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Marc Kaufman of Reed Smith alerts managers of corporate licensing programs to a case that may necessitate a change in licensing strategy. “Licensors should determine if their licensing strategy relies on restricting the license to specific claims of a patent.” If it does, those licenses may be exhausting the patent, preventing subsequent licenses of remaining patent claims for the same product.
Helferich Patent Licensing LLC (HPL) had already sublicensed patents on mobile devices to hundreds of manufacturers, restricting the licenses to specific claims in the patents. Then HPL sued several of the sublicensees for infringement, asserting claims not included in the licenses.
The defendants filed for and won a motion for “Summary Judgment claiming that, under the doctrine of ‘patent exhaustion,’ the licenses to the mobile device manufacturers prevented HPL from collecting royalties based on use [covered by remaining patent claims, or claims not specified in the licenses] of the same mobile devices.”
HPL will likely appeal. Nonetheless, prudent license program managers whose organizations are or would be affected by this ruling and their advisors should immediately begin contingency planning. Valuation analysts with clients offering licenses for separate claims in the same patent for the same devices will want to review those revenue streams.
Jim Singer in IP Spotlight reminds companies, inventors, and professionals performing due diligence that offers for sale, even of hypothetical concepts, can bar eventual patentability. In August Technology Corp. v. Camtek, Ltd. (Fed. Cir. Aug. 22, 2011), the Court found that August Technology’s offer for sale of an integrated circuit inspection system triggered an on-sale bar to patentability, even though the system was not ready for patenting at the time the offer to sell was made.
Now, in a split decision, the Federal Circuit agreed with a lower court that Hamilton Beach’s patent claims (asserted against Sunbeam in Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc. (Fed. Cir. 2013)) are invalid because acceptance of its purchase order for slow cookers from a foreign supplier to be delivered to the U.S. constituted an offer-for-sale, even though Hamilton Beach didn’t provide the necessary release to begin manufacturing and no product was actually manufactured or sold until after the critical date (more than one year before the filing date in the pre-America Invents Act environment).
BlackBerry, the Canadian smartphone company formerly known as Research in Motion (RIM), announced on Monday, Aug. 12, 2013, that its board has formed a special committee to explore “strategic alternatives.” It’s difficult to imagine a major smartphone competitor buying BlackBerry when the other platforms are well established and defeating Blackberry in the marketplace. So what strategic alternative is the best?
For some time, pundits have been describing the rich IP portfolio of BlackBerry. Envision IP reports BlackBerry has nearly 4,000 patents assigned to it (including those ultimately obtained in the Nortel deal) and its rate of investment in R&D and patent applications remains high. BlackBerry feels that “while a sale in-part or whole of its patent portfolio may be an option … aggressive licensing and monetization may provide for a [superior] long-term revenue model for BlackBerry.”
IAM Magazine has pointed out BlackBerry may well have shot itself in the foot with respect to its best option: licensing its patent portfolio to others to assert against competitors. Just last spring, BlackBerry co-authored a submission to the U.S. Department of Justice and Federal Trade Commission encouraging a critical look at the practice of patent privateering, suggesting it is an anti-competitive practice.
This will be interesting for IP valuators to watch—hopefully equally interesting to BlackBerry investors.
Highlights of the albeit lagging Association of University Technology Managers (AUTM) U.S. Licensing Activity Survey for fiscal year 2010 included:
- 657 new commercial products created;
- 4,284 licenses executed;
- 1,078 options executed;
- 398 executed licenses containing equity;
- 38,528 active licenses and options;
- 651 startup companies formed, 498 of which had their primary place of business in the licensing institution’s home state; and
- 3,657 startups were still operating as of the end of FY 2010.
Reporting institutions listed 12,281 new U.S. patent applications in FY 2010 and 1,116 non-U.S. patent applications.
An interesting metric is evolving, though little can be done with it other than use it for organization comparisons: research expenditures to related licensing revenue. For example, the University of Massachusetts announced the average research expenditures across the five-campus UMass system totaled nearly $400.8 million annually over the 20-year period covered in AUTM statistics, generating $79,732 in licensing revenue every year for every $1 million spent for research.
For a while now, The Licensing Letter has been reporting on the burgeoning Brazilian IP world, specifically with trademarks and brands. Jack Ellis, writing in IAM Magazine, has reported on the recent APBI (a Brazilian IP association) meeting that had an attendance exceeding 1,000 delegates.
According to International Licensing: A Status Report, Brazil in many ways has the most mature and developed licensing market of all the BRIC (Brazil, Russia, India, and China) countries. It has by far the highest per-capita sales of licensed merchandise (more than $10), the most diverse market in terms of property categories and property types, and a strong indigenous licensing landscape.
And things are looking up. Not only are the next World Cup and summer Olympics coming to Brazil, but the country is one of the world’s leading franchise marketplaces. The average Brazilian has increasing amounts of disposable income; unemployment is reportedly down to less than 6%, from a high of 13.5%. Over the past decade, over 40 million people have entered the Brazilian middle class.
The Huffington Post UK reports Brazil is now the world’s second largest social media market, with some 40.3 million people using social media regularly. Over 15 million smartphones were purchased in Brazil in 2012—an increase of 73% in ownership.
Collegiate Licensing Co. LLC (CLC), an affiliate of IMG College, announced its annual list of top-selling institutions and manufacturers. These rankings reflect royalty income from officially licensed merchandise reported from July 1, 2012, through June 30, 2013, on all collegiate merchandise sold in affiliation with CLC-represented institutions. The highlights include:
- CLC estimates the retail marketplace for college licensed merchandise in 2012 was $4.62 billion;
- This marked the eighth consecutive year the University of Texas at Austin ranked
No. 1;
- The University of Louisville moved from No. 32 to No. 25, largely due to its success in the NCAA basketball tournament;
- Nike USA Inc. was the No. 1 collegiate apparel licensee;
- EA Sports was No.1 among nonapparel licensees;
- Kentucky Wholesale Inc., an apparel manufacturer, was the top local licensee, producing officially licensed product for the University of Kentucky and the University of Louisville;
- Top apparel categories for 2012-13 included T-shirts, women’s apparel, fleece, and headwear; and
- Top nonapparel categories included video games, housewares, domestics, and sports equipment.
The market for luxury handbags in Hong Kong is surging, their value supported by a new practice: putting them up as collateral.
Some people might consider this as part of the lively pawn shop business in Hong Kong, but it is different, as Yes Lady Finance Co. sees it.
According to the Wall Street Journal, Yes Lady provides a loan within 30 minutes, at up to 80% of the bag’s value if it is from Gucci, Chanel, Hermès, or Louis Vuitton and 4% monthly interest and hires valuation assessors to check the handbag’s condition and authenticity. A customer gets her or his (20% are men) bag back by repaying the loan within four months. Yes Lady says almost all its clients reclaim their bags.
New, free browser defeats country Web censors
Denmark, The Netherlands, Iran, North Korea, and Italy—the list of countries that censor the Web is long. Pirate Bay is now offering a Web browser that can circumvent any censorship and Web blocks, according to PC Magazine. The PirateBrowser is available at www.piratebrowser.com.
How are third-party royalty agreements used to defend transfer pricing decisions?
Reebok India won its dispute with Indian authorities partially by presenting comparable third-party licenses that proved the 5% royalty it was being charged by Reebok UK (for know-how) was consistent with rates in other agreements, supporting its claim that the ‘negotiations” were at “arm’s length.”
More on borrowing against IP
Guangxi Zhuang is an autonomous region in China that acts very much like enterprise zones in the U.S. Officials want to attract the technology industry, and one way to do that has been to let small to midsize tech companies use patents as bank loan collateral. The idea was to help small companies secure R&D funds; officials chose 11 patents out of 23 applications and recommended them to local banks. Part of the process has been the creation of a new metric: Currently the city has 1.15 patents for every 10,000 people. It is also planning to work on regulation for borrowing against patents. |
