on the patentability of software in general have to wait. Though there was consensus in the ruling, the 10-judge panel was divided in its reasoning. Half of the judges sided with the majority opinion, while the other five agreed in part but dissented in part as well. Chief Judge Randall Rader said the opinions were so split that “nothing said today beyond our judgment has the weight of precedent.”
One judge, Kimberly Moore, thought the slippery slope of software patentability had been entered, fearing a “freefall” in the nation’s patent system.
“Let’s be clear: if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer-implemented and telecommunications patents.”
To explain the predicament in which we find ourselves, Ria Farrell Schalnat, a guest blogger on Patent Baristas, published an imaginary letter from the U.S. Court of Appeals for the Federal Circuit judges to the U.S. Supreme Court that pleads for a granting of certiorari when Alice Corp. appeals its recent setback, stating “we just can’t figure out how to apply Bilski v. Kappos when it comes to computer system claims (and some of us are also unhappy when it comes to the method claims) … and predicting a stranglehold on innovation if the USSC fails to act.… Besides, if you don’t grant cert, ‘with today’s judicial deadlock, the only assurance is that any successful innovation is likely to be challenged in opportunistic litigation, whose result will depend on the random selection of the panel.’”
Analysts working on software valuations are having the same difficulty understanding and quantifying the risks to continued benefit streams.
On April 1, 2013, the Supreme Court of India finalized the denial of the Novartis patent on its cancer drug Glivec, despite the fact the patent is recognized in 40 countries. The lay press and public interest groups have centered the debate on pricing. The Indian Pharmaceutical Alliance disagrees.
India must not be afraid of multinationals. The recent judgment by SC is not about pricing, affordability or access. Instead, it is about the interpretation and provisions in the patent law [the court decided that making small changes to an existing patented drug are not worthy of a new patent]. India must make it clear the decision in the Novartis case has been taken independently by the judiciary.
Now Mark Elliot of the Global Intellectual Property Center of the U.S. Chamber of Commerce has responded, in effect warning India and the rest of the world that the ramifications of denying intellectual property protection to rightful inventors will stifle innovation and endanger public health.
Elliot, too, dismissed pricing as the problem:
Novartis, like many innovative companies, offers programs under which medicines are subsidized or even given free. In the case of Glivec, 95% of the patients prescribed in India received the dosages free of cost and the remaining 5% were receiving it subsidized.
Not surprisingly, Elliot cites statistics compiled by the Pharmaceutical Research Manufacturers of America; “[to bring] a single life-saving treatment to market, and to patients, requires $1.3 billion in investment and 10-15 years of research and development.” How would a company in the private sector justify such an expense without the limited monopoly protections inherent in patents?
“With the proper IP rights in place, and the appropriate protection of these rights, global innovative companies will have the incentive necessary to operate in India and explore its endless business opportunities. Stronger IP protections create jobs, stimulate economic growth, and promote innovation of new technologies across industries, in addition to fostering public health. From biotech to software to textiles, the protection of IP benefits all.”
Disney Enterprises had hoped to secure name rights to “Dia de los Muertos,” a Mexican holiday honoring relatives who have died that has spread throughout much of Latin America.
Disney, which is making an animated film inspired by the holiday, followed a well-trod path in filing to trademark the name. It planned to follow up with licensed merchandise drawing on the current popularity of skulls and skeletons.
Shortly after a petition was filed on Change.org protesting the trademark request, it went viral. Overwhelming numbers told Disney to back off and withdraw its trademark application, which it did, with this statement:
As we have previously announced, Disney-Pixar is developing an animated feature inspired by the Mexican holiday Dia de los Muertos.… Disney’s trademark filing was intended to protect any potential title for our film and related activities. It has since been determined that the title of the film will change, and therefore we are withdrawing our trademark filing.
Access Copyright is a collective that manages a pool of protected intellectual works, charging fees to Canadian colleges and universities and paying royalties to copyright holders. Access Copyright and the Association of Universities and Colleges Canada reached an agreement in April 2012 that requires institutions to pay a per-student fee of $26 a year, a substantial increase from the $3.38 former rate (there used to be an additional per-page rate added for student copying of copyrighted works).
Some colleges balked at the increase and opted to go it alone. York University, which opted out of the Access Copyright agreement, is now being accused (by the collective) of copyright infringement, claiming the university has been reproducing and authorizing the copying of protected works without permission or compensation. “To combat unauthorized copying, Access Copyright has also filed two applications to the Copyright Board of Canada requesting certain tariffs that would require schools and universities that don’t have an agreement with Access Copyright to pay established rates to use works the agency handles the rights for.”
|
